Closing the Innovation Gap (Part 2)

From chapter one of Closing the Innovation Gap by guest author Judy Estrin

Risk

Failure is an inherent part of innovation. “When you start a project, you don’t know enough about the competition or customer needs. You haven’t developed the best ideas or the best technology,” says Curtis Carlson, CEO of SRI International, an independent non-profit R&D organization. “So it’s the nature of the game that in the beginning, most of what you’re going to do is going to be a failure.”

People need to trust that they will not be labeled as career flops if they have done their jobs well and understand why their ideas or projects did not succeed. Failures should not be personalized unless they result from poor execution or lack of effort. Aim for accountability without finger pointing and blame.

FedEx acquired a transportation company called Flying Tigers in 1989 as part of the company’s international expansion strategy. “We were very aggressive in Europe in the late 1980s and early 1990s, and got ahead of ourselves,” admits CEO Fred Smith. “We had to restructure those businesses, but we treated everyone fairly. You have to recognize that some things won’t work out. Then you’ve got to regroup and not shoot the people who made a valiant effort.” Instead, FedEx built out its Express Freighter network and narrowed its focus in Europe, which has become the company’s most profitable international market. By buying Flying Tigers, the company also acquired landing rights in Asia that are critical to its business worldwide.

An acceptance of failure as a necessary stepping-stone to success is an integral part of the culture of Silicon Valley. As a partner at Kleiner Perkins, one of the Valley’s major VC firms, Kevin Compton met with industry leaders from other countries who were visiting the Valley in hopes of learning the secrets of its entrepreneurial magic. He would try to communicate the Valley gestalt with a story. “You’re getting ready for your country’s version of Thanksgiving dinner with the family. You’re 32 years old, you have kids, and you’re going to your in-laws’ for dinner,” says Compton. “After working at your version of IBM for ten years, everything was going great. But all of a sudden you left that job to go to a high-profile startup that raised a whole bunch of money, and completely flamed out 18 months later. I would ask these guys, ‘Do you go to the family dinner?’ They would usually say no. And I would tell them that in Silicon Valley, not only do you go to dinner, but your brother-in-law comes up and gives you a high-five saying, ‘I wish I had the courage to do that.’ As a risk-taker, you got his attention. That’s in our DNA.”

The more successful you are, the more you have to lose, and the less likely you are to come up with disruptive innovation. But the failure to innovate often has a greater negative impact than the failure of innovation. The founders of Apple and FedEx, Steve Jobs and Fred Smith, have contrasting leadership styles and backgrounds, and are successful in completely different industries. But they share an eagerness to take bold yet calculated risks. Both survived very costly and public failures — Apple’s Lisa computer, FedEx’s ZapMail service — but that has not stopped them from pursuing grand new ideas with passion.

This segment is part 2 in the series : Closing the Innovation Gap
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