As entrepreneurship continues to have such great press, increasingly described as both the world economy’s answer to unemployment and the golden path for anyone to achieve a lifestyle of their dreams, it is small wonder it attracts ever increasing numbers.
Increased business failure is an inevitable part of this growth of entrepreneurship. In the US, one third of new ventures closes within two years and half within five years.
In the UK, survival rates are higher during that first year but research still shows that only four in ten will be still be trading at the five-year mark. If we look at the figure of the 650,000 new businesses started last year alone, that is an awful lot of owners who are going to become disillusioned or just not be able to keep going.
Economists from Stanford and the University of Michigan found failed entrepreneurs are far more likely to be successful on their second attempt. But the problem is that we often don’t try that second time. Another massive study of entrepreneurs by Francine Lafontaine and Kathryn Shaw, between the years 1990-2011, showed a huge 71 per cent of first time entrepreneurs giving up altogether. Of the ones who did try again, the success rates increased in tandem with the number of past failures.
This is a great example of business failure having been an essential teacher on the journey to success, which is something we know and recognise in some ways but in business we all struggle to see. A study of 576 UK entrepreneurs, shared in Harvard Business Review, suggested that the problem may lie in the single mindedness of our investment – both financially and emotionally. It found people with multiple businesses were much more resilient to failure than the ones who were dealing with one business at a time.
Organisations also come unstuck in the ways failure is represented as something “bad” to employees. The knee-jerk reaction when something fails is for a manager to order someone to find out what went wrong and to sort it out. The answer is rarely black and white, and sufficient or accurate data often not available so a useful answer will not be found.
The bigger issue is that all the focus is on the negative, which inevitably leads to a resentful, blame culture. Given that some failure in everything we do is inevitable, that can never be healthy. Instead, more people are encouraged to try something if they perceive it is “safe” to fail.
Failures when you are designing, prototyping, doing scientific experiments for just a few examples, are almost certain to have failure on the way to discovery and are a good example of just how vital those “failing” steps are to final success. The attitude in these areas tends to be much more accepting of failure.
James Dyson would perhaps not have been able to persevere for 5127 attempts before he achieved the design for his perfect bag-less vacuum. Clearly there is a differential between experimental errors and malicious or negligent failure. However, it can be destructive to blame anyone who has done their absolute best and come up against an inevitable failure. The focus needs to be on finding out what happened, rather than find an individual to blame.
Failure can be a great teacher. Psychologist Albert Bandura gave two groups of people identical management tasks, tasks so hard that failure was guaranteed. The first was told the test was to reveal their management abilities. This group felt like failures, blamed themselves for failing and made little improvement on a second attempt.
The second group were told the test results would not be provable but were being conducted to simply to give them practice. They rated themselves much more confidently and simply saw each attempt as a chance to learn and improve. Goals can be dangerous things. It makes it too easy for us to consider ourselves “not good enough” when we fail to achieve them.
To have a healthier acceptance to business failure, and failure in general, we need to first accept its duality, that simply there is no failure without success and no success without failure. The people who achieve success are ready to persist, to continually try new ways, to see setbacks as only temporary. In every walk of life and every part of life, to really obtain the lives we want, we have to get out of our comfort zones and try risky things. We need to look at how children keep on falling over till eventually they learn to walk. When we fail, we have a choice. We can define ourselves by success rather than learning. We can wallow in self-pity and self-hatred.
Alternately, we can keep on trying and keep on learning as recommended by Denzel Washington’s speech in his inspirational speech “Falling Forward”. He made a very powerful case for the absolute necessity of not letting fear or failures stop you.
We will need entrepreneurs to fall forward to keep our economies going. The first steps of trying again may seem terrifying and risky, but falling forward gets great results. The thing to remember is that, however simple the task, you will get no results without trying and that failure can be just a stepping stone to success.