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Why Companies Don't Learn from Mistakes – They Can't Distinguish Goldmines from Sloppy Ones

Mistakes and learning go hand in hand – you can't have one without the other. Encourage people to fail smart, not just fast.

By Gustavo Razzetti

June 9, 2021

Creating a culture that celebrates failure is vital, but not all mistakes are created equal. So reward learning mistakes and punish sloppy ones.

Organizations have an unhealthy relationship with mistakes. Learning and failing go hand-in-hand. However, failure triggers a variety of emotions – shame, embarrassment, blame, and anger. As a result, most of us try to avoid or ignore mistakes rather than confront them.

That's why most organizations fail to learn. They treat all mistakes as equal; they can't discern goldmines from sloppy ones.

Building a learning culture requires understanding that mistakes are not the end of the road – they open unseen doors. As James Joyce wrote, "A man of genius makes no mistakes. His errors are volitional and are the portals of discovery."

The question your company needs to address is not "Should we make mistakes?" but rather "Which mistake will help us learn, grow, and innovate?"

Why Companies Lack Mistake Tolerance

Learning happens through experimentation. And experimentation often results in failure. A willingness to fail by design – not chance – has to be embedded in your company culture. Soichiro Honda, the founder of the namesake automotive, said it best, "Success is 99% failure." So if most business successes come from failure, why do organizations avoid mistakes?

Mistake tolerance is a cultural thing – some behave better than others.

Encouraging people to fail is more valuable than avoiding mistakes. That's why Japanese students have been beating Americans at math. Not because they have a genetic predisposition to calculus, but because they prioritize learning over success.

In Japan, students are asked to solve math problems before they are taught how to do so. Teachers want kids to struggle purposefully. That means when they explain the respective formula or method, students can realize where and why they struggled. Learning is not just about failing, but about connecting the dots.

By the fifth grade, even the lowest-scoring Japanese classroom outperforms the highest-scoring American one.

Learning or discovering something new requires making errors. No one learns to ride a bike without falling from it first. Your organization must tolerate failing (and falling) over and over before it can master something new.

Mistake intolerance ignites the exact defense mechanism as in metabolic food disorders. Intolerance to milk, for example, triggers the immune system to reject anything that contains lactose. The same happens with mistakes. Organizational antibodies reject anything new or risky – the culture cannot digest mistakes.  

There's a difference between promoting a learning culture (or growth mindset) and actually creating one.

Gallup's research shows that only one in five employees in the US, France, and Germany strongly agree that "My company creates an environment where people can try, fail, and learn from mistakes." The results are slightly higher in the UK (24%) and Spain (26%), but still not good enough.

Why don't organizations learn?

To answer this question, Harvard professor Francesca Gino and colleague Bradley Staats embarked on a ten-year research project. As a result, they identified four biases that get in the way. The most significant: We focus too heavily on success. Other biases include: taking action too quickly, depending too much on experts, and trying too hard to fit in.

Our obsession with success leads to an unhealthy notion of failure – people avoid taking risks, focus on past performance rather than potential, and ignore the role of luck in both successes and failures. Managers usually attribute their success to hard work, brilliance, and skills – not luck. However, when they fail, they blame it on bad fortune. This attribution bias hinders learning at both a personal and organizational level.

Minimizing mistakes is the greatest mistake of all. There are situations when mistakes are most beneficial and others when they should be avoided.

McKinsey's research shows that organizations with a genuine learning culture reward people for taking risks at an appropriate level. There's a willingness to make mistakes – and learn from them – that's embedded across leadership and teams alike. Saying that it's safe to fail is not enough; you must create a trial-and-error culture.

The Four Different Types of Mistakes

Working with CHRO and CEOS to build more innovative cultures, I frequently get asked to help them develop a "Fail fast, fail often" mindset.

