Failure as a management technique? A concept that challenges the German soul

Children learn by making mistakes. They learn by trying things out, testing them and crossing boundaries. If the boundary crossing is successful, new skills are acquired and knowledge gained that can be further tested and refined. Companies also have to learn. Especially in the immediate environment of a basic innovation, the ability to learn is a vital quality. And that means that management must also develop an attitude towards “mistakes” and the concept of “failure”. The difference between children and managers? Children make mistakes because they don’t know any better. Managers should know better. That’s why we pay them not to make mistakes. Sounds logical – and yet is fundamentally wrong. Mistakes are a necessary side effect of risks. And taking risks is a necessary side effect of entrepreneurship. Entrepreneurs who do not take risks are living dangerously.

Nevertheless, in the corporate context, learning from mistakes is quickly equated with failure. This principle permeates the company at all levels: The Supervisory Board monitors the Management Board in the interests of the shareholders and, in this function, sanctions mistakes; in the most serious cases, it even reacts by dismissing the Management Board. In production, the shift supervisor monitors the work performance of the employees on the assembly line. It also sanctions errors with the consequences provided for them. The dilemma and the underlying question already become apparent here: Which mistakes are good mistakes? Which failure is a good failure? When should failure be sanctioned and when should it be rewarded? It seems as if the evaluation of behavior is a question of context and the – occasionally strategic – argumentation that precedes failure. Context and strategic argument make the difference.

In theory, this sounds logical and understandable. But the extent to which we Germans lack confidence in learning from mistakes is shown by a population-representative study by the University of Hohenheim entitled “Good mistakes, bad mistakes. Although – or precisely because – there are many events and discussion formats at which failed founders talk about their experiences with failure – such as the Fuckup Nights Berlin – Germany is still a long way from a positive culture of failure.

The study surveyed 2,000 participants aged between 18 and 67. And at least a growing number of people are willing to say that they are positive about failures and that failed companies deserve a second chance. However, this seems to be an ethical rather than an economic point of view. When asked whether they themselves would enter into business relationships with failed companies, more than 40 percent of respondents answered that they would have reservations about a company that had already failed. A second chance? Let others put them away instead. The study examines which reasons for failure are accepted by the German population. Failure is most likely to be accepted if the reasons for it are beyond the company’s control – such as macroeconomic developments, overwhelming competition or rising prices for relevant production factors. The respondents were least understanding of founders and entrepreneurs who simply try things out. Taking arbitrary risks is hardly accepted by the German population.

The fact that ethical concerns play a role in mistakes becomes clear when you analyze more closely what the reasons for failure actually are: They are excuses – reasons that make one’s own failure excusable. A willingness to take risks, which from the outside cannot be interpreted as entrepreneurship but as arbitrariness or even negligence, is a far cry from confession and remorse. It does not justify forgiveness. No forgiveness, no second chance. The topic of failure cannot be viewed from an objective economic perspective. It is overloaded with subjective projections that stem from our own Christian-Western socialization. And that is a problem. Because this mindset runs deep. It is so deeply rooted in us that we find it difficult to argue against it, let alone act. Entrepreneurship as a term has positive connotations. Risk not. The fact that one needs the other is a dilemma that can only be resolved through successful entrepreneurship. What can a plea for failure, for the courage to fail – against all cultural and historical convictions – look like?

In the context of innovation, the failure of ideas and ventures is a necessity: companies need the courage to try out new things, to experiment, to test, to go through iteration stages in order to ultimately achieve a result that creates added value. There is no progress without risk and failure. Or to put it another way: without planned failure, progress becomes a matter of luck – and luck has not yet established itself as a management technique either. Mistakes and setbacks are a natural part of development processes. The Anglo-American management doctrine is of the opinion that those who do not make mistakes have not given themselves enough credit. Agile management methods, such as the lean startup method, have been propagating this tirelessly for years. Lectures and books on this topic are in great demand. (Also worth reading in this context is the article by David J. Blandwho reports on his experiences with the lean startup method). This shows that there is a willingness to re-evaluate the topic of “failure”. However, a necessary prerequisite for this is transparency and a comprehensible vision that is understood and shared by those who also share the risk. Those who can strategically justify their actions and meaningfully derive them from changing environmental variables lead, take action and are also allowed to fail: strategic argument and context have the power to encode failure ex ante as a case of success. However, this is only possible if the stakeholders of the failure are involved.

Back to the topic of “learning”. There is no learning without the willingness to have negative experiences. Especially in today’s world, managing a company’s learning curve is a key management and development task. A steep learning curve sometimes also means taking risks that are not always manageable down to the last consequence.

The fact that these modern views are difficult to anchor culturally may be partly due to the fact that a significant part of Germany’s prosperity is based on the establishment of companies in the industrial sector in the 1950s, which were supported by the economic upturn in Germany induced by foreign countries after the Second World War. For societies with great prosperity and a functioning economy, efficiency has always been a valuable asset and a central component of management practice. However, Chantell Illbury and Clem Sunter’s statement must be held against this: Success breeds failure. The digital age, with its ever shorter development cycles and high development speed, is forcing companies to rethink.

Developing a positive culture of failure takes time – especially in Germany. And the study also shows that Germany has made progress: the younger respondents aged between 18 and 39 already rate entrepreneurial failures far more positively than the older generation. The social rethink has already begun. And that is important. This is the only way to make the breeding ground for start-ups and innovations more fertile.