Causes of Failure for Businesses

Most people think of failure as a personal shortcoming in a business. Choosing to give up makes it easier and easier to justify failure. When something goes wrong in a business, people quickly blame themselves or other circumstances for their inability to succeed. But what if there’s more going on than just individual failings? Here Dr. Sudberg discusses the causes of failure for businesses.

1. Weak Leadership

Sudberg says that the case of Lehman Brothers clearly illustrates how weak leadership can bring a business down. Jordan also explains that weak leaders are often challenged by bad luck or circumstances beyond their control. This makes them blind to the problems that arise because they fail to provide proper guidance and foresight for their business. They might also feel that resignation benefits their company in the long run. But by holding on for too long, they almost always end up sinking their business simultaneously.

2. Business Strategy

A business strategy defines how a company will gain market share from competitors and use its resources to build a dominant position. Dr. Jordan Sudberg says that poor strategy is one of the businesses’ top causes of failure. He says that business strategy is often made up in isolation, and no one has a consensus. This can lead to a lack of strategic vision, which makes every aspect of the company’s performance look like a part-time goal. He says the business strategy should be much more measurable than just what the company intends to achieve.

3. Poor Financial Controls and Poor cash flow Management

Sudberg says that businesses are bound to fail because of poor financial controls and poor cash flow management. Because they are inefficient, they will take longer than they should produce results. At the same time, their overhead costs will be more than they should be because of the money used to maintain such inefficiencies and mismanagement. He says that these businesses are also very limited in the way they can think and act in managing their resources. They are trapped by their lack of efficiency and inability to try new things or measure progress.

4. Bad Timing

Sudberg warns against poor timing, which he says is one of the businesses’ most common causes of failure. He says that having bad timing means that the business is not in contact with its customers, which means that it will be unable to know its needs. It will also be unable to notice how other businesses respond to its existence, making it impossible for businesses to react. It will also be unable to learn from its mistakes, which means it will fail again because of the same problems. Sudberg says that business timing is challenging to master because it requires constant analysis of the market, the decisions of its competitors, and the government.

5. Overdependence on one field

Sudberg says businesses are also very vulnerable to overreliance on one field, which he calls a loss of interdisciplinary skills. He says this happens when a business fails to challenge itself enough and its employees become too skilled in their particular fields. They think their current performance level is good enough for the company, but they are wrong because they are not extending themselves in new ways. Because of their unwillingness to improve, the company doesn’t experience any growth and runs out of options.
Dr. Jordan Sudberg says that the most frequent cause of failure for businesses is not indeed a failure. It’s a different type of problem that most people can overcome when they change their behavior. He says that being willing to fail is much more important than failing. It’s a great way to learn and improve, which is the only way to avoid the other causes of failure.