Kyle Zimmer from First Book, on their "Brick Wall Award"

From the New York Times Corner Office interview with Kyle Zimmer, CEO of First Book, a distributor of books to needy children:

Q. Let’s talk about hiring. What questions do you ask?

A. I’ll say, “Have you ever started anything? From the time you were little, did you invent anything? An organization? Did you start a club?” Then I’ll ask, “What was the hardest part of that? What about failure? Talk to me about failure.” I think that is really important, because if you’re pushing, you’re going to fail. If you’re pushing in whatever you’re doing, you’re going to fail way more than you succeed. It’s that old saying: “You can fail without ever succeeding, but you can’t succeed without ever failing.”

The culture we live in teaches us to fear failure, and I think that’s a huge mistake. When I look back over the history of our organization, the times we’ve been most creative were a result of the pressure of a failure or near failure.

So I’ll have people talk about that, and see if, in their narrative, they blame other people. Or do they have some degree of humility in what they maybe should have anticipated and didn’t? And what they would do differently? We try to detoxify that at First Book. Occasionally, we give out a Brick Wall Award for an idea that should have gone really well, but ended up crashing into a brick wall. It’s a way of saying, “It’s O.K., you did the thinking, and you gave it your best shot, and it crashed, but it was an honorable step.”

Q. What else?

A. I think that somebody with a sense of humor is really important, both directed at themselves and others.

I have learned that a sense of humor is essential for learning from mistakes. If you take yourself too seriously, you won't learn. Take it from someone who knows.

The Corner Office series, by Adam Bryant, is a great repository of mistake stories and thinking about learning from errors and failure. You can find links to more of these columns here. Bryant has also adapted this material into a book, called The Corner Office: Indispensable and Unexpected Lessons from CEOs on How to Lead and Succeed.

Video: View of failure in the startup world

A great 3 1/2 minute video from the New York Tech Meetup #startupstories. Entrepreneurs and investors talk about the impossibility of getting it right the first time, and the need to iterate to find a successful path when you start a new venture. Thanks to Fred Wilson for sharing it:

John Waters: it's a thrill not knowing where life is taking you

John Waters, the film director, recently embarked on an 8-day hitchhiking journey across the US, as profiled by Dave Itzkoff in the New York Times. An excerpt:

If, as you travel the nation’s highways, you spot a hitchhiker with a wiry build, a pencil mustache and a mischievous look in his eyes, you may not wish to pick up this person. Unless, of course, you are certain it is the cult filmmaker John Waters, thumbing his way across the country in search of material for a new book....

On a trip that Mr. Waters said took him eight days and about 15 hitchhiked rides to get him from one end of the country to the other, he has accumulated numerous anecdotes for a book he has tentatively titled “Carsick” and which will be published by Farrar, Straus & Giroux.

But more crucially, he said this journey has taught him that it can sometimes be thrilling to not know where life is taking you.

“My life is so over-scheduled, what will happen if I give up control?” Mr. Waters said by phone from San Francisco, where he was safe, sound and still surging with adrenaline....

Before setting off alone from his Baltimore home on May 14, Mr. Waters said, he wrote preliminary chapters for his book, describing the very best and the very worst fictional hitchhiking experiences he could imagine....

Instead, Mr. Waters enjoyed many best-case scenarios. On May 16, he was picked up on a stretch of Interstate 70 in Ohio by the rock group Here We Go Magic, whose members could not quite believe that they spotted him by an exit ramp.

This is a kind of deliberate mistake. Waters overturned his conventional (well, perhaps unconventional) thinking, and gave up control. As he did so, he exposed himself to new experiences and, yes, thrills. Waters's adventure has some resonance with an article I recently wrote for The 99 Percent, "Tripping Into Terra Incognita: How Mistakes Take Us To New Places."

Harvard president Drew Gilpin Faust: Harvard freshmen should "embrace risk and even failure"

Harvard President Drew Gilpin Faust, as quoted in the New York Times Book Review:

Is there any book you wish all incoming freshmen at Harvard would read?

Kathryn Schulz’s “Being Wrong” advocates doubt as a skill and praises error as the foundation of wisdom. Her book would reinforce my encouragement of Harvard’s accomplished and successful freshmen to embrace risk and even failure.

You can find a collection of posts about Kathryn Schultz's work here.

Small-business owner Linda Kelly: what she would do differently? Go bigger

From an interview with Laura Kelly in the New York Times You're The Boss blog. Kelly is founder and owner of The Handwork Studio, a kids' needle arts and fashion studio near Philadelphia.

Q. If you were starting all over again, what would you do differently?

A. I would pick a business with bigger returns. Working 12 hours a day are the same 12 hours whether you are dealing with sales of thousands or millions.

