When working with organizations I frequently talk about the need to build a “Propensity for Action” in order to support driving growth and innovation. With many for profit, and nonprofit, organizations it is far too easy to cower behind the “Tyranny of No” rather than building a culture of action around the tools of hypothesis, test, and verify. A frequently response from leaders is that new ideas are too costly or too risky to take on but if the alternative is waiting for the perfect answer it can be equally damaging to an organization. The challenge is that the odds are stacked against new ideas and most of them will not work out at planned – they will fail. The irony is that unless you are willing to take action and risk possible failure you will remain stuck with the status quo.
A friend and former colleague, Kari Kehr, wasn’t willing to stick with the status quo when she started her nonprofit foundation Fuel Your Fight. Kari had just helped a good friend through end stage cancer and saw firsthand the difficulties that singles faced in fighting their disease and in managing all the other aspects of their lives. Specifically she saw the struggle in keeping up with the mounting medical bills. Having raised money for numerous cancer groups before Kari knew what was involved in fundraising and went into action to create a foundation that could help singles in their fight with cancer.
After raising tens of thousands of dollars in their first full year of operation, Kari and her volunteer board of directors recognized that the effort required to sustain the organization was too great. She readily admits that she underestimated the difference in effort required to run a foundation versus fundraising for an organization. While they have shut down the fundraising arm of the organization they continue to help those fighting cancer find resources and information.
Kari and her board took action to help solve a problem,
as a result they have changed lives: their grantees, their donors, and their own.
This is the story of Kari and the Fuel Your Fight foundation that originally ran in the November 1st issue of the online publication Pollen.
Facing Failure: Shutting Down the Nonprofit You Founded
After a decade and raising more than $100,000 for national organizations like Susan G. Komen and LIVESTRONG, Minnesota native Kari Kehr wanted to specifically help cancer patients in her home state.
In 2012, Kari started a nonprofit to help single people who were fighting cancer by assisting them with the payment of distracting medical bills. A few years earlier, Kari had lost a close friend in her battle with cancer and saw firsthand just how distracting those bills could be. She recognized how singles lack the financial and emotional support of a spouse or significant other during this very difficult time.
Through the hard work of volunteers and the generosity of donors the foundation had quickly raised tens of thousands of dollars to help pay the medical bills of Minnesota singles struggling in their fight with cancer. Things were taking off but Kari quickly understood the amount of effort that would be required to keep the organization going. This year she determined that the organization was not sustainable. In the first year Kari had shouldered a bulk of the enormous effort in addition to her day job. For her it was an exceptionally difficult decision to shut down the Fuel Your Fight foundation but she knew that she could better use her time and skills to help other organizations. This is Kari’s story.
Q1: What had prompted you to create your own nonprofit?
A. Four years ago I helped my friend through end stage cancer. As I watched her battle the disease I also watch as she had the stress of a looming medical bill she needed to pay. Instead of focusing on her health, she was worried about how to pay this bill. Her friends and I created a benefit for her and raised the money to pay her bills but it brought to light the need to help others in same situation. Single cancer patients didn’t have a spouse’s salary or benefits to count on. I wanted to create a foundation that helped people like Cathy to pay their bills and alleviate that stress during their fight.
Q2: What were some of the biggest challenges in leading your nonprofit with a team of volunteers?
A. The first thing I needed to learn was how to lead friends. Our board was composed of people in my life that believed in the mission and wanted to help. That was an adjustment for me to lead as a leader and not to just ask as a friend. We all respect one another and brought different talents to the table. Leading a volunteer board was never an issue, however finding volunteers that could commit to leading work for our organization was a big challenge and one that I didn’t anticipate.
Q3: What was your fondest memory of the work?
Some of my best memories were speaking with people about their cancer experiences and offering them support both emotionally and through the resources page on our website. People want to know someone is there to support them; it was a great feeling to have them know our foundation could be that in their time of need.
Q4: What was the turning point for you when you decided that the work wasn’t sustainable?
Getting word out that we were here to help others was difficult. We didn’t plan for marketing. We were naïve to think we would form and people would hear about us through word of mouth and we would be successful. What we learned was, with all the nonprofits out there, we seemed to be lacking the awareness to grow our support system and identify recipients for our grants.
Q5: How hard was the decision to shut down your nonprofit?
I knew for about five months before we made the actual decision to shut down. We tried every which way to grow our organization. I met with other nonprofits to learn their best practices and heard over and over we would need a full time person working to grow it in order to be successful. Our board of directors was made up of four women with big full-time jobs. Our passion was there, but the time commitment was not possible.
When we finally made the actual announcement to close down it was very emotional for me. This work had been a personal mission to make a difference in the name of my friend Cathy. I had to work through the emotions of feeling like a failure by closing down the nonprofit. I knew that ultimately it was the right decision but it was still extremely sad.
