05 Oct 2024
258
14 minutes
Business mistakes and business development challenges
Business mistakes: lost resources or new opportunities?
Do you know the fear of making mistakes and disappointment in business? Young people full of ambition to start their own business are often afraid to face it. Losing money, time, your company’s reputation, choosing a losing strategy, creating a product that doesn’t sell… It’s hard to fall when you’ve already imagined your dream millions, Forbes lists, numerous achievements, and the reality doesn’t meet your expectations.
Why you shouldn’t be afraid of mistakes, what positive experience you can gain from them, and how you can avoid being disappointed in business, let’s talk further?
What is a mistake and why is it important for entrepreneurs?
A mistake is our teacher in business, any deviation from the desired result or expected process. Simply put, it’s when reality turns out to be worse than we planned.
?Business development problems are not only lost money and time or a reason for despair, but also an incentive to find more effective solutions.
Mistakes are the result of attempts by business owners. The loser is not the one who makes mistakes, but the one who does nothing.
Error has two dimensions: result and process
False result — is when expectations and reality do not match. For example, you expected a successful launch of a new product, but instead received low sales and customer complaints. This is the gap between what you planned and what actually happened.
False process — is when you deviate from the plan during your work, and this affects the final result. It may be unnoticeable at first, but if you don’t keep an eye on what’s going on, you can move in the wrong direction.
Why process control is ??
If you have a clear plan, you can quickly spot any failures and avoid faux pas. But if you don’t have an algorithm of actions, you won’t know that something has gone wrong. It’s like construction: if you don’t check the quality of work at every stage, it may turn out that the foundation is laid incorrectly.
Wrong process: where do problems come from?
Either you missed something important during planning or you found a glitch during execution. How can you avoid this?
- Continuously improve the control system.
- Learn from your old mistakes and take them as experience.
How to avoid mistakes in processes? Plan → Action
There are the following reasons for business mistakes:
- Wrong plan, standard or algorithm. When the plan is incorrect, the whole process will move in the wrong direction. You won’t achieve what you hoped for simply because you didn’t take into account important details.
For example, the online pet store Pets.com, founded in 1998, attracted customers through a system of discounts. This strategy turned out to be a losing one, as the prices of the goods were lower than their cost. And even a large number of customers would not have yielded the desired profit. As a result, the store lasted for 2 years and closed in 2000
- Failure to follow a plan or standard. Even if you have a perfect algorithm, but you don’t follow it, the chances of making a mistake are very high. It’s like trying to get to a destination without a map – you can get lost.
The American startup Scale Factor went bankrupt because it lost the quality of its product in the pursuit of capital. The technology they offered, which could replace an accountant in a company, did not live up to the promises of the startup’s founders. This would not have happened if the product had been properly tested before being launched.
- You need to have a clear plan and follow it. This is GPS in the business world. When you have a well-designed algorithm of actions, there will be no situation where the process goes off course. But this is not enough.
- You need to monitor the process at every stage. It’s like checking your car before you drive: you don’t want to end up in the middle of the road with a punctured wheel.
When things go wrong, it's a false positive
Usually, when people talk about mistakes, they mean an undesirable outcome. But in order to make a mistake, you must first have some expectations or a plan. If you don’t, you won’t know if you’ve succeeded.
If a plan is a map to your goal, then mistakes are unexpected turns that take you away from your goal. They throw you off course, show you that your ideas are flawed, and prompt you to revise your strategy.
A lesson from Mark Twain
It is impossible to avoid mistakes completely. A mistake is always an involuntary action. No one wants to deliberately move away from their goal. The problem arises when we are sure that we are doing the right thing, but later it turns out that everything went wrong.
‘A delusion is not just a false idea, it is a false idea that is accepted as truth’
Mark Twain
Learning from mistakes: is it possible to become an expert?
And so we come to the question: can mistakes be studied in the same way as any other science? Science is more focused on successes, but the real lesson for an entrepreneur is hidden in his or her failures.
Your business is not about avoiding mistakes 100% of the time. It’s about minimising their impact and learning to live with them.” A mistake doesn’t take us away from our goal, it brings us closer to it, makes us realise that a particular strategy is wrong and we need to choose another one. And it is through thousands of attempts that entrepreneurs reach their goals, and sometimes even achieve successes they did not expect.
