Monday, July 25, 2011

Help wanted: if you find a great mistake story, send it to us!

Thanks to all who read this space. If you like what you read here, I'd like to challenge you to help us make the site better by adding more stories. When you come across a great mistake story (funny, informative, with a great lesson, intriguing) - that's not full of schadenfreude, please let us know.

Email us a link at mistakebank (at) caddellinsightgroup (dot) com, and I'll do my best to get it on the site.

I'd like to also send a grazie mille to our Italian readership. I'd love to feature some stories from Italy. Please send them to us!

Thanks for your readership, and I look forward to reading some great stories.

regards, John

Wednesday, July 20, 2011

Invest in the people, not the idea

This story is from Steve Blank's terrific blog:

Before we closed [E.piphany's] Series A..., I had called on Mohr, Davidow Ventures, the firm which had funded my last company, Rocket Science. The senior partner at the time was Bill Davidow, a marketing legend and a hero of mine who had also funded other Enterprise software companies. I went in and pitched Bill the idea about how to automate the marketing domain. He gave me 15 minutes, then as politely as he could do it, walked me out the door and said, “Stupidest idea I ever heard, Steve. Enterprise software means across the Enterprise. Marketing is just one very small department.” As he was walking me out, I remember as I physically crossed the threshold of the door that: A. He was right, and B. I figured out how to solve the problem of making our product useful across the entire enterprise. So E.piphany went from a bad idea to a good idea by being thrown out by a VC who gave me advice that made the company. He has reminded me since, “Sometimes you invest in the idea, but you should always be investing in the people. If I would’ve remembered who you were, I would’ve known you would figure it out.”

"Investing in the people": echoes here of Fred Wilson's story on AirBnB. Also, Davidow's book "Marketing High Technology" is still as relevant as when I first read it as an MBA student in 1990.

Tuesday, July 19, 2011

Royal Little: a "simple lesson" about expanding capacity

Another story from Textron founder Royal Little (1896-1989), author of "How to Lose $100,000,000 and Other Valuable Advice." In spite of his wealth of mistake stories, Little was one of the most successful US businessmen of the mid-1900s.

Here he discussed some of his struggles with his company Atlantic Rayon Corporation in the aftermath of the Great Depression.

Atlantic Rayon Corporation, 1940

With all our expansion of dyeing and throwing capacity and optimism and enthusiasm for the future, what happened in 1940: Sales were approximately $7,500,000 and we lost $19,000. What a business! Here we had struggled successfully for many years without a loss through 1937 and then in 1938 and 1940 after all our expansion and optimism we lost money. It certainly looked as though there must be some better way of making a return on stockholders' equity than in the yarn processing business. That year's report stated:

The greatest contributing factor to the company's unsatisfactory results for the year was the low level of prices for throwing during its last nine months. Processing charges which the company obtained during and after the second quarter averaged 36% below those for similar services in the first quarter.

Since we had increased our plant capacity to service the New England textile companies' thrown yarn requirements, we made the false assumption that prices for the services would hold up even though increased capacity meant that we had to take business away from competitors, and we foolishly assumed that this extra competition would not create price cutting. Obviously, if one wants to expand one's position in an industry it is far safer to buy a competitor's business and not increase overall capacity. It took me many years to learn that simple lesson. At the end of December 1940, after eighteen years in business, we had built up the net worth of the company to only $1,765,000. No wonder we were getting discouraged.

Monday, July 18, 2011

Teacher Diana Laufenberg - "Telling kids to never be wrong doesn't allow them to learn"

Another great TED talk on learning from mistakes. Diana Laufenberg, an educator, points out that school was once a place to go to get information, but now that information is available anywhere via the internet, schools need a new mission. She votes for experiential learning - seeing for oneself, drawing one's own conclusions and learning by dialoguing with others about their different conclusions.

And she states that such an educational mission is at odds with the culture of A+/100% standards and multiple choice testing. (If you don't believe her, scrutinize an elementary student's reading comprehension assignments and the so-called "right" answers that are expected.)

Friday, July 15, 2011

Economist Tim Harford challenges us to be vulnerable and "make good mistakes"

In this TED talk, Harford talks about complex systems and that their common characteristic: they progress through trial and error. One example is the US economic system. Harford's observation: "10% of US businesses disappear every year." Therefore, the system is being renewed, constantly, by new businesses springing up, others adjusting and advancing and some going away.

In other words, having something turn out differently from your expectations may be a failure or mistake but not a disaster. It likely is a piece of information that you can use in your next attempt.

Echoes here of Edison, possibly the greatest trial-and-errorist in the modern age ("a negative result is as useful to me as a positive result").

Harford encourages us to be open and patient with trying and failing. He has great observations on things like educators' insisting there are "correct" answers to every question posed and politicians' confidence that their plan will "fix" an economy.

Another quote: "Is is much easier to lay down the law.... Uncertainty, fallibility, being challenged may hurt.... 'It is very difficult to make good mistakes.'"

