Learning from Failure… a collection of stories, insights and lessons learned.
Last Friday CNET reported that Nike had fired a large part of their Digital Sports division, the team responsible for their FuelBand product. It was estimated that of the 70 person hardware team, 70-80% were let go. Based on the comments of Nike representatives it sounds as though the company isn’t abandoning the technology altogether but just pivoting away from hardware manufacturing. With more phones and wearable devices adding the necessary chips to track motion it looks like Nike will pivot to become more of an integrator into other hardware platforms.
The truth is that these wild swings happen all the time within Innovation / New Business teams. Organizations that are trying to lead the way will frequently find themselves out ahead of the curve and will need to readjust their course. As I have previously posted (see 3 Out of 4 Fail), some researchers have concluded that the “failure rate” of new corporate venture projects comes in at 78%! For those outside of this space it can seem staggering to think that more than 3 out of 4 initiatives fail but from my observations over the years that number sounds about right.
Granted there are definitely things that organizations can do better to manage their innovation Innovation / New Business through the pipeline but the reality remains that there are an incredible number of variables that these teams are trying to manage (see Complexity Theory and New Business Models). They are building a new business, in some cases a new industry, and trying to aim it at a moving target.
The killer is that Nike was one of the first to introduce the “wearable” activity tracker when they launched the Nike+ transmitter that relayed information from your shoe to your iPod while you were on the go. Then they paused. Nike didn’t launch the FuelBand product until February 2012 almost 3 ½ years after Fitbit (the current market leader) introduced their first wearable activity tracker.
Many in the media and CE industry are already diagnosing the “limited” wearable category as dead citing the phone or the multifunction watches as the future of this space. I am not so certain. I continue to use my Fitbit as my activity gauge – telling me when I need to get off the couch and onto the elliptical. When I am home I rarely have my phone on me. I gave up wearing watches a decade ago and don’t intend to look back.
Whether or not this was the right call for Nike won’t be known for some time. More important for the organization is how those employees still remaining with the company will respond. The remaining employees will be watching to see if the company does their best to ensure that those employees who took the risk by join this new initiative are treated fairly. If they are treated poorly, it is likely that the remaining employees will be looking to “de-risk” their initiatives to better ensure their survival.
Every company out there is screaming innovate, innovate, innovate but few are prepared for what happens when these projects “fail” or when they need to make a dramatic pivot. My suggestion is that companies are transparent as possible with these employees early on so that they can plan accordingly – sort of an “innovation prenuptial.” If they wait until the project is in a tailspin it is too late. I wish Nike and the entire wearable category good luck – I really don’t want to have to go back to wearing a watch!
Image Source: Wiki.org
I have been following the story of Elon Musk for several years now. His attitude toward innovation, risk taking and the possibility of failure is what I consider to be an “example of good.” This attitude has earned him a handsome fortune (worth $12b as of 2014) and a top spot in my “must interview” list for my book. In my previous world of new business development, my team and I had followed Musk’s company Tesla Motors closely as we were working on opportunities in the electric vehicle industry. At the time Musk had just begun general production of the Tesla Roadster and while it had won an award from Time Magazine as one of the best inventions of 2006 it was far from certain that the company could survive.
In December of 2008 both of Musk’s two companies, Telsa and SpaceX, were on the verge of collapse. Tesla was sitting on a pile of defective cars that it couldn’t sell and SpaceX had three failed attempts at launching rockets into orbit. With a fourth rocket attempt, Musk was going to either succeed or fail. Luckily his persistence paid off with a successful launch and with it Musk’s failures were all but forgotten. NASA called soon after the launch with a $1.5b contract for SpaceX (link to 60 Minutes interview).
In 1995, Musk had moved to Palo Alto, California to pursue a Ph.D. from Stanford University in Physics but after his second day on campus he withdrew from the program to strike out on his own (link to Inc. interview). Musk had $2000, a car, a computer, and a penchant for risk taking. He knew that at Stanford his doctoral work may not have made a significant difference in the world and he saw entrepreneurship as a way to “get involved in stuff that really mattered.”
Silicon Valley was founded on the doctrine of trial and error entrepreneurship. The early engineers in the valley knew that discovery only came through the use of the scientific methodology – hypothesis, test, and verify. Most of the time the hypothesis is going to be wrong. But through the discovery process you (and your company) will come out the other end smarter than you went in. Repeat this cycle enough times and you will eventually find success. If instead you short circuit the cycle by 1) only place “sure bets” or 2) covering up your failures you don’t have the chance to learn from them.
