An Interview with German Accelerator mentor Dirk Schart, CMO and President U.S. of RE’FLEKT, on the importance of establishing a culture in Germany where failure is okay

This article was originally posted on the German Accelerator blog.

When comparing the culture of failure in Germany and the U.S. one can identify fundamental differences between the understanding of making mistakes and ‘failing’. For Dirk Schart, CMO and President U.S. of RE’FLEKT, experiencing the contrasts of how failure is perceived in the U.S. as compared to Germany was an eye-opening experience when he participated in our program four years ago. We asked him about his personal definition of failure as well as how he interprets it for his teams in both countries.

What does failure mean to you? What is your definition of failure?

In Germany, it usually means something very negative. That something has been tried and it didn’t work out and so the fault lies with the person who tried it out. Germans often seem to look at themselves first, blame themselves first for failures. And if I compare this with the U.S., specifically Silicon Valley, failure means something has failed but a lot could be learned from it and when you try it the next time it might work much better.

Despite Germans using the saying “Übung macht den Meister – practice makes perfect” we still look at failure as something very negative. If you take that thought process and apply it to startups and ask why startups fail, it is most likely not because of the founder lacking knowledge but rather things like the product not fitting a need in the market or the product not being scalable. For me personally, there is no ‘final’ failure – case closed. It didn’t work and that’s it etc. Rather, I look at failure(s) as a process of making mistakes and learning from them. I encourage my teams to do the same thing. “Don’t be afraid to make mistakes because you won’t grow if you don’t make them.” This is an example where I hope we can try to instill this kind of culture (and thinking) in Germany where failure is not viewed as final but rather as a trial and error approach.

In the startup world, we often tend to hear and use the word ‘learnings’. Does failure mean learning to you?

I think the culture of failure continues with learning in general. In Germany, it seems that learning is only allowed to take place until we’ve reached a certain age. At a certain age, or if you have a certain senior status at work, as a manager, for example, it seems to be frowned upon to admit to not knowing something. It is assumed that one knows “everything”. But in Silicon Valley that’s different. I’ve met people in the Valley over 60 years old that told me they were focusing on learning something new which I found fascinating. Because people learn over the course of their lifetime.

Especially in the startup world, it would help to be open to learning because there is not just one method or way of becoming successful. Every startup lives from the variety of people that work there and is dependent on the various markets it is active in. I find myself struggling with this kind of cultural view of learning in Germany because it tends to get me frustrated because of risk and new knowledge aversion (in this context). Another aspect I’ve started to incorporate is to share my learnings with others. People I meet in Silicon Valley are very open about this.

When working with international teams how do you communicate this part of the culture of failure with them?

I communicate this very directly. I encourage my teams to be able to make decisions and move forward. If they are not risking making mistakes during the process, there won’t be any development. You have to leave your comfort zone. In Silicon Valley, trial-and-error is much more common. Also during 1:1 meetings, I encourage my team members to make decisions and to risk making mistakes. But then I also stand behind them as a manager and take responsibility if something didn’t go as planned. That is also important for the other team members to recognize that we have this mindset and the freedom to try things out. And if things go differently we analyze them and try to improve on it. If you don’t risk making mistakes there won’t be the chance to evolve and grow.

How do you and your team actually learn from ‘failures’ or mistakes?

We look very closely at the different factors that may lead to “failures” whether it’s internal or external. Our company works in a field with a very young market that is different from other industry fields where you’d have more data to compare to and analyze. We work with a lot of hypotheses because of the lack of data or to-be-validated data [when it comes to the market]. So questions on lead generation and market demand, or with Corona potentially having an effect on the market can not be answered by looking at data.
Internally I don’t actually see any blatant failures happening unless they are on a managerial level where, for example, the wrong market has been entered or things like that. But also those things can happen for startups. But decisions that turn things upside down from one day to another don’t really exist. It is usually a bundle or string of decisions that lead to [startup] failures.

I also try to coach my team members into thinking and mapping out what the worst-case scenario of their decisions would be. “Are you risking $1 million of our budget? Then we should look at things more carefully. Or is it $2,000? What’s the impact of your decision?” and then we ask questions, like “Is this a situation we can influence, or are things happening in the market where we have limited influence on and how can we react to that?” Those questions are important to answer for the team because that’s how they can learn.

How important do you think it is to have resources for startups in the German ecosystem in case of a failed business?

I think this is more about having a certain mindset; at the individual level but also at a societal level. It would be great in this aspect to bring a little bit of that Silicon Valley or U.S. mindset to Germany. We do great things in Germany, but they might not necessarily be outside the ordinary. Of course, I don’t want to paint things to be just black and white. But I think that if someone went through this process of getting a startup off the ground and growing it, there are such valuable lessons to be learned and shared. These types of learnings will stay with the founder and everyone involved for a lifetime. I myself started to write down my learnings and track them and I look at them from time to time, when things are not going smoothly, to remind myself of the learnings. And these experiences and learnings happen in so many different areas too in such a short period of time such as sales, finances, product development, controlling. In my opinion, these learnings are worth at least as much as an MBA and you only have to pay for it with your nerves (*laughs). And this is a huge potential that “failed” founders can take into other companies they work for.