Q6: So where do you and Fuel Your Fight go from here?
I have always supported the LIVESTRONG foundation and their cancer programs. I plan to continue that work and also get involved with the Angel Foundation here in Minneapolis. It is important to me to maintain my fight in the Twin Cities area. The Angel Foundation is local and helps Minnesotan’s with household expenses while fighting cancer. They are very similar to Fuel Your Fight and we believe that they were a perfect nonprofit to donate our funds to.
Even though Fuel Your Fight is dissolved our webpage is still live. A very important piece of our site was a one-stop shop for resources for cancer patients and their loved ones, and I plan to maintain the site for that and my blog about cancer on a personal level. It is a great feeling to be able to refer people to that site and have them find help… it is where my passion still lies.
Q7. Looking back is there anything that you would have done differently?
Looking back I should have done a “competitive analysis” of what it takes to run a nonprofit. The raising of funds had come easy to me, so I had thought the rest would be also. It wasn’t. We should have met with other nonprofits to learn what it takes to be successful, and then moved forward.
Q8. Where there any resources that you found helpful in setting up your nonprofit organization?
When setting up our 501c3, we utilized a guidebook that the State of Minnesota had on their website to determine how to legally set up a nonprofit. The state offers quite a bit of information on their website. Here are links to a few online resources to help if you’re thinking about starting a nonprofit.
Image courtesy: BePollen.com
I often talk with business leaders about the need to build in a tolerance for risk taking and potential failure if they want to drive growth and innovate. Frequently I get asked if there are specific areas where we should not tolerate failure? My standard response is that Accounting would be one of those areas where organizations should be very cautious with “innovation” and the potential for failure. This story from today’s headlines in another such area.
Today Ford Motor Company announced a recall on their F-Series ambulances because of a problem that can cause the vehicle to stop unexpectedly. According to Ford, the vehicles have a faulty gas temperature sensor that can cause the engine to shutdown and not be restarted for an hour (Pioneer Press: Ford recalls ambulances because engines can stop).
Ford recalling ambulances because of engine problems that could halt vehicles for at least an hour: http://t.co/FnworpoQJb
— Pioneer Press (@PioneerPress) November 1, 2013
Recognizing the role of failure in driving growth and innovation is an imperative for organizations but building a tolerance for failure doesn’t mean it should be accepted everywhere.
I am curious to hear your thoughts on where else should failure not be accepted. What areas within your organization should strive to be failure free?
Innovation projects fail for many reasons but often times the reasons point back to a disconnect with the customer or within the company. Sometimes the customers weren’t sufficiently ready to buy or use the new product or service. Maybe they didn’t yet understand the benefits, they weren’t comfortable enough with the novelty, or maybe they lacked the infrastructure to take full advantage of the new product or service? There are an equal number of examples where companies were unable to operationalize the new product or service and had to abandon it. But sometimes new innovations fail because a company can’t get out of its own way. The story of Best Buy and their development of the innovative gift registry platform GIFTAG is just one of those stories.
In 2008, Best Buy launched a universal gift registry call GIFTAG. Knowing that most customers would want holiday or birthday gifts from more locations than just Best Buy the tool was designed to allow users to capture products from any site on the Internet and add it to their personal gift registry.
An internal Best Buy development team was able to use cloud based tools to create a new product both quickly and cheaply. The challenge was that executives were skeptical that anything done so “quick and cheap” could also be a quality product. During my years in information technology I would often see leaders stick with the “traditional” vendors or methods because they were too afraid of what would happen if they failed. They feared that they might jeopardize their career if their initiative failed.
The following is a reprint of the story of GIFTAG from the individuals who were involved in building it.
The Failure of GIFTAG (for the cost of discovery)
In the Spring/Summer of 2008, the iPhone was gaining steam but the smartphone revolution was in its infancy. Facebook was still on campus. The social web was still emerging. Internet Explorer was the most popular browser among all internet users worldwide – Safari and Firefox were dwarfed by comparison. Google Chrome did not exist yet.
During that time, Best Buy was in the midst of a great run. The company was profitable, flush with cash, and holding a dominant position in global retail. The halls were constantly filled with happy excited faces and the future looked bright.
Our group inside Best Buy was known as The Bistro. We were comprised mostly of contractors – designers, developers, and product people. Our work was a mix of experimental and enterprise-grade applications and data services. We were called upon by various entities within Best Buy to solve problems usually associated with marketing, user experience and digital product development.
The Bistro was often working on a few experimental ideas in parallel with funded project work.
One such experiment was in response to a challenge from Best Buy founder and former Board Chairman, Dick Schulze. He was on a mission. He was on a mission to launch a Best Buy gift registry. Best Buy had tried to start a registry in years past and failed. After holiday season 2007, Dick was committed to launching a gift registry before holiday season 2008.
