The 'Fail Fast' Method Has Failed Silicon Valley
Silicon Valley's "lose big, win bigger" model for success is actually leading to more big losses, and not as many big wins. Here's the approach they should take instead.
Not long ago, Silicon Valley was a blue ocean, a vast sea of uncontested market space. Disruptive innovations were built upon the foundation of a knowledge economy. Startups turned into scaleups — quickly. Silicon Valley's hidden gems of high-tech transformation became the California gold rush of the 20th century. Like prospectors in a boomtown, investors in high technology bet on the promise of a strike.
However, things are constantly evolving in response to reality, but also to fear and failure.
There's no denying Silicon Valley is a "startup heaven," but now many of these companies are suffering from turbulent market trends, talent dilemmas and 101 other reasons that are making this less than a founder-friendly environment. They've run out of money, misallocated resources or been blinded by their own ideas. Whatever the reason, what was once called the journey to success is now looking more like a path with ample possible failure points along that journey.
Maybe Silicon Valley needs a reset
Achieving massive scale at breakneck speed is called blitzscaling, and it's this strategy that gives Silicon Valley's model of entrepreneurship its uniqueness. Evoking sentiments of "lose big, win bigger," it ushered in an era of high-risk strategy and massive growth. It became synonymous with the word "entrepreneurship" itself. But entrepreneurship formed within a cluster of high technology firms in California is not the same as entrepreneurship elsewhere.
This is because blitzscaling in high-tech industries results in highly-funded companies that have volatile markets and are highly reactive to what is happening around them. In the Silicon Valley model, efficiency isn't all that important when the only thing that matters is gaining market share and beating the competition. And if you don't capture market share, efficiency is irrelevant anyway.
But now, inefficiencies are catching up.
The current model is failing
The disruptive innovations that emerged from Silicon Valley's blue ocean strategy cannot be easily recreated. Historically, investors in advanced technology were able to buffer their risks of failure by leveraging the law of averages — the sheer proximity and abundance of tech startups provided the best possible environment for risk-taking. The more founders and ideas they bet their money on, the higher the odds that one of them would stick. And once this happened, blitzscaling made the ROI worth all the risks investors took to get there. In Silicon Valley terms, this was a success.
However, big investments filled the space where efficiency should have been, hiding the cracks in the foundation. In 2022, the market has shifted. Where there was once abundant optimism, there is now caution as investors and organizations try to figure out the effects of global supply chain issues, the post-pandemic market and inflation. Rising pressure has quickly revealed those foundational cracks. Now, all of a sudden, society is more invested in the outside influence of the markets rather than backing the honesty and integrity of the idea and coming to the realization that founders are fundamentally human and thusly flawed — a trait that is normal. But the system is designed to put the founder at the center.
Am I saying that founders aren't important? Of course not. But they aren't the only factors of success that predict a company's longevity. The founder may be a genius at creating innovative products, but maybe not as great at developing sophisticated sales strategies. What I'm saying is this: Rather than asking about the founder's plan and how we can support it, we should be asking what the idea itself needs to be successful — and more importantly, what would cause it to fail.
A better approach
Founders are human; they make human mistakes. Choosing the wrong market, forming bad partnerships, not understanding their customer, etc. are cognitive errors. When we focus on the founder and invest in the founder's plan, we expect them to figure out all the answers. Investor and venture firm platforms are designed to support the founder, but where is that strategic plan coming from? How do you know if it is the right one? Are people being honest? Is the founder acknowledging gaps or shortcomings?
When we focus on the idea rather than the founder, we are more able to make the unknowns known. Figuring out what an idea's failure points might be is a better way to help businesses prepare for things that are out of their control; some of those might be the founders' failure points — a unique perspective and experiment in the admonition of hubris. Failure prevention is about creating an action plan before predictable problems arise. Focusing on critical failure points that could cause setbacks will allow you to prepare and strategize a way around them. Perhaps it's not as popular to talk about being an elite "failure preventer," but it's definitely cooler than being surprised in a shifting market. Maybe we empower another type of response and ask more people in your company the billion-dollar question: What would make our company fail?
The strategy of failure
The facade of success worked for Silicon Valley for a while, but all signs are pointing to the fact that the stakes are actually too high to get it wrong and to fail. But in the current economy, the blitzscaling strategy of years past has left many companies with an Achilles' heel. If you have to ask yourself "why are we falling short?" it's too late. What was once considered a Silicon Valley success looks very different under the lens of uncertain times. Companies should begin with the end in mind, and then come up with action plans and solutions to counter the potential failure points that could arise. Instead of filling cracks with the short-lived returns from blitzscaling, fill them with a solid, concrete strategy to address potential failure. And if your company, team and customers focus on preventing failure points, you will end up closer to the vision of success and you actually might find some hidden opportunities.
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