New research led by Yian Yin, a PhD student at Northwestern University, addresses this gap. Yin's team analyzed the nature of failure using three huge data sets, following the fortunes of startup companies, researchers attempting to secure funding, and terrorists seeking casualties with violent attacks. The work reveals a hidden factor that separates failures from successes at an early stage: learning.
What the researchers found was that to succeed, one needs to learn from each failure and iterate in specific manner. They concluded that the experience of failure can teach valuable lessons that can be used to improve performance the next time around--and that a team's learning process is a good indicator of whether or not it will succeed at some point.
Yin's work falls short of identifying which exact learning processes are optimal to lower failure rates, but for that we can turn to the founders of the Lean Startup movement, including Harvard's Eric Reis, who famously said: "The only way to win is to learn faster than anyone else."
The naked truth about startups is that nobody knows what they're doing, and the ones who do succeed adapt a method of fast learning.
Here are a few ways to increase the learning speed at your company:
1. Hire fast.
J. Neil Weintraut of 21st Century Internet Venture Partners, a leading VC firm, told Fast Company that the key to a startup learning and moving fast is to hire fast people.
"Starting a company is no longer about raising capital; it's about raising teams. The single biggest challenge for any startup is finding people who will enable you to move fast," says Weintraut.
Like many investors, Weintraut thinks raising capital is all about trading equity for speed, and that successful startups aren't the ones that out-think the competition--they're the ones that out-execute the competition.
I agree with this philosphy. Startups should "move fast and break things," and maximum acceleration can only happen when startups embrace the Lean Startup method and continuously learn and grow.
2. Focus on simplicity.
The key to outcompeting well-funded rivals is to present a solution that is focused and minimal, yet so distinctive and compelling that customers are quick to recognize its superiority. So, in many ways, less is more.
Again we can return to the Lean Startup method, which involves the creation and testing of a minimum viable product (MVP). This MVP has to include the barest number of features and generate a unique value proposition (UVP): in other words, it must be different from what's already on the market.
Simple equals fast. Founders building their MVP should start with one key question: What is the one feature that the largest number of customers will find immediate, obvious, and useful?
3. Pay for speed.
Time is money. At Ryerson Futures, where I invest and mentor, founders give up equity in return for resources to speed up their learning.
This includes more than just money. Our founders are really paying for all of the connections, skills, services, facilities, and technology that we offer -- resources that they believe will get their products and services to market, and their business plans in front of venture capitalists, faster than any other route.
To maximize the speed of learning, look for "smart money" and seek funding from investors who can bring more to the table than just money.
4. Making learning a core value.
Just like in all organizations, you must measure what matters. To make learning a core value of your company, include it the KPIs (key performance indicators) you use to track employee performance.
Consider allowing all employees to pursue lifelong learning, and support them with budgets. Remember, humans are your greatest asset, and upgrading them is rarely a bad idea.
5. Embrace failure.
Failure is the greatest teacher, so be sure to give yourself and your team permission to make mistakes. As long as you approach them as a chance to learn and do better, you will be moving forward.
This new research has confirmed that a team's learning process is a solid predictor of whether or not that that team will succeed. So to increase your chances at startup success, invest in creating a learning organization.