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Failed companies have this in common (and what you can do to avoid failure)


In the past few months, we have had news of several prominent (heavily funded) companies shutting down operations. Stayzilla, Taskbob, Just Buy Live, and Tolexo are some that I can list off the top of my head.
What went wrong with them?
Lots, going by reports in the media. Failure to raise funds beyond a point, a crowded market, consolidation, inability to execute, environmental shocks like demonetization and GST, etc., are some of the reasons that are listed by business writers and heartbroken founders.  
However, if you look closely you’ll find that most failed companies have a fundamental flaw.
Let me explain with the help of an example: I’m picking Just Buy Live (JBL) because they’re in the FMCG distribution space — a space Bizom knows intimately.

TOO BIG TO FLY

JBL appears to have ceased operations late last year (though the company is yet to confirm it). This great article in Ken talks about how JBL’s brilliant vision to digitize retail supply (distribution) and iron out the inefficiencies was derailed. Through interviews with ex-employees and other people in the know, it pieces together how JBL lost the plot and ended up doing all the wrong things — TV advertisements, discounting — without first fixing the operational inefficiencies that had resulted in very poor unit value economics – a classic recipe for failure. Soon enough, they blew through Rs. 140 crores of capital but fell short of delivering on their value promise: of changing the retail supply ecosystem for the better — and, consequently, lost customers and money.

In short, JBL failed because it neglected to add enough value to its customers’ lives.

All the other problems listed in Ken’s analysis – from the lack of customer loyalty, to the need to market expensively, to costs outweighing revenues – stem from this basic problem of not adding enough value. Mind you, “enough” is as important as “value” in that statement – how much value you deliver decides whether customers will pay you enough to make a profit.
All failed companies have this in common – not being able to deliver enough value to sustain the business. But don’t just take our word for it. CB Insights, the newest and smartest kid on the business intelligence block, lists “No market need” as the top reason startups fail.
Coming back to the JBL example – the question they should have constantly asked themselves is — are we adding enough value to brands and retailers to convince them to step away from their traditional way of doing business?
The answer seems to be no, despite the founder Sahil Sani pulling all stops to deliver a comprehensive offering. Sani, an established distributor of JBL (the electronics company) and Harman/Kardon, put in crores to try to achieve pan-India coverage. The company offered a range of services for brands and retailers across 30 product categories, along with complete logistics support, customs and clearance for international brands, and even after sales service. To gain traction and credibility quickly, it did what few B2B companies in this space do — it put out TV ads during IPL, Indian advertising’s equivalent of the Superbowl and just as expensive. JBL also extended credit and discounts to retailers.

However, at the end of the day, it looks like JBL failed to convince it’s most important customer, the retailer, to switch allegiances from the old model to JBL’s. The company’s reliance on giving credit and discounts only created new problems in the ecosystem, while true value lay in making the system less reliant on credit by predicting demand and optimizing stocking, thereby improving capital rotation and ROI.

Let’s break this down further. To unlock real, lasting value, an innovator in the retail distribution space must focus on all the stakeholders in the retail ecosystem. They must ask:
– Are brands getting the analytics and automation required to run their supply networks efficiently?
– Are distributors carrying the right amount of stock to meet the demand in their particular markets?
– Do retailers (and the salesmen taking their orders for stock) know exactly what to order, when to order and how much to order?
To cut to the chase, JBL’s overarching concept – to digitize and streamline retail supply – required a far more bottom-up approach. The value to the littlest guy in the system – the retailer – should have extended past easy credit and on-demand delivery. It should have helped him become a more intelligent, more responsive retailer.   

BIZOM’S PHILOSOPHY

Bizom was developed on the advice of industry insiders who were looking for a solution for the CPG industry’s retail supply inefficiencies. We have been lucky to have customers who are committed to  automating and streamlining their supply networks and retail operations. Their support has helped Bizom develop 360-degree workflows designed for the Indian ecosystem. Our solutions set off a series of positive outcomes for manufacturers that get passed down the ecosystem all the way to the end of the supply chain, transforming the lives of small retail entrepreneurs. No credit and no TV ads required.
Curious about the value Bizom delivers? You can start by checking out our outcome map that highlights all the results and metrics we help our customers achieve. More about the outcome map here.

Do you want to deliver outstanding value to your customers every single time? Check out Bizom Insights data-backed posts for trends and strategies to do just that.