Tolerance of failure

Michael Alan Hamlin

Posted on June 23, 2011

Among the attributes the Philippines requires to transform itself into an Asia Pacific center for innovation is “tolerance of failure,” according to Taddy Hall, co-founder of Innovation without Borders (IOB). IOB calls itself “a non-profit collaborative of international researchers that helps local and global organizations create innovation for the Base of the Pyramid.” By the base of the pyramid, the organization presumably focuses on technology for the masses.

Hall spoke last week at the PhilDev Forum where the theme was “Innovation and Entrepreneurship for a Globally Competitive Philippines.” The conference featured successful entrepreneurs, consultants like Hall, a sprinkling of well-known executives, and an impressive number of Philippine government cabinet secretaries as speakers and panelists. In his remarks, Hall presented case studies on successful innovation.

The case studies were impressive enough—although they are already widely known and documented—but the principle lessons they conveyed stuck. Among them was the aptitude to tolerate failure, particularly in the context of the overarching and recurring theme throughout the day of the principal role the private sector plays in funding innovation-generating R&D. As I pointed out last week, in Asia and around the world, the private sector is the primary source of R&D funding.

The ability to tolerate failure is important at two levels. Hall said that in Silicon Valley—the cradle of life for many well-known former U.S. startups—from Hewlett Packard to Google—failure is a rite of passage. The mindset is that failure is opportunity to learn; therefore, if we don’t fail—once, twice, or even many times more—we don’t learn. And if we don’t learn we don’t know enough to create high-margin, sustainable value.

In Asia and in the Philippines, failure does not enjoy that glorious perception. Rather, failure is a sound and acceptable reason to feel shame. Anyone who admits failure isn’t worth a second look. Once a failure, always a failure.

At the risk of sounding like a blazer-wearing, open-collared shirt motivational speaker, Hall and other speakers who made this point—which included the successful Filipino entrepreneur, engineer and inventor, and now respected venture capitalist Dado Banatao—are right. The Philippines doesn’t just need a critical mass of engineers, scientists, entrepreneurs, and professional managers to become a center of innovation. It needs a critical mass of smart, determined people who can leverage failure.

Providing that we have the mindset and the critical mass of talent to invent cool things and productize them for high returns, we’re ready for funding. But where will it come from? Executives in many large corporations find it difficult to rationalize investing in value-generating R&D with the huge prospect of a significant negative ROI offset by a sliver of a chance for an astronomical ROI if things somehow go right. On the other hand, investing in consumption-driven ventures is straightforward and ROI is virtually guaranteed. How, the reasoning goes, can executives justify to their closely-held companies’ shareholders that they sunk P500 million into a failed startup instead of a Makati condominium?

Point taken. Sure, if the investment does work and a high-margin invention succeeds in the market, it can produce ROI far greater than any real estate development. But that has never happened in the Philippines. Banatao invented the first IBM-compatible chip set and generations of graphic chips and technologies in Silicon Valley—where many other Filipinos have also done groundbreaking research, much of it leading to successful startups and successful IPOs or lucrative acquisition deals in the U.S.

I’ve been listening to Banatao and other venture capitalists for a decade or more and I’m used to hearing them say the Philippines isn’t ready; conditions are not right for transforming a perennial underperformer into anything close to a center for leading-edge R&D. So I was more than somewhat surprised when I heard him say in two different venues last week that, “It’s time.”

His message to the private sector was clear. He said investing in innovation to produce high-margin products of high value “is your future.” And Banatao provided insights into where that money can go: biofuels; low-cost vehicles; alternative micro telecom infrastructure providing high-speed data services for far-flung municipalities and provinces; and pad-type thin computing devices to support education. All opportunities that can benefit the bottom of the pyramid.

That’s some valuable free consulting advice from one of the most successful investors and venture capitalists in the world. But the best advice is this: Prepare for failure. It is your future. And it will pay off.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn.). Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

 

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