Making Failure Work

Originally published at the European Business Review, July-August 2019

By Ricardo Viana Vargas, Edivandro Conforto, and Tahirou Assane Oumarou

We’ve long believed that over time organisations tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant,” noted Larry Page on setting up Alphabet as a collection of companies including Google and a host of others – from Calico to Waymo.¹

Alphabet companies are a constantly moving portfolio of impressive, wild and brilliant ideas at varying stages of development. The social networking software company Dodgeball was part of the Google ecosystem. Acquired in 2005, it closed down in 2009. Others have had a stuttering existence. Google Glass was publicly launched in 2014 and then returned to development before re-surfacing as the Google Glass Enterprise Edition in 2017. And others appear set to make an impact: such as DeepMind which was acquired by Google in 2014 and is a leader in AI research.

For all the enormous success and power of Alphabet – 2018 annual revenues of $136.8 billion; profits of $26.3 billion; and 98,000 employees – what is intriguing is its appetite for making what the Google founders have labelled “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses”.

Central to Alphabet’s success is its implicit acceptance that failure is a fact of life. Failure, after all, is a daily occurrence. Bright ideas crash and burn; strategies hit the ground and stay there; and change programmes run into the organisational buffers. Not surprisingly, a full 90 percent of respondents to a 2017 global survey of 500 senior executives from companies with annual revenues of over $1 billion, conducted by the Economist Intelligence Unit, admitted that they failed to reach all of their strategic goals because of flawed implementation.² From transformation programmes which don’t achieve change to mergers and acquisitions which do not add value, failure is inescapable.

Facts of life

For entrepreneurs in particular, the perils of failure are writ large and constant. Research by Shikhar Ghosh of Harvard Business School found that 75 percent of venture-based start-ups fail.³ And failure is also a frequent experience in larger organisations. Size and scale do not insulate individuals or organisations from failure. Business history is littered with stories of misjudgement, companies doggedly pursuing the wrong strategies, throwing good money after bad, and simply getting it wrong. Think New Coke. Remember how, at the beginning of the century, Webvan promised to change the way Americans bought groceries. It established a network of warehouses across the country. But then the customers didn’t materialise. It failed slowly and on a grand scale (with losses of over $800 million).

But, despite the fact that failure is a constant presence in life inside and outside organisations, individuals and organisations are ill equipped to deal with it. Faced with failure, people are likely to bury their heads in the organisational sand rather than admitting things are going wrong. Plowing on is an instinctive reaction for many when they are faced with failure. Others abandon ship, heading in the opposite direction at the earliest opportunity.

What to do about failure

So, what needs to happen for individuals and organisations to have a more productive relationship with failure? We believe three things are key:

1. Recognise that plans cannot be set in stone

Plans are extremely important. Without them you don’t know where you are going, what you are doing and why. However, in some organisations, plans are as static as a photograph. They are fatally tethered to an out-of-date context. We tend to make assumptions about the future and sometimes ingenuously believe all will happen naturally. Sometimes, we just don't have goals, we merely have a set of hypotheses that need to be tested.

The ideal state could be described as dynamic stability. An organisation must be constantly reviewing and appraising the reality; and be willing to change things as they go along.

The saying that no plan survives contact with the enemy is forever being proved true. Managers must develop robust plans but allow for missteps along the way, and be able and willing to adapt the plan as fast as possible. The challenge for organisations is to create innovative strategies which are not organisational straitjackets.

The ideal state could be described as dynamic stability. An organisation must be constantly reviewing and appraising the reality; and be willing to change things as they go along. Agile practices can help teams develop a more flexible and effective approach to planning, by adopting short feedback loops, frequent adaptation of processes, reprioritisation, update plans constantly, and frequent delivery.⁴ As research shows,⁵ developing agile competences at all levels will help the organisation to promptly and effectively reallocate funding and personnel among initiatives. They can also rapidly adjust when implementation reveals new risks or opportunities.

