3 Ways to Fail Cheap

By Scott Anthony

I had an interesting dialogue with an innovation practitioner in a large corporation the other day. We were talking about how the high rate of innovation failure can hamstring innovation.

"The failure rate is actually irrelevant," he said. "It's the risk associated with those failures that gets you into trouble."

In other words, failure would be fine, if it wasn't so darn expensive. Because failures cost money (and time), high failure rates can cause corporations to become very gun shy about innovation.

Of course, one way out of this problem is to increase the innovation success rate. A noble aspiration for sure. But be careful. Following that seemingly sensible path can lead to some perverse behavior.

For example, a company can almost always "succeed" by introducing "new and improved" products that cannibalize what they already sell. A company can confidently state that all of its revenue comes from products launched within the past two years, feel good about its innovation efforts, and actually be falling further behind competitors.

The real answer is to dramatically decrease the cost of failure. A leadership team seeking to achieve this aim has three levers at its disposal:

1. Lower the costs of experiments. Running experiments need not be expensive. There are tons of low cost ways to test critical assumptions (chapter 5 of The Innovator's Guide to Growth describes about 30 such approaches).

2. Change the order of experiments. Many companies spend a lot of money answering the wrong questions. They'll seek to perfect a technology without understanding whether there's a market need. Assess strategic risks first, because they are often what sink an idea.

3. Increase the pace of decision making. Entrepreneurs with clearly bad ideas typically don't have the luxury of spending money on those ideas for too long. Companies, however, can let bad ideas linger for inordinate amounts of time because of slow decision-making processes. Shutting down flawed projects early avoids needless spending — and focuses resources on the best ideas.

Pulling these levers requires embracing the notion of "good enough." Experiments are often expensive because companies seek perfection in their own eyes before they run any sort of test. Remember, the less you've spent, the more freedom you have to change your approach.

And finally, remember that failure is not a dirty word. The odds are pretty high that your first idea is wrong along some meaningful dimension. If you fail fast and fail cheap, you can accelerate discovering a winning idea. Successful innovation and fast-cycle iteration go hand in glove.

Of course, it's one thing for companies to say they embrace the right kind of failure. It's quite another thing to create a culture that rewards low-risk failures and savors surprises. Maybe companies could set up a failure target as part of each employee's annual review. Or create a repository of "failure case studies." Any further thoughts?

Source: Harvard Business Blog

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Time to Detox the Work Environment

STANFORD GRADUATE SCHOOL OF BUSINESS—Corporate practices are having effects not just on polar bears and wetlands, but also they may be killing human beings, says Professor Jeffrey Pfeffer. The concept of "sustainability" must be expanded to include consideration of whether workplaces are good not only for the environment but also for people.

What Pfeffer calls toxic workplace environments, particularly in the United States, raise rates of disease and mortality. He urges business, government, and the media to pay attention to what has been a shockingly neglected topic. In the present distressed economy, he says, "the problem is only going to get worse."

"The lack of attention to employee needs helps explain why the United States spends more on health care than other countries but gets worse outcomes," says Pfeffer, the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business. "We have no mandatory vacation or sick day requirements, and we do have chronic layoffs, overwork, and stress. Working in many organizations is simply hazardous to your health."

Specifically, he says, epidemiological studies show that holding a lower-level position where one does not have much control over job activities and decision making puts employees at a higher risk of having—or dying from—a heart attack. "There’s nothing more stressful than being in an environment in which you have a lot of pressure but relatively little power," Pfeffer says.

In addition, spotty or interrupted health care insurance—a typical consequence of layoffs and job changes—and the trend toward jobs that offer no health coverage at all, leads to a significant decrease in routine preventive medical screening procedures such as mammograms and cholesterol and blood pressure testing, and as a consequence, added risk to workers’ health.

Pfeffer cites research showing that overwork and job stress lead to increases in smoking, alcohol abuse, and high blood pressure, while layoffs contribute to depression, violence, and even lowered life expectancy. "There is evidence that people who experience a layoff live 1.5 years less than those who don’t," Pfeffer says.

The Stanford professor thus maintains that the concept of "sustainability" must be expanded to include not only whether corporations care for the environment and resource conservation, but also whether they are good for their employees.

As to why the serious question of worker well-being has been given scant attention by executives, regulators, and pundits, Pfeffer suggests it may have something to do with current mercenary cultural values. "There was a time when CEOs believed they had an obligation to all of their stakeholders, including employees," he says. "But over time, we've come to look at even the simplest things in financial terms. Childcare, for example, which used to be a matter between parents and children, is now a service to be traded on the New York Stock Exchange. This way of thinking is taking out the human factor."

The great irony, says Pfeffer, is that most workplace policies that are bad for employees are also bad for companies themselves. Organizations that are more "humane"––offering generous benefits, sick leave, vacation pay, health insurance, and so forth––are shown to be more profitable. Pfeffer points to companies such as Southwest Airlines, Kimberly-Clark in the Andean region, and kidney dialysis provider DaVita as exemplars. "I hope businesses will wake up to the fact that if they don't do well by their employees, chances are they’re not doing well, period," Pfeffer says.

In the current economic climate, he notes, more people will be laid off, work longer hours, become saddled with increasing work responsibilities, and operate without health insurance. The government, Pfeffer says, will almost certainly need to step in with regulation. If nothing else, with health care costs on the rise, government should be looking to the workplace as one culprit in the decline in the quality of workers' health.

—Marguerite Rigoglioso

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Seven Communication Mistakes Managers Make

By Stever Robbins

1. Making controversial announcements without doing groundwork first.
Any controversial decision can engender rumors, anxiety, and resistance. So rather than announcing a controversial decision to an entire group, prep people one-on-one. Learn who will object, and why.

