by Tina Seelig
Bob Eberhart, a professor of organization theory and entrepreneurship, did research on how the changing bankruptcy laws in Japan affect the amount of entrepreneurial activity in that country. This was a natural experiment that could be studied because Japan removed the most difficult consequences of company failure in an attempt to revive the country’s economy. The results showed that after the cost of failure was lowered, more people founded high-potential companies than when the consequences for failure were high.4
Silicon Valley is known as a place where failure is acknowledged as a natural part of the innovation process, and accepting failures on the way to success is considered the secret sauce of Silicon Valley. Randy Komisar notes that being able to view failure as an asset is the hallmark of an entrepreneurial environment. He also notes that when he sees people who never admit to failures, he wonders what they have really learned from their experiences.
Of course, nobody wants to fail. However, on the most basic level, all learning comes from failure. Think of a baby learning to walk. He or she starts out crawling and then falling before finally mastering the skill that as an adult most of us take for granted. As a child gets older, each new feat, from catching a baseball to doing algebra, is learned the same way, by experimenting and failing until that child is finally successful. We don’t expect a child to do everything perfectly the first time; nor should we expect adults who take on complex tasks to get it all right the first time.
It is nearly impossible to learn anything without doing it yourself and failing until you succeed. You can’t learn to play soccer by reading a rulebook, you can’t learn to play the piano by studying sheets of music, and you can’t learn to cook by reading recipes. I’m reminded of my time as a graduate student in neuroscience. I had taken several courses in which we “learned” the principles of neurophysiology. Although I could pass a written test on the material, it wasn’t until I was in a lab, dissecting nerves under a microscope, impaling them with tiny electrodes, and manually turning the dials on the oscilloscope, that I fully understood the concepts with trial-and-error experiments. Likewise, you can read as many books on leadership as you want, but until you experience the challenges real leaders face, you will not be prepared to take charge.
The Mayfield Fellows Program, which I have codirected with Tom Byers for nearly twenty years, gives students this opportunity.5 After one quarter of classroom work, during which we offer an in-depth introduction to entrepreneurship through case studies, the twelve students in this nine-month program spend the summer working in startup companies. They take on key roles in each business and are closely mentored by senior leaders in the company. They experience firsthand what it is like to identify and address the white-hot risks that face each organization, the stresses of making decisions with incomplete information, and the challenge of leading in an ever-changing environment. After the intense summer experience, the students come back to class for ten weeks of debriefing about what happened in their respective companies. Each student leads a class on an important issue that evolved during their internship.
The students in the Mayfield Fellows Program develop powerful insights about what it means to run a fast-paced business in a dynamic environment. They watch these companies struggle with issues such as running out of cash, retooling after a change in the senior management team, the challenge of getting cutting-edge technology to work, and the daunting task of competing against giants in the industry. By the end of the summer, the students realize that only a handful of the companies for which they worked will be in business in a few years. Despite all of the efforts of talented teams, many of them will fail.
The entire venture-capital industry essentially invests in failures, since the majority of the companies they fund eventually go under. Other industries have a similar success rate, including the toy industry, the movie business, and the publishing industry. Consider book publishing. There are approximately one million books published every year in the United States, and about half of those are self-published. According to BookScan, the average US book sells fewer than 250 copies per year and less than 3,000 copies over its lifetime.6 Only a tiny fraction will be big hits, and it’s nearly impossible to predict which ones they will be. As a result, publishers continue to produce many different books, hoping that each will be a success but knowing that only a tiny fraction will make it onto a bestsellers list. Publishers, toy makers, movie producers, and venture capitalists understand that the path to success is littered with failures.
Mir Imran, a serial entrepreneur, has started dozens of companies, many in parallel.7 His success rate has been remarkable. When asked about this, Mir admits that the key is killing projects early. He uses a brutal process to weed out projects with a low likelihood of success and puts increased energy into those with a high likelihood of making it to the finish line. He uses considerable discipline and analysis in the early stages, prior to launching a new venture, to increase the chances that it will thrive in the long run.
