I was listening to a podcast from Chris Brogan a while back that talked about quitting, and the circumstances under which quitting is OK. Chris made the very wise point that our problem is not that we quit too early--it's that we quit too late. In other words, don't keep pouring resources into a sunk cost. It's certainly easy to say that about a recent failure like Zirtual--the founder desperately hung on until the end, quitting too late, and creating a wake of ill will and potential financial distress for stakeholders. Surely, she should have quit sooner--but she hung on, well past the last possible moment.
Conventional wisdom and the "legend" of the entrepreneur has it that we should "fail fast." If we aren't failing enough, we aren't trying enough new things. The passion of the entrepreneur trumps all. And so on. You've read the books, blog posts, and stories. Fail fast, fail often, learn from your mistakes, move on to the next play.
Here's the problem with these stories--there is an innate survivor bias in the tales of the "winners." We read about the plucky entrepreneurs who fail 10 times in a row, but hit it big on the 11th try. We don't read much about the ones who fail and never hit it big. And we read far too little about those who suffer neither the meteoric rises nor the Zirtual-esque plummets, but rather quietly build their little endeavors into self-sustaining, operating businesses.
We are taught to fail fast. I think we are failing too much. A large study conducted by researchers from Stanford and Berkeley examined 3,200 startups, and found that 92% of these startups failed. That's over 2700 of them, if you do the math. That's a lot of carnage. The Startup Genome study attributed many of these failings to premature scaling, but I think that's a trailing variable. Instead, I look to the post mortem done on a number of startups by CB Insights, which found that of the failed startups they studied, 42% died because the market didn't need what they were trying to sell.
We tend to overlook the bad beats here. It is true that nobody wants products that they don't yet understand, and it's easy to convince ourselves that we are simply "ahead of our time." But I return to that statistic that 92% of startups fail.
Don't you think that is kinda high?
Are those 92% creating value, or destroying it? That's complex. But one thing is surely true: the winners keep winning bigger, while the losers pile up. A recent KPMG study on "Unicorns" (companies with billion-dollar valuations) shows that the rate of "unicorn-creation" is growing sharply. There were 10 Unicorns created in 2012. Last year, there were 38 new unicorns. This year, KPMG projects at least 50. Capital is becoming more and more concentrated in these "unicorns," while the corpses of their would-be challengers continue to mount outside their walls.
If I asked you to name 10 successful watchmakers, I bet you could do it. Same with 10 car companies. Now name 10 successful (as in sustainable and profitable) search engines, social networks, marketing automation plays, or any number of categories represented by the unicorns in the KPMG report. Tough to do, isn't it?
Now think about the mantra of "fail fast." Who do you think failing fast is really helping, here? How many businesses with ideas and technology that might have competed with the unicorns had that potential squashed because they built, scaled, and failed too fast? Conventional wisdom teaches the entrepreneur to ship it, get it out the door, and worry about the rest later (like, is there even a market for the product.) With a 92% failure rate, do we still think this is good advice?
Sure, we all make mistakes. If we don't make any, I certainly agree that our reach has not exceeded our grasp. But the "legend" of the entrepreneur seems to be indoctrinating us into the world view that failure is OK. Well, you get what you measure, and we sure seem to be getting a pile of fail.
I recently returned from an engagement with a European client I've had for over 8 years. They are currently at the very top of their market, and have fended off numerous challengers, some of whom "failed fast." The team there has been pursuing a strategy for the entirety of our relationship, informed by our research, and aided by a very wise consultant I've had the pleasure of working with in a number of European markets. The client had a bit of fun at his expense on this trip, pinning their success on his "doing nothing."
"No," he said, "my job was much harder than that. I didn't just do nothing. I actively had to keep you from doing something."
"Succeed slowly" is also a strategy. Let's not forget to celebrate that, too.