JP Morgan Chase CEO Dimon on mistakes leading to $5B trading loss

Monica Langley of The Wall Street Journal offers a deeply researched behind-the-scenes look at the events leading up to JP Morgan Chase's historic trading loss, and its aftermath. Dimon's perspective is fascinating, and to his credit he is pretty clear-eyed about the mistakes made and his involvement in them. Some excerpts:

"The big lesson I learned: Don't get complacent despite a successful track record," Mr. Dimon said in an interview Wednesday. "No one or no unit can get a free pass."...

The stakes are high. Mr. Dimon personally approved the concept behind the disastrous trades, according to people familiar with the matter. But he didn't monitor how they were executed, triggering some resentment among other business chiefs who say the activities of their units are routinely and vigorously scrutinized....

One fascinating theme here is the bank's losing sight of the original mission of the hedging operation:

That year he named Chase executive Ina Drew to head of the Chief Investment Office, or CIO. The unit was responsible for taking charge of the bank's overall risks, and for managing what is now $360 billion of safe, highly liquid securities. Ms. Drew hired Achilles Macris the next year to oversee trading in London, and the CIO group began to expand into riskier derivatives, instruments that derive their value from an underlying financial index or product.

Blessed by Mr. Dimon, the activity originally was designed to provide an economic hedge for the bank's other holdings, executives say. It expanded, particularly after J.P. Morgan in 2008 bought troubled lender Washington Mutual, which held riskier securities and assets that required hedging.

In recent years, some of the group's trading morphed into what essentially amounted to big directional bets, and its profits and clout grew. Last year, Mr. Macris dropped risk-control caps that had required traders to exit positions when their losses exceeded $20 million. Ms. Drew and Mr. Macris declined to comment.

Hedging risky positions (investing some money in a counter-scenario to offset the worst case scenario of certain investments - excellent definition here via Wikipedia) "morphed" into a profit center. The hedges made so much money that they became positions of their own and lost their identity as hedges. This, of course, creates the possibility of a worst case in the other direction, which is what happened to JP Morgan Chase in this situation.

The whole idea of "clout" for a hedge is highly dangerous. A hedge should be dependent on the primary investment you're trying to secure; it shouldn't have any clout.

Hedges are wonderful tools if used rationally. JP Morgan demonstrates, again, that it is impossible to separate investments from the humans that control and depend on them.

Jay Goltz - lessons from hiring & firing 8 production managers

Jay Goltz is a seasoned entrepreneur who in his spare time writes for the You're The Boss blog in the New York Times. In this post, Goltz talks about his long-ago struggles to find a suitable production manager for his custom-frame shop in Chicago.

I was recently talking to a friend of mine who is struggling to find a production manager to run his small factory. The conversation brought back painful memories of my own struggles, many years ago, to find someone to oversee my factory.

At the time, I was trying to delegate so I could move on to working on the business instead of in the business. These were not the good, old days. I was in my early 30s, and the company was growing quickly, perhaps too quickly. Things were out of control. I worked long hours, had constant problems, was stressed out all day — and I was going through production managers the way Elizabeth Taylor went through husbands.

In one four-year period, I went through eight. Their tenures lasted anywhere from three weeks to a year. Believe me, as I write this, it sounds as nuts to me as I’m sure it does to you. But I learned three very important lessons that turned the situation around completely — and I do mean completely. My current production manager has been with me for more than 15 years, and his predecessor was here for five years. My factory is a well-oiled machine, and I do very little of the oiling....

[After trying and failing with the eight prior production managers], I spent a lot more time looking for the right person and checking references (which is not a waste of time). I spent months training him. I continued to manage. And it worked. So here are the three lessons:

1. Hiring. I was very bad at it. I was young and naïve, and I didn’t understand that a custom-order factory like mine is very different from a widget factory. If you don’t have the right person, it isn’t going to work. And you might have to go through 200 résumés to find the right person.

2. Training. I thought that I could hire the person, point in the right direction, and move on to other things. I was not delegating, I was relegating — giving it away. A smart consultant summed it up for me accurately: “Jay, you are hiring a production manager, and you think you’re hiring a C.E.O. He needs to be managed.” Voilà.

3. Tenacity. After every one of my missteps, I wondered whether it was possible to do what I was attempting to do. Most frame shops are run by the owner. Maybe what I was trying to do could not be done. But if you fall off the horse, you really do have to get right back on. Let me repeat. I did this eight times. (O.K., truth to tell, it was really 10 times. I just don’t remember anything worth saying about two of them.)

Goltz is a little hard on himself - he also writes this: "I wish someone would have told me [how to hire better] — but that’s the nature of entrepreneurship. We’re always reinventing the wheel." The truth is, in any position of leadership, and especially as the head of a business, you will find yourself in a position where you have to learn from your mistakes. Even if someone tells you what you should do, you won't really learn until you dive in yourself, make your own decisions, and your own mistakes.

