Plenty has been written about how to achieve success. According to numerous articles on the topic, Sir Winston Churchill famously said: “Success is not final, failure is not fatal: it is the courage to continue that counts.” But there are a couple of issues with this statement. The first problem is that Churchill scholars insist the eminently quotable former British prime minister never uttered these words. The second problem is that whoever did make this statement was speaking the truth.

Whether Churchill realized it or not, failure is an excellent teacher. The idea that success often happens quickly without setbacks is a fallacy. More often than not, success actually stems from failure. Indeed, as IBM visionary Thomas J. Watson put it, “the way to succeed is to double your error rate.” Simply put, personal or business success is typically a long and bumpy path, which is why the perceived “overnight success” of many success stories was actually a long journey littered with false starts and mistakes. As basketball icon Michael Jordan freely admitted, “I’ve failed over and over and over again in my life. And that is why I succeed.” This sentiment is echoed across industries and professions.

Clearly, there is a strong link between failure and success, which has been proven over time across all areas of society, including in organizational innovation. As a result, some organizations readily recognize that learning from failure often leads directly to innovative products, processes, and services. Unfortunately, despite failure’s value as a teacher, discussing it is often avoided in today’s business world. In fact, failure is not just frequently overlooked. It is routinely covered up.

As noted by Frese and Keith (2015), many organizational cultures see failure as an indicator of “poor performance, negligence, and even lack of intelligence.” This misguided workplace thinking about failure is a byproduct of our modern society, supported by newspapers and television reports that emphasize perfection and overnight success stories. And when organizations are preoccupied with error avoidance, instead of error acceptance, innovation suffers because creative processes are inherently error-prone. When failing is deemed unacceptable, experimentation is discouraged. Employees become frustrated and disengaged. Loyalty is lost. Witch hunts occur. In some cases, scapegoats are sacrificed. In other cases, employees holding the key to future organizational success are actually jettisoned for failing and learning a valuable lesson—knowledge that follows them out the door.

When this happens, of course, errors are often repeated over and over again, posing an ongoing and often increasing threat to revenue growth and profitability. The good news is that organizations have a choice. Instead of fearing failure, they can embrace it and “fail smart” to encourage innovation through prudent risk-taking and exploration.

So, how do you fail smart? The following five recommendations are based on extensive academic research on error and failure management, as well as years of experience helping companies improve their performance.

Create a culture of experimentation and creativity. This is the foundation for taking prudent risks in today’s business world. Trial and error is the new business model, and “failing smart” and “failing forward” is the mantra. Failing smart means to take risks and learn everything you can from a setback or failure. Failing forward means to apply what you learned from failure to the execution of the next move: put together a new game plan or strategy and apply the lessons learned from the failure to move forward from setbacks. While failing smart is about maximized learning with the expectation that failure will occur, failing forward is about taking the next step forward in the most efficient manner possible. This process will lead the organization toward a more rewarding and productive way of doing business.

Encourage risk-taking from the top. In any organization, leadership needs to realize the importance of being innovative and agile in a very competitive business climate. Recognize that failure is critical to the innovative process. Communicate to employees the importance of taking prudent risks to help the company grow and remain competitive. However, leaders should also share their own experiences with setbacks and failure. This helps create an authentic culture of risk-taking. Employees should be encouraged to learn from others and avoid making the same mistakes (Edmondson, 2003). Speak openly and honestly about failures, setbacks, and lessons learned. An organizational culture that encourages risk-taking becomes a great resource for learning beyond that of a formal classroom setting.

Celebrate failures like wins. William L. McKnight, the former President and Chairman of 3M, stated that “management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.” Businesses can encourage a mindset of error acceptance by removing punishment and consequences from failure, and by rewarding failing smart and failing forward. Keeping everyone engaged in the organization’s innovation from failure means that everyone remains on board after failure, and continues reaching for the organization’s goals and objectives. Progressive companies actually reward and celebrate failures as a source of learning and innovation. For example, the Canadian marketing giant Grey Group has a program called “Heroic Failure Award” that recognizes employees for their failures with their names engraved in a trophy. These organizations view failures and setbacks as progress towards something great—the next breakthrough or innovation that will change the marketplace.