Recognition that plans cannot be set in stone but need to be more fluid is growing. Consider the Dutch financial company, ING Group. It has embarked on an organisational transformation to create what it calls “One Way of Working”.⁶ This programme aims to incorporate agile methodology principles to improve flexibility, accelerate innovation with shorter time to market, minimise handovers, and provide employees with greater freedom and responsibility.

At ING, failure is becoming productively normalised rather than silently accepted. Some of its most ambitious programmes have had to change course. In extreme cases, programmes are completely halted, another path taken or the approach fundamentally changed.

ING relies on frequent review cycles and fast escalation procedures to identify which teams are stalling or need to be adjusted, as well as the root causes of a project delay or derailment. The focus is then on resolving the issue immediately. “If your projects take too long, cost too much money and don’t give you the agility to fail fast, learn and adjust, then you’re not going to be very effective in terms of strategy execution”, explains Dina Matta, Head of the Global Transformation Office at ING.

The challenge for leaders is to better understand their own relationship with failure and to use that knowledge to understand the failures of others.
Only then will failure really be put to work.

2. Build failure into the culture

Accounting software company Intuit gives a special award for the Best Failure and holds “failure parties”. “At Intuit we celebrate failure”, says the company’s co-founder Scott Cook, “because every failure teaches something important that can be the seed for the next great idea.”

Taking positive lessons from failure and encouraging people to seize the initiative and take risks has to be an integral part of a company’s culture. It has to be the way things are done around here.

Many leaders and organisations say that they are open to failure. Most pay lip-service to this in practice. Very few explicitly talk of failure in their corporate communications beyond platitudes. Enshrining an openness to failure enables people to take the risks necessary to succeed.

Leaders must be the role models. “You should have more things that don’t work out, you have to get more aggressive,” said Netflix chairman and CEO Reed Hastings when it cancelled a series. “The drive toward conformity as you grow is more substantial. As a leader, you want to drive people to take more risks.” He has also lamented, “Our hit ratio is way too high right now…. I’m always pushing the content team. We have to take more risk…You have to try more crazy things, because we should have a higher cancel rate overall.”⁷

In 2014, when Nadella Satya became Microsoft's new CEO, he declared that the new game was to be a Day 1 Company. For a Day 1 Company every day is a new day where experimenting, innovating and iterating is the norm. For Nadella this means asking three questions:

• How successful are we at creating new products, services or business models?
• How effective are we at adapting to new changes or disruptions?
• Does our culture reward risk and failure?

Role modelling failure starts at the top of any organisation, division, team or small company. “If we’re not making mistakes we’re not trying hard enough,” observed James Quincey when he became CEO of Coca-Cola in 2017.⁸ Amazon’s Jeff Bezos has been similarly vocal in making it clear that failing is an integral part of succeeding. “If you’re going to take bold bets, they’re going to be experiments. And if they’re experiments, you don’t know ahead of time if they’re going to work. Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.”

3. Fail fast, adapt and learn

Fail fast, fail often and fail productively. For entrepreneurs, being willing and able to pursue multiple inexpensive, quick experiments is part of their competitive advantage. Experiments and failure have a symbiotic relationship. But, it is not only a willingness to try out things to see if they work which is important. The best leaders and organisations regard failure as an opportunity. Chiefly, they regard it as an opportunity to learn as well as a motivational tool to guide future efforts. They adapt and learn.

The fail fast mantra is now commonplace. Failure has been championed by the adherents of organisational agility. This takes as its inspiration the work of software developers in working as teams to identify bugs and to sort them out.

“We aim to make mistakes faster than anyone else,” says Spotify co-founder Daniel Ek.⁹ At NASA employees are encouraged to experiment and learn in an environment where it’s safe to fail fast.¹⁰ At the American Red Cross leaders encourage employees to learn from their mistakes, discuss challenges openly an accept failure as a valuable part of their strategy implementation. “I have seen more leaders
fail and just stick to their strategy because they don’t want to admit they made a mistake”, says Gail McGovern, president and CEO of the American Red Cross.¹¹

Being honest and upfront about your failures – and those of people around you – opens the way to actively learning from failure.

