Fail Better

"Ever tried. Ever failed. No Matter. Try again. Fail again. Fail better."

—SAMUEL BECKETT

Michael Soenen (’89) was one of the countless entrepreneurs who tried to catch the dot-com wave of the late 1990s.

His company, Consolidated Commerce, offered a cloud-based software application that could connect corporate buyers with their suppliers around the world, streamlining the supply chain. It was, he recalled with pride, an “amazing product.” But its potential clients—big multinational manufacturers—weren’t ready for it.

“They loved the product, couldn’t argue that they didn’t need it, but it was so disruptive of their existing business model that they couldn’t swallow it at the time,” Soenen said ruefully. The business failed. But Soenen didn’t give up.

In 2004, he founded ClearTrial, a software company that uses cloud-computing—which allows clients to access software over the Internet rather than having to install it on their own computers—to help pharmaceutical companies run clinical trials more efficiently. This time, he took a different approach to building a clientele.

Instead of going after the biggest players, as he did with Consolidated Commerce, he began by pitching ClearTrial to mid-market pharmaceutical companies. He knew from painful experience that industry-leading companies could be timid, more interested in keeping up with trends than transforming their business models. The mid-market players, he figured, would be more willing to gamble on a new technology that could transform the way they conducted drug trials.

He was right. After signing up an impressive list of mid-market customers, ClearTrial had attracted eight of the top 20 pharmaceutical corporations by 2008 and in 2011 was named one of the top five “Cool Vendors in Life Sciences” by an IT research and advisory company, Gartner Group. This past March, he sold the company to Oracle’s Health Sciences division. Terms of the deal were confidential. Oracle recently purchased two companies for $3.4 billion and $1.4 billion. Soenen said, “Ours was not that large.”

Soenen also said, “I can draw a direct line from what I did wrong at Consolidated Commerce to the success at ClearTrial.”

That’s a common refrain from successful business people, especially entrepreneurs. More than “If at first you don’t succeed, try, try again,” the lesson is learn from your mistakes. The knowledge can be priceless.

Confronting the ‘F’ Word

The notion of being schooled by setbacks figures prominently in a slew of recent books with titles like Celebrating Failure and Better by Mistake. The Harvard Business Review devoted an entire recent
issue to failure. The editors noted that while many companies pay lip service to learning from mistakes, “in real life—and in real companies—failure is anathema.”

“We’re afraid of it. We avoid it. We penalize it,” wrote the editors. “It’s time for managers to get past platitudes and confront the F-word taboo.”

In Adapt: Why Success Always Starts with Failure, Financial Times columnist Tim Harford offers a recipe for “successfully adapting” to failure being a fact of life by following three rules: Try new things in the expectation that some will fail. Make failure survivable, because it will be common. And make sure you realize when you’ve failed.

In recent interviews, Notre Dame faculty and alumni volunteered stories of how they learned and adapted from failures.

The case of Meridian Systems, a project-management software company co-founded in 1994 by John Bodrozic (’89), demonstrates both the challenges and rewards of bold experimentation. In the early 2000s, Meridian launched ProjectTalk, a cloud-based program for managing commercial construction. Meridian had never before relied on cloud computing, which was then known as Software as a Service (SaaS), and the first six months were disastrous, Bodrozic said.

There were service outages, which meant customers couldn’t access their data. Customers received inaccurate bills. The Meridian help desk was overwhelmed by calls. Wait times skyrocketed. The way the cloud-based software program was marketed confused customers about the differences between it and Meridian’s more traditional programs.

Rather than pulling the plug, Meridian doubled down by reorganizing departments, hiring employees with SaaS expertise, and creating teams dedicated to meeting each goal, Bodrozic said. The turnaround worked: Today, ProjectTalk is popular with customers and profitable.

And the crash course in cloud computing gave Bodrozic a leg up in his 2012 startup HomeZada.com, which uses cloud-based software to help homeowners manage their home inventory, home-maintenance schedules, and home-improvement projects. Within just a few months, thousands of customers had signed up, and Bodrozic said he has plans for a major business expansion.

Descendant of Harry Potter

Emerson Spartz (MGT ’09), founder and CEO of Spartz Media, launched his first website, a Harry Potter fan site called MuggleNet, in 1999. He was 12. Today, his company launches a website approximately once a month. But the sites haven’t all been as successful as MuggleNet, which claims to be the Web’s No. 1 Harry Potter site.

