The launch of a team to prepare the newspaper to go 100 percent online is what kind of initiative?

Reprint: R1104B

Many executives believe that all failure is bad (although it usually provides lessons) and that learning from it is pretty straightforward. The author, a professor at Harvard Business School, thinks both beliefs are misguided. In organizational life, she says, some failures are inevitable and some are even good. And successful learning from failure is not simple: It requires context-specific strategies. But first leaders must understand how the blame game gets in the way and work to create an organizational culture in which employees feel safe admitting or reporting on failure.

Failures fall into three categories: preventable ones in predictable operations, which usually involve deviations from spec; unavoidable ones in complex systems, which may arise from unique combinations of needs, people, and problems; and intelligent ones at the frontier, where “good” failures occur quickly and on a small scale, providing the most valuable information.

Strong leadership can build a learning culture—one in which failures large and small are consistently reported and deeply analyzed, and opportunities to experiment are proactively sought. Executives commonly and understandably worry that taking a sympathetic stance toward failure will create an “anything goes” work environment. They should instead recognize that failure is inevitable in today’s complex work organizations.

The wisdom of learning from failure is incontrovertible. Yet organizations that do it well are extraordinarily rare. This gap is not due to a lack of commitment to learning. Managers in the vast majority of enterprises that I have studied over the past 20 years—pharmaceutical, financial services, product design, telecommunications, and construction companies; hospitals; and NASA’s space shuttle program, among others—genuinely wanted to help their organizations learn from failures to improve future performance. In some cases they and their teams had devoted many hours to after-action reviews, postmortems, and the like. But time after time I saw that these painstaking efforts led to no real change. The reason: Those managers were thinking about failure the wrong way.

A version of this article appeared in the April 2011 issue of Harvard Business Review.

Diversify your product line. Stick to your knitting. Hire a professional manager. Watch fixed costs. Those are some of the suggestions that entrepreneurs sort through as they try to get their ventures off the ground. Why all the conflicting advice? Because in a young company, all decisions are up for grabs.

Based on his observations of several hundred start-up ventures over eight years, Amar Bhidé has developed a three-step sequence of questions that all entrepreneurs must ask themselves in order to establish priorities among the vast array of opportunities and problems they face: What are my goals? Do I have the right strategy? Can I execute the strategy?

Before entrepreneurs can set goals for a business, they must articulate their personal goals. They may want, for instance, to attain a certain lifestyle, experiment with technology, or build an institution that can outlive them. Only when entrepreneurs decide what they want from their businesses can they determine what kind of company they must build, what they are willing to risk, and whether they have a well-defined strategy.

Great strategies, however, don’t guarantee great execution. A venture may fail if its founders do not hire the best people, attract capital, invest in organizational infrastructure, and shape a culture to suit the venture’s strategy.

Founders must also consider the evolution of their personal roles. Entrepreneurs cannot build self-sustaining companies simply by “letting go.” While they sketch out the future, entrepreneurs must manage as if the company were about to go under. They must continually acquire new skills—and continually ask themselves where they want to go and how they will get there.

Of the hundreds of thousands of business ventures launched each year, many never get off the ground. Others fizzle after spectacular rocket starts.

Why such dismal odds? Entrepreneurs—with their bias for action—often ignore ingredients essential to business success. These include a clear strategy, the right workforce talent, and organizational controls that spur performance without stifling employees’ initiative.

Moreover, no two ventures take the same path. Thus entrepreneurs can’t look to formulas to navigate the myriad choices arising as their enterprise evolves. A decision that’s right for one venture may prove disastrous for another.

How to chart a successful course for your venture? Bhide recommends asking yourself these questions:

• Where do I want to go? Consider your goals for the business: Do you want the rush that rapid growth delivers? A chance to experiment with new technology? Capital gains from selling a successful company?

• How will I get there? Is your strategy sound? Does it clarify what your company will and won’t do? Will it generate sufficient profits and growth?

• Can I do it? Do you have the right talent? Reliable sources of capital?

Improvisation takes a venture only so far. Successful entrepreneurs keep asking tough questions about where they want to go—and whether the track they’re on will take them there.

The Idea in Practice

A closer look at Bhide’s three questions:

Where Do I Want to Go?

To articulate your goals for the enterprise, clarify:

• What you want personally from your business: An outlet for artistic talent? A flexible lifestyle? The immortality of building an institution that embodies your values? Quick profits?

• The kind of enterprise required: For example, if you want to sell your business eventually, you’ll need to build a sustainable enterprise—one that can renew itself through changing generations of technology, employees, and customers. And you’ll need a company big enough to support an infrastructure that won’t require your daily intervention.

• Your risk tolerance: For example, building a sustainable business entails risky long-term bets—including trusting inexperienced employees, personally guaranteeing debt, and tolerating delayed payoffs. Are your goals worth the attendant risks?

How Will I Get There?

Successful strategies:

• Provide clear direction: Articulate the enterprise’s policies, geographic reach, capabilities, and decision-making framework—in concise terms that employees, investors, and customers can understand.

• Generate sufficient profits and growth: Ensure that your strategy will produce desired business results. For example, Mothers Work—which sells maternity clothing to professional women—took off only when its founder revised her strategy from mail order (which generated low profits owing to stiff competition) to retail stores.

• Serve the enterprise long-term: Anticipate future market saturation, intensified competition, and major technological change, then ensure that your strategy accommodates those future scenarios.

• Establish the right growth rate: Plan for a growth rate that will attract customers and capital without causing excessive stress for you and your employees.

Can I Do It?

A great strategy is worthless unless you can execute it. To do so, you’ll need the right:

• Resources: Augment your workforce with employees possessing the skills, knowledge, and values needed to implement your strategy. A strong workforce attracts customers and investment capital.

• Infrastructure: Establish the organizational systems needed to execute your strategy. For example, suppose you want to build a geographically dispersed business, grow rapidly, and eventually go public. In this case, you’ll need to invest heavily in mechanisms for delegating tasks, specializing job roles, forecasting and monitoring availability of funds, and maintaining financial records.

• Role flexibility: To grow your business, your role must shift from doing the “real work” to teaching others to do it, prescribing desired results, and managing the work environment.

Of the hundreds of thousands of business ventures that entrepreneurs launch every year, many never get off the ground. Others fizzle after spectacular rocket starts.

A version of this article appeared in the November–December 1996 issue of Harvard Business Review.