Failure is something that most people try to avoid. This is perfectly natural as no one likes to admit failure – particularly if that failure results in the collapse of a business and the impact that has on the owners, team members, suppliers and customers!
However, the fear of failure also has the effect of hindering the growth of a business. Failure in the context of this is not necessarily the failure of a business, but maybe the failure of a strategy in that it did not reap the reward relative to the investment made, financial and/or time.
However, it’s important to recognise that reward is inherently connected to risk. That is to say, if you take no risk at all, you will most likely have a business that will at best be average or most likely below average.
That may satisfy some – however, for most business owners, their aim is to grow their business and the financial rewards that come from it. To do this, they must distinguish themselves from what their competitors are doing. In other words, lift themselves out of the sea of sameness and look to provide something different or unique that their customers will see value for and be willing to pay for that privilege!
This means that businesses need to experiment with both new products and services and how they can be delivered. Technology is also a significant interrupter in how customers wish to deal with a business.
Experimentation comes with an element of risk – but without risk, you are guaranteed that whilst current profits may be maintained, future profits will most definitely be eroded.
I came across a simple method of assessing the implications of risk – which is simply answering two questions in respect of the identifiable risks associated with the possible change?
So, if the likelihood of failure is high but there is a negligible financial impact on this, it still might be worth a try as something great might be developed, but the downside is low.
However, if the likelihood of a negative result is low, but the negative financial consequences high, it still may be worth testing, but having strategies in place to minimise the both the possibility of the situation occurring but also minimising the financial impact should the idea fail.
Any failures that may occur under these criteria could be termed “smart failures”. These are failures arising from actions that have been carefully planned and assessed and outcomes monitored.
This leads me to the next important step in this process – learning from ones mistakes! It’s one thing to say this and another to actually learn and grow because of a failure. This is where the US Army’s After Action Review (AAR) system is a really useful tool to apply in business. The purpose of this process is to find the cause of failure, not the culprit. At the core of the AAR are these five questions:
Going through this process in respect of all strategies, both successful and otherwise, will result in the business learning and therefore growing – and will foster a culture that embraces change. This will be a critical element of any business in any industry as industry is disrupted through technology advances and other influences.
And one final point – maybe it’s best to refrain from calling a strategy a “failure” if it doesn’t work as planned as the word “failure” comes with negative connotations and fear. Maybe we’re best to say the outcome was not what was expected!