The power of a pre-mortem analysis
How to identify and address root causes of business failure before they occur
By Yannick Dillen
Professor of Management Practice
We often hear that many start-ups fail because they run out of money. But is this really the root cause of their failure? While it's true that many start-ups fail due to a lack of funding, Professor of Entrepreneurship Yannick Dillen says it’s typically more a symptom. The real causes often lie beneath the surface, such as poor market research, rushed product development, or ineffective business models. And cash flow problems are frequently the result of these underlying issues. If start-ups address these core problems early on, they can often avoid a financial crisis altogether.
Can you recommend any tools that start-ups can use to prevent or avoid failure?
Yannick Dillen: “A good tool for start-ups to help them prevent or avoid failure is the so-called pre-mortem analysis. This is a forward-thinking exercise where a team imagines a future scenario in which their start-up has failed. They then work backwards to identify what could have led to that failure. This helps to anticipate potential risks and challenges before they become critical issues. By identifying these root problems early, start-ups can develop strategies to prevent them, increasing their chances of success.”
The power of a pre-mortem analysis
While it's true that many start-ups fail due to a lack of funding, Professor of Entrepreneurship Yannick Dillen says it’s typically not the root cause of their failure. Discover what real causes lie beneath the surface - and how you can detect and address these problems early on to avoid a financial crisis.
But how do you go about identifying and analysing these root problems? Can you recommend a good approach for that?
Yannick Dillen: “A simple yet powerful tool for root cause analysis is the ‘5 Whys’ technique, developed by the Japanese entrepreneur Sakichi Toyoda. It involves asking ‘why’ five times – or as many times as necessary – until you reach the fundamental cause of a problem. For example, if a start-up is failing due to a lack of funds, you would ask why this is happening. As you dig deeper, you might find that the real issue isn't the lack of money but insufficient market research or a rushed product launch. This process helps start-ups uncover the real problems that need solving.”
It sounds like these techniques could be just as valuable for larger companies, and not only start-ups. Would you agree?
Yannick Dillen: “Absolutely. Larger companies undertaking innovative projects can also benefit from a pre-mortem analysis and the ‘5 Whys.’ These techniques help ensure that new initiatives are based on solid research, clear business models, and efficient operations. By anticipating potential pitfalls early, companies can tackle them proactively, increasing the likelihood of success.”