Failure IS an Option Article written by Pat Dillon Fast Company February/March Issue, page 154

Summary by Todd Mehrkens

This article highlights the dramatic rise and fall of Exponential Technology, a company that existed for about four years. The dream and promise was incredible!! At the time the company was formed, the top processor speed for computers was 50-60 Mhz. The founders of this company promised a processor with a speed of over 500 Mhz. In the end, they did achieve their goal of producing a processor with that kind of speed, unfortunately they lost their market for their processor and the company failed, losing $30 million in the process.

The story of Exponential is a story of a big dream, followed by an all out effort to make it come true. It was no easy or cheap matter to design and produce this processor, but the people involved in the project were committed to the dream and had the vision to see it through. In fact, as the funding started to dry up, many employees were still giving 200%, even when there was no money for paychecks. That is how much they believed that what they were doing would be successful.

In evaluating what went wrong, many of the major players said that the company should have played bigger and bolder. Exponential had decided to work with Apple Computers and Apple "clones". Exponential was situated pretty good with Apple Computers, which was a promising operation at that time. However, just about the time that Exponential was becoming financially vulnerable, Apple was also experiencing difficulties. When Apple cut its ties with Exponential, (in an effort to save itself) Exponential had no other options - they were pretty much dead in the water from that point on. Exponential had stayed away from the intense competition of IBM PC market, which was much bigger - and that meant bigger risks, but also bigger opportunities.

I find this to be a story of risk levels and how different people react to risk. The risk level for Exponential was much higher than most of us can even comprehend. Of course along with increased risk, there is an equal increased opportunity for payback. It becomes a question of how much risk is a person willing to take. One of the reasons I chose this article to read was that I could identify with having a dream and being so very confident that it would be a success, only to have that dream come to a premature end. All my life I had planned on being a dairy farmer. After graduating from college I made the investment in time and effort. After 12 years, I could no longer continue to provide a living for my family. It was pretty hard to accept that having a dream and giving it all I had was not going to work any longer. At the time I had no doubt in my mind that it was a worthy risk. After having gone through the experience of selling the cattle and the farm, I currently have a lower level of risk that is acceptable in my life.

I discussed this article with a guy who just recently bought a small business here in Red Wing. As I talked with him about Exponential, he felt that they were right in taking the risk that they did. After all, if things went right, the potential was incredible.

I was interested in seeing how much risk he perceived that he took when he bought the business. He felt there was some risk, but also was confident in his abilities and the stable and proven track record of the business. I asked him what would he have done if he was given the choice between the business that he bought and a much riskier business that also offered the opportunity to possibly end up as a millionaire in five years. He said that he would probably choose the riskier business. So far, he has been pretty successful in his current business. I am guessing that his answer would be different if that were not the case, but then again each person approaches risk taking differently.

The former founders of Exponential have gone on to other ventures, but for now, none of them are nearly as risky (or as promising of huge success) as the Exponential venture.

-- Anonymous, February 23, 1999

Answers

Todd, As I read your summary, it made me think about all the success stories we read in the "Fast Company" magazine, and wonder how many not-so-successful stories there probably are in comparison. Starting a business seems like such a risky venture to me. Maybe that's because my husband and I farm, too; and know how vulnerable we are to factors beyond our control. Although our business is successful right now, it only takes a couple of outside catastrophies to turn that around pretty quickly. And the hours that it takes to make a business like farming a success are pretty incredible, probably not unlike the hours the employees put in for the Exponential company. I enjoy reading your summaries. Kari

-- Anonymous, March 04, 1999