In response to Mr. Schulze’s challenge, The Bistro conceived a modern registry that would contradict conventional wisdom. We would consider how the user wanted to shop as the first order of business.
At that time, the Target gift registry experience was an example of what good looked like. Customers could scan product in stores (with a scanner gun), add items to a list, and invite friends to buy items from the list by telling them of the registry. The list could be viewed and printed from kiosks in the store. It was a solid brick and mortar solution.
We imagined a registry that would work to help a user with the pre-shopping that they were doing online before making their store visit. We recognized that Best Buy shoppers were event based shoppers (i.e. holidays, birthdays, home remodeling). We knew those shoppers were also shopping several other retailers for the same event. For example, you will probably not purchase all your holiday gifts from Best Buy.
GIFTAG, a universal gift registry, was born in the Spring of 2008 and launched in the Fall (at DemoFall 2008). GIFTAG was comprised of several components. To the user, it was a web interface with accompanying browser plugins and bookmarklets for IE and Firefox. The backend application was converted to run on Google App Engine.
Our choice to use Google Cloud products for GIFTAG introduced a new advantage to The Bistro. We were now able to conceive, create and deploy a scalable working application prototype in the time it took other teams to order, receive and configure a server. Our speed to working code created a lot of disbelief in an organization that was accustomed to spending and $50k-$200k to have their on-site consultant run a “discovery” project. That discovery project would yield a seven figure development proposal and the need for hundreds of thousands of dollars in hosting and server administration.
We were building enterprise-grade, scalable applications for the cost of discovery.
In some ways, GIFTAG was a success. GIFTAG was never marketed or integrated with the BestBuy.com user experience. It ran without an error or any significant downtime until 2012 when The Bistro turned it off. At the time, GIFTAG was fielding about 50,000 organic visits per month.
A confluence of factors contributed to GIFTAG’s glorious failure. It wasn’t a seven figure project so how could it possibly be good enough, powerful enough, durable enough, and secure enough? Aren’t customers going to shop at other retailers with it since it’s universal? How is it going to work if it’s not integrated at POS?
These questions and others were enough for the organization to set GIFTAG aside and pursue a more traditional project approach.
Image courtesy: djangosites.org
SimonDelivers had launched as a online grocery delivery business in 1999 at the height of the Dot.com boom. By 2001 many of their competitors had imploded in the Dot.com bust. Miraculously SimonDelivers had managed to be one of the few that weathered the storm only to be later caught up in the real estate bust of 2008. Often times we can learn more from failures of others than from their successes. This story is a glimpse into the lessons learned from the failure of SimonDelivers.
This article is my second in a new series for Innovation Excellence titled Failure Forums:
Failure Forums: Lessons From SimonDelivers – a failure to change customer habits
Editor’s note: This is the second article in a new monthly series titled Failure Forums. The series is focused on bringing the role of innovation failure to the forefront and will intentionally bypass the innovation success stories to focus on the lessons learned from failures. It is never easy to disclose our professional failures but these brave innovation practitioners are doing exactly that so that others can learn from their experiences. We hope you will enjoy this new angle on driving innovation.
In the late 1990’s it seemed as if everyone was leaving their stable jobs to join hot tech startups. Like so many others, Steve Lauder had the entrepreneurial spirit and saw amazing opportunities ahead of him. In 1998, he left Minnesota based grocery retailer SUPERVALU to join a couple of high risk startups. First he joined Drugstore.com and then in 2000 he jumped to online grocery retailer SimonDelivers as Vice President of Product and Procurement. SimonDelivers had just launched but it would soon feel the repercussions of the Dot.com bust in 2001. Miraculously it had managed to be one of the few that weathered the storm. The West Coast online grocery service Webvan, the pioneer in this space, wasn’t so lucky and it ended up going bankrupt in 2001.
SimonDelivers had been ahead of its time in logistics, supply chain, customer service, B2B sales and CRM but it couldn’t handle the weight of another crisis – the economic recession of 2008 had tightened credit markets and many investors were hunkering down for the approaching storm. In the summer of 2008 SimonDelivers had ceased operations. Within a few months the assets were purchased and the business was re-launched by another local grocer as CoburnsDelivers. Ask Steve today about his experience at SimonDelivers and he will tell you there isn’t a thing that he would have changed about his journey – he has learned so much. This is Steve’s story.
1. You left Supervalu to join a couple of high risk startups in the early Dot.com boom days. How did you see the decision to join Drugstore.com and then SimonDelivers at the time?
