Why is research critical?
Your type of business, or the business you would like to start, could be an ‘endangered species’. Good research can avoid financial ruin. But always keep in mind that no research is better than bad research.
Don’t be one of those who let the facts get in the way of the truth. And don’t mislead yourself into thinking that Googling is the only research activity you need to undertake.
Much-quoted statistics purport to show that new businesses have only a slim chance of succeeding. While the truth is more complicated, because much of the failure rate can be put down to inadequate research about the business the market and the community in which it operates.
Most of you know through bitter experience, that a lot of independent businesses do indeed run out of money and close their doors quickly. Certain industries are more prone to startups folding than others. Research should be regarded as creating new practical, reliable and useful knowledge.
So why is it that so many new businesses don’t succeed?
Or, more to the point, what can an entrepreneur do to ensure a better-than-average shot at success? First, let’s look at the “big picture”. Then move into specifics and do the required research.
Many are seduced by their dreams because they are unrealistic dreams. Most start with a dream, a passion, or an idea that they think is a solution to an age old problem. But in a business environment where information flies around like a river in flood, you can find surety.
It is very likely that many people have approached the same specific problem as you. They have a solution that, while not identical to yours, is similar enough and plausible enough to complicate even the most vivid dream.
Yet many start-ups, jealously guard their dream. They refuse to part with it and refuse to do proper research. Instead of sharing their dream, they risk becoming the big fish in a shrinking pond. Sharing with a team who can shape and guide their dream into more realistic pursuits.
What good research can do
If you are looking for success in your field, do your research. You are better off doing your own research than relying on anybody else. People can interpret research to suit their wants and needs. Attitudes to good regular research can be contagious. Is yours worth catching?
For the majority of businesses, research is viewed primarily as an opportunity to improve the efficiency of their business operations. For other businesses, the primary opportunity is potentially higher sales to new and existing markets. What every your objective is for research, the first thing is to draw up a budget and allocate the funds. The best intentions don’t deliver good research outcomes.
Research forces you to take a more objective approach
Lack of objectivity and perspective is repeated time and time again because business owners fail to see the writing on the wall. They dig in their heels in against a changing business environment. Tunnel vision is creating a business susceptible to failure.
Do your homework (research) and take a long hard and realistic look at your idea, product, or service. You need to do it long before you think about making a business out of it. Get some objective or outside input if your own view is coloured by being too close to the situation, or too emotional about it.
The business owner who plans on succeeding would be wise to create a better research approach. Start asking some basic questions and listening to a range of people and other businesses. Apart from your own, some of the broad questions you could ask might include:
- What are they seeing and hearing in the marketplace?
- Do you know the foundation industries in this community?
- Where do you see the opportunities so you can take advantage of them?
- What seems to be missing in this community?
- Is the local government receptive to new businesses?
- Where would be a good place to locate a new business?
- Can you describe for me the main infrastructure this community has to offer?
Business is too hard doing it by yourself
Pulling together a team of people to sustain the business is the next challenge. The skills required to run a business differ from those needed in a startup phase. Few people will be able to satisfy all those needs by themselves.
- Are there any practical business advisors available?
- Are good employees available in this community?
- Who would you recommend as an accountant and a lawyer so you don’t need to go elsewhere?
- Are there good contractors, is it easy to outsource in this community?
- What training programs are available in the community because you will need to train staff?
Start your business planning early
The business plan can act as a repository for all your ideas and the research that you do by putting your ideas into a structured format, things become clearer and one thought leads to another. Never rely on planning in your head, it’s too confusing and there is little to relate to. By starting your business plan early you start working towards being ‘Investor Ready’ and most investors will be impressed, including you.
It’s about getting your business into the ‘fair dinkum’ department. Put real products and real management in place along with all the necessary facilities and equipment needed to get the job done.
Luck favours the prepared business and this does not happen overnight. Research takes time. It will take many hours over many months. Of course, it will take longer if you don’t have access to expertise and your systems are not in place. Become Investor-Ready and get lucky. https://goo.gl/FqzKV8
Research will go a long way towards averting a disaster
While this post deals specifically with research, the failure of people and managers to act on it must be taken into account. Business is run by people and people are not machines, they need to be fed good information and knowledge. To steal ideas from one person is called plagiarism, but to steal ideas from many it is called research.
Business failure is all too common, particularly for new businesses and it can happen to anyone. The rate of business failure has been fairly constant for a long time, around 70% to 80% in the first year. Only about half of those who survive the first year will remain in business for the next five years.
Of these failed businesses only 10% of them close involuntarily due to bankruptcy. The remaining 90% close because the business was not successful, did not provide the level of income desired or, was too much work for the effort.
Timing can be everything
It might sound extraordinary but. The greatest luxury you have is the time from the inception of the idea to when the business, or project, is operating profitably. This is the time to research, plan, analyse and be sure of your readiness to build a sustainable business.
