The brave new world of failures
Sunday, September 13, 2009 at 4:56AM 
The retail sector has been hit hard..It is easy enough to be an innovator when the economy is booming and everyone is willing to take on some risk. But that time is over, at least for a while. We are working our way through the worst recession in decades. And we have lots of government "help" which will result in higher deficits, more regulations, and higher direct and indirect taxes.
Not too encouraging to think about if you are an entrepreneur trying to fund a startup. And if you're the CEO of an established company, you're probably gritting your teeth a lot these days. One is reminded of Donald Rumsfeld talking about the "long, hard slog" that was ahead in Iraq .
The economy will return to growth, but the recovery will take much longer than in a typical recession. Meanwhile, the real question is how well we are adapting to this new environment that's emerging.
There is a fragile, but discernable sense of stability now. Most businesses have implemented short-term remedies to ensure their survival. These remedies are not enough, however. Any incremental improvements you are making can easily be imitated by your competitors. Worse, these "improvements" often involve pricing concessions and absorbing financial risk from your customers.
There is only so much you can do with the products you have and and the markets you are in. Bigger, bolder ideas are needed if you want to create new growth. And we are uneasy about big, bold ideas, aren't we? Not just because they may involve financial risk. Perhaps even more frightening is the prospect of personal embarasment. What if we're wrong? What if the new "hot" product turns out to be a dud? A real fiasco. What if people make fun of us?
But there really is no choice. The world that's emerging now, more than ever, is one in which those who are willing to try many new things without fear of failure are the winners.
Yes, there is risk in failure. But there is more risk in trying to avoid failure by only doing what has worked before, or by only making small adjustments. The only road to safety, success, and prosperity is through lots and lots of failures. Not just through small ones, but big ones too. The sort of big, whopping failures people will gossip about during Happy Hour. Or worse, the sort of failures people will blog about and that will become trending topics on Twitter.
None of what I have written here is new, of course. Management gurus have been telling us this for ages. But every time we go through a boom-and-bust cycle, everyone seems to have forgotten all about it. "Tough" executives talk about how they tolerate failures (in pursuit of top-down imposed goals, naturally) once or twice, but no more.
I remember when Tom Peters wrote about celebrating failures, and that certainly made a lot of executives I knew more than a little uneasy. But what people fundamentally don't get, I think, is that to be competitive, learning is something everyone in the organization needs to be involved with. And learning isn't something that can happen without contact with reality. It's not a planning exercise. You have to actually interact with customers, develop new ideas, try new products and services, and use whatever you learn to progress further. You also have to be brave enough to go WAY beyond your current skill set, contacts, and comfort zone.
If you are a business leader, ask yourself how you can change your culture to make it safer to fail more often and more quickly, so that you and your organization can fail your way faster to success.
Unless you are brave enough to be a perfectionist, of course. I am certainly not! I expect, and hope, that not only some, but most of the new projects and ventures I am embarking on will have plenty of failures, or even BE failures. Big failures, too! Because if that isn't happening, I'm not pushing the envelope. I'm not really trying. And if you fail to try, that really IS the one ultimate failure you SHOULD be afraid of.
Welcome to the brave new world of failures.
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Reader Comments (6)
The question becomes how to reduce risk consistently with the bigger risks you take. That is to constantly work on eliminating the failure by taking bold but steps towards innovation.
I agree! I think of failure as a way to generate more data with which to navigate. I am rather partial to the Toyota product development approach, which is to generate a LOTS of options in a hierarchy (system architecture, components, modules, etc.) and then experiment to generate data so you can systematically eliminate options until you have the best answer within your alloted time and budget. By combining this with extensive knowledge reuse, Toyota is able to get products to market 2-3 faster than their competitors.
One concern that's a legitimate one, I think, is how to provide lots of freedom to try and fail, while protecting your brand and the trust that customers place in you. I think of failure as part of my brand's exoskeleton now, but I don't know that this could work for a brand like Apple or Toyota. Their discarded experiments have to be kept quiet, for understandable reasons.
