Is It Failure Or Incompetence?

If there is no data, the data has to be created. That does not mean plugging random numbers into your spreadsheet and doing percentage pogo. It means generating real insight from nothing. The more user-centric your effort, the more effort needs to be made to go and meet those users. Study them, understand them. It’s not informed by marketing metrics or desktop research. It’s done by a mixture of design and anthropological research practices. Those are often seen as a cost, a wasted effort, and of no value to aforementioned numbers. I refer to these “affordable losses” in the interest of learning, creativity, and discovery as “little bets.” Because the people we want to innovate for do not live in numbers. They live in the real world.

This seems like common sense; so why is it so hard? Three words: fear of failure. If you’re an MBA-trained manager or executive, the odds are you were never, at any point in your educational or professional career, given permission to fail, even on a “little bet.” Your parents wanted you to achieve, achieve, achieve—in sports, the classroom, and at work. Your teachers penalized you for having the “wrong” answers, or knocked your grades down if you were imperfect, according to whatever way they defined perfection.

Similarly, modern industrial management is still predicated largely on mitigating risks and preventing errors, not innovating or inventing. Corporate and professional reputation is everything, and the condition of always first needing to know the answers prior to allowing the question to be asked is—for a lot of legacy brands—an unwritten, non-negotiable rule.

Meanwhile, entrepreneurs and designers think of failure the way most people think of learning. We’re the ones who feel we must make lots of mistakes to discover new approaches, opportunities, or business models. Like Howard Schultz. When he started Il Giornale in Seattle, the company that Schultz used to later buy the original Starbucks brand and assets, the store had nonstop opera music playing, menus written in Italian, and no chairs; standing bars only. As Schultz has often said, “We had to make a lot of mistakes” before discovering a model that worked.

How is “failure” defined in the pursuit of innovation? If a company you started is going bankrupt, then, yes, that is a failure, and I can empathize. However, if your internalized view of failure is ‘anything that is not perfect,’ then you are disempowering yourself from exercising your inherent creativity. You’re certainly not the only one shackled by the fear of failure, and I don’t blame you with the way our educational system is focused so rigidly on “correct answers” and standardized testing. This must change. As must modern management systems; these must become far more adaptive. Leaders need to develop a discovery mindset for those situations where there are many unknowns and uncertainties. Instead of focusing on completing solutions, innovation leaders focus on providing tools and resources to drive a discovery mindset, to identify problems first before jumping in with solutions. And, to do so, they have to change a bunch of internal review approaches so that it becomes cool to be imperfect at the early stages of new projects—so long as you’re learning quickly.

One little imperfection after the other, GE, Cisco, Procter & Gamble, and many other companies are on the path to becoming more adaptive. Amazon and Pixar are leaders already. Bill Hewlett, co-founder of Hewlett Packard, an ardent proponent of what he called “small bet” innovation, found that HP needed to make 100 small bets to find six breakthroughs. Whether a small bet or an imperfect approach, each are efforts to turn a corporate culture of predictable performance into an innovative culture of proposing possibilities.

Such innovative cultures are generally depicted as pretty fun. Chances are, Google, with their office environments and perks, will come to mind. Corporations that aspire to have them would see a different world compared to theirs. When I ask managers to describe their view and expectation of such innovative behavior, I usually get a list of characteristics identical to those praised enthusiastically by management books: tolerance for failure, willingness to experiment, psychological safety, highly collaborative, and nonhierarchical. Most express confidence in the research that supports that these behaviors translate into better innovative performance. However, despite the fact that this culture is expressed as being desirable, and that most leaders and managers always claim to understand what it entails, this culture is hard to create and sustain. In fact, more common is the outright resistance to truly activating it. This is puzzling. How can practices apparently so wanted and understood turn out to be so tricky to implement and adhere to?

I believe the reason is that regardless of the books, seminars, workshops, and trainings, a truly innovative culture is misunderstood. The easy-to-like behaviors that get so much attention are only one side of the coin. The counterbalance involves some tougher and frankly less than fun behaviors.

You see, a tolerance for failure requires an intolerance for incompetence. A willingness to experiment requires rigorous discipline.

Psychological safety requires comfort with candour and being vulnerable. Collaboration must be balanced with individual accountability. And flatness requires strong leadership. Yes, even innovative cultures are paradoxical, just as their processes are. Unless the tensions created by this paradox are carefully managed, attempts to create an innovative culture where we dare to fail will . . . well; fail.

It is the fear of management’s negative reaction to failures that keeps people from bringing up new ideas or pointing out potential problems that could benefit from innovation. Fear will also keep people from admitting to failures that may cost the organization, or withhold a radical innovation that can mean developing a significant new market. It is this fear of failure that management must fight throughout the entire organization. Management’s reaction to failure determines whether fear will be a major inhibitor of innovation; this fear can be present at all levels of the organization. Management itself may be afraid to accept and implement innovations for fear that they will fail. When management does not accept failures as part of the innovation process, the fear of failure will cause the organization to focus on incremental innovations that are safer and have less risk. The more meaningful innovations that can change the industry or bring new value to our lives will be avoided because of fear.

