May 13, 2021

Failure looks great on you—really

Talk about successful rebrands. When failure became known as learning, it turned into a hot commodity. Newly humbled startup CEOs tweeted saccharine one-liners about the zen of failing. And every business blogger penned a post called “Five Important Lessons Learned from New Product Failures” or something equally clickbaity.

Failure had a whole new look.

But it’s funny: when you check out the websites of venture capital firms or the LinkedIn profiles of corporate innovation heads, there’s no Wall of Wisdom listing the dear departed product failures and the lessons they left behind. The type of learning acquired from failed investments is not the same kind, apparently, that warrants a diploma on the wall. Losing other people's money still feels bad.

So what's the deal with failure? Our take: if you’re going to take Vienna, take Vienna. Let’s use failure to learn as much as possible. But failure, like success, can be managed. There's no reason to blow the whole wad if you don't have to.

Failure Gets a Grade

Get this: failure is so hot it has its own website. Failory tracks startup failures so VCs don’t have to. Founded by a 19-year-old Argentinian college student, Failory is itself a startup—a media play with podcasts, a blog, a newsletter, content curation, and a sort of leaderboard of recent startup fails.

Failory’s stats about new business failure are sobering. It’s enough to make the faint-hearted chuck the pitch deck and apply for a job somewhere.

But those in the midst of company-building should tour the Startup Cemetery, a guide to dead startups and the conditions that led to their demise. While the analyses generally only scratch the surface, there are useful analogues to learn from. It doesn't have quite the gleeful gossip factor as, say, failure classic Fucked Company, but it's a good place to start.

The Price of a Good Education

Companies spend billions on R&D every year. And in 2020, VCs invested $428M in US startups every day. Add in government research spending and you've got yourself a nice bit of innovation.

All that new product development—and the goal in most cases is new product development—is heartening. Maybe we can innovate our way out of some big problems. But that investment is, of course, a sea of failure, with islands of success emerging only here and there. Take consumer packaged goods, for example: a full 25% of new SKUs are not on the shelves a year after launch; by year two, 40% have vanished And the rule of thumb for VC-backed startups is that nine of ten fail. That's a lot of dosh in the old learning kitty.

Is there a way to fail faster?

Alternative Education

If you ask startup founders how to avoid failure, more than half of them suggest more research prior to launch or a stronger business plan—in other words, temper big risk with data and rigor. With market incumbents, of course, it’s often the opposite—there is little incentive to take big risks because the cost of failure is too high.

The solution in both cases: “fail” before you spend all the money on building something. Testing viability before you build is not foolproof, but it can eliminate duds early and de-risk product development.

The tools for testing new product viability are growing. In fashion, for instance, 3D design software allows brands to save time by eliminating physical samples and making real-time changes to apparel designs online. With virtual "samples," brands can even test new designs with consumers long before they hit the manufacturing floor.

Failing can be faster—and cheaper—than it has been, but it requires culture change. At Spark No.9, we have found that clients who test product-market fit long before building a product have a different mix of successes and losses than those who launch first and fine-tune later. But the dominant culture, strongly influenced by engineering-centric Silicon Valley, still favors the build-first model.

Isn't it time for a new failure paradigm?

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