I was reading an article this morning about asking the question “are you afraid to fail?” It’s an article about innovation which reminded me of one of my favorite quotes from David Kelley at IDEO.
It also reminded me of another article from 2006 in Business Week about How Failure Breeds Success which was when I left Express Scripts to pursue several entrepreneurial opportunities.
Stefan H. Thomke, a professor at Harvard Business School and author of Experimentation Matters, says that when he talks to business groups, “I try to be provocative and say: ‘Failure is not a bad thing.’ I always have lots of people staring at me, [thinking] ‘Have you lost your mind?’ That’s O.K. It gets their attention. [Failure] is so important to the experimental process.”
It also got me thinking about success rates in companies. We all hear so much about the success of entrepreneurs and these 20 year old billionaires. Is that reality? Here’s a few stats from an article in the WSJ and a study by the Census Bureau.
- 80% of companies make it to year one
- 60% of companies make it to year three
- 50% of companies make it to year five
- 35% of companies make it to year ten
Sounds pretty depressing. What about the fact that according to the WSJ article, only 5% of them achieve the projected ROI and 30-40% of them liquidate all their assets returning nothing.
“People are embarrassed to talk about their failures, but the truth is that if you don’t have a lot of failures, then you’re just not doing it right, because that means that you’re not investing in risky ventures. I believe failure is an option for entrepreneurs and if you don’t believe that, then you can bang your head against the wall trying to make it work.” (David Cowan – Bessemer Venture Partners in WSJ article)
Just watch the show Shark Tank sometime. There are amazing entrepreneurs with interesting ideas who have sacrificed so much to try to make it work. I always try to tell people that it’s not just about passion and hard work otherwise people would succeed all the time. Some things you do learn from Shark Tank along with the book The Art of the Start is how to frame and present your ideas.
So, why is this so important? We’re on the the verge of huge transformation in the healthcare industry. I think Oliver Wyman did a good job of discussing this in a whitepaper last year. You can read article after article about mHealth, telemedicine, and remote monitoring. (I’ll point you to Rock Health or The Center For Connected Health as two starting points.)
Of course innovation has been the buzz for several years now. I think Jim Collins does a good job of teeing up this issue in discussing churn in the Fortune 500 list. With the technology and VC crowd, the more recent term for business model innovation is “pivot“. I think you’ve seen a lot more Chief Innovation Officers and innovation labs in healthcare companies these days.
I came across an interesting blend of technology consulting, investing, and innovation last night in the BCG Digital Ventures group. In watching part of a YouTube video by their CEO, I think he does a great job summarizing how consulting maps to the investment paradigm.
- Innovation is like seed capital
- Product development is like venture capital
- Commercialization is like growth capital
Interestingly, I probably get 1-2 calls a week from people in big companies that really want to get out of the big company and come work in the exciting start-up space. I always tell them that the grass always looks greener on the other side of the fence so be careful. It can be great, but it can be really tough. It’s just a different type of risk and not everyone can take the emotional and potentially financial risk. On the flipside, I also get people that look at the different entrepreneurial things I’ve done and say “why?” They want to know why I didn’t just stay in a F500 company. Sometimes, I think of this 8 years as a boomerang where I’ll end up back in a F500 company, but I’ll be a much more valuable product development, strategy, and innovation executive. [This idea of boomeranging was one that Gensler introduced me to years ago in architecture where they encouraged people to work at different companies and come back if relevant.]
Depending on the day, I also think about what I’ve learned since I’ve never had one of those huge exits that everyone talks about. I’m not cashing in on all my options to make money. I’ve summarized many of those learnings on the blog, but here’s a few that I’ll call out.
- Firepond was my first venture into this space. It was a 20-year company that General Atlantic had invested in to turn around as a product configurator in the CRM space.
- Learned about CRM (customer relationship management) technology.
- Learned about how to develop, structure, and manage alliances.
- Learned the importance and how to structure offshore deals.
- Learned about global sales and embedding technology into different solutions.
- Learned about evaluating and buying companies.
- CentralScript was my second venture I started it from an idea I tried to sell at Express Scripts (and later was suggested to them by Clayton Christensen).
- Learned about writing a business plan and financial modeling and projections.
- Learned about the legal structure of businesses.
- Learned about raising money and how to work with and evaluate angels and VCs.
- Learned about building a team and structuring contracts with them.
- Learned about selling and evaluating partners.
- Talisen Technologies was my third venture which was another turnaround where I worked with a friend of mine who had raise some private equity to do a technology services consulting roll-up.
- Learned about Business Process Management technology.
- Learned about how to build support companies around a technology platform. (The opposite of Firepond where I was the technology company.)
- Learned about the difficulties of transforming an existing company and evaluating new companies.
- Learned about how to use blogging and create exposure using social media.
- Silverlink was my fourth venture (and most successful experience) and first real start-up where it wasn’t trying to turnaround an existing asset but building off what the founders had built.
- Learned about how to present to and work with the Board of Directors.
- Learned about managing a sales force.
- Learned about product development, training, documentation, and product lifecycle.
- Learned about sales and marketing and being responsible for growth and a team.
- Learned about account management.
- Learned the value of using thought leadership, social media, and the press to drive awareness and pipeline.
- Learned how to develop competitive analysis and differentiation.
- Leraned about pricing and analytics.
- inVentiv Medical Management is my current venture which is part of a broader entity, but it’s still the same concept which is a 20-year old company that we’re transforming into a new platform and new business model.
- Still in-progress so more to come…
So, I wrote all this to make the point that innovation is difficult. You have to take some risks. Like the article said upfront, you have to believe you can fail. You have to have a plan for what to do if you do fail. Big companies should provide a safety net to people to fail fast. I think I’ve learned a ton that I wouldn’t have learned staying in the big company. At the right time, that will be a huge asset as I look to help drive the transformation and pivoting of a larger entity!