A large part of our effort is to help management understand that not all innovations will succeed, not all implemented concepts will be profitable and thus there is an inherent risk. Even when everything is done in a reasoned business process, with data to back up insights, there will still be failures as a normal and acceptable part of innovation development. Without that acceptance, the fear of failure will inhibit the creation of innovative ideas and the attempts to make risk-laden innovative ideas a reality.

One example for handling the failure problem comes from a presentation by John Cleese where he describes the value of accepting mistakes. The essence of the concept is that a guided missile must repeatedly receive input on its performance and make adjustments to its trajectory to be able to hit the target. In the business context, if no one admits to mistakes, there will be no corrections and the objective will be missed. If the mistake is only found out at the end, there will typically not be enough time to fix the problem. Thus, admitting to a small mistake, with management and leadership accepting these mistakes as a normal part of determining the best course for the business, is a far superior habit. If, however, people are afraid to admit failures—even the smaller ones—there won’t be any corrections until the problem is much worse. Admitting failure is a sign of a healthy organization, one that is optimally conducive to innovation.

Another such sign is the ability to accept risks when exploring new ideas and trying to develop them into marketable concepts. Experimentation will often be essential to innovation, but this, too, may result in a failure. The optimum situation is for management to have a well-defined innovation development process that includes failures as an accepted part of business. In our projects, we spend time exploring what success looks like for the brand we are partnering with. We also explore what failure would look like because it helps shape the realistic expectations for the team and the company to synchronize to. I made a deliberate choice in saying “synchronize” versus “align.” If a vision is driving the innovation, there may not be enough evidence or known markers for management to impose their expectations.

There are interesting examples of products that failed to meet their management’s expectations for their current marketplace, but then quickly improved to the point where they became the dominant technology. The personal computers developed by Apple and IBM were not products for their existing customers that needed serious computing power. In fact, major electronics and computer companies did not want to produce the first personal computers because they did not see a market for such a product. Apple and IBM managements were willing to take the risk to develop a new product and a new market.

Innovations can be wasteful with experimentation and failures, but they also allow an organization to glean information about why it failed, and from that knowledge develop an innovative perspective that can actually change the marketplace. Failure analysis is the key to finding success through innovation. Some of the most highly touted innovators have had their share of failures. Remember Apple’s Newton or MobileMe, Google Glass, and the Amazon Fire Phone? Some of these were a failure of tactics. Each are ‘how’ mistakes: a failure to execute on a good strategy and a clear vision. But you can have ‘what’ mistakes that result in a failure of strategy. When you follow a strategy that fails to deliver the results you want. And there is failure of vision, or when the mistake is the ‘why.’ When there is no clear direction, or no shared understanding of why you do the things you do.

Despite the ask and the desired culture to tolerate failure, innovative organizations have to be intolerant of incompetence. Innovation asks high-performance standards for those involved. Exploring risky ideas that ultimately fail is fine, but mediocre technical skills, sloppy thinking, bad work habits, and poor management are not. It’s the cold shower of this industry. People who don’t meet expectations are either let go or moved into roles that better fit their abilities. Steve Jobs was notorious for firing anyone he deemed not up to the task—something he had singular rule over, which I do not recommend as a practice. Building a culture of competence requires clearly articulating expected standards of performance. If such standards are not well understood, they are meaningless and set the effort up for failure. Shifting technologies or business models can render a person who’s very competent in one context incompetent in another. Consider how digitization has impacted the value of different skills in many industries.

Keeping people who have been rendered obsolete and show no learning agility may be compassionate, but it’s dangerous for the innovation capacities of any organization. Maintaining a healthy balance between tolerating productive failures and rooting out incompetence is not easy. A 2015 New York Times article about Amazon illustrates the difficulty. The piece, which was based on interviews with more than 100 current and former employees, labeled Amazon’s culture as “bruising” and recounted stories of employees crying at their desks amid enormous performance pressures. What collateral do we pay for innovation?

The truth is that a tolerance for failure requires having extremely competent people. Attempts to create novel technological or new business models are ranked with uncertainty, where often you don’t know what you don’t know, and you have to learn as you go. “Failures” under these circumstances provide valuable lessons about paths forward. Here’s where learning agility comes into play. Creating a culture that simultaneously values learning through failure and outstanding performance is difficult in organizations with a history of neither. Revealing the distinct difference between productive and unproductive failures is something innovation leaders need to help communicate often and early.

Simply put; “Fail fast, fail often” is just plain bad advice. That cliché “celebrating failure” misses the entire point—we should be celebrating learning, not failure. A simple prototype that fails to perform as expected because of a previously unknown technical issue is a failure worth celebrating if that new knowledge can be applied to future designs. Failure analysis needs to focus on the learning. If there isn’t any value, the reason for failure might, unfortunately, be incompetence.