Years ago I led a deal and invested in a company that looked like it had lots of promise to disrupt the women’s clothing industry with special algorithms and an online store. But something had bothered me from the very start – unsalable inventory.
You see, women’s clothing is subject to fashion changes so frequently that inventory becomes obsolete quickly. Add to that knowing that there are three distinct buying seasons each year, and that this site was offering to mix and match sizes to fit, leaving orphan matching skirts and pants – and you can see why my concern. The entrepreneur–founder explained this problem away by stating that the designers and manufacturers would ship direct after we’d grown to a large enough size. I had my doubts, but led the deal anyway.
We raised six million from angel investors for this otherwise brilliant concept, and several first tier VCs followed with another thirty–two million over time.
[Email readers, continue here…] And the company ultimately died a painful death. It never got its corporate arms around the inventory problem, first among other issues. And designers or manufacturers never did offer to ship direct.
Looking back at that complete financial loss, I keep thinking of my gut response to the brush–off about inventory being a problem. To my gut response.
How many times have you had this nagging feeling that an answer to your question just didn’t seem right, but that you accepted the answer because the person offering it was closer to the problem than you were? It is human nature to do so, deferring to the person more expert or more knowledgeable.
Over the course of these insights here and in my BERKONOMICS series of books and blogs, we explore the use of tools to help overcome this natural tendency. Perhaps the greatest of these is use of the “what if” or “why” question streams. I admit that I should have taken my own advice for that one and continue much further down the chain of “what if” or “why” questions, let alone doing more due diligence with a handful of designers and manufacturers.
Yes, sometimes your gut is the best you’ve got. Listen to it!