Linda Rottenberg of Endeavor: "Go Big or Go Home" sometimes means "Go Home"

This story by Linda Rottenberg, co-founder and CEO of Endeavor, an organization promoting entrepreneurship in emerging markets, is part of "Failure Chronicles," a section of the April 2011 "Failure Issue" of Harvard Business Review.

As the plane took off for New Delhi, my mind was still grounded in the intense board meeting I had just held in New York. It was 2007, and Endeavor, the organization I had cofounded a decade earlier to support high-impact entrepreneurs around the world, was expanding rapidly. We had offices in nearly a dozen developing countries, from Brazil to Turkey. But our board was agitating.

“Linda,” the directors said to me firmly, “we’ve been operating in emerging markets for 10 years. Why are we not in India?”

We were not in one of the world’s fastest-growing economies because I felt that India, with its thriving culture of entrepreneurship, was not the right market for us. Endeavor’s mission—to mentor young business leaders, to get them access to capital, to turn them into rock stars—had already landed in India. But the board made a compelling case, arguing that if Endeavor was serious about growth markets, we couldn’t ignore one of the biggest in the world—not to mention one in which many of our own entrepreneurs wished to expand.

Once I was on the ground, my resistance softened further. I had encouraging meetings with top business leaders in Delhi, Mumbai, and Bangalore. Sure, India had a vibrant community of entrepreneurs, they told me, but more local innovators were needed. Within months, Endeavor had secured $1.5 million in committed funds—half the capital required to launch local operations—and three (out of the needed six) local business leaders were ready to join the board. At our annual gala, I announced the news: Endeavor India had arrived!

But so had everyone else, I soon realized. Silicon Valley’s premier VC firms were already active in India. The media were full of homegrown entrepreneurial success stories like Wipro and Infosys. Although we were off to a successful start, I feared the seeds of failure were already planted.

Still, I was reluctant to give up. I had faced this situation before. A decade earlier, Endeavor’s inaugural office, in Chile, had been struggling because of lackluster buy-in from the local business community. I decided to shut down the office. Six months later we reopened, having received calls from many business leaders there expressing their desire to work with us. Endeavor Chile swiftly became one of our top offices, led by an all-star board.

Was India another Chile, I wondered, needing only time to flourish? The answer was no. We had trouble recruiting additional local board members. Also, people were asking Endeavor to relax its “high impact” standards by focusing outside the capital cities, on the base of the pyramid. I feared mission drift. I needed to face reality: Failure was an option.

I soon announced that we would close Endeavor India.

As the leader of a fast-growing organization, I know the importance of setting an ambitious course of action—and stubbornly following it. I believe passion is a powerful guide. But the Law of India, to me, is: You can’t always will an outcome. You can’t always win. You just need to fail smart.

I often think of that plane ride to Delhi and of how important that experience has become to my understanding of entrepreneurship. One of my favorite business mantras is “Go big, or go home.” We talk a lot in business—and at Endeavor—about the first half of that equation, “Go big.”

But we need to spend a lot more time on the second half, “Go home.” Sometimes knowing when to shut down a failed initiative is as vital as knowing when to start one. Sometimes embracing failure is as important as toasting success.

This is a very difficult decision for entrepreneurs. Persistence is a critical success factor - but persistence in the pursuit of a failing objective is a drain on precious time and resources. The magic happens at that margin - between doubling down and going home. When do you decide it's time to "Go Home" on a new venture?

Another gem from Plain Dealer's "My Biggest Mistake" - Learning from a rapid international expansion

The Plain Dealer's "My Biggest Mistake" series by Marcia Pledger is the best resource for mistake stories anywhere, and should be regular reading for anyone who visits this site. This story is from Sudarshan Sathe, CEO of New Concepts, Inc., a Solon, Ohio, company that provides products and services to the steel industry.

A couple of years after I started a metals brokering company that caters to the steel industry, business took off. I was driving to Canada every week and flying to London several times a year.

I made the mistake of opening offices in those countries -- even though they were one-person operations -- so I could better serve customers in those markets. I thought that there would be active growth in those markets beyond what we were already doing and that failed to materialize.

The problem was I'm a hands-on manager and I was not able to properly manage the people in offices so far away. Infrequent phone calls and technology just isn't the same as face-to-face conversations. Managing is a two-way street. With offices so far away, I didn't get to interact with them and learn from them either. Those far-away offices could not connect with the rhythm and flow of the main office. The loss of that kind of connection was the cause of failure....

As always, I consider any difficulty to be a cause for self-examination. I did a lot of introspection. Then I realized I had to close the Canadian office, which I did after two years and the London office after nearly four years.

When you make a mistake you have to come face to face with yourself and see what part of your personality made it possible. I learned I like to be personally involved with the work. I'm not the type of person who can be a hands-off manager. It's a small operation and I have a certain way of doing things, which worked. I wanted to see it continue. But I had to find a new way to grow. And I knew I had to do it closer to home.

In 2008, I bought a well-established company in the wastewater treatment field.

But after my experience of trying to operate satellite offices in London and Canada, even Eastlake seemed too far [25 miles] away. Despite the expense, I moved the five-employee company to Solon, where my other company is located.

