Friday, July 07, 2006

Failure is an option

In a previous life, oh, just a few years ago, I worked with a hard charging startup focused on bringing data mining technologies and conjoint analysis into the telecommunications world. The CEO used to sign every email with the notation "FINO" - stood for Failure is NOT an option. For a startup, funded on external capital, that thinking is probably OK. However, for most businesses seeking to become more innovative, that thinking is probably all wrong.

Turns out that failure is a necessary option when your firm is trying to innovate. For starters, it is simply not possible to create new things and have all of them succeed in the marketplace. As my friends who ski like to say - if you're not falling, you're not pushing yourself. If every product your firm releases is a success, you either have the golden touch or you're not exploring the opportunities as deeply as you should.

Another reason to expect failures is that the market often is uncertain of its needs and exceptionally fickle. To use the aforementioned startup as an example, our product team had been given specific requirements (which we met) by several cellular firms which had needs to better understand customer behavior. We built that functionality and more, but the market changed as we were developing the software, and we didn't change with it. The needs and requirements were changing, and new technologies and capabilities were coming online faster than we could understand them. New product development works the same way. Sometimes good ideas will miss their window of opportunity, or the market will change dramatically. Or a good idea, like low-carb Coke, will simply not take off even though it appeared that it would.

Third, failure provides a learning experience and opens up new opportunities that would not have been considered previously. Many failures are unexpected - I've heard the most commonly used word among Wall Street analysts is "surprise". If a team of people whose job is to monitor and anticipate the financial results of publicly traded firms is constantly surprised that their predictions are wrong, why should we expect perfection in our product development? The real question we should be asking is: what can we learn from the failure? What will we incorporate in our thinking and processes that will be different from before? Also, what new insights or opportunities arise? The old story is that the adhesive for Post-It notes was considered a failure - not sticky enough - until someone realized that a "somewhat" sticky substance had usefulness in other areas. Often in a failure we can relax our assumptions and see how the constraints we imposed may have blinded us to other opportunities or insights.

OK, so let's say failure is a necessary option in business for innovation's sake. That leads us to the conclusion that for the most part our cultures are in opposition to acceptable failure. As a recent BusinessWeek article points out (How Failure Breeds Success, July 3) "..for a generation of managers weaned on the rigors of Six Sigma error-elimination programs, embracing failure - gasp!- is close to blasphemy". The article points out that Neville Isdell, the CEO of Coke, used the annual company meeting to describe some recent failures as an exercise to put employees, customers and shareholders on notice that he will tolerate the failures that come with innovation, changing a traditionally risk adverse culture.

He's got it right. If failure is to be an option, the way people think about failure and success, how people are rewarded and compensated, how what they learn from success and failure has to change. Corporate culture in most firms rewards success and ignores or isolates failure. Failure is often seen as a career limiting move. To become more innovative, firms have to take more chances, and identify individuals willing to accept the opportunities, risks and responsibilities for failure which will lead to greater insight and new products. This will require a signicant change in corporate culture, starting, as Isdell recognizes, from the top.
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posted by Jeffrey Phillips at 6:35 AM

23 Comments:

Blogger Bob said...

Ever felt like you were just a little ahead of your time? That's how I feel!

I'm all for this type of mindset to develop in my organization, but not being in any position of authority, I can only hope I'm OK when it comes time to make suggestions or try to build initiatives.

This is not really a new idea, but really more of an "uncovering of the truth". At least it's nice to see people talking about it. Maybe we can build up some headway once it becomes part of the public discourse.

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