5 Biggest Reasons Companies Fail – and What You and UX Can Do To Prevent It

The Etiology of Business Failure

No reputable business seeks its demise. Just as death is inevitable, so is a business’ end. Whether or not every company ending constitutes “failure” is another article, but the indisputable fact is businesses fail. How – then – does this happen?

There are many causes – but here are 5 major underlying signs your organization may be headed the way of the Titanic, and here’s what you can do about it.

Whether or not you are an individual product contributor, a manager, or even the CEO – you have a direct voice, and ergo, impact on your company’s destiny: its underlying financial well-being determining your own economic state.

Your future hinges on your ability to put out the following fires, and warn the ship’s crew to avert disaster. Will you speak up and take action today, or ignore potential disaster?

5. Positive Reporting Bias

Nothing but good news! Then… nothing.

Transparency is key to trust. We live in an imperfect world, and know roadblocks will hit. Sadly, however, the dust often gets brushed under the rug in favor of appealing to the masses. Grandstanding, pep rallies, and nodding heads entice a weak leader more than somber silences.

Like most people, executives and business leaders place their own value in the wrong items: where a company misstep may cause them to shudder at the thought of facing their own imperfections cast onto a crowd.

Many people have been there. “We had an amazing quarter. We closed all these deals,” turns into silence – and suddenly “Important Update” is scheduled on a calendar, announcing mass layoffs. How did it come to this?

The truth is people fear truth. Just as a glance at the scale or mirror has potential to dampen morale, leaders cling to delusion over reality – forced to face the sirens at the final call.

The truth is people fear truth.

https://www.valuxr.com/5-biggest-reasons-companies-fail

If you are not an executive, how – then – can you make an impact to ensure a disaster is put out?

How You can Reduce Positive Reporting Bias

The key to preventing positive reporting bias is to understand its origin. Before we mentioned the likely etiology is a desire to appeal to masses. A desire to be valued that stems from the human fear of man. This can be a toughie – especially when the root comes from higher up.

However, understanding the human fallibility of everyone aboard and appealing to their need to be valued – while still reporting or requesting negative outcomes pokes holes in the deception that reporting the truth will end said reporters’ tenure.

There are three means any individual contributor or manager can combat bias towards positive results: (1) request transparency, (2) demonstrate transparency, (3) translate all poor performance into actionable opportunities.

Requesting Transparency

Let’s dive into the first solution. Requesting transparency daunts people. Often, in a Zoom call or all-hands of 500, it’s hard to speak up to a group of people that may have the power to end your livelihood. That being said – your voice actually has underlying protection: the armor of self-interest.

Finding the leaders communicating or obscuring results and reframing your request for accurate data as something that will greatly benefit broken barriers.

Executives don’t want to be humiliated nor appear weak. Retaliation can be a common consequence – like a dormant snake striking back if it feels publicly outed. Hence, if your words do not pose any threat – the pressure of accountably appearing good to the company will likely work in the favor of transparency.

People naturally hide what shames them. Communicating you and others are paid to help the company get out of whatever rut it might be in goes a long way to build trust – a vital prerequisite for transparency. What – exactly – are the ruts is then an easier question to answer.

Demonstrating Transparency

Actions speak louder than words. Demonstration outweighs oration. Thus: the second solution is to enact precisely what you seek from reporters.

Having the confidence to report negative outcomes, and distancing said outcomes from self-worth, not only accelerates your own career maturity – but that of colleagues. We have but one choices in life: change the truth, or allow the truth to change us. Join the latter category, and invite everyone in.

We have but one choices in life: change the truth, or allow the truth to change us.

https://www.valuxr.com/5-biggest-reasons-companies-fail

Business is far more enjoyable when discarding the pretense people are better than they actually are. Why? Said pretenses are shields to protect against attacks.

If a business is on a ship, arms should be preserved for other ships – not for other crewmates. Hence, disarming via demonstration is an essential business survival skill.

