BrainTrust Query: Failure Happens – Now What?
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.
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
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.
- Failure Happens – Now What? – ZAHN Consulting, LLC
- Why Companies Fail–and How Their Founders Can Bounce Back – Harvard Business
Discussion Questions: What are the most common reasons for failures in start-ups? What’s the right way and the wrong way for entrepreneurs to handle failure? What lessons have you seen learned from failed start-ups?