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Small Business Postmortem: Funeral for a Friend

Picture of napkin doodles someone makes as part of doing a small business postmortemA few weeks ago, an old vendor we still buy a few items from called. And for an odd reason. They wanted help with a small business postmortem of their firm.

Their business model had failed. They wanted to talk about the failure. And they had assembled a small group of stakeholders to provide insights.

In the weeks since this small business funeral, I’ve thought a lot about what went wrong with their venture. And this post is the result.

I think I have three insights from this small business postmortem. But to paraphrase the opening text from the 1996 Coen Brothers movie, “Fargo,”

At the request of the survivors, the names and some of the details have been changed.

Out of respect for the dead, the rest has been told almost exactly as it occurred.

And now let me share my thoughts and get your thoughts. Actionable insights probably flow out of understanding what slowly killed this small business.

Obsolete Core Products

A first quick observation about this firm and why it died…

Within its industry, lots of research over the last twenty years had pretty thoroughly proven their core product conflicted with modern science and current best practices.

In a nutshell, the firm’s core products were implicitly based on information and thinking that was maybe a century old or half a century old.

This reality was known to management. But for a variety of reasons, including industry orthodoxy and regulatory requirements, they simply weren’t able to update their core products.

The firm’s troubles probably started with this vulnerability.

And I guess the actionable insight from this element of their failure is simple: We need to update our products and services and “keep up with the times.” Because even if we can, for a while, continue to make and sell outdated products and services, eventually customers and clients will drift away…

Incomplete Re-engineering of Business for Technology

The small business postmortem highlighted a second issue, too—and an issue really common to small businesses. The firm didn’t adapt its operations for technology. Rather, the firm kept selling the same items in basically the same way using the same processes.

Many of their competitors handled the technology differently. Some used the technology to massively drive down their costs and therefore provide customers with really cheap substitutes. Some used technology to add new bells and whistles to their offerings and thereby provide truly improved solutions. Some used technology to target specific groups of customers.

Collectively, these technology-embracing competitors cannibalized those firms like the old vendor who still used the traditional, decades old formula.

This observation seems so, well, obvious… you almost can’t call it insightful. But haven’t many of us been too slow to re-engineer our firms for technology? I worry that’s the case.

De-Localization of Markets

A final thing this vendor got wrong…

For a bunch of reasons—many of the reasons understandable and some of the reasons even good—they didn’t expand their original geographical market.

As the world and the country became smaller due to things like the Internet and global supply chains, they continued to focus on their original, historical, and geographically-close customers and suppliers.

That sort of made sense.

But all the time they were “staying local,” other competitors, many of them new, were invading their local markets and their close-to-home supply chains. Often with the result that these competitors were creating better products or cheaper products. And probably with more efficient and scale-able business models due to technology.

Closing Thoughts on a Small Business Postmortem

You can ruminate on stuff like this and get bummed out. But can I point to two other insights that maybe we small business folk take away from this sort of small business postmortem?

First, there actually is good news here. You and I aren’t going to be surprised by this sort of change. We will probably have plenty of warning. We’ll hear the train whistle long before the locomotive and its cars come barreling down the track. (This old vendor did.)

Second, if you or I have been tardy about adapting to new science, technology or the elimination of geographical market boundaries, gosh, I think in most cases, we can fix all these problems very, very quickly.

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About Carol St. Amand

Carol St. Amand

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