Intelligent Failure Noted in The Economist

In an article published in the April 16 Economist, the positive side of failure, as featured in a recent special issue of the Harvard Business Review is discussed.  Interesting reading for those of us who follow failures and try to learn from them. 

Share this article:      

• Posted Rita McGrath on April 25, 2011

Questions from my webinar on Intelligent Failure

I just wrapped up a webinar on the topic of failing by design, which is the subject of a recent artilce in the Harvard Business Review.  There were some quite interesting questions asked during the course of the webinar, and I thought I would document them here for those that might have an interest but couldn't attend the webinar itself.  The presentation on which the webinar was based is available for download at the "tools" page of this web site. 

 

Q:  How can an HR department support the idea of intelligent failing in conducting personnel reviews?

What I suggested was that the critical distinction that needs to be made is between bad luck and bad decision-making.  The kinds of principles that you want to put in place are to make sure that people articulate what their assumptions are and then if things don't work out, make sure that they have contained the risk and understood why reality turned out to be different from expectations.  it's also important that people not make the same mistake repeatedly - that's not intelligent!

 

Q:  I am working on a technology project and the expectations are very high for it.  How can I tell leaders and users that we need to be doing some experimentation so that we can learn as we go, how do I communicate that?

Here, the answer has to do with how the system (assuming it's a computer system) is being built.  In the old classic waterfall methodology, requirements were developed by users and systems analysts, which would then be tossed over the transom to the technical people who would work on it and then by the time the users saw it next, it often bore little resemblance to what they actually wanted.  Some people advocate a more flexible agile methodology, in which the system is designed iteratively and users give feedback all along the way - in effect, generating lots of small failures so that they can avoid the calamity of a substantial systems failure when it comes up.  I do a lot of post-mortems of systems projects gone horribly wrong, and it is often the sequential nature of the design process that leads things to go astray. 

Q:  Do you have a template for what makes a failure intelligent?

Absolutely!  You'll find the questions on the last page of the presentation from the webinar, which is available for download at the "tools" section of my web site.

Q:  Organizations can tolerate lots of failures, but I don't think individual leaders could be successful if they failed 9 times out of 10.

Here, I would disagree.  By comparison, think of scientists.  Nobody expects a scientists' hypothesis to work out every time - after all, if you knew what the result would be there would be very little need for a scientific experiment. So scientists can fail 9 times out of 10 or even more, in the sense that their hypotheses were not supported, and nobody thinks that is odd in the least.  But somehow when it comes to management, we have this Taylorist idea that everything should be predictable and anticipated in advance. Instead, we would be much better off if we acknowledged the risks of taking action and supported people who try and fail intelligently.

Q:  Do you have an example of a CEO who has failed and overcome it?

Most CEO's  have experienced failures along the way in their careers.  Indeed, I think its highly dangerous to promote someone to an important position who has never had a failure - they won't know the warning signs and will likely make very poor decisions when the unexpected happens.  Take an example we'd all be familiar with:  Steve Jobs.  Everybody forgives Apple their failures (indeed, hardly remembers them) because we love their products so much.  Remember the cube?  The rockr phone venture with Motorola? Or of course the Apple Lisa, the precursor to the McIntosh.

Q:  How do you align strategy, resources and people in your company?

Oh, for that I use the opportunity portfolio concept from my book Discovery Driven Growth.  The basic idea is to categorize initiatives in terms of how uncertain they are:  core business, new adjacent businesses or options for the future.  Then, you decide how many of what kind of projects your strategy requires.  Then the best in class in each type compete with each other for resources - you don't want projects that are not alike to be fighting for the same resources.  Then you manage people's careers so that they have exposure to the different types.  It's a terrible idea to let people become senior leaders who have never worked in a new business area.

Q: Can you give an example of a company that embraces intelligent failure?

Absolutely - one of my favorites is United Parcel Service.  Their CEO does a great job of making clear where it is OK to fail and where it isn't, for starters.  They also make a point of learning from their failures and communicating the lessons.  A very interesting company.

 

More questions?  Send them along to me by email and I'll post the answers here!

Share this article:      

• Posted Rita McGrath on April 19, 2011

Analysts or business designers in today’s strategy work?

A LinkedIn Question went like this:

Is business strategy as we teach it in Harvard Case Studies Obsolete? Do we need to develop business designers and not strategic planners?
 

Traditioal strategic planning takes a linear left brain abstract approach to business development and looking at business opportunities. Most famous tool in the toolbox being a SWOT analysis. Business Designing is a more right brain wholistic visual approach to identifying and creating business models, strategy and opportunities. Business designers love to create "business models" as a way of thinking about change. According to Ms. Kay Plantes: "Business model innovation starts with challenging hidden assumptions
 

Here is my answer:

 There are several assumptions in the conventional, industry-focused and analytically intense view of strategy that no longer hold in an increasing number of categories.  First, the notion of industry as the fundamental analytical focus - more and more we are dealing with questions of inter-industry competition.  Second, the idea that the core goal of strategy is to create a sustainable advantage - today, more advantages are not sustainable than are. Third, a fundamental confusion between strategy and planning. They are two different things - strategy is about external views, determining how you are going to achieve objectives, and planning is about how to link up the necessary resources. Fourth, an increasing emphasis on category evolution and ecosystem partners. 

