Kim and Todd Saxton: Observing lessons from a 111-year-old failure

One-hundred and 11 years ago this April, the “unsinkable” Titanic sank (we love the 111 palindrome). How could the unthinkable happen? And what does this have to do with startups? Actually, it seems the company and people creating the Titanic fell into the same traps a lot of entrepreneurs fall into.

Let’s start by reviewing why the Titanic was so amazing and then examine lessons learned that apply to startups today.

What many people don’t realize is that the Titanic was the White Star Line’s solution to a hyper-competitive market—its own form of disruption. At the end of the Second Industrial Revolution, the goal for ships crossing the Atlantic was speed—who could get across faster?

As often happens in the pursuit of speed, it was getting more difficult and more expensive to eke out incremental speed gains. The White Star Line decided to go for a dimension where the competitors were not—a “white space” opportunity—and build the largest and most luxurious ship.

Along the way to accomplishing this goal, the company created huge technological innovations, including the most advanced propulsion system, which used steam to turn three screw propellers; a master clock system that let the captain adjust all clocks on board from the bridge; a wireless communication system that increased the distance a message could be sent from 100 miles to 2,000; four elevators; and an electric panel that was 30-plus-feet long and controlled everything from one place.

And let’s not forget the innovative new watertight compartments that would keep the ship from sinking. With all this new technology, what led to the Titanic’s early demise?

Pivoting the company strategy. It was in the White Star Line’s culture and market strategy to build and sail fast ships. While the shipbuilder changed the focus to size and luxury, it still wanted the Titanic to be fast among its competitors. The company gave the Titanic time goals for reaching port, and the captain was trained to sail fast. He kept pushing for speed even when weather conditions made this unsafe.

But changing a company’s strategy is difficult and complex. Companies have to change their metrics and plan carefully for a cultural change to be successful. Pivoting sounds great, but it can create hidden debts.

Hiring the right team. First, the captain had a track record of success, with a 40-year unblemished record, but he had never been tested under adversity. Now we know he did not know what to do when problems occurred. That’s one reason startup experience is important in a founding team.

While the Titanic was full of innovations, most were untested; their first test was the maiden voyage. To “de-risk” the technology involved in this test, the crew was also highly technical. Only 5% was able-bodied seaman. The rest were engineering and hospitality crew members. Unfortunately, most of the crew were not much help in a disaster and did not know how to load lifeboats.

It’s hard to figure out what skills are necessary both to grow and to not fail. Even today, we see companies struggle to balance the skill set in their workforces due to diversity of skills needed—in, for example, programming and marketing—and the lack of a qualified and abundant workforce.

Finding the right funders. Building big and luxurious ships is expensive. The White Star Line needed more funding. It brought in a new investor in the 1880s to help cover losses from previous ships and to fund growth. Turns out, this investor’s nephew cofounded a shipyard. So, the White Star Line was “nicely encouraged” to sign an exclusive contract with that shipyard. Harland and Wolfe would build all the White Star Line’s ships and only their ships.

This is not an unknown situation today, with investors who bring their own demands. Startups need to consider issues beyond just the money when engaging with investors and to be wary of the obligations such relationships might entail.

Sacrificing function for aesthetics. Developing a product is fundamentally challenging, with competing priorities. For the Titanic, it was charging the highest prices. It needed to deliver a first-class luxury experience.

This desire translated into a two-story dining room, which required lowering the height of the bulkheads in the watertight compartments. It also meant removing half the lifeboats, which were obstructing views from the best berths.

If everything had gone smoothly, these trade-offs might have been a selling point for future voyages, but the opposite happened. These changes contributed directly to the sinking of the ship and the tragic loss of life.

Designing products requires considering aspects that can go wrong. There are dozens of examples of people using products differently from what was originally envisioned. It’s better if startups try to “break” their own products, before customers do it for them.

Like many entrepreneurs, leaders of the White Star Line had to make decisions under conditions of uncertainty. By recognizing the trade-offs and consequences of pivoting, hiring the right team, cultivating the right funding sources, and understanding the implications of design choices, founders might be better able to navigate the hazardous seas of startups and successfully complete their journeys. Remember 111 to be number 1!•

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Kim Saxton is a clinical professor of marketing at IU Kelley School of Business at IUPUI. Todd Saxton is an associate professor of strategy and entrepreneurship at IU Kelley School of Business at IUPUI. They are co-authors of “The Titanic Effect: Successfully Navigating the Uncertainties that Sink Most Startups.”