Learning from Failure… a collection of stories, insights and lessons learned.
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.
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.
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 email@example.com 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.
Last month consulting firm Accenture released a report (“Why Low-Risk Innovation Is Costly“) on the state of innovation at big companies from the U.S., U.K., and France. Their survey of 519 executives at large companies concluded that most were disappointed with the return on their innovation investment. Many of these companies cited that they were scaling back their disruptive innovation efforts and settling for more incremental innovation like product line extensions.
The report draws some stark conclusions on the failure of these innovation initiatives to meet their expectations. While 70% of these company leaders listed innovation as a Top 5 priority only 18% of them believe that their innovation strategy is delivering a competitive advantage. There were two challenges that were consistent across the respondents – 1) firms only perusing the conservative approach were only seeing incremental improvements and miss big step changes, 2) many firms weren’t strong in their ability turn ideas into scaled businesses. The report concludes with some solid recommendations on how companies can drive a more formal systematic approach to innovation but it omits one very important question. How project failure fits into this systemic methodology?
If I had the chance I would go back and ask two follow up questions of the survey respondents to better understand their innovation ROI expectations:
Too many leaders have unrealistic expectations for the success rate of disruptive initiatives. These leaders think that with a strong brand, bright minds and good funding they can beat the odds and find success significantly more than they will find failure. They are delusional.
Over the last few months I have been collaborating on the issue of innovation failure with researcher and consultant Thomas Thurston. While at Intel, Thurston had pioneered data science methodologies to help guide their growth investments and innovation. Later he was invited by “the godfather of innovation theory” Professor Clayton Christensen to come to Harvard Business School and collaborate as a research fellow. Today Thurston is CEO of Growth Science and a VC investor.
Since most companies are reluctant to share their stories of failed innovation projects, let alone their data, Thurston is in a very unique and insightful position. As an entrepreneur who advises companies large and small on using data to drive innovation he has developed a database of over 1000 innovation projects. After building a statistically significant sample Thurston has concluded from the data that only 22% of corporate innovation projects survive 7-10 years after their initial commitment of funding. That is to say 78% of these projects had failed and ceased to exist 7-10 years later. After our last discussion Thurston has made this information public for the first time on his Growth Science Blog.
So what can we take away when connecting the dots?
Food for thought:
In my last post I had highlighted the benefits of being a young entrepreneur in experiencing failure sooner rather than later in life (Why Youth Can Be an Advantage in Being an Entrepreneur). As I was working on that story I kept thinking about how the same advice holds true for the young employee as well. Learning from our failures doesn’t have to equate to getting older. Last week I published an article on The 5 Traits of Those Who Learn and Grow from Failure for YouTern.com, a publication focused on students looking for internships or recent college graduates.
Here is an excerpt from the article:
Steve Jobs really hit the nail on the head during his 2005 Stanford University commencement address when he said, “You can’t connect the dots looking forward; you can only connect them looking backward.”
With this observation, Jobs meant we can only truly understand how our experiences have shaped our lives by looking back at our successes and, just as importantly, our failures.
Your failures — and your willingness to learn and grow from them — have the capacity to boost your positive attributes in unsuspecting ways. Here are some characteristics that failures can shape, and why companies are quick to snatch up interns and young careerists who possess them:
I suggest that there are some key traits that can be demonstrated from individuals who have failed and take the time to learn from their failures, including: Humility, Perseverance, Confidence, Curiosity, and Culture. I would love to hear your thoughts!
Here is a link to the full article: The 5 Traits of Those Who Learn and Grow from Failure
Food for thought:
Last week I gave a presentation to a class of undergraduate students from the University of Minnesota’s Carlson School of Management. The discussion was centered on the topic of failure and how the fear of business failure is relative based on where we live in the world. The students have spent the better part of the last year working on their startup business ideas and I was impressed with what the teams were able to accomplish and where they had admitted their failures. During the discussion one brave student admitted that he had felt a fear of failing during the course of launching their student business. When asked why he had explained that all of the students knew which projects from the previous year had done well and which had failed. He didn’t want his project to be on this year’s list of failed projects. He was interviewing with potential future employers and he wanted to be able to talk about his success.
