The era of Globalization is penetrating every nook and corner of the world. Today’s war front is the market where people buy or sell products or services. Everyone wants to achieve the largest volume of customers and the largest market share. However, the same phenomenon is now making it difficult for entrepreneurs around the world.
Through my many interactions with entrepreneurs from South Asia, Europe, and North Africa as an academic, researcher, trainer, and consultant, I have been able to observe some deep-seated problems associated with failing businesses. Most of the time, such failures are attributed to the market, the competition, and various other external characteristics. When I started researching the same phenomenon in India in the late 1990s, I found some interesting psychological barriers within the minds of entrepreneurs that I call “the 5 killer myths for any business.” Recently, in a similar study in the UK, we found similar myths prevalent within the entrepreneurial community. Interestingly, Indian entrepreneurs were largely owners of goods-oriented manufacturing units and UK entrepreneurs were service-oriented organizations. Here are those 5 myths that I have observed across the board:
1. The Product Growth Myth: The belief that since our product performs well in the market regularly for a few years, there will be no problem for years to come.
2. The Myth of No Alternative: The substitute for our product has such characteristics that the market will not accept it.
3. The myth of quality: the market accepts quality first and cheap products will not be accepted by the market.
4. The myth of no change: Growth would continue even if we did not change since the market has accepted the product.
5. The myth of friendly environment: Environmental factors will not affect us much.
Let’s take a closer look at them with some examples.
1. The Product Growth Myth: While working on an EU funded project, I came across this industry group called ‘Rajkot Diesel Engine Industry Cluster’. The cluster had seen phenomenal growth since the 1970s and began to lose out in the early 1990s due to Chinese and Korean competition in the market. However, it took the cluster 10 years to realize the same mistake, and guess what, it’s still struggling to catch up to previous levels of growth. Will he ever get it back? It is the question and we all know the answer. When entrepreneurs start to get complacent about innovation, we know that the cycle of decline (or certain failure) is not far away.
2. The Myth of No Alternative: In Egypt, at the time of Eid, children use Fanoos (lantern), made of paper and held with a stick. They go to neighborhood houses and ask for sweets and stuff. This type of celebration is also observed in other parts of the world at different times, such as Diwali times in India or actually trick-or-treating on Halloween. Well, until 2003-04 these Fanoos were made in Egypt only by local craftsmen. However, as the business with China grew, a Chinese businessman saw the opportunity and made some changes to the Fanoos concept. He used a small battery operated light instead of the candle and swapped the paper Fanoos for plastic Fanoos. The result, as one can imagine, is a durable, safe and easy to handle Fanoos that is much better than its previous incarnation that was used for centuries. The local industry almost disappeared in 2 years. If you think the market won’t accept your replacement, that’s one of the best ways to fail.
3. The myth of quality: This myth is so pervasive that it is sometimes easy to overlook. All the entrepreneurs I have met have told me how their product is a high quality product and how careful they are in the production processes. My only question to them is, does your customer really care? And each time the answer has been a big YES. Somehow I rarely get the same response from their clients. If customers really cared about quality, why was M&S in the UK struggling as a retailer while Tesco and ASDA were growing like never before? How is it that Primark (low-end clothing retailer) is one of the most successful retailers in the UK? How did George (another low-end clothing retailer) become the fastest-selling clothing brand in the UK? Consumers do not understand an entrepreneur’s obsession with quality. They want VALUE FOR MONEY. Because Wal-Mart does that day in and day out, it is now the largest company in the world and larger than all its competitors in the United States combined. How could one have imagined this just 40 years ago when Sam Walton started out in Bentonville, Arkansas? Remember, quality is in the minds of customers and, as good or bad as it is, they decide it in their minds. In fact, discrepancies between company and customer perceptions would not be unusual. However, even if the company is trying its best in the quality regimen, if customers see it as cheap, then it is cheap, in their eyes, and that is the most important thing.
4. The myth of no change: This is another classic myth. I call it the symbol of the bread holder. Once a product or service has been a mainstay for more than two years, entrepreneurs become obsessed with it. Buddha said 2500 years ago that “change is the only permanent constant” and this statement is truer today than ever. All the examples I have cited above fit into this area. Also, while talking to some service companies in the Essex area of the UK, I asked the employers when was the last time they or their employees had attended some type of training to improve their skills. The response was shocking. In 90% of cases it never was. In the other 10% of cases it was more than a year. In today’s world, if we don’t update ourselves, not even God can save us.
5. The eco-friendly myth: I have observed this myth mostly in developing countries like India, Egypt and others where entrepreneurs rely heavily on local, state and national government for subsidies and protection. As the waves of globalization have hit the shores of the world, there is very little that local, state or national governments can do to avoid global competition and if entrepreneurs are not prepared for it, their fate is already upon them. we know. This myth is also seen in other parts of the world much through the phenomenon of the market. It was in late 2005 that I saw an interesting pet store concept in Brighton, UK. All pink decor and it looked beautiful from the outside, however the first questions that came to my mind after seeing that store in the center of town was how long will it survive? The entrepreneurial logic behind this was pretty solid, as 7 out of 10 British pets receive gifts at Christmas alone. However, within two years, the store has been changed for as many environmental reasons as one might imagine. Another BBC show called Dragon’s Den really captures this phenomenon to the core.
Well, when you consider these myths they may seem like a product of the environment, however the starting point may be different than what seems obvious. Most of the time, when the environment is blamed for failure, it is actually the person behind the business who does not observe such changes. My suggestion would be that all entrepreneurs take a “thinking vacation” and see if any of these myths are present in their minds or businesses. If so, the time to act is sooner rather than later.