Translating Poor Performance into Actionable Opportunities

The final – and most pivotal – response to positive reporting bias is to create and enact an action plan. When people are in debt or gain weight, despondency and despair are more dangerous than the debt or fat.

The biggest freedom from said vicious cycles comes when a person finds the “impossible” exercise or money spending habit stepping into the right direction was not only possible – but they already completed and actually enjoyed it. This not only kills lies of inadequacy, but buries the related skeletons of despondency.

How – exactly – can the above solutions have any sizable impact, especially when a company is on red alert? The answer to this is user experience.

How UX can Reduce Positive Reporting Bias

To understand user experiences’ role in value creation, check out this article. The short version is that companies tend to hyperfocus on customers over users: optimizing the process towards people buying their products, rather than the actual long-lasting value gleaned from people using your products. The product must then adapt more than the person.

The product must adapt more than the person.

https://www.valuxr.com/5-biggest-reasons-companies-fail

This fresh perspective thankfully has a quick turnaround time. How? Nothing pops a bubble more than evidence. Gaps between product expectation and user reality can be revealed by a two-punch tactic: (1) 1:1 user interviews and (2) surveys or analytics.

The first solution yields an empathetic human element – a person in a video clip honestly describing what your product or service lacks and why.

The second solution ties said human element to larger trends: combatting any doubts that the singular feedback isn’t merely a sole disgruntled user. Pointing to evidence is far easier than pointing a finger at a leader: also paving an action plan.

Pointing to evidence is far easier than pointing a finger at a leader…

https://www.valuxr.com/5-biggest-reasons-companies-fail

Applying the three aforementioned means of confronting positive-reporting bias – requesting transparency, demonstrating transparency, and enacting opportunity – the latter is the most conducive with translating the problem space into the solution space in the design thinking model.

Presenting executives and leaders with user-informed problems is essential: but inviting stakeholders to ideate solutions and evaluating said solutions with the same users takes every single problem and translates it into an opportunity.

This type of thinking exemplifies the fallacy of positive-reporting bias: a missed opportunity to boost revenue.

4. Overspending

Funding is beautiful, but also dangerous. While funds may come and go – it is a business’ attitude towards money that remains.

Habits – patterns persisting through time – are what determine an organization’s destiny. Many businesses don’t realize their purpose as a value-producing machine: strengthening, rather than diminishing, relationships on both sides of the value mirror.

Funding is beautiful, but also dangerous.

https://www.valuxr.com/5-biggest-reasons-companies-fail

Why, then, do so many companies spend so irresponsibly? While it – indeed – costs money to make money, removing “every barrier” to productivity does nothing but remove employees.

Perks attract people. But more than beanie bags, expensive catered meals, deluxe offices, and numerous software subscriptions; people value culture and stability over amenity.

What is the core business user value proposition?

How does every role, tool, and piece of real estate align with said value proposition?

A lean business is able to rely on needed resources to optimize quality.

How You can Reduce Overspending

How much do you cost?

How much value do you provide?

Note: none of these question your immeasurable human worth; rather – they challenge a putative defense you can make to objectively justify yourself as a functional unit.

How much do you cost?

https://www.valuxr.com/5-biggest-reasons-companies-fail

Hiring you, your organization made the assumption the benefit you yield outweighs the cost your consumption of time, tools, and salary brings. Do you make this evident? 

Many people are cognizant of their footprint – be it carbon, carnivore, chemical, or cake. Adding to the mix of “C’s” is our corporate footprint.

This doesn’t mean to skimp on meals while on the company dollar, or to use Microsoft Paint in place of Adobe Illustrator. Instead, this gives a purview and recognition of how much you and teammates cost to operate. If money gets tight: how can you shave off costs without loss in quality?