The decision was more about my core personality traits than about companies. SUPERVALU could provide a great career, but it would be a slow career … managing “between the lines” and mitigating risks. Innovation experimentation and interest in building things were not going to be part of that path, which is what pointed me toward start-ups. So while co-workers at SUPERVALU questioned why I would move my family across the country and take such risks, I only saw opportunity.
2. When you committed to join SimonDelivers did you consider what would happen if you failed?
No, I really believed in the concept and wanted to work on it very badly. I thrived on the pure excitement of being part of something new and challenging. I always appreciated that I was learning at a faster pace than most others in my career, and I would walk away smarter – no doubt! I guess that’s the great part of taking risks: you learn a lot, regardless of outcome.
3. What kind of odds were you giving the company for success?
Interestingly, those types of thoughts/calculations never entered my mind. I am not saying we never had rough days, but we just kept moving forward. Over time, some people in the company reached a point where the risk of staying was too great for them, so they left. But most of the time we were really just focused on hitting our goals.
4. SimonDelivers had survived the Dot.com Bust but not the Real Estate Bust. What was different the second time?
I think investor fatigue had more to do with the ultimate sale of SimonDlivers.com than market conditions. Many of the funds had been invested for a long time — probably beyond their normal guidelines. The core business continued improving, but maybe they were just past the point of wanting return on investment.
5. You have mentioned before that SimonDelivers had survived for eight years but had been asking the wrong question all along. Can you explain?
SimonDelivers is a great business case study. The company was ahead of its time in logistics, supply chain, customer service, B2B sales and CRM. But a series of very talented CMOs could never get a handle on what the company called the “leaky bucket.”
The foundation of the business, and the investment in warehouse, trucks etc., was based on achieving a certain penetration percentage of the market. We could attract trial customers, but never really grew our loyal base. Numerous efforts were undertaken to understand what was wrong. We looked at service failures, lack of assortment, pricing … all of the normal triggers.
When the task of figuring this out made it to me, I teamed with two great partners – a database geek and a classic direct marketer. We came up with the idea of layering demographic data with behavioral data. I have a vivid memory of staring at the data in a conference room and sitting back and saying, “Wow! The good news is that we have penetrated our market to 95%. And the bad news? We have penetrated our market to 95%.”
What that meant was consumers who fit both the demographic and attitudinal characteristics were only 50% of the assumed base in the original plan. Customers loved us, but the majority did not shop with us regularly because they never changed their habit of grocery shopping.
6. Back in the day there were always rumors that Amazon might acquire SimonDelivers. Was there ever any truth to the rumors?
Not really. SimonDelivers investors pursued multiple options, partnerships, direct sale. Amazon, Wal-Mart and others were happy to entertain conversations, but it is my opinion that they simply were gathering intelligence. It seemed that they had no real intent to become buyers or investors.
7. You mentioned that you had worked with Amazon previously. What was it like working with them?
Drugstore.com had a close relationship with Amazon. Jeff Bezos was on the board for a number of years. It was clear to me at the time that our model of shipping high-value, low-weight, low-cube items intrigued Amazon. Having the partnership/investment from Amazon was like having a big brother. Sometimes they looked out for you and helped you grow, and sometimes they beat you up.
8. In your days at SimonDelivers was there ever a clear indication that the company wasn’t going to succeed?
Yes. I had a moment of clarity on that day in the conference room. After years of studying consumer data and appreciating the difficulty of changing consumer behavior it became clear to me. If we couldn’t reorganize our cost structure and match our operation to the true market potential, we would continue to burn cash. Soon afterward, I left the company. For about another year, there were valiant efforts to keep attracting a new base, but eventually the company was purchased by a group who could address the underlying cost structure. The new ownership continues to deliver groceries today, in the Twin Cities market.
9. How often do you find yourself drawing on the lessons learned from the failure of SimonDelivers in your current work?
There are three lessons I keep with me every day:
After leaving SimonDelivers Steve has retained that curious “entrepreneurial spirit.” He is Senior Vice President of Innovation at financial services firm CPP North America. Pouring your blood, sweat, and tears into a startup that fails can take an emotional toll but it usually involves learning a lot along the way. Steve survived the failure of SimonDelivers but has emerged as a smarter innovator on the other side.
Failure knows no distinction to whether our institution is in business, government, education, or the nonprofit sector. Facing Failure is a new monthly series that I have launched today with the civic-minded publication Pollen. The goal for this column is to bring the topic of failure to the forefront of our civic conversations in an attempt to remove the negative stigma. I intend to do this by sharing stories and the lessons learned from business, nonprofit, education, and government sector failures. The best hope for this column would be that we are able to learn from each other and strengthen our Pollen community. If you have a story that you would like to share please reach out and connect via my contact information below.
From the October 1st Pollen publication:
Pure and simple, a failure is when something that we were trying to accomplish fell short of what was required or projected.
