Failing At Something Doesn’t Make You A FailureByRaymond D. Matkowsky
Success is not an easy experience to obtain. Failure is a very common but beneficial occurrence. Failure is one of life’s best tutors.
People learn by failing. Researchers have found that errors play an essential part in the creation of mental strategies in problem solving. When dealing with errors, the human brain not only learns about the subject at hand but also develops the mental processes needed to form solutions to future problems. Simply put, in order to succeed you first must fail so that you know what not to do the next time..
Failure Of Expectations
Failure can be agonizing! It may also be catastrophic! However, more than likely, it is not. It is merely a failure of expectations. You expect one result and get something else.
How often do expectations conflict with reality? Quite often. Failed expectations are the rule rather than the exception. Several years back, QualPro®, a Knoxville, Tennessee (USA) consulting group, conducted a study of thousands of projects to determine how often new ideas lead to desired expectations. Their conclusions were that only 25% of new ideas were successful, 53% had no effect whatsoever, and a full 22% actually made things worse. In other words the failure rate in QualPro’s study was 75%.
Failure Is Central To Learning
Since failure is so central to learning, it makes sense to direct efforts towards information concerning what factors influence the failure of our projects. This information can then be used to tell how to control these factors and avoid future failures. Personally, I find this approach to be superior to classical project development in that it leads to quicker resolutions of problems.
The classical approach to project development is to set up a series of "hit or miss" experiments to see whether a viable product or process can be developed and under what conditions. There are three weaknesses to this approach. The failure rate is higher than it has to be. This is a very time consuming approach and that “hit or miss” experiments only test the limits of your thinking on what the product's potential may be, not the potential itself. Much of the time the experimenter has no idea what the project's true potential might be. Plus, many times the interactions of factors play a greater role than the factors themselves. It is true that sometimes one plus one does equal more than two. Sometimes it equals less. “Hit or miss” experiments do not consider these interactions at all and these interactions may determine whether or not your project is abandoned. There is no way of telling what these relationships may do unless you test specifically for them.
On The Wrong Side Of The Boundary
In thinking about classical “hit or miss” approaches, I am reminded of a cartoon that shows two fossil hunters standing at the end of a day directly above the buried, upside down dinosaur skeleton that they are looking for. The caption reads:
“Well, another day of digging and nothing to show for it.”
They failed to locate what was right under their feet! Why? Because their “hit or miss” technique had them digging everywhere except the precise spot they needed to be to unearth their goal. The same may be true of your project. Not until you know where success and failure meet and where you are in relation, can you learn as to what direction you should go in. Luckily, there are valid, predictive methods that will help improve your rates of success. They are referred to by various names:
They all allow you to test for a large number of factors at once and develop insights that can help confirm or disprove assumptions effecting your business decisions.
Analyze Variances
An AOV seeks to discover patterns among seemingly unconnected factors. When all is said and done with the results from an analysis of variance, you will know where to go and how to get there with respect to your goals. Since such an analysis tests multiple factors at once, you will also not only know how these factors interact and be able to gauge the extent of influence each has on the end result, you will also be more productive since you will have a total picture in a much shorter time. You can answer the questions:
The answers to these questions give you, the business owner or manager, a competitive edge in today’s fast moving business climates.
Competitive Advantage
An analysis of variance can be applied to many situations that can result in a gain of competitive market advantage. Let’s assume a scenario of two equal competitors as a demonstration.
Both businesses manufacture 5 million pounds a year of a chemical additive that is used in the manufacture of other products. This additive costs $0.50/lb. to produce and is sold for $1.00 per pound. This results in a $5 million cash flow. The industries that use this additive can probably support sales of 12 million pounds, but neither supplier has the capital to increase production beyond his 5 million-pound share.
Supplier #1 statistically examines his production standard operating procedures and discovers that under the right circumstances process yield can be increased by 20%. What previously cost $2.5 million to produce now costs $2.08 million or $0.42 per pound. This gives him a $0.08 per pound cost advantage over supplier #2.
Supplier #1 now has the luxury of a number of choices. He can keep the entire $0.08/lb profit to himself and increase his total yearly earnings by $400,000 or he could increase production to six million pounds to capitalize on 50% of the market shortfall. This would generate an additional profit of $980,000 (It is not always best to retain all profits) or a 39% increase in yearly profits. He could reduce his price to gain market share from his competition or he could use any combination of the above to his best advantage. Plus, supplier #1 still has the option of increasing sales according to his original plans, exponentially increasing his profits even further.
Increasing efficiency affords supplier #1 a great deal more competitive flexibility than increasing sales alone would have. When profits are increased through increased sales, all other competitive factors stay the same. The number of units sold increases, but the profit on a unit of sales remains unchanged. The relationship between your margin and that of your competitor is unaltered. There is no competitive advantage gained.
Cost Reductions Are Increased Profits
Cost reductions may not be as glamorous as increasing sales, but to a small business they are much more beneficial. For example take a business that profits by ten cents for every $1.00 earned through sales. Therefore, for every 10 cents that can be saved through cost reductions, such a business would need to increase its sales by a dollar to realize the same gain! It is much easier to reduce costs than increase sales. In addition, increasing sales usually requires an increased investment of time and money (raw materials, labor, overhead, etc.). Cost reductions do not require the further investment of capital to generate a profit. Another way of saying this is that a penny saved is a penny increase in profit. Cost reductions are pure profit that goes straight to the company’s bottom line. They can be viewed as a higher rate of return on an investment already made.
An analysis of variance can be applied almost universally to any human endeavor. It will pinpoint which factors are the most relevant to the optimization of your project, product or service. A well designed experiment can also give you “clues” as to how to control your individual parameters so you can “dial in” your desired results. All of these can lead to increased profits, marketing competitiveness, and greater marketing flexibility.
If you have any comments, let us know. Email me at rdm@datastats.com. We will try to print it in our next newsletter.
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