Category: leadership and strategy failures

Inspired to fail – inspired to succeed

He was defeated for the legislature in ’32. Failed in business in ’33. His sweetheart died in ’35. Had a nervous breakdown in ’36. Defeated in election in ’38. Defeated in nomination for Congress in ’43. Lost renomination for Congress in ’48. Defeated for Senate in ’55. Defeated for Vice President in ’56. Again defeated for US Senate in ’58. Elected President in ’60.

This man was Abraham Lincoln.

A child prodigy shunned by aristocracy. Lived much of his adult life in poverty. Died in his 30s. Buried in a paupers grave.

This man was Wolfgang Amadeus Mozart.

Fired by bosses after other workers refused to work with him. Homeless and impoverished throughout his youth. Survived as a poster artist. Rejected from an Arts Academy. Initially rejected as unfit by the army. Never rose above Corporal. Became the leader of his country.

This man was Adolf Hitler.

These are part of the long chain of other inspiring failures. It seems to be really successful, one has to really fail, badly, deeply.

How does failure happen?

Sometimes failure is a result of bad leadership. According to Denny’s “Motivate to Win,” reasons of leadership failures are:

  1. Inability to organize details
  2. Unwillingness to do what they would ask another to do
  3. Expectation of pay for what they know instead of what they do
  4. Fear of competition from others
  5. Lack of creative thinking in setting goals and creating plans
  6. The “I” syndrome
  7. Over-indulgence, destroying endurance and vitality
  8. Disloyalty to colleagues
  9. Leading by instilling fear instead of encouragement
  10. Emphasis of title instead of knowledge and expertise
  11. Failure to face negative reality
  12. Being ultra-positive

Sometimes, it is the change, with intention of improvement, that causes failure, as Kotter elaborates in his “Leading Change,“ change will not succeed if the leader is:

  1. Allowing to much complacency
  2. Failing to create a sufficiently powerful guiding coalition
  3. Underestimating the power of vision
  4. Undercommunicating the vision
  5. Permitting obstacles to block the vision
  6. Failing to create short-term wins
  7. Declaring victory too soon
  8. Neglecting to anchor changes firmly in the corporate culture

Why failure is the ONLY path to success

Failure. Success. What association do we have with each? Google search of the word “success” returns nearly 281 million results whereas that of “failure” 119 million. These are telling numbers and they seem to reveal the underlying “logic” of our lives. We are afraid of failures, whether they are in our personal lives and in our careers (whether changing a job/career or starting your own business).

Many are driven and inspired by success stories, recipes and recommendations of others. Success, even if it is not yours, feels good. It feels comfortable. Present and future, in that one instant, seem to become brighter and more rewarding. We live in that instant and want to stay in it.

Many are afraid of failure. We hide our failures. We try to forget them. We mostly attribute our failures to a bad luck, an out-of-control happenstance or an incident. Very few of us openly admit a failure, even less their part in it.

What we don’t necessarily know is that fear of failure destroys any chance for a possible success in future. What we also might not know is that failure breeds success.

Throughout our history, many a successful entrepreneurs, businessmen, politicians, scientists failed first before reaching success. Google returns about 672,000 search results for “failure quotes,” and each of those pages – this is a good example –  contains quotations and saying of those who made history.

I selected excerpts from some of modern (and currently very) successful entrepreneurs, businessmen and bloggers who tell of their failure stories and experiences.

Brazilian blogger Luciano Passuello, who is passionate about the world of our minds, thinks that failure “is the only way to go far enough”

Have you failed before? Was it as terrible as you had anticipated? Well, here you are reading this article, so it seems you survived all right. Truth is, failure is almost never as bad as we imagine. Fear of failure is usually much worse than failure itself.

Ryan Healy, dubbed “Most Referred Direct Response Copywriter on the Internet,” during his early youth, trying to grab on courses and lectures promising success and fortune,  admits

I was what they call a “hyper responder.” I’d buy just about anything that promised freedom and fortune. I bought programs about how to trade the commodities market (and I actually did that and made money); I bought programs on how to bet the horses; I even bought a program about how to become a “waste auditor.”

…

But as my drive intensified, I began to make larger investments.

I dropped $5,000 on a real estate investment course. I realized too late that I was uncomfortable using the techniques in the program; it was basically worthless to me.

And while that loss hurt, it didn’t hurt nearly as much as the next mistake I was about to make.

