McKinsey consultants, report that for every successful market entry, four fail. Many of these failures after appropriate forensics have been applied are filed under ‘P’ for poor decision making or ‘D’, don’t do that again. It’s a cliché, but hindsight is a wonderful thing. If only. I should have known better. Why didn’t we see the issues? If you’re lucky, hindsight’s consolation prize can be insight. Unfortunately, a diagnosis of market entry failure is not much use to an enterprise often left reeling from an expensive misallocation of resources. Perhaps a better question to ask up front is why? Why are there so many failures?
Of course, as I write this piece, it is obvious to anyone in business that enterprises have been struggling to crack the market access challenge for as long as consultants have been writing about it. So, why is market access so tricky, and so risky? There are many reasons given for failure, but a common culprit is cognitive bias. This hardwired handicap is baked in to human beings and it is very hard to prevent or mitigate against, even for those with heightened levels of awareness.
It’s amazing how strongly we each defend our view, stay with what we know, or fail to stay open to options. This human condition can subtly and subliminally lock decision makers into choosing a particular course of action. The problem is, many commercial decisions related to market entry are flawed because the market research underpinning them has either not been undertaken, or been undertaken poorly. Without solid data to counter the existing biases of the decision maker, the biases remain. If the assumptions behind the biases are false, market entry failure won’t be far away.
There are plenty of famous cases where market research, even when undertaken by experts, has failed spectacularly too. For example, the Ford Edsel and New Coke are two classics. Dr Robert Hamlin from the University of Otago suggests, “Producing well-targeted research involves the development of a testable research proposition from the original research problem, and the decomposition of this problem into a complete set of research hypotheses that are capable of testing its validity.” Avoiding the staggering statistics reported by McKinsey’s above suggests that enterprises should encourage their market entry teams to pursue some deep, reflective thought.
Thinking carefully about market entry is critical. Careful assessment of demand, market size, product, pricing and of course market access assists with making sound commercial decisions. Testing the assumptions around each of these elements to exhaustion is critical for success. There is plenty of art and science around market research, but failing to conduct research definitely makes an enterprise vulnerable to becoming a statistic.
Commercial decisions are for real. Where decisions about market access initiatives are being taken, decisions are also been made about allocating scarce capital into what has been clearly identified as a high risk pursuit. For this reason, it makes very good sense to cross check all doors before you take off. Ozan Varol reports, “Although we glamorize rocket scientists, there’s an enormous mismatch between what they have figured out and what the rest of the world does. Critical thinking and creativity don’t come naturally to us. We’re hesitant to think big, reluctant to dance with uncertainty, and afraid of failure. These were necessary during the Palaeolithic Period, keeping us safe from poisonous foods and predators. But here in the information age, they’re bugs.”
To my fellow entrepreneurs. I leave the advice of my cabinet-maker grandfather. Measure twice, cut once. In other words, do your homework. Investing up front is never a waste of money. Just ask anyone who has hasn’t.