We all know that innovative projects fail frequently. This is true for the largest corporations and the smallest startups.
The traditional corporate approach is to set a ‘venture budget’ – then determine which few projects get funded from a combination of powerpoint punch and business plan bash.
The idea behind this is that the best or most likely to succeed can be identified. Once that has been done, money is allocated, governance but in place and the venture is left to grow – with frequent reporting (and perhaps a little polish of the optics).
And failure rates are high.
Essentially because business unit managers are trying to use their practical experience, based on what has worked in the past, to determine how a new type of venture will do in a new market.
The logic may be sound – this is what we do for other corporate projects – but it doesn’t work when success is unknowable and unpredictable.
Exploring and going into the unknown does benefit from preparation – just look at Burke and Wills. At the same time, there is so much that can go wrong that can’t be predicted.
One or two or three startup expeditions is incredibly risky. When they fail it comes with a heavy cost.
A better approach is to say: ‘Well, most expeditions are going to fail. Is there a better way?’
Surprisingly there is. Instead of equipping an expedition to try and cross Australia all in one go – you launch lots of smaller ones. Instead of supporting a venture with a £10 million budget you give 50 ventures £10k and you see how far they get.
Most will die quickly – with each death you learn something important about the market. Fairly quickly you are able to identify which ventures have the combination of market, team and timing to make real progress.
Then you invest in them. Lots of little bets – so each bet doesn’t matter so much. As you make them, you learn faster and make increasingly better bets with less and less risk.
Why waste money and time when there is a better path forward?