by: John Caddell
I've been thinking a lot about failure. Don't worry--not about personal failure, but about failure in business and what it means (like here, for example).
Here's what it's typically meant: time to find a new job. And as we watch the person responsible for the ill-fated Project Fiji in his office packing his books and photographs into printer-paper boxes, our self-preservation instincts take over, and tell us, "Don't be like that guy." (At its extreme, we have the pinnacle of self-censorship and risk-avoidance, the bureaucracy.)
Well, all that anxiety about failure is utterly wrong, according to Paul Ormerod, an economic forecaster and founder of Volterra, a business analysis consultancy. Interviewed in June's Harvard Business Review (free link), Mr. Ormerod tells us that failure is the "defining characteristic of biological, social and economic systems."
Statistics he cites bear that view out: 10% of American businesses die each year; only nineteen of the world's largest 100 companies in 1912 were still in that position in 1995.
But rather than viewing failure as, well, failure, Mr. Ormerod asserts that expecting failure and embracing chance hold the key to success in business. Says he:
Well, all that anxiety about failure is utterly wrong, according to Paul Ormerod, an economic forecaster and founder of Volterra, a business analysis consultancy. Interviewed in June's Harvard Business Review (free link), Mr. Ormerod tells us that failure is the "defining characteristic of biological, social and economic systems."
Statistics he cites bear that view out: 10% of American businesses die each year; only nineteen of the world's largest 100 companies in 1912 were still in that position in 1995.
But rather than viewing failure as, well, failure, Mr. Ormerod asserts that expecting failure and embracing chance hold the key to success in business. Says he:
The companies that are most able to explore and innovate - something akin to random [biological] mutation - and then rapidly and flexibly adapt when an innovation succeeds or fails, will do best.
How well does that describe your organization?
Original Post: http://shoptalkmarketing.blogspot.com/2007/05/on-failure.html
John, intriguing thoughts about failure.
We see this issue in spades in Silicon Valley. The big companies have a harder time failing, as their culture doesn’t enable it. For example, Wall Street will kill you if you have single down quarter.
However, Venture Capitalists live in a failure culture. A very large percentage of their portfolio companies fail. Furthermore, an executive who fails attempting to start a company is viewed as an excellent choice to run a new venture. Granted, that executive isn’t as esteemed as the one who took a company public, but the exec who failed is more like the baseball player who struck out. He gets to get up to bat again and again.
Now, the bigger companies use that culture of “acceptable failure” to their advantage by letting the VCs take the risk, and then, if the company succeeds, the big companies buy them.
The environment in Silicon Valley enables entrepreneurs, VCs, private equity firms, and big companies all to succeed because failure is anticipated, and not the death knell for anyone involved.