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How to Encourage Successful Innovation:

Hint: Encourage Failure

“I’ve got to develop nine prototypes that go nowhere to make one that goes to production for big money. Only the place that tolerates failure gives rise to the thinking that results in success. ”
— Burt Rutan, innovative aircraft designer

“Could you please help us to encourage failure and mistakes in our organization?”We’ve never heard this as a genuine question in a board room. Yet New & Improved and many other innovation gurus say that mistakes and failures are a critical part of the innovation process. Consider this quote from Judith Estrin, CEO of Packet Design, Inc. , a network-technology company:

“Everybody uses the word, ‘risk’ [when they’re talking about innovation]. But what it really means is an attitude towards acceptance of failure. And people don’t want to use the word ‘failure,’ and so it’s not just that companies need to be willing to have projects fail. People need to know that it’s OK to fail. As long as it’s not for someone not trying or somebody just blatantly misexecuting, failure is actually a good thing and not a bad thing. ” (Managing Innovation: How to get the best out of your company’s big ideas, Wall Street Journal, Monday, 9/24/07)

So how do you encourage failure and mistakes in your organization? By instilling the New & Improved Absolute Value Law of Innovation (N&I AVLI). (Pronounced Knee-avlee) Let’s take a trip in the Way Back Machine to some high school math class you once took, when you learned about the mathematical phenomenon of Absolute Value, the official definition of which is |x| = √x² . Got it now? Me neither. Well then how about if we say, the absolute value of “x” is equal to the square root of “x” squared? No? How about the absolute value is the distance of the number from zero? No? Well the way I remember it is that the absolute value of a number is the same as the number without the positive or negative sign. So the absolute value of +2 is two. And the absolute value of -2 is two. In other words, it doesn’t matter if it’s positive or negative.

What the $&# does that have to do with innovation? Well the N&I AVLI says that regardless of whether the attempt at innovation succeeds or fails, the effort should be acknowledged and rewarded (as long as it was a well-intentioned effort). But “NO!” you say, “We can’t reward failure,” you say. “We want success so we reward success,” you continue saying before you conclude, “Remember, you get what you reward!” To which we reply, “Well, sometimes.” Because every time you create an incentive for something, you automatically create a disincentive for something else. If you reward people every time they wear a black shirt, you create an automatic disincentive for any other colored shirt. If you reward people for increasing the efficiency of a production line, you’re creating a disincentive for them to try something radically different. You’ll get improvements, but small ones. You won’t get radical new ideas. You won’t get well-intentioned experiments. If you reward people for successful innovations, you create a reward for safe attempts...ones they know will succeed, and an automatic disincentive for radical efforts, no matter what you say. Because money speaks, as we’ll discover in a few paragraphs.

Sports analogy time: take a look at the list of all time Major League Baseball career homerun leaders and you’ll notice a striking (pun intended) correlation between those on the list of all time MLB career strikeout leaders. In fact, nine of the top ten strikeout leaders are in the list of the top 34 all time home run hitters. In other words, in baseball as in business, you must be ready to fail (strikeout) if you are to have a radical success (home run). Yes, singles can win the game. Singles are not bad, and neither are incremental innovations. But you’re more likely to win with a combination of singles and homers. Note to non-baseball fans: please ignore the preceding paragraph, and create a metaphor that makes sense to you...and feel free to send it to <info@newandimproved.com>).

What’s critical is that the radical innovation that everyone says they want is different than an incremental improvement. So, if you want incremental improvements, reward only successful innovation. But if you want radical improvement, reward the innovation efforts, regardless of their success or failure. Which brings us to the performance review.

In the same WSJ article quoted above, Douglas Merrill, VP Engineering and CIO for Google, adds, “Every company in the world says, ‘It’s OK to fail. ” And for 99% of them, it’s probably not true. The place where those decisions get made are your annual reviews. ”

I’m reminded of a major organizational development initiative we were engaged in for the R&D division of a major consumer products company. Our message and our intervention was all about team-based creative problem solving (as a way of driving innovation via curiosity), which was going great in the organization, with many, many successes, until it started to be sabotaged by the traditional performance review wherein people were asked, “Okay, I hear you say you were working on teams, but what successes did YOU create?” This successfully shot the teamwork effort right in the foot. Yes, the communication said, “team effort: good!” But the money said, “individual effort: worth money to you!” Which one speaks louder to you?

Certainly there are many anecdotal stories of people throwing parties, ringing bells, making announcements and so forth to trumpet the spectacular failure of a new initiative. Hurray! Failure! However, perhaps that’s putting too much effort into creating a MAJOR SYSTEM AND BIG DEAL around failure. Instead, try asking these two questions in the performance review:

  1. What were your contributions to successful innovation of the organization?
  2. What were some of the new things you tried that didn’t work out?

Create a culture that encourages experimentation. Not just a little bit, but enough experimentation so that there is failure. If you really need to punish, punish the person who never has a failed experiment or someone whose only lesson from a failed experiment is “I’ll never do that again!” Reward the sensible experimenter whose failure led them to new learning and another experiment. That’s where innovation grows! In other words,(and perhaps the best way to state the N&I AVLI), the more people are contributing and the more people are trying, the more likely innovation is to happen in the organization regardless of whether the result is positive or negative. The most important thing is not immediate success, but whether people are producing some result focused on innovation. Soccer Analogy time: the more shots on goal, the more likelihood of scoring a point.

Better yet? Make sure there is the discipline in the organization to learn from the unsuccessful attempts. Ask, what did we learn? What should we do differently? What else should we try? Move from an attitude of “trial and error” to an attitude of “trial and learning!” Just make sure nobody’s learning the wrong lesson. The correct lesson? It’s important to try new things. The wrong lesson? If you fail, you’ll have a bad performance review. That automatically sets people up for the safe attempt (i.e. a single in the ballpark, or letting someone else take the shot on goal).

And as everyone in the board room should be able to tell you, trying new things is where innovation comes from.

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