Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine and we’ve developed this podcast in cooperation with BMO Bank of Montreal.
Thanks to the recession, failure is on the minds of many business people these days. More and more businesses are going bust through these though times leaving many entrepreneurs to ponder the futures of their suppliers, their customers and even their own companies. But failure is proliferating within businesses, too, as a weak economy and credit markets mean more teams and individuals are failing to close sales and raise capital. There might be no better time than the present to learn how to squeeze every last drop of success out of your mistakes which happens to be the subtitle of a new book called “From lemons to lemonade”. It’s authored by Dr. Dean Shepherd, the Randall L. Tobias Chair and Entrepreneurial Leadership and professor of Entrepreneurship at the Kelley School of Business, Indiana University. Dr. Shepherd joins me on the line from Bloomington, Indiana. Hello and welcome to the Business Coach Podcast.
Dr. Dean Shepherd: Hi Ian, how are you?
Ian Portsmouth: Very well thank you. Dr. Shepherd, why do we hate failure so much, given how much there is presumably to learn from failure?
Dr. Dean Shepherd: It’s mainly because it hurts, it hurts so much, mainly because we have lost something that has been important to us, you know, whether it is the income that we have lost or we have lost something that made us feel distinctive or something that made us feel that it belong to other people, it made us feel competent at the particular activity or that we were learning some new skills and some new activities. So, when it’s something that is important and it’s lost due to failure, you know, we often feel very bad about that.
Ian Portsmouth: Now, a lot of people will say that we learn our best lessons by making mistakes. Do you agree with that statement?
Dr. Dean Shepherd: I do. By making mistakes, if we attribute the failure to ourselves, then we have the opportunity to be able to learn how to change or modify our behavior in order to be able to avoid that from happening again. Of course, not all failures are the results of our own mistakes. But our default position is to typically blame others rather than blaming ourselves which actually kind of defers or deny our ability to learn from the failure.
Ian Portsmouth: Now, is there anything specifically that you can learn from failure, are there a general set of lessons that you can derive from failure?
Dr. Dean Shepherd: Yeah, I mean, you can learn hopefully not to make the same mistake again. So that’s really the most basic lesson. But I think also from failures, if we experience multiple failures, is we learn that we can handle the adversity associated with failure, that we know that emotion hurts but that we will recover over a period of time. So we really learn to be quite resilient to be able to regulate our emotion and to be able to learn and grow and progress as a result of the experience.
Ian Portsmouth: So, that’s a great segue into my next question. Many serial entrepreneurs are really serial failures. They failed many more times than they’ve actually succeeded. What characteristics do these people share that helps them keep on starting up?
Dr. Dean Shepherd: My experience is that a lot of serial entrepreneurs are also serial failures. One explanation sometimes, and I think this is the minority, that they start another business to try and overcome, you know, the emotions and the thoughts of the failure of the previous one. The only problem there is they are doomed to potentially make the same mistakes again. But most serial entrepreneurs stay emotionally committed to their particular projects or to their particular businesses. And that when they fail, they recognize that being an entrepreneur is associated with uncertainty, opportunities exist in environments of uncertainty. And because it’s uncertain and we pursue this opportunity, there is a chance that we are going to fail and just because we failed this time doesn’t mean that we are going to fail the next time if we have the opportunity to learn from that mistake. So I think the serial entrepreneur really understands this relationship between uncertainty and opportunity and also, you know the ability to learn to improve your chances the next time around.
Ian Portsmouth: So, let’s move from the individual to the organization. Are organizations good at learning from their failures?
Dr. Dean Shepherd: Typically they’re not. Particularly entrepreneurial firms should be but don’t seem to be either. And I think the reason why is that organizations typically assess people on the outcomes of their tasks rather than the process of the tasks. So if we’re an entrepreneurial firm and we’re pursuing these tasks under environments of uncertainty, we should realize that some of these projects, some of these ventures are going to fail. And they’re going to fail not as a result of, you know, the poor performance of the task of the organizational members, but just because it is a highly uncertain environment, and we couldn’t predict in advance what was going to happen. So I think what they really need to do is kind of focus more and recognize that in pursuing opportunities in these uncertain environments, we are going to have some failures, and we should be able to learn. But unfortunately, the focus is typically on outcomes rather than process.
Ian Portsmouth: Is there something more to learning from failure than simply asking how we could have done things differently?
