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Reframing Failure | The Discipline of Innovation

Reframing Failure

In 20 Things Good Managers Know About Innovation, number 18 is “Failing is good – try to fail as small as possible, and make sure you learn from it.”

One of the responses to that post said “Have never believed failing is good [see item 18]. Try telling that to the families of trainee pilots!!”

I get this a lot, and it is extremely dangerous thinking.  Some people just seem to shut down as soon as they see the word “fail” – the critical parts of this idea are the last two – fail small, and learn.

Here is how Hugh MacLeod put it in his daily newsletter:

Nassim Nicholas Taleb addresses the fail small idea in his latest book Antifragile.  He says antifragile systems gain from things that people try to avoid:

What is that something? Simply, membership in the extended disorder family. The Extended Disorder Family (or Cluster): (i) uncertainty, (ii) variability, (iii) imperfect, incomplete knowledge, (iv) chance, (v) chaos, (vi) volatility, (vii) disorder, (viii) entropy, (ix) time, (x) the unknown, (xi) randomness, (xii) turmoil, (xiii) stressor, (xiv) error, (xv) dispersion of outcomes, (xvi) unknowledge. It happens that uncertainty, disorder, and the unknown are completely equivalent in their effect: antifragile systems benefit (to some degree) from, and the fragile is penalized by, almost all of them—even

Or look at errors. On the left, in the fragile category, the mistakes are rare and large when they occur, hence irreversible; to the right the mistakes are small and benign, even reversible and quickly overcome. They are also rich in information. So a certain system of tinkering and trial and error would have the attributes of antifragility. If you want to become antifragile, put yourself in the situation “loves mistakes”—to the right of “hates mistakes”—by making these numerous and small in harm. We will call this process and approach the “barbell” strategy

The implication of the second quote is that in fragile systems, when we try to suppress failure (“we can always celebrate success!”), we actually increase the chances of a big catastrophic failure down the road.  Antifragile systems avoid catastrophic failures because they have a series of small mistakes that lead to learning.

Learning is the second issue.  The latest issue of Smith Journal has a great interview with Zach Klein, who has been involved with founding Vimeo, College Humor, Boxee and the Founder Collective venture capital fund.

There are a lot of investors who invest solely in the entrepreneur, because that relationship is really important,” he explains.  “They want to be supportive of their bad ideas so that when they do have a good idea, they have  front row seat to participate in the investment.  I don’t perform any science to evaluate what our success of failure ratio should be.  You need to invest in enough companies to be resistant to failure so that if one company fails, your entire portfolio isn’t spoiled.”

Failure, he says, is just fuel….

“Entrepreneurs and ideas are constantly mutating,” he says.  There’s never been a moment when someone just failed and that’s the end of it.  Usually what happens is that someone has a theory about how something should work or should be built, and they pitch that logic to me, and I trust them.  I invest money and I hope that they will faithfully execute on their plan.  When it doesn’t work, it’s just as much my failure as it is theirs, and we take that experience and we hopefully convert it into another opportunity; What do we know now?  What do we know better? I’ve never really dwelled on failure because it’s a critical component of succeeding  You have to experiment.  You have to take a risk.”

This is what Stefan Lindegaard calls SmartFailing.  He’s trying to address the same issue:

A few years ago, I argued that we needed to become better at learning through failure, but that the word failure itself is so negatively loaded. How could we create a new concept and vocabulary on the intersection of failure and learning?

I agree with Stefan, we need to reframe failure.  There are a few ways we can do this:

  • Dont’ Fail Fast, Learn Fast: that’s what Braden Kelley says.  And he is right.  We need to test ideas as early as possible, and we need to set the test up as an experiment so that we are sure that we learn.  When Hindustan Unilever launched their Shakti program, they started with a very small experiment.    They were trying to set up a rural sales force of entrepreneurial women so that they could reach the 40% of people in India that lived in villages too small to have a store.  They didn’t roll out the new program across the whole country.  First, they trained 17 women and tried to answer two questions: could these women run their own business, and was there demand for HUL products in these villages?  If the answer to both questions was yes, then they would expand the program.  If the answer to either was no, then they learned something and could adjust their plans accordingly.  That’s how to set up an experiment.
  • Ask “Is the knowledge that we’ll gain worth having?”  If you set up an experiment so that you learn something no matter how it turns out, then you are investing in knowledge, not failing.  There’s no point in experimenting if you don’t learn.  If you don’t learn, then that really is a failure, and we do need to avoid that.  If you learn, then you are building an antifragile organisation.
  • Scale up your investment over time.  If the first Shakti experiment had yielded negative results, the cost was low.  As they continued with further experiments in years 2-5, the cost gradually increased.  First they expanded the geographic ranges and went up to trialling the program with 60 women.  Then they tested the supply chain, and finally they tested potential profitability.  This minimizes the cost of failure.

