As per US Department of Labor statistics, about 30% of the start-up businesses fail within two years and 50% within five years. The longer it takes for failure, the higher will be the product development costs that get wasted. Instead of ‘doing everything you can make it to succeed’, the angel investors and venture capitalists now demand ‘failing fast’ within the first one or two years in order to reduce the overall risk of their investment portfolio. According to Eric Ries, the author of ‘Lean Startup’, technology risk – the risk that the company cannot develop what it is intended to build- is no more an issue. Instead, market risk – the risk of users who do not really want the product – is the factor that decides the fate of a product. He promotes a series of experiments that can be done quickly and inexpensively to gauge customer reactions to new product ideas or features. These experiments can be as simple as customer interviews at a local shopping mall or demonstrating a Minimum Viable Product (MVP) to customers.
Companies can save many millions of dollars by adopting a ‘failing fast’ strategy for a brand new product or a new product feature much before it gets to the production stage. For software product development, Agile methodology supports the implementation of failing fast strategy. The cross-functional and self-organizing teams can develop the most valued features of a product at small increments and test it immediately with customers. The feedback received can be utilized to make improvements to the product or the product idea itself can be abandoned without incurring any additional cost.
The travel retailer lastminute.com took this strategy to a new level by moving their development team to the lobby of Cumberland Hotel in London. It allowed the team to show prototypes to travelers directly and getting feedback on risky or raw product concepts (Computer Weekly, 2013). According to Bill Beckler, director of innovation at lastminute.com, their goal is to fail fast rather than letting bad ideas occupy the team’s product backlog. This approach enabled them to demonstrate many ideas directly to the customers and then make additional investment decisions only if that idea created or added value to customers. At Microsoft it used to take a longer time for a defect fix to reach customers due to its extensive development and testing cycles. After realizing that failure is cheap, most new products like Azure and Office 365 have monthly release cycles that incorporates changes demanded by customers. This makes sense for every product development especially considering the faster pace at which technology and consumer tastes change.
For an organization, failing fast strategy should enable it to create a company culture based on iterations and continuous improvement. High risk taking and the associated success or failure should be equally rewarded to create an entrepreneurial and friendly environment. This will promote innovation, improve time to market, and reduce development costs. It will only be a failure if organizations fail to learn from its failures.