You don’t want to be jumping in the deep end and hope for the best. Once you jump in your time will be taken up with operational issues, not allowing you to do the planning job properly. Sometimes there are no answers, but hopefully, you will see some early warning signs that may save your business from insolvency.
Once a new organisation is up and running, the most obvious cause of failure is simply running out of money. Experts call under capitalisation a symptom of poor planning. However, there are other causes of failure particularly in their early years. Refer to business failure avoidance, https://goo.gl/lJli5q.
Clearly, planning plays an integral part in success. But, without good research, a business plan can be useless and the business will fail.
Research audits are a good place to start
When Albert Einstein was asked, “If you were told you only had an hour to live and you could solve one problem, what would it be?” Einstein replied, “I would spend the first 59 minutes defining the problem”. You can tell whether a person is clever by the answers they give to questions raised about their business. But you can also tell whether a person has wisdom by the questions they ask.
Know how to start a business
Most startups underestimate the difficulty, not to mention the time and money required, to get a business launched and established in the marketplace. Here are a few questions you might start to ask:
- How difficult will it be to communicate your value proposition?
- Will you have sufficient working capital to make the business a success?
- What are the best ways to launch a new business or new product?
- How do you commercialise your business idea in today’s market?
- Are my ideas going to require a change of behaviour on the part of intended customers?
- Should you be looking at international markets at the start because you like travelling?
- Who can help you with your business and how can you excite them to help?
- When is timing important?
Know what is going on in the business.
If you think you understand everything that is going on in your business, you could be in for a rude shock. Many businesses are spending countless hours developing new products and systems.
They are doing this at the expense of other profit generating activities. In some cases, they are spending too much time and money on products and services the customers no longer want or need. Abraham Lincoln once asked, “How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg”.
Survey your organisation and establish who is doing what and account for both the time and the resources being used and why? For many businesses, one day seems to run into the next and nothing much seems to change.
Before you know it, without research, you could be out of control and destined to fail. Here are some questions you might ask to reverse the situation.
- Why should anyone want to buy from you?
- Does the business have the knowledge and capacity to reach its proposed budget?
- What do the customers think of your business and its products and services?
- Maybe there is someone who can do it better?
- What is the morale really like amongst the employees and other stakeholders?
- Has a competitor developed or copied your ideas, or are you in an old style business?
- Could you improve productivity by outsourcing?
- Maybe they don’t have the resources you think they have.
- Perhaps, with a bit of help, you could improve your profitability.
- Many organisations run out of money before their ideas can be commercialised.
Know what is going on in your marketplace
It is critical for you to understand the market and competition. Having a good handle on the competitive environment your business is in could mean the difference between success and failure. Your business could be in decline because you haven’t adapted to the new market forces.
Many startups make the major mistake of dismissing the competition. Initially, the business wins a few customers and you are lulled into a false sense of security thinking the competition is easy to beat. Suddenly after they have lost a number of customers the competition wakes up and you could be in trouble. They can start to fight in a way you have never experienced.
Too many startups still seem to regard their product as an end in itself, a solution looking for a market. Instead, you should become more aware of the problem which you are uniquely qualified to solve.
Some of the questions you could ask might include
- Is there is no market demand for your products and services?
- What are the customer’s problems, frustrations, wants and needs?
- Are your products and services being distributed through the most sensible channels?
- How has the market changed, is it expanding or in decline?
- Are you relying too much on your own understanding of the market?
- Should you be doing more market segmentation?
- Is there an unmet need or problem that the community would like solved?
- Do businesses cooperate well in your community, or is it a ‘dog fight’?
- What do they see your competitors doing that your business is not?
- Have you identified some things your organisation could do that your competitors are not doing?
- Are your products being sold at an appropriate price?
- What are some products or services you think would be of value to your community?
- Are your products, services and the business being promoted in the best way possible?
Know what is going on in your community
Understanding your community is one of the keys to successful decision-making. The more you know your community the more you’ll be able to deliver the kind of products and services they’re looking for.
The more you know about your community, the better you’ll be able to evaluate perceptions of local areas and of government services. You will be better able to gauge perceptions towards business, non-profits and general community issues.
Your community should be a critical part of your value chain. In many cases, it will be your community that provides many of the products and services your business will require. Community capacity building can do wonders for your business, making it well worth being involved.
Today the rise of health and well-being care is a big issue but one that is often neglected. Engaging in community activities is something people are becoming more conscious of. In fact, many are demanding a more flexible working environment to allow them to participate.
When you have businesses and non-profits cooperating with each other things happen. They start researching opportunities and exchanging ideas. Which in turn inspires innovative ways to improve themselves and the community generally.
Keep your community well informed about what you are doing and they will provide valuable insights.
Use customer intelligence to increase revenue
Like any research, you are all faced with a flooded river of data, information and knowledge. There are so many data points that can be utilised to aggregate, analyse, and act on what you need to be very selective in what you choose to use. Perhaps the most important set of data, information and knowledge you have to focus on is that relating to customer intelligence.
