How I teach ambitious entrepreneurs how to turn failure into success

In the world of entrepreneurship, successful startups get the lion’s share of the attention. However, I would argue that there is more to be learned from failed ventures. Accepting failure and drawing conclusions from it increases the probability of success in the future.

My students at Babson College, where I am an associate professor of entrepreneurship, nicknamed me “Doctor Failure”, thanks to the course I teach called “Failure is Good”. Although it sounds counterintuitive, I encourage students to recognize failure as an important source of knowledge and skills.

Here are four pieces of wisdom I’ve learned in my research and work with startup leaders about using failure to promote future success.

1. Begin your ventures with a conversation about acceptable losses

I encourage startup teams to conduct a “pre-mortem examination” before or immediately after launch. An alternative to an “autopsy” is a thought experiment that gives you a chance to talk openly and honestly about what will likely kill your business. Decide how you define “failure” and what you view as an acceptable loss. List the signs that the company is heading in this direction.

This exercise creates helpful awareness. In my experience, the more proactive teams are about failure, the less likely they are to fail. However, I must offer one caveat: If your organization culture is particularly conservative and risk-averse, proceed with antemortem testing with caution. I have seen firms develop into so afraid of possible failure that they abandon the enterprise before it even begins.

2. Learn from the mistakes of others

Most startup failures are the results of three sorts of mistakes, which I group under the acronym TIM. This means:

• Errors related to talentincluding hiring a “bad apple”. Hiring decisions are normally based on recommendations from other people, but I recommend only listening to those that have actually worked with the person in the past.
• Wrong ideascorresponding to not verifying demand before investing resources, which is a notorious “no problem solution.”
• Errors in money, like over-reliance on earned income without enough money. That’s right: money Is king!

3. Beware of your failures

Entrepreneurs vary in their ability to learn from mistakes. My research shows that what leaders perceive as the reason behind their failures affects their ability to bounce back and succeed the next time. For example, do they blame their very own decisions or external aspects?

I analyzed a group of over 200 recent enterprise founders in Japan and found that those that focused on their very own role in failure asked questions like “What could I have done better?” — were more likely to experience growth in subsequent endeavors than those that blamed external forces.

Of course, many failures have many causes, each internal and external, but entrepreneurs who start by examining their mistakes tend to learn more from them and achieve greater success. It’s vital to add a caveat here: focusing primarily on one’s mistakes only advantages the entrepreneur in his or her first few failures. The third time and thereafter, those that find external guilty causes perform higher, in part because it sustains their self-efficacy and confidence as entrepreneurs.

4. Promote acceptance of failure

Develop a healthy attitude towards failure and encourage your colleagues to do the same. Try not to wallow in shame. Failure is an event, not a reflection of your value.

I tell my students and clients that there is all the time value in failure if they are determined to learn from their mistakes. I encourage them to strive to achieve a high ROL, or “return on learning,” in every endeavor and ask them to share their MVF, or most beneficial failure.

Some managers won’t accept anything lower than total success, but I’d argue that everybody advantages from an increased tolerance for failure. Do you wish your teammates to hide their mistakes, or do you wish them to report them and discuss them openly so everyone can improve?

Tolerance for failure is also helpful outside the workplace. Spanx founder Sara Blakely famously shared that when she and her brother were children, their father would ask them, “What didn’t work out for you this week?” Blakely says it made her open to trying recent things and less afraid of taking risks. I, too, try to normalize mistakes as a normal a part of life and love hearing from students and clients who are now doing the same.

The ability to accept failures and learn from them not only increases your probabilities of making smart business decisions for your organization, but also increases your value to future colleagues and employers. Indeed, some of my former students failed to pursue their first entrepreneurial ventures. But their intelligent evaluation of what went unsuitable, in addition to the thick skin and self-confidence gained from overcoming difficulties, helped them land jobs with tech giants like Google and Apple or start their very own up-and-coming firms.