Viewing Product and Service Failures as an Opportunity


| October 1, 2015 | in

As a startup community we spend quite a bit of time focusing on processes and techniques for designing products, discovering product/market fit, scoping/building/iterating on MVPs, and ultimately acquiring customers. And rightfully so — these are the fundamental actions of creating sustainable innovation.

But there’s one aspect that I feel is overlooked in the early stages: handling situations where you’ve failed to meet customer expectations. There’s hidden value in dealing with these situations gracefully. In addition to avoiding vocal distractors, these efforts can actually lead to increased customer loyalty.

Early-stage products and companies face a challenging environment. Teams are stretched thin and moving rapidly to survive. People are still getting to know each other, their roles, and how to interact with customers. Products are immature and may lack critical features or fail on unexpected behaviors. Marketing and sales messaging is being tested and may miscommunicate the true value of the product and brand. Given this array of challenges, it’s natural for failures to happen.

Failures Happen – Now What?

One may be tempted to consider focusing on how to prevent failure. But this is the wrong solution in the early stages as it will only slow progress, discourage risk taking, and ultimately stifle innovation. That said, it doesn’t mean a company shouldn’t put thought toward how to best manage failures.

So what happens when we fail to meet customer expectations in some way? The primary tenants of lean thinking are build – measure – learn, and our solutions should live within this model. Companies that embrace the lean process generally try to learn with each iteration. My challenge is two-fold:

  1. Learn from both the success AND failures of each cycle.
  2. Give special emphasis to rapidly resolving the failures from the customer’s perspective.

The first mistake is that it’s easy to only focus on learnings from successes and ignore failures. When you find something that works, it’s natural to embrace that technique. Conversations with happy customers are easier to have. It’s much tougher to engage with a frustrated customer to discover the root of their frustration – and resolve it. At times it may feel like searching for a diamond in the rough—but when you find it, the return is well worth the investment.

How To Manage Failure

In many mature companies, front-line service often strives to “delight” a frustrated customer. When you’re still getting to know your customers, this can be an expensive and seemingly impossible goal to accomplish. The good news is that the research has favorable findings for startups: You can stop trying to delight your customers ( The key finding in this HBR article is “When it comes to service, companies create loyal customers primarily by helping them solve their problems quickly and easily.”

The first step is ultimately setting up clear communication channels and resources to help customers when they’re stuck or frustrated. The second is being prepared to quickly and effectively handle whatever situation comes through those channels.

It costs your startup to acquire each and every customer. With the constant pressure to always keep filling the sales funnel, it’s easy to put off thinking about retention as an important metric. However, in many business models, it is far cheaper to invest some resources in retaining a customer rather than acquiring a replacement. Knowing that investments in this area both retain a customer AND increase their loyalty really help justify some thought around handling failures.

The HBR article offers additional suggestions for how to make it quick and easy to resolve problems. These may or may not work in startup environments where a fix may require developer effort that is unavailable.

However, I suspect there are other creative tactics your company can employ. Perhaps a resolution is simply admitting to the customer that the product is currently unable to meet their needs and then reaching out to them when it does. Maybe it’s offering your product or service for free until the problem is resolved (or offering it for free once it’s usable again).

Make The Most Of It

Regardless of what techniques work for your startup and market, simply making plans and empowering front-line personnel will create returns for you. While you’re in this learning and discovery phase, encourage experimentation with offering different solutions to discover what works best. And as you move from early adopters to mainstream customers (who will be far less accepting of failure), your organization will have already learned how to serve them at a high level.

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