The problem with this mantra is that it oversimplifies our unhealthy relationship with mistakes. On the one hand, it emphasizes making errors rather than learning from them. But, on the other hand, speed just for the sake of moving fast is why companies fail to learn, as Gino’s research found out.

Most importantly, failing without any purpose is a waste of time and resources. So rather than "failing fast," organizations need to develop a culture of trial-and-error. That's what separates winners from losers.

Having great ideas, discipline, creativity, persistence, and a small dose of luck are not enough. According to a paper from Northwestern University, not every failure leads to a success. People who eventually failed tried basically tried to overcome mistakes the same number of times .

The authors performed an analysis of grant applications submitted over 30 years. They also analyzed venture capital investments and terrorist attacks in the past five decades. The researchers wanted to build a mathematical model that could predict the success or failure of any type of initiative.

It turns out that trying again and again only works if you can learn from your mistakes. The idea is not just to fail fast, but to fail smart. "Every winner begins as a loser," says Dashun Wang, who led the study. "You have to figure out what worked and what didn't, and then focus on what needs to be improved instead of trashing around and changing everything."

Some mistakes present learning opportunities, others don't.

As you can see in the chart below, mistakes can provide high or learning opportunities and might require low or high effort on our end.

There are four types of mistakes.

1. Sloppy Mistakes

Most mistakes that we make daily are highly avoidable. They don't require much effort and are easy to fix or prevent, but they provide low learning opportunities. For example, sending an email without proofreading it, speaking in a Zoom call with your mic off, or getting to a meeting late.

We all make sloppy mistakes because we're human.

The problem is when we keep repeating the same mistake over and over. Rather than focusing and learning from the mistake, we become lazy and turn making making sloppy mistakes into a habit.

2. Beginner Mistakes

Many mistakes are unavoidable. When we are learning a new language, sport, or skill, we need to make mistakes. These types of mistakes happen without much effort but provide higher learning opportunities compared to sloppy ones.

Within this type of mistake, I include a-ha moments and learning moments.

The first are the result of ignorance: we achieved what we intended to do, but the result is bad. For example, writing a line of code to improve the download speed of a website, but actually stop it from working. That's why they are called "a-ha." It's a moment of learning that wasn't planned as such.

Learning moments are more intentional. We are working on mastering something and will fail until we make it. Also, every mistake is followed by progress, the same way every inch of progress will generate new mistakes as we try to stretch to the next learning level.

This type of mistake is common at entry-level positions and with people being promoted and learning how to do a new job. However, everyone in the organization should embrace learning new things – as well as the mistakes and risks that are part of the journey.

3. Mistake Avoidance

Mistake avoidance requires a higher effort: we intend to prevent errors from happening or avoiding new scenarios. By trying to play it safe, we spend a lot of energy avoiding mistakes and lose the opportunity to discover or learn new things.

Fear is the key reason why employees put mistakes under the rug rather than learning from them. Our natural desire to avoid being ridiculed gets us in more trouble. Fearful cultures punish those who make mistakes. Instead of seizing those learning opportunities, they become a badge of shame.

Perfectionism is the worst enemy of change. Organizations expect employees to be flawless, but they aren't. Striving for perfectionism forces people to make more mistakes. That's the paradox of mistake avoidance. When we seed fear, we harvest more fear instead of learning.

For most organizations, the problem is not that they make too many mistakes, but too few. I reached out to many former CEOs and asked them what their biggest regrets are. Most recounted what they failed to try instead of things that didn't work out.

4. Goldmine Mistakes

The best mistakes happen as a result of trial-and-error – they are goldmines. Not only do they require more effort and design, but also provide a high learning opportunity. They are portals of discovery. Goldmine mistakes are about failing smart, not just fast.  

It took Unilever more than one attempt to find the perfect nozzle for a detergent factory. The initial 10 variations were tested, improved, and retested. After 45 generations of variation and selection, the team finally found their precious solution.

How to Create a Mistake Tolerant Culture

Here are some thoughts to get you started.