Christopher Columbus sought to find a shorter route to India and discovered America. Similarly, in business, you can spend a long time fumbling, making attempts, testing hypotheses, and as a result of your search, you may find an even more unexpected solution.
The science of choice and decision-making: two main components
- Predicting the future. This is an attempt to predict the future based on the past using mathematical and statistical methods, probability estimation, game theory and risk theory.
- Psychology of perception. This is the study of how people collect and analyse information, how they fall into psychological traps, how their logic or intuition works.
Decision-making process and its stages
Decision-making is a key moment in business. It is in these moments that both successes and mistakes are born. All 100% of mistakes occur at the moment of decision-making. Let’s look at how this works and why failures are inevitable.
The decision-making process can be divided into the following steps:
- Preparation. This is the experience, knowledge and information you have at the time of the decision.
- The point of decision. This is the moment when you have to make a choice. There is no time for doubt.
- The decision-making process. How do you think about your options? What do you consider? This is the moment when you are influenced by logic, intuition and all the knowledge you have.
- The decision itself. This is the final choice that is made on the basis of all the previous stages.
- Chances after the decision. Even if you have chosen the best option, there are always factors that can affect the outcome.
- The result of a decision. This is what you get as a result of your choice. But the result does not always reflect the quality of the decision - chances and external circumstances also play a role.
- Experience and analysis. Once you get the result, you analyse it, draw conclusions and accumulate experience for future decisions.
Groups of typical mistakes in achieving goals
- Mistakes in preparation. Insufficient information gathering or underestimation of risks. Often, people do not pay attention to research and preparation, which leads to wrong decisions. For example, a business owner does not analyse the needs of potential customers and competitors.
- Mistakes at the decision-making point. Problems can arise here due to haste or fear of making a decision. Uncertainty or emotions can greatly affect the right choice. This happens when we admire another expert and try to repeat their path, evaluating certain factors not objectively.
- Errors in the decision-making process. This refers to an erroneous assessment of options. People can rely on false assumptions or prejudices that affect their logic.
- Wrong decision. When the chosen option turns out to be ineffective due to shortcomings in the previous stages. For example, a cosmetics company fails to test a cream properly, which causes an allergic reaction in some customers.
- Errors in forecasting chances. Overestimating or underestimating the factors that can affect the outcome often leads to failures. For example, in 2022, small businesses in Ukraine faced problems mainly because no one could have predicted the war, frequent power outages, and rocket attacks
- Errors in the analysis of the result. After receiving the result, it is important to draw the right conclusions. Often, people do not learn from their mistakes and repeat them again.
Each of these stages can be a source of mistakes. But being aware of them will help minimise them and improve your decision-making process in the future.
Irreversible mistakes: the biggest threat
Irreversible mistakes are the most dangerous decisions that can have a significant impact on the business, and it will be impossible to reverse them. So before you make a choice, ask yourself a key question: will this mistake lead to irreversible consequences? Will you be able to rectify the situation?
For example, Martin Winterkorn, CEO of Volkswagen, made a business mistake that caused significant damage to his reputation. He wanted to bring his products to the American market, and he equipped the cars so that the emissions were lower than they actually were. As a result, the pollution levels were more than 40 times higher than normal, and the deception cost him his job and caused significant losses for the company.
So, the realities and limitations ?.
No one can accurately predict the future. Any theories that promise forecast accuracy are an illusion. Therefore, you should not rely solely on predictions.
Everyone makes mistakes, and no one is immune to them. No amount of knowledge of psychology or sociology makes you perfect in decision-making. Even experts are prone to errors in perception, which creates the effect of a bootless cobbler.
You cannot influence the future, but you can control your actions. Build on your experience to minimise losses in case of failure and maximise gains in case of success.
Even defeats can work for you and bring success where you don’t expect it. Business mistakes are what show the vector of further development. And as a result of getting bumps in the road, you come up with even cooler ideas.
It’s best to learn from other people’s mistakes, not your own, and to use the experience of other experts. I will help you identify weaknesses in your business and offer effective solutions.
And to minimise failures in your business and avoid irreversible mistakes, welcome to Wow Mentor!
