Innovations fail.
Some would say that every single innovation strategy must fail.
Some say, too, that without willingness to fail, there can be no innovation.
Sometimes, something new is the right thing to do, but the timing, or the partners, or the policy environment, etc., seem to conspire against it.
Take digital mortgage innovator, Sindeo, for example.
Who would argue with co-founder Nick Stamos’ claim that for those who want to get a mortgage, the process is a painful, slow, anxiety-ridden, wasteful, expensive black-box experience from the outset to the outcome?
He and Ori Zohar developed Sindeo to bring technology to bear on those pain points for the consumer, offering a simple, transparent, stress-free, and less expensive experience from the get-go to the closing. Stamos and Zohar assembled a dream team of finance pros, policy wonks, and tech developers and went to work to change how mortgages get done, and try to transform the experience from one of pain and red-tape processes to one where people came first.
But, alas, Sindeo failed. Someday, we’ll know the full, real story. For now, here, from HousingWire staffer Sarah Wheeler, is ceo Nick Stamos’ explanation to friends and investors about what happened:
Earlier this month, the investor with whom we had an executed term sheet to lead our Series C financing informed us of a new last-minute requirement to close the round, a requirement that was not realistic to achieve, given our cash position and available runway. My subsequent efforts to secure emergency bridge financing from this investor and others were also not successful.
Given the situation, I have taken the difficult action to do what is right and honor my fiduciary and legal obligations to our employees and clients. Today, we terminated 61 of our 70 employees, keeping only a small set of team members to help customers with their in-process loans and to support me in exploring options for Sindeo moving forward.
Still, in Stamos’ own words, here’s what the team at Sindeo did before it went down this week:
- We built a place where people could shop and apply for a mortgage from a robust marketplace of over 1000 loan programs, with one single application and one credit check.
- We secured partnerships with some of the top real estate and consumer finance brands.
- We helped our clients save millions of dollars on their home loans.
- We built a people-centric brand, putting the needs of Sindeo’s clients first.
Now, when careers and investors’ interests and real lives are in the balance, it may sound like a blithe toss-off to say, like Honda founder Sochiro Honda says, “success is 99% failure.” Failure is critical to innovation; it’s also, very likely, a pathway to succeeding. It teaches, perhaps harshly, us to think and act better next time around.
But, the take-away from Sindeo is this. Because this team and this particular initiative are going away does not obscure that what they did solved real peoples’ real problems. Their business model may have been at risk because of their particular capital and investment structure, but it does not mean that the business model, nor the instrument they created to make mortgage applicants’ lives that much easier, are flawed.
The good news is that Stamos and Zohar aligned stars in such a way as to expose to the business community a fresh, different way to bring people into financing their homes. If they made mistakes in how they built their company, and whom they partnered with, they were “good mistakes.”
Harvard Business Review contributor Greg Satell has this timely observation in a piece called “The 4 Types of Innovation and the Problems They Solve,” and it focuses nicely on areas home builders, and the housing ecosystem can and do benefit from having their devilish problems–such as pain-in-the-ass mortgage processes–exposed to “diverse skill domains.” In other words, out of the box brilliance. Satell writes:
I found that every innovation strategy fails eventually, because innovation is, at its core, about solving problems — and there are as many ways to innovate as there are types of problems to solve. There is no one “true” path to innovation.
Yet all too often, organizations act as if there is. They lock themselves into one type of strategy and say, “This is how we innovate.” It works for a while, but eventually it catches up with them. They find themselves locked into a set of solutions that don’t fit the problems they need to solve.
What Stamos and Zohar have done for mortgage finance is to expose its inefficiencies and unfriendliness to people to service that puts those people at the top of the priority chain, and brings technology’s cutting-edge repertoire of applications to bear on the process of getting a loan.
Sindeo may not be around as a going concern for much longer, but it succeeded as an agent of change, and its team members succeeded in opening up a new sense of possibility in a part of living most of us thought we’d dread forever. The risk with innovation is real. And it’s often worth it.