Most in Silicon Valley still hold true to this trial and error philosophy. Randy Komisar, entrepreneur, venture capitalist and author of Getting to Plan B cites this attitude of accepting failing as the key to the valley’s success. Why do we need to move to “Plan B” anyway? Because “Plan A” wasn’t working! The sooner we move on the next iteration the greater our chances of survival and of finding future success (my previous post on Randy Komisar).
So what is it that causes companies to move from being Risk Takers to Risk Managers?
As organizations grow beyond a startup their founders are frequently replaced by “experienced” executives. In part this happens because the founders are often times not interested or not equipped to run large organizations. Also as the investor base expands the “risk tolerance” of these investors usually decreases – they expect a more consistent return on their investment. With these transitions the engineers and scientists are that were leading the organization are removed or reorganized and replaced with professional managers. These new leaders are trained to minimize risk and are rewarded handsomely for it by their executives, their board of directors, and their investors.
Companies that take too many risks or risks that are “too great” may miss their earnings forecasts for the quarter or maybe the year. In this scenario, the stock price will drop and leaders receive a slap on the wrist from their board. Like Pavlov’s dog we have been conditioned to reward companies that demonstrate a slow and steady march of earnings per share growth.
The problem comes in when that reward system trickles down and permeates
every area within a company. Slow and steady growth becomes the mantra and
the risk taking entrepreneurial ethos eventually turns into the stasis of risk management.
With Musk staying on as CEO of both SpaceX and Telsa it is reasonable to believe that the entrepreneurial ethos will persist. During his 60 Minutes interview he commented that “Well, I didn’t really think Tesla would be successful. I thought we would most likely fail. But I thought that we at least could address the false perception that people have that an electric car had to be ugly and slow and boring like a golf cart.” Musk had a hypothesis that he has tested and now validated – the Tesla Roadster and Model S are both beautiful and fast!
After Musk cashed out of PayPal for roughly $180 million, he was willing to risk it all and bet on Tesla and SpaceX. Many of us are rooting for both companies to succeed but we also can’t wait to see what else might capture his attention next!
“If something’s important enough you should try.
Even if […] the probable outcome is failure.” –Elon Musk
image credit: 60Minutes.com & www.teslamotorsclub.com
The Olympics always bring out the competitive spirit in me. I find my heart racing along with the athletes as they put their lifetime of training to the test for their shot at Olympic glory. For some the difference between a gold medal and despair can be as little as a few hundredths of a second. After this week’s tie for the gold medal in Women’s downhill skiing, a first in Olympic Alpine skiing history, many were suggesting that they needed to start measuring times in the thousandths of a second. Swiss watchmaker Omega has been measuring Olympic time since 1932 and claims that their technology can be accurate to the millionth of a second but the level of accuracy for each sport is determined by the corresponding federation. Whatever the measure of time, success or failure for each of these athletes can come down to the slightest nuance during their final performance.
During the last Summer Olympics I wrote a post about how some athletes have practiced failure as a process in order to become more successful – Practicing Failure: Lessons from Michael Jordan & Olympic Athletes on Failure & Success. With the level of competition so high, winning a gold medal requires a near flawless execution during the final round. With the Winter Olympics, more so than the Summer games, small mistakes can cause extreme injury whether falling out of the air or landing on ice.
Each day brings an injury update and revised tallies of the medal count by country. Do we have more or less than they do? How many gold medals do we have? I will admit that I don’t have a fully thought through example of what the scorecard should be but I know it needs to be one that better captures the essence of the Olympic athlete.
Over the last few days I have glimpsed moments of that essence and was proud of the athletes who willingly shared it with the world. We have seen their surprising victories, their spectacular failures and their shocking withdraws.
American snowboarder Sage Kotsenburg unexpectedly won the first gold medal of the 2014 Sochi Olympics doing a trick he had never done before in the Snowboard Slopestyle competition. In fact, he had never done the “Holy Crail” trick before in his life. When asked about the trick he said “I had no idea I was even going to do a 1620 in my run until three minutes before I dropped. It’s kind of what I’m all about.” An Olympic athlete is confident enough in his skills that he tries a trick that he has never done before – and he wins the gold medal!
On the other side of the coin, Men’s figure skater Jeremy Abbott felt the agony of defeat as he crashed during last night’s short program competition. You could see Jeremy’s nervousness before he took to the ice to begin his routine. After his hard fall the announcers and the crowd were all stunned as he lay for what seemed an eternity. In the post interview Jeremy admitted that he didn’t know what he should do after his fall. As he got to his feet the crowd started cheering and clapping to the beat of the still playing music. With the energy of the crowd Jeremy went on to finish his routine with poise. Everyone in the area and watching on TV was proud of him for having the courage to finish his routine.
