Co-written with Fellow Future Shaper Sabine Simon    

“Failure is simply the opportunity to begin again, this time more intelligently” Henry Ford pointed out. Statistically, about 90% of all innovation projects fail.

Humans despise failure! They prefer to bury it deep. This makes beginning more intelligently again extremely difficult. There are recurring reasons for innovation failure, or to put it more blatant: Killers of Innovation. Over the course of four articles, Future Shapers Andreas Penzel and Sabine Simon will dive into the causes, starting with the origin: “The Failure. “

What do Coca-Cola, Ford, and Nintendo all have in common? They all had  epic failures – as did almost every other company, by the way. However, only a few of them are still remembered. Most of them are covered in the dust of time in the cemetery of failed innovation. 

Humans are conditioned to regard failing as negative, starting from an early age, thus avoiding talking about it. Yet, there is much to learn from failing, especially when it comes to innovation. Failure is an essential, inseparable, albeit an  undesired, part of innovation. Or as Brene Brown put it: “There is no innovation and creativity without failure. Period. “Understanding failures and the reasons behind them – the KILLERS OF INNOVATION – leads to insight, potential improvement and ultimately – hopefully – to more successful innovation.  

“Playing it safe. Following the rules. It seems like  the best way to avoid failure. Alas, that pattern is awfully dangerous. In a crowded marketplace, fitting in is failing”, as Seth Godin points out. In today’s dynamic markets, not innovating is a straight path out of business. Patent registration however,  seems to be on the right track. The number of patents filed in the U.S. and Europe is a good indicator of rising innovation activities. In the U.S., the applications for patents1 almost tripled from 112,379 in 1980 to 315,015 in 2000. Then it more than doubled to 669,434 in 2019. The number of patent applications2 grew by over 20% in the European Union, from 151,015 in 2010 to 181,406 in 2019. 

Innovation and Failure

 The road to successful innovation is full of pitfalls. Statistics show that for every successful new product, innovation or new startup, multiple ones failed. Havard Business Professor Clayton Christensen elaborated in 20113 that roughly 95% of newly launched consumer products fail each year. The Startup Genome Project provides annual reports on the Startup ecosystem. According to the 2019 report, 11 out of 12 startups fail. The U.S. Bureau of Labour’s4 statistics on the survival of private-sector establishments show a constant failure rate of 20% after the first year. After ten years, about 67% went out of business. An interesting fact is that the annual failure rates remain constant over the complete analysis of 25 years. This suggests that there might be insufficient learning from these unsuccessful ventures. 

The growing number of successful innovations seems to marginalise failing. This discrepancy becomes even more significant if there is a tendency to bury failures. In this context, failure is culturally accepted to different degrees. While in North America, professional failure is seen as strengthening the human psyche and contributes to the wealth of experience, in Germany, failure is only accepted to a limited extent, as Prof. Dr. Andreas Kuckertz investigated in a study at the University of Hohenheim5. The research shows that the  social stigmatisation of failure leads to a negative perception (Stam et al. (2008))6. This does not come as a surprise. The culture of failure has manifested itself throughout human history. For example, in imperial times, an honourable merchant, after failing, shot himself to protect the family. For generations, conformism was taught in early childhood, in education, and in the school system. There is a culture of punishing rather than rewarding. Those who are judged only on mistakes and not on courage and creativity in finding solutions find it difficult to talk openly about their own mistakes later on.

People are brought up to avoid failing because failure and mistakes are tough to untangle. Amy C. Edmondson argues in her article “Strategies for Learning from Failure”7 that leaders believe that failure is bad but also acknowledge that it is crucial to learn from it. Admitting failure almost automatically leads to blame, whether it is a bad test result by a ten-year-old or a bad decision by a manager of a multi-billion international company. This typical consequence impairs the willingness to disclose, analyse and thus ultimately learn from failures. Rolf Dobelli discusses the survivorship bias in his book “The Art of Clear Thinking” and strongly recommends regularly visiting the graveyard of the failed. Success is easy to market and visible everywhere, while failure is neglected and thus quickly forgotten. This is an obvious and dangerous imbalance.

Failure is buried deep

Image by qinghill, Unsplash

Let’s visualise this with an example and imagine a successful producer of video games. Not all of the games they develop will become major hits, of course. Some, hopefully only a few, will bust. In days of digital downloads, the flops will just be forgotten as soon as they drop out of download lists as new releases constantly pour in. About 40 years ago, this was different. Video console games came in cartridges. There  were also fewer releases compared to today. Atari launched “E.T. – The Extra-Terrestrial “ 1982, just in time for Christmas and it sold well first. However, the gameplay was poor, and people started to return it to shops. Atari had bought the rights for $22m and produced 5m cartridges. The game was a financial disaster, an epic failure that, as cited, played a role in the crisis of the video game industry. In 1983 Atari – decided to bury 728,000 copies (13 truckloads) of the game in a rubbish dump in Alamogordo, New Mexico, literally the middle of nowhere, never to be seen again – long absent, soon forgotten. Unfortunately, word spread quickly after, and kids found copies of the game in the landfill. Newspaper articles on the video game burial were questioned and disregarded. A layer of concrete was added to “avoid anyone getting harmed “while trying to excavate rubbish. A news story became a legend. However, what you try to bury might come back to haunt you forever. Desire more publicity? American screenwriter Zak Penn filmed the documentary “Atari – Game over “and then dug up the landfill, unearthing over 1,000 cartridges in 2014. Some of them are now displayed in several museums. By the way, several hundred spectators, mostly Atari and video game enthusiasts, gathered to watch the excavation. 