People and tools cost money. How can you balance both? Tools are cheaper than people, so start there. Make the following questions transparent, company-wide:

1. What is the company-to-organizational unit inventory of all software subscriptions and tools we are paying for?
2. What is the quarterly cost associated with each tool?
3. What are the usage rates of all these tools in the last quarter?
4. What internal Jobs to be Done does each tool enable?
5. If none of the above satisfies a need, is there a business justification template employees can use to inform a cost/benefit analysis?

Not only will the above inform every employee what their functional unit has access to, it may also remove tool redundancy across enterprises. “I need to record client calls” may justify a Zoom license over a Microsoft Teams license – even if you are the only user – but does the company know why it is needed?

That is your responsibility to communicate. Perhaps supporting that single role is worth the subscription for said tool rather than increasing headcount. Surface this information with guidelines, rather than hardened rules, to reduce overspending.

Demonstrating respect for a limited purse is not only infectious: it carries respect for yourself.

Money symbolizes value: and displaying a willingness to save costs that might otherwise result in needless employee termination not only reinforces your own value, but also discreetly disciplines those operating without a sense of the finite.

Demonstrating respect for a limited purse is not only infectious: it carries respect for yourself.

https://www.valuxr.com/5-biggest-reasons-companies-fail

While no manager enjoys settling with a slightly more inefficient tool – the ability to adapt and still perform with less is a test. Similar to a surgeon in a third world nation, have you been put to the test? Doing so can only strengthen treasures no man can rob.

How UX can Reduce Overspending

There is a dissociation with user experience and cost reduction. This is likely due to the common Achilles heel outlook that UX is a luxury rather than a necessity.

When an entire business unit is deemed a luxury – all associated costs are deemed egregious unless they prove return of interest. Few people realize the fatal flaw in this assumption: UX is at the core of cost reduction.

UX is at the core of cost reduction.

https://www.valuxr.com/5-biggest-reasons-companies-fail

How can such a bold statement be made, when essential functional units like marketing, sales, customer service, and engineering exist? Unlike other functions, the longstanding value, the beating heart of the customer/seller relation, is the experience a product user gleans. 

Customer support is short-term, whereas user experience defines long-term product value. Is there really any more to business then listening to what people want, to what people need – and providing the best common solution you can support?

How – then – does this relate to cost savings? Few things cost more than going too far in the wrong direction.

A car trip from Miami to Las Angeles isn’t benefitted from a detour to New York City – especially when said car is in disrepair. Any sane person would research the route thoroughly before embarking in such a vehicle.

Few things cost more than going too far in the wrong direction.

https://www.valuxr.com/5-biggest-reasons-companies-fail

User Experience research is no different: providing a straightforward means of translating user feedback into product roadmaps.

Moreover, methods like Rapid Iterative Testing and Evaluation (R.I.T.E.) tighten iterative feedback loops that would otherwise cost entire development life cycle loops to learn from. – leading to the next major form of waste.

3. Wasted Time

Time is money – especially when stakeholders are involved. Just as a savvy college student might calculate the exorbitant costs of missing an hour of lectures; business leaders should calculate the net expenditure of every overstuffed Zoom call.

Whether on salary or contract – every hour is time we can never get back. Note: some calls are essential for success – especially those that involve net creation of valuable deliverables. That being said, the ratio of said meetings to frivolous boredom is likely to be exceedingly low.

If there is an elephant in the room of every company: it is that so much time is wasted every day. Designers and engineers hired to design and to code face difficulty fulfilling what they were hired to do – because of a packed schedule.

Work becomes discussions detailing deferred work. People often look at problems rather than solutions, and tools saving time are often overlooked.

People fear reprimand. Saying “No” to a meeting is often paired with the pressure of delivering enough to justify one’s absence. Instead of forcing high performers to dodge meeting invites, it’s often best to limit scheduling them.

Forty-five minute pontifications might have been best served as Slack or Teams messages. Perhaps an input/output + outcome requirement for every meeting invite isn’t a bad idea.

Transit time, overgeneralized messaging, virtue signaling without substance, inordinately congratulatory speeches, and processes without purpose all add up. This is not to insult company culture, but moreover to align everyone with a unified sense of diligence: the solution.

