Failing—to Win

How leaders turn fumbles into fodder for success.

August 16 2013 by Russ Banham


Friends of Failure

Other corporate leaders also have found success amid failure. As the CEO of Chicago-based executive talent recruitment firm, Korn/Ferry Leadership and Talent Consulting, Ana Dutra knows well the mistakes made by fellow CEOs. “The confident ones readily admit them, knowing you can’t win without taking risks or trying new things,” she says.

Dutra, too, has taken risks that failed but has no regrets. “I once put someone here in a leadership position heading up a region because I could not find another candidate internally or one externally,” she recalls. “He desperately wanted the job and I was concerned that if I didn’t select him, I’d lose one of my most valuable players. I chose him, even though I knew he was not the right fit for the job—he was great in the marketing space but was just not good at leading people.”

A year and one-half later, Dutra owned up to her mistake. “He was flailing at the task,” she explains. “I got up the courage to tell him it just wasn’t working out. The shocking part is that he agreed he had no passion for the role and was unhappy in the job.” The executive moved back into marketing.

The lesson? “You cannot [sweep] difficult conversations under the rug,” Dutra replies. “I work with boards and CEOs on talent succession all the time, and I can’t tell you how many times I hear that the board is opposed to a particular person but doesn’t have courage to express it. Today, when I have a position to fill here, I don’t rush the decision. There’s always the right person out there for the job.”

Failure has also been instructive to Mike Serbinis, CEO of Kobo, a Toronto-based maker of e-readers. The midsize company launched in 2010 with an app that consumers could click on to read digital books on their mobile tablets or smartphone. “It was an open platform, so any book in any language could be delivered on any device anywhere in the world in a matter of seconds,” says Serbinis. “People were saying that no one would ever read a book on a smartphone, and we wanted to prove them wrong.”

The company’s marketing strategy was to advertise the app to consumers on their mobile devices, figuring this would quickly get the word out and they could easily download the product. While competitors like Amazon’s Kindle and the iPad were manufacturing hardware that provided a similar reading experience, Serbinis says Kobo’s backers never gave two seconds to the thought of making its own devices. “Ninety-nine times out of a hundred, investors said they were crazy about our app idea, but in no way would they ever give us a penny if we wanted to build our own readers,” he adds.

While the app launched well, the customer acquisition costs took a bite out of profitable growth. “The people signing on were technologically sophisticated, but they weren’t exactly avid readers,” the CEO explains. “They’d buy one book and that was about it; maybe two in a year. We were getting customers, but the metrics indicated we weren’t doing all that great.”

Kobo then did the unthinkable, becoming David to the industry’s Goliaths. It started manufacturing its own e-readers, devices a bit smaller than the smallest Kindle, albeit at a more attractive price point. “Our failure was that we weren’t getting the right customers via the app strategy, so we needed to switch gears to find them,” Serbinis says.

Where were these buyers? In bookstores—the really avid readers. Kobo signed distribution deals with thousands of neighborhood bookstores across the country. Since their patrons read a lot more books than the general population, they didn’t blanch at the cost of the reader, even at $149.99. “Everyone knows that 20 percent of the market gets you 80 percent of the profit, but the hard part is defining that 20 percent,” Serbiris says.

Kobo is now well on its way towards $1 billion in revenues this year. “I learned that there are a million people who will tell you something is impossible, but you can’t find out for yourself unless you give it a try,” he says. “We were seduced by all the buzz around online marketing via mobile devices without first considering what our market was.”