September 3, 2020

The upside of failure - Alberta Innovates

Illustration of a man leaping over obstacles towards a computer
Illustration by Scott Carmichael

Story by Scott Lilwall

In the start-up community, people love to show off their successes. Press releases about new injections of funding. Social media posts with smiling employees posing in front of new facilities. Reports packed with superlatives like “thriving” and “flourishing.”

It’s not a mystery why people are so focused on success. It’s exciting and inspirational when a new idea finds fertile ground and grows into something beautiful.

It’s also rare. In the innovation space, a lot of ideas — even great ideas — will crash and burn. Sometimes it’s a misjudgement. Sometimes it’s a change in trends and markets. And sometimes, it’s just plain bad luck.

But for many, it is something to avoid at all costs. No one wants to be at the helm when the ship runs aground.

However, many in Alberta’s innovation community argue that we don’t need to fear failure. If anything, we need more of it in the province. And we need to be sure to fail successfully.

“If you’re not failing, it often means you’re not trying,” says Laura Kilcrease, CEO of Alberta Innovates.

Kilcrease has long been a believer in the importance of failure when it comes to innovation. She says it might sound counterproductive at first, in a space where so much rests on success. But Kilcrease believes that occasionally falling short is a vital ingredient when it comes to finding greater success. And that Alberta’s innovation community needs to be willing to take risks to reap the rewards.

“If we don’t have any failure, it means we’re not pushing the boundaries of innovation enough.”

Failing fast

It’s hard to pin down exactly how many start-ups fail. Numbers from Industry Canada suggest that only half of all new businesses in the country survive past their fifth year. The Startup Genome, which researches innovation economies, estimates that for startups specifically, only one out of every 12 companies worldwide eventually succeed.

Entrepreneurs and innovators are well aware of the risk. And they argue that not all failures are equal.

Talk to anyone in the innovation community about the topic, and you’ll hear the phrase “fail fast” almost immediately. For many, it is one of the keys elements to a “good” failure, where ideas are tested quickly and, if need be, tossed out before they suck up a lot of time and resources. Like the entrepreneurial equivalent of getting a cavity filled. Expensive and sometimes painful. But it sure beats a root canal.

“The faster you can learn that what you’re working on is or isn’t the right option, the better,” says Jessica Doody, Lead Program Manager at Startup Edmonton.

Doody manages the organization’s Preflight workshops, which aim to help entrepreneurs in the early stages of their business. She’s seen firsthand what can happen when founders aren’t willing to expose their idea to the risk of failure early.

“I see a lot of them in the early phases, where they’ve been working on their idea in secret. They’re waiting to launch this big, perfect project that has never seen a customer and they haven’t told anyone about it, she says. “And then it goes nowhere because no customer wants it.”

Doody urges the founders that she works with to get their ideas out into the light as soon as possible. That way, they can see if their product is worthwhile before they put a lot of time and money into it. And, if something isn’t working, they can pivot — or abandon it completely for a new idea.

“We can get them in the mindset of testing and learning from customers and failing and adjusting. and then testing and failing and learning from customers.

That makes for a much better company. Or sometimes, a new company.”

Failing frequently

“‘Fail fast’ is something I heard from pretty much everyone I talked to,” says Chris Henderson, chief strategist and partner at Y Station.

In 2019, Henderson authored a report, commissioned by the Edmonton Economic Development Corporation, to collect feedback from the city’s innovation community. Through a series of surveys, Henderson compiled the opinions and thoughts of founders and entrepreneurs.

“It was designed to be a mirror,” he says. “We were trying to reach out to people who feel disenfranchised, those who didn’t feel they were being heard.”

Henderson’s YEG Compass report collected a little over a dozen recommendations from the innovation community. Number seven called on the city to “foster an environment where companies can launch easily and fail fast.”

He says when he talked to people in the community, many expressed a feeling that some of the organizations that support startups in the city “weren’t being straight” with some of the founders when it came to an honest assessment of their ideas. Which could lead to an unsustainable plan being dragged on far too long. It was a waste of time, money and emotional energy.

“The problem is that people spend two years of their late 20s working on an idea, when someone who knew better should have said, ‘this idea is no good.’”