How You can Reduce Wasted Time

Addressing wasted time starts with brutally honest look at your calendar. Why are you paid for what you do? Are you fulfilling what you do for the time you are allotted? If not, what – then – fills your time?

The answer to the latter question isn’t a blame game – “Bob’s boring standups” – but rather a call to action. Assess Bob’s standups. What is the net change, the value outcome?

Would outcomes change if Bob’s standups were removed?

Why are they boring?

Check your own area of responsibility. Have you taken every measure to contribute value?

If the answer is yes, then let Bob know directly you won’t be attending to maximize your time doing your job. If the meeting is mandatory, gently and respectfully communicate you feel the meeting format is not maximizing the value you could contribute, explain why, and propose some ideas for change.

Have you taken every measure to contribute value?

https://www.valuxr.com/5-biggest-reasons-companies-fail

Excellent! You now have more free time, you need to apply the same hardened test.

Are you using your free time wisely?

Again, what is your business value? Not your immeasurable human value, mind you, but what measurable deliverables do you bring to your company?

If you were fired, what would the company lose?

How can this be tied to revenue: not necessarily a love for money, but an uptick in value reflected in said money?

Finally: are you using your free time to measurably yield said value outcome? Are you optimizing the time-to-outcome processes via automation or delegation?

Distractions cost tons of money, and this time razor needs to be applied to each and every day. The office breeds distractions, and company-wide, leaders need to assess the purpose behind their office purchase. Are they justifying a real estate portfolio or running a business to yield value?

How UX can Reduce Wasted Time

Research doesn’t slow down processes: it slows down failure. As discussed in another article, user experience is divided into design, research, and strategy.

Research doesn’t slow down processes: it slows down failure.

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Underlying all three components is design thinking. User experience research – namely the design thinking questions, “Are we designing the right thing?” and, “Are we designing things right?” – don’t just save time, they save businesses.

Too many people consider research to be a blocker, but – when done properly – user research is a catalyst. Take the following metaphor: you invest money in a road trip, but sadly have just enough to pay for gas to your destination.

While the motto “fail fast” may drive you down every shortcut, the unaffordable cost of repairing your car now stuck in a sinkhole will have you wishing: “I would have arrived sooner had I researched the route.”

The same is true with businesses. Failing fast to pivot is the right mentality, but it requires teachability, planning, and the proper staging to reduce the consequences of failure and maximize the invaluable lessons.

Rapid iterative user testing (the RITE method) or testing a prototype over three weeks with 15 customers before release is far less expensive than paying the entire engineering team to release a rebuilt course correction months later.

When you’re in a ditch, it’s hard to unhitch. Once you go full stack, its hard to turn back. Pivoting requires movement, but if you move too fast – it may just propel you off the cliff.

Once you go full stack, its hard to turn back.

https://www.valuxr.com/5-biggest-reasons-companies-fail

2. Lacking Empathy: Deafness towards Customer and Employee Value

The traditional product life cycle with four phases – Introduction, Growth, Maturity, and Decline – is broken. While we live in an impermanent world, where our death is as guaranteed as the period at the end of this sentence; dooming your product before it even begins is a recipe for disaster. 

Your product will never be perfect. It will never fully fulfill the value users and customers seek. Ergo: it has unlimited capacity to iterate.

Your product will never be perfect.

https://www.valuxr.com/5-biggest-reasons-companies-fail

How does it iterate? Facts over feelings. No – we speak not of cold hardened metrics or OKRs, but rather measurable empathy in the form of the metric that matters most: revenue.

How You can Increase Customer and Employee Empathy

Replace “Decline” with “Iterate/Innovate”.

Your employees exist to delegate and diversify the value you bring to the customers.  This value is represented by the revenue.

Balancing the right amount of employees and their due salaries and work hours with the right amount of value exposed to the right customers should yield net positive value in the form of net positive revenue. This may seem idealistic, but without said ideal – there is no point.