Watch it:

Wednesday, July 13, 2011

Tuesday, July 12, 2011

NYU Researchers explore learning from success and failure

In a paper published in draft form in January 2011 ("Reaching and Falling: Why Failure in Exploration differs from Failure in Exploitation"), NYU Stern School professors JP Eggers and Jung-Hyun Suh studied learning from success and failure in a new-product development context. They compared learning in exploration (longer-term, more speculative) vs. exploitation (shorter-term, iterative improvement-based development) among mutual-fund firms over a 40-year period.

By using this frame of reference, Eggers and Suh discovered some fascinating results. Firstly, failure in exploratory new-product development had negative implications--but only for what the authors termed "near-miss" failures. Little or nothing was learned from more profound failures.

The authors generated a different but related conclusion from studying product development via exploitation. In this case, near-miss failures correlated with significant positive learning. More significant failures had negative learning. This result makes sense, as exploitation changes are more small-scale, a step forward that, if wrong, can easily be redone. This "probe-sense-respond" model is frequently used to move tech products from version 1.0 to 3.0, such as Microsoft Windows. And, of course, disastrous exploitative changes (Windows Vista, anyone?) tend to send those responsible scurrying into holes to hide.

Here's how Eggers and Suh summarize some of what they learned about learning from failure:

We suggest that positive organizational learning will result from both failures in exploitative activities (which are more pressing for the organization and must be dealt with) and successes in exploratory activities (which bring important new knowledge to the firm that the organization is more likely to encode and utilize). Meanwhile, significantly less learning will result from successes in exploitative activities (which may be viewed as validating the efficacy of existing processes and thus making additional learning unnecessary) and failures in exploratory activities (which may possess little information that can be assimilated and may be met with retreat from risky opportunities).

Here is James March's seminal paper, "Exploration and Exploitation in Organizational Learning," which provided the framework Eggers and Suh utilized.

Monday, July 11, 2011

Charlie Crystle audio story - on evaluating and dealing with hiring mistakes

This story is from Charlie Crystle, who founded Chilisoft, a web infrastructure provider which in 1999 was sold to Cobalt Networks for $70 million. He and two partners later started Mission Research, which offers low-cost business software to support nonprofits.

His new venture is, a social search site. You can sign up for the private beta of Jawaya here. He has founded a group of tech CEOs, Startup Lancaster, that meets occasionally to socialize and discuss interests and experiences in the startup world.

Charlie describes the effects on a startup of hiring "mediocre performers," and how it can take time, and teach fortitude, for CEOs to realize and deal with the issues. There's a sort of companion post to this one, Flip Video's Jonathan Kaplan on his unique approach of dealing with hiring mistakes at startups.

Charlie Crystle - making and dealing with hiring mistakes (MP3 - 3:43)


This isn't new news, but if you have a mediocre performer, you can give him a second chance, but if you keep giving second chances, it starts to drag on the company, drag on the excellent performers. When you remove that person, if you fire them or move them into some better career for themselves, the excellent people fill in the gap. They start performing better because they're not dragged down by the mediocre performer. They have fewer communications to manage, deal with. They see a problem, they take initiative and solve it. The mediocre performer won't do that - it would end up taking other people's time. And not executing very well.

It was a lesson learned but it wasn't a lesson applied, consistently, at Mission Research. I built that with my cofounders and we had a good initial core team. And I was 50/50 on hiring. It was really hit or miss. We weren't very methodical about it. We hired people that we liked. And we didn't take our time with it. We wanted to hire people who were generalists and were good people and liked the mission. There was a gap between that and the performance. The performance was tolerated. I tolerated it for a long time. And that really slowed us down, dragged us down. Because we were spending resources on people that ended up slowing down the excellent people.

It was hit or miss. At some point I developed the fortitude, and figured it out, and pushed by my own mediocrity at times to step up and be excellent. It's hard, when you're building a company, to make those decisions. Sometimes, you gotta recognize you yourself are performing poorly, and hurting the company.

Friday, July 8, 2011

Edison's failed "electric pen" finds a new life

This story is from Randall Stross' biography of Thomas Edison, "The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World":

Using his experience developing the machinery to perforate the paper tapes used for transmitting messages automatically, he came up with a handheld, battery-powered electric pen. This was Edison's first significant venture outside of the telegraphic field and would be the direct antecedent to the mimeograph machine: The pen had a sharp needle that moved up and down rapidly, creating a stencil master that could be used to run off hundreds of copies. Edison was sanguine about its commercial prospects. "There is more money in this than telegraphy," he wrote a colleague in September 1875....

The isolation of the [new] Menlo Park setting infused the laboratory with a feeling of unbounded creative freedom. It encouraged an outlook that saw far, which also meant that little interest could be mustered for fixing problems with older products like the electric pen. Royalty checks for the pen were not adding up as Edison had expected because it had been sent into the field without anyone at the laboratory noticing that it was rather difficult to hold and use. It was likened by one unhappy customer to holding "'the business end' of a wasp on a sheet of paper and letting the insect sting holes into the sheet while you move him back and forth." A sales manager reporting to Edison tried to strike an impossible balance of optimism and realism: "The thing is highly praised everywhere but it will be harder to sell than you anticipate." The fault, Edison was told by another manager, was with the customers' "prejudice and stupidity." (The pen would enjoy a second life years later, in the 1890's, when converted into the first electric tattoo needle.) p20-22.

