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From the ashes of failure grow the roses of success

Sun, 30th Apr 2006

WHAT SHOULD we think of failure? Personally, disappointment in the case of fired chief executives walking off with golden goodbyes, possibly rage or in the face of such unequivocal evidence of life's manifest unfairness, perhaps more rational would be to join them and take the suckers for as much as you can.

In City Slackers (published by Cyan), Steve McKevitt charges that in today's business the best route to success is failure: 85 per cent of grocery launches flop in the first year so do a similar proportion of new magazines, music releases and infant companies. In these circumstances, he says, the best way to the top is not to do something but to brand it, puff it or write it up. Hence the massive growth in marketing, public relations and media, self-serving sectors that connive with each other to part the client from the maximum amount of money with minimum accountability.

Slackers, he says (I interpret), are the apparatchiks who have learned that it is more profitable to manage the image than the substance. 'There's never been a better time to fail. The mediocre have inherited the [business] earth.'

It is true that companies contain huge amounts of waste and the vast sums (pounds 2.5bn on PR in the UK alone) that companies spend to persuade people to buy stuff they don't want suggests there's something seriously wrong. Shouldn't they be making what people want to buy?

Unfortunately, McKevitt doesn't throw much light on this specific kind of failure. Marketers are addicted to fancy presentations and Powerpoint. Well, blow me! Lots of PR is a waste of time, and some journalists are fond of freebies? Wow! Ironically, he fails to realise more generally how fascinating failure is as a subject. If it's any consolation, far from being a today phenomenon, failure is ubiquitous and constant.

In his brilliant Why Most Things Fail (Faber), economist Paul Ormerod notes that failure is 'probably the most fundamental feature of both biological and human social and economic systems'. Of all biological species the world has known, 99.99 per cent are extinct. Ten per cent of all US companies fail every year. Notwithstanding huge quantities of computer- and brain-power, not to mention taxpayers' cash, most government policies fail, even the most basic ones: poverty isn't history, social mobility is falling, happiness is not increasing. There is an 'Iron Law of Failure', concludes Ormerod, 'which is very hard to break'. Nor is this surprising. Even with a simple product, business is a complex process. There are just too many interconnections and interrelations for planning to have even a small chance of success. Big bets have unintended consequences that feed back into the system until it becomes too complicated to fix.

The solution is to recognise failure for what it is: essential to success. Success can only be defined against non-success - failure. A world without failure exists only in the general equilibrium equations of conventional economics. Everywhere else, success emerges from what economist John Kay calls 'disciplined pluralism' - the programme of competitive experiment, failure and fresh experiment that drives an innovative economy.

Failure is as much part of innovation as success. Successful small advances become failures as they are leapfrogged by rivals. Feedback loops often work within an industry even as they fail in a company: Kay shows how today's PC industry has been built on a mound of initiatives - remember Sinclair, Osborne, VisiCalc, the BBC Micro, IBM's OS2? - that are now defunct. 'Most initiatives which were crucial to the development of the industry were ultimately unsuccessful,' he says. If success is the plant, failure - cynical, hopeless, or just unlucky as it may be - is the essential compost from which it springs.

The excitable Tom Peters once declared: 'It's not enough to fail. You must fail often and you must fail BIG!' Of course, the caveat is that failure only works its magic if you learn from it. To borrow another of Kay's examples, GE is successful not ( pace the press) because of the genius of its chief executives but because it allows challenge, argument and experiment. Small experiments fail, but they allow adjustment without betting the company.

Evidently, there are slackers everywhere who for their own ends deny the lessons. But blaming people who are set up to fail by the system they work in is equally culpable, and far more common. While failure that is learnt from is, paradoxically, a source of advantage, failure that is swept under the table makes more failure inevitable.

Ultimately failure will take care of City slackers (and overpaid CEOs and authors), just as it has taken care of slide-rule manufacturers and roughly 1,980 of the 2,000 automobile manufacturers that existed in 1919 - the more successful slackers are in extracting revenues from their clients, the more likely the latter will fail. 'Evolution is cleverer than you are', Francis Crick, co-discoverer of DNA, used to say. Out of today's failure grows tomorrow's (temporary) success. Welcome to the compost heap.

The Observer, 30 Aprtil 2006


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