Clarify your mistake tolerance policy:

Clearly, define, and communicate what constitutes an unacceptable mistake level. In production, zero tolerance for errors must prevail – errors can be costly. However, in many areas, there's room for experimentation.

What is accepted and what's not?

Make It Safe to Talk about Mistakes:

Promoting psychological safety is crucial to address mistakes in the open. Make it safe for your team to fail. The unfortunate consequence of a culture of fear and silence is that many failures go unreported and their lessons are lost.

The Samsung Galaxy Note 7 was rushed to market even though it had many design flaws. Recalling and replacing the product costed Samsung $6.2 billion. Experts blamed Samsung's culture of silence for the problem. The mistake could have been avoided if people have raised the issues to management.

Model the right behavior:

Acknowledging your own flaws and limitations will help you gain respect from your team members. People trust intellectually humble leaders more than perfect ones.

Ed Catmull, the co-founder of Pixar, refers to early-stage movies as "ugly babies."

He constantly encourages the team to accept that ideas are never perfect, especially at the beginning. As Catmull wrote, "One of the things about failure is that it's asymmetrical with respect to time. When you look back and see failure, you say, 'It made me what I am!' But looking forward, you think, 'I don't know what is going to happen, and I don't want to fail.'"

Punish sloppiness, reward goldmines:

Encourage people to be more intentional about mistakes. Not all are created equal. Aim for gold mines; avoid being sloppy or repeating the same mistakes.

For Ratan Tata, "Failure is a goldmine!" The Chairman of the iconic Tata Group has instituted an award called Dare to Fail to encourage employees to explore new paths and ideas. This approach has helped Tata uncover countless opportunities.

Sam Yagan, ShopRunner CEO, asks executives to describe their recent failures in their reviews. If those mistakes haven't cost the company money, the executives don't get their bonuses.

Mine mistakes:

If companies do not take a systematic approach to make more mistakes, they should learn from the ones they unintentionally make.

As Paul Schoemaker, the author of Brilliant Mistakes, wrote, "You've already paid the tuition so why not get the learning." He argues that organizations should take a forensic approach to mining the learning by understanding why the mistake occurred at a detailed level. Most importantly, they must figure out what needs to be improved to avoid repeating the same mistake.  

Make time for experimentation:

Adopting a trial-and-error approach requires more than a mistake-tolerant mindset. It requires assigning the right time and resources.

3M systematized learning from failure by having clear culture norms. Its famous 20% policy allows employees to spend up to 20% of their time working on a project that interests them and helps promote innovation.

Share mistakes in the open:

The best way to learn from each other is by sharing mistakes with our colleagues. Not only will it prevent others from making the same error, but it also encourages a learning culture.

The Church of Fail is a monthly event where employees stand behind a pulpit and share their mistakes. This practice had helped social media firm NixonMcInnes build a learning culture where everyone views errors as stepping stones, not the end of the road.

Think before you fail:

There are many levels of experimentation. However, an effective trial-and-error approach requires a hypothesis to be tested. Rather than testing anything, start with challenging existing assumptions.

7-Eleven Japan built a culture of continually asking probing questions. Counselors ask salesclerks a set of three questions to evaluate the reasoning behind their assumptions. This process helps identify dubious reasoning before it becomes an expensive mistake.

Not All Mistakes Are Equal – Fail Smarter

Mistakes and learning go hand-in-hand – you can't have one without the other.

However, not all mistakes are created equal. Reward experimentation, not sloppiness.

Creating a learning culture requires seeing mistakes as stepping stones to get you to the goldmine. Addressing mistakes in the open will encourage people to focus on learning rather than on hiding their errors.

Paul Schoemaker said it best, "The great virtue of mistakes, whether they occur accidentally or by design, is their ability to enlarge our range of experience, shrink our ego, and thereby increase the chance of discovery."  

Don't just fail fast; fail smarter and learn faster.

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