There is no inherent blame or shame in the word itself although it is often inferred. The reality is that we all “fail” to reach expectations on a daily basis in our personal and professional lives.
Failure knows no distinction to whether our institution is in business, government, education, or the nonprofit sector.
Because of the negatives consequences of failure, many of us have fallen into the trap of avoiding our failures and thus frequently not learning from them. But this doesn’t have to be the case. Instead if we choose to understand and openly address our issues with failure, we can ensure that we are learning from them. What does it look like when we use this knowledge to strengthen our institutions rather than discard these lessons due to embarrassment and shame?
Mistake vs. Failure
A mistake is an incorrect, unwise, or unfortunate act or decision. A mistake can be caused by bad judgment, a lack of information, or a lack of attention to detail. While a mistake can lead to failure they don’t always have to end in failure. We make numerous mistakes every day without serious consequence. We would prefer to avoid making mistakes but without perfect attention and perfect prediction they are inevitable. Conversely, a failure doesn’t always have to stem from a mistake.
Over the last two decades of my career I have spent most of my time trying to build new business platforms, first as a systems programmer and later driving innovation and new business development. Oftentimes things wouldn’t go exactly as we had planned. We would recognize this and would make adjustments along the way. As a programmer, this was a completely natural state of the world. You would write code, you would test the code, and then you would fix the bugs in the code. As I moved out of the programming world I noticed that everyone seemed less and less tolerant of making errors.
At times I have witnessed executives intentionally trying to cover up their failures by sweeping them under the rug and heading in the opposite direction. While disappointing, I came to believe that this too was a natural state of the world. Most executives don’t get promoted to the C-suite based on their long list of failures. Many have gotten promoted in spite of their failures but never because of them. Failure in business often times meant missing that promotion, losing that bonus or even getting fired.
The problem with continually avoiding our failures is that we never actually learn from them. We are too busy shoving them under the rug to step back and dissect what had happened. As such, we will frequently repeat the same errors. During my last stint in the corporate world I tried to address this issue. For two years I ran a series of “Failure Forums” at Best Buy where company leaders would share their insights from their failed initiatives. They would get up in front of the company and share what they had accomplished, what they had learned, and what they would have done differently. We would follow up each presentation with a question and answer session with the audience.
Originally I thought the problem of avoiding failures was unique to my organization. As I shared this work with others outside of my company I learned that it was an epidemic in many large organizations.
As I have continued my research on failure for my writing and consulting I was surprised to see how prevalent the issue is beyond the competitive business world. The fear, stigma, and consequences of failure are just as real but for slightly different reasons. In many of these organizations the job security and compensation issue is still a concern but more important is the consideration that failure can risk the survival of the organization. With many nonprofit organizations a large portion of their funding is from foundation grants and large donors. The rationale behind the fear is that if those groups suspect that an organization is not competent or is using their money unwisely (i.e. failing too much) they could pull their funding. For nonprofits, reputation is everything when seeking funding.
Facing Failure in Sub-Saharan Africa
A great example of this challenge comes from the work of Ashley Good (@admitfailure), formerly with Engineers without Borders Canada (EWBC). She has been pressing the issue of failure in the nonprofit space for years. While at EWBC, Ashley started an Annual Failure Report in an attempt to shine a light on failures from development organizations. Her goal was for organizations to learn from the failures of others so that they would not be repeated. One of the failure stories was from a group involved in digging wells in Sub-Saharan Africa. The organization had gone back years later to check on the wells and found that many of them were no longer working. The wells had needed to be maintained but the group had failed to train anyone to fix them or to alert someone who could help when the well had broken.
Failure in this arena is much bigger than missing that promotion, losing that bonus, or even getting fired – failure in third world development projects could cost lives. If these development organizations are not sharing their failures with the other organizations that are attempting similar initiatives then they are only propagating their failures.
This is just one example on the importance of learning from our failures but there is so much more that we can be doing.
If you have a story or insight that you would like to share please reach out to me via email at matt@matthunt.co or on Twitter @huntm. I will do my best to make sure that these stories are shared so that we can all learn together.
This article is the first in my new series of Failure Forums published in Innovation Excellence. The series is focused on bringing the role of innovation failure to the forefront. It will intentionally bypass the innovation success stories to focus on the lessons learned from failures. It is never easy to disclose our professional failures but these brave innovation practitioners are doing exactly that so that others can learn from their experiences. This is the story of Jeff Stratman, a corporate innovator, and his journey to launch a new corporate venture called Orgango.
From Innovation Excellence:
Failure Forums: The Challenges of being a Corporate Innovator
Steve Jobs in his 2005 Stanford University commencement address challenged the audience to take risks and be ready to fail. In fact, it is hard find a business publication or blog that has not espoused the failure mantra: fail early, fail fast, and fail often. While risk taking and failure are essential elements to driving innovation there are often times significant consequences for those involved in the work. What happens to their compensation? What happens to their career? How do they manage the process of winding down a failed initiative?