What this student was feeling was completely natural in that none of us want to intentionally feel the pain and anxiety that accompany failure. But if we take a step back for a moment to appreciate that most new businesses fail outright or at least fail to achieve their set goals then we quickly realize that we will need to get accustomed to failure. The truth is that there are few safer places to fail than a student startup. I offered this piece of advice to the student: he wasn’t just building a new business; he was really building a new entrepreneur. As students, a failed business wouldn’t cost them their retirement money or their home mortgage, it wouldn’t cost them embarrassment with family or friends, and it wouldn’t cost them their job or that next promotion. They were in one of the most secure environments possible where an entrepreneur could test, try, and fail with little recourse – a place that every would-be entrepreneur was envious of.
As we wrapped up that session I had remembered back to a couple of amazing young entrepreneurs that I had met earlier in the year while I was presenting at a conference in Missouri (See my previous post Taking More Than I Gave: Lessons in Entrepreneurship). Bailye and Brynne Stansberry are twin sisters who have been working together on their business idea since they were teenagers. The name of their company is TwoAlity and they are about to launch their first product – a clear rain boot with colorful interchangeable liners. When I first heard them speak I was blown away by the preparation they had done and the determination that they displayed as they explained how they had come from idea stage to selecting manufacturing partners. I wanted to talk with Bailye and Brynne a little more to see how as young entrepreneurs they perceived failure and how they addressed any fear of failure.
Q1. They say that the most important decision an entrepreneur can make is if they will have a partner and who their partner will be. Like any startup I am sure that there have been some ups and downs along the way. Do you feel that there is a benefit to having a business partner who can help address any fear or doubt that tries to creep in? How have you supported each other through this fear?
Bailye: I feel like there is definitely an advantage to having a business partner, especially one that is your twin sister. We have worked as a team all our lives and we have perfected our teamwork to the point that we know how to work with and handle one another extremely well. We always joke that we have a unique way of balancing one another. On days that one of us is questioning our direction or futures, the other one, balances that negativity and brings everything back to usual. We even balance each other before speeches, meetings, conference calls, and daily work. People looking in on our relationship are always baffled by our ability to work as a team, and to be honest, most days we are too!
Brynne: Having Bailye by my side is one of the best parts about what we are doing. Because we are twins we have a way of being able to communicate with one another. When she has an off day, I can help her get out of her funk, and vice versa. We really have a way of working together and helping each other.
I think one of the best examples is, an “industry consultant”… I use that term loosely… tried to tell us that instead of completing business tasks together, we should divide all the work. For example Bailye be the CFO and me the CEO. That is the worst advice anyone could ever give us. We do our best work when we work together. No matter how many people tell us how to make our relationship “work”, only we know how to do that and we are sticking to what we know. After all, we have been working together for 22 years.
Q2. Often times young entrepreneurs find help in strong mentors when can help them gain confidence, wisdom, or insight from their experiences. Were there any strong mentors that have helped you in your journey? What have they helped most with?
Brynne: I think our strongest mentors have been our parents. They have believed in us since day one and they set a prime example on how to work together as a team through their marriage and owning a business together. We could not have had a better example of team work. Steve Fishman and the TwoAlity team have also been great support for us, through the last 2 years of this journey, mentoring in mainly strategic management and retail.
Bailye: Our dad is an entrepreneur and he has helped us and continues to help us in our journey. One thing that helped us understand working with a partner, was watching our father and his brother (our uncle) work as a team. They started Premier Paper and Packaging when we were 4 years old and did a tremendous job of building a successful company and of being role models.
During the video interview we discuss how Bailye and Brynne addressed the subject of failure, what they risked losing most if they had failed, the topic of role models, and their thoughts on roadblocks and perseverance.
What an amazing entrepreneurial story! If the snow ever melts here in Minnesota I am sure that we will have a receptive audience for their new rain boot! The boots and boot wipes are actually going to be Made in the USA and the boot liners will be in their home state – Made in Missouri. You can check them out on Facebook at www.facebook.com/TwoAlity and watch for the official launch of on their website at The TwoAlity Store.
Food for thought:
It seems like everyone is jumping on the Ron Johnson “failure” bandwagon the last few days. Being that he was a fellow hometown kid from Minnesota and having earned his retail chops at Target Corp I had followed Johnson’s tenure at JCPenney pretty closely over the last 17 months. When Johnson and his team launched their “Transformational Plans” for JCP back in January, 2012 I had watched the entire 93 minute presentation. I thought the presentation was articulate and very well thought through. Interestingly enough just last month I had overheard my wife commenting to a friend how she had stopped into one of the newly redesigned JCP stores and really liked it. That was the first time that I had heard her praise JCPenney in at least 10 years. Her friend had responded that she too had visited the store and really liked it. Having spent most of the last decade in retail I am always a little leery of the “sample-of-one” but two suggests a possible trend.
