The Other "F" Word: How Smart Leaders, Teams, and Entrepreneurs Put Failure to Work

"The Other "F" Word" helps readers do just that, offering practical tools to show leaders and team members how to embrace failure and use it as a catalyst for improved performance and growth.

In it, you’ll learn how to spot the signs of failure and prepare your organization to avoid repeated mistakes. You’ll hear how to communicate openly about failure and how to reduce the fear of failure that can block innovation and quash motivation. And you’ll read how some of the world’s biggest organizations and best-known leaders have produced products and services that flopped, but still they’ve gone on to triumph.

So who’s this book for? "The Other "F" Word" is best suited to leaders of organizations or teams and to entrepreneurs, particularly those in industries that require constant innovation. But given the pervasiveness of failure, this book appeals to a broad audience, from CEOs of multinationals, to those launching a start-up from their kitchen table, to anyone who lets the fear of failure stop them from pursuing their dreams.

Both authors have had their own failures, which they share at the start of this book, and they have decades of experience in the worlds of education and business.

John Danner is a management consultant, entrepreneur and professor. He advises global corporations and start-ups, and teaches innovation, entrepreneurship, strategy, and leadership at the University of California Berkeley and Princeton University.

Mark Coopersmith is a corporate executive, entrepreneur and strategic advisor. He’s also a professor, teaching innovation, entrepreneurship and leadership at UC Berkeley’s Haas School of Business. Coopersmith has built and run international businesses for Sony and Newell Rubbermaid, and has launched Silicon Valley start-ups.

So keep listening to hear how to keep innovating even when you’ve scaled up, how to create a culture of respect for failure, and how to bounce back after a big mistake.

"The Other "F" Word" is split into four parts, starting with What: The Facts and Facets of Failure. Here, the authors give their definition of failure, which is: mistakes and unwelcome outcomes that matter. We may fail because of events outside our control – an economic crisis, for example – or we may invite failure upon ourselves.

The authors also offer some statistics on failure that are both sobering and heartening. Did you know that between 50 and 70 percent of all new businesses in the United States fail within 18 months and 95 percent of new products introduced each year are a flop? Failure is a universal force, like gravity, so we might as well get used to it and learn to profit from it.

In Part Two, Danner and Coopersmith look at When and Where, examining how failure shows up at different times depending on the type and size of the organization. They explore "start-ups," "keep-ups" – companies that have met pay roll but still may be struggling to survive – and "grown-ups," big corporations that have their own set of problems.

Part Three is the How. Here, the authors introduce their Failure Value Cycle, a seven-stage process organizations can use to monitor their approach and reaction to failure, and make sure they’re reaping the benefits of it.

Part Four, entitled Now, ties up the book’s main points and shows leaders how to move forward and create failure-savvy organizations.

We like this neat structure and the way Danner and Coopersmith lead readers through the What, When, Where, How, and Now stages. But it does take a while to get to the book’s practical, take-home messages. The time-pressed reader might feel frustrated at the slow build-up and all the context and statistics that precede the more useful lessons and tips. But if you have a bit of time, we think you’ll enjoy the book’s earlier sections too, because they’re packed with anecdotes, case studies, fascinating numbers, and a huge variety of voices, from CEOs to venture capitalists, and from Albert Einstein to Mark Twain.

So let’s take a closer look at some of the authors’ practical tips, starting with their advice for large corporations.

They begin their chapter on "grown-ups" with a cautionary tale about Sony. The Japanese consumer electronics company once dominated its industry, bringing to market hugely popular, innovative products like the transistor radio, the Sony Walkman, and the Compact Disc.

Sony made mistakes – its Betamax videotape format lost the battle against VHS, for example – but it learned from them. In recent years, though, Sony has fallen on hard times, with Apple, Samsung and LG racing ahead with smarter gadgets.

Where did Sony go wrong? As it grew in size, it shifted its focus inward, away from the end consumer and on to its internal structure and objectives, losing its edge on innovation.

Established, successful companies have their advantages, but agility isn’t one of them. As corporations expand, their structures often become more complex, and communication and collaboration suffer. They miss opportunities, fail to respond to threats, and struggle to innovate.

Risk aversion and fear of failure grow because well-known brands have more to lose. Employee engagement falls because people don’t feel connected with an overall purpose, and they don’t feel free to try out new ideas.

One way to counter this is to encourage a more entrepreneurial mindset, the authors say. Think about creating smaller units or departments, and giving managers and team members a sense of ownership and influence. If a manager feels confident to take calculated risks, this can lead to extraordinary results.

Take Hyatt Hotels. The general manager of its flagship London hotel took the bold decision to redesign the hotel’s organizational structure so rooms could be ready sooner and guests wouldn’t have to wait so long to check in. Under the old system, housekeeping would enter a room first, spot a dripping faucet or an empty mini-bar, and alert engineering or food service to the problem.

Following the redesign, an inter-departmental team went room to room, addressing all issues at once. The result was a 30 percent improvement in room turnaround time. There were teething problems, but they didn’t affect the hotel’s results or guest satisfaction levels. The redesign is a work in progress, but the general manager has been recognized company-wide for his courage, and team members have rallied around the new system with a sense of ownership and pride.