I also think that another aspect of this mindset is the sharing aspect of learning. I like working with mentors. When we (RE’FLEKT) joined the GA program in 2016, I met up with one of our mentors frequently to bounce ideas off and get feedback from him. We tend not to have this kind of relationship in Germany. It’s either because people don’t want to share their learnings or founders are not comfortable with sharing their concerns or problems with VCs or other non-founders. Among founders in Germany, there is more of an openness to share but we don’t really have a mentoring culture. I think having it could be one way to avoid failures in the first place.

What kind of advice would you give startups (in that respect) before expanding into the U.S.?

In general, it’s important to bring openness and awareness for the difference in the U.S. market. We Germans may think that we know the U.S. market and that we speak the same language and that we are somewhat familiar with the culture, but nevertheless, things work differently in the U.S. Many might not realize it when first coming to the U.S. This realization takes place at a later time when they are there and hit a wall because they might approach market access in a German way. Germans like to plan things out, which can definitely have its advantages too, but Americans tend to be more pragmatic. It’s a “just do it” mentality and also seeing the bigger picture rather than planning things out into the very last detail. What Germans should not forget is when going to the U.S. they enter a country where marketing and sales are deeply embedded in the culture. This touches every facet of life especially with a heavy focus on value for the customer. So it’s important to incorporate that thinking as a German company in the U.S. market.

Another question that leads to a lot of decisions is “why does it matter?” In Germany I often see information on company websites that don’t address the question “what’s in it for me, the customer?” and this is something that needs to be learned before coming to the U.S. Especially in the Valley and also with the prospect of hiring a U.S. team, I see it as important to be open to that mindset of ‘customer first’.

I used to work for a large company in Germany and I remember a member of upper management saying the following when a product launch did not work out as planned: “The market reacted the wrong way!” which stuck with me because it showed what kind of mindset he had.

In Germany, I think the “just do it” mentality is often viewed as going into things without a plan, but in the U.S. it means to be hands-on and to learn what the customer wants, improving the product or process in an iterative way. Without wanting to overgeneralize, I think Germans are having a hard time doing very new things and trying new technologies where we don’t have too much data yet. It seems that we struggle with having a certain amount of uncertainty and maybe missing a certain level of risk affinity. I like having a combination of the German and the Silicon Valley mindset where I can take a few moments to think things through before jumping into them without losing the “let’s try” momentum.

How is the U.S. a different place to do business compared to Germany?

For me, it always comes back to service. Germans perceive the smile of a U.S. employee in a supermarket as superficial, but in the U.S. it’s just part of your job to smile and make your customer happy. This is a cultural difference and I understand that. But if you want to be successful in the U.S. market, customer service is key.

What do you believe are the main ingredients for success in the U.S.?

Basically, it’s about three main ingredients: understanding the market and the people, listening to customers, and being open-minded.

1. Understanding a different market: We knew that the U.S. market is different from Germany and that this is often underestimated. The German Accelerator program prepared us for it when we participated in 2016. While in the U.S., the basis for your success lies in the importance of customer service, this is something that doesn’t really exist in Germany. Especially when it comes to response times, listening to customers needs, appreciating their feedback, and making the customers happy.
2. Listening to our customers (and adapting it to the U.S. marketing and sales way/style): Welcome to the land of marketing and sales! Here, it’s all about value, why it is relevant to your audience, and not about yourself. Startup marketing in the U.S. is more experimental than in Europe. You must try out new things, measure them, improve (or cancel), and test again.
3. Being open-minded (and building an interface): You need a translator between the teams—this is my role. I know the German way of thinking and I understand the U.S. principles and can explain it to both sides to make sure the teams understand each other.

Are there examples of cities/ startup ecosystems in Germany that are similar to Silicon Valley?

In my opinion, it is hard to compare Silicon Valley to other places. That doesn’t mean that everything in the Valley is cool. Everybody is a founder or a VC—with multiple exits of course. You have to look behind the scenes. What I find special is that you can meet so many experienced serial founders and tech executives in a radius of 70 miles, with multicultural backgrounds, and that special mindset. I’d say this is what it makes unique. Berlin and Munich are fantastic startup spots in Germany with a great infrastructure—both very different though.

Is the U.S. mindset of ‘failure being okay’ something teachable? Or does one have to experience it themself to truly understand?

Absolutely! I am a big fan of the growth mindset (read Carol Dweck’s book) and you can train that. Of course people are different and change is tough, and failure is perceived differently. You can create a culture in your team where people dare to leave their comfort zone and take the risk to make mistakes. For me, this is the basis for growth.

What is one piece of advice you’d like to give other founders?

Look for a mentor. Ideally someone who understands the two worlds and helps you with your own experiences. This will save you a lot of time and avoid frustration. I remember the hustle starting with securing a visa, opening bank accounts, setting up accounting, hiring a team (and having the important perks), and everything around product feedback, customer expectations, go-to-market. I am very thankful for the support I had from my mentors, it helped me become successful.

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Dirk Schart is CMO and President of the Augmented Reality startup RE’FLEKT. His focus is on B2B enterprise software and SaaS models with early-stage technologies like AR, AI, IoT—from market engineering to thought leadership and go-to-market. Dirk is a startup mentor at the German Accelerator in the Silicon Valley and author of two books about AR.