Learning the hard way is inevitable in scale-ups. Not all of your creative ideas will be developed into working products. Not all of your prospective clients will sign the contract. And not all of your negotiations with investors will result in attracting capital. Failure is unavoidable for all businesses, but for scale-ups failing is much more painful than for start-ups. Start-ups have little to lose, while scale-ups already have a commercial product, real customers and a growing organization.
For scale-ups, failure comes at a real cost. Disappointed customers will spread the word. Investors will lose faith. The organization will lose confidence and momentum. That is why it is important to limit the harm, extract maximum learning from failure and grow from it. It requires honest reflection to understand the causes of failure and to translate your learning into a guiding principle that will help you to avoid future failures.
Recognize Failure
First, look your failure in the eye. Did you see it coming or were you too engaged in your big ideas and ignored negative feedback? As a scale-up CEO, you believe in your business idea, and it is difficult for you to accept that it might be wrong. As one of scale-up CEOs recalls: “As a team, we are all cheerleaders. We did not see it coming. We ignored the feedback from investors who were saying that they would not give us money because consumers would not pay for our product. In the end, we failed to bring the product to the market.” Were you the last to recognize the failure? Next time, be aware of the possible warning signs. For instance, investors might withdraw their funds or your co-founder might suddenly find another project to work on.
As soon as you recognize the failure, stop the fire, contain the damage and communicate immediately and honestly to all the parties involved. Don’t try to cover up your failure. Think about all the people who might be impacted by it and take all the steps to limit the harm.
“As soon as you recognize the failure, stop the fire, contain the damage and communicate immediately and honestly to all the parties involved.”
Understand what you could have done differently
The next step is to analyze what has happened. Don’t do it alone, ask others for their feedback. Most people will be willing to help you learn from your failure. Analyze their feedback together with your team. What went wrong? What have you lost? What can be repaired? Are you still on a mission? Reflect on your failure. Understand what you could have done differently. Write it down as a principle and discuss it with your team. It will give you important knowledge that you can use in a similar situation next time.
Grow from failure
Finally, reframe your failure. Turn it into an advantage by ending the wrong path and starting clean. Failing provides an opportunity to pivot, it strengthens your muscle and increases your motivation to win next time. Remember: even if you are failing, at least you are pursuing your dream. The biggest failure is not pursuing your dream at all.
Learning from failure may be inevitable, but it is not the best way to learn is scale-ups. Read how you can learn the smart way in our recent article:
Learning Velocity in scale-ups: Learning the smart way, not the hard way
As a scale-up, you do not need to learn from failure.
If you want to learn at less risk and costs, read the ScaleUpLab‘s full article on Learning Velocity.
1. Research on learning velocity in scale-ups is conducted by ScaleUpNation and supported by the Goldschmeding Foundation and Europees Fonds voor Regionale Ontwikkeling (EFRO).