Being willing to kill a weak idea doesn’t just help the individual entrepreneurs – it also makes for a stronger innovation ecosystem as a whole. Big local success stories might bring in a lot of attention and interest. But cities need a certain amount of momentum in their startup community. Even if smaller companies never become sustainable, it can provide support for other projects that may go on to be major successes.

“That’s a great sales pitch for an innovation region. You could live in a city … where you can try something out, try your damn best…and then your thing fails.

And if you’re a software engineer and your business fails, you know you’ll be okay because there’s another opportunity across the street,” Henderson says.

That vibrancy creates a pool of talented workers who can move on to create more companies or join others who are looking to expand. Henderson points to Alberta companies like Jobber, who have relied on that base of talent when it came time to grow.

“If you want to keep a big Edmonton office, like Jobber has done, you need those software engineers here.”

In the year since the report was released, Henderson says he’s seen things shifting in a fail-fast direction, with new approaches and organizations that are more willing to embrace missteps and kill off bad ideas. Still, he says a lot more has to be done to encourage that vibrancy that will lift up the entire ecosystem.

“If you get more companies and opportunities, you’re going to have more failures. That’s just the math. More [companies] means more competition, and competition breeds failure,” he says.

“I’m not sure Edmonton is there, yet. I’m not sure Alberta is there, to be honest.”

Failing smart

It’s one thing to say that failure should be embraced. But it’s another thing entirely to actually do that. Nobody likes to admit defeat. So how do we make sure that when something does fall apart, it does so in a useful way?

How do we fail successfully?

For Doody, it’s about the willingness to learn. She goes as far as to avoid the word “failure.” Instead, she prefers to describe it in terms of discovery.

“It’s never the end of the story, it’s all about ‘what did you discover?”

In her experience, the thing that separates a useful failure from a run-of-the-mill defeat is the openness to learn from the experience and change one’s assumptions. She points to one of the entrepreneurs she worked with as an example: a student founder who was working on an online platform to help people plan parties.

She thought her idea was a solid one — until she took the time to stand outside a party store and ask her potential customers about her idea. Soon, she found out that people didn’t find party planning that cumbersome and her idea probably wouldn’t attract much attention.

But, she did find something else out. People, she learned, hate buying all kinds of party decor just to throw it out when the celebrations are over. This gave her the idea for a business focused on reusing and reselling party supplies, cutting down on waste.

“If she hadn’t listened and hadn’t gone out to hear people say, ‘well, the planning isn’t hard, this is the annoying part,’ she wouldn’t have known that is what people were wanting. Now she has a better idea for it,” Doody says 

That willingness to pivot doesn’t always come easy, especially for those who have invested a lot of their time into their idea. It’s one of the values that Doody and others at Startup Edmonton are trying to impart as part of Propel, a new program with funding from Alberta Innovates that’s aimed at innovators who are past the initial idea phase and are working on solidifying their business plan. She says it’s a critical time for founders, where learning to pivot and learn from mistakes could be the difference between survival and collapse. The first cohort of the Propel program took place in early 2020, with a second planned for the fall. Doody says that embracing failure and being ready to pivot was one of the key lessons the participants took away. 

That principle is just as valuable for a small party supply company as it is for a multi-million-dollar project. Kilcrease describes a geothermal project that Alberta Innovates was involved within Hinton. They looked into the feasibility of tapping into the natural heat deposits under the town for use in the town. Early indications were that the spot was ideal for the wells. But it soon became apparent that geological anomalies in the area would make the project much more difficult than first anticipated.

“The studies showed that we probably should stop at that point, because of these unique geological features that we didn’t know [existed.] But it hasn’t stopped us in the whole issue of geothermal.

We’ve gone and funded other geothermal projects in other areas. And now we know that these anomalies are something we need to look for first. Now we have that answer and can avoid the same problem in the future.”

That, Kilcrease argues, is the seed at the heart of every good failure — the lessons that one takes away from it.

“Failure is the path to success. If we can learn from it, we can actually do lots of good,” she says

It can be a fast forward learning tool, so we don’t waste a lot of time.”