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that of a gasoline-only car. Consumers didn’t need to make a major shift in their
behavior to shift to this new product.
1.8.3 Managing Failure
Above all, organizations need to resist doing nothing at all – never implementing
new or creative ideas. Robert Sutton of Stanford University suggests that inaction is
far worse than failure. Failure, after all, implies some sort of output. Because the
quality of innovation is intrinsically linked to quantity of ideas, it makes sense to
employ metrics based on quantity of ideas.
Examples of such metrics include how many prototypes built, patents filed,
papers published, projects completed, etc. Without a high quantity of attempts, there
can be no innovation. Therefore, output – regardless of success or failure – must be
rewarded. This may seem unrealistic without additional information.
So how do you reward failure?
According to Sutton, organizations can do the following:
• Make sure people are aware that failure to execute new ideas is their greatest
failure and that it will bring about consequences.
• Make certain everyone learns from past failures; do not repeatedly reward the
same mistakes.
• If people show low failure rates, be suspicious. Perhaps they are not taking
enough risks, or maybe they are hiding their mistakes, rather than allowing others in the organization to learn from them.
• Hire people who have had intelligent failures where lessons have been extracted
that enabled subsequent success. Let others in the organization know that’s one
reason they were hired.
In the pharmaceutical industry, although spending on research and development
went up more than 300% industrywide during the 1990s, the number of new drugs
approved by the US Food and Drug Administration (FDA) during that period
dropped by 50%. Companies see drugs that have cost hundreds of millions of dollars in the R&D phase simply stall out or fail in the FDA approval process. If this
attrition does not improve, drug development will become prohibitively expensive.
Vertex Pharmaceuticals is one example of a company that on purpose tries ideas
that fail in pursuit of solutions. Vertex uses biotechnology to create transformative
medicines targeting diseases such as cystic fibrosis, Duchenne muscular dystrophy,
and hemoglobinopathies, among others, and also pain. Paradoxically, Vertex has
attempted to decrease the attrition rate by increasing it during the early stages of the
innovation process. The driving idea is that the more ideas (molecular combinations) researchers can test, the better their chance of finding a few good ones.
Consequently, many ideas lead to dead ends, but at a much earlier stage. Good
leads – in this case, effective, safe drugs – have a better chance of getting approved
and ultimately generating sales.
1 The Quest for Innovation: Addressing User Needs and Value Creation
that of a gasoline-only car. Consumers didn’t need to make a major shift in their
behavior to shift to this new product.
1.8.3 Managing Failure
Above all, organizations need to resist doing nothing at all – never implementing
new or creative ideas. Robert Sutton of Stanford University suggests that inaction is
far worse than failure. Failure, after all, implies some sort of output. Because the
quality of innovation is intrinsically linked to quantity of ideas, it makes sense to
employ metrics based on quantity of ideas.
Examples of such metrics include how many prototypes built, patents filed,
papers published, projects completed, etc. Without a high quantity of attempts, there
can be no innovation. Therefore, output – regardless of success or failure – must be
rewarded. This may seem unrealistic without additional information.
So how do you reward failure?
According to Sutton, organizations can do the following:
• Make sure people are aware that failure to execute new ideas is their greatest
failure and that it will bring about consequences.
• Make certain everyone learns from past failures; do not repeatedly reward the
same mistakes.
• If people show low failure rates, be suspicious. Perhaps they are not taking
enough risks, or maybe they are hiding their mistakes, rather than allowing others in the organization to learn from them.
• Hire people who have had intelligent failures where lessons have been extracted
that enabled subsequent success. Let others in the organization know that’s one
reason they were hired.
In the pharmaceutical industry, although spending on research and development
went up more than 300% industrywide during the 1990s, the number of new drugs
approved by the US Food and Drug Administration (FDA) during that period
dropped by 50%. Companies see drugs that have cost hundreds of millions of dollars in the R&D phase simply stall out or fail in the FDA approval process. If this
attrition does not improve, drug development will become prohibitively expensive.
Vertex Pharmaceuticals is one example of a company that on purpose tries ideas
that fail in pursuit of solutions. Vertex uses biotechnology to create transformative
medicines targeting diseases such as cystic fibrosis, Duchenne muscular dystrophy,
and hemoglobinopathies, among others, and also pain. Paradoxically, Vertex has
attempted to decrease the attrition rate by increasing it during the early stages of the
innovation process. The driving idea is that the more ideas (molecular combinations) researchers can test, the better their chance of finding a few good ones.
Consequently, many ideas lead to dead ends, but at a much earlier stage. Good
leads – in this case, effective, safe drugs – have a better chance of getting approved
and ultimately generating sales.
1 The Quest for Innovation: Addressing User Needs and Value Creation