Finding Value in Disappointment

To err is human. Why then is it so difficult for managers to acknowledge when things go so wrong?  Despite the fact that important lessons can be learned from failure, we seem to have a hard time accepting and understanding the implications of disappointments in our business endeavors.  How can we use the learnings generated from disappointing results to develop new and better ways of doing things?

Learning from disappointment is not easy.  It is difficult because time and money have been invested in the effort. It takes a conscious commitment on the part of the people involved in the effort and the firm’s management to find value in upsetting events.  The challenge is to create processes that permit disappointment to be viewed, not as a disgrace, but as a source of information, and even as a source of innovation. 

Peter Drucker, in his book Innovation and Entrepreneurship lists “The Unexpected” as the first of seven sources of opportunity for successful innovation.  “If something fails despite being carefully planned, carefully designed and carefully executed, that failure often bespeaks underlying change, and with it, opportunity.  The assumptions on which a product or service, its design or marketing strategy, were based may no longer fit reality.  The unexpected failure demands you go out, look around and listen.  Failure should always be considered a symptom of an innovative opportunity, and taken seriously as such.”

Perhaps the most significant block to positive regard for setbacks is the deeply rooted conviction among many managers that being “right” is a sign of competence and strength, and being “wrong” is a corresponding signal of incompetence and weakness.  Disappointment is unavoidable in innovation efforts, as noted by Rita Gunther McGrath in her article, “Advantage from Adversity, Learning from Disappointment in Internal Corporate Ventures,” published in the Journal of Business Venturing, March 1995.

Companies embark on new ventures in order to develop a new stream of revenue, to increase dividends to shareholders, and/or to react to competitive threat.  McGrath suggests that companies also view innovation as a means to develop competencies that lead to competitive advantage.  Since no advantage is likely to remain in place indefinitely, it is important for a firm to be able to generate new competencies to renew its competitive advantages.

Certainly one measure of a venture’s success is the new stream of revenue and profits its produced.  Another, however, may be its contribution to growing the firm’s capabilities.  Such endeavors require a healthy amount of trial-and-error.  Errors are necessary for learning and competence-building and are a natural and inevitable part of trying something new.   The challenge for an organization’s R&D and commercial development strategy becomes how to manage the disappointment generated by unexpected failures and manage it well.

Learning from disappointment in innovation endeavors can be made easier if a team develops a set of guiding principles (as paraphrased from McGrath’s article) where it agrees to have:

1.              Clear ways of measuring its progress.

2.              A sponsor who has a gut feel for the innovation itself.

3.              A hunger for “new” news rather than whether news is “good” or “bad.”

4.              A clear business model (or strawman) with which to start.

5.              A willingness to change the model and redirect the effort.

6.              A deliberate and explicit process to extract learnings from the effort.

Perhaps the most significant challenge for managers, who are trained to believe in being “right”, is to treat disappointment not as a disgrace and close the door on it, but as a signal, a new window of opportunity for innovation, and a valuable source of original insight.

Inviting Disappointment

In the late 1980’s, a new commercialization team was formed to develop commercial opportunities from a new technology that had been invented in the labs.  The project manager recognized a similarity between the new technology and a previous commercialization effort which had been regarded as a monumental mistake.  Instead of trying to distance himself and his team from the failures of the past, he sought out those involved in the previous project.  He wanted to find out what had happened and what his team could learn before they went too far on their project.

Though the previous project manager had “retired,” he was brought back, along with his former project team, to formally debrief the previous effort.  We conducted a thorough and rigorous examination of what actually happened and effectively shared what was learned with the new project team.  This debriefing allowed the new team to understand and use the experience of the past immediately.  It arguably saved the company much in time and money by not repeating the past, but by learning from it.


This article was originally published in Innovating Perspectives in May 1995. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 460-1313.