Posts

Stop Reading Success Stories. Focus on the Failures.

Most of us seek out stories of winners when deciding how to run our businesses. But losers’ experiences can be far more illuminating.

How many articles have you read in business magazines about entrepreneurs’ failed business attempts, bankruptcies, or products that went bust? Probably none. No business owner wants to talk about what went wrong. We’d all rather discuss our triumphs than admit defeat.

Likewise, if you’re on the way up, you don’t want to study a loser who went bankrupt in a year; you want to learn from a winner, get inspired, and then replicate his success. Right?

There are several large problems with trying to copy someone who has “made it”: In those success stories, what important steps are missing? What useful failures did he experience along the way (and leave out in the story)? And what makes you think the exact same process will work twice?

Welcome to “survivor bias.”

You’ll find the above term on dozens of business blogs, along with this illuminating story that defines the term perfectly: During World War II, the Allies lost thousands of bombers and airmen to fighter and anti-aircraft fire in raids over Germany. The Allied Forces hired top engineers to discover the aircrafts’ vulnerabilities — to learn which parts of the planes should be reinforced in order to bring more crews home safely.

The engineers observed that returning aircraft had suffered the greatest number of hits to aircrafts’ extremities — to the wings and tails — and the least number to the cockpit, engine, and fuel tanks. “We’re getting shot in the wings and tail,” they reasoned. “If we increase the armor plating there, we’ll keep more planes in the sky.

Enter Abraham Wald, a mathematician who made one simple deduction that the engineers had missed — and most likely saved hundreds of lives as a result: Planes with holes in the cockpit or fuel tanks never made it back. The ones that did make it back — the survivors — were the ones with no holes in the most vulnerable spots.

In this story, the real data was in the planes that were shot down, not the ones that made it back home. And in the returning aircraft, engineers needed to pay attention to where the holes weren’t instead of where the holes were. But paying attention to what isn’t there doesn’t come naturally to us.

Why Imitation Doesn’t Work

When I started Investigator Marketing, I thought I would receive inquiries from unique agencies looking to expand on their success. Instead, the clients who contacted me were mostly investigators whose agency names and websites (including content and images) were all extremely similar.

In our evaluations, we asked each agency why they so resembled their competitors, and they each provided almost the same answer: “We’re trying to keep up with the competition.”

That was a scary thing to hear. And it made us realize that a very small number of the agencies contacting us were leading the competition. Most were simply trying to keep up.

As a business owner, you automatically become a victim of survivor bias when you try to imitate what your competition is doing instead of carving out your own niche, by doing what the competition is not doing.

Some of the most successful investigators I know have become successful after dozens of trial and error campaigns. I’ve met investigators who make $200,000 a year offering only one service. I also know investigators who make as much money by offering 20 different services; both are successful, because both have tried, failed, and found self-made accommodations to help their agencies survive in the field.

A very small number of the agencies contacting us were leading the competition. Most were simply trying to keep up.

Mimicking your competition is not only going to turn you into a follower instead of a leader; it’s going to open you up to all the failures your competition had to face on their way to the top. These failures can sideline your business if you’re not prepared to face them. Better to study the failures that came before and learn important lessons from them.

The leaders of the industry didn’t start at the top. They kept on flying into the battle zone, one day at a time, and made accommodations to their flagship in order to withstand the assaults of the market. Going full frontal into the field without arming yourself properly — just because your competition is doing it — can quickly become a costly mistake to repair.

Everyone wants to learn from the private investigations firms that “made it.” They want to study the agencies that started in a garage and became multimillion dollar corporations in a matter of months. They want to follow in the paths of companies that are going strong into their 30th year anniversary.

But what about all the agencies that failed in the first year? What can you learn from them?

Abraham Wald’s genius was in predicting a combat aircraft’s vulnerabilities by considering data he could not observe directly — i.e., what caused the fatal hit to downed bombers. But what if there had been no Wald? What if the Allies had sent out all those bombers with wings and tail heavily reinforced, and with no additional protection to the cockpit and fuel tanks? They would have, quite literally, gone down in flames. They’d have spent millions fixing the wrong thing, without offering any real benefits to the crews they hoped to save.

The moral? If your business is limping, be wary of pouring money and effort into the first “simple” solution that comes to mind…especially if it’s the same “fix” most of your competitors are using.

Granted, it takes a lot more creative energy to consider what the competition isn’t doing, and to break new ground. But like Wald and all those lost planes, sometimes analyzing why companies failed can teach you more than observing the companies that survived.

References:

Mangel, Mark and Samaniego, F.J. “Abraham Wald’s work on aircraft survivability.” Journal of the American Statistical Association 79:259-271. (JASA Applications Invited Paper 1983) Retrieved from http://people.ucsc.edu/~msmangel/Wald.pdf