Yes, he made mistakes. We all do. But he came out of these mistakes and experiences a stronger person.

Ben Settle, an email marketing expert and web entrepreneur, thinks that

Because weird as it sounds, failure is a requirement for success.

And like it or not, without failure you can’t truly succeed, so avoiding it pretty much makes you dead in the water right out the gate.

…

I’ve met (and worked with) some serious “power players” in business. Not just on the Internet, but offline biz owners, too. I’m talking about people who sometimes make more scratch in a DAY than the average working stiff makes in 6 months toiling away for the corporate beast masters.

And you know what all these people have in common?

They started out as miserable FAILURES.

Last but not least, remember one thing. If you are failing or what you are doing is failing and things just seem plain bleak and without any perspective, then perhaps, it is time to give up what you are doing and start anew. Or perhaps, it is time to start doing something else.

As a serial entrepreneur and bestselling co-author of Trust Agents, Chris Brogan puts it

There is a right time to give up. There’s a right time to quit. The trick, and it is a HUGE trick, is knowing which is which.

adding that

Remember that surrender is every bit as much a part of strategy as victory. Learning when to surrender or lose a smaller battle has been part of the success plan of every major war ever fought. The trick is in knowing what really matters, and never letting go of that. The problem we have is that we fall into the trenches and think the battle is the war.

Failure. Success. Two sides of the same coin. One cannot exist without the other.

Embrace your failure and you will succeed.

Guidelines: from red failure to blue value-based model

There is no ready receipt to make your business succeed, but their are components many successful companies embrace in order to go from red, bloody competition-driven mindset into a blue, value-based, innovation driven one. The name of the game must be value (for employees, customers, stakeholders, society and environment) innovation.

To build a viable and sustainable business model based on value innovation, the following four strategic dimensions need to be decided upon: buyer utility, price, cost, and adoption.

Business model strategic dimensions

To decide upon each of the dimensions above is equivalent to finding exhaustive and compelling answers to certain questions. For example, at the first stage, Buyer utility, to go or not go ahead with a service/product you are thinking of (re-) introducing to the market is determined by seeing whether your offer is useful and whether there is a compelling reason to buy it. If any of the two questions do not get a resounding YES, then you are risking to enter a competitive market without guarantee of attracting a big enough crowd or having to put forth your offer without getting expected/necessary revenues.

The most important part in Buyer utility stage is to position your product/offer on the following target “buyer map,” you will determine whether your product/service will create new demand/market (like Nikon is now trying to do, a market for energy goods or in a production of arts) or enter into an already existing market. The map also allows you to check existing competitor products/services, their locations and where the gaps, hurdles and unmet demand exist for your offer.

Buyer map

Essential for Price stage is to understand the economics of similar offerings. Target buyers will more eagerly buy a product/service recommended/referred to them by their peers/others rather than one that only few buy – network externalities. Hence, the need for correct pricing to attract that initial threshold of customers, which will then cause a snowball effect.

Another important factor for determining a price is the idea of rival (for example, production materials, which exclude their use by their rivals/competitors) versus non-rival (for example, ideas, which can be adapted/used by their rivals/competitors) types of products/services. By looking at similar offerings – same form and function; different form, same function; and different form and function, same objective – you will be able to narrowly define a price corridor for your target customers that will be feasible from your side (ensuring sales and profit).

For the Cost stage, the counterintuitive but winning strategy is to have price-minus costing rather than cost-plus pricing, if you are willing to have a cost-structure that is both hard-to-match for competitors and profitable. To be able to attain your preset cost target, there are three ways:

And finally, for Adoption stage, you need to consider that new things tend to always be met first with resistance even by those for whom they are made/offered. Hence, a need to clearly communicate, address issues and receive “acceptance” before going ahead with employees, stakeholders, target market, generic public.

Failing at any (or few) of the four strategic dimensions is what usually leads a company down the drain..

P.S. A more complete elaboraiton of this dicussion about value innovation and more can be found in “Blue Ocean Strategy.”

Top 4 assumptions that cause market failures

Many articles have been written (including my blog post) and much ink has been spent on this topic. Let’s now have a cursory look at the history of modern finance, which will help explaining how modern finance works, hence how the regular market crashes/failures (by the way, have a look at an excellent round-up economic history of finance and market failures by John Cassidy; also check out the article about the three recent Nobels for explaining market failure from an unemplyment perspective) happen.

