I was recently advising a bold entrepreneur who was determined to expand into new product categories at breakneck speed. Fuelled by the wild success of their initial products, the company was itching to roll out new offerings in uncharted spaces. However, these new products were not differentiated enough. The company attempted to replicate its previous marketing playbook, not realising that the game was different in these new categories. As a result, the company faced multiple setbacks, leaving the team bewildered about which opportunities to pursue and which ones to let go.

“Fail fast, fail often” is an oft-repeated cliché, especially in the world of start-ups. This makes it seem like learning from failure is a straightforward process. When you or your team fail, the common advice is to just identify what went wrong, avoid making the same mistake in the future and move on.

As it turns out, that may not be the wisest way to approach failure.

To begin with, not all failures are equal. While some are bad, others may be inevitable or even desirable. Moreover, gleaning the right lessons from failure isn’t quite as simple as we might think.

In fact, learning from failure is even harder than failure itself. We are ashamed of being wrong. We tend to blame others, go into denial or hide from our mistakes. The reality, though, is that any foray into new opportunities will lead to some form of failure.  While failure is hard, it is a reality and crucial to our growth & development. We need to learn how to fail intelligently.

Noted Harvard Business School Professor Amy Edmondson delves into this topic brilliantly in her book, Right Kind of Wrong: Why Learning to Fail Can Teach Us to Thrive. As Edmondson notes:

The attitudes and activities required to effectively detect and analyze failures are in short supply in most companies…. Organizations need new and better ways to go beyond lessons that are superficial (“Procedures weren’t followed”) or self-serving (“The market just wasn’t ready for our great new product”).

This week, my message focuses on failing intelligently. How can we respond to organizational failure in a better, more constructive way? How can we harness our missteps to fuel greater success?

The blame game is one of the biggest barriers to learning from failure. To admit defeat is to admit fault: this is a lesson most of us are taught early in life, and it tends to stick with us. On the other side, leaders struggle with the question of how to assign blame and consequences. If nobody is held responsible for failure, aren’t we in danger of creating a lax, free-for-all culture?

This is why it’s so difficult to create a psychologically safe workplace where failures can be acknowledged freely and without fear. With the blame game at play, it’s no surprise that setbacks of all stripes tend to get swept under the carpet.

Not all failures are alike

Edmondson, who has studied the psychology of failure for three decades, separates organizational missteps into three categories:

• Basic — arising from human error, negligence or inability. These “bad” failures are preventable.
• Complex — arising from ambiguity or interdependence. These “inevitable” failures can be anticipated and mitigated.
• Intelligent — arising from exploration, experimentation or innovation. These “good” failures are desirable and should be encouraged.

In discussions with Edmondson, corporate executives said that only 2-5% of failures in their organization were genuinely blameworthy. However, they also noted that 70-90% of failures were still treated as blameworthy, regardless of the reason — a worrying gap indeed!

Essentially, this means that when failures do come to light, people are wrongly held responsible and (possibly) scapegoated. By extension, this also implies that we are learning the wrong lessons from failure.

Basic & complex failures

Basic failures can be curbed through training, support and smart solutions. A great example is the original ‘andon’ cord on the Toyota assembly line. Employees who spotted a problem were encouraged to pull the cord, which would slow down the manufacturing line and alert a supervisor to provide real-time assistance. If the defect couldn’t be fixed in under a minute, production was stopped until the problem was fully resolved.

Complex failures, meanwhile, spring from inherent unpredictability or a unique combination of factors. While such failures can be limited to an extent, they cannot be eliminated entirely. Rather, the focus should be on addressing small missteps as they occur, in order to avoid catastrophic failure down the line. An example would be a series of minor medical errors at a hospital. If overlooked, these could lead to a poor outcome for the patient. If tackled in time, their impact would be negligible.

Failing intelligently

Intelligent failures fall firmly in the praiseworthy category. Striking out for new horizons often results in undesirable outcomes. These failures occur because you are operating in unfamiliar, uncertain territory. In other words, if you never try, you’ll never know!

