I have been fortunate to work at both startups and enterprises, and have learned very different lessons from each. Even though every enterprise was once a startup, the two can seem like complete opposites in many ways.
One key way is how failure is regarded differently at a startup versus an enterprise.
I recall the early years of my kids growing up — they were constantly failing. They were failing every day, every hour. But to them, it was not failure; they were learning how to walk, or eat, or talk. It seems like there is always something new they are trying to fail at, and soon enough, they’ve perfected it and moved on — just like you and I did.
We are born with a “learn by trying” and “learn from failure” mentality. But at some point, many of us lose it because we are taught that failure is bad — something to be avoided at all costs — and we carry that with us in our later lives.
‘Next Time, Don’t Take Such a Big Risk’
While working for a large company several years ago, I recall a conversation I had with my new SVP of Engineering, who joined five months after I did. It went something like this:
- SVP Engineering: I’ve heard great things about you. You’ve made some really bold decisions and they’ve worked out well. How did you know you would not fail? Did you solve a similar problem before?
- Me: No, this was the first time and I did not know that I wouldn’t fail.
- SVP Engineering: But you took a big risk — you could have failed.
- Me: Yes, it’s true that it was a risk. I’m not afraid of failure. I think it’s okay to fail, as long as you keep trying and looking for success.
- SVP Engineering: I disagree. It’s definitely something I don’t condone; however, I’m glad it worked out. But next time, don’t take such a big risk, because if you fail, it could impact your career.
Even though I did not fail (in this instance), he saw my lack of fear of failing in a negative light, and even though it came with success, he was clear that he would rather have me not do something like that again.
I had a very different conversation with the CEO of a startup I worked for. It went something like this:
- CEO: I heard you did a live system migration without a dry run – risky, no?
- Me: Yes, we were at capacity, and we were losing revenue because new orders were not coming through.
- CEO: That’s nuts. Big risk, but great job and great reward!
And, once, when we did fail at a startup:
- Me: We spent two months building this out, but it had no impact on sales.
- CEO: Well, we had to try it. Let’s move onto the next experiment. Maybe that will work.
Enterprises look at failure as something that can derail the organization’s current success. But in startups, failure is just another bump in the road on the way to success.
So why is failure perceived differently at both?
Enterprises already have a well-defined model when it comes to how they make money, their value proposition, and the key resources and processes that are needed to deliver on their model.
Startups, on the other hand, do not known how money will be made, what their value proposition is, or what processes and resources they really need. They must scramble to find product-market fit before they run out of money.
Applying an ‘If This Works’ Mindset
Can large enterprises change how they view failure and risk-taking — perhaps just starting in small pockets and expanding from there? I think they can, and one place to start is with three little words:
“If this works.”
A startup has very little to lose, but a lot to gain. “If this works” could take you from 10 users to 10 million. It could help you find product-market fit and access to the financing you need. It could help a scrappy no-name startup rise to fame. And should you fail, you may not really be that worse off — as long as you survive to try another “if this works” experiment.
Unlike a startup, an enterprise believes it has little to gain from experiments, but a lot to lose. A risk that comes with success may carry some reward — maybe you get a promotion, or win an innovation award — but it won’t be seen as something that “makes the company.” At most, you may increase efficiency or profitability by 5, 10, or 20 percent.
Although enterprises generally have had a negative perception of failure, over the past few years, there has been significant effort in corporations to “behave more like a startup,” taking risks and failing fast. Some have even gone as far as rewarding successful failures.
But a common mistake that enterprises make when they try to become more accepting of failure and to act like a startup is that the effort becomes “too enterprise-y.” What should have started off as a quick effort in experimentation by a couple of people — quickly iterating, getting feedback, and looking for early signs of success or failing fast and moving onto the next thing — instead becomes a significantly larger initiative with multi-year projections and sprawling networks of contributors. As vested effort and spending continue to balloon, so does the fear of failure, because the project is “too big to fail now.” In addition to this, people end up getting emotionally tied to it — no one wants to hear that their baby is ugly, let alone abandon their baby and start over. When the cost of failing gets so big, and failures are so high-profile and messy, no one wants to try that kind of experiment again.
How to Do the Triple Two’s Experiment
In my current role at Everbridge, a publicly-traded software provider, we’ve been able to avoid this mistake and fail successfully in a way that lets us get up and try again. How? By building a very lean and dedicated team that scales up and down as needed, depending on iterative progression and early examples of success per iteration. To avoid an initiative that grows “too big to fail,” we follow something I call the triple two’s experiment. You have two days to put a pitch deck for the idea together. Should we decide to act upon it, you then have two weeks to build and iterate with examples of success. Finally, you get two months to get to a point where the idea is killed for lack of merit, or we have enough evidence of success to bring it to production.
As an example, we worked on an evolutionary innovation idea that came from customer friction we observed, related to a certain product on our platform. We understood what the customer did not like, and we knew they wanted the experience to be better, but we did not know what the solution would look like. Our success criteria was to make the product significantly more sticky and useful, or to figure out how decreasing the friction might increase revenue. We spent two days and came up with what an ideal product could look like as a pitch deck. We defined our failure criteria (which was a minimum number of customers in a pilot test.) If we had been unable to articulate this within two days, we would have killed the initiative.
We then spent two weeks building out the product, while working with sales and product management to explain what we were building; get their buy-in; and validate the idea. If we couldn’t get buy-in and validation from our sales team, we would have killed the initiative.
When launched our pilot, sales had already lined up customers for us to onboard. We documented how the product had become more sticky, but the icing on the cake was this: a sales rep used the pilot to save an at-risk deal. In that instance, not only was the customer happy, but they ended up renewing and purchasing more because we were able to show how this small innovation plays a critical role in a much larger (and more expensive) use-case that mattered to them. Their contract value increased by 20x.
Over the past three years, 85 percent of our ideas have never make it beyond that internal pitch deck. Thirteen percent have made it to a working proof-of-concept with limited pilot customers, and only two percent have made it to production. But the impact of the two percent that have succeeded makes the 98 percent failure rate insignificant in comparison.
The idea’s that have made it to production and commercialization share at least one of the following traits:
1. They increase revenue via new product offersings, or by making an existing product significantly stickier; or,
2. They significantly drive down cost by improving operational efficiency.
It’s not only important to try to develop a culture that is more accepting of failure; you also must implement processes and structures that ensure that initiatives do not balloon out of control. By ensuring that no initiative becomes too big to fail, an enterprise can successfully fail over and over again. A single “if this works” might not amount to much at an enterprise — but applied over time, several successful “if this works” experiments can help an enterprise get more confident about risky ideas and innovation; adjust the culture for the better; and, ideally, create new sources of growth and competitive advantage.
Zeeshan Sheikh is a Contributing Columnist and formerly the Director of the Emerging Technologies Group at Everbridge, a software company focused on critical event management. In 2022 he co-founded and began serving as CEO of Taco Labs, which focuses on helping brands leverage utility-based NFTs to increase repurchases and subscriptions.