BrainTrust Query: Failure Happens - Now What?
According to an article written in Harvard Business Review that addressed failures of start-up businesses, failure occurs between 30-to-40 percent of the time if it is defined as losing all assets and 90-to-95 percent of the time if defined as not receiving the expected ROI or payback on any individual or discrete project. However, the autopsy of the failed enterprise can provide great insight into what went wrong and how to prevent it from reoccurring in future endeavors.
In fact, Shikhar Ghosh, a lecturer at Harvard Business School, maintains that failure is the norm and that very few companies achieve the initial projections of the founder/entrepreneur. In part, the failures are often avoidable and could have been prevented if the entrepreneur had done the due diligence of testing the base assumptions of the business plan (assuming there is a business plan created). One interesting insight that Prof. Ghosh provides is that entrepreneurs will sometimes believe that they can predict the future instead of working collaboratively with customers to create a future with them. The over-reliance on their own insights, perspectives, beliefs in technology, service models, or products can blind them to the realities of the marketplace.
While the best of intentions and beliefs were used in creating the initial business model, plan, and organization, there should always be room to "wiggle" or modify things once the business has been launched and has had time to interact with the marketplace to pilot or test itself against competitors, engage with prospects, and operationally execute against expectations. If the business model is so rigid that it cannot be corrected "mid-stream," the initial plan had better be right, because there is no going back and trying something new.
Moreover, the professor notes in the HBR article that the difference between big failures versus small failures is often "too much funding." He elaborates, "What funding does is cover up all the problems that a company has. It covers up all the mistakes, it enables the company and management to focus on things that aren't important to the company's success and ignore the things that are important."
Taking the lessons of what did not work previously to the next assignment can be a real experience-building asset. A well understood failure can often be more illuminating in preventing a repeat than a lucky or happenstance success.