The Key to Making Your Failures Productive, Not Destructive
Here's the difference between informative and unnecessary failure.
Failure used to be a private affair, like eating peanut butter from the jar or dancing in your underwear. Now, many founders wear their failures as a badge of honor. From confessional blog posts to gatherings like startup funerals and FailCon to podcasts and online communities, entrepreneurs have taken the “fail fast, fail often” mantra to heart.
“Failure teaches self-confidence and tenacity,” FailCon founder Cass Phillipps told Entrepreneur in 2014. “There are people who fail and take it very, very personally, and that makes it hard to recover from it… We tell people ‘Don’t take this so personally. Failure’s actually really great.’”
Statistics show that 70 percent of new tech companies fail, usually about 20 months after their first financing round. A staggering 97 percent of seed- or crowd-funded consumer hardware startups will also fail.
These figures make me wonder: What role does failure play on the road to success? And how much failure is too much?
Investors only tolerate failure to a point, entrepreneur and venture capitalist Bruno Bowden told The Guardian. “You won’t get funding unless you’re credible. One previous failure can be OK, but multiple failures will make it impossible to get funding.”
When I started JotForm in 2006, I chose to bootstrap the company instead of chasing venture capital. I was afraid to rush critical decisions like finding product-market fit, hiring and other factors that might have led me to fail fast. Admittedly, I was also risk-averse, and I was lucky that I didn’t need deep pockets to build the first product versions.
I made plenty of mistakes, but I also had the time and freedom to course-correct. And as I look back on the past 13 years, our biggest failures fit into two categories:
1. Productive failures
These missteps taught me about software development, business-building, culture and teamwork. Many of these lessons were catalysts for our future success.
2. Unnecessary failures
These are the mistakes I could have avoided through planning and experience. They still make me cringe, and they weren’t helpful in the long run.
Examining our flops reveals why all failures are not created equal, which is a distinction the pro-failure cheerleaders seem to overlook. In order to fail more effectively, we need to get comfortable with productive failure and harness it as a tool for innovation.
How productive failure leads to achievement
Science reinforces the idea that productive failure can foster success. In a study of two eighth-grade math classes taught by the same instructor, researchers found that constructive failure can be a catalyst for deeper learning, innovation and creative problem-solving.
Anecdotally, many of the world’s most successful entrepreneurs also endured significant -- and sometimes highly public -- failures before reaching the top. Consider media mogul Arianna Huffington, whose second book was rejected by 36 publishers before she created The Huffington Post. Or billionaire investor and PayPal co-founder Peter Thiel, whose early hedge fund, Clarium Capital, reportedly lost 90 percent of its $7 billion in assets.
Everyone fails at some point, whether it’s a small misstep or a crushing loss. What matters is how we handle the situation. Here’s how you can dust yourself off and use failure to your advantage.
Eliminate the blame
As children, we often learn to associate failure with blame. And in my experience, most entrepreneurs are either intense perfectionists or free spirits who never fit the mold. Both types are quick to blame themselves when things go wrong, which can cause significant emotional distress.
For example, U.K. entrepreneur James Routledge left college to start an online platform for soccer lovers called MatchChat. The company lasted nearly four years before he shuttered it in 2016. “At that point all these feelings I’d quashed really started to surface,” Routledge told the Financial Times. “I was anxious, getting panic attacks. It was pretty debilitating. I’d not been honest with myself for years.”
Convinced that entrepreneurs need to be more honest about failure, Routledge started Sanctus, which provides counseling and mental health support to startups and other companies. The firm’s clients now include the BBC, Red Bull, Vice and Aviva.
Removing blame in a team setting is equally critical. According to Amy Edmondson, a professor of leadership and management at Harvard Business School, executives often wonder how they can respond constructively to failure without promoting negligence. “If people aren’t blamed for failures, what will ensure that they try as hard as possible to do their best work?” Edmondson wrote in Harvard Business Review.
Their concerns rest on the false assumption that most failure is deliberate, said Edmondson, while research shows that most failures result from process complexity. On the spectrum from intentional deviance to exploratory testing, the first level is “blameworthy,” while the final rung should be “praiseworthy.”
“When I ask executives to consider this spectrum and then to estimate how many of the failures in their organization are truly blameworthy, their answers are usually in single digits – perhaps 2 percent to 5 percent,” writes Edmondson. “But when I ask how many are treated as blameworthy they say (after a pause or a laugh) 70 percent to 90 percent.”
The disconnect Edmonds outlines shows why many failures aren’t discussed, and therefore, represent lost learning opportunities. As an entrepreneur, it’s important to cut the cord between failure and blame -- both for yourself and your team.
In his book, Little Bets: How Breakthrough Ideas Emerge From Small Discoveries, author Peter Sims describes the process of placing low-risk wagers to test your ideas. For example, comedian Chris Rock is known for trying out new jokes at small venues. He gauges audience reactions and cuts the “bombs” from his set long before delivering an hour-long act or TV special. And writers for satire publication, The Onion, propose about 600 different headlines before choosing the 18 they publish each week.
“A lot of people still think of failure as a sign of personal incompetence and try to avoid it at all cost,” says Andrew Filev, CEO and founder of Wrike, a startup that pivoted from project management services to software. “But when you view building a business as a series of experiments, you start to see failure as an inevitable step in the process.”
At JotForm, we use hack weeks to help product teams experiment and fail small -- to place those little, informative bets. We also test new features on just one percent of our user base before the full release. In the interim, we kill bugs, gather feedback and learn how we can improve.
Examine what you’ve learned
It seems the business world is becoming more comfortable with failure. In 1937, the average company spent 75 years on the S&P 500 Index. Today, that figure has dropped to 15 years. Technology has slashed the proportional capital required to launch most ventures, so there are more entrepreneurs -- and more failures. We also see shorter business life cycles.
Entrepreneurial failure is often a springboard to success, even when it takes the whole company down. But it’s rare for most founders to reflect on what truly unraveled. For example, entrepreneurs like Marc Hemeon, who publish detailed -- and now ubiquitous -- startup post-mortems, outline their mistakes and future plans, but they often fail to acknowledge the deeper flaws.
“If no one wants your product, your company isn’t going to succeed,” writes business journalist Erin Griffith, citing a CB Insights poll showing that 42 percent of startups failed due to a lack of market need. “But many startups build things people don’t want with the irrational hope that they’ll convince them otherwise.”
4. Maintain some perspective
As with most things in life, it’s good not to take failure too seriously. Of course, we still need to be invested; to care about our goals, aspirations, and teams, but a small attitude shift can make entrepreneurship feel more playful.
“Treat your life like a game or martial art,” writes Bridgewater Associates founder Ray Dalio in his book Principles. “Your mission is to figure out how to get around your challenges to get to your goals. In the process of playing the game or practicing this martial art, you will become more skilled. As you get better, you will progress to ever-higher levels of the game that will require -- and teach you -- greater skills.”