37Signals

Reframe failure as intention

June 28, 2013: 11:21 AM ET

Better Place and Tesla prove there's an art out to turning sub-optimal outcomes into success.

By Saul Kaplan

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FORTUNE -- The key to unlocking the next wave of economic growth may be as simple as enabling more people to try more stuff. The industrial era was all about scale and squeezing out the possibility of mistakes. As a result we are too afraid to fail. Companies only take on projects with highly predictable results. Employees fall in line for fear of making career-limiting moves. How will we get better if the fear of failure prevents us from trying anything new? How will we make progress on the big system challenges of our time, if every time someone tries something transformational and fails, we vilify them? What if we reframed failure as intentional iteration?

Take the example of Better Place, the startup that set out to create a world full of electric cars with a novel battery swapping business model. I highlighted Better Place and its founder Shai Agassi as one of the best examples of business model innovation and the importance of a real world test bed.

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In 2005 Agassi attended the World Economic Forum (WEF) in Davos, Switzerland. He was inspired by a framing question asked by WEF's founder Klaus Schwab at the beginning of the conference, "How do you make the world a better place by 2020?" Agassi took Schwab's question seriously and decided he would make the world a better place by reducing its dependence on oil by creating market-based infrastructure to support a transition to all-electric cars. Agassi knew that the only way to accomplish his goal was through business model innovation and industry system change. OK, it didn't work. After 6 years, raising $850 million in private capital and launching commercial operations in Israel and Denmark, Better Place filed for bankruptcy.

The "I told you so crowd" immediately started taking shots. New York Times columnist David Brooks took a swing directly at Agassi calling him a "brilliant technology entrepreneur" but implying that he was among "conference circuit capitalists who give fantastic presentations but have turned out to be marginal in history." Ouch. Easy for David Brooks to criticize others for sharing their point of view at conferences when he leverages a New York Times platform to do the same thing. Agassi is among a new breed of 21st century leaders who know that transforming any industry is as much about launching a movement as building a company.

Movements require a viral social conversation that people can participate in and share with friends. Sharing stories at innovation events that enable random collisions of unusual suspects help to catalyze movements. I would point to other leaders including Tony Hsieh at Zappos (AMZN) and Jason Fried at 37Signals. Both are leading successful companies that if you look under the covers are really movements. They are inspiration accelerators.

After the Better Place bankruptcy announcement I've been asked if I was wrong about Better Place's business model. Many suggest that battery swapping is doomed to failure. I don't think so. Just because Better Place didn't work doesn't mean that the business model innovation they pioneered won't. Better Place tried to skip the middle phase of the transformation mantra, think big, start small, and scale fast. They needed a smaller place to prove out the entire system before scaling fast. Even Israel (8,000 square miles) and Denmark (17,000 square miles) were too big to quickly demonstrate the network effect of their proposed battery-swapping model. I exchanged emails with Agassi when Better Place was getting started suggesting that they prove out the model in Rhode Island, only a thousand square miles with a population of a million people! Agassi responded that Rhode Island had been on their early consideration list, but with private investors throwing $800 million at them, Better Place chose larger markets. They ran out of money and time to prove out the model.

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I still think the Better Place business model is possible with further experimentation. Don't take my word for it. Elon Musk just announced that Tesla (TSLA) is launching a battery-swapping model. Tesla is going to test stations where Model-S owners can swap batteries in 90 seconds for $50-60, less time and money than filling up a tank of gas. Bold business models don't die; they just get reinvented. If we want to go from best practice to next practice we have to try more stuff. We learn more from efforts that don't work than from those that do. So instead of piling on those that try to do bold things without initial success or criticizing those that share their paradigm shifting ideas publicly, we should thank them for pushing us forward and providing the knowledge to try again, only better the next time. Let's reframe failure as intentional iteration.

This piece is adapted from The Business Model Innovation Factory. Saul Kaplan is the author of The Business Model Innovation Factory. He is the founder and chief catalyst of theBusiness Innovation Factory (BIF) in Providence, R.I., and blogs regularly at It's Saul Connected. Follow him on Twitter at @skap5

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