My son does not always get his homework done. That’s not really news – he is 16, in high school, and while he does well on tests and knows his material, turning in homework is just not always a priority. Like I said, not much news there for a teenage boy in America.
But the numbers of American companies that don’t do their homework is another thing.
Not finishing your homework in business is dangerous. It is irresponsible. And it can be fatal.
When we talk about doing your homework as an entrepreneur, we mean doing the research and doing the thinking about your business strategy to make it work. Here’s an example from the history books:
In 1998 an entrepreneur named Greg McLemore started pets.com, an online store for pet supplies featuring a sock puppet in its famous (and famously expensive) TV ad campaign. Pets.com raised more than $300 million in venture capital during the dot-com bubble, before collapsing spectacularly.
Pets.com seemed to have all the right stuff. They had buzz – one Super Bowl television spot cost more than $1.2 million. Leading VCs like Hummer Winblad, and Amazon founder Jeff Bezos were big investors. Julie Wainwright, a hot young CEO hired by the VCs, was put in charge. The team at Pets.com was bold, brash and seemingly smart.
But somewhere along the line, they were ignorant. Not necessarily stupid, but definitely ignorant. Ask yourself a simple question: If Sparky is out of dog food, do you really want to go online and pay an $8 shipping fee to have a bag of food drop-kicked to your door? When there is a 7-11 three blocks around the corner? Think about that business model – or in that popular phrase (I can’t resist here) – will the dogs eat the dog food?
Business strategy does not always rest on the latest focus group (think Apple and Steve Jobs). But it does rest on vision. Market knowledge, intuition, and careful planning are required. Market research is indispensable in the broad sense that you must understand your customer, know your competitors, and have a vision for the future.
Pet.com investors put in more than $300 million, and got nothing in return. As I tell my MBA students, stop all this frenetic doing, and spend some time to just think. Develop your vision. Have a well-reasoned plan. Finish your homework.
And then, don’t forget to turn it in.