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The Other F Word: How To Make The Most Of Failure

How leaders can convert failure from a regret to a resource.

The Other F Word: How To Make The Most Of Failure
[Photo: Flickr user David Thompson]

Failure–“the other F word”–is a fact and force of life in every organization. But in many firms, it’s also a taboo topic, one that is embarrassing and painful to talk about. Discussing embarrassing screwups and miscalculations is rarely easy. After all, wouldn’t we rather celebrate our successes and wins?

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But failure is reality’s way of showing you what you don’t yet know. The insights failure delivers, however awkward and difficult, can change your strategy, products, and culture for the better if you’re honest, humble, and confident enough to pay attention. Savvy leaders understand that failure is a resource, one that most organizations create every day in many ways.

Companies that choose to engage constructively with failure reap two crucial benefits:

  1. Failure does a great job, often painfully and publicly, of demonstrating where and how your current approach or solution is not working.
  2. In the residue of those failures, you can discover the insights needed to develop new solutions or approaches to drive your next cycle of innovation or growth.

Want proof? Check out Netflix’s recent history. You may recall its Qwikster fiasco, when it separated its video-on-demand and DVD-by-mail services and immediately confused and angered its customers–who fled in droves. Within several months, Netflix had lost more than 75% of its market capitalization. Many market-watchers assumed its days as an independent entity were numbered, with acquisition rumors flying.

But Netflix weathered the storm. CEO Reed Hastings posted a video in which he personally apologized to customers and promised fixes. Netflix then stepped back to reassess the rapidly changing media distribution environment. It withdrew Qwikster, rolled back price increases, created new custom programming such as House of Cards, and has since recovered all its lost shareholder value–and then some.

Contrast that scenario with how then-chairman Chip Wilson handled Lululemon’s comparably embarrassing failure of its too-sheer yoga pants by seemingly blaming some of his customers for the product’s shoddy design and manufacturing. His company survives, albeit without him.

Netflix demonstrated what we call “failure savvy” leadership. It responded quickly, and apologized once the scope of its self-inflicted failure became apparent. Leadership reflected candidly and creatively on its mistake, carefully assessed the dynamics in its evolving marketplace, and extracted key insights that anchored its rebound strategy. Finally, it effectively executed a solid recovery plan with a newfound respect for both the pain and power of the other F word.

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For our new book, The Other “F” Word: How Smart Leaders, Teams, and Entrepreneurs Put Failure to Work, my coauthor and UC Berkeley colleague John Danner and I researched hundreds of similar scenarios and interviewed hundreds of executives and organizations. We looked at how they respond to failure, whether self-imposed or brought about by competitors or external events. We looked at how the other F word is handled in other disciplines, from engineering and science to the arts and government (and even space travel). John and I also identified consistent patterns exhibited by the most resilient, effective leaders and teams in turning failure from a regret to a resource.

These insights are embedded in our seven-stage Failure Value Cycle, a practical framework that helps leaders put failure to work to drive innovation, growth, and employee engagement. It suggests treating failure not as an isolated event or even a recurring process, but as a valuable–and manageable–strategic resource like capital, talent, and customer goodwill.

To do that successfully, leaders need to address one major challenge: the fear of failure itself. That fear, and the memory of past failures that fuels it, stifles creativity and initiative, limits candor, and corrodes trust. If you don’t talk about failure openly, others won’t either. If you unfairly punish those involved with a failed project or product, others are unlikely to volunteer for the next risky assignment. And if you ignore evidence of failure, others will be less likely to alert you to correctable problems in your business.

Here are four basic actions you can take now to create a more failure-savvy culture:

1. Begin The “Other F Word” Conversation

Your colleagues will look to you to determine whether or not it’s safe to talk about failure openly. If your default mode is blame and shame, don’t expect your colleagues to volunteer their observations, ideas, or time for fear they will be on the receiving end of that treatment. However, if you show humility and perhaps some self-deprecating humor about your own encounters with the other F word, you’re more likely to be rewarded with the trust you need to unlock genuine engagement from your coworkers.

2. Treat Your Business Like A Scientist

Experiments anticipate both positive and negative discoveries. Try taking on a spirit of experimentation as you try new strategies, internal process improvements, or product offerings in the market. It may make it easier and faster to learn as you go. After all, most of the initiatives you undertake are based on assertions and assumptions yet to be tested by reality. Failure is reality’s way of showing you you’ve been experimenting all along.

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3. Focus On The What, How, And Why Before The Who

It’s natural in the immediate aftermath of a failure to start looking for the person responsible for the failure. But too often, finger-pointing substitutes for more reasoned and careful assessment of the real factors that led up to this less-than-desirable result.

4. Don’t Waste A Good Failure

Companies that successfully weather failure create rich stories that reinforce resiliency and confidence while accommodating inevitable fallibility. You can use these firsthand failure-to-success stories (like the Netflix story we recounted above) to reduce fear of failure across your organization and reinforce the culture of trust and reciprocal accountability you need to accelerate innovation.

Remember: Don’t just bemoan failure when it happens–and it is definitely going to happen. We’re not saying you should tolerate failure when it is the product of incompetence, negligence, or worse. And we’re not saying you should celebrate failure for its own sake. But your job as a leader is to liberate failure as a resource that can create better results in the future.

Mark Coopersmith is the coauthor, along with John Danner, of the new book The Other “F” Word: How Smart Leaders, Teams, and Entrepreneurs Put Failure to Work (Wiley 2015). He teaches innovation and entrepreneurship at UC Berkeley’s Haas School of Business. He is a strategic business advisor, has run divisions for Sony and Newell Rubbermaid, led a number of startups (one of which is now owned by Google), and sits on several boards.