You can find a collection of hiring mistake stories here.

My favorite interview question

I have done more than one hundred interviews over the past five years. [You can find a bunch of them here.] My idol is Terry Gross, and I modeled my style on hers. I try to be prepared, curious, and to listen carefully to what my subject is saying.

I have found that there is one question that has led to more interesting and insightful responses than any other question by far. It is this:

"Is there anything else you'd like to tell me?"

You can't ask this question straightaway; for me it comes last. But as long as the earlier questions have resonated, this last one is almost sure to draw out some great thinking.

I was interviewing the customer of an e- commerce client once, and wrapped up a 30-minute interview with this question. He paused a few moments to think, & then spent the next 45 minutes laying out a number of concerns he had with the client's systems. At the end of his answer, he said, "Thanks for asking."

If you ever need to interview a colleague, customer or family member, don't forget to ask this question.

[And, if you have a mistake story or two to share, and you'd like to experience my interviewing style first-hand, email us at mistakebank (at) caddellinsightgroup (dot) com.]

Renny Gleeson: the 404 error page is an opportunity to engage with users

In this TED talk, Renny Gleeson discusses the HTML 404 error (page not found), and how companies have creatively designed their version of this error page to build connection with their users. Says Gleeson, "A simple mistake should remind me of why I love you."

"Teaming" Day 5: Final Thoughts

This is the last in our weeklong series of posts on "Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy," by Amy Edmondson.

I will wrap up our week by highlighting some of the best quotes in "Teaming." I've added a couple of editorial comments in [square brackets]:

When facing an uncertain path forward, trying something that fails, then figuring our what works instead, is the very essence of good performance. Great performance, however, is trying something that fails, figuring out what works instead, and telling your colleagues all about it - about both the success and the failure. (pp 29-30)

Despite rhetoric to the contrary, many of us still expect ourselves and others to get things right the first time. We view failures as unacceptable. We give directives to those below, and look for direction from supervisors above. (p 40)

When people frame a task as a "performance situation" they are more risk averse and less willing to persist through obstacles than when the same task is framed as a "learning situation." Not only do people adopting a learning frame persist longer in unfamiliar, challenging tasks, but they ultimately learn more as a result. In addition, people with a performance frame engage in less experimentation and innovation and are less likely to formulate new strategies in difficult situations. Instead they're more likely to fall back on ineffective strategies they have used previously. (p 86)

To learn from mistakes and missteps, organizations must employ new and better ways to go beyond lessons that are superficial (procedures weren't followed) or self-serving (the market just wasn't ready for our great new product). This requires jettisoning old cultural beliefs and stereotypical notions of success and replacing them with a new paradigm that recognizes that some failures are inevitable in today's complex work organizations and that successful organizations will be those that catch, correct, and learn from failures quickly. (p 150)

People tend to be more comfortable considering evidence that supports what they believe, denying responsibility for failures, and attributing problems to others. (p 155)

The difference between failures that are truly blameworthy and those that are simply treated as blameworthy reveals a gap between logic and practice. [I would add that it reveals a gap between a person's vision, or what she hopes to be true, and raw reality.] (p 160)

Engineers' or scientists' intuition can be telling them for weeks that a project has fatal flaws, but making the formal decision to call it a failure may be delayed for months. Considerable resources are saved when such projects are stopped in a timely way and people are freed up to explore the next potential innovation. [I've experienced this in business-to-business sales environments. The declaration of a loss can take weeks or months, chewing up resources all the while.] (p 174)

Most of us would prefer to have reliable solutions to the problems we face, and we certainly like to feel that we are good at what we do. But execution-as-learning requires us to accept our individual and collective fallibility. (p 225)

You can find all our posts related to "Teaming" here.

"Teaming" Day 4: Varying reasons for failure

This is the fourth in our weeklong series of posts on "Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy," by Amy Edmondson.

Blame and fault-finding is as old as humanity. We learn this early in life: "It wasn't my fault. They did it!" For mistakes in the workplace, the context of the situation matters a great deal when deciding whether an unexpected result is, in Amy Edmondson's words, "praiseworthy" or "blameworthy." She describes a spectrum of situations that explain failures, spanning from ... to ... Here's the list of reasons for failure, from most blameworthy to highly praiseworthy. Items in quotes are taken from Edmondson's description.

Deviance - failure due to not following prescribed procedures is a cause for reprimand, discipline, or firing.

Inattention - "inadvertent deviation" from specifications. This sometimes happens to me when I forget to attend a conference call I'd committed to. Blameworthy!

