What distinguishes the 10 per cent of startups that don’t fold? They still fail, but they fail forward.
If you want lasting success, don’t just fail. Fail forward.
Failure is no longer a dirty word. The new orthodoxy, spreading across the globe from Silicon Valley, is that failure is not just inevitable but something to be welcomed. Nine out of ten start-ups may still fold, but what distinguishes the other 10 per cent is the ability to use this positively and “fail forward”. Here’s how to fail well and use it to your advantage:
- Don’t be afraid
Learning from failure rather than fetishising success is the sign of a promising start-up, according to Simon Stockley, Senior Faculty in Management Practice at Cambridge Judge Business School who runs the MBA course in entrepreneurship. “Startups learn by experimentation. That’s the process of new venture creation. They’re not just smaller versions of established businesses; they’re a different species. If we substitute ‘failure’ with ‘hypothesis testing’, it may seem a lot less threatening. And nine times out of ten, there is something wrong with your initial hypothesis.”
- Fail small and fail often – but always learn
One of the buzz-phrases in entrepreneurship is the “J-curve” of returns: the idea that little failures come thick and fast at the beginning, while success takes more time. But the mantra of “fail fast” shouldn’t be taken to mean that a scattergun approach is best.
“Fail fast, but learn from your failure,” says Hamish Hughes (Cambridge MBA 2010) who has acted as angel investor, mentor and board member for a number of successful ventures. “There’s no point in throwing things at the wall to see if they stick, and not paying attention to why they don’t. And there’s a fine line between believing in your product and being delusional. At the first sign of failure, you don’t want to pack up, go home and say ‘clearly no one wants this’. But if you’re hearing over and over again that people hate the idea – or an aspect of it – it’s time to learn and take action.”
- Learn to distinguish the different types of failure
Whether it’s a minor blip or a major catastrophe, every failure falls under one of two headings: avoidable or unavoidable. Telling the two types apart is vital to build up self-awareness and come away with the most valuable insights. “Sometimes failure can’t be helped,” says Stockley. “You may encounter disruptive events – so-called ‘Black Swan’ events – that no one will see coming. The most recent example, of course, is the Brexit vote.”
- Change direction when you need to
Another buzzword beloved of start-up gurus is the “pivot”, a change of direction based on evidence – an example of an entrepreneurial team learning from failure. By the time they become successful, very few companies are doing what they started out at when they first raised seed capital. Lara San Gil, co-founder of amaella.com – a Cambridge-based start-up that is preparing to launch its first range of organic lingerie in September 2016 – realises the importance of being flexible within the realms of the fundamental mission. “As long as it follows our original strategy, which is about delivering the best product to make women feel good, we might for example end up in organic beauty products. That would still be in tune with our mission.”
- Don’t let perfectionism militate against success
It’s never a good idea to go to market with an offering that’s not ready for release. But from a strategic point of view, it can be equally ruinous to procrastinate for fear of failure a long way down the line. Hughes recalls one example with a technology firm. “I had a chief technology officer tell me we couldn’t release a beta version because when we got 100 million users, there would be a critical bug,” he says. “He’d be on his private island by that point. I’m a big believer in finding something that works, releasing it and letting the market tell you what you need to fix.”
- Fail honourably
The USA has the reputation of being an environment where failure is not just tolerated but expected, while entrepreneurs and investors in Europe and Asia view failure (particularly insolvency or bankruptcy) as a far bigger deal. But across all business communities, individuals who fail badly and leave others to pick up the pieces will have great trouble finding support for future ventures. Stockley says: “In an ecosystem like Cambridge, people don’t have the opportunity to do that more than once; the network of relationships is too tight. We talk all the time about importance of social capital and reputation. If you fail badly and don’t try to do the right thing by your suppliers or customers, no one will want to deal with you.”
The Entrepreneurship Centre at Cambridge Judge Business School aims to inspire, enable and research entrepreneurship.