Russian four-time Olympic medalist Evgeni Plushenko shocked the hometown crowd when he withdrew from the final men’s skating competition. During the interview Plushenko mentioned that he had hurt his back the previous day while practicing and it was apparent that he was still in pain after an attempted jump in his warm up exercises. The camera captured how he winced from extreme pain. In responding to an interviewer’s question after his withdraw he had to remind everyone that – he is human, just like us, he’s not a robot. Struggling to hold back tears Plushenko admitted that he was about to cry as he left the ice knowing that this would be his final attempt at an Olympic medal.
Two-time gold medal winner Shaun White summed it up perfectly, “it just wasn’t my day.” He went on to say “I don’t think it makes or breaks my career. It’s just one night.” White came up short of a medal in Soshi when he placed fourth place in the halfpipe competition. What makes it more difficult is that White actually had the highest score of the competition but unfortunately it was in the qualifying rounds and not the finals. [See his NBC interview]
After all of the practice and the labyrinth of qualifying events that these athletes have been through to get to the Olympics the language that we (and the media) seem to gravitate toward is success or failure in winning a medal. Is that really what it boils down to – success or failure? The binary option of one or the other seems woefully inadequate to capture the essence of being an Olympic athlete. They may have failed to win a medal but they are still an Olympic athlete, they are still at the pinnacle of their sport.
With a new year brings the annual cycle of personal New Year’s resolutions. Frequently these resolutions include losing weight, reading more, spending less, or getting more involved. Many of us want to change from our current course to something that is more desirable but statistically 88% of the time we will fail at our resolutions. Oftentimes failure comes early in that we say we want to make changes but we never even take the first step.
This article is about two individuals who resolved to get more involved to in their local communities. Knowing that the odds of winning their first campaign for public office were against them they proceeded in taking that first step and registered as candidates for their respective city councils. Chad Bell and Emy Johnson wanted to shared their stories of failure and success in an effort to encourage others to take the first step to get more involved.
This article originally ran on January 15th in my monthly column Facing Failure for the publication Pollen:
Facing Failure: Two Tales of Running For OfficeStories of Two Candidates Who Wanted to Make a Difference
With the New Year upon us, many will be formulating their personal resolutions. As the years have passed, I hear more friends and colleagues committing to get involved in order to make a difference in their community. I am continually amazed by those who take their desire to create change or serve their communities and run for public office. Having worked on campaigns in the past, I have seen firsthand the effort and the toll that running for office takes on the candidate and his/her family. Knowing that the odds of winning an election can be low, these candidates proceed in putting themselves out there because they believe that they have something to offer and that they can make a difference.
This is the story of two candidates, who in 2012 both ran for their respective city councils. One ended in success and their other ended in failure. The goal of this article is not simply to compare and contrast but to provide those who might consider running for elected office transparency into their journeys. While both candidates were interviewed separately, it was remarkable how similar some of their responses were.
Both candidates have been active volunteers in their community and both had participated in the Policy Fellows program at the University of Minnesota’s Humphrey School. Emy Johnson won her race for Shoreview City Council against five other challengers for only two open seats. Chad Bell lost his race for Edina City Council against three other challengers for two seats that were held by incumbents. Knowing that it wouldn’t be easy, they both were willing to throw their hats into the ring because they wanted to make a difference. These are their stories.
Q: What motivated you to run for office?
Emy: There were many things that led me to pursue a run for office. I’d been actively involved in my local community already and had served on committees and boards, but I wanted to be in a position of making a greater impact. I felt that if I were to be elected to serve on the city council, I would get a chance to serve more broadly and use what I had learned from my professional life in service for the greater good. Several members of my family spent their lives making a difference in their community and public service wasn’t necessarily an elective or an option—it was just what you did, what you should do.
Chad: I always had an interest in politics and got exposed to it in college when I was on the all college council. But for me it came down to the fact that I wanted to serve the city. I have lived in Edina for over eight years and I thought I could bring a perspective and skill set that would be helpful. Also, I thought it would be an enjoyable experience.
Q: Some people might say they are interested in running for office but they never do. What was it that motivated you to follow through and register as a candidate?
Emy: Moving from the idea of public service to running for the position came about as a result of the effect numerous mentors had on my life. I was encouraged to have compassion for people and their issues and challenges. If you care about people, you want to help them, but you have to be in a position of leadership to do something; you can’t just sit back.
Chad: I told myself that if I was really serious than it was time to stop talking and start doing. I also got motivation from the time I spent in the Humphrey School Policy Fellows program. It had awakened the interest I had around public service and getting more involved.
Q: Did you think about your chances of success as you stepped forward? Did you know how many other candidates were running at the time?
