The Economics of Embracing Mistakes: How Startups Prove That Success Favors the Brave

In almost every industry, startups play a crucial role in driving innovation and competitiveness, and it’s not surprising. Startups traditionally bring with them a fresh outlook, strong appetite for risk and high tolerance for failure. With an eye on startups, traditional businesses have begun shifting the way they operate.

The ripple effect is much more than just new products or services – startups are bringing to the market a fundamental change in attitudes toward failure throughout the wider business world. The result is a new outlook on how to handle and embrace mistakes – or in other words, a way for enterprises to take a lesson from the startup playbook and learn how to embrace mistakes.

Join us as we explore the shift that is taking place among large enterprises and changing the way in which they view and handle failure.

Enterprises No Longer Advocate a No-Mistake Policy

Witnessing the failures and post-failure comebacks of a growing number of unstoppable startups, managers at large companies and legacy institutions are realizing that not having made any mistakes in a while might mean they’re playing it too close to their comfort zones.

While this may have been acceptable in the past, the dynamic world of today means that companies must take risks to reap rewards. This caused many enterprises to recognize that when they don’t take risks, a market vacuum occurs, luring in other companies who may recognize the lack of risk as an opportunity to dominate the market.

An increasing number of successful business leaders have started urging their companies to make more mistakes and embrace more failures, seemingly taking a page from the startup handbook. These leaders argue that failures can provide the raw material for long-term improvement, and that risks don’t have to be impulsive or absolute win-lose cases. In fact, failure can often provide a competitive edge.

For example, releasing products or services into the market is a risk that can be overcome through early stage customer feedback.

The Enterprises that Already Embrace Mistakes

The small percentage of organizations that have openly worked to cultivate a culture of psychological safety are the ones leading the way for more innovation in traditional enterprise settings. Companies like Amazon and Coca-Cola are known for creating an environment where learning from failure can be realized and even be rewarding.

Amazon, for example, has made many mistakes, among which is the infamous FirePhone it released in 2014. Yet for CEO Jeff Bezos, risk taking is nothing more than experimenting.

“If you’re going to take bold bets, they’re going to be experiments,” he said after Amazon bought Whole Foods. “And if they’re experiments, you don’t know ahead of time if they’re going to work. Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.”

James Quincey, the CEO of Coca-Cola, also showcases his policy of accepting failure as part of growth. Upon accepting his new position in May 2017, he pointed at what’s known as “The New Coke Syndrome” – the cautiousness and risk aversion The Coca-Cola Company has been showing ever since the epic failure of the New Coke drink back in 1985.

He stated that such a fear of failure is counterproductive, and that for Coke to become a total beverage company, employees must not be afraid to make mistakes. They should, in fact, embrace mistakes.

What these leaders are doing is essentially providing a supportive environment and a positive mindset that accepts, rather than reprimands, failure. As a result, they are leading their employees into a more flexible, open future where mistakes can be viewed as steps that can get the company closer to longer-lasting success. By removing blame games, they are fostering a collegial environment where people are encouraged to grow.

Old Truths, New Effects

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
-Bill Gates

It’s well known that no company makes the right decisions all the time – Apple, Microsoft, FedEx, Kentucky Fried Chicken, Mary Kay Cosmetics, and many other top brands have all traveled rocky paths before they established themselves in their respective markets and grew to their current massive size.

If we go back even further, to a time when Henry Ford was just beginning his career, we will see that mistakes were as much a part of the game back then as they are in Mary Kay Ash’s or Jeff Bezos’ worlds. It took Ford several failed product models to get one very right. With the rise of the Internet, such setbacks and failures became a highly ordinary aspect of startups – and they also became shareable, discussable truths.

Into a Bold Future of Possibilities

Leading by example, startups have prompted the wider business world to explore without frontiers, to innovate without having to be mistake-free, and to wholeheartedly accept imperfections. The unhindered revival of this entrepreneurial zest and its subsequent infusion into established organizations is snowballing into a business culture renaissance, shape-shifting whole industries across borders.
As the megatrend continues, we believe that more and more success stories will come from those companies that let bold risk-taking not only happen but also become a cultural value in and of itself.

To learn about the foundation of these new risk-driven strategies, read The New Chiefs of Disruption: What Is A Chief Disruption Officer?

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