Monthly Archives: March 2013

Learning from Failure

I am thinking about developing a course or at least integrating cases into my current teaching to explore failure, in contrast to the more often touted successes.  Failure is one of the understudied areas in academic research in general, and entrepreneurship in particular, despite its recognized prevalence throughout business history.  Although it is well-known that many entrepreneurs fail, as usual understanding why this happens is the interesting challenge.

When presenting my research on business models, I discuss several examples of less successful companies – Prodigy is one of them.  Result of a joint venture between IBM, CBS, and Sears founded in 1984, the company was a predecessor to what became known as the Internet portals fifteen years later.  Beginning in the 1980s it offered its customers such services as weather, news, banking, electronic commerce, email, and message boards, similar to the concurrent Minitel proliferation in France.  My first contact with Internet actually occurred through a Prodigy account when I was a high-school exchange student in Florida.  I was very far from realizing then the impact this new technology would be having on the world as we knew it for the years to come.

Prodigy erred on the side of “too much too early” though – customers were not ready to buy on the Internet in the 1980s, they thought they might actually be paying a premium for buying online, transactions over the Internet were not secure, “shopping cart” was not yet introduced to the online world (Amazon came up with that 10 years later), and overall legitimacy of the Internet was very low during those days.  Unfortunately for Prodigy and their pioneering technology, the innovation failed to adjust to customer needs and understand how exactly various services such as email might be used.  Despite investment and managerieal effort, the company lost its first-mover advantage.  Hargadon and Douglas (2001) discuss this example in more depth.

Other cases of failure that might be interesting for entrepreneurship students to examine are the cases of Internet start-ups such as WebVan, ChemDex, or  HBS cases are available about the first two, and can be discussed profitably in the classroom.  More interesting thoughts about entrepreneurial failure in the recent post by Andrew Hargadon here.