Emy: Since this was a new arena I was stepping into, there was certainly a fear of the unknown, but I was excited too! I found out quickly that I was one of six attempting to fill two seats on the council, and I knew that it would require hard work and dedication to separate myself from all the other candidates. Although I was already actively serving in the community, I realized I needed to grow my relationships with residents and business owners, to embrace the history of the city and grow that legacy. If I could do this, I could succeed.
Chad: There were two seats up for election and two incumbents were running. Both were formidable candidates with longstanding community ties. Honestly, I knew my chances were long but I did not want to use that as an excuse. Waiting for the “right time” seemed like a cop out to me. If I was serious I should get involved and do it now.
Q: What was the most enjoyable piece of running for office?
Emy: My favorite part of running for office was meeting and interacting with such a diverse audience—from children who attend our schools to parents who are raising families. One woman I met at Johanna Shores Assisted Living had been born and raised in Shoreview and had raised her own children there. The stories and life histories I encountered were inspiring.
Chad: Meeting people and listening to what they had to say. It was interesting and enlightening. I never got tired of that.
Q: What was the most difficult piece of running for office?
Emy: I was really challenged by trying to be in two places at once, maximizing the time I had, and negotiating social media with my marketing director (in this case, my sister-in-law who was pregnant at the time with her fourth child). This is the reality of running a campaign—pulling together a staff consisting of a retired neighbor, a father-in-law, a pregnant sister-in-law, and two teenaged children along with countless other volunteers and supporters.
Chad: Having people tell me they really liked me as a candidate but were not going to support me due to their relationship with the incumbent candidates. I tried to remain upbeat during the campaign but have to admit that was disheartening.
Q: What did you find most unexpected about running?
Emy: The amount of people—even perfect strangers—who rallied behind me and showed support early on, trusting my abilities and my vision to lead them. I found myself in awe of the trust they placed in me.
Chad: How much fun it was and how little connection to the town I had. During my eight years in Edina I thought I knew a lot people and had a wide network. I had to admit that I was naive to think that was enough.
Q: Was there ever a time during the campaign when you felt as though you knew how your race would turn out?
Emy: No. I truly had no idea if I would be the winner. Even though I started the campaign on the premise I would win, there is a big gap between the idea and the reality. Were people getting to know me? Did the community understand the dedication and hard work I would bring to the position? Did they realize that my heart truly was in serving my neighbors, my city of Shoreview? I had been coached by many and understood that most candidates lost their first elections. The first time you run for office is more about the experience of getting out there and growing your confidence in public service than winning the position.
Chad: After my first community debate when I got feedback from so many folks about how much they liked my candidacy but that were not going to vote for me. It was tough. It felt like I was not going to get into the club no matter what. Personally I wanted to see it through and give my best effort. I didn’t want to have regrets and I didn’t want to stop fighting.
Q: Emy, how surprised were you when you won?
Emy: The evening of the election, I had invited all of my supporters, friends, family, and even fellow candidates to an election reception at a local business as a way to express my gratitude. I think the moment when a supporter, and now friend, came running in with the results from just one precinct, stopped me dead in my tracks. His excitement as he ran over to me with the news, announcing me as the winner of that precinct, affirmed that my hard work and commitment had actually paid off. I was simply stunned.
Q: Chad, how has losing your election changed your goals?
Chad: It has not changed my goals, but it has solidified what I need to do next time to have a better chance to win. I need better organization and to be stronger with my clarity of vision when explaining why I was seeking the position. I had chosen to run my campaign by myself and it was a significant amount of effort.
Q: What advice would you give to others who are thinking about running for office?
Emy: Do it. The experience is incredibly rewarding and our society needs people who believe in the common good.
Chad: Do it and don’t wait for the “right time.” It takes a lot more courage than I thought it did. It’s humbling but also rewarding…even in defeat.
Q: Were there any people or resources that helped you along the way?
Emy: I was certain that running for public office would require backing in every corner. I was incredibly blessed to have support from individuals who helped with marketing, social media, door knocking, donations—essentially an army of supporters, willing to contribute in different ways and who believed in me.
Chad: I had made a few strong connections with voters who after hearing what I had to say went out of their way to help my campaign. Looking back, though, I realize that I would need more support if I was going to be able to win.
Will this be the year that you make your resolution to run for public office? Building a strong civic-minded community takes candidates who want to make a difference and who are willing to throw their hats into the ring. It does take time and effort, but whether you win or lose, you will survive. I want to thank both Emy and Chad for sharing their candor and insight. We are lucky to have such qualified candidates!
Connect with Emy Johnson on LinkedIn, Twitter, or her blog www.emyjohnson.com.
