There’s a rousing scene in Ron Howard’s 1995 movie ‘Apollo 13’ in which Ed Harris plays the role of Gene Kranz, NASA’s Flight Director, working desperately with his team to figure out how to bring the flight crew home safely following the explosion of a service module. Emotions are running high. American lives are at risk. The team are discussing never-before-attempted scenarios to get their boys home, against all the odds. At the conclusion of the conversation, Gene Kranz galvanises his team with a solemn statement, “failure is not an option.”
These are bold words.
And they seem to capture the very essence of resilience: never failing.
We frequently hear these words repeated in the world of business – sometimes in an abbreviated form through the acronym, ‘FNAO’. Failure is to be avoided at all cost. Processes must be robust. Methodologies must be tried-and-tested. Certainty must be delivered. Resilience must be guaranteed.
The problem is that none of this is actually true. Gene Kranz never uttered those words. They were dreamed up by the movie’s scriptwriters, following a conversation with Flight Controller Jerry Bostick in which he explained:
When bad things happened, we just calmly laid out all the options, and failure was not one of them. We never panicked, and we never gave up on finding a solution.
There’s a big difference between stating that ‘failure is not an option’ and the more reasonable approach to problem-solving described above. FNAO is used by businesses to communicate a zero-tolerance approach to failure. This suggests that sources of failure should be eradicated and that any instances of failure should be seen as a source of shame for the business, potentially prompting an inquiry into who is to blame and signalling subsequent unemployment for the poor soul who didn’t get the FNAO memo. But sound bites from Tom Hanks movies rarely translate into sensible management principles. Business life is not a box of chocolates. Jerry Bostick’s summary of NASA’s approach to making decisions in a crisis seems altogether more positive than FNAO: when bad things happen, don’t let failure distract you from identifying positive strategies for success. Failure is inevitable. Promoting a fear of making mistakes won’t stop them from happening. At best, it makes people risk-averse. At worst, it stifles good decision-making and encourages people to cover up cracks until they become too large to paper over.
Lack of failure comes at a significant cost: lack of innovation. And innovation is vital for resilience. Of the original 1955 Fortune 500 companies, only 66 remain on the list today – a drop-off rate of over 7 companies each year. This rate is increasing: only 283 of the current list were Fortune 500 companies ten years ago – a drop-off rate of over 21 companies a year over the past decade. Cursory analysis of the companies that have disappeared reveals some common themes. Some companies – Dynegy, Enron, MCI WorldCom, Lehman Brothers – belong to a rogue’s gallery of businesses that have failed to act with integrity. A second group includes companies such as Motorola, Northwest Airlines, Gateway and Levi Strauss that have failed to anticipate smartphones, low-cost airlines, build-to-order direct computer manufacture and the rise of fast fashion, respectively. The surviving 66 companies are some of the world’s most relentless innovators: IBM, General Electric, Procter & Gamble, Pfizer, DuPont and 3M to name just a few.
It’s extremely difficult to launch new propositions or to introduce new ways of working without taking a leap into the unknown. Companies like GE, DuPont and 3M have all experienced failure, but failure at these companies is regarded as an opportunity to learn. Failing itself is not a crime, but failing to learn certainly is. People in these companies aren’t punished for pushing boundaries to unlock new opportunities for growth. Failure is most healthily regarded as a harsh but valuable lesson in resilience. In the process of developing a commercially viable lightbulb, Thomas Edison is reputed to have created 10,000 unsuccessful prototypes. I’m willing to bet he didn’t celebrate each time. But he did learn from each disappointment:
“I have not failed 10,000 times. I have not failed once. I have succeeded in proving that those 10,000 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”
These words echo the pragmatic approach to failure avoidance described by Jerry Bostick. Setbacks and disappointments are both painful and inevitable in the course of trying out new ways of doing business. We can admire people like Thomas Edison because he failed systematically: failing, learning and then trying something different; never repeating the same mistake twice; persisting with the system until he had achieved his goal.
These stories demonstrate that resilience is as much a cultural phenomenon as a structural issue. A strong company requires a strong culture.
But what does a strong culture actually look like?
In a 2007 paper titled ‘Creating and Sustaining a Winning Culture’ three Bain & Company partners shared the results of a worldwide survey of 1,200 senior executives, 91% of whom agreed that “culture is as important as strategy for business success.” The article stresses the importance of creating cultural alignment. In the first place, this means working with senior management to create a “single voice” for the entire organisation. In the second place, this involves aligning “hard drivers” such as organisational structure, talent management systems and incentives to make sure the culture is embedded for the long-term.
None of this seems controversial. Strong cultural alignment results in a more harmonious working environment and helps to co-ordinate employee behaviour and decision-making. Management theorists prefer the tool of culture to a formal system of rules because it is a more positive way to inspire behaviour, rather than overtly seeking to control it. Rules also rob employees of their ability to take responsibility for their actions, whereas culture places the onus on individuals to be accountable for their own decisions and actions. Harmony, it seems, is best achieved through the exercise of “soft power”.
