Thursday, 13 July 2023 04:29

Do you really have to fail to succeed?

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Failing your way to success has become the rallying cry for early-stage entrepreneurs worldwide. Partly because failure is ever present and often more likely than success, and partly due to the change in how startup businesses are formed. But do you need to fail at all?

Tom Eisenmann’s book, The Fail-Safe Startup, builds on this theme and gives precious lessons to entrepreneurs from the failed attempts of several early-stage ventures. 

The book sets out to understand the knotty problem of why startups fail. Great question. The author conducted good-quality research on the subject, drawing on dozens of interviews as well as many Harvard Business School (HBS) case studies on startups. 

I mention this because many business books today written by self-proclaimed experts – usually some entrepreneur or business executive trying to reinvent themselves after early business success and suck at the teat of the international lecture circuit – lack the rigour of proper research. Not this book.

That said, this book’s one failing is that it draws on cases and data from a particular subset of humanity – HBS alumni who have raised venture capital funding. Probably a group about as small as those who have gone into space, so the lessons drawn from these cases may not apply to the rest of us mere mortals.

Context is also an issue. These are startups in the US in a well-functioning and buoyant capital market with sophisticated consumers with disposable income.

I don’t mean to suggest that the African context is devoid of these market features, just that our lived reality is slightly different from that of Cambridge, Massachusetts.

The book is organised around three sections – launching, scaling and failing. Based on his research, Eisenmann has identified common themes within the businesses he examined that mark the moments or actions that have led to startup failure.

The principles he identifies seem to result from carefully examining the fabric of failure. 

So often, as he says, in the post-mortem of a failed business, we say, “oh, the business ran out of money; this is a little like the patient died because she lost too much blood.” What he wanted to know was why that occurred.

A launch failure such as the theme “good ideas, bad bedfellows” illustrates how no matter how great the idea and the research, if the team does not work well together, then the business may well be doomed. 

Success, it seems, is about fit – between the founders, their partners and stakeholders, and skill – ensuring that there is industry knowledge and entrepreneurial skill in the founding team.

The scaling section has a chapter called “Moonshots and Miracles”, which focuses on the case of Israeli electric car startup Better Place. By the time the dust had settled on the story, the company had burned through almost US$1 billion.

There was little to show for that massive investment apart from a handful of electric car owners in Israel and a network of beautifully designed but under-utilised charging stations.

The founding team has a moonshot idea that is a serious long shot needing massive effort and investment, but if it pays off could alter the course of humanity. According to Eisenmann, these moonshots need a set of cascading miracles – a set of events that must unfold in sequence for the venture to succeed. 

To make this even more challenging, the founder of a company seeking a moonshot is very often monomaniacal – someone with a fervent belief in her audacious vision and a relentless drive to bring it to life.

These people can be the greatest asset to an early-stage business, but the greatest liability as the business grows. These individuals are often narcissists – according to an HBR article on the topic, the startup world has plenty of examples, including Bill Gates, Larry Ellison and Steve Jobs. [Let’s not forget Elon Musk - Ed]

The final section on failing is a road map for how to fail with some degree of grace, but I thought that the chapter “Bounding Back” was compelling. Eisenmann explains how failed founders go through a process of recovery, reflection and re-entry into the workplace or startup businesses.

Again, drawing on interviews and research with the founders whose stories were told in the book, he tells some harrowing tales of the emotional stress of failure and the long road to recovery. Nikki Durkin, the founder of a failed venture 99dresses, seems to sum it up rather well:

“My first instinct was to apologise – to my co-founder, to my team, my investors and to the loyal community we’d built. I felt shame, embarrassment – like a shepherd who’s led her sheep off a cliff when it was my responsibility to keep them safe. 

“I logically knew that I shouldn’t feel these things, but emotions aren’t always logical. In fact, I didn’t really know what I should be feeling. I’d been working on this company ever since I finished high school, so 99dresses was all I have ever known. It was a huge part of my identity – I was the 99dresses girl. Who was I without this startup? I had no idea.”

The reader gets closure as Eisenmann details what happened to each entrepreneur after their venture failed. Rest assured, they are all fine and well, and conquering the world in their unique way.

I think this book enters the realm of essential startup books along with The Lean Startup and Business Model generation. I’ll be wrapping mine in plastic and keeping it under lock and key – until I get myself to Harvard one day and have it signed by the maestro himself.

Jonathan Marks is an associate professor at Gordon Institute of Business Science (GIBS) and founder of Rocket School. In addition to reviewing books for Inc.Africa and doing his day job, Marks is on a personal mission to review 52 other non-fiction books in 2022

 

Inc

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