Driving corporate innovation is far more complicated than most observers realize. During my Innovation Development days I knew that successfully launching a new initiative was a long shot. but looking back I had greatly underestimated all of the forces at play, especially the internal politics. As many organizations are mining “big data” to make better business decisions some companies are looking to mine their “innovation data” to better understand these internal and external forces that determine an initiative’s success or failure.
Intel is one such organization that has been digging into this data. A couple of months ago I had the opportunity to interview Brandon Barnett – Director of Business Innovation at Intel to better understand their methodology. What I appreciated about Brandon’s story was how he and his colleagues were taking a very systemic approach by looking at the underlying technological, social, and economic forces that shape new business models.
This article was originally published on January 3rd in Innovation Excellence:
Failure Forums: Complexity Theory and the
Role of Failure in Driving New Business Models
Driving corporate new business initiatives can be an incredibly challenging job. There are the normal complexities of launching a new business, similar to entrepreneurship, but within a large organization there are many additional factors that can lead to failure.
Finding success in these endeavors requires navigating a series of complex forces like garnering internal resources, defining decision making criteria, and avoiding the landmines of corporate politics just to name a few.
Where some intrapreneurs see these forces as random obstacles others are trying to study them in a larger picture. Some innovation experts see these forces as data points to be measured and evaluated as factors in determining innovation success or failure.
Brandon Barnett has spent 11 of his last 17 years at Intel driving new business opportunities and studying the science behind Intel’s innovation work. He has come to understand that a failed initiative has more to do with internal and external forces than the merits of the opportunity itself. The goal is that by studying these forces organizations can learn to innovate better. This is Brandon’s story.
1. You have mentioned before that you have led a number of new business ventures where some have succeeded and others have failed. How have both shaped your thinking about growing new businesses within a large company?
The process has made me think differently about the foundational differences between the successes and failures. I realized that the challenges are much more about the “initiative within the organizational system” than the initiative itself. Looking back, my successes and failures were not determined by the market but by the internal corporate forces. I have observed that this is generally the case for most corporate innovation. This fact is discussed openly in heuristics like “you must have CEO sponsorship” but it is just one manifestation of a deeper underlying system at play.
These corporate forces driving the success or failure of an initiative are what got me thinking about the complexity in driving innovation. I had studied complexity theory in my PhD work years ago and as I expanded complexity to larger scales I found similar patterns for ventures within corporations, companies within markets, and markets within ecosystems. In my current work I focus on understanding how underlying technological, social, and economic forces shape an innovation program’s success or failure in creating new business opportunities.
2. It seems as though markets are shifting faster and faster in high tech. How have you seen that impact large company innovation programs?
I think about this in a couple ways. For a specific company, what is fast or slow is the speed at which a market drifts away from them, or conversely how nimbly a company keeps up with the changes of the market.
With the digitization of so many things – books, music, identities, reputation, accountability – the number of ways that people can access and combine technologies has exploded. So ‘speed’ is as much a matter of increasing the combinatorial possibilities as it is the shifts in the markets.
The latter is an evolutionary process and the former is an exploratory process. So for modern companies to be innovative they must continue to advance their products (sustaining innovation), adapt to foundational changes in their markets (disruption, or changing bases of competition), and they must engage in the search for new value. The impact to companies is the need for multiple innovation programs – each with different tactics and metrics – progressed simultaneously.
3. You have spoken about how you see Complexity Theory as a vehicle to better understand new business development. Can you explain more?
At a conceptual level embracing complexity relative to business ecosystems shifts the perspective and focuses not on the market as the fundamental unity of analysis but on the forces that underlie it. In other words, I think of a market as a system of exchange that emerges from the interaction of social, cultural, technological, economic forces. If I can understand those forces I can gain insight into how a market evolves or a new market forms.
More precisely, I’m interested in the metrics grounded in complexity that can inform business strategy. For example, we are working with Professor Rahul Basole at Georgia Tech to develop a theory of business ecosystem complexity based on coopetition and convergence measures. Any individual company can be assessed relative to the overall network. The theory is like the U.S. Military adapting from the cold war to combating modern insurgency. The complexity of an organization must match the complexity of the problem it is trying to solve. We are trying to advance a rigorous framework that comprehends this complexity
4. This is not language that most companies use when they describe their efforts to drive new business opportunities. Where do you recommend they start if they want to better understand this approach?
At Intel we launched a new business initiative called Digital Health. The group produced some great products that allowed technology to gather unprecedented data in the patient’s home and deliver it to physicians. After piloting the program we discovered that the physicians didn’t want all that data, especially if they were not being paid for their time to look at it. We took the time to understand why they preferred to act on a single number and with that to better understand why the initiative struggled.
