“The startup life is a wild ride; survival demands more than a map—it requires a compass, and that compass is Agile.”
In the unpredictable world of startups, where 9 out of 10 face the stormy seas of failure, Agile emerges as a guiding light. From insufficient market understanding to struggles of cash burn, startups wrestle with an array of challenges.
There’s a lot of uncertainty and a wrong step could mean the end. Yet, chances of failure can be minimized; or in fact it can even be an opportunity or stepping stone — to learn, adapt, and rise stronger. It’s here that Agile mindset and putting it into practice can make a difference.
Here is an attempt to unveil the practical application of Agile principles and address some top reasons startups fail.
Top 15 reasons startups fail:
In the relentless journey of startups, failure often looks at you from a close distance. Understanding the terrain of challenges is crucial to move through this uncertain path successfully.
We highlight key reasons that often challenge startups and show how Agile principles can help address each. Although, it is important to know writing is easier than following and executing and a lot of it has to do with culture, environment and management behavior.
1. Lack of Market Demand:
Starting a business involves understanding what your target customers need. This requires a keen understanding of market needs. Agile, with its focus on collaborating with customers and making adjustments through iterations, helps to foresee and fulfill market demands.
Example: Let’s take the example of a hypothetical startup called TechGear Innovations(TGI). TGI is developing a cutting-edge fitness tracker and assumes an initial set of features for its MVP launch. They work closely with potential Customers and users to get feedback, validate their assumptions and identify some holes in their thinking. They go back and modify their requirements. Their MVP, as a result, fares much better than it would otherwise.
2. Go-to-Market Strategy Woes:
Launching your product successfully demands a well-thought-out strategy. Agile’s approach, with its adaptive planning and early delivery, ensures your strategy is not just thorough but also flexible to market shifts. The initial releases and reviews should answer the question, “Are we building the right product?”. Once that is in place, the subsequent releases and reviews should answer the question, “Are we building the product right?”
Example: Let’s say TGI’s initial strategy was to focus solely on online sales. Working with an Agile coach, they shifted to adaptive planning. This prompted them to move away from sticking to a fixed, rigid go-to-market strategy. They decided to release the initial version of the product locally before a broader launch. This was a result of insights gained through the development process and studying the changing landscape through customer collaboration.
3. Poor Product Development:
A flawed product can be a death knell for startups. Agile’s iterative development, collaboration, focus on technical excellence and systems thinking (keeping the big picture in mind approach) ensures continuous improvement. It aligns development with changing requirements and enhances the product as it evolves.
Example: Let’s say TGI faced issues with performance when their fitness tracker was released locally. They collaborated with customers, refined technical aspects and ensured the performance improved with iterations and regular firmware deployment ensured customer happiness.
Building something great means constant refinement – each iteration is a step towards excellence
4. Bad Business Model:
Agile thrives on adaptability. It encourages constant reassessment and adjustment, providing startups the agility to refine their business models based on real-time feedback and market shifts.
Example: TGI’s initial revenue model relied heavily on direct sales. Adaptive mindset encouraged them to experiment with subscription based models and partnerships based on real time feedback. As a result, they were able to positively impact the sales and loyalty for their fitness tracker.
5. Pricing and Cost Issues:
Striking the right balance between pricing and cost (without compromising quality) is important for any company, and more so for startups. Agile’s emphasis on sustainable development and continuous attention to technical excellence can provide startups with ability and insights in making cost-effective decisions without compromising quality.
Example: Let’s say TGI was struggling to balance pricing and cost. They worked with a lean approach to identify and eliminate unnecessary waste in their manufacturing process, thereby cutting costs without compromising quality. They also focused on technical excellence and improvised features that truly added value.
6. Not the Right Team:
The success of a startup rests on the shoulders of its team. Agile’s people-centric approach fosters collaboration, transparency, and adaptability, ensuring that the right team dynamics are cultivated for success.
