Reasons why companies fail

A couple of days ago I have seen a very interesting Ted talk on the reasons why companies fail. Knut Haanes underlines in it the two factors:

• Exploration - search, disvoery, new products and constant reasearch on innovation
• Explotation - getting the most of the known, proven knowledge 

Definitive focus on just one of them on a long and short term perspective has some important risks: with explotation factors the risk lays within the opportunities that are being lost due to continously implementing the same strategy. If companies explore too much, the innovation factor can be an overkill: if something fails, there is no back up, if the product does not survive out in the market, the bet can lead the company towards its end. 

I started to dig in the papers of the actual reasons behind failures, ones that go beyond all the clichés. Harvard Business School did an interesting article on the subject, where the main reason is not having a balanced plan: companies focus too much either on technology or sales. There is also a luck factor: even if a Start Up gets good team and good financing, they face dozens of lower-cost competitors and fragmented customer demand. One of claims YCombinator proudly does is that even if your idea doesn't get funded, it shouldn't matter to you as an entrepreneur (your business still can be a successful one), since VCs are making mistakes all the time. 
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It is estimated that nine out of ten companies starting their business (start-ups) to bear defeat. Knowledge of the reasons for that show CEOs failing companies can provide information on what to do in order to achieve long-term success. The first most prominent reason for the collapse of the company is simply no market need. Businesses are generally optimistic. In the end, they started the company in the hopes of success. Unfortunately, even if there is a market fit for the product or service, another problem is the lack of cash to keep the company when things do not go as well as assumed. In addition, there may be unforeseeable and incalculable costs, which will result in much higher cash outflow than expected. 

For me, the actual lessons with bases to avoid along with a set of good frameworks are keys to, maybe not avoid completely, but at least minimise risks of failure in an agile StartUp environment. There is a great list in Autopsy.io which everyone should visit once in a while to get an overview of what can happen and how to prevent that.  Henry Ford said: "Failure is the opportunity to start from scratch - only more intelligently.", and if a founder is able to maintain high level of integrity even in difficult times, the failure can actually lead to many new opportunities.