We might consider that near sighted of the doctor but I’ve seen business leaderships fall into the same myopic trap by making decisions singularly focused on net present value (NPV). NPV is one measure of a business opportunity but it completely ignores all the complexity involved in a search problem – the search for value. So I first recommend an exploration beyond tradition business tools and frameworks.
Through this journey we have built our innovation processes to focus on the search for new value in a framework we call the Business Opportunity Canvas which we modeled after Alex Osterwalder’s Business Model Canvas. Other strong influences to the framework are from ecologist and TED Fellow Eric Berlow (collaborator on the WeTheData project) and Stuart Kauffman (author of At Home in the Universe). Finally I would suggest that others examine the work of a former Intel colleague Thomas Thurston (now at Growth Sciences). Thomas has shown how a data-based model can be distilled from theory and can be very influential in decision making (see the Innovator’s Manifesto).
5. What advice would you give corporate leaders who are trying to drive innovation within their organizations?
I would summarize my advice into three buckets:
Building new businesses within an organization has always involved portions of both science and art. The work that Brandon and his colleagues are undertaking is an attempt to broaden the science portion by examining all of the complexities involved in the process. With a better understanding how these underlying technological, social, and economic forces shape our businesses we can learn how to improve our chances for success in launching new business opportunities.
As a side note, Brandon and his colleagues are also taking what they have learned and are extending it beyond the confines of corporate innovation. Last summer Intel sponsored the largest ever U.S. hackathon (National Day of Civic Hacking) to search for new value opportunities within the public domain. They’ve also created an accelerator to bring strategically related startups together in order to catalyze the opportunities found. This work is the culmination of all the tools and the framework used together. Collectively they are learning from all of the complexities in order to build something new.
image credit: edukart.com
Much was made this last week over United Parcel Service’s (UPS) failure to deliver packages before Christmas. The media seemed to border on delight in sharing the stories of customers who were upset that their packages didn’t arrive in time. As I heard these stories played over and over again I kept wondering how we got to this point. Last minute shoppers who were Amazon Prime members could order their gifts on December 22nd and still expect them to be delivered anywhere in the country before Christmas with free two-day shipping. But when some gifts didn’t arrive in time who’s to blame – the retailer, the shipper, or us, the consumer?
Online gift buying continues to grow year over year and online retailer Amazon has taken advantage of this trend. While Amazon doesn’t normally comment on specific sales or order numbers they did issue their traditional post-holiday press release. According to the statement, the online retailer sold more than 36.8 million items world-wide on Cyber Monday at a record-breaking 426 per second. That was up almost 40% from their peak day a year ago. According to the Wall Street Journal, Amazon hired 70,000 seasonal workers for its U.S. warehouses, a similar 40% increase from the year before.
So if Amazon sees a 40% increase in their online orders how are their logistics and delivery partners expected to respond to that fact? Most likely they can’t react quickly enough to that spike in demand. For companies like UPS, that would require adding more planes, trucks and employees. I did notice that in my neighborhood UPS had added rented trucks to their fleet to assist with the increased volume of packages. Quickly adding more planes and pilots seems a little more complicated.
In fact, according to a UPS spokeswoman the planes were the bottleneck. On Monday December 23nd they had more shipments than the expected 7.75 million in their air network. Overcapacity and bad weather in the Northeast created a difficult scenario – some packages were going to miss their expected delivery date. In response, UPS and Amazon quickly began getting the word out that some packages were going to not arrive in time. They contacted the impacted customers, refunding their shipping fees giving them a $20 gift card for their inconvenience.
The response from Amazon and UPS was text book- communicate, apologize, and resolve. The communicated to their customers to let them know about the problem, they apologized for the impact that this problem had, and they moved quickly to resolve the problem and get the remaining packages delivered. What was missing from all of this was 1) addressing whether this “problem” was likely to happen in the future or 2) if we the customers need to rethink our expectations.
1. From the statistics this problem is not new and it will likely continue. According to Forrester Research analyst Sucharita Mulpuru, in a typical year about 15% of online shoppers who order items by retailers’ specified cutoff dates don’t get their packages by Christmas Eve. But with the continued growth in online shopping and more gifts being shipped the quantity of missed deliveries will likely rise even if the percentage doesn’t. According to Ms. Mulpuru, “Retailers think they can take orders up to the last minute, but they just can’t pick and pack fast enough.”
2. Where do we the consumer fit into the equation? In the era of instant gratification and expectations of perfection are we as culpable in making this problem? As a poster child for last minute shopping I have always known I would be in stores buying gifts a day or two before Christmas. But now with online shopping and “delivery guarantees” I don’t necessarily need to leave the comfort of my own home. The trouble is that too many of us last minute shoppers are moving to online shopping and the system can’t support the increased volume – this is when bad things happen.