Lack of Ability - failure due to lack of skills, training, etc. Blame here rests partially on the worker, and partially on management, who need to assess and verify ability on an ongoing basis.

Task Challenge - failure due to the inherent difficulty of a task. Failing to get a hit in baseball seven out of ten times is simply a facet of the game.

Process Complexity - a breakdown in a system due to "novel interactions." Not blameworthy, in fact workers need to be encouraged to report these types of failures, so the novel interactions can be diagnosed and training developed to overcome the new obstacle.

Uncertainty - failure due to circumstances unforeseen at the time an action was taken. This type of failure happens often when there is a long lag between action and outcome. For example, locking in the price of next year's natural gas supply, and then seeing prices fall dramatically. Failures due to uncertainty are reason to evaluate how decisions are made and whether steps can be taken to manage uncertainty or its consequences. (People who succeed in an uncertain environment get undue credit. This discussion by Daniel Kahneman on stock-pickers addresses this point.)

Hypothesis Testing - "an experiment conducted to prove that an idea or a design will succeed or fail." Whether the hypothesis is proven or disproven, you've gained valuable information as a basis for higher-stakes decisions.

Exploratory Testing - an attempt to probe and understand a novel area. Many of these attempts will fail, but even a small percentage of successes will yield large rewards. Praiseworthy!

This quote was cited in an earlier post, but it's worth repeating when talking about how to assess whether someone should be blamed or praised for a failure:

When I ask executives to...estimate what percentage of failures in their organizations are caused by blameworthy events, the answers usually come back between 2 and 5 percent. But when I then ask what percentage of failures are treated as if caused by blameworthy events, after a pause or laugh, their responses often yield a much higher number in the 70-90 percent range.

You can find all our posts related to "Teaming" here.

"Teaming" Day 3: Three Types of Failure

This is our third post on Amy Edmondson's "Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy."

Chapter 5 is called "Failing Better to Succeed Faster" and it's full of wonderful insights about learning from mistakes. Amy defines three types of failure so well and so crisply that I won't paraphrase the definitions, but will quote them directly:

• Preventable Failures: process deviations in well-understood domains, usually caused by behavior, skill or support deficits. 

• Complex Failures: process or system breakdowns that arise due to inherent uncertainty and may or may not be identified in time to prevent consequential accidents.

• Intelligent Failures: the unsuccessful trials that occur as part of thoughtful experiments and provide valuable new information or data.

Of these three, complex may be the most difficult to manage. In routine environments, preventable failures should be easy to spot and to diagnose. In innovative environments, tolerance for failure is built in. In complex environments, however, deviation from expectations could be a "near miss" that could lead to a "consequential accident." It could be valuable information about a change in the environment. It might be an anomaly, due to events out of your control. How do you learn and improve in complex operations?

When reviewing these types of failures, first, don't blame individuals. Second, don't jump to the first explanation that springs to mind. [Quote from "Teaming": "The primary danger in failure analysis is that people tend to leap prematurely to conclusions, unless the analysis emphasizes a careful consideration of all possible causes and effects."] Finally, take ownership of the failure by looking at things you and your team can do differently when confronted with a similar situation in the future.

Here's a real example. I was involved on a sales campaign with a large customer. We crafted a very innovative solution for them. The team at the customer was very confident in our capabilities and had justified this project. We had negotiated price, and contractual points. Finally, only one more signature was needed by a customer executive.

He did not sign.

We who had worked on the opportunity were crestfallen. We had done everything we could to win this deal, and had nothing to show for it. Our first reaction was to chalk the failure up to bad luck, or fate, or even an evil, conniving customer executive plotting to screw us.

But as we reflected on the situation, it became clear that we had not done everything we could have. We had not fully understood who at the customer could make a commitment for this business. And we hadn't gotten in contact with that person to see if this project helped him with his objectives, or whether there were other projects he felt more passionate about. So, the learning was this: the next time we engaged on a sales campaign, we would, as early as possible, understand who would sign the contract and assess how to enlist that person's support. And if we couldn't enlist that support, consider stopping the pursuit.

You can find all our posts related to "Teaming" here.

"Teaming" Day 2 - The Process Knowledge Spectrum

This is another post on "Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy," by Amy Edmondson.

One concept in the book is the "Process Knowledge Spectrum." This spectrum describes three broad types of business operations that require different approaches to learning and tolerances for mistakes. It runs from Routine Operations through Complex Operations and to Innovative Operations on the other pole.

Routine Operations are business processes that are well-defined and for which conformance to specification is crucial. A McDonald's hamburger is made the same way worldwide. Mistakes in this environment are unexpected and due to inability or unwillingness to following procedure. Learning in this environment involves observing and noting small changes that can improve outcomes. The classic learning environment for Routine Operations is the Toyota Production System.