Too often we only hear the stories of the successful innovation initiatives, leaving the stories of the failures to go untold. As a Director of Innovation Development for Best Buy I knew firsthand how the lessons from my failures could help future initiatives. While at Best Buy I had launched a series of Failure Forums to share the lessons from our failures across the entire organization. Now I consult with many organizations to help them build out their own sustainable innovation practice. Addressing failure and ensuring that we are learning from it is central to this work.
This article is an interview with Jeff Stratman, an innovator / intrapreneur who had left a reasonably secure position with a Fortune 100 company to follow his dreams and help launch a new corporate venture at Coinstar called Orango. Orango was created to test the concept of selling used consumer electronics out of an automated kiosk (note: since Jeff’s departure Coinstar has been renamed to Outerwall). In his fifteen months with the project Jeff saw the many highs and lows of launching a new corporate venture. Eventually he was part of the team that had to shut the business down. Like most corporate ventures, this one had failed to reach expectations. While the initiative may have failed that doesn’t mean that those who led the work were failures. This is Jeff’s story.
1. What was your thought process at the time in leaving a relatively stable position at Best Buy to take on a high-risk innovation initiative at a new company?
A: To be honest, my decision had nothing to do with what was going on with Best Buy at the time and everything to do with what I believed could go right at Coinstar and the Orango initiative. I had been at Best Buy for 24 years – my entire adult life. My time at Best Buy gave me something new and interesting to focus on every two or three years. It was an amazing run, but I felt that I needed to address gaps in my resume to prepare for the next 15 years of my career.
Orango offered me a chance for legitimate startup experience. It gave me a chance to learn the automated retail business, which I found very interesting. Also, Coinstar was successful with Redbox but was a non-traditional consumer electronics (CE) player. My team and I could quickly add legitimacy to Orango, especially within the CE vendor community. Lastly, I appreciated that the business model was so completely different from Best Buy’s business in terms of core customer, location, assortment, etc. I could leave with a clear conscience and not compete directly with my friends and a former company I still cared about.
2. Was there a deciding factor that helped to make your decision?
A. I have always based my job satisfaction on the intellectual, social and creative return on effort. I would always ask myself, “Is what I am doing interesting and fun?” I would always evaluate my answer up against any future goals. In the move to Coinstar, I checked off the three most important things and they made me a very good offer in title, scope, and compensation that helped to de-risk leaving the Best Buy nest.
3. When you took your new role what kind of odds were you giving yourself for success?
A: I pegged it at about 50/50 I guess. I didn’t really think about in terms of probabilities at the time. I was just going to work as hard as I could to build Orango into something cool. When I say it out loud now it sounds impossibly difficult but our goal was simple: “Let’s sell a female customer a refurbished $400 Apple iPad out of an automated machine located in a grocery store.” But we did it! Our machines were state-of-the-art, our branding was cool, we sourced great deals, and we had excellent feedback from customers. I’m proud of what our team accomplished despite the final outcome.
4. How long did the project last? What was the ratio of the time spent planning vs. executing?
The concept had been in development for about 18 months and had gone through a business model pivot before I arrived. When I got there, we had 8 of the version one machines in two markets. I was there for 15 months and although there was a decent road map for scaling when I started, we were constantly tinkering with it. Sometimes we were changing in response to a challenge and sometimes to an opportunity.
The team accomplished a lot in a short time:
While this was happening, we lived the “magic in the mess.” We spent time planning, but we reacted day-to-day to what was necessary to grow the business quickly. Frequent and disciplined planning was tempered a bit by having a great entrepreneur in charge and the fact that we were a small team based in 4 different locations – merchants in Minnesota, operations in Illinois, marketing in Washington, and information technology in California. It was tough getting everyone together and maintaining a good plan on paper, but we did try.
5. Did you have an “end game” in mind when you took the role if things didn’t work out?
A: No, not really. Professionally, I hoped my experience and reputation in the CE industry would offer other opportunities if Orango didn’t pan out. I got a few nice congratulatory phone calls when I left Best Buy. One person said: “If I knew you would have left Best Buy, I would have hired you!” That compliment gave me a little extra dose of confidence. Personally, I knew my family would be understanding and adapt easily if I found myself unemployed. We live comfortably, but simply. Any raises for the past decade have pretty much gone into the bank instead of just accumulating more stuff. Not being overextended on your lifestyle reduces anxiety and gives you the freedom to try new things when they come along.