Your ability to know everything that you can about your customers is a key factor for success in this highly competitive globalised marketplace. If you’re not doing so, you can bet that your competitors are mining whatever customer data they can to the hilt. They’re utilising it for decisions to further enhance the customer experience of their customers making it more difficult for you to compete against them.
The first two questions that should be asked are where do you start and what are your objectives? As revenues and profits are the requirements for any successful organisation, your activities from the outset should be with this in mind.
More importantly, you need to be customer-centric in everything you do and ensure that all of your efforts align with this focus. You need to know intimately your customer’s problems, frustrations, wants and needs so you can properly compile, analyse and utilise data to support your objectives .
Knowledge is always gained through action and for action. From this starting point, to question the validity of information and knowledge is to question how to develop genuinely well-informed actions that will have the biggest positive impact.
Action research is a reflective process of progressive problem solving by individuals working with others in teams or as part of a “community of practice”. It is used to improve the way they address issues and solve problems. Action research can be carried out in the implementation process, to improve the methods and approach of those involved.
You will find action research challenges traditional problem-solving research. By moving beyond reflective knowledge created by outside experts to active moment-to-moment theorising, data collecting and inquiring. Making informed decisions about things that are occurring in the midst of implementing a project can be extremely beneficial.
Action research consists of multiple research methodologies which pursue action and research outcomes at the same time. It, therefore, has some components which resemble consultancy or change management and some activities which resemble field research. The process for action research is well established as an excellent approach to understanding and acting on issues, including those concerning businesses. Action research is a simple, effective tool for businesses wanting to constantly improve their operations and address the issues of their own choice.
Research design plan
A research design is a plan of what type of information will be collected and how it will be analysed. Will the research design be used in an exploratory way? Will it be principally quantitative or qualitative research? Specifically, this could involve:
- A survey of customers.
- Surveying competition and competitors.
- You could survey a range of similar business in your industry.
- An introduction of a benchmarking program.
Information collection methods
Attitudes towards products and prices can be identified through qualitative research. Usually, focus groups or in-depth personal interviews. The former is the more widely used and better known, involving a moderated discussion group of 8-12 people lasting for between 1-2 hours.
Focus groups have several advantages. They are cost and time effective and can be fruitful if the moderator is able to stimulate ideas through discussion. However, they are susceptible to biases due to dominating personalities and a poor representation of the market or community.
Personal interviews are face-to-face interviews lasting usually about 30 minutes. They are suitable if the topic being discussed is personal, involves industry experts, or detailed information is needed about people’s motives for certain behaviours.
Given the nature of the questioning that is required in this research and the difficulty faced in getting people to attend focus groups, face-to-face interviews are recommended.
Survey Monkey is a free tool to help you gather valuable information. It is certainly a most widely used survey tool with a long list of features. Survey Monkey’s Pro service comes with some nice analytical tools to help you organise and export responses.
A starting point could be a Business Health Check
Business Health Checks or assessments will determine the urgency of action. A Business Health Check on the whole business should be carried out if there is time, to see what else is broken. (Refer to tools in the FAQ Analysis Kit to access this and other analysis tools).
The busy, busy syndrome can cause you to procrastinate. Just because you are busy is no excuse for stalling what needs to be done. If you procrastinate for too long, then it may be too late. Getting Ready to properly address the important issues is important. It will probably require making some special arrangements in order that the business will keep functioning without any further damage.
Advising the stakeholders may be important. What will you need in the way of information, records and materials? Do not forget to advise your family of any extra working hours you may need to put in, and how you will communicate with them during the crisis.
Find yourself a quiet place to do some preliminary thinking. A quiet place is a special place for quiet contemplation and reflection. Here you can hear yourself think, perhaps for the first time in ages. It will give you a chance to catch your breath and give you confidence for the road ahead you may want to even pray a little.
Your research will become more meaningful if you conduct a detailed ‘Business Health Check’, before anything else.
Preliminary discussions with an adviser can help
Advisors can help you to become familiar with the tools, methods and processes that are used. You will also meet the people who will be helping you, giving you a chance to find out whether you are comfortable with them. Address your feelings before any research is undertaken and any help is fully engaged.
You may be stuck in the mud of the past, but your feelings must be taken into account at all times. Do not let anyone bulldoze you into doing something that you do not think is right for your organisation because you will come to regret it.
Conversely, if you are a stubborn old so and so then the helpers and advisers will probably give up on you and walk away. Your feelings are very important. If you feel that there is no hope then you will be beaten before you start.
Success is not an accident, it is not something you get by luck, it is not something a betting win will give you. Surveys have shown people who won the lottery were back in their old habits and in the old financial struggles after a few short years.
“If we knew what were doing it wouldn’t be called research would it”. Albert Einstein
“Some people use research like a drunkard uses a lamppost: for support, not illumination”. David Ogilvy