However, organizations need to have a solid and effective performance management system in place to recognize the value of failures and track the lessons learned. Employees are thus given an opportunity to continue to pursue business objectives through innovative ideas and setbacks. An effective performance management system includes formal and informal continuous learning programs. Employees are formally trained and informally advised by team members, employees, clients, and anyone else affected by the failure.

Stimulate creativity and experimentation. Establish systems and programs that allow employees to be creative, experiment with controlled risk, and try new ideas to see how they work—or don’t work. Create a program that encourages small-step risk-taking, trial-and-error exploration, and innovation. Such a program can become a powerful and profitable means to turn failures into innovative products and services. Allowing employees to temporarily set aside routine activities in order to experiment and create can greatly benefit the organization.

Companies like 3M and Procter & Gamble have had innovation programs in place for years, allowing their employees to dedicate a portion of their time to experimentation, failures, and learning. For years, 3M allotted a portion of the employee workday as “daydream time,” which led to innovative products such as Post-it Notes, Scotchshield, and Coolmax. For innovative digital-era companies such as Amazon and Google, creativity is an inherent part of the everyday business and culture. Employees are allotted time both for core work and for innovative projects to support the business. Failures and learning become part of the organizational culture, keeping them at the forefront of their industries, and keeping employees engaged and proud of their work.

Hire entrepreneurs who are eager to learn. Organizations can create a culture of failure and innovation by hiring people with an entrepreneurial spirit and mindset, and a strong learning-goal orientation. The objective is not to lead employees to start their own businesses, but rather to retain them as part of a company that is founded on innovation. Goal orientation, as a personality characteristic, helps us understand differences in people’s cognitive, affective, and behavioural responses to frustrating situations like failures or errors (Dweck & Leggett, 1988).

Learning-goal orientation has been associated with high persistence in difficult learning situations (Colquitt & Simmering, 1998) and abilities that are malleable and increasable. Such employees are more likely to believe that their efforts will lead to personal development. They enjoy challenges and are eager to enhance their skills and knowledge through continuous exploration and learning. They tend to view errors as “challenges to be mastered through effort” (Dweck & Leggett, 1988, p. 258). Learning-goal-oriented people are more likely to learn from errors than people who boast about their abilities to gain favourable performance evaluations.

However, personality traits such as entrepreneurial spirit and learning goals are not easily identified in a résumé or educational degree. They are innate parts of a person’s character that require effective interviewing and listening skills to identify.

Today’s business world is ripe with opportunity for innovation and creativity in the development of new products and services for clients and customers. However, for an organization to remain competitive and innovative, a certain level of risk-taking is inherent. Failures, errors, and setbacks are normal parts of the process when engaging in innovation and opportunities, whereas fear of failure is the brick wall that stops organizations from capitalizing on those opportunities. As innovation leaders, managers and organizations need to build a culture that removes fear of failure and directs employees to pursue innovation through failing smart and failing forward.

REFERENCES

Ronald Bledow, Michael Frese, Neil Anderson, Miriam Erez, and James Farr, “A Dialectic Perspective on Innovation: Conflicting Demands, Multiple Pathways, and Ambidexterity,” Industrial and Organizational Psychology 2, no. 3 (2009): 305–337.

Jason Colquitt and Marcia Simmering, “Conscientiousness, Goal Orientation, and Motivation to Learn During the Learning Process: A Longitudinal Study,” Journal of Applied Psychology 83, no. 4 (1998): 654–665.

Carol Dweck and Ellen Leggett, “A Social-Cognitive Approach to Motivation and Personality,” Psychological Review 95, no. 2 (1988): 256–273.

“Innovation: A Survey,” The Economist (1999): 1–28.

Amy C. Edmondson, Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy (San Francisco, CA: Jossey-Bass, 2012).

Amy C. Edmondson, “Speaking Up in the Operating Room: How Team Leaders Promote Learning in Interdisciplinary Action Teams,” Journal of Management Studies 40, no. 6 (2003): 1419–1452.

Michael Frese and Nina Keith, “Action Errors, Error Management, and Learning in Organizations,” Annual Review of Psychology 66 (2015): 661–687.