Here’s my take on where Ron Johnson and the JCPenney board when wrong:
Failure to bring customers along for the journey: At my former employer, Best Buy, we had spent several years driving our a customer centric strategy that focused on identifying our best customers. The goals of this initiative were to offer better products and services to our best customers, shed some of our least valuable customers and identify and grow new customer segments. This work took years to accomplish before it had permeated across the organization. A key difference beyond the pace with which Johnson was trying to move was the scope of the changes he wanted to make. Our Customer Centricity initiative was trying to make small strategic improvements wasn’t nearly as radical as “reinventing” our brand or customer experience. When Johnson was building out Apple’s retail stores he was building from scratch where he had the luxury of time and he didn’t need to change customer perceptions of Apple retail stores because there wasn’t any legacy. Changing behaviors takes time and the conventional wisdom is in years not months.
Last fall I had attended a Citizen’s League celebration last year where Ron Johnson was presenting. During his speech Johnson recognized how long it took to change customer behaviors with the Apple Genius Bar. They knew customers had questions but they weren’t approaching their staff at the Genius Bar. Finally, after 18 months of trial and error they figured out how to get customers comfortable enough to sit down and ask their questions – the provided free bottles of Evian water. Once customers saw other customers talking with a Genius they would also become comfortable. Eventually, customers learned the behavior and Apple no longer needed to offer free water.
The difference is that when Apple was learning how to engage customers with the Genius Bar they only had a few stores. At the time Apple was conducting rapid prototypes of trial and error. Their goal was to fail quickly in order to see what worked and what didn’t. This process is much more expensive and much slower when you have over 1100 stores like JCPenney. By not bringing JCPenney’s current customers along for the journey, Johnson killed the cash flow that he needed to fund these expensive store transformations and started the clock ticking on how much time we would have from his board in finalizing the transformation and growing new customer segments.
Failure to continually communicate to all stakeholders: Johnson started off his new role by clearly articulating his “Transformational Plan” to customers, employees, and shareholders back in January 2012. The plan got cascaded to the general public with exciting media stories about how Johnson was going to revolutionize the retail experience in service of the customer. I have no doubt that Johnson and his team had test marketed the idea of eliminating the gamesmanship of coupons and discounting with a positive response from a broad swath of customers. That said he must have known that there would have been a backlash from those customers who loved their coupons and steep discounts. In a somewhat similar vein, my former employer had eliminated mail-in rebates because they were identified as a pain point by our best customers who hated them. They would always forget to send them in before the expiration date. With this change there was a conscious effort to communicate to customers and employees several times throughout the implementation.
Where this “champion of the customer” broke down for JCPenney was after the initial launch they focused their marketing message more on the products and less on being the champion of the customer. As such, they were able to bring in these new customers who appreciated their efforts fast enough to replace the discount loyalists. Whether this timing factor was part of the original plan or an unintended consequence Johnson and his team failed to adequately tell their story to the financial analysts causing concern over whether this was a temporary lag or a more fundamental concern with the new strategic plan.
Failure of the Board: While I absolutely agree that Johnson had made some mistakes in implementing his strategy and in communicating with his stakeholders I also find significant fault with the JCPenney Board of Directors. Johnson had been crystal clear in laying out his plan and the time horizon he was anticipating for these changes to be completed. He told the world that he wanted to get JCP customers off of the discounting drug. In the proposed strategy there must have been some estimates of how many customers and how much in sales the company would expect to lose from the changes. So where the estimates too low or did the board lose faith that the customers would eventually come? Either way, I find it incomprehensible that the board members we surprised by the drop in sales.
There is a lot of speculation about what returning CEO Mike Ullman will do with the company as it is only halfway through the transformation. Only time will tell.
Here is a small collection of the Ron Johnson / JCPenney stories from the last few days:
Last year I was amazed by a couple of stories that had hit the media about kids who had made amazing scientific discoveries. Jack Andraka, who was 15 at the time, had discovered an inexpensive and accurate test for pancreatic, ovarian, and lung cancers. Check out his seven minute video from the TED Talent Search. Another innovation teen Catherine Wong, who was 17 at the time, had created a prototype of a portable electrocardiogram (EKG) that can connect to a cell phone via Bluetooth and transmit the results over a cellular network. As both told their stories it was remarkable how they were undaunted by the trial and error process. They were not deterred by failure or setbacks and they simply kept trying. But where do kids learn not to fear failure and develop the courage to pick themselves up and keep moving forward?