Thursday, July 7, 2011

Gillian Welch's CD cover artwork - overcoming a mistake

This video follows musicians Gillian Welch and David Rawlings and their collaborators as they work to create a distinctive cover for Gillian's record "The Harrow & The Harvest." The entire thing is fascinating, but in particular there is a real-time mistake story that happens starting at 3:20. It's amazing to watch the emotions and reactions of the people involved, how they deal with each other, then decide how to move on. It's emblematic of the handmade process that was involved with the music and the artwork in general.

As Gillian says later in the video, "It's not perfect without the anomalies."

Wednesday, July 6, 2011

Pentagon uses mistake stories to teach ethical behavior

The Pentagon's Encylopedia of Ethical Failure is one of the inspirations for this site. I first read about it in this Wall Street Journal piece from 2007.

Here are a couple of stories from the book:

Failure to Report Gifts From Abramoff Gets DOI Official Two-Years of Probation.

A former Department of the Interior Officer who accepted Washington Redskins tickets, which cost over $2,000, as well as other gifts from lobbyist Jack Abramoff, was sentenced to two years of probation, and to pay a $1,000 fine. Abramoff was seeking official action from the officer when he gave the officer the gifts. The officer failed to disclose these gifts on the required financial disclosure report (Form 450), and after being investigated in connection with the Abramoff scandal, he pled guilty to making a false certificate or writing. Public officials who are required to file a Form 450 must disclose gifts that exceed a minimum value. Bottom line: if public officials keep secrets about the gifts they receive from sources like lobbyists, they will receive a gift from the federal government that they cannot keep secret—probation.

Government Parking

The Inspector General received a report that an officer had been using a Government vehicle parking pass to park his personal vehicle while he was at work. The report indicated that on several occasions other employees were forced to pay for parking a Government vehicle because the officer’s personal vehicle was using the parking pass. The subsequent investigation revealed that the officer had been using the pass for parking his personal vehicle, and that his superior officers had not been informed or given him permission to do so. Although the officer advised that he only used the pass when going to work, and did not use it when he believed a Government vehicle would need it, he received a letter of counseling.

According to the WSJ, the book's originator Stephen Epstein, at the time a Pentagon attorney,

was inspired to create the Encyclopedia by a Navy magazine that used humor to discuss aviation mishaps. He recalls an account of a fighter pilot who took off, only to realize that his plane's wings were still folded. "These were stories that got your attention and had a strong message, a parable," he says.

The Encyclopedia's users are sold on the concept that stories can educate better than rules:
Patrick Carney, assistant general counsel for ethics at the Federal Communications Commission, draws on the Encyclopedia for training and encourages his staff to read the document online because the "bite-size examples are more entertaining than reading the statutes" themselves, he says. In quarterly internal FCC "Ethicsgram" newsletters, Mr. Carney includes items from the Encyclopedia. "Everyone around town is looking for ways to get the word out on ethics, and Steve's material is often used," he says.
Mr. Epstein provides a good example to others trying to convey increasingly complex ethical principles to their employees. Rulesbooks are either far too detailed or too sketchy to provide guidance.

Mistake stories, on the other hand, are better at helping us avoid ethical Scyllas and Charibdises. The entries in the Encyclopedia are extreme and funny, and so are engaging. But meanwhile, they get people thinking about these ethical areas and are effective in helping them modulate their own behavior.

You can download the Encyclopedia (it's a Word Document) from this link.

Tuesday, July 5, 2011

Thomas Edison quote of the day

"Negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t."

via Goodreads.

More on Edison's life here.

[Photo: part of Edison's lab complex in West Orange, NJ]

Friday, July 1, 2011

From FastCo Design: Only Certain Failures Help You Innovate

This is a neat post from FastCo Design, written by Jamer Hunt, organizing types of failures and which are productive or not productive ("Among Six Types of Failures, Only a Few Help You Innovate"). Here are his types; he organizes them from most severe to least:

  • Abject Failure (aka a disaster)
  • Structural Failure (requires significant rework and recovery)
  • Glorious Failure (not completely sure what this is; he references the Jamaican bobsled team; I might call it a trivial failure. Something blows up, but no one is hurt and little damage done)
  • Common Failure ("what the apology was invented for")
  • Version Failure (something that doesn't work great but is the basis for improvement, such as Microsoft anything 1.0)
  • Predicted Failure (the result of experimentation and prototyping)

Of these, only the last two are helpful for innovation in Hunt's view.

There's a lot to think about here. As Hunt writes, "we may now be able to recognize that there are valuable kinds of failure that are essential to innovation processes (version and predicted), while acknowledging that there are other types of failures that do little good."

I think what Hunt has done is very useful as a starting point for dialogue. The Mistake Bank is set up to share failures and learn from them. The diversity of stories and viewpoints here shows that there are many ways to view failures - and that many more types are productive than may be seen at first glance. We need to leave room for "the Happy Accident."