I am a big fan of failure. I not only encourage my team and people around me to fail, I consider it a problem if they do not. It means we are not trying enough new things.
Even if we have a 90 percent chance of success with everything you try, if you try 30 or 40 initiatives 3-4 will fail. I argue that only trying things with a 90 percent chance of working is too conservative; you need to look at the expected return and try any that have a positive expected value, even if they have less than a 50 percent chance (if the upside is high enough). The key is if you are not taking risks, you are not doing enough to increase value.
A great article in the Harvard Business Review, “Increase Your Return on Failure” by Julian Birkinshaw and Martine Haas, adds an important layer to the thesis of pursuing failures. Birkinshaw and Haas provide a framework to learn from your failures, so that even the initiatives that do not work create value.
The authors point out that while most companies acknowledge and support the need to fail occasionally, management processes actually work against this goal. Most budgeting, resource allocation and risk control systems are built on predictability and optimizing efficiency, giving bonuses and promotions to those executives “in control.” Thus, even if you are encouraged to fail, you are incentivized to do everything possible to avoid it. The solution is to extract value from failure so you an increase your return on it, boosting benefits while controlling costs. There are three steps to raise your return from failure.
Learn from every failure
The first step to generating additional value from failure is getting people to reflect on projects and initiatives that had disappointing results. While it sounds obvious, it often does not occur. Most people find reviewing failures quite painful and would prefer to invest their time in looking forward.
A failure provides the chance to revisit your core beliefs and adjust them where needed. The authors recommend asking the following questions to understand the benefits and costs of the failed initiative or project:
- What have we learned about our customers’ needs and preferences and our current markets? Should we change any of our assumptions?
- What insights have we gained into future trends? How shold we adjust our forecasts?
- What have we discovered about the way we work together? How effective are our organizational processes, structure and culture?
- How did we grow our skills individually and as a team? Did the project increase trust and goodwill? Were any developmental needs highlighted?
- What were the direct costs – for materials, labor, art and production or software development?
- What were the external costs? Did we hurt our reputation in the market or with customers, or weaken our competitive position?
- What were the internal costs? Did the project damage team morale or consume too much attention? Was there any organizational fallout?
- What are the key insights and takeaways for the business?
These questions will help you think of everything that you and your company have learned, how it might help you move forward and all the positive side effects from the experience.
Share the lessons
The big benefit from failures is spreading the lessons across the company. You can amplify the paybacks from failures by passing between business areas the information, ideas and opportunities for improvement gained from the above analysis.
Shared learnings also increases the proclivity to pursue future initiatives. By reflecting on the positives, you build trust and goodwill and clear the path for others to take action on risky initiatives.
Review your pattern of failure
The final step to gaining value from failure is “to take a bird’s-eye view of the organization and ask whether your overall approach to failure is working.” Do you have a process to learn from every failure? Are these lessons shared? Are you using these lessons to improve both your strategy and execution?
This analysis will help you see if you are failing too much (and unnecessarily), not enough (and thus not taking enough risks) or at the appropriate level. If you are failing too often, you probably need to make the green light process for initiatives more rigorous. If not enough, you need to generate and evaluate more initiatives.
Failure is critical to generating the most possible value. By rigorously learning from failures, you increase their return and the ability to pursue future initiatives.
- You need to encourage failure. Without failure, you are not pursuing enough initiatives to grow.
- To get the most from failures, and subsequently prompt people to launch initiatives that can fail, you must study failures carefully and learn about the market, customers and organization.
- You also need to circulate this information through your organization.