Crash & Learn: The seeds of success

Written by Rick Spence
When Boston Pizza proved that its recipe for casual dining with an attached sports bar could work across Canada, the Richmond, B.C.-based chain naturally started eyeing a bigger prize: the U.S. market.But, like most companies expanding stateside, Boston Pizza encountered rough sledding. While Americans may look and sometimes talk like us, their consumer habits and business culture are so different that only a co-ordinated strategic assault will do. “You hear people say it’s easier doing business in the U.S.,” says Boston Pizza co-chair Jim Treliving, “but it’s not true.”

With the U.S.’s mind-boggling webs of banks, landlords, suppliers and power companies, along with skeptical franchisees who questioned the Canadians’ staying power, that market forced Treliving to tear up his business plan and move to Dallas himself. Ten years later, he says, “It’s been a great big learning experience.” Boston Pizza’s U.S. operation now has 60 successful restaurants, plus six more on the way, and it’s finally about to make its first profit.

Learning from your mistakes — easy to say, so hard to do. But it’s proof that legendary football coach Vince Lombardi was wrong when he said, “Winning isn’t everything; it’s the only thing.” No one can win all the time, so what you do with failure is more important than winning every battle.

Lombardi’s message — that there is just one way to define success — was supported by the late stock-car driver Dale Earnhardt Sr., who believed: “Second place is just the first loser.” But in real life, things are different. You have to play a long game. True champions aren’t just those who win, but those smart enough to recognize that failure sows the seeds of future success.

Consider the career of former British prime minister Winston Churchill. Who knew greater victory (his British-American coalition helped win the Second World War) or such crushing defeat (his Conservative party was tossed out of office two months after VE Day)? Churchill lost more elections than any other figure in recent U.K. history. Yet, a 2002 BBC project named him the Greatest Briton, ahead of Shakespeare, Darwin, Princess Diana, King Arthur and David Beckham. It was the long game that mattered to Churchill, who declared, “Success is never final, and failure is never fatal. It is courage that counts.”

In business, failure comes with the territory. Often, it takes the form of a motivating moment that makes future successes possible. K.C. Irving got his start in the oil business only after Imperial Oil yanked his licence to sell Esso products in 1924. John Angus “Bud” McDougald built Toronto’s fabled Argus Corp. after not being able to land a job in England better than milkman. Media magnate Roy Thomson failed at farming as well as selling appliances and auto parts before buying his first radio station.

Canadian business history is studded with success stories, from the Canadian Pacific Railway to Tim Hortons to Research in Motion. But the failures are hard to forget: Eaton’s and Simpsons, Nortel, Stelco, Abitibi, Jetsgo and many more. Often, the line dividing winners and losers is faint. Twenty years ago, few expected Canadian Tire to survive the simultaneous onslaught of Costco, Home Depot and Wal-Mart. Yet, the homegrown retailer has thrived — even though its customer-service sins are still notorious and its 1980s push into the U.S. remains a textbook example of what not to do.

“Losing” and “failure” are part of the experience of being alive and competitive. Yet, Canadians seem to have a nagging fear of failure — and it may prevent them from succeeding. Susan Ward, a Vancouver-based small-business consultant who runs the Small Business Canada forum for, says she has encountered many Canadians who say they would like to start their own business, but€¦ They fear that no one will buy their product, they’re not very good at selling or they won’t make enough money to live on.

For some personality types, such uncertainties are a cue to take action: to step up and do the research or get the training needed to make their dreams come true. But for many Canadians, such misgivings stop them from moving forward.

Could they be right? Canada abounds with stories attesting to the toxic impact of failure. Entrepreneurs complain that lenders and investors shun people who have failed in business — even if the experience has made them wiser and better prepared. Financial Post columnist Diane Francis claims Canadian banks won’t lend a dime to any unsuccessful business owner (which isn’t true, although credit history is the banks’ most important criteria in lending to entrepreneurs — and it’s hard to lose your business without missing a few payments). Many entrepreneurs who lose money to firms that have gone bankrupt vow never again to do business with those who left them holding the bag. In fact, some would prefer the offenders go to jail rather than be allowed to walk away from their debts and start over. They deplore a bankruptcy process that is one of society’s few institutions designed to help people bounce back after failing.

Joe Martin, who teaches Canadian business history at the University of Toronto’s Rotman School of Management, believes Canadians are middling risk-takers — not as afraid to fail as Europeans but less confident than our American cousins. The most common comparison, however, is to Silicon Valley, where venture capitalists encourage tech entrepreneurs to “fail fast.” Valley investors don’t just overlook failure; they embrace it. Entrepreneurs with character who have failed recently, investors figure, have now made mistakes they’ll never make again.

“In the Valley, if you’ve failed well, that’s a good thing,” says one Canadian entrepreneur now living there. “€˜Failing well’ means you made good decisions but maybe the market risks were beyond your control. People figure if you were good at it, you’ll eventually succeed.” In Canada, he says, “You could go after something with a lot of potential and make great decisions and fail, and that would be looked at as a bad sign. Which is totally flawed, because if you’re not failing, oftentimes it means you’re not trying hard enough.”

