Why Study Failures? 
Typical
entrepreneurship textbooks use only successful startups as the basis for study,
example and learning. It’s really neat to discuss Skype, Google, and YouTube.
But over 90% of new drugs fail, the majority of new tech-based startups fail,
and it is a well-documented that the vast majority of restaurants fail. In this
class, we will study failures as well as successes. The Failure Cases (and
others) that we will be studying are located at www.thinkbeta.com/cases. Unlike the
typical HBR case, these cases provide the basis for additional research on the
part of the student and/or team; they act as a common starting point. Students
are encouraged to conduct research in the failure case to be dissected through
their own initiative.
Cognitive
psychologists have shown how central failure is to learning. For example,
Collins and Brown have found that errors are essential to the creation of
mental strategies in problem solving. Van Lehn has shown that real learning
only occurs at an impasse during a problem-solving episode. Research by Foss
has shown that not only do students learn when they encounter errors, but they
also improve their ability to "detect errant solution strategies." In
other words, when faced with errors, students learn not only about the subject
at hand but also more generally how to plan solutions to similar problems.
[From: http://www.engines4ed.org/hyperbook/nodes/NODE-78-pg.html]
Failure
as a Primary Vehicle for Success
"If you
give people freedom to innovate,
the freedom to experiment, the freedom to succeed, then you must also give them
the freedom
to fail. According to Deepak Seethi of AT&T, the organization of
tomorrow will demand mistakes and failures. It is only by trying lots of
initiatives that we can improve our chances that one of them will be a
star."6
Failure
provides a great learning
opportunity and should be viewed as a very lifeblood of success. "Although
most people hate to be labeled a failure and love to be labeled a success,
it is only through seeming failure that most of life's greatest successes are
achieved. Usually, "failure" or "success" is almost
entirely in the eye of the beholder... Failure is very often a misperception
about the difference between what exists and goes unnoticed (such as growth and
learning
when we fall short of reaching a goal) and what is realized later (longer term
success)."
[This and
following examples from:
http://www.1000ventures.com/business_guide/crosscuttings/failure_managing.html]
Abraham Lincoln
Failed in business in
'31. Defeated for the legislature in '32. Again failed in business in '34.
Sweetheart died in '35. Had a nervous breakdown in '36. Defeated in election in
'38. Defeated for Congress in '43. Defeated for Congress in '46. Defeated for Congress
in '48. Defeated for Senate in '55. Defeated for Vice President in '56.
Defeated for Senate in '58. Elected President in '60... This man was Abraham
Lincoln.
Microsoft [Should add Zune to this list! J Hank]
Many costly Microsoft product failures provided the learning
and opportunity for development of many of Microsoft's biggest successes.
Examples include:
- Many
apparently wasted years working on a failed database called Omega resulted
in the development of the most popular desktop database, Microsoft Access.
- Millions
of dollars and countless hours invested in a joint operating system
project with IBM that was discontinued led to the operating system Windows
NT.
- A failed multiplan spreadsheet
that made little headway against Lotus 1-2-3 provided learning that helped
in the development of Microsoft Excel, an advanced graphic spreadsheet
that leads the competition.4
Jacuzzi
"In the 1950s
the Jacuzzi brothers invented a whirlpool bath to treat people with arthritis.
Although the product worked, it was a sales flop. Very few people in the target
market, sufferers from arthritis, could afford the expensive bath. So the idea
languished until they tried relaunching the same product for a different market – as a luxury item for the wealthy. It
became a big success."6
Dell Computer Corporation
"At
Dell, innovation
is all about taking risks and learning from failure," writes Michael Dell7,
the Founder & CEO of Dell Computer Corporation.
"Today, we're well known for inventory management, logistics, supply chain
management, and such, but that wasn't always the case. Back in 1989, we had a
very large disaster – large, at least, for the small company we were at the
time. The personal computer industry was making the transition to a new type of
memory chip, and we found ourselves stuck with far too many of the old kind.
That was a costly mistake, and it took us about a year to recover, but we
learned from it. The failure led us to develop a new way to manage inventory,
and we went from being last place in the minor leagues to where we now win the
World Series every year."
Bibliography:
1.
"It's not the BIG and eats
the SMALL... it's the FAST that eats the SLOW", Jason Jennings and
Laurence Haughton, 2000
2.
"NLP Solutions", Sue
Knight, 2001
3.
"Changing Strategic
Direction", Peter Skat-Rørdam, 2003
4.
"Bill Gates @ the Speed of
Thought", Bill Gates with Collins Hemingway, 1999
5.
"The Power of Failure",
Charles C. Manz, 2002
6.
"Lateral Thinking
Skills", Paul Sloane, 2003
7.
"Inspiring Innovation",
Ellen Peebles, Harvard Business Review on The Innovative Enterprise, 2003