Learning from Failure

Stephen DeAngelis

May 18, 2011

Yesterday’s post discussed Why Start-ups Fail. Quotes about overcoming failure may be as numerous as quotes on any motivational topic. A sampling of such quotes include:

  • “The greatest barrier to success is the fear of failure.” (Sven Goran Eriksson)
  • “Fear of failure must never be a reason not to try something.” (Frederick Smith)
  • “There are no failures – just experiences and your reactions to them.” (Tom Krause)
  • “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” (Colin Powell)
  • “Success builds character, failure reveals it.” (Dave Checketts)”
  • “Try and fail, but don’t fail to try.” (Stephen Kaggwa)
  • “I didn’t fail the test, I just found 100 ways to do it wrong.” (Benjamin Franklin)

Despite such encouragement, the fear of failure still holds sway in the hearts and minds of many individuals and undergirds many organizational cultures. Overcoming that fear is critical if progress is to be made. Most, if not every, successful entrepreneur has experienced his or her share of failures. That is because most great entrepreneurs are risk takers. Entrepreneur Luke Johnson believes that even people who are by nature risk takers can suffer regrets resulting from failure [“The past is paralysing, face the future,” Financial Times, 19 April 2011]. He writes:

“Regret can be a terrible addiction. Those who suffer from it so often become bitter and full of self-pity. It is an emotion that serious entrepreneurs cannot afford: they must keep pressing onwards and should not look back with remorse, dwelling on errors of long ago. As Alexander Graham Bell, inventor of the telephone, said: ‘When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.’ Entrepreneurs must learn to manage the conflict between constant experimentation –- which means lots of painful mistakes — and a fear of failure, which can lead to paralysis.”

If “regret of the past” is stamped one side of “looking back” coin, Johnson reminds us that the flipside of the coin bears the imprint of another impediment to progress — relishing past glories. He writes, “Likewise, past glory can be a killer.” He concludes his column this way:

“By all means treasure experience, and learn from your blunders. But don’t wallow in nostalgia, pining for what might have been. Rather, go ahead and seize the day no matter what. I have little time for those who say: I wish I had started my own business. My only response is: so do it now.”

While Johnson’s advice is aimed at individual entrepreneurs, a column in The Economist on overcoming failure is aimed at companies. It claims that “companies have a great deal to learn from failure — provided they manage it successfully.” [“Fail often, fail well,” 14 April 2011] The article begins:

“Business writers have always worshipped at the altar of success. Tom Peters turned himself into a superstar with ‘In Search of Excellence’. Stephen Covey has sold more than 15m copies of ‘The 7 Habits of Highly Effective People’. Malcolm Gladwell cleverly subtitled his third book, ‘Outliers’, ‘The Story of Success’. This success-fetish makes the latest management fashion all the more remarkable. The April issue of the Harvard Business Review is devoted to failure, featuring among other contributors A.G. Lafley, a successful ex-boss of Procter & Gamble (P&G), proclaiming that ‘we learn much more from failure than we do from success.’ The current British edition of Wired magazine has ‘Fail! Fast. Then succeed. What European business needs to learn from Silicon Valley’ on its cover. IDEO, a consultancy, has coined the slogan ‘Fail often in order to succeed sooner’.”

Some of those headlines reflect the sentiments found in the quotations with which I began this post. Even though they encourage us, they remind us that overcoming fear is a difficult thing to do. The article continues:

“There are good reasons for the failure fashion. Success and failure are not polar opposites: you often need to endure the second to enjoy the first. Failure can indeed be a better teacher than success. It can also be a sign of creativity. The best way to avoid short-term failure is to keep churning out the same old products, though in the long term this may spell your doom. Businesses cannot invent the future—their own future—without taking risks.”

Another way of looking at risk and failure comes from the naval arena. During times of conflict, a ship transiting dangerous waters needs to be on high alert — prepared to challenge an attack from any quarter. The ship’s vigilance is augmented by sensors like radar and sonar that can be tuned to various levels of sensitivity. Set the sensitivity too high and you may miss a stealthy aircraft or quiet submarine as it closes in. Set the sensitivity too low and you may be flooded with so many false targets that a real enemy might be fatally lost among clutter. As a result, sensor operators look for the sweet spot that permits a small number of false targets (i.e., failures) but not so many that the ship’s personnel are too overwhelmed to respond to them. By permitting an acceptable level of false targets, the ship is better prepared to respond when actual danger does emerge. Companies too often set their sensitivity to failure so high that real opportunities are missed. The article continues:

“Entrepreneurs have always understood this. Thomas Edison performed 9,000 experiments before coming up with a successful version of the light bulb. Students of entrepreneurship talk about the J-curve of returns: the failures come early and often and the successes take time. America has proved to be more entrepreneurial than Europe in large part because it has embraced a culture of ‘failing forward’ as a common tech-industry phrase puts it: in Germany bankruptcy can end your business career whereas in Silicon Valley it is almost a badge of honour. A more tolerant attitude to failure can also help companies to avoid destruction. When Alan Mulally became boss of an ailing Ford Motor Company in 2006 one of the first things he did was demand that his executives own up to their failures. He asked managers to colour-code their progress reports—ranging from green for good to red for trouble. At one early meeting he expressed astonishment at being confronted by a sea of green, even though the company had lost several billion dollars in the previous year. Ford’s recovery began only when he got his managers to admit that things weren’t entirely green.”