I would not say that the "answer" is go switch to business designers, as absent an informed external perspective you are designing in a vacuum. 

Share this article:      

• Posted Rita McGrath on April 08, 2011

Profit from the Core - A growth theory is put to something of an empirical test and OUCH!

One of the more popular books on growth in recent years has been Profit From the Core, a book that suggests firms should focus their efforts on core and adjacent markets to find growth opportunities.  I've found it to be thought provoking and intelligently written.  I've never taken the trouble to double-check the research, however.  Blogger Thomas Thurston, however, did.  In an interesting blog post he describes a small empirical test he did using business units to try to replicate the results reported in the book. 

His conclusions?

Firstly, that the categorization of businesses into various types of adjacencies was highly subjective and dependent on the rater doing the classification.  About as robust as one could get was "core" or "not core".

Secondly, that the prediction that adjacent ventures would do better than non-adjacent ventures did not hold up.  About the only predictable result was that core initiatives did better than either adjacencies or non adjacencies in terms of survival.  There was no difference in his sample between the other two types of venture.

I found that interesting!

Share this article:      

• Posted Rita McGrath on January 07, 2011

Nice start to the year - Directors’ publication recommends Discovery Driven Growth

A good friend and very successful publicist, Mark Fortier was kind enough to pass along the information that Discovery Driven Growth has been recommended by the editors of "Agenda" magazine, a magazine aimed at corporate directors.  If you read the post below, you'll see that we are in very good company!

Directors' Recommended Reading

Directors are turning to a wide array of reading materials to give them an edge in their oversight duties. In fact, out of 101 directors who responded to Agenda’s most recent Directors and Officers Outlook survey with a book or other reading material to help corporate directors with their board duties, only two respondents gave the same response: Atlas Shrugged,Ayn Rand’s most critically acclaimed novel. The rest of the recommendations are dominated by business books, many of which were published in the last year. Below is a list of those recommendations.

Atlas Shrugged

By Ayn Rand

Paperback: 1,200 pages

Publisher: Plume (August 1, 1999)

List Price: $25.00

Director’s Comment: “It reinforces the importance of playing and investing to win in a capitalist,
global economy.”

The Next Asia: Opportunities and Challenges for a New Globalization

By Stephen Roach

Paperback: 414 pages

Publisher: Random House (1957)

List Price: $16.95

Predictably Irrational: The Hidden Forces That Shape Our Decisions

By Dan Ariely

Paperback: 384 pages

Publisher: Harper Perennial; revised and expanded edition (April 27, 2010)

List Price: $15.99

The Why of Work: How Great Leaders Build Abundant Organizations

That Win

By Dave Ulrich and Wendy Ulrich

Hardcover: 304 pages

Publisher: McGraw-Hill Companies (June 6, 2010)

List Price: $27.95

Well Made in America: Lessons from Harley-Davidson on Being

the Best

By Peter C. Reid

Paperback: 226 pages

Publisher: McGraw-Hill Companies (April 1991)

List Price: Out of print (available from used booksellers)

Director’s Comment: “The turnaround of Harley-Davidson can be an [important] lesson for us all.”

Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company

By Andrew S. Grove

Paperback: 240 pages

Publisher: Crown Business (March 16, 1999)

List Price: $16.95

The Strategy Paradox: Why Committing to Success Leads to Failure (And What to do About It)

By Michael E. Raynor

Hardcover: 320 pages

Publisher: Crown Business (February 20, 2007)

List Price: $27.50

Director’s Comment: “It offers a way to think critically about strategic risk.”

Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity

By Rita Gunther McGrath and Ian C. Macmillan

Hardcover: 200 pages

Publisher: Harvard Business School Press (March 16, 2009)

List Price: $27.95

Decide and Deliver: Five Steps to Breakthrough Performance in Your Organization

By Marcia Blenko, Michael C. Mankins and Paul Rogers

Hardcover: 192 pages

Publisher: Harvard Business Press (September 27, 2010)

List Price: $29.95

Director’s Comment: “Excellent book on improving organizational performance.”

Owning Up: The 14 Questions Every Board Member Needs to Ask

By Ram Charan

Hardcover: 224 pages

Publisher: Jossey-Bass (April 13, 2009)

List Price: $29.95

Valuation: Measuring and Managing the Value of Companies

By McKinsey & Company, Tim Koller, Marc Goedhart, David Wessels

Hardcover: 811 pages

Publisher: Wiley; Fifth edition (July 26, 2010)

Share this article:      

• Posted Rita McGrath on January 04, 2011

Search: