How CEOs Should Handle Big Bets That Fail

Apple has quietly closed the book on its autonomous car project, having spent almost a decade and several billion dollars on the effort. But Apple’s failure with its big bet shouldn’t scare CEOs away from high profile gambles: rather, it underscores the importance of ensuring that big, ambitious projects align tightly with the company’s vision, mission and capabilities.

So what happened with Apple’s aims for a car? For one of America’s most innovative companies, it’s a failure of uncommon proportions—which combined with lagging stock prices, likely has stakeholders concerned.

Project Titan was supposed to produce Apple’s next iPhone: a groundbreaking consumer product that continued Steve Job’s legacy of offering consumers products that they weren’t even aware they should want.

An electric, self-driving car would seem to fit that bill.  But Apple ran up against the realities of development. A self-driving car was a bigger ask for their product teams than leadership had budgeted.

What followed seems to have been years of internal discord and disagreements where executives left, rejoined and failed to align around a single idea. Apple pivoted away from their original, ambitious plan and instead shifted focus to simply developing an electric vehicle.

In an already crowded market that includes legacy car companies as well as electric-first challengers, no one was clamoring for an Apple EV. It’s not a project that aligns with the vision Apple has of itself as an innovator, and likely did little to inspire enthusiasm from its team. When you’re gambling on a future that’s a decade out, it’s key to get the foundation of a project right. If a big bet doesn’t align with who and what your company is at its core, it’s never going to get off the ground.

In Apple’s case, they may have started with a project that did — but as it became clear that development wasn’t working, leadership balked.

Hiding failure rarely works in these situations. Candor is essential, both for teams to be able to effectively collaborate, as well for managing stakeholder expectation.

Creating clear standards for ROI and metrics to measure success help to create this culture. Rather than funneling money to a black box project, clear and regular assessment creates gate posts that can capture successes and failures. Rather than allowing a struggling project to continue on unchecked, having ROI standards helps leadership to understand when to pull a project, as well as provides opportunity for reassessment as the economic landscape changes.

Self-driving cars were all the rage when Apple began their project. But a series of dangerous accidents from other developers and increased scrutiny from regulators should have shifted how the company was considering their project.

When talking to executives about how to think about this work, I go back to a phrase the Mayo Clinic uses: think big, start small and move fast. Creating something new is like making a stew: you’re putting ingredients into a pot together, and you don’t always know what the exact result will be. Sometimes it turns out great, and sometimes it doesn’t—but you can learn from it if you’re careful about tracking and measuring progress along the way.

A leader who can communicate these things is going to do better than one who can’t—especially when these projects fail.

Tim Cook isn’t likely to lose his job over all this. A mature board is generally going to understand that these gambles are a necessary part of running a successful company, and even the smartest bets sometimes fail; it’s why instilling a model of ROI management is so critical.

Bets like the one Apple made are an educated gamble on the long-term—especially true in industries like tech where sticking to the status quo means getting left behind. But facing obsolescence isn’t just a Valley phenomenon: Blockbuster, Xerox—even a company like Hostess Brands —shows how quickly dominance can turn into irrelevance.

It’s inevitable that some of these projects don’t work, and when they do fail, CEOs should be prepared to answer key questions. Why did this project fail? Was the market not ready? Was the tech not right?

There is still value in these projects, even if they don’t work out exactly as intended, as a sort of collateral beauty. Coke, for example, learned the extent of their customers’ loyalty to their product after the blowback to New Coke.

Similarly, though Apple failed to develop their own car, it managed to gain a dominant foothold in the automobile industry, with Apple CarPlay installed in 90% of new vehicles.

In a world where success can sometimes boil down to timing and luck, an invincibility mindset can lead companies down bad paths. As Apple found, abandoning their ultimate vision is a costly way to try and avoid admitting defeat.

Big bets need a CEO who is inquisitive and takes the time to clearly lay out expectations and ROIs. Even in failure, there is something to be learned.