Why companies fail

Again, I found an interesting article in an old Red Herring, dated October 1999. It is entitled the Anatomy of Failure and more importantly, it was written by Geoffrey Moore.

There is not much to say about Moore (if you know him) but he is an absolute much read. In the innovation landscape, he can be placed between Bill Davidow’s concept of Whole Product (pdf) (Moore worked at MDV as a venture partner) and Steve Blank’s concept of Customer Developement. (I will come back soon on Blank and his book The Four Steps to the Epiphany).

In 1999, Moore used his concepts of Chasm and Tornado to explain why companies failed and here are his four main reasons:

1- The Slow Fail: Traditional management (accountability to the plan) does not work. Early markets are unpredictable and require a lot of flexibility.

2- The Chasm Trap: If early enthusiats may buy your initial product, you will need a much more complete product (The Whole Product) to satisfy the early majority. If not, you will be trapped in the chasm.

3- The Tornado Dive: if you are lucky enough to have created the “Killer App”, you may not face the chasm, but an antichasm: the inability to deliver a huge demand and manage your hypergrowth. A dream becoming a nightmare.

4- The Dead Zone: The previous grid shows an area which you may find moving from emerging market to crossing the chasm and finding the tornado. The pain and gain are decent but experience shows you will never reach mature markets, the place for the living deads.

In conclusion, Moore shows optimism and mentions the Full Circle: if you find soon that you are failing (“Fail Fast”), you can react (not follow the plan) and avoid the dead zone to either cross the chasm and/or enter the tornado. Then you may succeed. I scanned the full article, in case some of you would like it. Just email me.

PS (2021): Apparently the link with the pdf on the Whole Product is broken. Here is a video of Bill Davidow that might be the same event.

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