Failure can be essential for success – if handled correctly, executives say

The wildly successful POP! Gourmet Foods​ “was built on many failures across the board as I learned a new industry,”​ said David Israel, CEO of the award-winning snack company.

Rather than let each failure get him down though, Israel said he “took each of the many and used them to create a process to either prevent them or capitalize on them”​ and ultimately used them to become “smarter and better.”​

Learning from failures, rather than just throwing them out, is what salvages mistakes, agreed Doug Rauch, former President of Trader Joe’s, who spoke at the Summer Fancy Food Show. He said one of his biggest failures was almost micromanaging Trader Joe’s to death, which taught him to take a step back and learn when to let go.

Early in Fat Cat Gourmet​’s business, the co-owners learned from a failure “to fight the temptations caused by the entrepreneurial spirit,”​ which can cause young companies to seek a quick turnaround verses producing a quality foundation, said co-owner Eyal Goldshmid.

Goldshmid explained that Fat Cat Gourmet partnered early on with “some businesses that supposedly had our best intentions in mind”​ and created ambitious timetables and turnarounds for profitability that ultimately resulted in batches of product being ruined, money lost and the company almost shutting its doors.

The company learned to take “a more conservative approach to building our brand,”​ which “doesn’t mean you take it slow when opportunity comes knocking, but it does mean that you need to spend more time weighing options and potential outcomes before committing to or refusing these opportunities.”​

Consider the risk-to-benefit ratio of failures​

Building on this idea, Rauch said that companies should “focus your risk and potential for failure on those areas where you have got something you need to know.”​

For example, he said if there is a potential for failure that doesn’t mean a company should back away, but rather it should consider if it fails whether it will learn more about its consumers, the product, market or investment.

That said, he noted, “the risk reward ratio has to be smart,”​ and companies should “never test the water with both feet.”​

For chia-based nutrition bar company Health Warrior​ this means holding a “very large balance line”​ to ensure it has enough ingredients to fill more orders than it anticipates, said Shane Emmett, the company’s co-founder and CEO.

He explained that Health Warrior bought a “tremendous number of chia seeds”​ after it unexpectedly sold $90,000 worth of chia seeds in under an hour. The rush on the seeds came after the company was featured on the front page of the sports section of the Wall Street Journal in a story that said chia was the National Football League’s “top secret seed.”​

“That was extremely exciting and then extremely sad,”​ because the company was out of stock for two months after the blitz and unable to fill orders, Emmett said. “We said before we do that again, we should make sure we are in 10,000 stores and have a lot of stock!”​

Fail fast​

If failure is inevitable, then it is best to “fail fast,”​ learn from it and move on, said Kevin Powell, co-founder of True Made Foods​.

“Get your product out there and see what people think about. If people don’t like your product, quickly modify it and continue to get back out there until you have something great,”​ he said.

He explained that when True Made Foods launched its vegetable ketchup at farmers’ markets “we kept getting an odd reaction.”​  Specifically, people who didn’t like traditional ketchup loved its version, but people who loved traditional ketchup didn’t like its version, Powell said.

“This prompted us to reformulate the recipe and continue to taste test it at farmers’ markets until we got something that ketchup lovers really liked,”​ he said.

This experience also taught Powell how important it is to meet consumers face to face and find out what they do and don’t like.

“If you’re not getting feedback from the people who are truly your customers, you will start making strategic company decisions based on bad information. This will kill your company and you may not realize it until it is too late,”​ he said.

Share failures​

Fessing up and sharing failures with others “goes against human nature,”​ but if company employees don’t share failure than others likely will make them, too, Rauch said.

“Corporate organizations and culture that punish you for your mistakes and cause you to hide it means that everyone has to learn on their own,”​ he said. Plus, he added, “Teams that know things and share things will be better than an individual every time.”​

Finally, Rauch said, if a company fails it should always fail around its purpose, not around something stupid like its sexual harassment policy or accounting practices. He said failing around things that matter most shows that the company is trying.

“Bottom line is without the failures, there wouldn’t be success,”​ said Israel. “But you better be ready to take those lessons and convert them, and also have the positive mindset to persevere.” ​