Example: TGI’s teams faced communication gaps. There were lapses in accountability and results were impacted. Safety and trust issues came up often. TGI invested in strong Servant Leaders coaching and guiding their teams. The leaders encouraged collaboration and swarming and acknowledged and rewarded people who showed such behaviors. This resulted in transparency, collaboration, and skill development, ensuring the team dynamics were conducive to success.
7. Being Unprepared for Market Changes:
Startups are at the mercy of market fluctuations. Agile, with its responsiveness to change and regular reflection, equips startups to not only weather market changes but also leverage them for growth.
Example: TechGear anticipated the volatile nature of the fitness tech market. They utilized Agile principles to remain adaptable, monitored, reviewed and retrospect market trends, and quickly adjusted their product roadmap based on emerging changes.
8. Failure to Learn and Adjust:
Learning from mistakes is a cornerstone of Agile philosophy. It cautions us about the missteps and guides us with adapting and improving. Agile reviews and retrospectives provide a structured way for startups to learn, adjust, and iterate.
TGI instituted regular retrospective rituals where the teams openly discussed failures and successes. This allowed them to learn from mistakes, adapt their strategies, and continuously improve their development and business processes and people behaviors.
There is no such thing as failure …. Only Feedback
9. Inability to Raise Capital:
Agile principles encourage delivering value continuously. This not only improves the chances of attracting investment but also ensures that the capital raised is judiciously used (to drive desired outcomes) which is ensured by working closely with the customers.
10. Bad Timing:
Timing is everything in the startup world. Agile’s iterative cycles and short feedback loops enable startups to quickly adjust their timing based on market feedback, ensuring they stay in sync with industry trends.
“Timing is not just about being in the right place at the right time, but also about making the right move at the right time.“
11. Ignoring Cash Burn:
The burnout of cash reserves is a constant threat. Agile, with its focus on sustainable development and incremental progress, aids startups in managing their resources effectively and avoiding cash burnout. Funding incremental releases, pausing for feedback, reassessing funds and how they should be mapped to further features are good Agile practices for startups.
Example: Working with Agile Coaches, TGI implemented above Agile practices and made every penny count for sustainable growth.
Strategic cash management is key to startup survival—making every penny count for sustainable growth
12. Lack of Core Skills:
Agile values continuous learning. Startups can leverage this by creating a culture of skill development, ensuring that team members are equipped with the core skills needed to drive the company forward. Swarming, pairing, developing T shaped or Pi shaped skills should be encouraged amongst the developers
Example: TGI leaders encouraged learning and invested in the growth of their employees with free lunch and learn sessions, funding conference participation, quarterly hackathons. Award winning ideas were incorporated into future product features.
13. Overlooking the Competition:
Agile promotes regular reflection and market analysis. Startups can use this to keep a vigilant eye on the competition, ensuring they don’t lose sight of industry trends and stay ahead in the race. Encourage your team to create story maps from day-1. Keep this as the source of truth. Mark areas where your potential competitors have an edge and areas where your target customers have pains challenges. This will help you create a development strategy to maximize your outcomes while deciding your next release.
14. Weak Foundational Partnerships and Communication Issues:
Building strong partnerships requires effective communication. Agile’s emphasis on collaboration, face-to-face interactions, and open communication channels strengthens foundational partnerships and resolves communication challenges.
15. Burnout and Lack of Passion:
Agile’s people-centric approach values work-life balance(Principles #8). Startups can embrace this principle. Also working with true understanding of iterative and incremental and carefully avoiding the agilized waterfall trap can really help promote sustainable pace despite being a startup.
Conclusion:
While there is meaning to these thoughts, It is easier said than done. Agile and Scrum are abused in their current understanding by most people. Instead of focusing on the first principles and basics of Scrum, many go onto experiment from day one. “By the book” has become such a big escapist attitude. In the end I hear people saying that Agile and Scrum do not work. I think, with such an attitude nothing will ever work perfectly. But nothing is perfect and it does not have to be so. However, Agile and Scrum do work. There is a need for adaptation but it should only come with a deeper understanding of the why behind each recommendation. The ideas presented here will only work with some discipline and behavior changes and it needs to start with the leaders…