What signs of hope can you offer to your readers who you are encouraging to take risks? Yes, this is a time of recession, but what has happened in historical recessionary periods like this one? Haven't they been times of great innovation? I think we have to be careful of telling business people that this recession will take a long time to recover. Although it might, there is great power in the message and if our message is to tell folks that the economy will continue to be bad...then won't it? If you are willing to hustle...and innovate, then might not the world be your oyster for the greatest of all pearls now or any time?
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Before we can have any hope, we have to face up to reality as it is. Here is my view of what we are dealing with.
The main reason our economy is subject to boom-and-bust cycles and why it is still subject to so much uncertainty is Government interference over many, many decades (banking regulations, insurance regulations, Fannie Mae, Freddie Mac, the Federal Reserve, etc.)
In this environment, many executives in the financial sector have been motivated by delivering short-term results to shareholders and meeting goals to attain bonuses, and there has been a fair amount of incompetent risk-taking. While 95% of the blame for what we are going through should justly, in my opinion, be placed on politicians and regulators, the popular conclusion seems to have been that it is all the fault of "greedy executives".
At any rate, whether or not we think it's a good thing, and I freely admit I don't think it is, the current reality is that we now have a political environment where the Government is as intimately involved in the day-to-day workings of financial institutions as the Nazis were in the German weapons industry.
This Washington Post article shows how financial industry executives are now looking to bureaucrats to approve their every move. It also shows how these same executives are spending much more time and money trying to influence and lobby politicians: If you worried about corruption before, better to just assume it's happening now. You can be a benevolent regulator today and expect a comfortable corporate job for you or for a family member down the road. Or, after you leave your corporate job, perhaps a cabinet post awaits. This has been going on for quite some time, but the more Government interference in the economy, the more corruption you will see.
It is hard to say when the recession will end this time. Instead of letting supply and demand adjust in a natural fashion, we are still subject to massive and unpredictable Government interference. The current administration is expanding on an approach that began under the previous one (and which of course goes back much further). Having asserted a larger degree of control than ever before of the financial industry, the very veins through which new capital flows to startups and new initiatives in establish company, the Government entered the auto industry with a takeover of General Motors, and now we see a debate as to how the Healthcare Industry is going to be rearranged.
When the Government, through the capriciousness of legislative politics, may decide to impose a 50% tariff on Chinese tires to curry political favor with a certain constituency, what will strike next? (The tire thing irked me, seriously, because I'm about to buy new tires and I really don't look forward to paying 50% more in order to subsidize corrupt tire industry executives and unions who have successfully lobbied for Government protectionism.)
We now are faced with the sort of uncertainty we faced as schoolchildren, not knowing if the school bully was going to go after us or one of our friends the next day. You just never know what you are going to show up to.
What we do know is that we in the United States is likely to see inflationary pressures and/or tax increases in order to pay for the massive increase in budget deficits and the national debt that's resulting from all all the bailouts and "reforms". The US dollar is continuing to drop, reflecting the world's concern over what will be done with our national debt, which is expected to exceed twelve trillion dollars.
So there, those are the facts.
When confronting a worry, I have learned, the first thing is to check the facts, then make an assessment, prepare a plan of action, and take action. As for hope, it the opposite of worry, it is a positive anticipation, an optimistic view that good things will emerge. I think we still have to start with reality, to acknowledge what we are facing. No one else will come to our rescue, so we have to make our own hope.
Hoping that "things will get better" seems not to be a workable strategy. But taking initiatives on our own, to think of new ideas, products, services, business models, and taking ACTION, THAT will make us feel more hopeful. Just avoid any industries under heavy Government regulation. There is a reason why there is so little innovation in those sectors - incentive and freedom are muted out by bureaucrats and legislators.
I wish it was easier to celebrate my own failures. I feel like I have tons of experience that should be worth something but don't know how to really profit from it!
On celebrating your own failures:
Why don't you try to just get stuff out of your head first, make lists, make mind maps, try to just dump everything until nothing more seems to be in there. Then see what patterns you can identify from your failures. Then you will see what the juicy ones are and you can see how you can profit from them. THEN you can celebrate.
Since you are local, I hope you can come to my @refeshsd talk on Tuesday! :-)