Complex Operations happen over and over again, but never exactly the same way twice. For example, customer service interactions or sales engagements. The people involved are different, the context has changed, and the environment has evolved. So the idea of "best practice" as used in routine operations is not applicable. (This hasn't stopped many organizations from trying unsuccessfully to make it so, but that's a subject for another post.) Mistakes in this complex operations often indicate, as Amy points out, system breakdowns. They can also indicate weak signals of change in the environment. They are rarely the fault of an individual, and treating them as such has a very negative side effect - it promotes hiding of mistakes, and, therefore, hiding the system breakdown or weak signal that is vital for learning and improvement.

Examples of Innovative Operations are development of a brand-new product or starting up a new business venture. In these operations, much is unknown, and only by developing hypotheses, probing and experimenting can learning occur. Innovators are often unperturbed by mistakes, and in fact welcome them. (Consider this quote from a famous innovator, Thomas Edison: "Negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t.")

Uncertainty increases along the Process Knowledge Spectrum, from low uncertainty in Routine Operations to very high uncertainty in Innovative Operations. That amount of uncertainty indicates the usefulness of standard practice and the predictability of outcomes. In innovative projects, outcomes are highly unpredictable, experimentation is important and tolerance for failure needs to be high.

This spectrum is very useful in analyzing mistakes. If you are involved in a project in which the result is not what you expect, think about which of the above definitions fits the project best. Is it routine, complex or innovative? Knowing this will help you understand how to deal with the mistake and how to manage for mistakes going forward.

You can find all our posts related to "Teaming" here.

Amy Edmondson's "Teaming"

I'm so delighted that Amy Edmondson has published "Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy," a summation of her 20-year study of organizational learning & performance. Amy's ideas provide one of the pillars for this site and have helped shape my thoughts about perfectionism, leadership and teamwork.

I'm equally delighted that the book is utterly worthy of the expectations I had for it. Impeccably organized and crisply written, it sets out Amy's arguments so cleanly that you forget how radical her ideas are. At least, until you read something like this:

When I ask executives to...estimate what percentage of failures in their organizations are caused by blameworthy events, the answers usually come back between 2 and 5 percent. But when I then ask what percentage of failures are treated as if caused by blameworthy events, after a pause or laugh, their responses often yield a much higher number in the 70-90 percent range.

If you are looking for an introduction to the ideas we're exploring on The Mistake Bank, please read Chapter 5, "Failing Better to Learn Faster," several times. And then all the other chapters.

We'll spend the rest of the week sharing a few of the countless valuable nuggets from "Teaming." Expect it to be on our year-end "best of" list.

A full collection of posts related to Amy Edmondson's work can be found here.

Glen de Vries: "When you think everything is lost, don't give up"

This story is from Glen de Vries, President of Medidata Solutions, as told to Patricia Olsen in the New York Times:

Eight years ago we were giving a sales presentation to a California company. The first day, everything went well. The second day, one of our employees spilled an enormous cup of coffee on the chief information officer. Then our software wouldn’t work. I thought we’d blown it. Our head of sales asked what we could do to salvage that meeting. Ballroom dancing teaches you to be confident, not arrogant, and we took that approach. We decided to act as if things had gone well and we were on the way to winning their business.

We told the group we’d had a bad day, but if they could see us at our best we were sure they’d like us. We sent them everything they needed to create and simulate a clinical trial. After using the system, they were sold. They ended up being our biggest customer. The lesson is that when you think everything is lost, that’s the time to not give up.

Charlie Crystle audio story: deciding when to step down from your company

This story is from Charlie Crystle, who founded Chilisoft, a web infrastructure provider which in 1999 was sold to Cobalt Networks for $70 million. He and two partners later started Mission Research, which offers low-cost business software to support nonprofits.

Among other activities related to the startup ecosystem in Central PA, Charlie has founded a group of tech CEOs, Startup Lancaster, that meets monthly to socialize and discuss interests and experiences in the startup world.

In this brief story, Charlie shares the difficult process to decide to step down from a company you've founded. It's a situation ripe for mistakes, because there are so many ways to get it wrong - doing it too late, or too early, or when the core issue is really something else entirely.

Charlie Crystle on when to step down (3:14) [Right-click to download]

Rita Gunther McGrath: On being late for my own session at the World Economic Forum

Rita Gunther McGrath is the co-author of the seminal innovation book "Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity" and was #19 on the 2011 Thinkers50 list of top business scholars. She contributed this story from an early experience visiting the World Economic Forum in Davos, Switzerland.

