Jul 27th, 2020

The Value of Failure

New Value is a Function of Failure, not Success.

I recently stumbled across this sentence. It’s the perfect encapsulation of how to create new value. Note that this is about new value specifically, not value in general. There is, of course, plenty of value being created by optimization – leveraging Wright’s Law to bring down the cost as a function of cumulative production.

But new value is different. You can’t invent anything without failure. But not all failure is created equal: You heard about Silicon Valley’s favorite mantra: Fail fast, fail often, fail forward. Most people emphasize the first two aspects (fast and often) and forget about the third. Failing forward means learning. Failure without learning (and as such systematic, recorded and reviewed learning) is useless. Alas – we all too often get caught up in the thrill of experimentation, launching early and often and the lure of the pivot.

The best teams I ever worked with act much more like scientists in a lab than adrenaline-seeking startup jockeys. They formulate a clear, distinct and testable hypothesis, figure out the fastest and cheapest way to verify or falsify the hypothesis, run the experiment, capture the result, mull it over and create their follow-on hypothesis based on their findings.

A dear friend of mine once described this as the “drunken walk of the entrepreneur”. I think that metaphor, as lovely as it is, could be made better: The best entrepreneurs are not stumbling forward, barely knowing where it is they want to end up – but rather like the captain on a ship in rough waters: Knowing exactly where they want to go, steadying themselves against the elements but also embracing the intricate dance between their ship and the sea.

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