Mistakes in business or in life emanate from you. The challenge is to recognize them and work on correcting those within you. As an Indian philosopher has said, "The world is a mirror. What you see in the world is your own reflection."

Note that Sathe never points fingers at anyone but himself. This shows a sense of agency and ownership that will serve him well. He also learned from his international experience, and put that learning into practice when he invested in moving his acquired company so he could spend more time with its team face to face.

Mistakes you will make. They will cost you. But taking accountability for them, learning from them, and applying that learning will repay you handsomely.

Royal Little: a "simple lesson" about expanding capacity

Another story from Textron founder Royal Little (1896-1989), author of "How to Lose $100,000,000 and Other Valuable Advice." In spite of his wealth of mistake stories, Little was one of the most successful US businessmen of the mid-1900s.

Here he discussed some of his struggles with his company Atlantic Rayon Corporation in the aftermath of the Great Depression.

Atlantic Rayon Corporation, 1940

With all our expansion of dyeing and throwing capacity and optimism and enthusiasm for the future, what happened in 1940: Sales were approximately $7,500,000 and we lost $19,000. What a business! Here we had struggled successfully for many years without a loss through 1937 and then in 1938 and 1940 after all our expansion and optimism we lost money. It certainly looked as though there must be some better way of making a return on stockholders' equity than in the yarn processing business. That year's report stated:

The greatest contributing factor to the company's unsatisfactory results for the year was the low level of prices for throwing during its last nine months. Processing charges which the company obtained during and after the second quarter averaged 36% below those for similar services in the first quarter.

Since we had increased our plant capacity to service the New England textile companies' thrown yarn requirements, we made the false assumption that prices for the services would hold up even though increased capacity meant that we had to take business away from competitors, and we foolishly assumed that this extra competition would not create price cutting. Obviously, if one wants to expand one's position in an industry it is far safer to buy a competitor's business and not increase overall capacity. It took me many years to learn that simple lesson. At the end of December 1940, after eighteen years in business, we had built up the net worth of the company to only $1,765,000. No wonder we were getting discouraged.

Don Keough sparks a revolt at Coke by rejecting a plan without a full evaluation

From Donald Keough's book "The Ten Commandments for Business Failure." This is regarding Commandment Four: Assume [Your] Infallibility.

Earlier I mentioned being fortunate in having a team of managers who individually thought my executive infallibility was not so infallible. One very important instance occurred right after the Berlin Wall came down in 1989.

If you want to fail, do what I did.

We were in a meeting with the head of our German operations and Claus Halle, also a German, who was head of all our international operations. During a review of a routine annual business plan, the German management team put a project on the table that called for the company to invest roughly half a billion dollars or more in this new democratic state of East Germany [now part of the Federal Republic of Germany]. The project cut deeply into the total budget that was being put together, and apparently I was tough, to a fault, in rejecting it. After the meeting Claus came to me and said the head of the German management team wanted to resign.

I was shocked. Why?

Claus responded, "You didn't listen clearly to what he had to say. Much of this investment would come from the German bottlers. You don't know the potential of East Germany. You've never been there. You rejected it out of hand without considering that this could be a great opportunity."

Claus went on, "At the very least, you should talk to them again. But I'd like to ask you to do more. Come with me to see East Germany for yourself, first hand, and make up your own mind."

We went to East Germany. We went everywhere. And everywhere I saw opportunity. My mind was completely changed. We assembled everyone involved together, and I apologized for being so narrowly focused and so intransigent. Together, we made plans then and there to buy several plants in the East....

Our ultimately profitable experience in East Germany and in the rest of the Eastern European countries is further proof that one cannot know enough about a country or a business situation from a briefing book in the comfort of one's headquarters offices. (pp 63-65)

Sue Pera video story: the perils of opening a second store

Sue Pera is the owner of the Cornerstone Coffeehouse in Camp Hill, PA. Visit them on the web at http://thecornerstonecoffeehouse.com. (Disclosure: I've been a customer there for over 10 years. It's a great place; if you happen to find yourself in Camp Hill, you must stop by.)

Transcript:

I've owned my own business for almost 20 years, and I've made several mistakes along the way. The one that truly affected us more than anything was when we decided to open up another coffeehouse. Instead of one Cornerstone Coffeehouse, my husband and I, who is my business partner with me, he and I decided that we would open up a second coffeehouse, about 15 minutes away from here. It's in a different area, and we were hoping that it would attract different people.

What I discovered, on the upside, is that I am much better at running one place. That's my strength in running a business - getting to know people personally. Making them feel welcome as though they're here in my home. I'm here to entertain them. To have the best food, the best service, the best baristas. What I found out when I opened the second coffeehouse, I was now dividing my time between two. And instead of making both of them do fantastically well, I was making both of them pretty mediocre.

Because I didn't have enough time during the day. Nor did I have the, maybe, business savvy that many people have, who can open up multiple locations. And so it wasn't really something that I took to heart, so much as I took financially to heart. It was a very large financial investment that we made in the new business. And I'll probably be paying that off for the next 5 or 6 years. It certainly was something, that knowing myself better, running my business now... It's something I'll never be able to do again.

I'm back to running one shop. Running one business is my forte.