From Failure to Victory. Team New Zealand’s Startup Lessons.

“First they ignore you. Then they laugh at you. Then you win.”

That’s Gandhi’s quote. And I thought it fit quite well with how the formerly-defeated Team New Zealand out-innovated the mighty Team USA in the 2017 America’s Cup. Their story is packed with lessons that apply to your startup.

The quick backstory. After losing the 2013 America’s Cup in one of sport’s greatest ever comebacks (read more on that ‘miracle‘ or ‘gut-punch‘, depending your bias), Team New Zealand was on its back. The loss amplified internal divisions, unleashed a merciless press, and jeopardized the backing of important sponsors, the New Zealand public, and the New Zealand government. From the ashes of defeat, the team went through an introspective period. Without the funding that Oracle’s billionaire founder Larry Ellison pumped into Team USA, it was forced to trim the fat and find its edge, otherwise it was lights out. To say they were behind the development curve is an understatement. While the other syndicates were already on the water testing their boats, Team New Zealand was still figuring out if it was in the game. By the time they got their boat out, they were 18 months behind their competitors.

However, during that time, they weren’t idle. They sought out unconventional experts on LinkedIn to join the ranks, especially from fields like hydraulics and aerodynamics, and they paid particular attention to those without yachting experience. By recruiting some outsiders, they were able to nurture fresh ideas and, as skipper Glenn Ashby stated, to “throw the ball out as far as we possibly can, and run after it really hard.”  Of the many ideas that percolated through this process, one stood out as revolutionary.  Rather than relying on burly-armed grinders (the default method of all teams), they recruited Olympic medalist cyclists, installed bike stations, and went with leg power. The theory was that leg power would beat arm power. That obvious, yet hidden, fact evaded every team in the 150+ years of this sailing competition. Not only was the thinking right, but they discovered that by having their arms free, the cyclists were able to operate other equipment on board.

Game changer.

As Gandhi had it, Team New Zealand was initially ridiculed for its approach. There was plenty of skepticism, especially from the incumbent Team USA which, having been in the privileged position of victor for the past decade, stuck to the tested formula that led it there. However, just weeks before the competition started, Team USA realized the superior power that the cyclists brought to Team New Zealand. Unfortunately, the best they could do in such short time was add a single bike station to their boat. It was too little too late, and Team New Zealand powered to a 7-1 redemptive victory.

Of the many lessons to unpack from this saga, here are a few that stood out to me that apply to entrepreneurs and businesses at all stages.

1. A posture of humility and curiosity, coupled with deep introspection, is necessary to consider one’s strengths and weaknesses. There must be a continuous quest of inquiry into assumptions whereby our own status quo paradigm is deconstructed. The examination must go beyond just recognizable weaknesses, but also into perceived strengths, which may just be a weakness in disguise. For example, you can have a couple of sailors with watermelon-sized biceps working those grinders. But you’re still not going to beat the pedal power on the other boat.

2. Don’t think that your large funding round, the patronage of your VC’s, or that great partnership with the Fortune 100 company gives you breathing room. We’re in era where access to technology is flattening at an accelerating rate. A smaller and scrappier team, forced into a do-or-die corner, can sail in and out-innovate you.

3. Conversely, if you’re the one with limited resources, use that to your advantage. I sometimes hear clients lamenting that if only they closed a higher round they would have more resources to increase their odds. Yes, the runway is longer with more cash. But it can also provide a false sense of security. Work with what you have, find a better way to do things, test it, and deploy.

4. Be aware that previous conclusions can shut you off from alternative and new ideas. This is what Charlie Munger, in his famous Harvard speech on human misjudgment, calls the “Commitment and Consistency Tendency”. Find ways to test the veracity of what you think is true.

5. Consider non-linear hiring of experts from different industries who, along with their core expertise, bring fresh thinking to the problem. Even in tech, there is the trap of stodgy tunnel vision. Hiring those with complimentary skills from outside the traditional channels can expand your team’s vision and help rethink assumptions.

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