Decisions about change are the most charged — reorganizations, changing goals, and the departure of key employees create uncertainty, and uncertainty generates anxiety.

To forestall anxiety, open a dialogue with the other person. Put a name to the problem: "This reorganization means we'll be doing some things differently, and that makes some people apprehensive." Then address the concerns raised in response to your statement:

* Is the other person uncertain about the future? Share the scenario you expect to unfold.
* Does the reorganization jeopardize a project? Share plans for keeping it afloat.
* Demonstrate that you get it, keeping in mind that you can address emotion better with body language than with words. Make sure yours conveys concern and empathy.

2. Lying
Some lies or partial truths are well-intentioned. Certain topics must remain confidential while they're under discussion. But be careful how you keep secrets. If people know you've lied, you will lose their trust forever. A start-up company's controller watched the CFO lie to members of other departments and subsequently began to doubt the CFO's sincerity. He began looking for a new job with a boss whose intentions he could trust. In that instance, lying cost the company a valuable employee.

Rather than lie, train yourself to respond, "I'm not free to comment" or "I can't answer that fully right now," when asked about confidential or sensitive topics. Consistency is important. Warren Buffett never discusses his investments, even with shareholders. As a result, his silence on a particular deal gives away nothing.

3. Ignoring the realities of power
Surprised that you never hear bad news until it's too late? Don't be. The more power you have, the less you'll hear about problems. It's human nature: problems are filtered and softened as they ascend the corporate hierarchy, with each messenger seeking to soften the blow. If you want an honest assessment of a problem, seek out bad news. Welcome it. And when it comes, show your appreciation.

Conversely, messages are magnified as they travel down the hierarchy. If you look pained during a presentation, everyone will "know" you hated the presentation (or worse — the presenter). No one will think to blame the pastrami sandwich you ate too fast before you came to the meeting. Jokes are especially dangerous. When the managing director of a consulting firm joked, "If you're not here Sunday, don't bother coming in Monday," his project team wasn't sure what to do. One said, "We were pretty sure he was joking, but. . ."

Put a lid on rumors by using plain, simple language. End meetings by reviewing your reactions and next steps. "I value your analysis, Chris. The sales trend is disturbing. Let's follow up on Wednesday."

4. Underestimating your audience's intelligence
It's tempting to gloss over issues because "people won't understand." Why explain a reorganization when you can simply say, "Here's the new org chart"? But that's a cop-out. Front-line employees may not be masters of organizational design, but they deserve to know the rationale behind changes that affect their lives. If you think your people won't understand something, remember it's your job to explain it to them.

Many managers like to gloss over problems when motivating their teams. But if things aren't going well, those teams are probably well aware of the problems. In fact, they've probably known about them longer than you have. Rather than avoiding the situation, enlist their skills in finding solutions.

5. Confusing process with outcome
In goal-setting, compensation, and evaluation, it's easy to confuse process with outcome. You promise your team a 7% raise, but then the board, concerned about the downturn, caps raises at 3%. You fight like mad to raise the number, and you compromise on 4%. But your people don't appreciate it. In fact, they're downright resentful. How could they be so insensitive to all your hard work?

Simple. Your hard work was process, and you promised them an outcome. You want them to appreciate how hard you tried, but they wanted a specific result. Since they didn't get it, they can't see past that fact. You want people to value you for your hard work. But when evaluating others, it's always easier to judge outcomes. Most organizations penalize employees for the wrong outcome, even if they follow the right process. Perversely, others are rewarded for the right outcome, even when they flout the rules about process.

6. Using inappropriate forms of communication
E-mail is great for conveying information, but don't use it for emotional issues; e-mail messages are too easy to misconstrue. If you're squirming while reading an e-mail, leave your computer and deal with the situation in person or by telephone.

At the same time, phone calls and face-to-face meetings are inefficient ways to disseminate information, but great for discussing nuanced issues. You can respond directly to the listener's reaction, and you can use your tone of voice and facial expressions to control your message. "I'm sure you did a great job" could be read sarcastically in an e-mail, but the same words can be delivered sincerely in person with the right tone of voice.

Furthermore, some people are listeners, while others are readers. Listeners won't focus on written memos but are great in conversation. Readers write great memos and are also glad to read them, but conversation sometimes fails to fully engage them. If you talk to a reader or write to a listener, your message might not get through. Don't be afraid to ask people how they prefer to receive information; most people know the answer. If they don't, a little attention on your part will reveal what works best. (And for some people, it's a combination of the two.)

7. Ignoring acts of omission
What you don't say may be sending as loud a message as what you do say. If you don't give praise, people get the message they're unappreciated. If you don't explain the rationale behind decisions, the message is that you don't trust them. And if you don't tell people where the company wants to go, they don't know how to help it get there.

When fundraising became the CEO's priority at a distance learning company, he stopped communicating his vision to employees. Since money was constantly on his mind, he did mention financial goals. Eventually, the company culture became money-focused, and the vision was lost. But when the CEO delivered a vision-oriented presentation at a conference, one of his employees approached him afterward to say that she had never felt so inspired. As a result, he changed his internal communication strategy to emphasize vision once more, and saw morale soar.

By their very nature, mistakes of omission are hard to uncover. Review your major goals and the communication that's needed to support those goals. Ask what message may have been sent by your silence so far. And be willing to ask people, "What messages are you getting from me?"

Stever Robbins is president of VentureCoach.com, a Cambridge, Mass. entrepreneurial coaching service.

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