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If At First You Don’t Fail...

Doing the right thing, in the right way, the first time. Wasn’t that supposed to be our goal? So how is it that purposely pursuing what might be considered a questionable path has gained attention as an innovation strategy? Turns out, the lessons learned from failure may be of more value than those learned from success.
Intentional errors
Most of us are conditioned to avoid mistakes. Yet there are situations in which intentionally making a “mistake” pays off by creating a learning opportunity, according to experts at management consulting firm Decision Strategies International. CEO Paul J.H. Schoemaker and consultant Robert E. Gunther suggest that deliberate mistakes may be an acceptable course when the decision to be made is a repetitive, routine one. For example, Citibank’s credit extension decisions were put to the test when it decided to buck conventional wisdom and aim for the college market in the 1980s. Pursuing consumers with no jobs or credit history appeared to be a risky avenue, but bills got paid (sometimes by save-the-day parents), and many students became loyal customers in the long run. Other circumstances in which firms may want to consider purposely following an unproven path are when the potential for gain exceeds the potential cost of failure or when the problem is one in which your firm has little experience (Schoemaker and Gunther 2006).

A culture of risk acceptance
Not only is there more potential to learn from failure than from success, but creative firms that encourage risks also experience those failures and learn those lessons sooner, according to Harvard Business School professor Amy Edmondson. The willingness to do that is directly related to the environment and tone set by leaders. A recent BusinessWeek article shared examples of how some organizations were establishing such a culture (McGregor 2006).

Coca-Cola Company chairman and CEO E. Neville Isdell, for example, used the 2006 annual shareholder meeting as a platform to reassure employees and shareholders that he was willing to tolerate the failures that may accompany risk taking as the organization strives to change the nature of its historically risk-averse culture. “As we take more risks, this is something we must accept as part of the regeneration process,” he explained.

The IBM research division, too, demonstrates its acceptance of risks in the design of its performance evaluation program. The division uses two evaluation timelines—a one-year evaluation on which bonuses are based and a three-year evaluation that determines job level and base salary. The longer evaluation period encourages innovation risks and allows potential setbacks from those risks to be absorbed.

Dissecting and sharing what went wrong
While companies are typically eager to celebrate success, they may be reluctant to dwell on failures. Even though stories about why ideas fail might be as valuable a source of learning for businesses as stories about success, few, it seems, are shared. Failed companies tend to disappear from the business landscape, taking their data with them. Even successful firms that first tried an approach deemed unsuccessful rarely research failures, instead focusing on the hows and whys of their success. Without examining why ideas fail, though, valuable lessons that might be learned are lost, according to Jerker Denrell, assistant professor of organizational behavior at the Stanford Graduate School of Business (Wagner 2005).

General Electric Company is an example of a firm that has taken its best-practices sharing to another level by adding discussions of failures to its business unit practices. The firm’s “imagination breakthrough” (or “IB”) projects represent ideas with sales potential of $100 million or more in a three-to-five-year time frame. A conference call in 2005 brought together champions of eight “IB” projects that didn’t make it (McGregor 2006). Such dissection of failures is an important step in examining chosen paths and extracting lessons for the future.

Sometimes companies can find out from customers how they’re failing. QuickBooks, the highly successful business accounting program from software company Intuit, was strengthened after the division sent some 500 employees to users’ homes in 2003 to see and hear firsthand not only how the product worked but also how it didn’t work for customers. Intuit founder Scott Cook recently recognized “The Failure We Learned the Most From” with an award at an organization-wide meeting (Kirkpatrick 2005).

Even public failures can provide lessons to organizations on risk recognition and crisis avoidance. The 9/11 Commission, for example, examined the institutional failures that occurred on that day and then stressed the need to make “the exercise of imagination” part of the fabric of organizations. That is, organizations must be willing and able to visualize future failures if they want to avoid them.

Scenario planning must look at various possible outcomes and not focus only on the one that executives want to hear. The Columbia Accident Investigation Board is another case in point. It warned that remaining fixed on past successes can build unwarranted confidence that thwarts challenges to conventional wisdom. In other cases, a failure of communication is as much at fault as a failure of imagination. Investigators of the New York Times reporting scandal found the organization vulnerable because of “too much information … locked in too few brains” (McGregor 2005).

A strategy for errors
Schoemaker and Gunther say that “smart mistakes” follow a process. First, you should identify some of the commonly held assumptions about how your firm ought to run. Then select which of those assumptions are to be tested, and rank them based on their importance to the company and confidence in their accuracy. Next, create a strategy for taking an action the firm wouldn’t ordinarily take (i.e., “make the mistake”), execute it and, finally, learn from it.

Kirkpatrick, David. “Throw It at the Wall and See if It Sticks.” Fortune, Dec. 12, 2005, pp. 142–150.
McGregor, Jena. “Gospels of Failure.” Fast Company, Feb. 2005, pp. 62–67.
McGregor, Jena. “How Failure Breeds Success.” BusinessWeek, July 10, 2006, pp. 42–52.
Schoemaker, Paul J.H., and Robert E. Gunther. “The Wisdom of Deliberate Mistakes.” Harvard Business Review, June 2006, pp. 109–115.
Wagner, Cynthia G. “Learning from Failures.” THE FUTURIST, Jan.–Feb. 2005, p. 14.