The first step to increase empathy is to increase your capacity to listen. Hold yourself accountable to the outside and the inside, and something crazy will happen: people, neurologically empathetic creatures, will work harder to improve the ugly truth. Your company will transform from the inside out.

Hold yourself accountable to the outside and the inside.

https://www.valuxr.com/5-biggest-reasons-companies-fail

How does this happen? User advocacy.

How UX can increase Company Empathy

While we previously described user experience research – answering the questions, “Are we designing the right thing?” and, “Are we designing things right?” – as the ultimate time saver: we failed to fully articulate how and why.

80% of research is wasted, not due to the fact it is bad research but due to the fact it is poorly shared. Do you spend your time reading economic journals, cybersecurity dossiers, or urology publications? Likely not.

Why? They’re typically boring. The words don’t stir up empathy or interest inside you, and it drones on and on without visual excitement.

The most effective form of research isn’t quantitative, it’s qualitative: actual videos detailing the patterned lives of the people who pay money to use your product or service.

While you can find more detail about how your brain is wired to provide value in this article; the rundown are a few special cells called mirror neurons.

When you watch people get hurt on camera, your pain receptors actually activate. You don’t just empathize with emotions: you mirror them.

The same is true with videos of people doing their jobs without your product, and with your product. Share these videos. Break the bane of all business.

You don’t just empathize with emotions: you mirror them.

https://www.valuxr.com/5-biggest-reasons-companies-fail

1. Pride

The killer of all businesses is pride. Pride is not only the cause of all above reasons, but it is a guaranteed trait in every human being.

Pride is the natural assumption we are innately good. This may seem morbid, “Am I not good?” – until we look at the true definition of good. Etymologically, good in Old English means “God”: the precise standards we are measuring.

Last we checked, no humans are timelessly perfectly blemishless, omniscient, omnipresent, omnipotent, nor immortal creatures. Ok, so what does this have to do with business fatality? We have the tendency to assume we are good.

To assume there’s a market suited for our brilliant idea. To assume our ideas are important. It’s human nature to drown out the ugly truth. But, twist all the truth we want – we can never change it.

Twist all the truth we want – we can never change it.

https://www.valuxr.com/5-biggest-reasons-companies-fail

We are not God, nor are we giants. We are ants. The moment we wake to this is the moment we realize it is not the giants that see the mountains, it is the ants.

How You can Reduce Pride

We reduce pride by confidently assuming we are wrong, but teachable by the truth. The truth is not crowd pleasing: it is cutting through all variables to find the constants – the consistent patterns across all samples.

We don’t want to be so indecisive, so open-minded that our brains fall out. We don’t want to speak with a stutter and allow thoughts and currents to overtake our resolve.

But, we do recognize that our company mission to interject good, ideal, value is not wrong. How we get there is always “wrong”, with infinite room for growth.

“Humility is the mother of giants. One sees great things from the valley; only small things from the peak.” G.K. Chesterton

This may have veered into more philosophical territory than makes you comfortable, but it is actually imminently applicable in day-to-day company interactions.

How UX can Reduce Pride

Herein lies the most important takeaway in this entire article: remove your assumption bias your product is the “best”. Let the users tell you positive product feedback, and echo it across your teams; but never, ever falsify it.

Let the users tell you positive product feedback but never, ever falsify it.

https://www.valuxr.com/5-biggest-reasons-companies-fail

Separate conflicts of interest: put user research in a safe accountability zone – where they report the brutal patterned truth, always backed by triangulated patterned data with qualitive interviews at the forefront.

This doesn’t diminish positivity, but actually amplifies it. No team that spends half of their waking lives working on and owning product or service creation relishes the truth their “baby is ugly”.

The moment company culture shifts, and this assumption is thrown out the door with robust user research data is the moment companies stop being deaf or fatally marked by product demise.

Why? Their financial future is now tied to the timeless patterns underlying user voices, not a product as variable as a burst bubble.