Research by Julian Birkinshaw of London Business School and Martine Haas of the Wharton School encourages executives to consider their return on failure. “Failure is less painful when you extract the maximum value from it. If you learn from each mistake, large and small, share those lessons, and periodically check that these processes are helping your organisation move more efficiently in the right direction, your return on failure will skyrocket,” say Birkinshaw and Haas.12 They suggest that each failure is an opportunity to challenge “your default beliefs and adjust accordingly” and should be followed by an examination of what you have learned as a result about customers and market dynamics; the organisation’s strategy, culture and processes; yourself and your team; and future trends.

Being honest and upfront about your failures – and those of people around you – opens the way to actively learning from failure. The challenge for leaders is to better understand their own relationship with failure and to use that knowledge to understand the failures of others. Only then will failure really be put to work.

About the Authors

Ricardo Viana Vargas is a specialist in project management and transformation. Over the past 20 years, he has been responsible for more than 80 major transformation projects globally, with an investment portfolio of over $20 billion. He is the executive director of the Brightline, a PMI Initiative together with leading global organisations dedicated to bridge the gap between ideas and results.

Edivandro Carlos Conforto, PhD is a research award winner and thought leader on organisational agility and agile innovation. His work help leaders transform their organisations to succeed in today’s ever-changing business environment. He is the head of strategy research at Brightline Initiative, responsible for the benefit pillar of thought and practice leadership through academic and professional research.

Tahirou Assane Oumarou, MASc, P.Eng, PMP has over 15 years of experience in leadership roles, civil engineering, and project management. As director of operations of the Brightline Initiative, Tahirou oversees the activities under the three benefit pillars of thought and practice leadership, networking, and capability building. From 2013 to 2017, Tahirou worked as the deputy director of infrastructure and project management group in the United Nations Office for Project Services.

References

1. https://abc.xyz
2. Economist Intelligence Unit, “Closing the gap: Designing and delivering a strategy that works”, 2017; https://www.brightline.org/resources/eiu-report/
3. Carmen Nobel, ‘Why companies fail – and how their founders can bounce back’, Harvard Working Knowledge, 7 March 2011
4. The Agile Practice Guide. Project Management Institute and Agile Alliance, Global Standard, 2017.
5. Economist Intelligence Unit, “Closing the gap: Designing and delivering a strategy that works”, 2017; https://www.brightline.org/resources/eiu-report/
6. Brightline Initiative and Forbes Insights Case Study. “An agile blueprint for effective strategy execution at ING Group.” Published on December 04, 2018. Available at: https://www.brightline.org/resources/ an-agile-blueprint-for-effective-strategy-execution-at-ing-group/
7. Andrew Wallenstein, “Reed Hastings doesn’t want ‘The Get Down’ cancellation to discourage Netflix”, Variety, 31 May 2017, https://variety.com/2017/digital/news/reed-hastings-doesnt-want-the-get-down-cancellation-to-discourage-netflix-1202448798/
8. Bill Taylor, ‘How Coca-Cola, Netflix, and Amazon learn from failure’, Harvard Business Review, 10 November 2017
9. Derek Roos, “Six ways to foster digital innovation”, Real Business, 28 October 2015; https://realbusiness.co.uk/six-ways-to-foster-faster-digital-innovation/
10. Brightline Initiative and Forges Insights Case Study. “NASA’s Downto-Earth principles deliver positive strategic outcomes.” Published online on June 08, 2018. Available at: https://www.brightline.org/resources/nasa-down-to-earth-principles-deliver-positive-strategic-outcomes/
11. Brightline Initiative and Forbes Insights Case Study. “How a focus on culture, talent, metrics and technology drives the American Red Cross’s Strategy.” Published on line on May 11, 2018. Available at: https://www.brightline.org/resources/how-a-focus-on-culture-talent-metrics-and-technology-drives-the-american-red-crosss-strategy/
12. Julian Birkinshaw and Martine Haas, “Increase your return on failure”, Harvard Business Review, May 2016