You might think it’s unfair to compare Canadian attitudes toward failure with those in Silicon Valley. But as our economic future increasingly tilts toward information technology and global markets, lenders, investors and entrepreneurs across Canada must adopt more of this fail-and-learn philosophy, or our best business builders will simply head south as soon as they hit their first wall.

Do Canadians have what it takes to make peace with failure? Despite big-name meltdowns such as Molson, Laidlaw, Seagram, Woodward’s and Dylex, Rotman’s Joe Martin believes Canada’s track record of business failure is no worse than that of other industrialized economies. But he questions whether our business leaders are learning anything from these front-page lessons in business mismanagement: “There’s been far too much amnesia in Canada. We’re forgetting the mistakes of the past.”

Asked to name any Canadian firms that are good at studying their past to make better decisions in future, Martin stutters to a stop. RBC maybe, he says after a long pause, mainly because Canada’s largest bank regularly commissions new corporate histories. What many people don’t realize, says Martin, is that a century ago, Royal Bank was only the seventh-largest bank based in Halifax. Studying history can help you realize that no one’s success or failure is inevitable. As Martin notes, “I hope the people at RIM set up a study team to figure out what Nortel did wrong.”

The secret of success is to use failure as a tool that helps you and your team grow and improve. How do you create an organization that learns from its failures? The first thing leaders have to do, says Martin, is avoid what he calls Whitepainters’ Syndrome: presuming that history started only once they became CEO. He gives credit to PCL Construction Inc. chair Ross Grieve, who in a speech celebrating his selection as Canada’s 2009 CEO of the Year, acknowledged his debt to his immediate predecessor and to the Poole family who had founded the firm a century ago. Martin says more companies have to begin preserving their history and analyzing it for patterns of success and mistakes. “You need to know where you’re coming from and what made you successful,” he says. Then you need to communicate those lessons on an ongoing basis to your team, so they become part of everyday culture.

One of Martin’s favourite case studies is Massey Ferguson, the tractor manufacturer that was Canada’s first global brand. Protected from U.S. rivals by high Canadian tariffs, Massey easily dominated immature markets in Europe and Africa but never really braved the U.S. “That’s where you hone your competitive skills,” says Martin. The Massey brand dwindled through a series of restructurings and bailouts, and today it’s just a brand name used by Atlanta-based AGCO Corp. (formerly Allis-Chalmers). Yet, AGCO says Massey Ferguson is still the world’s leading tractor brand.

Inability — or unwillingness — to compete runs through many Canadian business disasters. As Eaton’s fought for its life, it folded its catalogue, curtailed its big promotional sales and let international fashion designers, not its own buyers, decide what merchandise Eaton’s customers would buy. Molson got swallowed up after it lost $600 million buying a Brazilian brewery rather than investing in cracking the U.S. market with its own brand.

Companies that get too comfortable in local or domestic markets just don’t have what it takes when hardened rivals come to call. The first lesson of failure, then, shouldn’t be to cut back and retrench when faced with hard times, but to jump into the marketplace and compete your heart out. Coach Lombardi would have liked that.

There are many other ways a firm can learn from failure. Ralph Heath, who ran a LaCrosse, Wis.-based ad agency with big clients such as Budweiser and State Farm, published a book last year called Celebrating Failure. Heath says that when his agency, Ovation Marketing, was starting out, his team made mistakes all the time — and those failures built his business: “Failure and defeat are life’s greatest teachers.”

Here are some ways Heath created a learn-from-failure culture:

Use storytelling
Talk about company mistakes that have led to new insights and breakthroughs. It’s not enough to say you tolerate mistakes. Demonstrate how mistakes can move the business forward.

Be open about your own failures
Heath constantly discusses his own mistakes, and what he learned from them, to encourage his staff to do the same. When one manager pointed out that leaders aren’t supposed to make mistakes, Heath didn’t buy it: “Everything is changing so fast today, you’ve got to keep trying new things. There’s no way you’re going to hit it out of the park every time.”

Publicly celebrate both successes and failures in your company
Group critiques can help divine the right lessons. Keep the mood positive and forgiving.

Explore every failure
Find out what happened so it doesn’t happen again. Every time Ovation lost a pitch for a new client, a staff member would call the prospect back for details on what they did wrong. Some clients didn’t want to talk about it, but most provided direct feedback on incorrect assumptions that Ovation staff had made, key concepts they’d failed to explain or presentation tactics that had rubbed a boss the wrong way. “It’s an incredible learning experience,” says Heath.

Test, test, test
With a background in direct marketing, Heath understands that most new marketing tactics don’t work. But if you innovate often and track results fast, you can learn what works in less time than it takes for other companies to guess.

Fail smarter
Invite constructive criticism of your own plans and ideas. Show you can take it as well as dish it out.

The Montreal-based president of a fast-growth company once told his staff: “If you don’t make a mistake, you’re fired.” That’s probably taking it too far. But, clearly, he understood the fundamental rule of failure: the only way to avoid it is to stop trying to achieve. Fail fast, fail smart, win big.

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