Leadership Note: Fail Fast To Succeed Faster
The average lifespan of a company in the S&P Index has declined to 15 years today, what was about 75 years in 1937. Over 92% of businesses fail soon after being founded. As per some reports by a research firm, about 50 percent of S&P 500 will be replaced over the next 10 years. Less than 2% of films accounts for over 80% of box office returns. The number of mergers and acquisitions making the rounds is ever increasing. Several businesses file for bankruptcy or lose market share.
Innovation is a sine-qua-non for business endurance. While one could argue whether every business needs to think of disruptive innovation, it is a well-known fact that businesses needs to constantly innovate to succeed. As Mark Zuckerberg said: “If we don’t create the thing that kills Facebook, someone else will”. Yet, innovation is ridden with failures that could potentially risk the company of capital and human assets. The innovation failure rate for most enterprises is at a staggering 80%. We’ve seen several examples of this including New Coke (Coca-Cola), The Edsel (Ford), Newton (Apple), Facebook Phone, Blackberry Playbook et al. So how do enterprises then sharpen this double-edged sword to make it the very ammunition to build endurance. Time is short and money is dear.
Amongst other things, the answer could be failing small and failing fast. Like the famous ‘J curve’ of returns, one needs to endure failures that comes early before getting onto success. The IDEO slogan of “Fail fast in order to succeed sooner” is very relevant in today’s marketplace. While the culture of embracing failure seems to be self-defeating, enterprises who have innovated successfully have certainly recognized the failure early and made quick corrections.
As paradoxical as it may sound, it is important to recognize that any innovation requires organization, not just ideas. The idea may come from one person or a set of people, but the enterprises gathers its engine around execution. What then could be the best ways to organize the enterprise around execution and manage failure? How do responsibilities need to be assigned and what if any is a good mix of metrics to measure success or failure early? In speaking with several CXO’s, here are some lessons that could prove useful:
Build a culture of tolerance
As a famous quote goes “Real knowledge is to know the extent of ones’ ignorance”. A more tolerant attitude towards failure avoids destruction. While this could also have cultural influences (failure could be more acceptable in the US for example vs. Europe), founders and management in enterprises will have to drive a culture where people take ownership for failures. One of the greatest example of the turnaround of a once iconic organization is Ford. When Alan Mullaly was brought in to lead this transformation, one of the first things he did was demand that his executives own up their failures. This is not to say that enterprises should be encourage failures. Getting to one’s best self is only possible when there is even a recognition of something failing. Looking through or ignoring this important element will only get to more of the same results and no innovation is possible with that.
In his book titled ’Little Bets’ Peter Sims how new ideas can be developed and breakthrough results achieved by taking small, experimental steps. Rather than taking on a big idea and a large-scale execution plan, the concept of agile works well where self-organized teams work in short cycles and aim continuous improvement. Prototyping an idea and seeing its outcome, to then further revise to suit is a great way to make small bets and limit the downsides of failure.
A wining idea may come from one person or a team, but its longevity depends on how well it is executed. A team that is responsible for assessing the right timing, creating and validating market assessment, engaging with the production / development team and leading the changes required to execute the idea is paramount to assess its early success or failure. Innovation cannot be a one-time exercise, enterprises need to set-up in a way that encourages them to continually reinvent themselves. Like the Toyota production system, enterprises need to organize to build continual learning from tiny failures into its approach to improvement. This also requires that people commit to their best selves and work in a team to achieve a common purpose. Instead of focusing on their own individual goals, teams need to focus on what is important for the greater good of the organization.
Measure the right metric
Success or failure is heavily dependent on the metric against which it is measured. Several companies follow transaction driven metrics. So, they will measure how many projects have been kicked off, what is the progress of each project (and bucket them into various colors depending on the planned timelines versus actuals), how much investments have been put into each versus planned, how many people are involved and when is the release date.
However, these do not necessarily indicate the impact made to profit margins, revenues or share of wallet. Well begun is half done. While there is no perfect answer, it is important to ensure that the metrics align with the core purpose and intent, based on which the enterprise is investing in the change. It is equally important to measure based on what the leadership really cares about. This means unshackling the over analytical thinking and problem solving that we are natively used to. The role of instinct and gut also needs to have its fair share. When Starbucks founder wanted to create a totally novel coffee experience, he didn’t order a detailed market research.
Learn from failure
There is no point in failing fast, if there has not been any learning in the process. In addition to learning from failures, it is important to have a system to disseminate and share these learnings with peers that just helps to limit the costs of repeated failures. Eli Lilly did this well by developing a formalized and detailed process to review failures more honestly. Several companies hold failure parties to commemorate and share experiences of the great work done by innovation teams even though they eventually result in failures.
Companies need to organize themselves to continuously reinvent and set themselves for success. There is no magic formula that guarantees success. Enduring organizations focus on building strong and dynamic decision making capabilities that is hard to imitate, and a process of continuously assessing and learning from quick failures. As they say, endurance is not just the ability to bear a hard thing, but to turn it into glory. Failing fast and failing safe is the surest way to succeed in a digital world.
[Disclaimer: The views expressed in this article are solely those of the authors and do not necessarily represent or reflect the views of Trivone Media Network's or that of CXOToday's.]
- Here Are The 10 Best Companies For Women In India
- Delving Into The ABC Of Cyber Security
- IoT Knowledge Gaps Exist In Consumer Product Industry
- HR Managers See CRM As An Effective Business Tool
- Cloud Computing Driving Innovation For Next Generation
- How Algorithms Are Revolutionizing Lending Business
- Intel’s Former CEO Paul Otellini Dies At 66
- Are You Choosing The Best Software For Your Business?
- 5 Best Ways to Use Collaboration Tools for Quick Growth
- What's Stopping Banks From Embracing Latest Technologies?