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Failing by Design

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21 July 2020
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It’s hardly news that business leaders work in increasingly uncertain environments. Nor will it surprise anyone that under uncertain conditions, failures are more common than successes. And yet, strangely, we don’t design organizations to manage, mitigate, and learn froIt’s hardly news that business leaders work in increasingly uncertain environments. Nor will it surprise anyone that under uncertain conditions, failures are more common than successes. And yet, strangely, we don’t design organizations to manage, mitigate, and learn from failures.m failures.

“Learning Through Failure: The Strategy of Small Losses.” If your organization can adopt the concept of intelligent failure, it will become more agile, better at risk taking, and more adept at organizational learning.”

How Failure Can Be Useful

Some of the failures I’m about to describe were the results of intentional experiments. Others were completely unplanned and unexpected. But all of them provide valuable takeaways. 

Keep your options open

As the range of possible outcomes for a course of action expands, the chances of that action’s succeeding diminish. You’ll improve your odds if you make more tries. This is the logic driving businesses that operate in highly uncertain environments, such as venture capital firms (whose success rates range from about 10% to about 20%), pharmaceutical companies (which typically create hundreds of new molecular entities before coming up with one marketable drug), and the movie business (where, according to one study, 1.3% of all films earn 80% of the box office).

Learn what doesn’t work

Many successful ventures are built on failed projects. Apple’s Macintosh computers emerged in part from the ashes of a now-forgotten product called Lisa, which introduced a number of the graphical user interfaces and mouse operations in today’s computers.

In truly uncertain situations, conventional market research is of little use. If you had asked people in 1990 what they would be willing to pay for an internet search, no one would have known what you were talking about. A massive amount of experimentation was needed before workable search engines emerged. Early entrants sought to be paid for doing the searches themselves. Later, companies explored business models based on advertising. Later still, Google developed a system to maximize the profitability of the ad-based model. Without all that trial and error, it’s highly unlikely that Google could have built the algorithm-based juggernaut so familiar today.

Create the conditions to attract resources and attention

Organizations tend to move on to new projects rather than fix systemic problems with existing ones. Let something big go wrong, though, and it’s all hands on deck!

I was personally introduced to how failure can be used strategically years ago, when I worked for the City of New York. I ran an IT group charged with installing an automated procurement system. I was blissfully unaware of how challenging it would be to gain political support and financial resources for the project. Luckily, my boss was a political genius. One afternoon, while I was running some analytics, I learned that the data in the old system had become corrupted. I leaped into action, determined to save the day. But after I ran my plan past my boss, he quietly said, “Don’t do any of that. Sometimes things have to fall apart before anybody musters the will to fix them.” He was absolutely right. The failure of the old system created a compelling argument for the new one and was a turning point in gaining support.

Putting Intelligent Failure to Work

Obviously, not all failures are useful, and even some that we could learn from should be avoided at all costs. But if you accept that failures will sometimes occur in uncertain environments, it makes sense to plan for, manage, and learn from them—and in many cases to consider them experiments rather than failures. Here are seven principles that can help your organization leverage learning from failure.

Failures become undiscussable, and people grow so afraid of hurting their career prospects that they eventually stop taking risks.

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