One of the most important reasons why established companies struggle to grow is fear of failure.


In a 2015 Boston Consulting Group survey, 31% of respondents pinpoint risk-averse culture as a key obstacle to innovation.


return of failure



Senior executives and CEO’s are highly aware of this problem. On one hand, they recognize the value of failure. On the other hand, management processes for budgeting and risk control are built on predictability and efficiency. So, executives get promoted by showing they’re in control. So even if people understand that they can and should fail, companies do everything possible to avoid it.


But there’s a way to resolve this enigma: Fully extract value from failure, so you can measure and improve your return on it. Boosting benefits while controlling your costs.


There are three steps you can take to raise your organization’s return of failure:


First, study individual projects that did not succeed and gather as many insights as possible from them. Second, crystallize those insights and spread them across the company. Third, do a corporate-level survey to make sure that your overall approach to failure is yielding all the benefits it should.


Step 1: Learn from Failures


Begin by getting people to reflect on projects that disappointed. Reviewing past problems isn’t just uninteresting, it’s painful. Most of the executives prefer to invest our time looking forward, not back. To help people answer the right questions, this exercise can categorizes all the sources of value that might accrue from a failed project.


When something doesn’t go as planned, it’s an opportunity to challenge your beliefs and create strategy for return of failure. We recommend writing out what the project has taught you about each of these things: customers and market dynamics, organizational strategy, processes and culture, yourself and your team, and future trends. These insights, of course, are the main assets. This exercise also has you collect a list of the associated liabilities: the project’s direct costs in money and time, any external and internal indirect costs.


Research found out that when you encourage people to talk about projects in this way, the resulting conversation is enlightening. It forces them to think about everything they’ve learned, how that might help them move forward, and all the positive effects gained as return of failure.


return of failure


Step 2: Share the Lessons


It’s valuable to reflect on individual failures, but the real payoff comes when you spread the lessons across the organization. As one senor manager commented, “You need to build a review cycle where this is fed into a broader conversation.” When the information, opportunities and ideas for improvement gained from an unsuccessful project in one business area are passed on to another, their benefits are multiplied.




Shared learning also increases the possibility of future initiatives. The biggest mistake you can make as an executive is to shoot the messenger and bury the bad news. By reflecting on the positives, you build trust and clear the pathway for others to take action on riskier ideas.


We recommend bringing senior leaders together on a regular meeting to talk about their respective failures. These reviews work best when they are fast and to the point, take place frequently, through bad and good times and are forward-looking, with an emphasis on learning.


Step 3: Review Your Pattern of Failure


return of failureThe third step is to take a bird’s-eye view of the company and ask whether your overall approach to return of failure is working.

Are you learning from every unsuccessful experience?

Are you sharing those lessons across the organization? And are you using them to improve your strategy and execution?


Venture capital firms are very disciplined about inspecting their review process in this way. At Hoxton Ventures, partners sit down for half a day every quarter and go over the businesses they’ve invested in. Asking if they’ve gotten something fundamentally wrong and looking for patterns. “It’s easy to be swayed by one big success or failure,” says partner Hussein Kanji, “so we push ourselves to do this systematically.” At the Future of Management conference, Silicon Valley investor Steve Jurvetson said, “You have to strive for a process of decision making that over a large number of decisions gives good outcomes. It’s not ‘Are we making appropriate decisions?’ but ‘Do we have a process for making decisions that is statistically working?’




These discussion meetings should help you determine whether your failure rate is too high, too low, or just right.


Failure is less painful when you excerpt the maximum value from it. If you learn from each mistake, share those lessons, and periodically check that these processes are helping your company move more efficiently in the right direction, your return on failure will skyrocket.