Dr. Dean Shepherd: I think, you know, they need to recognize this relationship between being an entrepreneurial firm, the pursuit of opportunities in these uncertain environments and that failure is really a natural part of that whole process. But I think they also need to recognize that for your organizational members, the employees, when they make an emotional commitment to these projects, when the projects fail, they are going to feel bad. And that the institution should acknowledge that people are going to feel bad when projects fail, and also try to help them to cope with these negative emotions. One example might be to have kind of like these failure parties where everybody gets together to celebrate the effort and the process that went into it, you know, a particular project that failed so that people can kind of express their negative emotions, that they can say goodbye to the project and then they can get ready to invest their emotional resources in the next project. So, I think, you know, there’s some of the things that organizations might be able to do to help members regulate their emotions in order to learn from failure.
Ian Portsmouth: Now, given that we tend to want to blame others when we fail, how do you limit that reaction within an organization?
Dr. Dean Shepherd: I think to just recognize what you said is probably the most important point, that we all as really a mechanism to try and protect our self-esteem from these attacks, you know, when we fail is our default position is always to blame other people. And in some ways, it’s a good strategy because we can keep our self-esteem high. But after a period of time, we’ve got to be able to turn around and say to ourselves, alright, if I make a contribution to this failure, what can I do differently that will enable me to avoid it in the future. Because unless we make these transitions, and we always blame other people for the failures and negative outcomes, then there is no opportunity to learn because there is nothing for us to modify. So, I think initially, it is a good strategy but after a period of time, we really have to say to ourselves, what did I do that contributed to this failure? And how can I improve my behavior so that I have a greater chance of success the next time around?
Ian Portsmouth: And how do you do those two things that you just mentioned without becoming depressed or de-motivated?
Dr. Dean Shepherd: The depressed and de-motivated is almost a normal reaction initially. I think what we need to do is you need to say, we need to confront the failure or confront our emotions to say, and try and work through the reasons why the project failed. So, actually go out there and look at the preceding events and to say, how did the things I did or the actions I took, how did that lead to the particular failure and the idea there is to try and create an account for why the failure occurred, you know to create a plausible story. But as we do that, sometimes, our emotions become more and more negative and therefore, we really need to take a break from thinking about the project and actually avoid thinking about it, go and do other things, maybe be proactive towards these other secondary causes of stress. And kind of revive our cognitive. And then we can go back once again and try and create this account for why the project failed. So once we create this account and we understand why the project failed, then we are less likely to feel these negative emotions when we think about the actual project or the business.
Ian Portsmouth: Now, finally, so many entrepreneurs have told me that they have been successful because they fail fast. And I know that you mentioned that in your book. What does it mean to fail fast and how does one accomplish that?
Dr. Dean Shepherd: I suppose this is a lot easier said than done and the book kind of recognizes that in many cases, the prescriptions that I suggest are easier said than done. But the whole idea here is that, you know, when we’re facing a decision that is going to give us a negative emotional outcome, we either procrastinate or sometimes, we even escalate commitment, which means that we have a feeling that the project is going to fail but we keep throwing good money after bad. And we actually dig ourselves into a deeper hole. So, what we need to realize is we need to not be in denial and recognize how badly the business is going or how badly the project is going. And emotionally prepare ourselves that eventually, the project is going to get killed. And in some cases, that decision relies on us. So we have to be prepared to pull the plug on a project or terminate the project so that we don’t continually throw good resources after a bad investment. And I think if we stop denying our emotions, we stop denying the reality then I think we really know when the jig is up, we really know when it’s time to really kill the business. But it is important to do but it’s a very difficult thing for most of us to do, is to kind of kill a project that we’re so emotionally committed to at the start of it. Also, I wanted to make one further point. If people do really get seriously depressed from a project failing or a business failing, I suggest they seek professional help and just acknowledge that there is no shame in doing that because it really can impact us very deeply when we lose something that is so important to us.
Ian Portsmouth: That’s great advice Dr. Shepherd. Thanks for joining the Business Coach Podcast.
Dr. Dean Shepherd: Thank you.
Ian Portsmouth: Dr. Dean Sheppard is the Randall L. Tobias Chair in Entrepreneurial Leadership and professor of Entrepreneurship at the Kelley School of Business, Indiana University. His latest book “From lemons to lemonade: Squeeze every last drop of success out of your mistakes” is published by Wharton School Publishing.
That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. If you have any comments or suggestions about the podcast, then please send them to me at email@example.com.
Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.