Why Every Organisation and Board Need a Failure Strategy

Most organisations and boards have a growth strategy, marketing strategy and a risk strategy. Most strategies are embedded in the business plan and ratified by the board. Few organisations and boards have a failure strategy.

If organisations and boards aren't looking at innovation as mandatory today, doing something that hasn't been done before, they will be, as they say, "behind the eight-ball". And if you want your people to feel safe, they have to know what happens when an experiment fails. Otherwise they will stop experimenting. If they don't feel there is a safety net to catch them if they fall. They won't experiment.

They will stay safe. They will put a shine on existing products. They will keep their heads down. Fear of failure shows in organisations as reasons not to try. Actually, it doesn't 'show' persay. It is the unwritten and unspoken. It is the never-to-be-uncovered. It is in stagnation. It is in the decision not to try.

A failure strategy changes that. It's a plan for how to 'fail well'. That allows people to take calculated risks. And every now and again a big one.

A failure strategy should answer four questions. They should be answered before you start. You don't wait until things go wrong.

What are you willing to lose? Set a budget - time, money, resources - that you can afford to spend. If things go wrong, you're disappointed but not damaged.
Can you reverse this? Some decisions are easy to reverse. Others, not so easy. Know where you stand.
When should you stop? Agree on the signs that indicate you should kill an idea, change direction, or double down on what you are doing. This should be decided from an objective stance.
How will you capture what you have learned? Failures, when they yield learning, are investments. Buried or unexplored failures are a cost.

Once you have the answers to these questions, risks are no longer leaps into the abyss. There are boundaries. There is management.

How has this played out? What does it look like in 'real life'?

In 2014, Amazon launched the Fire Phone. It flopped. The company took a write-down of around $170 million USD.

Some companies would consider this a disaster. But Amazon had built a culture where bets like this were almost the norm. Jeff Bezos wrote to shareholders that "failure and invention are inseparable twins". The teams and technology from the Fire Phone were later diverted to other products, including Echo and Alexa, which became among Amazon's most significant new businesses. Granted, most organisations cannot afford this type of loss. Yet it was relative. And so were the ensuing gains.

Bezos also gave the world a useful tool for this: one-way and two-way doors. Most decisions are two-way doors. If you walk through a door and don't like what is going on, you walk back. Decisions on two-way doors can be made quickly by small teams. One-way door decisions, decisions that cannot be reversed, need slow and considered deliberation.

At X (Alphabet's moonshot lab, formerly known as Google X), teams are encouraged to kill their own projects as early as the evidence suggests. Astro Teller, who leads X, has spoken out about rewarding teams for ending projects that weren't going to work.

Project Foghorn was such a project. It explored turning seawater into fuel. The technology actually worked. But the team concluded it couldn't become cost-competitive in a reasonable time. So they shut it down. I question the second-order consequences of extracting the proposed amount of seawater. But I digress. That is a topic for another article.

The signals being sent were clear. It isn't heroic to keep a downward-spiralling project alive. The heroic action is saying, "we are done' and putting the resources into the 'next bet'. And that is a failure strategy in action.

In 1968, a 3M scientist, Spencer Silver, was trying to make a super-strong adhesive. He made the opposite: a weak glue that stuck lightly and peeled off cleanly. It looked like a failed experiment.

3M had a culture of sharing results, including the ones that didn't work. The idea survived. Years later, Art Fry wanted a bookmark that would stay put in his church hymnal without damaging the pages. Together, these became the Post-it Note. It was launched in 1980 and remains one of 3M's best-known products to this day.

Your failure strategy should include a way to keep what you learn. Silver's failure sat in the wings for the right problem to appear years later. If it had been pinned, we wouldn't be able to run workshops as colourfully as we do with Post-its. Just kidding. Sort of.

A good failure strategy includes small bets. As well as big ones. It's like a portfolio. Most of the bets could be small, fast and cheap. Think two-way doors. And lots of learnings.

Some of the bets are medium-sized. You've done the research, you have the evidence, and you are scaling up what works.

Sometimes, occasionally, you go for the Moonshot. The disruptive innovation. The idea that could change your organisation. Your industry. You go in with the four questions answered. And you might even hold your breath. The Moonshots are possible because you have the strategy. You have built the muscle. Your team knows how to handle the big risks without panicking.

The biggest risk in innovation isn't failing. The biggest risk is being so afraid of failure that you never try anything worth failing at. The organisations that plan for failure aren't reckless. They are the brave ones. The crazy ones. And every now and again, that crazy idea becomes reality. Just like the motor vehicle. Just like the aeroplane. Just like the driverless vehicle.

Where are you keeping your failure log?

Celebrating Success One Failure at a Time is now available as a book, an audiobook, and an online course. You can bring this conversation to your organisation as a keynote, workshop, or leadership programme.