If this trend is going to continue we will need to do one of three things: shop earlier – heaven forbid, shop in a store where we can take it with us, or change our expectations of “guaranteed delivery in time for Christmas.” I know that online retailers use the delivery guarantee as a sales enticement but perhaps it should read “Guaranteed to likely be delivered by December 24th.” As a society we need to move beyond our expectations of perfection.
Hoping that 2014 will be your best year yet!
If you would like to learn more about statistics and the probability of bad things happening I suggest that you check out Nassim Taleb’s The Black Swan (no, not the movie) and Nate Silver’s The Signal and the Noise. If you would like a great book that addresses our country’s increasing problem with perfectionism I highly recommend Brene Brown’s book Daring Greatly.
Image Source: www.nashvillescene.com
The truth is that nonprofits experience failure just like every for-profit business: new initiatives fall short of expectations, the synergy of partnerships fails to materialize, or expansion plans overburden an organization’s cash flow. But because nonprofits are so reliant on donations and grants to fund their operations even mentioning the word failure can be lethal. The perception, and perhaps reality, is that no donor wants to think that their contribution is being wasted and no foundation wants to report back to their board on “failed” investments. The result is that “safer is better” and failures are frequently covered up.
This same scenario plays out in government and education as well. Few are willing to admit to their failures and prefer to instead to go along with the facade that failures don’t happen. This farce only perpetuates the problem because “if failures aren’t happening then I certainly shouldn’t talk about my failures and risk being the outlier.”
The challenge with this reasoning is that if organizations are covering up their failures then it is unlikely that they are learning from them and it is certain that others are not learning from them. An alternative is that if organizations were willing to share their failures the entire ecosystem could benefit. Every organization would have the chance to learn from their experience and make a better decision next time.
This is the story of how one nonprofit, The Bridge for Youth, overcame a failed expansion plan after the economy collapsed in 2008. It was difficult and painful journey but the organization survived. The Executive Director, Dan Pfarr, is willing to share the story of their failure with the community to demonstrate that failures do happen and to encourage others to learn from their experience.
This is my third article in a new Pollen series titled Facing Failure. The series will share stories and the lessons learned from business, nonprofit, education, and government sector failures. The hope for this column is that we are able to learn from other’s failures and strengthen our Pollen community. If you have a story that you would like to share please contact me at matt@matthunt.co.
Running a business during an economic downturn can be difficult at best. Diligently managing sales, expenses, and cash flow is critical to the organization’s survival but each one of these business levers is within the leader’s control. Sustaining sales revenue is often the most challenging but if the company is willing to temporarily erode profit margins they can drive incremental sales by lowing prices and increasing their promotional campaigns.
But many nonprofits don’t have the same levers to adjust. They are not built around an “earned revenue” model where they receive fees for their services. Instead, they are highly reliant on government/foundation grants and donations to cover their operating costs. When the economy hits the skids, every one of these revenue sources gets called into question.
The Bridge for Youth (BFY) is a nonprofit that has been supporting homeless youth in Minneapolis, MN since 1970. In 2007, they were excited to expand their operations into a new facility in order to grow their services. But soon after the facility opened the economy collapsed. The expansion strategy had made sense but a new economic reality was causing severe hardship on the organization.
In the few years that followed, the organization struggled financially and had quickly cycled through several executive directors. In 2010, the board of directors brought in another executive director, Dan Pfarr. For The Bridge for Youth to survive, Dan knew he had to make several difficult decisions, each of which might have failed and could cost him his job. This is Dan’s story.
“Keep walking, though there’s no place to go…
Move within, but don’t move the way fear makes you move.” -Rumi
Matthew Hunt: Three years ago you took over as executive director for the nonprofit The Bridge for Youth. Can you explain what your organization does?
Dan Pfarr: The BFY serves 10-17 year old homeless youth and youth who are in crisis. For 43 years, we have worked with the youth and their families to resolve conflict and restore confidence in the youth’s ability to manage their life. We serve over 1,000 youth and families each year with the majority of them coming from Hennepin County. We also operate a crisis line, longer term housing for 16-17 year olds (Transitions Program), and counseling services including aftercare and groups.
MH: Prior to you joining the organization The Bridge for Youth had gone through a significant expansion project. Can you explain what had happened?