Davos is this little ski town with one primary street which I have subsequently learned only supports efficient transportation in ONE direction. I had decided to go to a "Philanthrocapitalism" luncheon which featured Bill Gates, Tony Blair, Bill Clinton, Mohammed Yunus and Richard Branson (I mean, who wouldn't???). The hotel the lunch was at was at one end of the town and my session was at the other.

Not being familiar with the layout, I was advised by the hotel concierge to take a bus to get back to my hotel. What I hadn't realized is that the bus back has to go along a side-windy path that takes you all over the place and incidentally picks up and drops off all kinds of other riders, even if their locations are out of the way. I'd allowed double the time they said it would take, and the minutes were ticking....ticking...

Add to that the fact that every hotel and facility in the town has intense security, and you can imagine my anxiety.

It got worse. And worse.

By the time I was lined up at security to get into the conference area (it's like going through the airport) and had not YET gotten through security at the hotel or made my way to the 3rd floor seminar room my session was in...well, you can imagine the state I was in!

Fortunately, I called my helpful liaison at the World Economic Forum who moved heaven and earth to make things happen and I hit the room with only ten minutes gone. So much for fixing my lipstick and hair, it was right into business.

The session blessedly went well and my participants were fantastic about it.

Lessons learned:

• If the stakes are high, do a dry run. 

• Don't take well meaning advice from hotel concierges. 

• Walk if feasible; taxi if not. Life is too short to spend on buses.

Urban Outfitters apologizes for web outage, with kittens!

Urban Outfitters ran an online sale this week which they promoted with an email blast (see below).

During the sale, their website crashed. And to their credit, the company sent another email out apologizing for the outage, and adding free shipping. If I had tried to order something that day and was unable to, this email would have made me feel better:

This is evidence that you can turn a negative into a positive with some humility and a sense of humor. A deal-sweetener doesn't hurt either.

Thanks to the Listrak Email Marketing blog, which posted on this (and from which I got the screenshots).

From "Reverse Innovation": PepsiCo India's experience of trial and error

The new book "Reverse Innovation: Create Far From Home, Win Everywhere" by Vijay Govindarajan and Chris Trimble, describes the phenomenon of new products being born in emerging markets, with radically different value propositions and price points, and spreading to developed markets. This approach is the reverse of the traditional model for Western companies, which create (expensive) products at home, and then adapt them to developing markets.

This excerpt describes some of PepsiCo India's experience developing a new snack cracker named Aliva. It beautifully highlights the inevitability of mistakes when you are trying something new, and that persistently pushing through and learning from those mistakes are hallmarks of a successful product launch.

From its inception to its 2009 launch, the Aliva project took nearly four years. Aliva was evaluated against criteria that took full account of potential uncertainties. Such latitude was indispensable. Aliva had to make its way through a predictably fraught gestation. There were plenty of bumps in the road, and plenty to learn on the way.

Aliva's most vexing challenge was its packaging. Packages are hugely important to snack food performance. If snacks had remained in the era of the general-store cracker barrel, great branding opportunities would never have materialized. Aliva's packaging needed to be as distinctive as the shape of the cracker. The packaging had to communicate that Aliva was both healthy and fun. Decisions about the package would have implications for Aliva's texture and shape, the way the cracker was produced (through baking), and the attractiveness of the offering at the point of sale.

The Aliva bag featured a number of innovations. [Program manager Vidur] Vyas claims that nothing like it had ever been tried before. It was to be made from new materials on brand-new - and untested - machinery. The bag was designed to be flat on the bottom. Unlike typical snack bags in the United States, it could stand up straight on a retail shelf, tabletop, or counter. The packaging material was therefore heavier and stiffer than conventional plastic film. It turned out that a more rugged package could actually be made using only two laminate layers, not three. This solution was both more cost-effective and environmentally friendly.

The package specifications needed to address certain constraints of local infrastructure. It often took a long time to distribute perishable goods through a vast, predominantly rural retail network. Crackers can spoil more quickly than other types of snacks. Aliva therefore had to be protected from spoilage as well as breakage. A rugged, lightproof, hermetic package was key.

Vyas and his team endured a perfect storm of complications on the way to satisfying these needs. Because the Aliva bag was a first-of-its-kind package design, it seemed that every element of the package's structure and manufacture either had to be invented or endlessly troubleshot. To start with, the new packaging machinery was touchy. In limited test runs, things seemed fine. But once Aliva launched, in May 2009, problems cropped up during production-scale runs, particularly with the heat seal at the top of the bag. So, new material had to be designed. This required help from squadrons of global experts on polymers and lamination technologies.

There were nettlesome challenges on other fronts as well. Because Aliva would rely on a new baking system, which had only recently been used for the first time to produce cookies in PepsiCo's Mexico region, Vyas's team needed time and technical guidance to learn how to operate it reliably.