You might or you might not know, but the modern financial theory is built upon a legacy of a son of a French wine merchant and diplomat,  Louis Bachelier. His doctoral advisor was Henri Poincaré, one of the most celebrated and influential mathematicians of all time. The defense of his 68-page thesis, “Théorie de la Spéculation,” took place in March 1900 and was about trading of government bonds on Paris exchange. In his thesis, he laid the foundations of financial theory, and more generally, for all theories of probabilistic change in continuous timeframe. The cornerstone of his thesis was to explain how the prices change.

Bachelier died unknown as his thesis was respectfully discarded in the annals of French academia and only by accident discovered in 1963 by Eugene Fama, the creator of Efficient Market Hypothesis, the foundation of the orthodox financial theory. What he proposed – and the his proponents Markowitz, Sharpe, Black and Scholes elaborated on – was a coin-tossing model of finance. He assumptions can be formulated as follows:

  1. People are rational (if this were true, there would be no science of behavioural economics)
  2. All investors are/think alike (ignoring different types of investors)
  3. Price changes are practically continuous (of course prices jump in a discontinous manner – almost every day, NYSE reports “imbalances” due to exogenous changes)
  4. Price changes follow Brownian motion (Bachelier proposed to use Fourrier formula of heat spreading to describe how bond prices change)

A little further elaboration on point #4. Bachelier’s adaption of Brownian motion had three critical implications: independence (prices last day/week/month have do not influence prices today); statistical stationarity (prices change in the same manner in the past/present/future); normal distribution (price changes follow Gauss’ bell-curve). The third implication, which underpins almost every tool of modern finance,  is the one most obviously contradicted by the facts.

Ever since rediscovery, utilisation and expansion of his theory in 1960s, Bachelier’s ideas found their way into virtually every aspect of modern financial theories. Capital Asset Pricing Model (one study suggested that about 75% of financial managers/CFOs use it to estimate cost of capital), Modern Portfolio Theory (the most widepsread method of selecting investments) and Black-Scholes formula (for valuing options contracts and assessing risk) are the three pillars of modern orthodox finance theory. All three are part of every MBA curriculum and are translations of Bachelier’s ideas into practical tools.

The above (wrong, or in the best case, narrowly applicable) assumptions being at the core of every modern financial tool, it is clear why markets failed and will continue to fail, unless a radically new approach, a paradigm shift takes place in the financial market. This tectonic shift has already started taking place…

Round-up: failed startup post-mortems

I have previously blogged about top dot-com flops.  By chance I came accross this great round-up of failed startup post-mortems on ChubbyBrain.  The list includes, among others, the following:

An article (also pointing to the above source) on GigaOm featured information about post-mortem of the infamous StandoutJobs . As for main reasons why statups fail, have a look at Paul Graham’s article and my previous blog post. Finally, here is good set of lessons from Mark Goldenson, founder of PlayCafe (one of failed startups on the above list). I especially like his “Set a dollar value on your time,” which helps prioritize tasks and clarify what is and is not important for your business.

Devver and other thoughts on failures

Till today, I somehow failed to know about the existence of Failure Magazine. Although most of articles I checked are quite long (like this article about “No Logo” of Naomi Klein that goes for 7 pages) there is much to read and learn about.

What I meant to write about was Devver, a maker of cloud-based tools for making Ruby developers more efficient (code testing, QC).

As one of co-founders, Ben Brinckerhoff, points out:

Most of the mistakes we made developing our test accelerator and, later, Caliper boiled down to one thing: we should have focused more on customer development and finding a minimum viable product (MVP).

They assumed they already got their MVP and focused on further developing their products at the expense of loosing touch with existing/potential customer base. He admits that:

Our mistake at that point was to go “heads down” and focus on building the accelerator while minimizing our contact with users and customers (after all, we knew how great it was and time spent talking to customers was time we could be hacking!).

As Devver focused and developed its accelerator product, it became increasingly sophisticated, eventually “resulting” in setup/configuration problems – the main put-off for many users. When this hurdle was found, they came up with a solution, but again failed to keep in touch with users, instead churning out new features.

Result? Two years and $500K later, the three tech-savvy founders had to fold.

