Let’s start with the bad news: most companies fail. According to the US Bureau of Labor Statistics, 70% of all companies will shut down within ten years of being founded. And it’s not just a small business thing. The stats don’t meaningful change for better-funded or higher-growth companies like venture-backed startups, where something like 75-80% of companies won’t return investor capital. The truth of any flavor of entrepreneurship is that failure is going to be a part of the job.
Oof. The “f” word. I know it’s scary. No really, I know. Not only did my first company, Quincy Apparel, fail, but after Harvard Business School wrote a case study on its demise, I became the face of failure across the most prestigious business schools, asking the leaders of tomorrow to pick apart everything I did wrong along the way.
I’ve both observed and taught the case to thousands of MBAs over the last eight years and it’s been an interesting window into the psychology of ambitious business leaders. The lightbulb moment for most students is not in the business model analysis that highlighted inconsistencies between our value proposition and our operational choices, nor in the discussion of founder dynamics and hiring mistakes along the way. No, the moment that seems to stick with students year and year is that I failed… and then I got back on my feet and showed my face without shame. That it wasn’t the end of my career or my confidence. That it was something that taught me incredible lessons that I hadn’t been able to learn via successes up to that point. And that there were things I could have done—and they could do now—to better prepare myself for future failures.
Why am I already planning for future failure? Because without risk there is no reward. And taking risks, both large and small, are a crucial part of my work as entrepreneur, as a business leader, as a professor, and as a mother. That’s right: I’m concerned not just about my own ability to react to and rebound from failure, but also how I am teaching my children to get comfortable with taking risks and pushing themselves to find the edge of possibility rather than staying put in the domains where they know they can succeed.
The good news is that there are two ways to improve your response to failure.
First, you can build two important “failure muscles”: resilience and adaptability. Resilience is the capacity to bounce back from setbacks. Put another way, it is the ability to brush yourself off, get back up, and continue making progress toward your goals given the resources you’ve already gathered. Adaptability is the skill of revising your goals or tactics to accommodate new information or a new reality. It’s the art of the pivot. Rather than assuming there is nothing they can do about their setbacks, people who have developed the capacity for adaptability see failures as temporary, local, and changeable.
And second, you can do a frank assessment of your cost of failure and identify how you can mitigate that cost in advance. I like to break down the cost of failure into three buckets:
- Financial costs—direct financial losses and indirect opportunity costs
- Social costs—damage to relationships and reputational costs
- Psychological costs—damage to self-perception, grief, and the stress of financial and social costs
Individuals with safety nets in any or all these areas will find they can mitigate and absorb these costs more easily. But while some safety nets are ingrained, others can be built. For example, if you don’t have a robust financial safety net (family money, a spouse with an income to cover both of you, a nest egg to draw on) what are ways you can create one? Could you work part- or full-time while building your company, or consult on the side, to bring in extra income and offset the financial pressures of your business? Similarly, what about the potential psychological costs? For instance, if you wrap up your entire identity in being a business owner, the “cost” of it failing will loom large over your self-perception. Are there ways you can broaden your identity beyond work, recognizing that while your company is what you do, it is not who you are?
Okay, you’re warming to the idea that you should grow familiar with failure. But how do you do it? Simple: fail in small ways on a regular basis. “The more that you can embrace all the little failures you have, and treat them as ways of improving the system, the less likely that the entire system will collapse,” says Shikhar Ghosh, my colleague in the entrepreneurship unit at Harvard Business School.
Do you know why lifting weights causes your body to build muscle? Because the stress creates tiny tears in the muscle fibers, which the body repairs to be even stronger. Pushing yourself out of your comfort zone and into the realm of potential failure is like lifting mental and emotional weights. Take advantage of your failures to build strength so that next time you can meet the moment and succeed.
The world is more volatile than ever before, with political, economic, technological, and environmental disruptions becoming ever more frequent. Becoming comfortable with failure—and preparing yourself in advance for how you will move through it—is a crucial skill to master. Do I want you to fail? Yes. At something. Maybe several things. Not all the things, obviously; overall, I want you to succeed beyond your wildest dreams. But if you don’t fail at anything, it means you aren’t pushing yourself beyond your comfort zone. You aren’t testing the limits of your abilities so you can learn and build new muscles. You aren’t taking on enough risk to earn a return that will support and sustain you through the virtually guaranteed disruptions ahead. I promise that once you have experienced a failure or two, you’ll realize it’s not nearly as life- threatening as it may seem right now. And, rather than hiding those failures, they can play a meaningful part of your story, as Quincy has mine.
Christina Wallace is a senior lecturer of entrepreneurship and marketing at Harvard Business School and the author of The Portfolio Life. A serial entrepreneur, she has built businesses in fashion, edtech, media, and professional services. Follow her on LinkedIn.
