April 6, 2014 in City

The Wrong Stuff: Going from fail to finish line

By The Spokesman-Review
 
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Linda Elkin learned her lesson when it came to taking on a home-building project. “The worst business deal I ever made” was hiring a contractor who dragged out the project, she said. She built this new home on the South Hill after her first setback, and shares it with her dog, Joey.
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Researchers who study why some people succeed more than others have come to the conclusion that failure plays a big part in success.

Uber-achievers are those who make big mistakes, accept the blame and work hard to avoid repeating the failure.

Failure, in fact, has become a form of virtue. Business schools everywhere repeat the mantras “learn by failing” and “fail fast, fail often.”

Seth Godin, the guru of modern marketing, summarized the creed of fearless failing this way on his blog: “In an organization built around exploration people need to say, ‘Good news, I made a mistake.’ Only by seeking things that don’t work will the group end up exploring.”

Stories of failure are common stock-in-trade for modern business leaders, said Mark Coopersmith, a professor at the Haas School of Business at the University of California at Berkeley.

“In Silicon Valley people use a business failure as a badge of courage,” he said.

Coopersmith and a colleague at UC Berkeley are writing a book dissecting the stages of business failure, called “The Other F Word.”

Local business leaders have learned the lessons of failure.

Here’s what they say came out of it:

Rand Miller: Get it in writing

In the early 2000s, Rand Miller and his crew at Cyan looked for their next big thing. They had developed two big CD-ROM video games, the bestseller “Myst” and its sequel “Riven.”

In 1999 the Cyan team chose to ramp up the Myst idea and create an online version, with constantly evolving environments and big sweeping scenarios for game players to explore.

Their plan coincided with a growing need by content companies for consumer-friendly games and applications that would fill the broadband pipes consumers were paying monthly fees for, Miller recalled. So Cyan went all in with a multinational game publishing company called Ubisoft. Miller and his team worked for three years on the development of Myst Online, later given the name URU.

It turned out to be a commercial failure. After Cyan spent a few million dollars developing the online version of Myst, Ubisoft launched the game in November 2003 with the name “URU: Ages Beyond Myst.”

Then the company pulled the plug in February 2004.

Miller said a Ubisoft executive who helped sign the deal with Cyan had assured him the test run of Myst Online would last at least a year.

“We had a verbal commitment with that one man. But one man’s commitment is not a company commitment,” he said.

Following the shutdown, Cyan shifted gears and produced another boxed version, calling it “Myst V: End of Ages.” After that product was released, Cyan had to shrink its workforce to a few workers and spent more than a year revising its strategy.

In the past year the company has rehired developers and is working on a new online game called “Obduction.”

Miller said the takeaway is to be more careful about verbal agreements involving big sums of money. “We’ve always been a trusting group,” Miller said.

“That’s a lesson learned. You have to expect to be burned, I guess.”

Linda Elkin: Missed warning signs

In 2002 Linda Elkin, then a vice president and commercial banking manager for U.S. Bank, decided to build a new home in the Ridge at Hangman development.

She and her husband hired a builder who was a reliable customer at the bank. Based on her business dealings with him, he seemed like the right choice, Elkin said.

“That was the worst business deal I ever made,” said Elkin, now the bank’s regional president.

The contractor told them his work would be faster and less expensive than that of his competitors.

It didn’t happen that way. The contractor dragged out the project, focusing most of his professional energies on jobs in Arizona.

It took more than a year before she and her husband could move in. By that point the job had taken longer and cost more than the builder predicted.

Elkin said she ignored warning flags that should have triggered her decision to fire the contractor. “I didn’t listen to my gut soon enough,” she said.

They moved into the house, and her husband finished the incomplete work. He lived in the house for three weeks before moving out as the relationship turned stressful, Elkin said.

They divorced within a year. Three years later, after the house was sold at a large loss, they reconciled and decided to build another home.

This time, all the key details — schedule, costs, the whole scenario — were nailed down before signing the contract, Elkin said.

John Stone: Listen to your instincts

North Idaho developer John Stone said his biggest failure was a decision, pre-2000, to bring in two investors who wanted to be partners in a development project.

Stone said he didn’t know the two men at all and his instincts told him to be careful, but other partners worked hard to convince him to let the would-be partners become involved.

He didn’t trust his instincts and the two partners became aggressively obstructive in trying to correct problems they saw keeping the project from moving forward.

Stone and other investors in the project had to buy out the two partners.

“I shouldn’t have brought them in,” he said. “It taught me the lesson of always trusting your instincts.”