As the saying goes, “don’t fall in love with your product; let your customers do so.“

As an article in Business Know-How explains, “key factors that — if not avoided — will be certain to weigh down a business and possibly sink it forevermore”:

  1. You start your business for the wrong reasons (making money is the first one on this list)
  2. Poor management (sometimes management is too techy – case with Devver – or too business)
  3. Insufficient capital (lean startups must be able to avoid this trap)
  4. Location, Location, Location (one of factors that contributed to a temporary suspension/failure of my own startup Elegua)
  5. Lack of planning (this depends on a type of business, but many businesses change/evolve so much from their original vision/plan that they become unrecognizable)
  6. Overexpansion (riding on top of seed/series A capital, hiring frenzy)
  7. No Website (this is debatable – my second startup, GPDoors, has no website yet – I do get leads via WoM)
And even if you fail (as I did and surely will do in the future), remember that:
  • Failure is necessary
  • Failure reinforces the need for risk
  • Success can breed complacency
  • Failure means you’re not alone
  • Failure doesn’t necessarily mean something went wrong
  • Failure can emphasize process, not merely people
  • Failure broadens your thinking

How NOT to lay off employees

Let’s make a little scenario, where you undergo the following experience.

You work for a mid-size Internet company. One day, you receive an email from the CEO to all employees announcing there are upcoming layoffs and restructuring. The email’s subject reads, “Important Updates – Please READ.” Why not mentioning directly about layoffs in the subject – the main subject of the email? In brief, the email (see the image below – I outlined the most “interesting” passages) states that few people will be laid off and the decision to lay certain people off is not based on their performance. It then uses terms such as “aligning business lines” and “reducing costs” as justifications for a layoff and stops short of being outright ridiculous.

The layoff emailIt is about 2pm. In about 30 minutes, you are cartered to the HR manager’s office, where you find quite a few of your colleagues crammed into a tiny space, all of you standing and facing the HR manager – she is seated. You are told that you are to leave the company. No further elaboration – it is all in the email, you are told.  It all goes for few minutes only and you are then dismissed.  You inquire about how you will handover your tasks and to whom – you assume before the end of the month. You are however told that indeed that day is to be your last day – you have 3 hours to handover all of your tasks.

You then return to your office. It is about 2:35pm. You open your Outlook and try to check your email. Your Outlook responds with “authorization failure.” You later discover that, during the time (5 mins) you were in the HR office, your email account has been blocked.

Below is the list of points of how the scenario unraveled, a case study of how NOT to lay off employees.

  • sending an email about upcoming layoffs, containing vague terms and no solid reasoning;
  • not giving an advance warning to affected employees (making the day of email announcement also the last day for affected employees);
  • ignoring employee-employer relationship specifics as written in contracts signed between employees and the employer (and the labor law – subject to sue the company);
  • inconsistently selecting employees to lay off (in some cases, not even consulting an employee’s immediate supervisor/manager);
  • making the employee layoff in an impersonal way (by bringing them all together to a room and the HR manager informing them that they are to go);
  • blocking access to email account/internet (again without any prior warning) for affected employees shortly after they were told to leave;
  • not offering to affected employees reasons/explanations leading to their layoff;
  • not letting affected employees to organize a handover of their work ;
  • claiming “there is nothing personal – it is only business” but contradicting it by saying that decision to lay off is not based on performance, which provides a direct or indirect measure of contribution to the business/output of the employee.

P.S. This happened in a company I worked for.

I was dully told that indeed today was to be our last day – in mere 2.5 hours (working day finishes at 5pm and we were at HR office at 2:30pm).

The Seven Deadly Sins of Leadership

Here is a piece about leadership “sins” as categorized by management/leadership guru Drucker.

The Sin of Pride

The Sin of Pride is almost always considered the most serious of the Seven Deadly Sins. Yet it seems so innocuous. My wife calls it “being full of oneself.” I believe feeling proud of what a leader has accomplished or is accomplishing is perfectly acceptable. The problem comes when one feels this pride to the extent that the leader believes himself so special that ordinary rules no longer apply to him. That’s where many leaders go awry.

The Sin of Lust

I once heard a retired leader of a large organization of almost a million members speak about his challenges of leading this organization. “One of the biggest problems,” he said, “was newly promoted senior executives. I may be exaggerating a little,” he continued. “But it seemed almost that as soon as we promoted a man to be a senior executive, he suddenly decided that he was God’s gift to women.”

