The fast pace of change, business and thus innovation requires several changes in the innovation processes as well as in the innovation culture in today’s organizations.
One key element is that they must embrace and foster a culture of experimentation in which failure is acceptable as long as the intentions were relevant and if the learning of the failure was captured so that you don’t go on repeating the same failures over and over again.
This is not the case today because most companies have “low tolerance for failure culture”. This leaves no room for experimentation and without much of a surprise the punching back for this is the top leadership.
Before I get into why top leadership takes the blame for this and what can be done about it, I want to share some thoughts on the definition of failure in the context of innovation. Like most words, it can mean different things to different people. It can also be defined differently from one organization to the next.
Paul Sloane, an internationally known author and speaker on innovation and leadership, points out, it’s important to “distinguish between the two types of failure – honorable failure is where an honest attempt at something new or different has been tried unsuccessfully and incompetent failure where people fail for lack of effort or competence in standard operations.”
Jamie Notter put it this way in a blog post: “A mistake is when you do something wrong, even though you knew the right way to do it. Failure is when you are trying something new, and you don’t know ahead of time how to make it successful.
Certainly, our topic here is not incompetent failure or mistakes. If your organization suffers from repeated bouts of incompetent failure and/or mistakes, your company almost certainly has bigger problems that I am prepared to address. But how else can we define failure?
Tim Kastelle, who co-writes the Innovation for Growth blog says, “Mistakes are things you do even though you know better. Experiments are tests designed to expand your knowledge. The big difference is that you learn from experiments (or at least you should).”
I completely agree; to innovate, we have to learn and we do that through experimentation, some of which are destined to fail. But it’s not the failure that drives innovation, but rather the learning. Hence, my term “smartfailing” as I have written about in previous posts.
Kastelle also offers up this hierarchy of failure:
• System failure (the collapse of communism)
• System component failure (stock market crashes)
• Major firm failure (Enron going out of business)
• Start-up failure (pets.com going out of business)
• Product failure (New Coke tanking)
• Idea failure (Apple Navigator prototyped but never launched)
For our purposes here, we are primarily talking about the last three categories on the hierarchy, although, certainly, if a company continuously experiences product and idea failure, they put themselves at risk of eventually moving up the hierarchy to suffer a major firm failure.
Business model failure is another level we might consider adding to the hierarchy because a lot of innovation revolves around finding a new way to do business and, certainly, lots of failure occurs there, too. This is different than start-up failure because often start-ups are following old business models that have succeeded elsewhere.
Another point to make about this Kastell’s suggested hierarchy is that the failure to stop ideas or projects early on can lead to bigger failures later in the process. To use one of Kastelle’s examples, the executives at Coca-Cola ignored warning signs that arose in focus groups as they tested New Coke that should have alerted them to the considerable backlash they would face if they messed with the formula for Coke.
Yet they went ahead with an expensive product launch that quickly resulted in a complete humiliation for the company when it had to pull the much hyped new product off the market in less than three months. Examples like this, where companies should have shut down a project far sooner than they did, litter the innovation landscape. There is little doubt that part of the problem here is an unwillingness by people at various levels and at various stages along the way to admit they might be on the wrong track, i.e., the track to failure.
Here is another way to look at failure. I believe failure in organizations most often happen on two levels: the failure to anticipate and the failure to execute. I would also argue that failure to anticipate happens on three levels:
• Organizations fail to anticipate changes in the market.
• Organizations fail to anticipate changes that impact the platforms needed to bring their products and services to market. This includes the failure to build proper ecosystems.
• Organizations fail to anticipate changes that will have an impact on their organizational setup and the culture.
My focus on this is very much about change; it is important to notice that the fast pace of change we experience today actually seems to happen much faster outside organizations than inside. It takes time for organizations to adapt to changes and this creates pockets of opportunities that can be lost or won.
At last, I can also mention that another key element of failure for organizations is related to execution. Not so much of a surprise.
Top Executives Are at Fault
Based on my recent survey on why corporate innovation fails, Paul Hobcraft identified the top ten causes of innovation failure and this points straight to the top of the of organization.
Here you get the top six causes as mentioned in Paul’s post:
1) unrealistic expectations from top management regarding resources and the time really required in achieving innovation
2) the lack of resources allocated in budget, people, infrastructure and
3) far too much focus on products and technology and ignoring the other options within innovation, such as service, business model, platform collaborations etc.
4) that people or teams operate in silo’s instead of broader collaborative approaches,
5) the wrong personnel are in place to make innovation happen and
6) that classic of classics, a poorly defined innovation strategy and the goals to achieve this.
I fully agree with Paul that each of these are top management failures and the key reason is that the executives simply do not understand innovation well enough to lead these efforts in the best possible way. This is unfortunate as this means that there are no quick fixes to this problem.
Nevertheless, here you get some of my suggestions on what we can do about this:
Better overview, new processes: Corporate innovation teams must identify the key reasons for failure in their organizations and then they must develop a learning process on how to address this. This process can be inspired by other failure/learning processes in the company (perhaps in production) or if the team already has a process in place in which they learn from their successes.
Be open about failures: There is not much surprise here. You need to talk more about failures and how to learn from them if you want to change an innovation culture for the better.
Reward learning behaviors: If you only reward outcomes (successes), then you do not improve your corporate innovation capabilities by much. You will also need to find ways to reward behaviors including the ability to detect early failure and deal with this (correct it or kill it). We need to remind ourselves that learning behaviors are the true drivers of a culture of innovation.
Educate up and down on innovation: It is the responsibility for corporate innovation teams to educate and train the organization on innovation. They also need to educate upwards (the executives) which is often neglected since it is difficult for many to point out to their executives that they have shortcomings that need to be addressed. But they need to ask themselves an important question here: Who else will do this?
As I said, there are no quick fixes to these issues, but I hope these thoughts will help organizations get started on improving their innovation processes and culture by becoming better at learning from failure.
Your input is much appreciated.
