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?
- What is the likelihood of a negative result?
- What would be financial implications of the negative result?
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:
- What was supposed to happen? ie what was the aim of the strategy?
- What actually happened?
- Why was there a difference in the expected and actual outcome?
- What can be learnt from this failure?
- What will we do about it?
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!
