Why Startups Fail: No Clear Differentiator

May 11, 2016 | Business, Positioning

Like this? Share it.

I recently viewed this video created by the University of Chicago’s Business School. It highlights three Professors of Entrepreneurship as they talk about why so many startups fail.

The video is about 30 minutes long but within the first eight minutes it becomes clear that one of the main reasons startups fail is because the business owner or founder is unable to explain clearly what their differentiators are.

There are two types of business startups that fall into this trap and it’s for two very different reasons.

1. The Startup that cannot explain what they do

When you hear the word “startup” you may conjure up a high-tech, high-growth company. There are a lot of these in Silicon Valley all eagerly hoping to scale quickly and attract customers and investors.

For this group, the challenge is articulating the benefits of their product or service.

Professor Craig Wortmann states: The biggest mistake entrepreneurs make “is that they are super passionate about their business … but they have no idea how to talk about it.”

[bctt tweet=”One of the most common mistakes entrepreneurs make is the inability to concisely communicate their differentiators.” username=”VisibleLogic”]

He continues: “One of the common mistakes we see entrepreneurs make is their inability to really tightly and concisely communicate who they are, what’s their value proposition, what are their differentiators, why are they doing this. It’s tough.”

2. The new business owner who does nothing unique

While we tend to associate the word “startup” with high-tech, high-impact businesses, the reality is that most people start businesses doing exactly what they did previously in their job. This second group of startups are not sexy high-growth companies, these are everyday businesses with low barrier to entry.

Professor Waverly Deutsch explains that when you look at the average American entrepreneur, “over half of them don’t think they are bringing anything innovative to the market. They are just doing, as a new entrepreneur, what they would do for another company.”

She challenges business owners to think about what can you bring to the market that the market can’t get elsewhere.

If there’s no reason for someone to choose you, they’ll go with the known choice.

Even for mundane businesses (that are easy to understand) it is equally challenging for business owners to articulate what makes them different.

All businesses benefit from learning to clearly articulate their benefits

For two completely opposite reasons startups from one end of the spectrum to the other ultimately are likely to fail for the same reason: no clear differentiator that they are able to articulate.

4 comments

  1. Mike Maddaloni (@thehotiron) | May 14, 2016 at 4:23 pm

    What sucks is when you find this out several years into your business… 🙁

    mp/m

  2. Emily Brackett | May 14, 2016 at 9:32 pm

    @thehotiron, yes it’s not unusual for business owners to wake up one day and realize this is the a big limiter to their success. But that doesn’t mean it’s too late to try and fix it. It should be an opportunity to assess your strengths and market opportunities and then make a pivot.
    –Emily

  3. Neil Licht | May 18, 2016 at 4:25 pm

    Frankly, you may have missed key core reasons why startups fail – Its all in what they looked at or ignored before they went full speed ahead.

    Why do so many startups not make it and shut down?

    A) Unfortunately, The startup forgets from the day of their idea that there is quite a difference between what you see as a great idea and a “needed something or other” that folks or businesses would actually spend money for. This unfounded “belief” in a market for their products is why a startup cannot sell and frankly why they do not succeed in the first place.

    B) Many startups don’t have the inbuilt team sales person who love to and can actually find real markets and, for the reasons of the target audiences, not the startups pitch, know how to acquire paying customers. Instead, the startup goes around pitching to everyone as a “we have this, it does this, isn’t that great,buy it” and usually the answer is No. Its not a product Pitch that sells nor can it connect with what may actually be someone who, for their reason’s not yours actually need the product or solution but many think that’s what works.

    C) Nothing in their pre-business launch exploratory other than checking with friends and colleagues most of whom have no buying power is present or was done that actually deeply and honestly analyzed
    –who were the natural target markets
    –what really are the markets issues that if solved were truly natural prospects for their “product”
    –revealed an understanding of the issues each natural target audience faced and its resulting adverse “cost”
    –understood if their idea had a real market and one that was on a large enough scale and if properly approached would say “Hey that’s me! I need that product, service, software, solution to solve my x issues so I can gain a better ROI, faster production, competitive edge, leaner operating, etc. I need to call these guys now”

    D) They said in justifying their reason for starting up that
    –“there are x gazillion global prospects who because of their industry they were in and or the way they do business could use the solution.”
    –“If we get just 3%, we are golden” and the dove right in with development, maybe even production for that “giant” market opportunity to get their 3% share

    E) They forgot to dig deeper, reveal what actual portion of that giant number they actually might logically fit into and then how exactly to ID the people to contact, how to approach them, what to say that could get powerful receptivity and how to define/implement a great acquiring paying customers approach to get those real opportunities as customers.

    Thats why they cannot gain traction and why so many startups fail.

    Neil Licht©, author, info@how2acquirecustomersonline.com
    Lets Talk Without Facing Competition, How To Acquire Customers Online Before They Google Search Schedule a 15 minute phone conversation

    Neil Licht Founder And Chief Client Advisor, Hereweare
    – How To Acquire Customers Online Without Facing Competition
    p:1-508-481-8567 | m: 508-341-9563
    e:info@how2acquirecustomersonline.com
    b:http://mybusinessreputationonline.wordpress.com/
    w:http://www.how2acquirecustomersonline.com
    a: 57 West Main Street, Marlborough, Ma 01752

  4. Melissa Omolo | December 9, 2016 at 9:08 pm

    Well written piece!No amount of marketing for your business will be effective unless you know who you are and what you stand for.

Join the Conversation

 

 

 


Answer using numbers, not text. Thanks. Time limit is exhausted. Please reload CAPTCHA.