This individual spoke at a time when almost all senior executives had been male. However, I do not think that one would find much difference with female executives. There is unfortunately a feeling among some leaders that they have “arrived” and are “entitled” to additional sexual gratification as some sort of fringe leadership benefit. In one online survey done by the White Stone Journal, The Deadly Sin of Lust was the most frequent of the Seven Deadly Sins self-reported as “my biggest failing.” So this sin is hardly uncommon. However, it can have very unfortunate consequences. In any workplace it creates jealousies, feelings of favoritism, a lack of trust, damages people and relationships and more.

The Sin of Greed

The Sin of Greed is a sin of excess. It frequently starts with power. Leaders have power, and unfortunately having power has a tendency to lead to corruption if the leader isn’t careful. This may start with the acceptance of small favors and grow into vacations, loans and worse. How do these things happen? A leader sees others with more than he has. Questions may be raised in the leader’s mind as to why others have so much more, yet (in the leader’s mind) are far less deserving. Maybe a small bribe is accepted. It may not even be seen as a bribe, just a favor between friends. If the leader allows himself to be seduced in this way, greed can take over. Unlike the movie, greed is never “good,” even as a motivator, and though Drucker analyzed and approved many motivations, greed was not one.

The Sin of Sloth

The Sin of Sloth has to do with an unwillingness to act. Sometimes this is due to laziness. More often it is an unwillingness to take on work that the leader considers is beneath him. I have many times seen leaders watching critical work that must be completed and for which they were also qualified to do. Yet they stood around “supervising” when they could have given real help to their subordinates and to the mission that they were responsible for accomplishing. In too many cases, good men and women fail because their leader failed to help or take action in other ways. Make no mistake about it, The Sin of Sloth leads to disaster. Leaders must be proactive and they must take action.

The Sin of Wrath

This sin has to do with uncontrolled anger. There is a time for anger in leadership when it serves a definite and useful purpose. As Kenneth Blanchard and Spencer Johnson taught us, you can take one minute to make a correction and include the words “I’m angry” and then tell the recipient why. Moreover, anger does have a useful function in that it can mobilize psychological and physical resources to do something about a problem.

However, leaders need to avoid repeated and uncontrolled anger because it can have negative impacts on their leadership. It can destroy morale, does not guarantee a lasting effect in correcting problems, and in effect requires surrendering anger as a tool for the times when expressing it is really useful and appropriate. Moreover when in an angry state, anger causes the leader a loss of self-monitoring capacity and the ability to observe objectively.

Drucker taught leaders to analyze their environment and to determine what actions that have already occurred mean for the future before taking action. Using anger as a single response to all leadership challenges prevents us from doing this analysis. It prevents the leader from making good decisions and may prevent the leader from taking the correct action appropriate to the situation. Actions taken during uncontrolled action are frequently in error and require additional work to undue the consequences of these mistakes later.

The Sin of Envy

With the Sin of Envy, the leader is envious of what is enjoyed by someone else. This may or may not be incorporated with greed. The sin usually leads the leader to make decisions and to take actions that will be to the disadvantage to the object of his envy. So a leader who falls victim to this sin may deny an earned promotion to a qualified subordinate, attempt to destroy another’s reputation or in other ways attempt to make himself feel better by lowering the situation of another. This is obviously harmful to this other individual, hurts the organization and is probably harmful to the leader who perpetrates these actions.

The Sin of Gluttony

Most think of food or drink with this sin, but for the leader it has a far more ominous connotation. The Sin of Gluttony was the one that most frustrated Drucker. Expensive food or drink is scarce. Therefore excessive consumption can be seen as a sign of status. But gluttony need not apply only to food.

Drucker knew how hard managers had to work to do their jobs as they needed to be done, and he had defended high salaries for top managers early in his career. However skyrocketing executive salaries caused him to drastically alter his opinion. Drucker said and wrote that executive salaries at the top had become clearly excessive and that the ratios of the compensation of American top managers to the lowest paid workers were the highest in the world. Moreover, this difference wasn’t slight, but differed by magnitudes. He said this was morally wrong. The ratio of average CEO compensation in the United States to average pay of a non-management employee in the United States hit a high in 2001 of 525 to 1. Drucker recommended a ratio of no more than 20 to 1.

The Sin of Gluttony was to be avoided for good leadership. Interestingly, Drucker drew a parallel of high executive salaries with the demands of unions for more and more benefits without an increase in productivity. He said we would pay a terrible price for these examples of gluttony and that “it is never pleasant to watch hogs gorge.” As I write these words, we are paying this price.