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Even though it is always difficult to abandon a project, it is much easier to do so in the early stages of a venture, before there is an enormous escalation of committed time and energy. This happens in all parts of our lives, including jobs, stock investments, and any type of relationship. Leonardo da Vinci is credited with saying, “It is easier to resist at the beginning than at the end.” Bob Sutton, an expert on organizational behavior, describes “The da Vinci Rule” in his book The No Asshole Rule, in which he talks about leaving jobs that are not a good match as soon as you discover they are untenable. Here he generalizes this much more broadly:
Although most people know that sunk costs shouldn’t be considered in making a decision, the “too-much-invested-to-quit syndrome” is a powerful driver of human behavior. We justify all the time, effort, suffering, and years and years that we devote to something by telling ourselves and others that there must be something worthwhile and important about it or we never would have sunk so much of our lives into it.8
Quitting is actually incredibly empowering. It’s a reminder that you control the situation and can leave whenever you like. You don’t have to be your own prison guard, keeping yourself locked up in a place that isn’t working. But that doesn’t mean quitting is easy. I’ve quit jobs that were a bad match and abandoned failing projects, and in each case it was terribly difficult. We’re taught that quitting is a sign of weakness, although in many circumstances it’s just the opposite. Sometimes quitting is the bravest alternative, because it requires you to face the fact that things are not working. The great news is that quitting allows you to start over with a clean slate. And if you take the time to evaluate what happened, quitting can be an invaluable learning experience.
When Randy Komisar left his vice president position at Claris, a computer software company that spun out of Apple Computer, he felt he had failed. He had a clear vision of what he wanted to accomplish and left Claris when he realized he was never going to achieve his goals. Randy’s “failure” was very public, and it stung badly. However, within a short time Randy realized that being released from this job provided him with an opportunity to reevaluate his passions and determine how he could best use his skills. For instance, it became clear that one reason he felt so dissatisfied at Claris was that he was neither passionate about the product nor passionate about what he was doing. He loved thinking about the company’s big picture and scoping out its vision, but he was hardly inspired by the day-to-day management issues.
When Randy was asked to become CEO of a new company, he suggested instead that he work with the CEO to set the direction for the company. In this way he crafted a brand-new role for himself—virtual CEO—and was subsequently able to become involved with dozens of companies, many at the same time. He served as a coach, sounding board, and advisor for CEOs but didn’t have the day-to-day responsibilities. This suited him and the companies well. Randy told me the failure allowed him to better align his passions with the opportunities a
round him. This is a poignant reminder that learning when to call it quits is crucial. You need to know when to stop pounding on an idea that isn’t working and when to move on to something new.
There are actually many ways to turn a failure into a success. One memorable story about transforming a big disappointment into a big win came out of the Innovation Tournament in which students had to create value from rubber bands in five days. One team decided to create a Wishing Tree. They identified a tree in the center of campus, across from the university bookstore and wrapped the trunk with chicken wire. They then used rubber bands to attach messages to the chicken wire. The idea was that anyone passing by could post a wish on the tree. The team promoted it widely, using online networking sites and email lists, and by literally standing in front of the tree, inviting passersby to post a wish. Unfortunately, people just weren’t interested.
In an attempt to build momentum, the team started seeding the tree with wishes. This had little effect. They then became more aggressive in their promotion and more actively invited passersby to contribute. Again, this had little impact. But the students’ disappointment was amplified by the fact that not more than fifty feet away a similar project was getting lots of attention. Another team had created a huge web of large rubber bands from which they invited students to suspend their secrets. The rubber-band web was brimming with hundreds of brightly colored papers, each with a different secret. They fluttered in the light breeze, in sharp contrast to the nearly naked Wishing Tree next door.
The Wishing Tree team decided to chalk this one up as a failure. However, they didn’t stop there. They extracted as much as they could from this experience by making a provocative three-minute video documenting the failure. The team described all of their attempts to make the Wishing Tree successful and compared their failure to the success of the Web of Secrets. They very publicly celebrated their failure and shared what they had learned about the “stickiness” of wishes versus secrets. Stories, products, and websites are “sticky” when they hold your attention and don’t let go. The team also made it clear that this was just one step along the path to the next idea, and the next, and the next. They clearly learned something about the innovation process since they went on to win the Stanford business plan competition later that year for their medical technology venture.9
Because even great ideas require a tremendous amount of work to reach a successful outcome, it’s incredibly hard to know when to keep pushing on a problem, hoping for a breakthrough, and when to walk away. We all know that persistence is to be admired, but when does it become foolish to continue working on something that’s never going to fly? Gil Penchina, a serial entrepreneur and venture capitalist, describes the dilemma wonderfully: “If you throw gasoline on a log, all you get is a wet log. But if you throw gasoline on a small flame, you get an inferno.”10 That is, it’s important to know whether you’re putting energy into something that has the potential to pay off. This is one of life’s biggest challenges. We often stay in dead-end situations way too long. This occurs when companies commit to a doomed product or project, or when individuals stay with jobs or in relationships that make them miserable, hoping the situation will improve.
Yes, failure is hard. But it is a normal part of the learning process. Instead of looking at false starts and dead ends with regret, I suggest that you look at each one as a source of “data.” Scientists do this all the time. They know that each experiment may lead to unexpected results. And the unexpected results are often a source of great inspiration. This is true in all parts of life. If you view each day as a series of experiments, you end up with lots of fascinating data that can be mined for valuable insights.
