Start-ups. Failure. These two words are very often associated with each other, but the mindset in which we approach failure can have a significant impact on the success of our enterprise. In this article I will be discussing an approach to failure which may help develop your business or yourself as an entrepreneur, to increase the chances of achieving your goals.
Treat Failure as a positive!
Often times throughout school and education, we are programmed into thinking that failure is a bad thing and should be avoided at all times. As an entrepreneur this is a mindset which should be avoided as some estimates in the US show that only 35% of ventures survive within their first 10 years (1). FAILURE IS INEVITABLE IN ENTREPRENEURSHIP!
Eric Ries has pioneered the lean start-up methodology where he talks about how start-ups should aim to ‘Fail Fast’. This means that if you have a business model which isn’t working then it is best to change your idea before you invest a large amount of money, time and people into this idea. This is what Ries calls the Pivot which is when an idea isn’t achieving its goals and so you test a different hypothesis by creating a new product which you offer to the market.
The story of how ConnectUs Pivoted
Varun Balsara is a student entrepreneur at Warwick who is the Co-Founder and CEO of ConnectUs, an innovative business supported by Warwick Enterprise. The platform matches up like-minded students to meet for events through an algorithm which assesses individual personality types. ConnectUs pivoted away from a model based around finding students their best friends to a platform based around matching up like-minded students at events. Varun recommends that you ask yourself 3 key questions when assessing whether you should pivot your idea:
1. Traction- how many people are using your product?
2. Retention- How many people are buying your product and then coming back to using it?
3. Sustaining the business- are you growing traction and maintaining retention of customers?
Varun’s original idea of helping people find their best friends was gaining traction, however its retention model fundamentally failed as when someone finds their soulmate, they aren’t going to use the platform to find another one. This caused Varun to pivot to an events-based platform as it is still connecting like-minded people, but with events occurring throughout the year it maintains the retention.
How might you change the product you are offering?
1. A specific product feature- is there a slight product tweak which could make a big impact?
2. The product entirely- is the product being offered to customers the right one to solve a problem?
3. Changing the customer base- are you targeting the right customer segment?
4. Income methods- are you generating revenue in the best possible way?
5. Platform which the product is used on- should you use an app or a website?
6. Growth strategies- is the model of growth you are chasing the best way forward?
How have radically successful companies pivoted?
Successful entrepreneurs adopt a growth mindset when assessing the failures which they have experienced in their journey of starting a business. As the CEO of Coca-Cola puts it: “If we’re not making mistakes… we’re not trying hard enough.” Coke infamously failed when they changed their recipe to create ‘New Coke.’ Immediately sales fell and they lost a significant amount of revenue and profits. However, they let this strategy fail fast and pivoted back to their original recipe in just 79 days, which saw new levels of success. While the financial losses of this were great, the failure taught Coca Cola how attached their customer base were to their brand and so this lesson has helped them to sustain their dominance in the drinks industry. Coke has shown that if you treat every failure as a learning experience then you grow as an entrepreneur and your business will come back stronger and more successful!
The popular team messaging service Slack is another example of a company which pivoted their business model from running a computer game to the platform we have today. Originally the company had created a computer game which produced little traction. However, Slack’s founder saw a potential business opportunity in their team management software which was being used and decided to take the leap. That leap is now worth $20bn which isn’t bad for something which was a huge failure in the beginning!
Business ideas in start-ups often fail but through experimenting and testing hypotheses, this is the key to a truly innovative and successful business. Embrace failure and embrace pivoting to achieve your goals!
Check out ConnectUs, where you can find like-minded people with whom you can attend events at Warwick: https://connectusweb.com/home.
Are you a current student at Warwick looking for support for your business idea? Check out the opportunities from Warwick Enterprise to receive guidance, support networks and funding at: https://warwick.ac.uk/fac/cross_fac/enterprise/funding-overview.
On a side note, I didn’t initially intend to focus my whole article around failure and pivoting, however as I started writing it, I decided to pivot myself!
Luke Netherclift is in his second year studying Global Sustainable Development (GSD) and Business. He is a passionate social entrepreneur, having worked with Food Intercept and co-founded The People’s Backpack. As an Innovation Fellow this year, he is keen to support student businesses and social enterprises which are being created to make a meaningful, sustainable impact in society.
Please message him at firstname.lastname@example.org or find him on LinkedIn!