Succeeding through Failure

Jonathan Ortmans, President, Public Forum Institute

“Lizard King” John Bello describes his first entrepreneurial venture as a miserable failure. Bello launched South Beach Beverage Co. in 1995. Despite the popularity of other geo-based drink brands such as Nantucket Nectars and AriZona iced tea, South Beach didn’t resonate with consumers, not even in the upscale Florida community that shared its name. Within two months, Bello knew the $2 million startup investment was heading, well, south.

Rather than retreat, Bello opted to examine the reasons behind his failure, discovering a lackluster label and uninventive flavors among the chief culprits. Armed with this knowledge, he mortgaged his house and went back to the drawing board. He reemerged with SoBe: a beverage boasting herb-infused formulas and an energetic brand complete with athlete endorsements. In 2000, Bello sold his development—with its now-famous reptilian icon—to PepsiCo for $370 million.

Bello represents entrepreneurialism at its best. His and countless other stories illustrate the central role failure plays in the entrepreneurial process. Indeed, the ideal environment for innovation not only celebrates success, but also accepts—if not encourages—failure.

The United States enjoys a longstanding belief that failure is merely a pit stop on the way to success. Thomas Edison conducted more than 10,000 failed experiments before turning on the first incandescent light bulb. Milton Hershey faced three unsuccessful starts before satisfying the American sweet tooth. Even Steven Jobs confronted failure when Apple fired him from the company he created—only to welcome him back to transform the marketplace once again, this time with the iPod and iPhone.

Unfortunately, similar stories are far too infrequent around the world. Failure—and the economic growth that its lessons stimulate—is not an option in every culture.

In Japan, a severe stigma surrounding failure thwarts entrepreneurialism, as does a cultural bias against individual over group behavior, plus a host of economic and trade policies. The country’s best and brightest don’t dare risk their careers on a small startup, according to the MIT Entrepreneurship Center. Instead, they seek security in the government and at big, mature companies—neither of which are known as hotbeds of innovation. 

In many parts of Europe, would-be entrepreneurs face a double whammy—a stigma for both failure and success. As in Japan, cultures that do not accept failure breed an aversion to risk. Even worse, a zero-sum belief in distributed wealth suggests that if one person gets richer, someone else must have grown poorer. Many successful European entrepreneurs either hide their wealth or relocate to more entrepreneur-friendly countries.

Countries that do not accept failure risk missing out on significant benefits to grow their economies and improve the livelihoods of their citizens. Their “failure is not an option” mindset stands in distinct contrast to that of those providing risk capital who have reaped big rewards from putting their fears aside. Research shows that angel investors for example often have a tolerant, open-minded attitude toward failure. Previous failed startups have minimal, if any, negative effect on their decision to invest in an entrepreneurial venture.

In fact, evidence suggests venture capitalists often see failure as an asset—not a liability—in an entrepreneur’s record. Why? Because failure suggests a tolerance for risk, a perseverance to succeed and, most important, a passion to push the envelope.

In terms of ROI, failure can imply hard-fought lessons likely to pay off in the future. And for many entrepreneurs, the next opportunity lies just around the corner. These “serial entrepreneurs” start one company after another. If one venture fails, they know when to call it quits, learn from their mistakes and move on. If another beats the odds, they stick around and grow the company—at least until the culture turns corporate.

During Global Entrepreneurship Week, November 16–22, young entrepreneurs from all over the world will have the chance to share the lessons of failure and find inspiration in experience. Visiting unelashingideas.org will help them realize that learning to fall is an important part of learning to stand. 

A true entrepreneurial economy can thrive only in a culture that allows people to make mistakes, learn and try anew. As Henry Ford once said: “Failure is simply the opportunity to begin again, this time more intelligently.”

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