Finally, the team aspired to create a cracker in an eccentric triangular shape. The cracker's unique design was considered an important aspect of the values the brand would communicate. The triangle shape was meant to connote speed, stimulation, and taste. The triangle's curved edges were meant to connote health. At first, however, the crackers suffered unacceptable levels of breakage. Coming up with a workable version - a cracker with a low rate of breakage and a pleasing combination of textures - required innumerable trials.

But if Aliva's journey to market had an unusual share of difficulties, that is only because it was forging entirely new paths in a number of areas. To its credit, PepsiCo patiently tolerated a high degree of necessary experimentation... with packaging, with the baking system, and with the architecture of the cracker itself. (pp 167-168)

From "Reverse Innovation: Create Far From Home, Win Everywhere," by Vijay Govindarajan and Chris Trimble. Published by Harvard Business Review Press. Excerpted by permission.

Daniel Kahneman: It's "more enjoyable to identify the mistakes of others"

More wisdom on mistakes and self-knowledge from one of the best books of 2011, Daniel Kahneman's "Thinking, Fast and Slow":

It is much easier, as well as far more enjoyable, to identify and label the mistakes of others than to recognize our own. Questioning what we believe and want is difficult at the best of times, and especially difficult when we most need to do it, but we can benefit from the informed opinions of others.

Part of what I'm trying to figure out here is if we can make it a little easier to look inside ourselves, to get a better idea of what we "believe and want," so we can make better decisions and sidestep avoidable mistakes. Another objective is to get us to think about how to make better mistakes, so that given our difficulty in truly knowing what drives us, we can find that out by trial and error with lower cost to ourselves and others. Finally, by sharing others' mistakes, I hope you can learn more about your own situations and maybe take that learning into account in your own decision-making.

Check out the complete collection of our Kahneman-related posts.

TerraCycle's Tom Szaky makes a tough decision

An undertone of this project is decision-making. Each decision point is an opportunity to make a mistake. Avoiding decisions are mistakes in themselves. Yet in a complex environment there is no playbook for assuring a decision leads to a good outcome.

It's rare to get a peek into someone else's significant decision-making process, so kudos to TerraCycle CEO Tom Szaky, who discussed a key business decision in the New York Times "You're The Boss" blog this week.

TerraCycle has been trying to add a new type of business to its existing one - collecting juice pouches and remanufacturing them into consumer goods such as purses. In this case, the juice companies (such as Capri Sun) subsidize TerraCycle's costs for collection. The new business (called World of Waste, or W.O.W.) involves engaging consumers to cover the costs to collect and recycle other products for which the manufacturers aren't willing to pay TerraCycle to collect.

Enhancing TerraCycle's information systems to support this new model has caused delays in the program's introduction. Those delays are the subject of Szaky's post. I was most interested in the section where he talked about the management debate between investing in enhancing the existing juice pouch business model versus adding this new, quite different model:

I have made a firm decision that W.O.W. will not be delayed again. Not everyone on my senior management team agreed with this decision. The essence of our debate was whether we should spend all of our resources building our existing infrastructure (which is proven but dependent on one source of funding, our brand partners) or whether we should take three or four months and improve our I.T. infrastructure so that it can handle the new demands of W.O.W. (with a new system, W.O.W. would allow us to receive funds directly from consumers and thereby diversify our revenue). Of course, W.O.W., if it works, would not start generating real revenue until 2013, because we would not be able to introduce it, at best, until late in the third quarter of this year.

The arguments on both sides are compelling and logical. On the one had, it makes sense to strengthen a proven business model and have it immediately generate more revenue, which can in turn help drive our ability to invest further in the company. On the other hand, adding a new revenue generator and a major extension of our offerings could open us up to new customers and bring a big new revenue opportunity.

So far, my experience in business (which admittedly is limited, given that I’m 30) has taught me that taking such gambles is a worthwhile endeavor — even if the odds are against you. I have also found that in such moments it is difficult to make decisions that everyone on the team will support. Perhaps this is why most organizations have a leader and are not run by committee.

Dialogue, debate, decide, fall in line. This is a classic decision process. As Szaky says, there is a leader so these hard decisions can be made. And when he says "taking such gambles is a worthwhile endeavor - even if the odds are against you," he is saying that the bold decision energizes the team and makes it work like crazy to make the decision successful. (For more on this point, check out my article on The 99 Percent.)

Lyndon Johnson biographer Robert Caro finds his career-long theme via a mistake

This is from the New York Times profile of Robert Caro, written by Charles McGrath, published in advance of Caro's fourth volume in his monumental biography of Lyndon Johnson, "The Passage of Power: The Years of Lyndon Johnson." McGrath's article points out that many turning points in Caro's career came as a result of mistakes:

There was never a plan," Caro said to me, explaining how he had become a historian and biographer. "There was just a series of mistakes."

