Execution Trumps Inspiration
A recent report by the Global Entrepreneurship and Development Institute ranked the USA as the best country to be an entrepreneur, driven by it’s access to capital and mature ecosystems. Switzerland was second, followed by Canada and then the UK. Israel was a lowly 16th which is perhaps somewhat surprising. However, the report looked at the failure rate to maturity and this is one of the problem areas that has been highlighted for example in Israel – numerous startups but too many simply want to exit too early and subsequently fail.
So why do so many startup and early stage businesses fail? Much brain power and analyst time has been devoted to this but it seems that the hard evidence points to one thing – incompetence.
A study by the US Small Business Development Centre was unequivocal. It concluded that 46% of businesses fail due to incompetence, 30% due to lack of managerial experience the rest were attributed to the market, fraud, neglect and other factors. So ¾ of startup failures are down to the entrepreneur.
Looking at this in more depth, a study by the Statistic Brain put lack of focus first, followed by lack of motivation, commitment and passion; then too much pride, resulting in an unwillingness to see or listen and taking advice from the wrong people. Other factors included lacking good mentorship or general and domain-specific business knowledge; finance, operations, and raising too much money too soon.
Perhaps such research is too anecdotal. A similar study by CB Insights stated that the most significant reasons for failure started with no market need, followed by running out of cash; then not securing the right team, or being outcompeted or price or product etc. However, a commentary by the Entrepreneur website concluded that all of these reasons could be attributed at one level or another to poor leadership.
But surely being in the right place at the right time is a key factor? A respected study by Harvard Business School tried to look at the importance of luck in the story. They concluded that experience and skill are the factors that really matter. Entrepreneurs who succeeded in a prior venture, such as a company that went public, have a 30% chance of success in their next venture. On the other hand, first-time business owners have only an 18% chance of succeeding. Entrepreneurs who previously failed have a 20% chance of success.
The fact is, investments in already successful serial entrepreneurs generate higher returns.
It’s often said that execution counts for much more than inspiration. And you don’t have to look too hard to see the evidence.
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