Learning from failures

The recent suicide of Mr. V G Siddharth, the celebrated founder of Café Coffee Day prompted me to reflect on how individuals and organisations think about failure (read what he wrote in his note to the board, here). In our classes on innovation, we keep harping on why we should learn from failure, I have not had an opportunity to dwell on the “how” question, yet. Here are my thoughts on how firms can learn from failures.

One of my colleagues at IIMB, introduced me to the work of Prof. Amy Edmondson, especially on psychological safety. While reading about psychological safety, I came across her work on three types of failure, specifically in the popular HBR article titled, “strategies for learning from failure”.

Types of failures

She elucidates on three types of failure – preventable failures, complex failures, and intellectual failures. Preventable failures occur when one had the ability and knowledge to prevent it from happening. Making silly mistakes (in a test) that you could have avoided, had you spent some time for review; deviance from a manufacturing/ service processes due to laxity or laziness; and just taking some things for granted, like jumping a traffic signal in the middle of a night, are examples of preventable failures. Such failures are clearly attributable to the individual, and therefore she/ he should be held accountable. One way of managing such preventable failures is to define and keep following checklists and processes; establish clear lines of supervision and approvals; and conduct a series of intermediate reviews at predefined critical junctures.

Complex failures happen in spite of having processes and routines. They happen due to failures at a variety of points, including internal and external factors, that individually might not cause failures, but when occurring together, may cause failures. Agricultural (crop) failures, business (startup) failures, or even industrial accidents like the Bhopal gas tragedy and Fukushima disaster are examples of complex failures. Such factors are difficult to predict as the combination of problems may not have occurred before. Fixing overarching accountabilities for such failures are futile, and these can be considered unavoidable failures. It is these kinds of failures that provide fertile sources of learning to firms. Firms need to be prepared to review such failures, dissect the individual factors, and establish robust governance processes so as to (a) sense such systemic problems when they occur at the individual factor levels; (b) erect early warning signals for alerting/ educating the organisation about escalations of these problems into failures; (c) and define options for counter-measures for managing each of these problems, in particular and the occurrence of failure at the systemic level.

Intellectual failures happen due to lack of knowledge about cause-effect relationships. Especially at the frontiers of science and behaviour, where such situations have not happened before. Such situations are ripe for experimentation and entrepreneurial explorations. Firms need to sustain their experimentation and entrepreneurially approach the problem-solution space. There could be situations where the solution is too early for the problem, or the ecosystem is such that the problem is not ready to be solved. Indian automobile industry’s (for that matter, all over the globe) experimentation with electric vehicles would fall under such experimentation. Processes such as open innovation and embedded innovation would greatly contribute to learning. One such experimental innovation boundary space is JOSEPHS, built in the city centre of Nuremberg, Germany as an open innovation laboratory.

Learning from failures

In order to learn from preventable failures, organisations need to strengthen their processes, embark on benchmarking exercises both within their organisation as well as others in their competitive/ collaborative ecosystems, and continuously evaluate the impact of their initiatives. The Indian telecommunications firm, Airtel, had a promise of providing consistent consumer experience to their customers across all the 23 telecom circles they operated in India. One of their initiatives was to constantly benchmark each circle’s performance on a wide range of non-financial parameters and enable other circles to either learn & replicate the process that led to the performance or justify why their circle had different processes that would achieve the same performance. Such justifications would be documented as new processes and would be candidates for replication by other circles. This enabled Airtel improve its performance to six sigma levels and provide consistent customer experience across all its circles.

Learning from complex failures require firms to undertake systematic and unbiased reviews of such failures, typically by engaging external agencies. Such reviews would be able to dissect failures at each factor level, interdependencies across all these factors, and the causes of failure at the systemic level as well. When unbiased reviews happen, they allow for organisations to strengthen their external (boundary-spanning) opportunity sensing and seizing processes; refine their interpretation schema to provide the organisation units/ senior management with early-warning signals; and create options for managing each of these problems well before they actually occur. For instance, in response to the Fukushima Daiichi Disaster, the Japanese Government decided to review its nuclear power policy and undertook a variety of counter-measures, including shutting down of old/ ageing power plants and introduced a slew of regulations/ restrictions on nuclear industries.

Learning from intellectual failures is possibly the easiest. The firm just needs to “persist”. One of the firms I was consulting to, referred to their experimental product-market venture as a Formula-1 track: failures are insulated there, whereas success can be easily transferred to mainstream product-markets. It is such kinds of mindset shifts that enable to continuous learning from intellectual failures. For instance, the failure of the E-commerce venture, FabMart in the early 2000s Indian market is an intellectual failure (this is well documented in the book, Failing to Succeed by its co-founder, K Vaitheeswaran). When we wrote the case on FabMart in the year 1999 (available in the book Electronic Commerce), we hailed it as a harbinger of change in the way India will adopt Internet and E-commerce. However, the business failed. The co-founders regrouped over the next decade and have created other E-commerce enterprises (Bigbasket and Again). The failure of the earlier venture provided them an opportunity to reflect on the specific reasons for failure, treat it as an experiment and learn from it. Intellectual failures, therefore, need to be celebrated and treated exclusively as an opportunity to learn from them.

In summary, mistakes lead to failures when we fail to learn from them and keep repeating them. Let us admonish repeated mistakes and celebrate failures!

Cheers!

(c) 2019. R Srinivasan