Failure in Innovation, what does it really teach you?

New value creation is a leap of faith, and a high degree of failure is expected. If you study the most innovative companies you can think of, you will find that they have had far more failures than successes, more misses than hits. No one knows beforehand what will work or be successful, so you need to expose yourself and your customers to a breadth of ideas and solutions. The business model of an innovation is uncertain, and while we might attempt to reduce this uncertainty through the development of the practices shared in The Innovation Biome, innovation needs to run freely and with flexibility. Companies should not assume they know whether an innovation will work, how it will be used, who exactly will use it, or how it will be monetized. All of these variables need to be fluid, and the organization must be ready for change. Rigidity in any of these aspects is the antithesis to value creation.

Whether you are an individual or a corporation, innovation takes practice, and you are likely to have misses—far more misses than you anticipate. Here, the apocryphal quote from Thomas Edison is pertinent: “I have not failed 10,000 times. I have successfully found 10,000 ways that will not work.” Every great innovator has a string of failures behind them. They had to fail, otherwise they would have missed out on the successes. As Thomas J. Watson is said to have pointed out, “If you want to increase your success rate, double your failure rate.”

Failure is uncomfortable, but it is necessary if you are in the business of creating new value. Cerebrally we understand that we should encourage failure and even celebrate learn-fast, fail-fast methodologies. But practically it is hard to reward failure. If failure is rewarded, aren’t we creating a culture of mediocrity rather than preeminence? Failure is not necessarily bad per se, but an innovation biome should be designed to maximize the odds of success, reduce the number of failures, and teach people valuable lessons from the missteps.

To do this, we must first do away with practices that are likely to generate a high rate of failure. For example, we need to think carefully about some traditional innovation methods such as setting up group brainstorming sessions to develop ideas that are rapidly prototyped and sent up the management chain for approval. This approach is fraught with risks and has a higher chance of failure than using a more structured approach.

The way to determine whether an innovation will be successful is to first examine whether it has a positive experience delta (whether it is a marked improvement from current customer experiences). If we can see the positive impact an offering makes, then we know we have something on our hands that could potentially be valuable. If an innovation is unable to positively impact an experience, then it should be considered a no-go. The experience delta becomes the currency to decide whether to invest in an innovation or not.

Using the experience journey as a barometer reduces some of the subjectivity of the go/no-go decision. Although approving the resources for a new development is ultimately an individual manager’s decision, the experience delta is a tool that can reduce the chance of failure. Using the experience delta as a lens for evaluating an innovation replaces opinions with something that can be used consistently.

Once an innovation decision is made and the development has started, there are two possible types of failures. The first is that the product or offering never gets built due to a technical inability to develop it, and the second is that the offering gets built but does not generate market success.

If the failure happened because you couldn’t build the product as originally envisioned, don’t give up right away. In many cases persistence pays off. Gather a cross functional set of people from multiple and disparate disciplines and discuss the matter. These individuals will apply a different lens to the problem. Innovation science shows that breakthroughs happen during discussions where multiple perspectives are shared.

Sometimes, despite your best efforts, a dead end simply can’t be overcome, and you must make the decision to pull the plug on the innovation. Remember that just because a problem is unsolvable today does not mean it will never be solved. Keep the idea alive through documentation of the scenario. As other developments occur or different people get engaged in the work, old ideas get a new life. Always keep looking at the cutting-room floor for ideas that did not work at a specific point in time; they are likely to work later.

If the innovation gets built and fails in the marketplace, despite having a positive experience delta or a high relative advantage over the alternatives, ask yourself the following questions. Was there truly a substantial gain in the customer experience, or did you perceive the experience delta incorrectly? Was there a substantial disadvantage associated with the enhanced experience delta (such as unacceptable side effects or other unintended consequences)? Or did something else prevent successful diffusion of the innovation, such as perceived advantage, ease of use, cost, availability, quality, lack of awareness or any other of reason.

Everyone talks about learning from failure. What exactly does that mean? Historically, companies have shown a low level of learning from failure and often repeat the same error. In innovation or new value creation, we know we are embarking on a journey that is going to give us more misses than hits. We understand that we need to accept and learn from the misses. While we accept the failures, what exactly do we learn from them, and how can we apply that learning to future initiatives? Do we even have a strategy for failure analysis? A general practice is to have the initiative leader prepare a brief report or account documenting why something did not work as planned. And in most cases, this is sufficient because no one wants to relive failures, especially when the “next big thing” is waiting for our attention.

We can only learn from failure if we respect it enough to accept, analyze, understand, document, and reference it in the future. The first step in this process is recognizing failure when it surfaces early. If we know something is not going to work, we need to pull the plug and not mask failure as a work in progress. Then we need a non-judgmental environment where it can be discussed openly. Managers understandably do not like to talk about failure, but it is critical. We need to use structured postmortems to understand why an innovation did not work. Cross functional teams without a vested interest are best at having an open discussion on failure. It is important to document what happened so others do not encounter the same situation, and this is what we mean when we say, “learning from failure.” I recommend having a “failure portal” or knowledge repository where the details of each innovation that failed (for any reason) are archived and available to others to learn from. This level of introspection will also make the innovator more likely to be successful in future endeavors.

While the reasons for failure can be many and may be within or outside your control, the main point of this discussion is that it is okay to fail for the right reasons. But if there truly is a desire to learn from failures, then there needs to be a methodology in place to make that knowledge accessible to other innovators within your company so each endeavor adds real value, even if its market value did not materialize.


Adapted from The Innovation Biome.