Why Failure May Not Always Be Good

Flickr Creative Commons - daveschappell

The startup community has lately been enamored with the concept of “fail often, fail fast”.

The underlying notion is that companies whose business models aren’t functioning properly should “pivot” as quickly as possible, in order to minimize the potential cost of failure. In doing so, they hopefully eventually establish a business model that is market tested (if things work right).

The issue is that “fail fast” is a business aphorism, and like all such statements, it doesn’t always apply, and even where it does, there are subtleties.

What I’ve been noticing lately with startups that I’ve been working with are some troubling problems that result from blind adherence to this concept:

  • It saps drive – i.e. people aren’t really working as hard as they should be in order to succeed, because “they can always pivot”.
  • It causes impatience – it takes a few years to build a decent business (even something prone to networking effects, like an internet startup). Pivoting too quickly (I’ve seen this happen over days or weeks, never mind months) means that a company doesn’t really know whether what they’re doing would eventually have succeeded.
  • It burns bridges – there’s only so many times you can scrap things and start over without severely damaging relationships with staff, customers and investors.
  • It wastes resources – in the world I inhabit, most startups are starved for cash, and don’t have ready access to outside capital. A “pivot” can eat up significant resources that aren’t easily replenished.

As we all know, some failures can be extremely costly (not just cash, but also time and opportunity cost). If things aren’t working, closing the door quickly can be an effective way to cauterize the bleeding. I know this personally from hard earned experience. That doesn’t mean that entrepreneurs should romanticize business failures, eagerly seek pivot points, or precipitously act in ways that will hurt the people around them. The usual rules apply: caution and common sense!