Based on a Harvard Business School study by Shikhar Ghosh, 75 percent of venture-backed startups fail and up to 90% of startups in general fail. In a study by Statistic Brain, Startup Business Failure Rate by Industry asked leadership of the companies the reasons for business failure, including a list of 12 leading management mistakes. Patrick Henry, Founder & CEO of QuestFusion, boiled those 12 leading management mistakes to seven and I have further boiled them down to the top five:
- Lack of focus
- Lack of motivation, commitment, and passion
- Too much pride, resulting in an unwillingness to see or listen
- Taking advice from the wrong people
- Lacking good mentorship
As you can see, these top mistakes made are leadership and management issues. Essentially, the leaders, managers, and team are not managing well the process of building the startup. However, I believe both the VCs and the startup teams have been missing a huge piece of the leadership and management puzzle for startups: Systems Thinking.
The Missing 94% Rule
Approximately 94% of the outcomes we create in the workplace are a function of the systems/processes in which people work, NOT the efforts of people. How many VCs know this? How many startup teams know this?
More importantly, how many are using a systems-based management and leadership strategy to start and build the startup? Almost none is the answer to all these questions.
Think how much more effective management would be if they could check off these boxes in a systems-based implementation plan:
- We have identified the 20% of the systems that will create 80% of the outcomes needed to make this company a success.
- We have identified the Right Actions to take to quickly create and optimize the systems critical to the execution of our plan.
- We have identified the proper Sequence of those Right Actions, who is responsible for completing those Right Actions and by when.
- We have learned to facilitate The New Agreements Tools as the way we lead and manage and stay on track.
Question four is a bit of a plug for a simple set of tools, the New Agreements Tools, I created over 25 years of fixing businesses through planning/systems/process optimization. These simple Tools are, I believe, a new systems-based model for leadership and management that brings more value, faster, to companies, including startups, than current models. I’ve written a new little book on this subject, The New Agreements For Leaders. If anyone would like a copy, I’m happy to send you one.