Various researchers, such as Sim Sitkin, Rita McGrath, along with Edmondson, have identified various criteria to define intelligent failures. These include:

• Are they in a new territory?
• Are they carefully planned with a hypothesis so you know why when things go wrong? Are the underlying assumptions explicitly declared?
• Are they genuinely uncertain, so the outcome cannot be known beforehand?
• Are they managed quickly so there are not too many time elapses between outcome and interpretation?
• Can they be tested at specific checkpoints and identified in advance since planned results may not be equivalent to outcomes?
• Are they modest in scale so that they do not result in a catastrophe?

Failure on a small scale yields valuable new knowledge, which can help teams unlock fresh potential and catapult organisations ahead. Thus, intelligent failures should not only be tolerated but celebrated. Without them, we would have no discovery, growth, or game-changing innovations.

Learning to embrace failure

To achieve continual excellence, we must learn to fail smartly. So, how can leaders create a culture where failure can be safely admitted, reported and encouraged — while still maintaining a high standard of performance? Here are seven suggestions to consider:

1. Ask, “What happened?” not “Who did it?”.

When something goes wrong, focus on the course of events and the reason behind the failure — rather than trying to find someone to blame. Is it a basic, complex or intelligent failure? Analyse the mishap objectively to discover the learning contained within it.

2. Don’t shoot the messenger.

The bearer of bad news is often put in the spot. Rather than being shamed or castigated, those who come forward with concerns should be encouraged. As leaders, we need to be especially cognizant of this. When team members come to us with unwelcome news, do we recognise them for their courage — or do we turn on them in our frustration, making them unwilling to stick their necks out again?

Chances are you already use certain methods of failure detection in your workplace, whether it’s TQM or colour-coding reports. However, whether these tools actually work depends almost entirely on how leadership responds to negative news. If all you want to hear is “no issues, it’s all systems go”, then that’s what people will tell you, regardless of the reality on the ground.

Another option is to make failure-reporting anonymous. Organizations that implement such a system usually see a huge jump in incident reports, which is helpful for learning and improvement.

3. Surface small failures.

In most companies, minor problems that can be covered up are covered up. The problem is that these can mushroom into catastrophes. A tragic example comes to mind: the Columbia space shuttle. For weeks, NASA managers glossed over a seemingly tiny mishap during launch—a broken piece of foam—and turned down requests for proper investigation. NASA’s schedule-driven, hierarchical culture made it tough for people to speak up. The larger problem remained undetected, eventually leading to the fatal explosion.

To prevent molehills from becoming mountains, we must create a workplace culture in which small failures are consistently detected and assessed. This is vital to getting an early handle on systemic problems and concerning trends.

4. Send the right message.

It’s up to leaders to frame workplace failures in a thoughtful way. For instance, it’s good to explicitly give your R&D team license to experiment and fail creatively—because that’s the recipe for boundary-pushing innovations.

On the other hand, when it comes to routine work, the focus should be more on curbing preventable errors. Clear communication from the leadership will help employees develop a shared understanding of failures anchored in openness and transparency.

5. Build participation.

To increase effectiveness, turn failure management into a collective project. Invite employees across departments to join the effort. Ask for suggestions and ideas on how to curb human error and mitigate complexity-driven failure. Encourage high-reward opportunities for failing intelligently.

6. Enact consequences.

Interestingly, employees feel safer when genuine carelessness and neglect are appropriately punished. While reporting bad news should never be penalised, leaders must hold people accountable for problematic behaviours like deviating from a specified process or not paying attention.

7. Remove stigma from defeat.

An important aspect of failing intelligently is knowing when to quit. Unfortunately, because of the stigma associated with failure, projects are often kept alive far longer than they should be. If we take the sting out of declaring honourable defeat, employees can own their failure, learn from it and move on. The organisation can stop throwing good money after bad and re-divert resources into more promising avenues.

Edmondson gives the example of pharmaceutical giant Eli Lilly, where “failure parties” were held to celebrate excellent scientific work that didn’t have the desired outcome. Undesired outcomes were comprehensively investigated, with scientists focused on finding new uses for “failed” drugs—in fact, several of Lilly’s most successful pharmaceuticals were originally intended for a different purpose!

Failing intelligently is integral to learning, growing and innovating. Being more open about failure helps organisations tackle different types of failure appropriately. By overcoming their blame-searching instincts, leaders can create psychologically safe workplaces where slip-ups are reported without fear and “good” failures are celebrated with enthusiasm.