There are things that a leader must do, and things he must not. The Seven Deadly Sins are those that Drucker maintained that leaders must not do.

Common and important social media fail techniques

The current and foreseeable “big” thing, as seen from an Internet user’s perspective, is the social media. As for anything considered or perceived as fashionable, social media has its own caveats. Testimony to that are (some of  the) social media approaches illustrated below (see the full article here), which guarantee an eventual failure of any sustained endeavor, be it in personal or professional life and career.

  • Doing nothing ’cause you’re scared of what people will say. People are going to talk, with or without you. Wired)
  • Pretending to be somebody else. When is it ok to lie to a customer? (mumbrella)
  • Selling your product all day, everyday. Social Media is about capturing interest, not just sales. (The Next Web)
  • Failure to respond when asked a reasonable question. It’s a crime to have a presence yet ignore customers. My favourate is @VlineInform
  • Plagiarising bloggers content. Most bloggers are overtly happy with a mere hat tip. (Journalism.co.uk)
  • Not personalising your profile. People want to know who you are, what you’re about. (Webinknow)
  • Blocking access to Social Media in your workplace. For so many reasons Social Media can be an allie or enemy. (Chris Brogan)
  • Thinking people care about your product. Your product, probably boring. Find an interesting angle. (Emergence Marketing)
  • Calling your product green when your website isn’t. Many make big claims, few think about their power sucking web presence.
  • Not understanding how Social Media fits into your marketing mix. Hailed the death of print media… it’s not, it’s a communication tool. (The Oyster Project)
  • Relying too much on online research. There’s a wealth of info online, it may not all be valid. (Pigs Don’t Fly)
  • Failing to listen. Social isn’t always about talking, it’s just as much about listening. (Just Another PR)
  • Not recognizing that you are shooting at the moon…You’re going to fail, lots. Social requires commitment.
  • Thinking you can’t contribute to a community, just sponsor it. Enthusiasts are already coming together? Why not ask how you can get involved?
  • Thinking ‘news’ is the only thing that can be talked about online. There’s a plethora of opportunity on the social web. (Search Engine Land)
  • Saying something, just for the sake of it. There’s no rules to success, just be honest and interesting. (Online Marketing Banter)
  • Relying on strategic thinking alone. Social media is the worlds largest experiment – recognise you may need to fail to learn.
  • Using the exact same strategy and content across multiple networks. Love it, you update Facebook & Twitter with every new presser. (Search Engine Guide)
  • Not measuring / monitoring your activity. Yes it’s possible! (I.e. – Radian6, Buzz Metrics, Dialogix)
  • Trying to get as many followers as possible. Large unresponsive list = bad, smaller profitable base = good. (digitalOZ)
  • You treat Social Media as another advertising medium. It’s different. (MediaPost)

    • The list above is what I consider the most relevant and important failure-leading  approaches espoused frequently by both individuals and businesses while using social media.

    How Not to Manage Innovation (Umair Haque)

    Umair Haque is one of luminaries who deserves to be read and reread by all those who care for or envision a better, less consumerist and money-bogged future.

    In the article below he shows his take how venture capitalists are stiffening innovation by focusing on numbers, short term goals, quick profits, etc. Read this englightening piece and look around for many examples. Below are his strategies (based on Jeremy Liew’s analysis) of Apple’s iPhone AppsStore outlining how not to manage innovation.

    Focus on short-run numbers

    When venture investors or middle managers act like, well, middle managers, innovation is likely to wither.

    Apply surface economics

    When venture investors or managers don’t look deeply at the economics of the markets and industries they are investing and competing in, the result is a hodge-podge, often unsuccessful innovation portfolio — one where potentially successful innovations are under-invested in, and almost certainly unsuccessful innovations are over-invested in.

    Be strategy-blind

    When venture investors or managers alike act like purely financial backers — instead of partners who acknowledge and encourage a durable, shared strategic interest — the disruptive potential of innovation is sapped.

    Fail to see the right context

    When investors or managers fail to place innovation in the right context, value is difficult to assess. Context is what makes numbers meaningful: it adds validity, reliability and accuracy to financial logic that is otherwise bereft of it.

    Never have an ideal

    The mistake isn’t particular to venture guys. It is what happens when we misapply the mechanics of finance to the art of innovation. The fallacy of inferring economic meaning from financial numbers is what’s bankrupting Sony, what eviscerated Detroit, and what, ultimately blew up the investment banks.

    The full article is here.