Of course you fail if no customers, but odds are you'll make the same mistake, because assuming customers, given the stats, is what you will do too. It takes more than just mental resolve you won't make that mistake. Every one of the failures cited were run by people speaking the mantra "customers first" without ever first getting customers.
Markets are grossly divided between commodity and specialty. A start-up does not have the economies of scale to compete in the commodity realm, so as a start-up that is a non-starter. I've encountered countless people pursuing commodity merchandise as a small business, and they seem to find "customers" rather quickly. In my experience these business failures involve a lot of money too, but it is lost by the entrepreneur being scammed out of the money, not burn rate looking for customers. Here again, people come to me with questions and my first question is "who is your customer?" In the commodity trade, they have a ready answer. They can name names. I look at their deal, and can tell them instantly how and when they will be ripped off. ("I am buying from Cargill! Selling to Mitsubishi!..." ... No, you aren't.) I can tell them how to structure the deal so they cannot be ripped off. But alas, by that time, they have been conned, and cannot see what is happening.
In the movie House of Games, David Mamet's study of con artists, the con artist makes the point the trick is for the con artist to establish confidence in the mark himself, not in the con artist. Then when the mark realizes he has been ripped off, he feels stupid, and is unlikely to complain, if only because there is no sympathy, everyone says, "how could you be so stupid" or worse, "I told you so." I can't think of a single person pursuing a commodity deal that ever came back to me with an update.
But that is commodity business, where no one should start up. Startups are necessarily specialty, another generation of division of labor. And here is yet another difference between commodity and specialty: for the startup, the customer cannot possibly be known. The customer does not yet exist. The startup, following Drucker in his book Innovation and Entrepreneurship, innovates and creates customers. As a startup, how can you know you have customers, when necessarily they do not exist?
Yet, our muse, what normally drives entrepreneurial effort, is the vision of the customers. But that vision is fantasy, indeed, delusion. How exciting! Build it, and all these people will come. Keynes, the regime economist, cites J B Say "supply creates its own demand." It is a stupid thing to say, so Keynes attributes it so Say. Say never said it. "Supply creates its own demand" is taught in all the business schools and assumed in all the business media. Thus we have several generations brainwashed into believing they need only produce, and the customers will magically appear. Hence many assume customers.
(George Bush senior accused Reagan of advocating voodoo economics. Bush went to Yale. Yale's top economists won a Nobel prize, and holds many positions in the commanding heights. His work centers, following Keynes, on "Animal Spirits" driving the economy. Talk about voodoo economics.)
So who succeeds? Those who assume no customer. Those who understand the customer must be created. Now as a preliminary, one more dimension. You hear to succeed you must have passion. True enough, but here again, we have deluded ourselves to think "excitement" "commitment" "fun" when we hear the word passion (to suffer.) Startup necessarily means to suffer, as what you want to do, the solution you offer, meets real customers and requires change to satisfy the customers. And there is the second part to passion, required for start up, which as far as I know no one else has ever noted. Passion is the genesis of the startup, but the entrepreneur must also experience joy in working on the solution. We must have passion and joy, or we cannot compete. We suffer when those we would have as customers reject our solution, we experience joy as we work on integrating their demands into our offers. Steve Jobs modeled the first Mac on the Cuisinart (the computer as home appliance) and declared it "insanely great! (passion, joy)" And here is another tricky part of start up, you cannot get to joy without first suffering. Women have a huge advantage over men in start up, since they instinctively know this. Any one starting up a business assuming there are customers is delusional, and destined to fail.
Drucker says entrepreneurs do not take risks. All those companies cited in the CBInsights report risked all by not getting customers first. Since they took that risk, they were not entrepreneurs at all. They are Keynesians, and assumed customers are created by production. It's what they teach at school, it is what the WSJ and all business media assumes, what all bankers promote in their effort to enslave by lending limitless credit, what government assumes. They are wrong.
Now you know better.
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