More on Why Business Plans Fail – part two – the connection to customers

In the preceding post about key causes for business plans to fail, we discussed the lack of a robust process to convert strategy into tactics, to convert the plans into the day-to-day work of the organization. This posting will take up another major failure mode. That is the failure to have a compelling customer perceived value proposition and the corollary failures to understand markets and customers more generally.

Most new ventures are driven by innovation in products or services. Typically this flows from an inspiration coupled with technical knowledge to bring the products or services to life. The difficulty arises when no real customers are involved in the innovation process. The design of the product or service is carried out in an internal vacuum where no real testing is done to establish that customers actually find value in the features of the products or services. The basic insight that customers buy benefits not features remains true and the only way to find out whether your new set of features, your innovation, has benefits is by asking real customers.  

All products and services exist within a context of a marketplace or the intersection of marketplaces. The failure to study and understand these is another major source of failure. To successfully position a new product or service and to price it correctly requires an understanding of what is already in the marketplace (competitors, substitutes, etc), how customers want to buy, what the life cycle is, are there precursor and successor products and services, and so on. 

How many times have I heard an entrepreneur proclaim that their business idea is “unique”. They are so swept up in their own cleverness that it must be obvious that they have invented the next internet  And recently, following the death of Apple leader Steve Jobs, there is a resurgence of faith in the idea that he so boldly operated on, “Customers will know they need it when they get their hands on it!” (to paraphrase). 

Both of these dramatic claims should be examined with more than just a bit of skepticism. In the first case truly unique innovations come along very rarely. Think accurate determination of longitude, steam engines, electric power, telegraph, telephones, public water and sewer systems, digital computers, antibacterial agents, the Internet. You can extend this list yourself and you will quickly see how few truly original transformative inventions dot human history. So, when you hear the word “unique” be dubious. 

As for Steve Jobs first recognize that he clearly had a certain genius about him. But, he was hardly infallible in his career. Take a look at the history of Next Computing for an example of one of his products that failed utterly (though it’s operating system did reappear IN today’s Macintosh OS).