Technology start-ups that fail fast succeed faster

Failure rates of new technology-based companies are shockingly high. It is estimated that 75% of technology start-ups do not generate profits. Other data suggest upwards of 90% of new technology enterprises completely fail.

However, some failures of products or technologies have been positive and lead to success. It took Thomas Edison thousands of attempts before he succeeded with his lightbulb design. Although learning from failure has been described as critical to the success of technology-based start-ups, there is little existing research that supports this claim.

Strategic management scholars have described and found support for a number of organizational philosophies, behaviors, and strategies that promote business success.

Read: [5 ‘product market fit’ tips to make your startup successful]

However, little attention has been paid to empirically validate the strategies that pertain to learning from failure in technology-intensive industries.

My interest in this topic came from working as a manager for a global biotechnology company. When creating novel innovations, their organizational mantra was simple: fail fast to succeed faster. After joining the faculty of Edwards School of Business at the University of Saskatchewan, I wanted to explore if other technology-based start-ups employed this failure learning strategy and how it influenced their performance. This topic is an ongoing area of my research and relates to the technology commercialization and venture development courses I teach.

Failure can produce success

In my article published in the Journal of High Technology Management Research, I explored commonalities of 120 leading Canadian technology start-ups. I found that those with organizational commitments to learning from failure realized greater scientific output, raised more capital, filed more new patents, developed novel innovations, and achieved greater scientific milestones as compared to other start-ups.

Specifically, firms with what I called a “failure learning orientation” encouraged employees to openly discuss failures, sought to understand why the failure occurred as opposed to who was responsible, prioritized learning from the failure over any other activity, and strategized how to move forward after failure. The relationship between failure learning orientation and how well a company performed suggested that this strategy could be viable for technology-based start-ups.