I

n the business world, mistakes are often seen as something to be feared or shameful of. A costly black mark on someone’s career, or a reflection of incompetence.

And yet in entrepreneurship conferences, top leaders often share how their journey to success is a repeated story of trying to do something new — first, making mistakes, let’s call them errors — and then, crucially trying to improve.

Djoenaedi Joesoef, chairman of the board, PT Konimex, who was recognised as one of Indonesia’s top entrepreneurs by consulting group EY, once said that it is not a waste of time and energy when one learns from mistakes, seek solutions and dares to change things.

Prolific inventor Thomas Edison, regarded as the father or modern innovation, is quoted as saying: “I have not failed, I’ve just found 10,000 ways that don’t work.”

The message is clear: Learn from your mistakes.

However, the negative consequences of errors — for example, the aerial mishaps experienced by Malaysian Airlines and AirAsia — tend to gather the most attention.

Perhaps this emphasis on the negative is the reason why many firms focus exclusively on a policy of error prevention.

But almost all successful and ground-breaking innovations — from the light bulb to the post-it-note stickers — have a back story of errors that came before them.

Instead of emphasizing the eradicating of errors, the lesson for firms is to cultivate an operating culture, ways to reduce the negative consequences of errors and promote the positive — a process we call error management.

First, let us define what an error is.

In our case, we define errors as “action errors” — errors that are unintended deviations from plans or goals, as well as incorrect actions resulting from lack of knowledge.

My research on the impact of errors found that; on average, firms with a high error management culture see approximately 20 percent higher return on their assets than those who do not.

We should stress that errors should still be taken seriously and that error prevention is important.

While there are strong business benefits to accepting that errors will occur, we should still approach them in a pragmatic, open and constructive way.

Consider the example of an organizational culture demonstrated by this quote from a manager of a firm with low error management:

“I don’t want to discuss errors at length […] I indicated this shouldn’t happen again and that was the end of it.”

By allowing no room for discussion, there is no room for learning. Errors are seen as inherently bad and there is no incentive for the firm’s employees to try anything new.

The only real incentive is for staff to try to cover up errors — an outcome that not only blocks opportunity for learning but which also opens the way to further inefficiencies, like simply repeating the same error further down the line.

This can lead to what we call error cascades — a succession of spin-off errors, potentially even worse than the first, that sees one relatively small error quickly snowball into something larger and harder to manage.

In contrast then, consider this approach from a manager of a firm with high error management:

“I try to create an open atmosphere and tell people they should inform me if they have made a mistake, so that we can do something about it. We try to be open and discuss errors because we believe that is the only way to control damage.”

This position shows a culture that takes errors seriously, and yet is open, accepting and non-judgmental about them once they have occurred. It allows errors to be quickly identified, analyzed and recovered from, as well as providing an environment in which they can be discussed and learning extracted.

Moreover, firms following this approach can lay the groundwork for coming up with more and more radical innovations.

These would be impossible without making errors because the innovation process implies entering a new and therefore unknown environment.

Take the Post-It note stickers by 3M as an example. It was invented by accident. While trying to create super strong adhesives for use in the aerospace industry in building planes, an incredibly weak adhesive that is pressure sensitive was accidentally invented. This new product did not interest 3M top management and was shelved for five years until an employee, who kept on losing his song page markers, had the stroke of genius to use the adhesive to keep the slips of paper. The rest as they say is history.

Having a practice of error management in tandem with error prevention helps firms and individuals deal with unexpected events, show more initiative and behave more proactively. All of these are critical factors in improving productivity and profitability.

Perhaps top entrepreneurs’ way of learning from mistakes and moving forward is proof that error management has a place in the organizational culture. It may well provide firms with a unique competitive edge.
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The writer is professor of management & organization at the National University of Singapore Business School.