How Failure Breeds Success Even heard of Choglit? How about OK Soda or Surge? Long after ‘New Coke’ became nearly synonymous with innovation failure, these products joined Coca-Cola Co.’s graveyard of beverage busts. Given that history, failure hardly seems like a subject CEO E, Neville Isdell would want to trot out in front of investors. But Isdell did just that, deliberately airing the topic at Coke’s annual meeting in April. “You will see some failures,” he told the crowd. “As we take more risks, this is something we must accept as part of the regeneration process.” Warning Coke investors that the company might experience some flops is a little like warning Atlantans they might experience afternoon thunderstorms in July. But Isdell thinks it’s vital. He wants Coke to take bigger risks, and to do the, he knows he needs to convince employees and shareholders that he will tolerate the failures that will inevitably result. That’s the only way to change Coke’s traditionally risk averse culture. And given the importance of this goal, there’s no podium too big for sending the signal. While few CEOs are as candid about the potential for failure as Isdell, many are wrestling with the same problem, trying to get their organizations to cozy up to the risk-taking that innovation requires. A warning: it’s not going to be an easy shift. After years of cost-cutting initiatives and growing job insecurity, most employees don’t exactly feel like putting themselves on the line. Add to that the heightened expectations by management on individual performance and it’s easy to see why so many opt to play it safe. Indeed for a generation of managers weaned on the rigors of Six Sigma error-elimination programs, embracing failure-gasp! Is close to blasphemy. Stefan H. Thomke a professor at Harvard Business school and author of Experimentation matters, says that when he talks to business groups, “I try to be provocative and say : ‘Failure is not a bad thing,’ I always have lots o people staring at me, (thinking) ‘Have you lost your mind?’ That’s O.K it gets their attention. (Failure) is so important to the experimental process.” Granted, not all failures are praiseworthy. Some flops are just that : bad ideas. The eVilla, Sony Corp’s $500 “Internet appliance.” The Pontiac Aztek, GM’s ugly duckling ‘Crossover’ SUV. But intelligent failures-those that happen early and inexpensively and that contribute new insights about your customers-should be more than just tolerable. They should be encouraged. “Figuring out how to master this process of failing fast and failing cheap and fumbling toward success is probably the most important thing companies have to get good at’ say Scott Anthony, the managing director at consulting firm Innosight. Perhaps most important it means designing ways to measure performance that balance account ability with the freedom to make mistake. People may fear failure, but they fear the consequences of it even more. “The performance culture really is in deep conflict with the learning culture,” says Paul J. H. Schoemaker, CEO of consulting firm Decision strategies International Inc. “it’s an unusual executive who can balance these.” Some organizations have tried to measure performance in a way that accounts for these opposing pressures. At IBM Research, engineers are evaluated on both one and three year time frames. The one year term determines the bonus, while the three year period decides rank and salary. The longer frame can help neutralize a year of setbacks. “A three year evaluation cycle sends an important message to our researchers, demonstrating our commitment to investing in the early, risky stages of innovation,” says Armando Garcia, vice president for technical strategy and worldwide operations at IBM Research. In addition to making sure performance evaluations take a longterm view, managers should also think about celebrating smart failures. (Those who repeat their mistakes, of course, should hardly be rewarded.) Thomas D. Kuczmarski a Chicago new-product development consultant, even proposes “failure parties” as a way of recognizing that it’s part of the creative process. “What most companies do is put a wall around a failure as if it’s radioactive,” says Kuczmarski. Most companies don’t spend enough time and resources looking backward. General Electric Co. (GE) is trying to do just that. The company, which is well known for sharing best practices across its many units, has recently begun formally discussing failures, too. Last September the company set up a two-hour conference call for managers of eight ‘imagination break throughs’ that didn’t live up to expectations and were being shelved, or ‘retired’, in GE’s parlance. Such discussions can be nerve-racking especially in companies where failure has traditionally been met with tough consequences. That was the case at GE, which is now three years into the effort spearheaded by Chairman and CEO Jeffrey R. Immelt to make innovation the new mantra at the $150 billion behemoth. Some companies have gone even further, taking a comprehensive look at all their previous failures. That was the case at Corning Inc., which found itself teetering on the brink of bankruptcy after the once red-hot market for its optical fiber collapsed during the telecom bust. Following that debacle, then –Corning CEO James R. Houghton asked Joseph A. Miller Jr. executive vice president and chief technology officer, to produce an in-depth review of the company’s 150-year history of innovation, documenting both failures and successes. That’s why W.L. Gore & Associates Inc. in Newark, Del., makers of the waterproof fabric Gore-Tex, recognizes outsiders-people within Gore but not on the product development team-who make the call on projects that need to be pulled. When Brad Jones led Gore’s Industrial Products Div. which makes sealants and filtration systems, he handed out ‘Sharp Shooter’ trophies to these outside managers when a project was effectively killed. These marksmen, so to speak, freed from the trappings of familiarity, can identify potential snags that the team may have overlooked. “We’re effusive in our thanks for that contribution,” says Jones. “We ask them to write up with they learned from it, and how we could have made the decision (to kill the project) faster.” A company’s reaction in the face of intelligent failures can send tremors or thrills through a culture. It top executives are accepting, people will embrace risk. But if managers react harshly, people will retreat from it.

Questions : 1. Why can studying failure help managers to better manage the control process and improve performance. 2. What kind of specific changes in control systems would studying failure lead to? 3. It is reported that Ratan Tata the chairman emeritus of Tata groups celebrates failures publicity. Comment