Failing Fast: Why Do Cannabis Companies Need to Get Better at Failing
“I've failed over and over and over again in my life and that is why I succeed.” Michael Jordan
Every company and person fails. It just a question of frequency and impact. If you don’t accept that failure is a part of life, there is no point in reading further.
Its counter intuitive but cannabis firms that are good at failing (with new products, strategies or operational initiatives) improve their odds of winning over the long run.
If there is one management coin then failing fast is the opposite of scaling up growth.
Being good at failing brings many benefits including preserving scarce time and capital; reallocating resources towards more profitable, strategic considerations and; enhancing market and operational learning. It can also stimulate your staff to think more innovatively and better understand risk.
Many leaders acknowledge the virtues of failing fast but are challenged to call things off before they turn ugly.
Why?
1. People and cultures are plagued by psychological biases such as hubris, the sunk cost fallacy and cheerleader's ‘we are almost there’ trap. For these corporate zombies, if 3 x 0 = 0, why would 5 x 0 yield a different result?
2. Key decision makers are often rewarded for creating products and growing revenues, not cutting them. Admitting failure is often seen as a career limiting move.
3. Many LPs and MSOs lack Product Line Management skills. This hinders them from establishing the right metrics and targets upfront or reading the early market tea leaves (e.g., slowing growth, high inventories).
There are other, less obvious root causes:
> Sandbagging & shifting metrics
Managers often set the financial hurdle rate so low they are easy to hit while ignoring other key measures such as Returns on Assets, Return on Capital and opportunity cost. Furthermore, other executives will dial back the goals to keep a project going and funded.
> FOMO vs key competitors
It is easy to become overly competitive in a battle while losing sight of the war.
> Market growth
Frothy markets can give leaders false hopes that their new product or acquisition will catch up aka the rising tide argument...
Fixing the problem: Leaders can….
1. Foster an environment of psychological safety where employees feel encouraged to speak up and companies can leverage ‘trial and error’ learning;
2. Apply a neutral, external analytical lens to the proposed business case;
3. Create early warning mechanisms to spot nascent failures. These would include more senior level reporting, consumer surveys and post launch team scrimmages;
4. Insist your brand managers have PLM skills and that these activities are baked into the performance measurement system.
#failure #strategy #MSOs #LPs #metrics #decisionmaking