But is harmony really such a good thing? Is agreement more valuable to a business than disagreement? And does strong culture really require such a high level of consensus? The Bain report also quotes an interesting statistic from another of its studies: 81% of executives agree that a company without a winning culture is “doomed to mediocrity”. Mediocrity isn’t something any business aspires to. It’s something that businesses allow to happen. And it is frequently the result of an over-emphasis on harmony and consensus in decision-making. Part of the reason is that people often only pretend to agree with one-another. Harmony is a seductive idea in theory, but in practice it relies on a combination of indifference, surrender, submission to authority and compromise. None of these is an attribute of effective or brave decision-making. Compromise in particular is a sure fire route to mediocrity. Intelligent people are more likely than not to disagree on important issues. It is far better to encourage open discussion of their different views than to compel consensus. The Bain partners’ conclusions are particularly striking given the culture of Bain & Company itself. According to the company’s own website, “we seek multiple points of view to ensure that we have the best answers for our clients. An open mind to new information helps us improve our ideas.”
So much for the importance of a “single voice”.
The surviving members of the original 1955 Fortune 500 have demonstrated a wonderful knack for resilience. In 1955, Thomas J. Watson Jr. was three years into his presidency and only just beginning to refocus the business from a manufacturer of measurement and tabulation machines toward the development and commercialisation of electronic computer technology. And he understood how important it was to encourage people to challenge the status quo within a business. He coined the term “wild ducks” to describe employees who don’t fit in with the prevailing culture of the company. He saw these employees as a “priceless ingredient” for IBM. The term “wild duck” comes from a parable by Danish philosopher Soren Kierkegaard:
‘With his mates, a wild duck was flying in the Springtime northward across Europe. During the flight he came down in a Danish barnyard where there were tame ducks. He ate of their corn and liked it. He stayed for an hour – then for a day – then a week – then a month – and finally, because he relished the good fare and the safety of a barnyard, he stayed all summer. Then one Autumn day when the flock of wild ducks was winging its way southward again, it passed over the barnyard and their mate heard their cries. His breast stirred with a great thrill of joy and delight, and with a great flapping of wings, he rose in the air to join his old comrades in their flight but he found that his good fare had made him fat and his muscles so soft and flabby that he could no longer rise higher than the eaves of the barn. So he dropped back into the barnyard and said to himself, “Oh, well, my life is safe here and the food is good.” But, alas, he was not safe from the man who fed him, for he later discovered that he was being fattened for the kill.’
The moral of the story for Watson was that you can make a wild duck tame, but once tamed, the duck can never become wild again. He also took to heart the point that a tame duck will never go anywhere. A retired IBM employee described Watson’s emphasis on “wild ducks” in a letter to the New York Times in 1989:
‘I first heard it in the mid-1960’s when I was a young I.B.M.’er in N.Y. Thomas J. Watson Jr., then chairman, was speaking to employees in a telephone broadcast. Here is the part about wildfowl: ”I talk a lot around here about wild ducks, and people kid me a good deal about my wild ducks. But it takes a few wild ducks to make any business go, because if you don’t have the fellows with the new ideas willing to buck the managerial trends and shock them into doing something new and better, if you don’t have those kind of people, the business pretty well slows down. So I would tell a 21-year-old I.B.M.’er what I’ve told a lot of 21-year-old college people . . . that is, that the priceless ingredient that a youngster has when he starts in business is that sense of not compromising beyond a certain point.’
Enlightened organisations promote dissent and diversity of opinion as sources of resilience. PayPal is one such company. Setup after a chance meeting at Stanford University, Peter Thiel and Max Levchin created their first mobile wallet proposition in 1998, which evolved into PayPal in 1999. From the beginning, PayPal’s founders were preoccupied with fostering a culture that was strong but by no means orthodox or harmonious. Their belief was that the talent of individuals should not be held back by consensus or alignment. The organisation was antipathetic to meetings – gatherings of more than four people were viewed with caution and subject to immediate adjournment if they weren’t deemed to be productive. Disruptive behaviour was required, not discouraged.
David Sacks was PayPal’s Chief Operating Officer and subsequently founded Yammer in 2008. In a 2011 interview with the New York Times, Sacks discussed the importance of a democratic culture, where internal dissent is encouraged:
‘I think you’ve got to create a culture in which dissent is valued. And there’s probably a lot of ways to set that tone. Certainly you can tell if you’ve got a culture of dissent when you walk into a company. People can figure out very quickly whether dissent is encouraged or whether it’s actually something that’s not welcome.
‘It’s a red flag to me if there’s just too much consensus and not enough dissent. I feel like in any human community there’s always dissent because people just disagree. Anytime there doesn’t appear to be dissent, it means that the corporate culture has just shifted way too much toward consensus. That means the leadership just doesn’t welcome dissent enough.’
Encouraging dissent is a way of letting employees know that management is curious about and willing to act upon their opinion. The people who work for you are as well placed as anybody to identify when your strategy isn’t up to scratch. The corollary of demonstrating this curiosity is that employees are in turn encouraged to be interested in their business and what it can achieve. Cultural strength isn’t measured by the level of agreement achieved within a company; it is measured by an ability to accommodate different people and opinions without falling over. Inviting dissent provides an opportunity to stress test how resilient your company is, from the perspective of the people who are simultaneously most capable of identifying issues and resolving them.
What do these stories tell us about the nature of resilience? Firstly, that it is about far more than mere failure avoidance. Fear of failure is a sign of weakness, not a source of strength. Failure is not optional: it is inescapable for a company that hopes to adapt to change. Joseph Schumpeter coined the paradoxical term “creative destruction” to describe the messy process through which economies evolve. Resilient businesses evolve by challenging themselves to find new and better ways of working. It is the absence of such challenge that dooms a company to mediocrity and, ultimately, to failure. Perhaps Schumpeter would have called this “creative dissent.”