The managers’ initial responses at Ford are completely understandable. No one likes to admit they failed. They fear that admitting failure will result in their dismissal. Entrepreneurs working for themselves face no such concern. I suspect that Ford charts only started to change colors when Alan Mulally convinced managers that they had a better chance of being dismissed for prevarication than for failure. Lessons from failure can only be learned in an organization whose culture is risk tolerant. The article implies that either tolerance for failure is on the rise or business competence is on the decline. It continues:

“Failure is … becoming more common. John Hagel, of Deloitte’s Centre for the Edge (which advises bosses on technology), calculates that the average time a company spends in the S&P 500 index has declined from 75 years in 1937 to about 15 years today. Up to 90% of new businesses fail shortly after being founded. Venture-capital firms are lucky if 20% of their investments pay off. Pharmaceutical companies research hundreds of molecular groups before coming up with a marketable drug. Less than 2% of films account for 80% of box-office returns.”

Albert Einstein is widely credited with defining insanity as “doing the same thing over and over again and expecting different results.” Obviously failing over and over again and learning nothing from such failures would be considered a form of insanity. As the article states, “Simply ’embracing’ failure would be as silly as ignoring it.” It continues:

“Companies need to learn how to manage [failure]. Amy Edmondson of Harvard Business School argues that the first thing they must do is distinguish between productive and unproductive failures. There is nothing to be gained from tolerating defects on the production line or mistakes in the operating theatre. This might sound like an obvious distinction. But it is one that some of the best minds in business have failed to make. James McNerney, a former boss of 3M, a manufacturer, damaged the company’s innovation engine by trying to apply six-sigma principles (which are intended to reduce errors on production lines) to the entire company, including the research laboratories. It is only a matter of time before a boss, hypnotised by all the current talk of ‘rampant experimentation’, makes the opposite mistake.”

If a seasoned executive like McNerney had a difficult time seeing the difference between and good and bad failures, one can understand why fostering risk tolerance in organizations is so difficult. The article notes that one way to foster such a culture is to immunize the organization through a series of small bets. It explains:

“Companies must … recognise the virtues of failing small and failing fast. Peter Sims likens this to placing ‘Little Bets’, in a new book of that title. Chris Rock, one of the world’s most successful comedians, tries out his ideas in small venues, often bombing and always junking more material than he saves. Jeff Bezos, the boss of Amazon, compares his company’s strategy to planting seeds, or ‘going down blind alleys’. One of those blind alleys, letting small shops sell books on the company’s website, now accounts for a third of its sales.”

The advantage of placing small bets is obvious — you’re not going to lose the farm if you fail. The article claims that there are other “ways that companies can limit the downside of failure.” It continues:

“Mr Sims emphasises the importance of testing ideas on consumers using rough-and-ready prototypes: they will be more willing to give honest opinions on something that is clearly an early-stage mock-up than on something that looks like the finished product. Chris Zook, of Bain & Company, a consultancy, urges companies to keep potential failures close to their core business—perhaps by introducing existing products into new markets or new products into familiar markets. Rita Gunther McGrath of Columbia Business School suggests that companies should guard against ‘confirmation bias’ by giving one team member the job of looking for flaws.”

No one, of course, is arguing that individuals or organizations should set out to fail. That would be stupid. Failures will happen — you don’t have to go looking for them. But as the article states, “There is no point in failing fast if you fail to learn from your mistakes.” It concludes:

“Companies are trying hard to get better at this. India’s Tata group awards an annual prize for the best failed idea. Intuit, in software, and Eli Lilly, in pharmaceuticals, have both taken to holding ‘failure parties’. P&G encourages employees to talk about their failures as well as their successes during performance reviews. But the higher up in the company, the bigger the egos and the greater the reluctance to admit to really big failings rather than minor ones. Bosses should remember how often failure paves the way for success: Henry Ford got nowhere with his first two attempts to start a car company, but that did not stop him.”

Another important thing to remember is that you can learn from others’ mistakes not just your own. For more on that subject, read my posts entitled Entrepreneurism: Learning from Others’ Mistakes as well as yesterday’s post entitled Why Start-ups Fail.