- Identify several reasons for failure


[SLIDE 1]

Failure can be said to exist on a spectrum from blameworthy to praiseworthy. Some of the reasons for failure on the spectrum are indeed blameworthy. For example, entrepreneurs who intentionally violate certain rules and regulations ("Deviance" at the top of the spectrum) are more likely to have failed businesses as well as a tarnished reputation. However, not all of the failures in the spectrum are bad. In fact, many of them are at least preventable or even praiseworthy. Someone who doesn't have the skills to do a job can receive more training; processes can be monitored and refined; and "failed" hypotheses and exploratory testing can be opportunities to expand knowledge, iterate, and set the scene for different, better approaches.

Therefore, despite our misgivings about failure, it is not always bad. The failure spectrum describes situations that may be perceived as failures, yet can sometimes have positive rather than negative outcomes. Let's examine each of the factors listed on the spectrum in turn. 


[SLIDE 2]

Deviance occurs when an entrepreneur defies legal and ethical boundaries leading to mismanagement of the venture. Napster is a good example of a company that demonstrated deviance from social norms, as well as its defiance of legal and, some say, ethical boundaries. Founded by Shawn Fanning and Sean Parker in the late 1990s, the music-sharing website allowed users to swap music for free, enraging musicians all over the world. When the band Metallica took Napster's founders to court, other musicians followed suit and Napster eventually collapsed under the weight of the lawsuits, filing for bankruptcy in 2001.


[SLIDE 3]

Inattention is when an entrepreneur gets sidetracked from the core business -- either in a new business direction or by delegating too much too soon without following up. Entrepreneur Jason DeMers became sidetracked from his main business, AudienceBloom, a social media marketing firm, by turning his attention to a new startup. As he became more involved with the new venture, his original company stopped growing, as he did not have enough resources to run two companies. The new venture failed and DeMers went back to working on AudienceBloom full time. This incident helped DeMers realize that a "successful venture requires 100% attention, focus, and effort." 


[SLIDE 4]

Lack of ability means that the entrepreneur is overextended and lacks the skillset to get the job done. He or she may have been good at the start, but as the business grew more skills were needed. It is very common for companies to outgrow their founders because the founders lack the skills and abilities to get the company to the next level. In some cases, the founders either can't or won't develop the necessary skills to develop the organization, and may have to step aside as a result. 


[SLIDE 5]

With process inadequacy, the wrong (or lack of) processes are set up in the organization so communication breaks down among employees and things begin to fall through the cracks. Shaun Swanson, Mark Cicoria, and Mark Johnson are the founders of Ayloo, an online and mobile shared forum to broadcast events and interests in a particular city. Johnson believes lack of communication was one of the reasons that the startup failed: "Communication was a problem. We butted heads a lot. Shaun would come up with these big ideas and I would try to be reasonable, but he thought I was shooting him down." 


[SLIDE 6]

Lack of clarity about future events can cause entrepreneurs to take unreasonable actions. Today, Gary Swart is a venture partner at Polaris Partners, but his first business was Intellibank, which he describes as "sort of like Dropbox done wrong." Swart believes Intellibank failed because he and his team lacked focus and certainty about how to define the startup and where it was going. "We failed because we tried to go too broad. We were trying to be all things to all people. ...We were pivoting so often for different types of customers that we completely lost the big picture. 


[SLIDE 7]

Market tests are conducted to get early feedback and acquire important learning and information. Some of these tests may fail miserably, but in this sense, failure is not the same as being unrecoverable. Exploratory experimentation is crucial for learning.  There are different kinds of failures. Some failures are small, adjustable, informative, linked to bigger goals, and designed to highlight key issues. Others involve rigid thinking, discouragement, and may result in reputational damage. Whatever the type or reason for the failure, the most important part for entrepreneurs comes from the lessons they learn from it.