In the following excerpt, McGrath explains how Caro first became interested in the subject of getting and wielding political power, a theme that he has carried through five massive books over more than 40 years of writing:

In order to marry, Caro needed a job. The Times offered him one as a copyboy for a salary that he now recalls as "something like $37.50 a week." The New Brunswick Daily Home News and Sunday Times offered him $52 a week to be a reporter, and Caro took it. Another mistake, except that it led to an early lesson in power politics. The paper's chief political writer was on leave to work for the Democratic Party in Middlesex County during an election. When he became ill, Caro took his place. He wrote speeches and did P.R. for one of the party bosses. On Election Day he rode around with this man to the polling places, and at one point they came upon the police loading some black people into a patrol wagon. "One of the cops explained that the black poll watchers had been giving them some trouble, but they had it under control," Caro recalled. "I still think about it. It wasn't the roughness of the police that made such an impression. It was the - meekness isn't the right word - the acceptance of those people of what was happening. I just wanted to get out of that car, and as soon as he stopped, I did. He never called me again. He must have known how I felt."

The fascination and revulsion Caro found in that scene, in the privileges and unwritten rules of power, made a lifelong mark. Soon after that, Caro fixated on the behind-the-scenes opoerator Robert Moses, initiator of many 20th century New York public works projects (Triborough Bridge, Lincoln Tunnel, Cross Bronx Expressway, etc., etc.). That led to Caro's first book, "The Power Broker: Robert Moses and the Fall of New York" (winner of the Pulitzer Prize), and, then to his 40-year study of another power broker, Lyndon Johnson.

Entrepreneur Randy Minchew: listen to what the numbers tell you or else

Entrepreneur Randy Minchew posted on the My Venture Pad blog some lessons he has learned from his own mistakes ("Mistakes From Past Ventures I Won't Be Making Again"). Here's a taste:

Lesson 1: Respect the numbers.

I used to rely on my intuition too much when it came to pulling the trigger on a deal. What I found was that, while my intuition is great for helping me employ the right people, it’s not enough to make financial decisions.

A great example was when I started a restaurant. My wife (and business partner) told me that, based on the startup costs, our new restaurant would have to serve 800 people a day in order to make a profit. I promptly told her to stop being negative and explained that I had a gut feeling that we could make it work. The business went bankrupt in two years. I now have a great respect for the numbers (and others’ input!).

Minchew also offered some advice for others, which I wholeheartedly agree with:

People make mistakes in many of their everyday ventures; it happens. The important part is applying the lessons that you learn from these mistakes and considering them in future initiatives. And while you’re at it, don’t be ashamed to share them with others. You might save them from sharing in the same frustrations.

The act of sharing mistakes with others so they can learn is one of the main points of this site. Thanks, Randy, for sharing yours.

You can read his entire post here.

Mistake stories come alive when we discuss them

Recently, my wife and I were driving south to visit family, and on the drive we listened to the "This American Life" episode featuring the retraction of the Apple Foxconn story (which we discussed in an earlier post).

There's a lot going on in the story - the role of journalism, journalism versus theater, telling truth versus fiction. The episode took an hour, and then for the next hour or hour and a half, my wife and I talked about the story - what it meant to us, what we thought about it. The heroes and villains, and what really was our perspective on all these actions. After that, I had a much deeper understanding of the story and my reaction to it than if I had listened to it alone.

I think that's an important lesson for anyone who wants to learn from others' mistakes: you can get even more out of them and maybe substantially more if you share them with others. Because it is in discussion that we make sense of complex and ambiguous situations that frequently come up in business, in life and certainly around the issues of making mistakes and failure. Absorb these stories, share them, discuss them. Come to your own conclusions, and please share your comments on the site; it helps all of us get a bit smarter.

Thinking you can emulate Instagram is a mistake

Amid all the hype this week over Instagram's acquisition by Facebook for a cool $1 billion, it's worth pointing out the following. Your business will not be able to take advantage of many of the factors that enabled this 12-person company (12 people!) to quickly gain 30 million users and the attention of the biggest social software dog on the planet. Those factors include impeccable timing and a specialty (mobile) that fit a particular weakness of its acquirer.

You'd be better off scrutinizing failed ventures for things that their leadership actively did that you would not want to emulate. Sidestepping avoidable mistakes gives you a chance to succeed, at least modestly, with virtually any business. The difference between a modest success and a blockbuster will, for the most part, depend on things that are part of your environment or conditions peculiar to the time. They don't call it "catching lightning in a bottle" for nothing.

One feature of Instagram's leadership that I do think is instructive is their ability to nimbly adjust their product as they got feedback from users on where the market was headed. That's a habit we all could use to emulate.