The Secrets of Failure

Are you mapping out your path to greatness by studying the successes of others? Seems like a smart approach, which may be why business books promising to reveal the secrets of successful companies sell so well. But consider this: Many would say that Amazon.com became the powerhouse it is today by taking great risks, ignoring naysayers and persisting in the face of setbacks. Does that mean this strategy equals success? Not if you look at the dozens of bankrupt and now-forgotten dot-coms that used precisely the same techniques. By focusing on triumphs and ignoring failures, we can't clearly identify which techniques are incidental to success and which ones are crucial, according to Stanford business professor Jerker Denrell. In fact, drawing conclusions only from successes can be not only misleading but dangerous.

So why is there no scholarship of failure? For one thing, data about businesses that go belly-up are hard to find, says Denrell -- it tends to sink along with the failed organization. People also prefer not to advertise their failures, says Richard Farson, a psychologist and author of Management of the Absurd: Paradoxes in Leadership. For example, researchers rarely bother to report ho-hum results, and drug makers often suppress findings that reflect poorly on their products.

Even when data on failures are available, we tend to listen to only what we want to hear -- like the inspiring stories that motivate us to persevere despite the odds. Likewise, we filter out evidence that contradicts our beliefs, particularly the mistaken idea that the opposite of a true statement must be false. By this logic, we think a course of action must either always lead to success or always lead to failure. "People believe that something always works or always doesn't work," explains Denrell, pointing out that real life is more complex, with countless variables influencing business outcomes. And many of these -- such as what our competition will do -- are beyond our control. For example, many entrepreneurs latch on to the advice to keep investing time and money into their start-up until sales take off. This bold strategy works -- sometimes. Other times, it causes the business to bleed even more red ink.

Then there's the luck factor, often discounted by those with a strong wish to see themselves as masters of their fates. "We like to think our success is our achievement, our hard work," says Farson, "but gee, plenty of people work hard and don't succeed." Perhaps we'd be wiser to follow the formula for success once recommended by oil billionaire J. Paul Getty: "Rise early, work hard, strike oil."