Saturday, 23 April 2016

Flying a plane and the problem with failing businesses.

A lot of businesses fail these days. Statistics show that about a quarter of businesses fail in their first year and nearly half by the third year. These are alarming figures by any measure. Just imagine a business that starts only to end in 12 months. But of course the business plan would have predicted
something totally different. We all wonder why this
happens, and many business drivers play the blame game - its the employees, its the business environment, its foreign exchange, its government, its this, and this one too and then that one also. The game is on and accusing fingers point everywhere but themselves. Granted, many external things could be happening but many times its not the obvious issues that lead to business failure, its rather the more salient ones.

To find a solution to the problem of closure, we will explore the principle behind flying and take a lesson. Lets dive in a little bit. Before the Wright brothers innovated the fixed-wing plane, a lot of engineers had looked at the sky and copied birds who flap their wings to fly. What they didn’t realize is that what makes an actual flight is not flapping but the  ability to lower the airpressue above the wings, hence they had all failed very woefully even though they built more powerful engines for their flying objects. When the Wright brothers started in late 1800s/early 1900s, they shifted their paradigm from powerful engines/flapping wings and experimented with fixed wing airplanes and gave control of the flight to the pilot i.e. the pilot would have levers of control of the flying object. As technology improved, engineers tweaked their model of fixed-wing air planes, found the single most profound reason for air planes to fly and maintain momentum in the air and then launched a successful flight.

But did you know that the single most profound reason for why planes fly is very salient? Yes, it not how powerful a plane’s engine is that gives a lift, but the simple curve on the wings of the plane. That wing or part of the plane is called aerofoil or airfoil. Every plane has two, one on both sides of the plane. It is important to note that the aerofoil is slightly bent with respect to oncoming air, hence it has an angle of attack to the air. This aerofoil has two sides - a flat bottom and a curved top. The flat bottom deflects air slightly creating high pressure on the wings from the bottom. The curved or symmetrical surface greatly deflects air because of its curvature and creates a lower air pressure (wrt to the bottom surface). Physicists have explained that the lower pressure at the top is due to more volume that the same amount of molecules of air as the one hitting the lower surface has to fill. This high volume creates less pressure while the lower volume below creates high pressure. Some have said the speed of the molecules hitting the wings is higher at the top and lower at the bottom leading to low pressure above and high pressure below respectively. In any case airplanes fly because the pressure below the wings is higher than that above the wings. In simpler terms we can say lift force (one that takes the plane up) is higher than the weight force of the plane (the one pulling it down) when the plane is going up. The engines basically allow the forward movement of the plane, creating a thrust that is greater than the drag force pulling a plane back. At the point of landing, the pilot controls the plane to allow the drag increase while the thrust lowers, basically slowing down the rate of the engine.

Now, whats the point of this Physics 101 class? Solving problems might require us to look at the simple little things that create a large effect and zoom in on them. I see Paretos principle apply here also. For friends who are not familiar with this principle, lets lay a background. Vilfredo Pareto is an Italian economist who discovered that there is a pattern between most things he compared. There are fewer people with the largest total wealth of the nation than the larger number of poor people who have only a small portion of the nations wealth. If you look around today you see that his principle shows up in almost everything. A small percentage of your clients pay you the largest. A small percentage of potential customers actually become real paying customers. In time we can begin to see relationships such as 90/10, 80/20 in the order of outcome/input.

The Pareto principle applies squarely here. Find that small little thing or bottleneck that creates the most or the biggest major issue for you. Many people tend to think their failures come from things like lack of sales, inadequate business development activities etc. Those are obvious issues that are 80% input issues causing 20% result issues. The way I look at things  when I consult is that I look for non-commercial processes (the 20%) that are impacting business results the most (the 80%). In many situations these might seem logically unconnected, (like the curve on the wings of a plane that makes it fly) but when you dive deeper with a good focus you will notice the connectivity. Examples of salient processes are inability of the CEO to make good decisions, tussle between managers, fear of change and structure of a company. The list can be very long, but lets leave it at that.

In my work, I look at three major areas of an organization when I see business failure. These are People, Product and Process. There are countless things to analyze or probe under each of the three areas. A business owner or a team must be able to identify critical items to pick under each and run a quick analysis for possible cause of failure. Ideally if the three areas are functional and seamlessly integrate, you can be sure of performance. This should be the target of startups. Design and retweak these areas of your business right from the start. Don’t settle until it is fine because that is when your business can be assured. Replacing sales people when you have low sales might just be like rubbing lipsticks on a pig. (arrrggghhh!) No body literally wants to do that, so I wonder why we do it at all.

We all get one chance (sometimes) to make the right impression. Similarly, we sometimes get one chance to make our company right. Your ability to uncover and fix the little things that matter in your organization is critical to business success and survival of the early years of your organization.

Culled from Tayo Gbenro.

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