This example is an excellent demonstration  of how much we are trying to bury our failures as deep as possible, and here in a literal way. Only because of its aftermath is this particular case still remembered. To learn even more, the Museum of Failure8 is a great place to visit yesterday’s epic failures – a literal cemetery of innovation.

It is vital to understand that failure is an integral part of innovation. It is essential to develop the mindset to deal with failure in the best possible way and ultimately learn and gain insights from it  for the future. Therefore, it does not seem wise to bury them to soon be forgotten.

But – What does failing actually mean?

To fail means “to be unsuccessful in accomplishing a purpose “. The etymological origin lies in the Latin verb “fallere “, which translates as “to trip or cause to fall “. It can also be traced back to the Old French word “falir “, standing for “to miss or not to succeed or to come to an end “. Furthermore: failure is not equal to failure. There is room for interpretation. A shipwrecked project is undoubtedly considered a failure. But what thinking about is as  missing the goals that was set, yet not going out of business? To analyse, understand, communicate clearly, and ultimately gain a common understanding, there is a great need for a subtle distinction of what failure means. Different levels of failure with various dimensions exist. 

Shikhar Ghosh, Professor of Management Practice in the Entrepreneurial Management Unit of Harvard Business School, points to a discrepancy resulting from different definitions and perceptions and a lack of research. In a study he conducted in 20129, including data from 2,000 ventured-backed startups, he found out that 30% to 40 % fail entirely, with investors losing all their invested money. This contrasts the numbers reported by the U.S. Venture Capital Association, which estimates a failure rate of 25% to 30% for venture-backed startups. Professor Ghosh continues that another considerable part of  startups do not reach their projected financial objectives. He argues that if this is also  defined as failure, it is clear that about 95% of startups fail.

As mentioned above, leaders dislike failures but also understand the importance of learning. David S. Pottruck, former CEO of the Charles Schwab, a financial service company, put it this way: “The idea that failure is okay is ridiculous. I am not going to go around the company and reward someone for failing. But here at Schwab, we differentiate between noble failure and stupid failure. “The definition of noble failure provides additional clarity. To make the cut as a noble failure, it requires 

  • a proper preparation, encompassing 
    • a differentiated analysis, 
    • a fundamental understanding of action and consequence and 
    • an elaborated plan of implementation as well as the needed resources and the commitment to get it done,
  • a (implemented) contingency plan
    • Fallback scenario or
    • Exit strategy,  
  • and ultimately a debriefing to learn from the experience and gain valuable insights for next ventures.

The distinction between stupid and noble failure is very valuable, and especially the assessment in terms of what went wrong helps provide guidance and establish a learning organisation. In this particular example, the company keeps track of the failures, and the insights gained. In general, no matter what kind of failure it is, it  is important to talk about it. The benefit is twofold. First, we understand ourselves better when we assess our actions and feelings, and second, others can learn from our mistakes and the pitfalls. 

The Four Categories of Innovation Apocalypse

To learn and improve means to better understand the causes, the Killers of Innovation, for failure of innovation. The awareness, diligence, and ultimately the willingness to evaluate, understand what went wrong, and then get up again will make a failure noble and help on the road to success.

There are specific factors that can be isolated and need to be addressed at any cost. There is a lot of research on why innovation projects fail. Depending on the focus and background of the investigators and those studied, certain factors are highlighted. We define  four overarching categories of innovation cemetery factors that are often responsible for innovation project failure: organisational factors, individual factors, team factors, and approach factors. 

In the next article, we will first look at organisational killer factors. We will discuss corporate culture, market pressure, the danger of short-term goals, and deadly hierarchies that nip innovation in the bud.

We will look at the team and individual factors that also have a licence to kill. What role does team formation play? What dangers might lurk in group dynamics and groupthink, and what influence do individuals have on the failure of new ideas? Communication is the sword of Damocles that hangs over them. 

Finally, a lot can go wrong when taking the wrong road, a wrong turn, or only hitting bad weather, maybe caused by an adverse economic environment. 

The list compiled is by no means exhaustive but emphasises specific aspects with enough destructive power for innovation. In the process of digitalisation and within our VUCA (Volatile, Uncertain, Complex, and Ambiguous) world, we need to understand that the potential of failure is an integral part of business. The current trend of talking about failure helps both the failed and the founders. Because only with the willingness to take risks can innovations and also successes emerge. 

Failure has become a bit hipper, as trends such as Fuck-up Nights show. But a hip trend is not enough. It is essential not to be satisfied with discovering proximate causes, but to get to the root causes instead. This is why we want to dig deeper and help to develop and discuss a common understanding. So please stay tuned! We will detail the Killers of Innovation in three further follow-up articles, starting with “The Organisation “in two weeks.

 

Sources:

1 https://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm

2 https://www.epo.org/about-us/annual-reports-statistics/statistics.html

3 https://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing

4 https://www.bls.gov/bdm/us_age_naics_00_table7.txt

5 neue-unternehmerkultur.de

6 Stam, E., Audretsch, D., & Meijaard, J. (2008). Renascent entrepreneurship. Journal of Evolutionary Economics, 18(3–4), 493–507

7 https://hbr.org/2011/04/strategies-for-learning-from-failure 

8 https://museumoffailure.com

9 https://www.wsj.com/articles/SB10000872396390443720204578004980476429190