Failure has become a rite of passage for tech startups. If you’re a fan of HBO’s “Silicon Valley” you appreciated the episode where Gavin Belson, CEO of the fictitious Hooli, persuaded his board that the disastrous launch of his company’s compression platform was actually a good thing.
“What those in dying business sectors call failure, we in tech know to be pre-greatness,” said Belson.
What Belson doesn’t mention, however, is that in our veneration of failure, we end up becoming dependent on strategies that should be deployed sparingly -- strategies like the “pivot.”
The pivot, while beneficial in certain instances, is increasingly used as a crutch to excuse everything from a flawed idea, to mismanagement, to faulty execution. In a culture that prides itself on failing at least once, we end up with a vicious cycle where initial failure leads to pivoting and the overuse of the pivot leads to more failures.
Just ask Clinkle’s CEO Lucas Duplan, who recently confirmed the company’s pivot away from debit card products to a B2B API for payment rewards. The announcement comes after two years of launch delays, layoffs, increasingly skeptical VCs and more than $30 million in funding. Fab is another great example of how startups are getting “pivot happy” yet still failing. Over four years, Fab raised $330 million in funding and pivoted (at least) twice. Yet in February, the company once valued at $800 million announced they were being acquired for a fraction of that.
Both Clinkle and Fab offer three key lessons on entrepreneurship in a tech culture that has been too influenced by the fetishization of failure and the pivot.
Execution is devalued.
Great entrepreneurs can't just come up with great ideas, they must also develop those ideas into a thriving business. Too often, so called “strategic pivots” are the result of poor execution of a good idea enabled incorrectly or inefficiently, and so rendered ineffective. In a failure culture, we diminish execution and focus on sexy ideas. But a failed idea is still failure.
Clinkle’s original idea of making mobile payments easier drew $25 million in stealth seed funding, despite having no working prototype. Duplan, Clinkle’s CEO, was only 21 and had never proven he knew how to build the infrastructure needed to support a sound idea and ultimately execute it. He was green and untested. What followed was two years of bad press, resignations and poor decisions that confirmed the lack of experience.
A culture that prides itself on failure devalues the importance of execution. Execution takes a back seat to the overall concept. Someone with a good idea but no knowledge of how to actualize it can secure millions in funding because, if at first they don’t succeed, they can pivot toward something else.
This shouldn’t be. Innovation is only as good as its impact, and impact depends on a thousand details. If we de-emphasize operations, future entrepreneurs won’t be setup for success.
Research is undermined.
A pivot in response to initial failure generally means there was little concrete data in the first place to support the original business model. For any entrepreneur, in-depth research into the landscape is essential to determine product or service viability over the long term.
Fab’s disastrous first run as a “Groupon” and subsequent pivot to flash sales was initially lauded as a success. However, instead of focusing on scaling their U.S. business, the company decided to expand into Europe out of fear of copycat competition from German startups. This decision seemed to be made on an impulse rather than facts and became a catastrophe costing Fab $100 million. Yet, instead of pausing to consider their next move, Fab’s leadership simply pivoted away from flash sales toward actually holding inventory, a challenging and completely new business model.
Failure culture has contributed to a too-casual view of rigorous research, where analysis is ignored or never even conducted. Instead, many of today’s entrepreneurs dive head first into an endeavor without properly vetting the marketplace, knowing they can pivot to something else if it doesn't work.
Failure culture wants to claim an idea first and figure out how to provision it for success later. This is a risky strategy.
Related: Why Market Research Matters
Innovation is thwarted.
VC Marc Andreessen has said that “taking the stigma out of failure is very exciting, but we see founders who give up too quickly. It’s permission to give up very fast.”
Going back to Clinkle, the company’s original concept of taking mobile banking to an almost social media level with stylish notes and personalized “wallets” was a decent enough concept. However, rather than innovating on the current idea after realizing Apple Pay was a threat, they dropped it completely and pivoted toward something far safer rewards programs.
Recognizing when you need to shift strategy is important for any entrepreneur. But, too often it’s used as a justification for going in a completely new direction, before all options are properly vetted and considered.
By championing “failing fast,” we kill great ideas prematurely, leaning into trends – not true innovation – to be successful. In doing so, the lifecycle for execution of a great idea has grown shorter, and “immediate success” or lack thereof is often evaluated unrealistically. The result: VCs and the media judge too hastily and entrepreneurs give up too easily.
Failure can be helpful. It’s great that our culture doesn’t immediately punish someone who trips, falls and gets back up. The problem arises when we put failure on a pedestal and rely on questionable approaches or fallbacks like the pivot in lieu of sound strategy. It’s better to ensure execution, research and innovation -- the building blocks for a successful startup -- are essential steps to building a successful entrepreneurial business. To do that, we must overcome our love affair with failure.