DP: In 2007, after operating out of a residential home for over 30 years, The BFY refurbished an old telephone exchange building across the street from our shelter, adding on a new wing that could efficiently house 18 youth each night and expand our transitional housing beds/capacity. This new facility housed the administrative offices, space for counseling services, an on-site medical clinic and space for community partners. The project was completed in 2007, followed by the great recession and tremendous cuts in government contracts and funding. This left the organization vulnerable with insufficient operating funds to fully support the expansion and keep the beds full.
MH: So with growth plans in place, the economic recession hit. How did the downturn impact the organization?
DP: The organization burned through its reserve fund, laid off staff and over the next 3 years, went through 2 executive directors and an interim director before I was hired in November 2010. The organization was using its line of credit when I arrived and the services were suffering from all the changes in leadership.
MH: You mentioned that you needed to dramatically alter course if the organization was going to survive. What happened next?
DP: When you enter an organization that is struggling, there is immense pressure on the leaders, staff and supporters to figure out what isn’t working. Usually, the simple solutions that we think of immediately do not go deep enough to address chronic issues. We spent a full year looking at data that was gathered by McKinsey & Co. We engaged in a strategic planning process that took into account the cultural vision of the organization, our mission, and feedback from our community partners. We looked at bold strategies to recover our core mission and not just place a band-aid on the problems.
MH: You also mentioned that you felt as though your own job was at risk, how did that factor into your decision making?
DP: Everything is at risk in a failing organization: the board, the executive director, the leadership team, the staff, and the clients we serve. Bringing an organization back to health requires difficult decisions that impact finances, long-term strategies, and expanded visions for both facility and mission. We made difficult choices in changing our leadership, recruiting new board members, and building a strategy that would bring the organization back to fiscal and organizational health.
The fear of failure can cripple a leader’s (or an organization’s) ability to make sound decisions. It’s a challenge to live with these risks on a daily basis and not let that fear overwhelm you as a leader. You have to deal with fear by asking yourself: what’s the worst thing that can happen here? And when you’ve come to terms with whatever that worst outcome could be, you have faced your worst fear and you find it no longer controls you.
In the end The BFY had to make difficult decisions on a daily basis but we based our decisions on our mission and on the concrete data that we had collected about our services.
MH: So looking back over the last year how did the changes play out?
DP: Our board passed a comprehensive strategic plan in May that has returned us to our core mission of serving 10-17 year youth and adding services for 16-17 year olds that needed longer stays to find stability in their lives. The plan called for us to better use technology to provide our services and record data as well as integrating mental health assessments into our work. We are in the process of implementing a new case management system, a Text for Help system, and a system for coordinating open shelter beds with our community partners. These innovations are all using cutting edge technology to improve our services. We have also succeeded in consolidating our services from two buildings, fully utilizing for the first time the refurbished building that was built in 2007.
These changes have caught the attention of a number of funders who had stopped their funding, but are now confident in both the direction and the leadership as we move forward. These changes have not been easy, but we have restructured the organization in such a manner that we can succeed in serving out our mission in innovative ways.
MH: Looking back is there anything that you would have done differently?
DP: I underestimated the amount of stress that turning around a troubled organization entails; and the impact that a stressful job like this would have on my own personal health. I am grateful for my mentors, coaches, and good friends who have supported me and helped me to navigate this process. All of these things are essential to a leader’s success.
MH: What resources or advice would you recommend for other nonprofit executive directors?
DP: Using strategic consultants that are both familiar with the community and capable of understanding organizational change are critical. Making strategic leadership changes sooner rather than later is also vital. On the flip side of that, hiring talented people who have the same culture and vision to support you is crucial. In the end, you need to have a team that understands the vision that you want to achieve.
MH: You mentioned that one of your previous funders has come back and reengaged with the organization. What was their response to the changes?
DP: They basically said that because of our solid strategic plan and changes in how we conduct our business they supported 100% the direction of the agency and were confident in my leadership moving forward. After what we had been through, I can’t tell you how heartening it was to hear that a donor clearly understands your message and trusts in your leadership.
The lessons learned were hard but The Bridge for Youth is back on stable footing. Prior to the recession funding for BFY had been 65% government grants and only 35% private donations. The team has worked hard to spread out their sources to include more supporters—flipping it to 65% donor contributions and only 35% government grants.
It was a challenging time for everyone in the organization. Dan looks back at the last few years as the most difficult in his career but he also recognizes that he has learned a lot along the way. As he noted during the interview, he wasn’t always sure that the decisions he was making were the right ones but he kept walking and he kept moving his organization forward.
I would personally like to thank Dan and his entire team at The Bridge for Youth for their commitment and dedication to making this a better community. If you would like to learn more about The Bridge’s innovative technology or service projects Dan has agreed to answer your questions directly. You can reach Dan via email at d.pfarr@bridgeforyouth.org.
Image courtesy: BePollen.com
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