Jason Thackston: Restoring office trust

In the early 2000s, Thackston, now an Avista vice president for energy delivery, worked in the utility’s energy purchasing group. That group’s job was to analyze supply and demand for energy and make purchases when demand exceeded supply.

The market became volatile, spiked in part by huge price increases as companies speculated on power contracts.

Power costs soared and Thackston said he and others on the team continued signing energy contracts at horrific prices.

After staggering through a hot summer, Avista was out of cash and analysts worried the company could declare bankruptcy.

“That caught us totally flat-footed,” Thackston said. Avista’s credit rating sank “and it took us eight years to regain it,” he said.

He felt he had lost credibility and the trust of company peers, with no quick fix to restore his reputation for not seeing the energy crisis coming.

For Thackston, the next step was taking full responsibility for all his obligations and delivering beyond the expectations of his supervisors.

He worked on being transparent about any other mistakes he made thereafter. He made sure to follow through on any job he was given.

“Getting that (trust) back took time. There’s no silver bullet,” he said.

Jim Frank: It’s all about the details

Spokane developer Jim Frank has been riding the economic crests and troughs for more than two decades. His company, Greenstone, has a series of high-profile successes, including the conversion of the former Agilent campus into a busy commercial park and the bustling city-center mixed development, Kendall Yards.

His philosophy is you can’t get everything right all the time, so be prepared to find yourself making mistakes and needing to recover. His company has a philosophy: “30 percent of what we do is wrong, but we don’t know what 30 percent it is. It’s our job to find our mistakes and fix them.”

Back in the 1980s Frank put down earnest money on a 50-acre section of undeveloped land along North Argonne, east of the Northwood development. Frank said the land had beautiful views and seemed ideal for homes.

At that point he was a novice developer, and Frank’s previous two projects were straightforward, leading him to think this project would be no different.

Then the project stalled as his team discovered the complexity of the property, including a significant presence of rock in the ground.

“You can get caught up in a piece of property that looks and feels good without understanding the details of developing it,” he said.

He had to forfeit the earnest money, a loss of around $200,000.

Frank said he learned a complicated deal can be undertaken but it needs to be structured with options to get out without losing big money.

“You have to structure those risks in a way they don’t kill you, or shut your company down,” he said.

Some deals now are structured as a joint venture with the land owner as a partner, to share the risks and reduce Greenstone’s exposure.

Marty Dickinson: Meet Murphy’s Law

In 2005 Marty Dickinson became president of the Downtown Spokane Partnership. In her first year on the job she was asked to present reasons why the Spokane City Council should adopt an ordinance banning sitting or lying on downtown sidewalks.

She organized information, created a PowerPoint presentation and loaded it on her computer.

“I was fresh on the job and I needed to prove myself,” Dickinson said. At the council meeting she stepped up to the podium to present her organization’s argument for adopting the ordinance.

The presentation didn’t come up, due to computer failure. She didn’t have a backup thumb drive. Not having a full grasp on the key issues, Dickinson tried to wing it.

“I was completely unprepared. I failed all of the people who were there from the DSP,” she said.

The council didn’t adopt the ordinance that night. The near-identical version of that ordinance was passed last year, long after Dickinson had moved on to Sterling Bank, where she is vice president of marketing and communications.

“Now I feel that good planning equals good presentation.” Dickinson always has a backup of a presentation on a thumb drive, plus a paper copy.

She vows never to go into a forum without having done adequate homework on the topic. “That was a learning experience. I realized I shouldn’t have gone into (that meeting in 2005) cold. I should have met with the council members before I got to that public meeting,” she said.

Jon Eliassen: Keep track of deadlines

In 1974, Eliassen was working as a tax accountant for Washington Water Power. He’d eventually stay there 32 years, moving up to chief financial officer, guiding the utility through dozens of financial deals and business transactions.

But that year he blew it by missing a March deadline to file for an automatic three-month extension to file the utility’s federal tax return.

The rookie mistake set off repercussions; the return had to be filed in 90 days. Plus the IRS hit WWP with a $25,000 penalty.

Eliassen got a summons to the office of WWP President Wendell Satre. “I always remembered he asked me, ‘So, what are you going to do?’

“My response was that I was going to file the return in half the usual time, and we would have to pay the penalty.”

After suffering a few weeks of embarrassment, Eliassen said he discovered what could have been a “career-limiting move” instead allowed him to recover and move on with his job.

Later Eliassen took on a number of executive positions, including CEO of Red Lion Hotels, until he retired last year.

“Ever since, I have tried to encourage people who worked with me to try things, to take reasonable risks; if they don’t work out, learn from the experience and don’t make the same mistake over and over.

“And I also learned to really keep track of deadlines. I never missed another important deadline.”


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