Danner and Coopersmith offer some great reminders to companies about the risks that come with growth and expansion, and the potential upsides of creating a culture of entrepreneurship.

Let’s now look at the authors’ Failure Value Cycle – the book’s most practical and original tool. Danner and Coopersmith suggest organizations monitor their relationship with failure against this cycle, which has seven steps: Respect, Rehearse, Recognize, React, Reflect, Rebound, and Remember.

We don’t have time to look at each of the steps in detail, so we’ll focus on two, starting with the first.

The Respect stage is about changing the culture of your organization so failure moves from being a taboo to being an important topic of conversation at internal meetings and in external company reports.

Leaders have a vital role to play here – they need to walk the walk, discussing their own failures openly with employees and creating what the authors call a "zero-stigma" failure culture. But there are leaders who prefer not to use the word failure itself. If that’s you, it’s fine to substitute it for alternatives like problems that need solving, issues or challenges.

When creating a failure-friendly culture, make sure you’re not encouraging mediocrity or permitting countless excuses. There’s a big difference between supporting experimentation and letting employees off the hook.

It’s also important to identify the areas of your business that lend themselves better to trial and error and those that don’t. Danner and Coopersmith suggest taking a look at your organizational chart and identifying the areas where you’d like to encourage more experimentation and those where failure is best avoided or nothing should be left to chance, perhaps because the risks to life, health, the environment, or your organization’s reputation would be too great.

Consider dividing your operations into three zones – a "no fault" failure zone, where innovation is the focus and the impact of failures can be easily contained; a low-defects zone, where "good enough" trumps great, faster is better than later, and prototypes beat perfection; and a no-failure zone, where perfection is the benchmark and the consequences of failure are high.

As a leader, it won’t be easy to strike the right balance between performance and accountability, between experimentation and near-perfection, but creating a culture that understands the inevitability of failure and discusses it openly is a great start.

We like the authors’ advice on dividing organizations into zones with different tolerances for failure. This’ll also make it easier to match individual employees to roles or departments, depending on their aversion to failure or thirst for innovation. And once again, the authors back up their theories with a variety of voices, including former and present leaders of Roche, Charles Schwab, Hyatt Hotels, and Avon.

Let’s now look further along the seven-step process, at number six, the Rebound stage. Failure has happened. You’ve reacted to it, hopefully in a way that limits the fall-out. You’ve reflected on it, and got some good insights into how it happened and what you can learn from it. Now it’s time to use your failure to achieve greater success.

Netflix did this with style several years ago when it turned a near-catastrophic mistake into a huge opportunity for growth. The company lost nearly a million subscribers and three quarters of its market capitalization when it announced, in 2011, that it was splitting its movie rental business into a DVD rental service called Qwikster and a streaming movie service which would keep the name Netflix.

This change brought a big price hike for existing customers, and they left in droves. Netflix reacted quickly, apologizing instantly. It reflected on its mistake and looked at what the changing competitive landscape and the growth in tablets and big smart phones meant for its future business. It then jumped on the opportunities it saw.

Netflix simplified its pricing structure so it was cheaper than many of its rivals. It abandoned Qwikster. It moved beyond DVD rental and movie streaming into original programming, with hit series like "House of Cards" and "Orange is the New Black." And it invested in infrastructure, so it could give great customer service.

Two years after its mistake, the company’s shares were trading at a record high and it had more than 30 million subscribers, beating HBO into the market-leader spot. The Netflix story brings the authors’ rebound theory to life and we think it’s a great fit, even if it’s already been widely quoted in business books.

There are a number of rebound strategies organizations can pursue, and the authors offer another alliterative list of options: tenacity, where you stick to your guns and hope you can persuade others you’re on the right track; tweak, which involves minor adjustments; turn, which is a more abrupt shift; turnabout, which is a fundamental change of direction; and throw in the towel, where you abandon your strategy, or pull the plug on your product or service.

This list may sound simplistic, but the authors accept they’re not able to cover all the options in depth – they just want to give a flavor of the kinds of choices you might face. They do this well, giving readers food for thought.

Danner and Coopersmith set out to write something that would stand out from other books on failure, offering practical tools to help organizations harness insights from mistakes to innovate and grow.

They promised not to use the standard Silicon Valley mantra of "fail fast, fail often," nor to simply tell readers to learn from their failures. They don’t quite achieve this. They do talk of failing fast and often, and of learning from failures, albeit using different words. And they include some of the same case studies and anecdotes other business writers have used. That’s why we don’t think "The Other "F" Word" is as unique throughout as the authors suggest.

But it does have some really useful, practical tools, particularly the Failure Value Cycle. It’s also thoroughly researched, and includes a huge range of candid, insightful interviews with prominent business leaders.

So if you want to confront your fear of failure and make failure work for you or your organization, we think this book is a great place to start.

"The Other "F" Word," by John Danner and Mark Coopersmith, is published by John Wiley & Sons, Inc.

That’s the end of this episode of Book Insights. Thanks for listening.