Date: October 2nd 2024
Success Ajilore
Introduction
One of the core essentials of business analysis is to help achieve comprehensive strategies for businesses, enabling them to scale up and achieve maximum growth for long-term relevance. These strategies will guide business owners towards navigating the complexities involved in the competitive business landscape. The service of business analysis, despite its usefulness, usually fails for startups, leading to financial loss, business inefficiency, and eventually, business failure. As confirmed from the report of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), over 80% of startups in Nigeria fail within the first five years, even with the professional expertise of business analysts. This article is therefore set to address the missteps of business analysts and provide practical solutions to overcome the challenges involved with startups.
Unclear Objectives
One of the primary responsibilities of business analysts is to help define and align the business objectives of a startup.
Getting clear the objectives of a given venture is key towards unlocking comprehensive strategies for that business, and in this regard, most business analysts fail to assess the actual objectives of a startup, leading them into a business foray with an unfocused plan resulting in failure. A clear case in this regard is a health-tech startup in Lagos, Medify, whose intention was to focus on providing health solutions to people digitally. While there’s an intention, objectives were not clearly defined, as they battled between creating a platform for telemedicine or developing an electronic health record (EHR) system. This ambiguity, compounded by business analysts’ failure to clarify the startup’s core objectives, led to misaligned strategies, customer dissatisfaction, and eventual closure in 2022.
Salvaging this situation, business analysts must work keenly with business founders to develop and curate clear objectives for the venture. This would involve the specific, measurable, achievable, relevant, and time-bound (SMART) elements to guide business analysts to ensure that strategies to meet customer needs are aligned with the company’s objectives.
Inadequate stakeholder engagement
The involvement of stakeholders in a company is the equivalence of business and growth, and this is one avenue that allows business analysis to thrive successfully. However, most startups undermine the importance of stakeholder engagement, where most of the business decisions are done in rigid patterns without considering the interests of stakeholders. According to the Harvard Business Review, companies with active stakeholder engagement in decision-making processes get a 60% high chance of succeeding.
Let’sPay, a fintech startup in Abuja, serves as an illustrative case here. With a unique selling proposition of streamlining online payments for SMEs. Business analysts failed to engage its stakeholders, such as investors and potential customers, before implementing strategies, which were based solely on the input of the founder. The result of the strategies flopped because of disengaged stakeholders that would have provided helpful data related to market competition, customer behaviour, and customer preferences. It’s therefore advised that analysts should always involve stakeholders from the onset to the end of planning processes, so risks can be reduced to ensure that intricate details that could present opportunities are not missed.
Over-reliance on Short-Term Solutions
Many startups are driven by the desire of quick returns, where analysts proffer short-term cues to actualise the aim. However, the benefits of short-term approaches are short-lived, but it deters the process of attaining long-term vision. FreshToGo, a consumer goods startup in Lagos, had a manifestation in this regard. They launched into the market with a strategy focused on sales discounts, which was recommended by their business analysts. Although it boosted sales, it sucked up most of the company’s profit margin, causing the inability to reinvest. After two years of this mistake, the startup struggled to maintain financial balance but couldn’t keep up; hence, they resorted to shutting down.
To prevent similar outcomes, business analysts are therefore charged to trade short-term goals alongside long-term ones. If any must be prioritized, long-term strategies should be considered. Because this would allow startups to soak into the process to achieve solidified strategies that would not only make the business relevant but also sustainable. Business analysts should decline the option of “quick win,” as its cons often lead to detrimental effects.
Insufficient Market Analysis
Market research is essential for any business. Failure to undertake appropriate market research covering areas such as trends, technologies, industry volatile seasons, customer demographics and psychographics, and competitors, attracts grave consequences. A comprehensive assessment of these factors gives credible insights to shape overall business strategy. Unfortunately, many startups fail to sufficiently understand the market, leading to a failure in operations. This fact is backed up by the study of PwC in 2023, revealing that about 68% of startups fail as a result of low market research, underscoring the importance of market research to drive the direction of business analysis.
