InformationWeek

Well, now it's time to add a new one: failure.

Speed to market, speed to serve customers, and speed to develop products mean great innovation must go hand in hand with a healthy dose of failure. For managers and employees to experiment, failure must be an option. In fast-paced economic environments, failure needs an exalted place.

"Rigor mortis sets in as companies grow larger," says Bob Nelson, author of 1001 Ways to Take Initiative at Work (Workman Publishing Co., 1999). "As we get successful, we fall to old routines and become fearful of trying new ways of doing things."

Tim Talbot, VP of technology management at PHH Vehicle Management Services in Hunt Valley, Md., understands the links between failure and innovation. Talbot encourages his team to "fail fast," learn the lessons, and move on to the next project. But with this culture of acceptable failure, what mistakes irk Talbot? That gradual, painful, slow-simmering failure that reveals itself fully about 18 months into a multimillion-dollar project. "If you're going to try something, try it and fail--fast," he says.

The necessity of failure is so ingrained in some companies that they strive to recognize practitioners. For instance, the IT department of Tandy Corp. in Fort Worth, Texas, uses a large toy gorilla as a traveling trophy that "recognizes" whoever has made the latest gaffe, says CIO Evelyn Follit.

PHH doesn't go that far. But the vehicle-fleet-management company encourages innovation by talking about acceptable risks and failures. Talbot recalls one idea PHH had been kicking around for a while: taking over the management of garages for customers such as government and utilities that did their own vehicle maintenance. PHH had customers in those industries that wanted this additional service, and the company already had software to track repair work on vehicles. That gave it the whiff of synergy that in many companies would have been enough to launch into the development of a new business and technology.

But PHH managers wanted to avoid long developments that might later go bust, so the marketing and IT groups needed to test the concept early. The key: both departments considered project feasibility at the same time. "We spent two weeks, and decided we weren't going to do it," Talbot says. "The entire market was the people who were already talking to us."

You don't have to be a billion-dollar company to corner the market on failure. Indeed, one could argue that startups need capital, ideas, people, and failure to thrive. And while an increasing number of large companies strive to emulate the flexibility and daring of the entrepreneurial startup, they're rarely prepared for the whipsaw changes in strategy and crippling technical setbacks many startups face.

RedCart Technologies Inc. knows that road well. In 1999, the San Francisco startup set out on three strategies as it tried to storm its way into the Internet retail market. CEO Nicolas Van Den Berg had a simple, compelling business model: RedCart developed and marketed technology to let an Internet shopper go from site to site, pile goods into a "RedCart" shopping basket, and check out only once.

Early last year, Van Den Berg tried to position RedCart as a service provider selling to portals that were promising a shopping experience. But demand from such customers proved lukewarm at best. So RedCart switched gears, and Van Den Berg decided last summer to become a destination site where a prospective shopper would start. RedCart linked to 35 retail sites, where users could shop and make purchases--and end up with one RedCart payment.

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