Shute

If you are thinking about setting up a company or other type of enterprise it will probably fail within three years, cause you a lot of stress and cost you a lot of money.

In most countries more than eighty per cent of new enterprises fail within three years with a very high proportion lasting less than one year.

The causes of failure have been studied by large numbers of academics, consultants and government employees. A lot of reports have been produced analyzing the reasons why so many enterprises fail and identifying possible lessons to learn from the survivors.

The main reason for failure is incompetence.

Just because you find something interesting does not mean other people will find it interesting.

Just because you think something has a certain value does not mean anyone else will agree with you.

If other people cannot understand just how brilliant your idea is you have not communicated your idea properly - do not blame them, you have a communications problem.

So, how do you avoid the pitfalls of incompetence and communicate in a manner that is not only understood but also motivates other people to provide assistance?

Corporate planning is a well established discipline in large organizations. It deals primarily with long-term strategic matters. It has its own methodology and is very different from normal business planning. A typical business plan considers horizons of typically three or five years. A corporate plan will often have a horizon twice that of the business plan.

The majority of small and medium sized enterprises do not carry out corporate planning and do not think strategically. The owners and directors of most small and medium size enterprises believe that the tactical planning that they carry out amounts to strategic planning. This belief is a major contributor to the very high failure rate of small and medium size enterprises during their first three years of existence.

Concentration on day to day management and tactical planning leaves the new enterprise vulnerable to changes in market conditions, reactions of competitors, delays by key customers and delays in the overall startup project.

Failure to consider values, vision and mission can contribute significant stress during the initial periods of rapid growth or startup problems. As additional personnel join the enterprise the culture of the organization quite often changes. If the organization's values, vision and mission have not been clearly articulated, the developing culture may lead the organization off at a tangent that the founders had never intended.

Sometimes the founding owners end up in conflict as they each try to take the enterprise in different directions. This can be particularly dangerous if the founding owners have key skills or facilities which, if they remove them, can cause the business to fail. If the business direction of the enterprise conflicts with the values of one of the founders there are bound to be problems.

The solution is relatively straightforward but is a process followed by few start up enterprises. The following steps should be followed:-

1. Elicit the values of each of the key people involved in the enterprise. Any conflicts at this stage must be resolved and, if the differences cannot be reconciled, a methodology of avoiding confrontation must be determined. If this is not possible it is dangerous to proceed further without a significant risk of failure.

2. Based on the values determine the vision of the enterprise. This needs to be meaningful and inspirational, maybe even a bit frightening. Too many vision statements are meaningless and fail to inspire resulting in alternative, informal visions really driving the enterprise.

Do not forget - your enterprise is unlikely to ever exceed your vision so - think big.

If you want to know if your vision statement means anything give a copy to any potential recruit and ask them to explain what they think it means - the response can be very interesting.

3. Once the values and vision have been articulated the next stage is the mission statement.

Why should your enterprise exist, what does it do?

Does it do anything of any real use or is it just a method of obtaining money?

If it ceased to exist would any of your customers miss it?

What strategies are you going to use in order to achieve your vision?

This represents only the initial stages of corporate planning and the use of corporate strategy. However, if you miss this stage you will not produce a coherent strategy and will not have clearly defined corporate goals.

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