On the Notion of Failure and Entrepreneurial Sustenance

The socialization process of individuals begins as soon as they are born. The fundamental values imbibed by children start with parents/relatives/friends rewarding them with little smiles, encouragement, approval and gifts on achieving standards set by them (who in turn have been socialized in similar ways).

Learning happens,essentially, based on primitive motivational theories such as the operant theory, where little children, like rabbits and pigeons are rewarded on pressing the right lever and the Pavlovian stimulus-response training to habituate responses to signals through extrinsic rewards. This is further reinforced by the formal education systems that set the norms on success and failure,anchored on predetermined outcomes. Hence, a child that envisions the world differently and arrives at alternative outcomes, typically “fails”. This leaves the outliers in most formal systems, either bewildered or toeing the line to receive their little pats on the head and the little carrots.

The collective notion of success and failure and an enabling system that emphasizes so-called “success” overran opportunity to challenge oneself, ruins an individual’s chance for a fulfilling life, characterized by learning and growth. Most often, such systems robotize individuals into following a standard process for achieving predetermined goals such as marks, grades, college admissions, jobs with certain salaries, certain profiles and companies, a lifestyle that’s an envy of their friends, so on and so forth.

Given the context, we never pause enough to ask ourselves: why then, are we inspired by stories of struggle? Why does every tale of achievement in love, freedom, spirituality and business narrate a plotline of challenges, failure and achievement at the end of a long struggle? Why then, do we lose sight of the long steep path strewn with hurdles between the foot and summit of the mountain?From those of Socrates to Elon Musk, every path-breaking action or thought has faced tribulations before it transformed the world for the better. There is no inspiring story in entrepreneurship that does not delve on failure more than success. While we tell inspiring tales of challenges and failure, why do we frown on those who dare to walk the same path? Why do we have such little tolerance for failure? What is failure anyway?In the business context, management thought that began with Taylor and Fayol stressed on improving efficiency and effectiveness through control – reduction of failure and waste to absolute minimum in terms of time, work and people management. The quality control process such as the 6-sigma evolved from similar thought processes and focused upon the reduction rate of defect. Failure of processes, product, market acceptance and innovation are reckoned expensive and hence not appreciated in mainstream business management. Large business houses are most penalized for these failures, and they pay it back in kind to the society they operate in. They appreciate and seek those who have a track record of success with no blemish of failure on their CVs. And thus we train our talent, to fear and reject failure while embracing the safe path of the tried and tested for success.

So, in trying to succeed, we ask ourselves, what is the formula for success and how do we avoid failure - in a generic sort of way.

No formula brought forth from those questions has been the panacea for success or a medicine for purported failures. Perhaps, it is not the answer, but the question that needs altering. In the past couple of decades, with the growing dynamicity of technology evolution, rapid disruptions have been caused by entrepreneurial outfits that have dared to risk failure. This trend has somewhat changed the dialogue on the value of success and the need to embrace failure. Now, we increasingly ask- what can we learn from challenges? Can we dare to try new things, disregarding risk of failure or need for success?

The answer could be found,plausibly, in the approach used by entrepreneurs in following their dreams, disregarding the traditional mind-set of success and failure. An entrepreneur seeks answers to questions that solve the problem he/she chooses, one step at a time. Every action and its consequence is a learning opportunity as embodied in Edison’s famous quote “I have not failed, I have just found 10,000 ways that won’t work.”As is well known, Edison’s genius lay in not his ingenious invention of the incandescent lamp, but in his grit to ensure provision of wired electricity to millions of homes. He solved a lighting problem, and not just invent the ubiquitous electric bulb. When an entrepreneur embarks on his journey, it’s the insightful journey and the little battles he overcomes,that become his rewards. These challenges do not quite end, and nor does a true entrepreneur expect them to end. He overcomes one hurdle, just to find the next. Thus,the success versus failure dialogue is rendered irrelevant in such contexts, as it offers no value to the problems being solved by an entrepreneur. It simply does not matter whether one is successful or not, so long as the identified problem is being resolved.