Rita Gunther McGrath has done great research on how to make this work.  In an article in Harvard Business Review, she says that you can do this by:

  1. Define what success and failure look like before you start.
  2. Experiment to turn assumptions into knowledge.
  3. Iterate through this process quickly.
  4. Do it cheaply – ask how much you can afford to lose to gain the knowledge.
  5. Contain uncertainty by testing one thing at a time.
  6. Build a culture that celebrates experiments that lead to learning.
  7. Make explicit what you learn, and share it.

The fact of the matter is that trainee pilots fail all of the time.  They do it in simulators, and in trial runs on the ground.  The repeated small failures make it much less likely that they will fail once they’re actually up in the air.

We should follow the same principles in our innovation work.

About Tim Kastelle

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

9 Responses to Reframing Failure

  1. Jorge Barba 26 April 2013 at 12:25 am #

    Hola Tim,

    Nice post.

    The ongoing discussion about failure is quite fascinating. If 5% of percent of the planet would see failure as learning, we’d be living in a different world.

    It is interesting because some people view failure as absolute, and some will do some trial-and-error on some things but not in others.

    Explaining the value of learning to each side is part of the challenge. Context matters.

    Anyway, I’ve also hit on this topic recently and asked: How do we know when we’ve failed productively? – http://ow.ly/kpRGo

    Cheers,

    Jorge

    • Tim Kastelle 26 April 2013 at 6:04 am #

      Thanks Jorge – that is the post I was looking for, but didn’t find it.

      I absolutely agree with what you say about the change we’d see if more people viewed failure as learning. It’s a tough topic to get traction on.

      Even writing about it here is a challenge – I know that these posts will always be shared less than others. But I guess we have to keep trying to find new ways to tell the story, and learn from the approaches that don’t work, right?

      • Jorge Barba 26 April 2013 at 7:02 am #

        Yes, we have to keep bringing it up either directly or indirectly. It is unavoidable if you are looking to create something other than the latest mix of Insta __fill in blank__ .

  2. ed bernacki 26 April 2013 at 10:39 am #

    I want to raise something about the concept of failure.
    Is this truly a useful concept in the innovation work considering that 90% of organisations are service based? I understand we could invest millions in a product which fails to sell. The issues are different for the rest of socity.

    Can you me a practical example of a service idea that truly failed….I mean a business you know personally, not read about? I think the reality is that when things fail to be innovative, the result is closer to mediocrity, The do not fail — they continue to stumble along and give average service.
    The cliche ‘innovative or die’ is just an innovation speaker cliche. 99% of companies that fail to innovate do not die — they continue to sell stuff to consumers. How innovative are the AU grocery chains? Compared to my experience in Canada I would suggest ‘not very’. I do not see Coles dying any time soon

    • Tim Kastelle 26 April 2013 at 11:32 am #

      Hi Ed – I agree with you about the value of “innovate or die” – it doesn’t really say anything useful. But I’ve experienced lots of service idea failures. When I managed a service centre in New Zealand, we tested ideas constantly. Some worked, some didn’t. Overall service quality went up (at least on the metrics that we used), which had a direct bottom-line impact of >$2m per annum. On the other hand, the last firm I worked for before heading into academia was a software as a service firm that went completely out of business because we weren’t able to deliver at the level required in the market in we were in. More recently, I’ve had ideas for new courses and new consulting ideas that have failed.

      So to my mind failure is still highly relevant in service industries as well. One of the issues that I was addressing in this post:

      http://timkastelle.org/blog/2012/06/what-were-talking-about-when-we-talk-about-failure/

      is trying to control the scale of failure. In NZ, we did a great job of testing small and building on the ones that work. Same in my current position. In the SAAS firm, we had a big bet and that blew up.

      I agree that Coles probably won’t die any time soon, but on the other hand, people said the same about Lehmann Brothers right up to the day that they did in fact die.

  3. Kevin McFarthing 27 April 2013 at 1:29 am #

    Hi Tim – the attitude of not failing can also have a negative impact on company performance. Let’s imagine someone in the C-suite issues a “no failure” mandate; I guess many people have heard these so-called zero tolerance statements. NPD schedules become longer as fat is built into the program. Only easy sales leads are pursued. Line speeds go down to ensure nothing happens to quality. “Safe” profile people are recruited by HR. And eventually the enterprise is no longer enterprising.

    • Tim Kastelle 3 May 2013 at 12:16 am #

      That’s all true Kevin. If you can’t fail at all, then the entire enterprise becomes more conservative. It leads to bad outcomes.

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