Sunday, July 08, 2007

Failure and Innovation

Failure in most companies is a bad word. Some more innovative companies have leaned that failure is part of innovation, but most of what people hear is fail quickly or don't repeat the same mistake which are both good things to keep in mind, but not the whole story. Entrepreneurs are acutely aware of the concept of failure, and it is often equivalent to a badge of honor in the startup community. What else should an innovator (company or person) keep in mind with respect to failures?

Frans Johansson in the Medici Effect says that mistakes and false starts are part of the process for making ideas happen in unknown spaces, and must be factored into the equation in three ways:

Try ideas that fail to find ideas that won't
So how do you create that type of environment?

  • Its not just enough to be accepting of failure, but output whether generating success or failure should be rewarded.
  • Failure to execute ideas is the greatest failure, and be punished
  • Be suspicious of low failure rates. Maybe not enough risk is being taken or people are hiding mistakes
  • Hire people who have made intelligent failures, and let others know about it
Reserve resources for trial and error
One thing to note about innovations in new directions are that many assumptions you make during development of the idea will be wrong. This is the primary reason why many internet startup companies in the late 90's failed. They thought they were going to get it right the first time. You need to keep an agile mindset in your team and company.
  • Be prepared to change your plan of execution
  • Give yourself the time for several attempts
  • Spend your money carefully and try and keep reserves for more than one try
  • Be extremely careful if your reputation or goodwill is riding on success the first try
Remain motivated
Probably the most important, but you must find ways to keep motivation high. Essentially you need to build passion in your business.
  • If intrinsic motivation is high, and we are passionate about what we are doing, creativity will be free flowing
  • People who are driven to perform do so based on internal drive - not external incentives. They want to do a good job.
  • People in new innovation spaces must believe that they will get the reward they deserve for their efforts, even though at the start no one really knows what the reward will be.
Clearly it is important in new innovation spaces that failure is expected, but if you are in this space, make sure it goes deeper than that. It must be supported with the appropriate culture and incentives, allong with appropriate expectations, planning, resources to have many 'do-overs' in order to find the right solution.


Justin Beller said...

A very timely post as I just completed reading a brief on a book called "The Strategy Paradox". The premise is that strategies companies employ with the highest possibility of success are also capable of having the greatest possibility of failure.

The case study the book used to illustrate this was Sony's Betamax and MiniDisc formats. Sony is a company with many successes, but they placed far too much commitment into these strategies that they were unable to pull out of it. In other words, they essentially had to "eat it and smile".

This sort of ties back to the first point you mention from the Medici Effect - "Try ideas that fail to find ideas that won't". Unfortunately, the problem that is prevalent in the Strategy Paradox is most companies avoid studying failures because they feel their future success is best learned by studying those who are successful.

Tac said...

Great now I have another book I have to read, thanks.
I like the point that the only true failure is the failure to execute. Great post.

Patrick Lee said...

I'm with you, Tac. My reading list gets longer every day. I wish all these books were available as podcasts. Now that would be nice...