The mantra that hard work and intelligence leads to business success underpins our society’s attitude to business. However, luck plays a more central role in the success of business than people give it credit for. As Sir Richard Branson said in his autobiography ‘Losing my Virginity’, “[…] if you have a good team around you – and more than a fair share of luck – you might make something happen.”
One area where luck plays a major part is in market appetite. 42% of failed start-ups identify a lack of a market need for their product as the single biggest reason for their failure. The obvious answer to this would be extensive market research, however few start-ups have such resources. Part of the leap that you make as an entrepreneur is the hope that your product will be embraced by the market.
This is especially true in the digital ecosystem where we are creating products of a kind never seen before, the types of products that not only cater to but shape human behaviour. In such a fast paced & fickle environment, the first mover isn’t always the one with the advantage. For every Friends Reunited or Ask Jeeves there’s a Facebook and Google hot on its heels.
Homejoy, an app that connected people with cleaners. is an example. Home cleaning is estimated to be a $400bn market, and Homejoy raised $40m in capital to go to market. However, the app suffered from what’s known as platform leakage, a situation in which employers start hiring their cleaners outside of the app once they find a cleaner they like, cutting out the digital middle man. It was sunk by something that nobody could have foreseen and therefore could not be accounted for. It was bad luck.
However, people remain optimistic and undeterred. 400K new businesses have been started in the UK so far for 2018, by people who probably took a leaf out of Levi Roots’ book: “most [entrepreneurs] have either made their own luck or at least taken full advantage when a little bit of luck has come their way”. Never has the idea that failure can lead to success been more important than in business; in fact, you’re more likely to succeed in launching a business if you’ve failed before, than if you’re brand new.