Young: Learning from business success
While recently conceptualizing new Okanagan Valley Entrepreneurial Society initiatives for 2011, I found myself dwelling on a cornerstone of our society’s mission: “…to contribute to the development of entrepreneurial leaders in the Okanagan.”
My thoughts gravitated to the meaning of success within an entrepreneurial context, whether and how entrepreneurial leaders may actually learn more from their success curve.
Business and industry history annals are full of tales about companies that once dominated their industries, then eventually fell into decline.
The quick reply reasons presented to the world—staying too close to existing customers, a myopic focus on short-term financial performance and an inability to adapt to disruption—really don’t give us fully an understanding as to why such entrepreneurial leaders who had led their ventures to greatness somehow lost their touch.
The research literature tells us that success can also breed failure by hindering learning at both the individual and organizational levels.
We all know that learning from failure is one of the most important capacities for people and ventures to develop.
Yet surprisingly, learning from success can present even greater challenges. To understand that, let’s look at three interrelated impediments to learning than can cloud our journey to maintaining a success curve in our entrepreneurial journey.
The first I discovered in my exploration within the Kauffman Entrepreneurial Foundation research portals is the inclination to make what psychologists call fundamental attribution errors.
This suggests that when we do succeed in our journeys, we’re likely to conclude that our talents and our current model or strategy are the sole reasons for our perception of success.
We also tend to give short attention to the role that environmental factors and random events may have played in this outcome.
The second impediment is what might be labelled an overconfidence bias. Success does of course increase our realm of self-assurance.
Faith in ourselves is normally a good thing, but too much of it can make us believe we don’t need to change a thing to continue on the “success” path. Ouch…wrong!
The third impediment is the failure-to-ask-why syndrome—the tendency not to investigate the actual cause of solid good performance for a venture in a systematic manner.
When entrepreneurs and their teams suffer from this syndrome, they don’t tend to ask the tough questions that would help them expand their knowledge or alter assumptions about how the world works.
I remain puzzled about our inability at times to understand why a business venture starts to fail when things had been going so well.
I do feel that perhaps to avoid the “success breeds failure” trap, we might wish to understand how experience shapes learning.
Learning is a highly cognitive process, and there are numerous models in literature to present such channels.
Your choices about people you hire, the projects you fund (or not), the features you may include in product or services, and the strategies you pursue are all influenced by these models.
Many theories are informal and we may not even be aware they are swaying our entrepreneurial decision.
Frankly, as I have sometimes realized the hard way, learning is all about understanding why things happen, and why some of our seemingly realistic decisions lead to specific outcomes.
This understanding does not come automatically. Failure does provide a motivation for organization, companies and entrepreneurs to learn as well.
Does success then mean ‘it ain’t broken?’ Not necessarily.
The reality is that while a success bubble may mean we are on the right track, we merely can’t assume this to be true without aggressive testing, experimentation and reflection.
So, how do we avoid the silly traps I have presented to you today? Below are five simple yet complex ways to learn from success.
1. Celebrate success, but examine it. Noting wrong with toasting your immediate success. But, if you stop with the champagne glasses, you may have missed a huge opportunity. When a win is achieved, your venture needs investigation as to what led to it with the same rigor and scrutiny to understanding the causes of failure.
2. Institute systematic project reviews, which will assist in discovering the reasons for success or failure, and will often generate specific recommendations that can be put to use immediately.
3. Use the right time horizons—when the time lag between an action and its consequences is short, it’s easier to identify cause. Unless you have the appropriate time frame for evaluating performance, you may misconstrue factors that led your success or failure. When you understand appropriate time dimensions, you can prevent tricking yourself by randomness .
4. Recognize replication is not learning. We all know that when things go well, our biggest concern becomes how to capture what we did and embrace it for repetition. Replication is important; we need to spread good practices throughout our venture frame. But, if the chief lesson is merely a list, then the exercise is a failure.
5.If it ain’t broke, experiment. I particularly like this item because it gives way to test our assumptions and theories, right or wrong about what we need to do to achieve higher levels of success in our entrepreneurial pursuit. And guess what, it ought to continue even after a success milestone.
Good entrepreneurial leaders must actively test their theories, even when they seem to be working, and rigorously investigate the causes of both good and bad performance.
A local serial entrepreneur once told me, “Such as in racing, when you make a change, you only care whether or not it leads to superior performance. You tend to care less why something works. But, over the long-term you need to know why.”
I trust this has been a learning experience for us in the journey.
Joel Young is an entrepreneurial leadership coach, educator and consultant and founder, Ok anagan Valley Entrepreneurs Society.