Business analysts should frontline processes that involve market research, making sure it’s thorough enough to tick professional standards, and this goes beyond market and economic trends, but competitor analysis and customer segmentation, as this provides the cues to develop fresh strategies for business. When the market is understood, strategies would be fashioned to meet the needs of the target audience while capitalizing on industry trends.
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Inadequate Use of Data and Analytics
Data is paramount for any business, as this helps to track business history to provide concrete analysis for strategies ahead. The technology of data analytics is underutilized mostly because of a lack of expertise. Deloitte, in its study, attests to claims that 55% of startups in the world lack credible data measurements, which impedes growth. A logistics startup, QuickRoute, in Port Harcourt, took decisions based on generalization and assumptions instead of using different metrics to elicit data relevant to their service. This lack of insight resulted in service inefficiencies such as delivery delays and improper routing of customer locations. Their competitors forged ahead to utilize better data-driven technologies, leaving QuickRoute to fall behind as they eventually closed down operations.
In scenarios like this, business analysts must emphasize the importance of data analytics in order for right and informed decisions to be made. They should point startups to utilizing analytics technologies in order to track performance, stay informed on customer behaviour, and generally follow market trends. It’s data from this research that analysts would thoughtfully consider to curtail strategic recommendations.
Neglecting technological challenges
Technologies are great for businesses; however, the challenges they present, if not properly managed, can crumble a business. Startups, probably because of their shallow knowledge of technology, often overlook the challenges that they present. Business analysts who are also green in practice might fail to consider the limitations of these technologies and make strong recommendations, which may be difficult to implement in the long run. An example of this is an e-commerce company whose operations were set in Kano. The idea was to deliver essential goods to diverse people in northern Nigeria. Based on this objective, business analysts proposed the adoption of a digital logistics system without taking account of poor electricity and poor internet connectivity within the proposed areas of operation. Down the line, the strategy failed, and it led to high customer dissatisfaction.
The solution here is that business analysts should ensure that technological tools for operations are fully understood, inclusive of their limitations. Solutions should be planned in accordance with the startup’s capability and resources ahead of operation to prevent irreparable lapses.
Poor communication and documentation
Effective communication solves almost half of every business problem. If communication patterns are not properly organized, a lot of things might go wrong. In the case of business, when startups decode wrongly, they struggle to retrace, and this is in consonance with McKinsey’s report that revealed poor communication as the cause of over 56% of failed projects.
A fashion startup in Lagos received a comprehensive document from their business analysts concerning the strategies to be employed. The document was, however, poorly organized and propped with jargon that was overly technical. The founders with zero comprehension failed to heed the strategies, such that it made the company miss opportunities for set dates. Business analysts should ensure documents are codified clearly in a concise and simple format. This could include visuals and summaries for easy understanding.
Resistance to Change
Startups are assumed to have little or no experience in business; as a result, they hold on to their knowledge as supreme. This develops into a form of resistance for external ideas. They tend to enforce just their ideas, neglecting the suggestions of business analysts, which allow businesses to fail and stunt in growth. In cases like this, analysts should employ integrative systems like collaborative activities to enforce joint decision-making. When there’s transparent and open communication, startups could develop a sense of understanding and make necessary adjustments for substantial change.
Inadequate Resource Allocation
Business analysts often fail to weigh the financial and human resource capability of startups, which can lead to recommendations that cannot be implemented. An Abuja-based social enterprise was given a marketing plan, and because of unavailable human resources, the company struggled with execution.
Therefore, it’s necessary for business analysts to align their recommendations with the available resources of businesses. It has to be cost-effective and scalable such that realization becomes easy.
Conclusion
Over the years, business analysis has failed to succeed in startup ventures, and this is as a result of several missteps taken by business analysts. It’s important that analysts know the key areas of their lapse and ways for improvement to change the narrative. By going heads-on the solutions, business analysts will improve the effectiveness of their work and record business success in startups.
Success Ajilore is a highly seasoned accounting professional and business analyst with over eleven years of experience, specialising in enhancing operational efficiency, policy improvement, governance, and process optimization of various companies in Nigeria.
