How Companies Can Make the Most from Failure

Truly innovative organizations encourage employees to freely discuss and learn from unsuccessful efforts.

How Companies Can Make the Most From Failure

MANY EXPERTS OFFER this advice to organizations that want to encourage greater innovation: Create cultures where employees are not afraid to fail. But is creating a failure-tolerant culture enough to spur innovation? Maybe not, say the authors of a recent study. They argue that truly innovative organizations don’t just normalize failures; they also make time to discuss and learn from them.

“Even though tolerance for failure has been touted as beneficial for innovation by academics and journalists alike, surprisingly there has been no systematic empirical study to support this belief,” write Erwin Danneels, associate professor of management at the Muma College of Business at the University of South Florida in Tampa, and Alex Vestal, assistant professor of management at the Cameron School of Business at the University of North Carolina in Wilmington.

By normalizing failure, organizations might spur greater experimentation among employees. But such experimentation might result in only superficial or even “stupid” failures, Danneels and Vestal argue. True and continuous innovation occurs only when employees analyze, discuss, and learn from failures.

But if not structured carefully, discussions of failure can cause employees to feel guilt or embarrassment—or even sow conflict. “Because analyzing failure involves expressing controversial and challenging opinions, people are generally reluctant to discuss failures or do so only in superficial ways,” the co-authors write. That’s why the most innovative organizations promote only constructive, respectful discourse in the analysis of past failures.

“Examining the mechanisms by which organizations draw the right lessons from failure to enhance innovation is crucial,” Danneels and Vestal write. “Organization members need to make explicit efforts to learn from failure, and do so in a climate where people feel safe to talk about the tough issues.”

Read “Normalizing vs. Analyzing: Drawing the Lessons from Failure to Enhance Firm Innovativeness.