Inherently Wasteful

Posted on February 7, 2007

Trying new things in business is a must. But not all new ventures succeed, so the process involves some inevitable waste of resources and time. Don’t let that discourage you:  the amount of waste can be managed.

In the book, The Feel of the Deal:  How I Built a Business through Acquisitions, I lament that a trade show in Amsterdam netted no orders at all and hardly had any attendance. I put it in the “waste” column.

Was it a waste? Surely. But was it avoidable waste? Maybe not.

Mistakes will happen.
For businesses to grow and expand, new things must be tried. Our world is changing ever faster, and new products and services keep customers interested. New processes and technology reduce costs or make possible new offerings. By definition, “new” means not tried and true. The greater the innovation or “jump,” the greater the potential for both big gains as well as failures. It stands to reason that the process of trying new things will have plenty of mistakes along the way, and mistakes mean wasted efforts, wasted money and wasted resources. Waste is inherent in the process of innovation.

Of course, trying new things in business certainly can be either more or less wasteful. The archetypical entrepreneur with a “Ready, Fire, Aim” mentality will have huge waste. I am not advocating this. Commensurate with the scale of the risk, any new venture should be researched carefully. Take the time to rough out how much investment will be required (time and money) and what the likelihood of success is. In particular, prospective customers must be consulted.

Think phases.
Sometimes, the most appropriate focus must be to understand how much must be spent to get to the next level of certainty. Efforts should be made to test on a smaller scale first (if applicable). Beware of trying more than one new thing, lest you spend a bunch of money and not know what worked (or didn’t). So attending a new trade show in a new territory with new products is not a good endeavor to learn from. Clear expectations should be established, and limits to how deep in the hole the new venture should be allowed to go. Proper measures should be in place so everyone will be able to see the progress.

If you do it all right, you’re still going to fail some of the time. It’s easy to look back, with all the knowledge you gained through the attempt, and be critical of the decision. But that’s not fair. If for any reason you feel so badly about failing at some new things, you’ll be reticent to ever try anything new, which leads to stagnation and business decay. And yes, you should feel bad about business stagnation and decay.

A big side benefit of trying new things is that you’ll discover something useful that was unexpected. When your intended initiative is failing, ask yourself: what does this mean and how can I find value for the company anyway? Attempting the new freshens our outlook on the business and the industry.

One last thing:  Spend only what you can afford. Too many businesses have fallen in love with their own beliefs—so much so that they wind up in debt or unable to recover.

Takeaways:

• Keep trying new things regularly.
• Do an appropriate amount of research and planning, and understand the level of risk you will be taking.
• Expect that some will not succeed, and never use hindsight to “beat yourself up.” Focus instead on learning.