Learning to Learn from FailureEveryone hates to make mistakes. And yet, almost everyone would agree with the statement “mistakes provide valuable learning opportunities.” How can we resolve that paradox and learn to both make the right mistakes and to get the most out of the opportunities they present?
A recent article in the Harvard Business Review1 addresses this increasingly popular subject. According to Paul J.H. Schoemaker and Robert E. Gunther, the principals in the consulting firm Decision Strategies International, failure is becoming all the rage in executive boardrooms.
How can failure be a good thing? The answer is that you have to make what experts call “intelligent mistakes.”
Consider this scenario: Congress ordered that 30 percent of all military ground vehicles be made robotic by 2015. The law didn’t say how that was to be accomplished, so the Pentagon threw the problem at DARPA, their forward-thinking research group, which tackles the most esoteric problems.
DARPA held a contest that it was certain would fail. In 2004, it offered $1 million to anyone who could pilot an unmanned vehicle across the California desert. As predicted, no one could do it. But that exercise forced entrants to develop and analyze 13 designs that could then be eliminated. This led to more intelligent thinking about other designs that might work. If those 13 had been developed with traditional engineering methods, the same exercise might have consumed years before anyone realized that they were dead ends.
The following year, DARPA upped the ante to $2 million and held the contest again. This time, five vehicles succeeded in crossing the desert and racing the full 132 miles. A team from Stanford University took the prize with a modified Volkswagen.
By deliberately ? and carefully ? making calculated mistakes, DARPA succeeded in two years, while traditional engineering efforts might have taken decades.
Research has demonstrated that executives who use a traditional, logical, systematic approach to solving problems find the solution much more slowly than people who are willing to fail with counter-intuitive methods.
On the other hand, everyone likes to be right. So how do you distinguish between intelligent mistakes and plain old blunders?
Schoemaker and Gunther recounted an experience in which they set out to make a mistake that they believed would lose them money but teach them valuable lessons. To their surprise, they made $1 million from their supposed blunder.
To do this, they turned fundamental assumptions on their heads. Based on that experience, they formulated a six-step process that anyone can follow:
Identify your core assumptions. What are the deepest assumptions you make about how you should run your business? You may not even be aware of all the assumptions you make from day to day. Seek the help of others in rooting out those assumptions that lie at the core of your business, including those about strategy, operations, marketing, finance, legal, IT, and human resources.
Pick out the assumptions that you plan to test. Have people ask themselves how they might act if each assumption proved wrong. This helps to assess how important certain assumptions are. The most important assumptions, if proven false, would result in very different ways of doing business. Arrive at a consensus about which are your most fundamental assumptions.
Rank the assumptions. This is done through polling company managers about the importance of each assumption. Ask them to agree or disagree with statements such as, “We rely on this assumption repeatedly,” or “Our experience with this assumption is limited.” Select the assumptions that score the highest.
Devise a strategy by which you will make “intelligent errors” against these assumptions. For example, one of the assumptions at the consulting firm Decision Strategies International was that responding to requests for proposals was not worthwhile, because companies that sent them were just price-shopping against a decision that had already been made. They set out to respond to the next RFP, which happened to be from a regional electric utility company. The strategy they devised was to let new employees craft the response to keep costs down but then to take the proposal seriously and do a good job.
Execute the intelligent error. The authors went ahead with the proposal, sending the electric utility a plan that would cost $200,000. They were astonished that the utility not only accepted the proposal, but also went on to assign them another $800,000 in consulting work.
Learn from the mistake. Whether the mistake loses money or, like this one, turns out to be “no mistake at all,” conduct after-action reviews to gather valuable lessons. Reexamine all your assumptions and look for new opportunities. Then, consider new experiments to carry out.
In light of experiences like these, we offer the following four forecasts:
First, as more and more companies recognize that success depends on “learning to learn from failure,” a new type of corporate culture is going to become commonplace. After years of talk about flatter organizations and pushing decisions down the corporate ladder, psychological research and empirical results are showing that new ways of doing business, like the judicious employment of intelligent errors, really do work.
Second, many organizations will find it nearly impossible to adopt this new perspective. Many years ago Thomas J. Watson, Sr., the famous CEO of IBM, said, “If you want to succeed, double your failure rate.” But now, as then, people inherently think there’s nothing to be gained from making mistakes. They tend to be too overconfident and risk-averse, and to seek confirming experimental evidence ? especially in corporate settings. These common biases keep people from experimenting in the quest for better ways of doing business.
Third, in a globally competitive world, those companies that are willing to learn by failing will dominate. Six Sigma and cost-cutting alone will no longer propel great fortunes. Consider that Thomas Edison developed the phonograph despite the fact that he believed there would never be a market for it. And he tried thousands of variations on his light bulbs before he found the one that worked.
Fourth, within a decade the power of “creative destruction” will result in companies with “learning cultures” rising to the top. In recognition of this reality, IBM and General
Electric have both set up institutions to examine and learn from failures. At the same time, according to BusinessWeek,2 consultants are helping companies throw “failure parties” to celebrate useful blunders. Or consider Corning Inc.
After the fiber optics market collapsed, it was on the verge of bankruptcy and instituted a complete review of all its failures during its 150-year history. In doing the analysis, Corning examined its failed entry into the DNA microarray chip market in the late ‘90s. Although it lost $100 million on that project, its failure analysis led to success. By combining the DNA microarray with another failed project, photonics, it launched Epic, a technology for drug testing whose sales are expected to reach $500 million a year. References List : 1. Harvard Business Review, June 2006, “The Wisdom of Deliberate Mistakes,” by Paul J.H. Schoemaker and Robert E. Gunther. ⓒ Copyright 2006 by the President and Fellows of Harvard College. All rights reserved. 2. BusinessWeek, July 10, 2006, “How Failure Breeds Success,” by Jena McGregor, with William C. Symonds, Dean Foust, Diane Brady, and Moira Herbst. ⓒ Copyright 2006 by The McGraw-Hill Companies. All rights reserved.
