Failure is a fact of life for most social enterprises and social entrepreneurs.
· Social entrepreneurs will need to greatly improve the sustainability of their social enterprises.” Currently 83% of social enterprises fail in three years or less.”
· One of the key reasons for studying why enterprises fail is “to learn from other’s mistakes because we can’t live long enough to make them all ourselves.”. Chanakya
The Startup Drake Equation
Jason Cohen, a successful entrepreneur, wrote this article in his excellent blog the Smart Bear,
“Frank Drake created his eponymous Equation in 1961 to guide discussions at the first meeting of SETI (the Search for Extra-Terrestrial Life). It became a famous way of estimating how many alien civilizations we should expect to see in the night sky:
N=R* x Fp x Ne x Fl x Fi x Fc x L
In English: There are billions of stars (R*), some fraction of which have planets (Fp), some fraction of which are habitable (Ne), on which life sometimes forms (Fl), and sometimes becomes intelligent (Fi), and transmits detectable signals into space (Fc), and have been doing so for long enough for us to see it L. So that’s how many aliens civilizations we should see (N).”
Cohen then notes.
“Startups face a chain of risks, or as I like to say, a chain of “ands”—many things all have to go right. Of course, “all things” rarely go right simultaneously; this is why startups typically fail.
The Startup Drake Equation
Here are just some of the factors in the Startup Drake Equation, the failure of any one of which is terminal:
Product that people want to pay for (really) AND*
Able to grab those people’s attention amidst the noisy Internet AND
Pricing that those people will accept (and that is greater than your costs) AND
Competitive and distinctive enough to be chosen AND
Able to build the product as promised by the home page AND
Sustained value-delivery months and years later, so customers stay and keep paying AND
Able to fund the venture, either through early profits or fundraising AND
Able to work well with co-founders (or able do it all alone) AND
Develop a repeatable and profitable customer acquisition process AND
Able to attract and retain talent AND
Able to psychologically handle many years of deep effort, stress, and pain AND
Get lucky on occasion”.
Note to Reader All AND*s added by me to illustrate Cohen's “chain of ands”.
Module 5 of the Practitioner Guide reviews causes and sources of enterprise failure.
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