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Disruptive entrepreneurs: An interview with Eric Ries | McKinsey & Company

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Productive failure is a useful concept:

All of our process diagrams [in major corporations] are linear, boxed diagrams that go one way. But entrepreneurship is fundamentally iterative. So our diagrams need to be in circles. We have to be willing to be wrong and to fail. But modern management says, “Failure means you get dinged.”

For example, one of things I’ve tried to do is to tell companies, “Put on your employees’ performance evaluation a concept we call productive failure: ‘How many productive failures did you have this year?’ If someone comes to you and claims that they didn’t fail this year, you know one of two things: they’re either lying to your face or they were incredibly, unbelievably conservative.”

In both cases, it’s actually not a positive attribute. You want to say, “Show me a time when you failed but learned something really valuable, or were able to pivot from something that didn’t work to something that did.” I have a lot of examples now where it’s possible to say: “You saved the company an incredible amount of money, because instead of spending $10 million on something, we spent $100,000 and did an experiment that proves conclusively there ain’t no business here.”

Executive sponsorship of a start-up is about learning and supporting the team and going on the journey with them. It’s not about reviews and evaluation and go-kill decisions. It’s a really different change required at the executive level, at the middle-manager level, and at the line-manager level to do this thing.

But the alternative is to die. So I feel, like, yes, it’s hard—but that’s better than having your company go the way of Kodak or BlackBerry or, you know, pick your favorite company in the last few years that’s gone from a $100 billion market cap to $5 billion. And ask yourself, “Was playing it safe actually that safe?” I don’t see the evidence that that’s true.

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