6. Did Coinstar ever mention what would happen if the project failed to take off? Were expectations set?
A: In the beginning, not formally. We had a budget, of course, but there wasn’t really a clear go/no-go mandate based on Orango’s performance for most of my time there. Early on, leaders mentioned another venture that Coinstar had previously shut down, where everyone was offered placement elsewhere in the organization, as an example of how things might go if Orango didn’t work. Later, when it became clear we weren’t going to move forward, a formal transition and severance package helped stabilize the team and ensure an orderly shutdown. At the time the entire Coinstar organization was going through a lot of change in leadership. They changed numerous executive positions over a six month period. Any lack of clarity during this time was short-lived and quickly stabilized as the new people got settled in, but a lot happened during a crucial period in Orango’s evolution.
7. Was there ever a clear indication that the project was not going to succeed?
A: Yes and no. On one hand, we had a rough launch during the holiday season from a technology standpoint and it hurt sales initially. However, we had a plan to fix everything quickly. With these sophisticated machines, you can only test so much at the factory under controlled conditions. When they get out in the wild and customers start doing things that you didn’t expect, things will break at first. Even still, customer feedback on the machines and assortment was very positive.
This was a great lesson in expectation setting with leaders. I imagine that, years ago, the first Redbox machines didn’t work flawlessly. They likely needed years of tweaking to eventually perfect them. Our IT group really worked hard under incredibly tight timelines and budgets to shore things up. I think with just a little more patience, we could have fixed everything. Towards the end, our machine up times and sales were going in the right direction, but by then it was too late.
There was a moment, late in the game, when I realized that Coinstar was a service company at its core and Orango was a true retail venture. The CE retail business has always been a brutal low-margin industry littered with failure. I felt that maybe Orango was never going to be embraced fully by the company culture, but hoped I was wrong. The purchase by Outerwall (formerly Coinstar) of ecoATM – an automated mobile phone trade-in venture – just a few months after shutting down Orango, looks like a CE play that is more in their wheelhouse in terms of experience and capabilities. It’s a good move and probably a major reason they could regrettably, but confidently, move on without Orango. I give them a lot of credit for making the tough decision in order to keep forward momentum.
8. What was the most difficult task in shutting the business down?
A: Technically, the normal operation of the business was stopped while Coinstar tried to sell Orango – the brand, machines, IP, etc. So, we couldn’t just shut everything off and liquidate. Some things needed to go and other things needed to stay. Trying to keep an already small team engaged to the very end was difficult. Even with the transition and severance package, we lost some managers before the official last day.
Some people who quit weren’t as crucial to the draw down as others, but it got pretty lean toward the end. Remaining staff had to pick up the ball and do their best in areas that weren’t their specialty. Understanding that everyone is at a different place in life and with their own tolerance for risk I can’t fault the people who left early, but I really have a ton of respect for the people who stayed and managed a very professional and successful shut down.
9. So what’s your next move?
Through this work I decided that I wanted to continue down the startup path. I recently joined a Silicon Valley based startup called Gigwalk (www.gigwalk.com). They are a mobile based temporary labor force that specializes in retail merchandising audits, consumer insight collection and digital photos. I’m really excited about this company and its potential to reinvent our definition of work in the mobile age.
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As Jeff’s story describes, joining a company to launch a new venture can be extremely rewarding but there are also risks. When working with companies on building out their new venture or innovation development programs I continually reinforce the importance of deploying the systems, processes, and tools to deal with failure prior to launching the new initiatives. Waiting until after the project arcs and it looks like it might come crashing back to Earth is too late. Most employees will be too focused on finding their own safe landing before they focus on the work. When questions about severance or retention bonuses are left unanswered employees will always assume the worst case scenario.
Most organizations aren’t willing to publish their own innovation failure rates but data scientist Thomas Thurston, CEO of Growth Science, has a significant data set which tracks the rate at 78%. With a database including more than 1000 corporate ventures, Thomas has found that 78% of them will cease to exist seven to ten years after their initial funding. When organizations recognize that most of these high risk initiatives will end in failure the imperative becomes clearer that we need to end the shame and blame game. Rather than covering up our failures we should stop and listen to the stories if we expect to actually learn from them.
If you would like to share your story or insight from an innovation failure please reach out to me via email at matt@matthunt.co or on Twitter @huntm. I will do my best to make sure that these stories are shared with a broad audience so that we can all learn together.
Additional Orango Media Resources:
For the longest time business and military leaders wouldn’t dare utter the word failure in front of their organizations. For many the credo was that failure wasn’t an option. Times have certainly changed but many organizations are just scratching the surface in addressing the difficult issues surrounding failure.
The following is an article that was published on the FailCon Blog. FailCon is a one-day conference for technology entrepreneurs, investors, developers, and designers to study their own and others’ failures and prepare for success. This year I will be facilitating a discussion at the FailCon Conference in San Francisco on October 21, 2013.
