Although many companies claim to embrace failure as an integral part of
the innovation process, near-zero tolerance for it blocks them from
pursuing new ideas. Corporate budgeting, resource allocation, and risk
control are all designed to promote predictability and efficiency, and
even when people understand that they can and should fail, they do
everything possible to avoid missteps. There’s a way to resolve this
conundrum, however: Increase your return on unsuccessful projects by
rigorously extracting value from them, boosting their benefits while
minimizing their downsides. In this article, two business school
professors outline three steps you can take to improve your firm’s
return on failure. First, study projects that didn’t pan out and
document all the insights they offer about customers, markets, future
trends, your organization, your operations, your team, and yourself.
Second, magnify the impact of those lessons by spreading them across
your company. Senior leaders should gather frequently to discuss their
failures, and efforts to share lessons with all employees will build
trust and goodwill and encourage future initiatives. Third, step back
and do a corporatewide review of your pattern of failure, to ensure your
overall approach is yielding all the benefits it should. If failure
rates are too high, you may need to tighten up your systems, but low
rates may signal a need to encourage more openness to risks. Mistakes
are the inevitable consequence of trying something new. But they can
also be a source of tremendous value in the form of learning if your
firm has the right mindset. [ABSTRACT FROM AUTHOR]