Chapter 6
Turbulence Ahead
How do you know when to quit and when to push through a problem? It’s always a mammoth challenge to separate your desire to make something work from the probability that it will or won’t. Of course, the more you put into a project, the more likely it is to succeed. But some efforts will never pan out, no matter how much time, money, or sweat is invested. The most scientific answer I’ve found is to listen to your gut and look at your alternatives. Essentially, you have to negotiate honestly with yourself. Do you have the fortitude to push through the problems in front of you to reach a successful outcome, or are you better off taking another path?
If you decide to quit, make sure that you do it well. That is easier said than done. I’ve seen people quit gracefully and others quit so clumsily that they leave a huge crater in their wake. As discussed earlier, you are likely to bump into the same people again and again in life, often in unexpected ways. This alone is reason enough to make sure that when you quit, you do so with careful thought about the consequences for those around you. Besides the impact that quitting gracefully might have on you later, it is just the right thing to do. You can never rationalize quitting in such a way that you hurt your colleagues, friends, or former business.
A colleague told me about his assistant, who was doing a terrific job. He gave her great reviews and spent a lot of time talking with her about her career path within his group. She made it clear that ultimately she hoped to move into a different field, and my colleague was supportive of this. In fact, he told her he would be delighted to serve as a reference for her anytime. With this as a backdrop, my colleague couldn’t have been more surprised when his assistant came in one day and gave two weeks’ notice. The team was in the midst of a huge project, the deadline three weeks away. She was going to leave one week before the project was completed, putting the entire team in a very difficult position. My colleague asked her several times if she would consider staying one more week to help him get to the end of the project, which involved dozens of people directly and several thousand indirectly. She refused, saying, “I know you’re going to be unhappy that I’m leaving no matter when I go, so I decided to do what I want.” My colleague felt as though he’d been kicked in the stomach. It was nearly impossible to fill in the holes she left during the last week of the project, and everyone worked around the clock to try to fill the void. All those who worked with her will remember that decision. Despite the fact that she did a great job while she was with them, the damage she did to her reputation during the last weeks of her employment dwarfed all the positive things she had done in prior years.
In sharp contrast, I’ve seen others quit jobs with remarkable style. Even if they were leaving because the job wasn’t a good match, the way in which they left made such a positive impression that everyone involved would be pleased to give them a glowing recommendation at any time in the future. They provided enough notice to fill any gaps, they took the time to put their work in order so someone else could pick up where they had left off, and they even offered to help with the transition. They mastered the art of quitting with grace.
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Instead of quitting, there is often a huge bonus for working through a tough situation. Sometimes this involves figuring out how to collaborate with a challenging person, how to succeed with limited resources, or how to fix an unexpected technical problem. A great example is Debbie Sterling, the founder of GoldieBlox, which makes construction toys for girls to help them learn engineering. She was inspired to launch this company based on her own lack of exposure as a girl to the power of engineering to solve important problems in the world. After spending countless hours scaling the scrappy startup, beginning with a very successful Kickstarter campaign, she and her small team finally reached escape velocity by raising a million dollars to help them develop the product.
Then, using grassroots marketing, they won the right to air a commercial during the 2014 Super Bowl, which resulted in huge exposure and enthusiasm. Orders for the GoldieBlox products began pouring in, and they started shipping tens of thousands of units of their toys. Unfortunately, things did not go smoothly, and scaling so fast came at a price. The physical blocks in the product turned out to have a problem—they didn’t fit together properly. The company received complaints f
rom customers, telling them the toy was flawed. This was a devastating blow to Debbie and her team. After so much work and success, they were hit with this huge failure. What to do?
They decided to take apart the problem and solve it as an engineer would do. After dealing with the manufacturing issues and fixing the blocks, they needed to rebuild trust with their disappointed customers. They did this by literally sending a million new blocks to all of their customers, explaining the mistakes they had made and how they had fixed them. Most important, they wrote a personalized letter to each child from the fictional character in the game, Goldie, explaining that engineers don’t always get it right the first time, but that doesn’t mean that you should give up. They explained what had happened and shared the engineering drawings of the old and new blocks. This negative experience turned into a positive learning opportunity for the business and for their customers. In fact, they turned this failure into a powerful opportunity to gain more trust and support for the company and the product.1
This example demonstrates how this dance works. Debbie had to change her own emotional response from deep disappointment to optimism, she had to change the conversation with her customers from one of frustration to one of appreciation, and she had to change her relationship with the overall problem by seeing it as an opportunity.