The word “fail” is quite provocative, as RCS CEO Regan Adams says. It’s not, as we go about making our businesses, a useful word. But the notion of failure is a real threat hanging over all of us, and in a LevelUp panel discussion, this is what we asked: in our work, if we find ourself going down a path we’re not confident in, how do we recognise when to stick with it, or when to do a re-set? And how do we extract maximum learning both from the paths we’ve stayed on, and those we’ve stepped off?
In a provocative, thoughtful conversation, Regan was joined by founder of The Open Letter, Renier Kriel, and LevelUp’s own Paul Nel, who facilitated the conversation.
It’s important for startups to be agile, and to learn lessons quickly, Renier pointed out – startups don’t have the luxury of a leisurely exploration of things that don’t feel right. On the other hand, there’s less to lose: when your time and financial investment and profile are still quite low, the price you pay for “failure” is often limited to disappointment.
“Failures”, the panel suggested, could in this case be reframed as “experiments”, and treated as essential building blocks towards achieving ultimate ambitions. Regan shared an example of this: when RCS acquired the business of a particular fashion retailer from the bank which had previously held it, it did so in order to have a case study of how such a business might perform as part of its portfolio. The cash outflow was painful but – you don’t know what you don’t know; sometimes you have to do things simply to find things out.
And early-stage experiments allow you develop an understanding about, for instance, the underlying economics of your business. “We ran a Facebook campaign that was very successful in terms of sign-ups,” Renier told the room – “effectively we paid R2,50 per sign up. But when we did the analytics, it transpired that very few of the people who had responded to that ‘successful’ campaign actually opened the newsletter – so it was closer to R25 per acquisition. We didn’t need to measure sign-ups; we needed to measure readers. You have to understand what you’re measuring.”
“Also, if you can’t measure it,” interjected Paul, “don’t waste your time focusing on it.”
The panel also spoke about the often paralysing dimension of risk. Risk is inevitable, but“we need to learn a stoic approach,” the panel said, when we are confronted with a hard decision about an idea that’s not looking good. “If we do nothing, the thing dies. If we do something, it might die anyway, but we’ve not lost anything because it was already on its way to dying.
“The problem is not failing. The problem is indecision and not doing what is necessary to make the change.”
It’s useful to remember that in business, risk and money are interchangeable. If you can take risk off people, they will pay you for it. That’s the central principle of the insurance sector, for instance. So in your own business, learning not to fear but to work with risk, is equivalent to generating a kind of currency. Befriending risk is about continually asking questions about your offering, your customers, your distribution channel; and about what you can deliver, understanding that to some extent you are working within the ambit of the unknown. “How do you explore without betting the farm?”
Other principles shared by the panel:
- Be slow to promise, and quick to deliver.
- There is nothing new under the sun. Build on what has gone before. “Most things are a derivation of something else, in other parts of the world,” said Regan; for instance something launched in UK that isn’t here yet. Look for other models in the world, and then localise.
- Read stories, understand what others are doing. “I got inspired by The Hustle,” said Renier. “Some of the best ideas in the world are in research labs while people work out how to sell them.”
- The business world is not everything. “You can always manage the consequences of decisions you make under duress,” said Paul, “but looking at yourself in the mirror is also important to making the right call for where you are.”
- Be in touch with who you are serving. Don’t design around a smartphone, for instance, if your audience has a percentage of feature phones. Take a lesson from Capitec, which put up branches within close walking distance of every taxi rank. Don’t be like DSTV, which years down the line is still struggling for a response to how the streaming channels have disrupted their distribution channels. Understand your customer, and understand your distribution network. “This is the challenge we face,” said Regan: “you can be quite successful, and become dependent on that success, but if the customer changes, you have to wean yourself off a level of profitability and be willing to reinvent.”
THE MOST IMPORTANT WORK
In question time, a member of the audience asked the essential question for all business: what’s the most important work to do every day? The three answers from our three panelists should serve as a checklist for all enterprises, big and small:
UNDERSTAND UNIT ECONOMICS, said Renier. How much did it cost you to acquire a customer? What’s their estimated lifetime value and their estimated value? If those sums don’t work out (once you’ve included servicing costs), you either have to decrease the costs or increase the lifetime value/value. “The main reason entrepreneurs can’t raise funding, is that they cannot share those equations. Of course there’s risk and there’s disruption, but if the sums look good it’s an investable business. So work on getting those numbers looking better.”
UNDERSTAND WHAT PROBLEM YOU’RE SETTING OUT TO SOLVE, said Regan. Oftentimes, we find people are selling solutions for problems that don’t exist. “What is the problem that you’re trying to solve, and how do you express this simply? Many people don’t know how they’re going to make money on something. You need to understand this – that’s how you know you have a business and not just vapourware.”
SPEND TIME IN THE BUSINESS, in operations, even with competitors, said Paul. “Do you understand your customers’ circumstances and how they live? That radically changes how you think about the complexity of what the customer is trying to juggle.”