Last week, I attended a ceremony at Boston University at which a good friend and colleague was honored with an endowed chair, thanks to his impact teaching entrepreneurship and much more (congratulations, Ian!).
Ever since, I have given a lot of thought to a point he made in his talk that day: One of the challenges in teaching entrepreneurship is getting students comfortable with failure…something they spend their academic career trying to avoid. As he explained, this is critical since the path to impact and innovation often includes setbacks along the way.
The Minimum Viable Product
In his book, The Lean Startup, Eric Ries popularized the concept of the Minimum Viable Product (MVP). Since any new venture (or service offering, or product) involves risk, there’s no way to really know beforehand how the market will respond. So it’s best to develop something that is minimally viable, test it in the real world, and “fail fast.”
Contrast this with the old-fashioned way of testing a new idea by employing market research to see if people are interested. Using this information, entrepreneurs would often take positive feedback as a solid go-ahead signal and build out a “complete” offering, only to discover it doesn’t sell.
While market research is still a useful first step, the challenge is that with a product or service that does not yet exist, people can’t really know what they will do when it is actually offered. The responses tend to be only directionally helpful at best — and potentially misleading at worst.
MVP, which is essentially just a formalized type of experimentation, sees failure as a form of “tuition” on the path to success, with the goal of minimizing its cost. It relies on developing a set of core features at low cost and getting that imperfect version into the market quickly, giving people a chance to vote with their wallets. Failure under these circumstances is less expensive and provides clues for adjustments or major changes.
It’s worth noting that MVP doesn’t necessarily mean cheap — it means as inexpensive as possible. For example, my Apple iPad version 1.0 was used to test the market for Steve Jobs’ new vision of a tablet. It can only operate one program at a time, has no camera, and is powered by the least expensive chip that would allow for browsing content for eight hours on a single battery charge. Once that sold well, Apple followed-up quickly, launching new versions with significantly more capabilities.
Big Failures Can Be Instructive
Even significant failures can be valuable, provided you are paying close attention and are willing to change course significantly.
Consider the example of Slack Technologies that began life as a video game development company called Tiny Speck. The game they created went nowhere, but they did notice a lot of interest in the internal chat tool they built for their own use — one that they then grew into a highly successful product. Similarly, Twitter emerged from an unsuccessful attempt at building a podcasting network called Odeo.
These and others are examples of companies that headed to market with one plan, but later discovered that other things they were working on had greater potential.
Playing it Safe Comes with Its Own Risks
Critical to consider, too, is the risk of failing by not taking any risks or trying anything new. Here, fear of failure can itself lead to failure; companies that eschew bold new things can become the victims of disruption by new companies or new technologies.
As HBS professor Joseph Bower noted in his work on disruption with the late Professor Clayton Christensen, “Because managers are evaluated on their ability to place the right bets, it is not surprising that in well-managed companies, mid- and top-level managers back projects in which the market seems assured. … Risk is reduced — and careers are safeguarded by giving known customers what they want.”
This way of thinking often results in companies missing a newer market demand entirely. Look no further than taxi companies which used new artificial intelligence (AI) tools to improve dispatch operations, missing the market for on-demand rides that Uber and Lyft have so successfully embraced.
Key Ideas to Keep in Mind
- Understand that most innovations or new approaches are really testsrather than sure things. Then manage your path with that in mind.
- Define success early. The more clearly you can articulate what success looks like (Sales volume? New subscribers?), the more likely you are to keep tacking towards the results you want.
- Don’t fall in love with your initial idea. Market feedback is for finetuning — not for simply reinforcing what you already believe to be true. Be ready to abandon your idea for a better one if the market points in that direction.
And, most importantly, keep trying new things. Even large, successful companies risk stumbling if they aren’t paying attention to market needs and wants or experimenting in ways that new trends or technologies make possible.
Now go out there and fail!