Starting a new business requires complete commitment and conviction. Sometimes irrational confidence in your ultimate success is a core requirement.
Friends and colleagues are patting you on back and wishing you “good luck” while wondering why you are taking on this quixotic venture. They expect you to fail but do not say so – just because most new businesses do fail.
Your best friend will say, “I hope you fail quickly.” And go on to say, “I hope you quickly learn what does not work and move on to discover what does work.”
If you are starting a new business or are the leader a of team developing a new product, thinking you will fail is not a winning mindset. Media and popular culture talk about “failure” whenever something goes wrong implying that the people involved are “failing.” In fact, failing – meaning discovering what you are doing does not work – is an essential part of learning and an essential part of becoming successful.
Thomas Edison patented the light bulb in 1879. His first 1,000 light bulb designs did not work. When a reporter asked, “How did it feel to fail 1,000 times?” Edison replied, “I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.”
Discovering what does not work is as important as discovering what does work.
Failing – A Process of Discovery
Innovation is a process of discovery. Business innovation is, in some ways, more complex than technology innovation. Harvard Business School Professor Bill Sahlman developed the conceptual framework for the entrepreneurial process. The core elements of the entrepreneurial process are:
- The Deal
- Dynamism – change over time
For every new business initiative to be successful, the right combination of people, opportunity, context, deal, and where you are in a river of change must be in place. If you are a business founder or the leader of an initiative within a company, your job is to quickly discover whether you have the right ingredients for successful innovation in place. If not, getting them in place – quickly – is your first priority.
“Will the dog eat the dog food?” is shorthand for asking whether the customer you believe is your target audience will buy your product at the price you set. Answering the question early in the business creation process is an essential discovery.
To be successful as a new venture leader, your mission is to discover what works. If you believe you know exactly how your business will work and what your customers will buy, you are certain to fail. Too often, company founders are so entranced by their new technology that all their focus is on advancing the capabilities of the technology rather than discovering whether there is a customer who “will eat the dog food.”
Your Business Plan – Discovery and De-Risking
If you are starting a business funded by outside investors, your financing proposal should be built upon your steps of discovery. These are de-risking steps. Identify the biggest risks of failure and group them together, if possible. Raise enough funds to discover how to resolve the highest priority unknowns first. If you do not find a way past these barriers, don’t go further.
If I am a potential investor in your company, I want my funds used to quickly determine whether the business venture can be successful. I want to know what you believe are the biggest obstacles to the business succeeding – the biggest risks – and the most important questions requiring an answer. I want to know your views on what could go wrong. Your answers to these questions are part of my evaluation of whether you understand the business you want to enter and whether you understand the barriers you must overcome.
Your budget should assume some elements of your concept or business plan will “fail.” The original product formulation or manufacturing approach may not work. An early team member leading marketing and sales may not live up to expectations. The worst time for a company founder to raise new funds is after an important part of the business is not working and additional funding is needed to discover what will work.
Killing the Business Quickly – Google X
Google has a skunkworks or Moonshot Factory called “Google X.” The charter of X is to use 10% of Google’s R&D budget to solve:
- Huge problems
- And breakthrough technology
With billions of corporate funding available, one might expect Google X to operate much like Bell Labs in an earlier time where researchers were given wide latitude to pursue science and technology with the expectation that science would advance, and commercial products would eventually emerge. Google has taken the opposite approach.
Astro Teller is Co-Director of Google’s X. He recognized that while funding may be available, the real constraint on big impact innovation is the capacity of X’s highly talented team of scientists and engineers. The core of the innovation approach developed by Teller and his colleagues is to:
1. Start projects quickly
2. Kill them even faster
The project involved extracting carbon dioxide (CO2) and hydrogen from seawater and combining them to create methane to be used for fuel.
As a measure of economic viability, the Foghorn team set the goal of producing methanol at the equivalent of $5/gallon of gasoline. In the case, project leader Kathy Hannun is preparing to report to Google X management after three years working on the Foghorn project. Her team brought leading edge technology together in innovative ways, secured new patents, and built a prototype that works. But the delivered price of methanol would be $8/gallon or more without significant new investment and major technical advancement.
The questions in the case are: what should Kathy Hannun recommend; and should the X leadership kill the project or give it more gas?
I could leave you in suspense and suggest you read the case. But here is what happened next. Ms. Hannun recommended killing the project because the obstacles her team had identified were unlikely to be overcome at an acceptable cost and in an acceptable time frame.
The Google X leadership thanked Kathy Hannun and her team for their good work. Ms. Hannun was congratulated for her courage in making the kill recommendation to her management on behalf of her team.
Consider adopting a similar approach to quickly killing a path your company is pursuing or even the whole business venture – including your business – when the process of discovery establishes that what you are pursuing is not likely to succeed. This approach to developing a new business will get you more focused on what can succeed.
Success Requires Learning What Works & Also What Does Not Work
When starting a new business or any new business venture, begin with your vision for success. Quickly move to what you do not know. Develop a plan for answering the biggest unanswered questions. And evolve your plans as you learn what works and what does not work.
Here are steps you can take when launching a new business to improve your chances for success.
- Your business plan must identify your customer and the problem your product solves for the customer.
- With the opportunity outlined, identify the unknowns and questions to be answered.
- Identify the highest priority business unknowns. These could be technology developments, but they also could be the value a customer would attach to the proposed solution to their problem.
- Build your financing proposal around addressing the highest priority unknowns. The work to be funded should answer these questions and reduce the risk of additional investment in the company.
- You are proposing to build a business. An investor will not fund your exploration of
an interestingtechnology. The plan must be focused on discovering whether your business has the combinationof people, opportunity, context, and deal to be successful and whether your position in the river of change is viable.
- Describe the “experiments” you will conduct to determine what works and what does not work.
- Establish a path of
discoveryprocess for creating the business, and a path of discovery culture on your team.
- Celebrate answers to the big questions – whatever the answers.
- If you reach a point where the results of your team’s work strongly suggest you do not have a reasonable path to success, have the courage to stop. You will be giving a gift to your team, your investors, and yourself.
- Pursuing a path of
discoverygivesyou a better chance of success than pursuing a path of dogged commitment to your original business plan.