In the recent years, with resurgence of entrepreneurial spirit across the globe, the startup culture of nonchalance to so-called failures has been often criticized as first, the failure of baseless business models during the dot.com era and now, the overvaluation of non-monetized firms. Sometimes, the approach comes under criticism as being unplanned, wasteful and irresponsible. However, the fact remains that, out of the ostensible chaos, startups have redefined what have held as standard notions of right and wrong by challenging assumptions about marketplaces, people, economics and business.The torchbearers of the entrepreneurial approach have had to trial against odds to learn experientially.

They have had to go where no man has gone before, to find their own truths. In following the entrepreneurial way, startups have rendered several theories based on traditional knowledge obsolete since they have proved to be exceptions in almost every case. Companies such as Amazon, Google, Facebook, Dropbox, Skype and AirBnB have changed marketplace conversations in ways no management theory could have predicted. Amazon demonstrated how working with a single vertical and then replicating across other verticals can help in scaling to unprecedented volumes; Google demonstrated how using a single algorithm can reorganize information shared on world wide web and how far that information curation and analytics can take us; Dropbox changed the idea of marketing cost in using viral methods and sharing; Skype reduced costs by simply using the users servers and solving the problem of space before the cloud was conceived of; AirBnB created a shared economy no one knew was possible.

These are just a few examples of how business rules can be changed if only they were challenged through gritty actions. For every startup that survives, there are several that die for various reasons. Consider Webvan, the much touted “failure” of the dotcom era. While the company died, the idea of online grocery did not – the learning from Webvan helped the next generation grocery startup survive better. The point is, unless these entrepreneurs attempted doing what they did, there was no way to find out if their premises were right. These companies took the risk to try. They tried and failed several times before they got better. In failing, learning and applying, they continue to grow better, evolve and change.

In evolving, most of these companies have transformed into very different forms. In fact, the entrepreneurial way is to set up to fail effectively so they can learn the most. The aim is to squeeze out as much learning from every dollar/rupee pumped into the trials and thereby maximize return on the investment. Startups that have mastered this art of setting up to fail successfully have thrived, as in the examples quoted.

Peter Thiel, the co-founder of Paypal and well known as investor of Facebook and SpaceEx, in his book Zero to One, discusses the entrepreneurial approach that emphases future cash flows over immediate profits: “The overwhelming importance of future profits is counter intuitive even in Silicon Valley. For a company to be valuable, it must grow and endure, but many entrepreneurs focus only on short-term growth. They have an excuse: Growth is easy to measure, durability isn’t. Those who succumb to measurement mania obsess about weekly active user statistics, monthly revenue targets and quarterly earning reports. However, you can hit those numbers and still overlook deeper, harder to measure problems that threaten the durability of your company. For example, rapid short term growth at both Zynga and Groupon distracted managers and investors from long term challenges……....If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?”

When start-ups are viewed through the stakeholders’ lens of success/failure, they buckle under the pressure, move away from their entrepreneurial approach and begin focusing on gratifying short term needs of stakeholders. Firms that lose their entrepreneurial spirit and focus, tend to lose their way. Most often, this leads to an untimely demise or premature and uninspired exit. As Peter Thiel points out, “founders only sell when they have no more concrete visions for their company, in which case the acquirer probably overpaid; definite founders with robust plans don’t sell, which means the offer wasn’t high enough.” Some entrepreneurs who do not survive the classic ‘Founder’s Dilemma’ of relinquishing control versus value creation, end up in quagmire of their own making. So long as the startups believe in their own mission and stay the course with unwavering dedication to learning what no one can teach them, their success lies in their well-crafted failures.

The author Dr. Srividya is the Chairperson – Center of Excellence in Entrepreneurship and Associate Professor - Marketing at IFIM Business School