MGT 340 - Chapter 11: Anticipating Failure Study Guide PDF

Chapter 11: Anticipating Failure Dr. Kipp A. Krukowski MGT 340 – Fundamentals of Entrepreneurship What is a Business Failure? • • • Business Failure - termination of a commercial organization – Missed its goals and failed to achieve investors’ expectations – Prevents venture from continuing...

Chapter 11: Anticipating Failure Dr. Kipp A. Krukowski MGT 340 – Fundamentals of Entrepreneurship What is a Business Failure? • • • Business Failure - termination of a commercial organization – Missed its goals and failed to achieve investors’ expectations – Prevents venture from continuing resulting in bankruptcy or liquidation Might lead to improved learning – Leads to increased probability of future success – Entrepreneurs that see it as part of the journey bounce back quicker May be financially costly and emotionally painful, even traumatic Big vs. Small Failures • Big Failures – • Bankruptcy or forced sale is probably the biggest failure for a startup. Small failures – Constant occurrence in entrepreneurship – May lead to a pivot (change in the direction of the business) – Peaks and Valleys Top 20 Reasons Startups Fail The Failure Spectrum Example: Napster – Defied ethical and legal boundaries with “free” music that was copyrighted (Filed for bankruptcy in 2001) • A “successful venture requires 100% attention, focus, and effort” • Don't bite more than you can chew • Common after “growth stage” of startups • Entrepreneurs may have creative juice to get traction in market, but rarely possess skills to grow it to the “scale-up” stage • Processes must be deliberately checked to ensure this doesn’t happen • Overcommunication is far better than under communication • Must have certainty and a clear definition on who the startup is and what goals it is trying to achieve (Cannot go too broad, cannot go too narrowed. Must find the “sweet spot” for your market.) • The most adjustable and informative form of failure • Follows the “fail fast” mentality (Often early enough to pivot) Managing the Emotions • Failure is a largely emotional event – Feeling these emotions isn’t the problem – managing the emotions is • Pain, humiliation, shame, guilt, self-blame, and anger are common emotions • Everybody has a different degree of fear of failure – Those with a higher degree of fear of failure may have gained it through past experiences or upbringings – People with a strong fear of failure tend to be anxious, lack self-esteem, and demonstrate reluctance to try new things Coping with Failure • Reframe specific goals so they become more achievable – • Separate personal feelings from facts – • Instead of focusing solely on numbers, consider adding learning goals Ask yourself: “What did I learn from this experience?” and “What are the positive things about what happened?” Seek help from the mentors in your life – Entrepreneurs are likely to have tips from their own experiences 10 Signs You Might Have a Fear of Failure Key to ‘Beating’ Failures • Make intelligent failures (experimentation) – Good failures provide valuable new knowledge that can help a startup innovate and stride ahead of its competition – “I’ve made billions of dollars of failures at Amazon. Literally billions. . . . Companies that don’t embrace failure and continue to experiment eventually get in the desperate position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence.” - Jeff Bezos, Founder of Amazon • Study the lessons learned from other entrepreneurs (hence one reason for our Ignite presentations of famous entrepreneurs!) • Build a blame-free environment What is Grit? • Quality that enables people to work hard and sustain interest in their long-term goals – Related to resilience (perseverance to stick to long-term commitments and goals) • Grit can be natural, but also built through deliberate actions • Attributes of grit: – Courageous (Not being afraid to fail, part of learning) – Conscientious (Working despite challenges) – Perseverance (Commitment to long term goals through deliberate practice) – Resilience (Strength to recover from failure and overcome obstacles) – Excellence (Committing to activities that enhance skills, prioritizing improvement over perfection) 3 Key Points • Entrepreneurs must embrace some forms of failure. It can be essential to both your company and personal growth. • Study the lessons learned from other entrepreneurs. You may save yourself some time, money, and headaches in the process. • Grit is the quality that enables you to work hard and sustain interest in your long-term goals. Those with the growth mindset have more grit. Questions? Dr. Kipp A. Krukowski MGT 340 – Fundamentals of Entrepreneurship