Leaving your mark on the business world is no easy feat. As an entrepreneur, you have to have a clear vision and proper values. Meanwhile, you have to make a profit while also ensuring that you leave behind a legacy you can be proud of!
However, business owners aren’t infallible. Strategic mistakes can and do happen. Some of them can radically alter the course of the company’s future… for the worse. The r/AskReddit online community shared some of the most well-known examples of companies getting wrecked because of a single miscalculation. You’ll find their stories as you scroll down.
Bored Panda wanted to learn about how business leaders can make good strategic decisions and what common mistakes they ought to avoid, so we got in touch with Matt Johnson, Ph.D., a marketing psychology speaker and the host of the branding and human nature blogs. Johnson shed some light on the topic and you'll find his expert insights below.
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We asked marketing psychology speaker Johnson about how business leaders can be more confident that their decisions will benefit, rather than harm, their companies. "Business leaders can enhance their confidence in strategic decision-making by employing robust frameworks and exercises that prioritize thorough analysis and risk mitigation," the host of the branding and human nature blogs explained to Bored Panda via email.
According to the expert, the classic framework for this in business leadership is SWOT, which stands for strengths, weaknesses, opportunities, and threats. Leaders can use this analysis to "plot out their plans" and "assess internal capabilities and external market dynamics." This should then allow them to make informed decisions that are not only aligned with the company's strengths and opportunities but also mitigate weaknesses, as well as potential threats.
"This can be a good start and can help the decision-maker unearth some worthwhile information. At the same time, it’s frankly a bit outdated," Johnson pointed out to Bored Panda that there are newer, more effective ways to approach this question.
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One of these is scenario planning. It "allows leaders to anticipate various future scenarios and devise strategies to navigate each, thereby reducing the impact of unforeseen events. Unlike SWOT, this helps business leaders develop strategies that are robust concerning market conditions and unforeseen events."
"By integrating these frameworks and exercises into their strategic planning processes, business leaders can optimize their decision-making and increase confidence that their choices will benefit their companies in the long run," Johnson said.
Meanwhile, the marketing psychology speaker shared a few key insights into the common mistakes that new business owners might make. "Starting a new business of any kind has a very slim success rate. Some of these failures aren’t the fault of decision-making, per se, but instead, reflect unforeseen, unavoidable changes in the market. However, new business owners do fall into several common mistakes," Johnson, the host of the branding and human nature blogs, told Bored Panda.
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"One of the most common is their misunderstanding of how their product is actually valued by the market. Many business owners think that, because they value the product, consumers should too. They fail to realize that a product is only valuable if it is perceived as such by the market; it can’t be unilaterally dictated by the business. Overall then, the common mistake here is underestimating the importance of market research and failing to understand the target audience's actual needs and preferences. This oversight can lead to products or services that don't resonate with customers, hindering the business's growth," he said.
"Along similar lines, business owners also struggle to assimilate the signals they're getting from the market and to use that to make adjustments to their product itself. When a product fails to resonate, the common approach that business owners take is to change how their brand looks, or their approach to marketing the product, instead of doing the hard, necessary thing of actually changing the product."
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Data backs up the idea that going into business for yourself can be risky if you don’t know what you’re doing. The Bureau of Labor Statistics reports that, in the United States, around a fifth of new businesses fail in the very first 2 years of being open.
Meanwhile, 45% of all businesses fail in the first 5 years and 65% fail in their first decade. Fast forward a bit and you’ll find that only a quarter of American companies survive 15+ years.
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According to Investopedia, these findings have been consistent since the 1990s. So, out of the 843,320 new businesses that were started in the US between March 2020 and March 2021, it can be expected that around 168,664 will have failed within the first 2 years of operating.
However, good entrepreneurs will be able to avoid these disasters and become just another statistic. But it takes consistent planning, lots of flexibility, and good money and people managing skills. In short, you need a business-savvy leader with a good head on their shoulders and a trustworthy intuition at the helm of the ship.
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Forbes notes that a lack of short and long-term planning can ‘kill’ a business. Entrepreneurs must have a business plan for the next few months and years, including specific deadlines for measurable goals. While plans often change because you can’t account for everything in advance, the more clarity you have, the better off you’ll be.
Knowing what direction you’re taking your business in is far better than doing whatever and praying for good luck. You have to be meticulous when running your company, including taking the time to research the market and your potential competitors. But you also have to find a balance between delegating decisions to your trusted staff and keeping an eye on the day-to-day operations without becoming a micromanager.
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Another big part of entrepreneurship is balancing the vision you have in your mind for your brand with the reality of the market. If you’re doing exactly what your competitors are doing, you might not be able to stand out from the crowd, making you just another bland copycat.
On the flip side, if you’re unwilling to make any adjustments or compromises to your grand vision, you might run the company into the ground because things aren’t going as ‘perfectly’ as you’d hoped. Rigidity in the face of major market and trend shifts can sink your ship faster than you can spell ‘bankruptcy.’
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Aside from being flexible, you also have to understand the virtue of patience. Many people want to get rich as quickly as possible. However, this opens them up to impulsive and rash decisions. It’s important to strike when you sense an opportunity, sure. But at the same time, you have to consider what might happen if you’re wrong about your gut instinct. Expanding too fast or drastically altering the philosophy of your brand are very risky decisions.
For some more insights into bad business decisions to avoid at all costs, check out Bored Panda's earlier articles.
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