Failure has become a pretty hot buzzword in many business publications and blogs. In fact, it is hard to find one that hasn’t suggested to: fail early, fail fast, fail often and of course the rebranded fail – To Pivot (See The Lean Startup). While all of these ideas are in the right sentiment we need to dig a little deeper or we will miss the entire point. Organizations need to go beyond encouraging employees in purposeful risk taking and possible failure. They need to create the systems, processes, and tools that will address failure when it does happen. When organizations neglect to recognize that failure is an option or are not prepared to address failures proactively they discover that these failures always end badly. This doesn’t have to be the case.
The fact is that large companies are political bureaucracies by definition. There are always a few exceptions but most are being run through a century old model of command and control management. Early management philosophy came out of military doctrine where it was necessary to coordinate the complexities on the battlefield from the generals down to the privates. It was by intent that the strategy would get broken down by the leaders into actionable tasks for the troops to carry out their mission. From the beginning, the mission always took precedence over the men. A single man could fail but the unit was expected to succeed in accomplishing the mission. We have repeatedly heard military leaders order “We must be succeed in our mission – failure is not an option!”
As a rally cry “Failure is not an option!” makes for a great tool to motive the troops but it couldn’t be farther from the truth. In reality that particular mission may or may not have been important, that particular battle may or may not have determined the outcome of the war but failure was always an option. In every single one of those wars there were hundreds if not thousands of “failed” missions. In fact, the military has recognized that failure is such a likely outcome that it has created a process to identify and learn from failed missions, it is called the After Action Review (AAR). (See Veterans Day Lessons)
All branches of the U.S. military use some form of an AAR process to analyze what happened, why it happened, and how it can be done better next time. The AAR is focused on creating a clear comparison of what were the intended results versus what were the actual results. By understanding what happened the military can adjustments in their future planning. In 1990, Peter Senge coined the terms “Systems Thinking” and “Learning Organization” to describe how organizations can study action-reaction feedback loops to better learn how to solve their own problems. When an organization makes a plan, executes the plan, and documents what they learned they are completing the system. When they instead attempt to cover up their failures they are short circuiting the system and failing to learn from the feedback loop.
For most of the last decade I worked for the consumer electronics giant, Best Buy. During much of this time we were keenly aware that we couldn’t endlessly grow more stores in our U.S. market. We were reaching what we thought was a saturation point in our number of stores. A priority for the organization was to find new growth opportunities. Over those years I saw us launch dozens of new business initiatives. Most of them ended in failure but the failures weren’t from ineptitude. Frequently the teams had done good work but the initiative didn’t move forward for any number of reasons. Maybe the organization wasn’t yet capable of operationalizing the initiative. In other cases the customer wasn’t ready for the changes that we had created. With one particular initiative the regulatory environment first needed to change before it could be successful.
These initiatives had successfully explored new opportunities but they just weren’t ready to move forward. They had “failed” to reach their objectives but they weren’t “failures” in the pejorative sense of the word. The challenge is when an organization doesn’t differentiate between the two they usually end up with the latter definition and the negative stigma that goes with it.
Most business scorecards remain pretty similar to the academic report card. Get more A’s and you get recognized in a good way but get more F’s and you get recognized in a bad way. In business you get compensated and promoted based on your successes. Failures can cost you your promotion, your bonus, and even your job. With this equation it is easy to understand why leaders would prefer to quickly kill a project and cover up their failures but the result is that the organization never really learns from it.
In the military, failure can cost lives yet they have recognized the importance of addressing their failures in order to learn from them. Not to say that the U.S. military is perfect in this realm. I have heard many stories of leaders attempting to cover up their failures in an attempt to save their career but the organization as a whole has created the AAR system and processes to understand their failures and attempt to learn from them. Outside of Lean or Six Sigma manufacturing processes how many Fortune 500 companies go through this same rigor to learn from their failures?
When an organization neglects to formalize their expectations of addressing failures they are sanctioning the individuals to cover them up. As we reviewed with the business scorecard, if you leave it up to the individual they are personally incented to cover up their failures. Each of these initiatives had a cost to the company in time and money. It is up to the organization’s leaders to create their expectations for the systems, processes, and tools that will be used to learn from their failures.
In 2007, I created one such tool at Best Buy. I started an internal series of Failure Forums to openly address our failed initiates. It was a venue open to all employees where initiative leaders would share their story: what had they accomplished, what had their learned, and what would they have done differently. We kept the presentation sessions intentionally brief so that we had ample time for questions from the audience.
To be a learning organization you first need to admit that failure is an option and then build the necessary systems, process, and tools to address and learn from your failures. In my follow up article I will share my lessons learned and some of the best practices for starting Failure Forums within an organization.
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