All human development has involved trial and error, making mistakes and then trying to improve. In business the trials that lead to successful innovation, new processes and better performance necessarily entail errors on the way. Error is an important part of the process.
In two recent articles on NUS Business School Think Business, Professor Michael Frese considers error and innovation, and offers six steps to an effective error management culture. Frese points out that, whereas mistakes or errors made in childhood are viewed as part of growing up and learning, in a business context errors are often seen as something to be feared, a shameful sign of incompetence, something entirely negative.
In some companies fear of the negative aspect of error becomes a phobia, causing an exclusive focus on error prevention policies. According to Frese rather than focus solely on eradicating errors, organizations should: “…embed within their culture ways to reduce the negative consequences of errors and enhance the positive - a process we call error management.”
In today’s fast changing business world innovation is a key to success; but the process of innovating new business models and processes is one inextricably linked to making errors. In fact several academic studies have shown that companies can learn more of business value from negative outcomes than positive ones.
Professor Frese’s comments are based many years of research: “…our findings show that on average firms we categorised as having high error management culture see approximately a 20 per cent higher return on their assets than those who do not.”
He offers six steps to developing an effective error management culture that can improve an organization's capacity for innovation:
Innovation processes are inherently contradictory and chaotic: Innovative processes are inherently error prone. There is so much information that is unclear – therefore, errors are frequent. Moreover, creative ideas sometimes appear by chance. Errors help this serendipity during the innovation process.
Experimentation is crucial for innovation: Since there is no prior knowledge of what constitutes a useful innovation, experimentation is necessary. Many experiments, of course, do not work out, but experimentation should be done methodically, rather than at random. This way necessary mistakes are made quickly, and their impact controlled.
Errors lead to exploration: Errors make people more aware of their actions and their environment, which can in turn spark exploration and lead to new areas of inquiry and innovations. E.g. the discovery of the – at the time surprising – effects of Viagra and penicillin came about as a result of action errors. It takes an open and prepared mind however to make the link, turning an accidental detection of a surprising phenomenon into an innovation. A closed mind that views errors as only negative, will simply discard the results and move on.
Entering uncharted territory raises the likelihood of errors: New ideas, innovative products or services implies entering new and unchartered territory. Inherent to this is that there will be less knowledge and therefore more errors are likely. Entrepreneurs in particular have to explore and improvise as they seek to build their business and connect with customers. Errors are the inevitable result.
Errors and creativity are related: Some creativity techniques such as brainstorming are precursors of error management. Brainstorming (whether done in groups or alone) begins with a phase in which one should voice whatever comes to mind—even if it is wrong. Only in the second phase of evaluation is the efficacy and usefulness of ideas put to the test. Such creativity techniques implicitly differentiate between errors and error consequences, allowing and enabling errors as important for creativity.
Error management is closely tied to performance ambidexterity: A firm or organization that is ambidextrous is one that is able to both experiment with new products while at the same time refining its existing products or services. This however requires an organizational culture that is open to and accepting of errors. It acknowledges that failures can instigate new ideas and increase the organization's strength to follow through on them, generating new products, services and methodologies that boost organizational performance.