I had seen a glimpse of this persistence with my son last summer as he was playing the game “Plants vs. Zombies” on our iPad. I wrote about the connection with gaming and learning from failure in a post on my blog (link here). Since then, this recurring question keeps coming back to me. Where do our kids learn how to fail? In the era of “7th Place” ribbons, “no score” little league games, and academic “grade inflation” where do kids learn how to persevere through their failures in the process of trial and error?
I understand that we are trying to protect our child’s self-esteem by postponing their introduction to the unpleasantness of failure. But I don’t think we are doing them any favors when we delay this introduction with failure too long. Research suggests each of us has the power to control our production of dopamine (the fuel that the brain uses to keep us motivated) by changing our attitudes and behaviors. But we need to build these neural pathways and habits in order for them to stick.
We need to find a balance between protecting our egos and building the attitudes and behaviors that will help us persevere through our failures. When a child is able to fail at something, dust themselves off and try again they are developing a habit that will stay with them throughout their lives. Games are a great mechanism to build these habits – fail in a safe environment and strengthen our perseverance.
I wanted to find out more on how game developers thought about failure as they created these learning environments so I reached out to a friend and former colleague Omar Abdelwahed, Senior Online Producer for 2K Sports. As a side note, if you happen to be attending the PAX East gaming conference this week (Mar 22-24) you can hear more from Omar as a panelist. He will be sharing his story on how he networked his way into the gaming industry – Breaking Into Gaming. I have broken the interview into two parts: 1) a video interview via Google+ Hangouts and 2) a Q&A session with Omar.
Q1. In game design how important is the level of difficulty and whether the player might fail?
Omar: “Difficulty” is really something that depends on the game experience you’re trying to deliver. But in general you want to provide a rewarding experience that a player feels she earned. The challenges in a game often scale over time as the player progresses (ie: gets better, levels up, etc.) The most important question becomes, “Is this a fun experience?” The “difficulty” is part of that but not the end-all-be-all.
Q2. Is there any science/math behind how many times a player will be willing to fail before they give up?
Omar: There’s a more general concept around what’s called “player fatigue.” This is an issue where players literally get tired of playing. I’ve played plenty of games that required as much as 100-hours of play, or even 1000+ hours for MMO’s, but they did an excellent job of rewarding me so that it offset fatigue. The mechanics were well-understood and so were the benefits. Failure should inform a player for their next attempt in the pursuit of an end goal they wish to achieve. If there’s no learning from failure and no tangible, well-understood goal, then players will quit.
Q3. You have worked on games across platforms. Have you noticed changes to a player’s willingness to fail based on the platform? Say console gaming vs. social media gaming?
Omar: It’s more a matter of game genre than platform, although in the case of social games they are currently one in the same. Still this is more to do with player fatigue and the driving mechanics. What is well-known is that player life-cycles are much shorter on social games than hardcore games. This is partly to do with the nature of the content and how quickly it can be consumed. Social games tend to let a player consume as rapidly as they want so long as they manage “energy” via real world purchases. Hardcore games tend to require real-time commitment as the gate to consumption.
Q4. I vividly remember “failing” hundreds of times trying to beat Mike Tyson on the Nintendo game Punch-out. What game have you failed at most often?
Omar: So a long a time ago, video games had no “saves.” You either beat the game entirely or started over. And still they were fun. Games today are not necessarily harder but the amount of content has dramatically increased, the amount of information to manage has dramatically increased and there are often several core mechanics to learn. Because of that, you need to give players a break by letting them save their progress to continue at a later date. A game called “Demon Souls” released a few years ago that went back to the “no saves” day and was remarked as one of the most difficult games ever. Personally, one series I absolutely love is Portal by Valve. There are two games in the series, Portal 1 and Portal 2. They are puzzle-based shooters that challenge players to find their way out of locked rooms controlled by a sarcastic AI called GLaDOS. I definitely “failed” a lot trying to find the solutions to each room. But I kept playing over and over until I reached the end of each game. The stories helped drive me as I discovered more of the plot lines and got to know the characters better as I solved each puzzle. Brilliant game!
Food for thought:
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