Spartz said his worst mistake came in 2010 when he created a site called Flirtlocker that allowed high school students to flirt anonymously online. The site quickly became popular, but also attracted a small number of users who posted abusive comments. Spartz and his small team couldn’t monitor all the comments for signs of bullying. So they decided to pull the plug, believing too much was at stake for the victims of the comments.

“We bit off more than we could chew,” he admitted. 

 When the entrepreneur recently launched another website aimed at high school students, High School Memes, he made sure he had a much larger staff to monitor comments, and he created filters to make sure the comments stayed clean.

Admitting failure may be the hardest part of adapting to it, author Harford says in his book Adapt. People are naturally reluctant to admit that they’re wrong. Instead of acknowledging defeat and moving on, we often plow blindly ahead with our first, flawed idea. We also have trouble accepting criticism from others, which Harford argues is essential to gaining an objective perspective.

Bob Kill (’59), who recently retired as chair and part-owner of Hacienda Mexican Restaurants in South Bend, Ind., learned that skill the hard way.

In the late 1980s, he and a partner purchased an egg-products company called Schneider Brothers. One of their first decisions was to move into a much larger facility. Unfortunately, they soon realized that their new main production line was poorly engineered and would never meet minimum profit and productivity levels. The business was hemorrhaging cash. To fix the engineering, they needed capital, but their private-equity backers balked at putting up any more money. Cash quickly ran out and Kill was forced to sell Schneider Brothers to a liquidation company.

The experience left him understandably bitter.

“I dealt with it poorly and blamed the private-equity backers for everything that went wrong,” Kill said. “But in an epiphany of sorts, I realized that I was the problem.”

He said he didn’t get deeply involved in the project in time, trusted the wrong people too much, and didn’t say “no” often and soon enough.

“The biggest lesson was to take responsibility for my actions or inactions and not blame others. As Hemingway wrote, ‘If you are any damn good, it’s your own fault.’ Failing is very humbling, but I did get an advanced degree in cash-flow management in a short time.”

Matthew Matigian, a chiropractor and founder and CEO of the Chicago-based consulting company Blue World Asset Managers, has been a guest lecturer at the Gigot Center for Entrepreneurship and a judge for the center’s annual McCloskey Business Plan Competition. In lectures, he relates what he learned when one of his early ventures, the Matigian Clinic, faced a near-death experience.

Matigian’s mistake, he tells audiences, was allowing a landlord to talk him into assuming a lease on a 6,000-square-foot facility in order to grow into it and not lose a good space. He realistically needed only 1,200 square feet and quickly realized that the business wouldn’t be able to ramp up in time to pay for the unnecessary space. Faced with the clinic’s likely failure, he chose to merge it with a legal consulting firm he also owned. The revenue stream from the consulting firm made up for what the clinic was lacking, and the clinic was saved. Matigian had nonetheless learned a valuable business lesson.

“I tell young entrepreneurs to think of everything as a return-on-investment decision. Any investment you make in your business, from space to equipment to telephones, has to pay for itself. Don’t go for the bells and whistles. The No. 1 problem new businesses have is buying things they can’t afford, which leads to debt that they can’t handle.”

They shoot businesses, too

Gary Gigot (’72), the Seattle-based investor for whom the Gigot Center for Entrepreneurship is named, has a colorful adage for admission of failure: “When the horse is dead, get off.”

Gigot said that the biggest setback he faced in his career was the failure of a chain of mortgage brokerage companies he had a majority stake in. From that experience he learned to limit his level of investment in a single business and look more closely into the business models of companies in which he was considering investing.

David Brenner (MARK ’73), executive director of Innovation Park at Notre Dame, which draws on the University’s resources to help incubate new businesses, said he found himself in trouble with a Tupperware-style housewares business he co-founded in 1999. At the last minute, the company’s major investor withdrew, leaving Brenner’s plans in disarray. Fortunately, he and his partner were able to transfer their basic business model to a line of dietary supplements. The brush with disaster taught Brenner the importance of having a contingency plan.

To the budding entrepreneurs he meets at Innovation Park, he urges persistence in the face of failure.

“You really only ‘fail’ if you stop trying,” he said. “Most successful entrepreneurs have failed in the past, some many times, but all share the deeply ingrained attitude that ‘next time will be better.’” Provided, of course, they learn from the experience.

David Wieland (’01), founder/CEO of RIVS, a Chicago-based human-resources software maker, tells entrepreneurs: Immediately after your business collapses, write four or five pages analyzing what went wrong. “Ask yourself why and be honest with yourself,” he says.

Successful entrepreneurs may fail multiple times, but they rarely make the same mistake twice.