black box thining

Failure, RTCs, iteration and grit will lead to success

fast failure 

I always hated the notion of “fail fast” in the context of startups. The whole purpose of starting a business is not to fail. I understand the sentiment. You need to fail to learn. We work with a lot of innovation directors, and the standard question is the size of the failure fund. How much money are you allowed to lose?

Failure is the new black

Failure is the new black. “Brilliant Mistakes” paved the way and now every business book has at least one chapter about failure. But the real learning is in the lessons from failure. “Black Box thinking” is about that. Starting with using the difference in attitude to failure between the medical sector and the airline industry.

Avoid hospitals

After reading “Black box thinking”, you will avoid hospitals like the plague. The plague might be less risky.

  • A million patients are injured by errors during hospital treatment in America alone. 120,000 die immediately. 400,000 die prematurely. That is the equivalent of two jumbo jets falling out of the sky every twenty-four hours.
  • The full death toll due to avoidable errors in American healthcare is more than half a million people per year. Think about this. That is a 1,000 preventable deaths per day and 10,000 preventable complications per day.
  • One in every ten patients is killed or injured as a consequence of medical error or institutional shortcomings. French healthcare put the number even higher at 14 percent.
  • It is estimated that 44 to 66 serious injuries occur per 10,000 hospital visits. In a different study of 800 patient records in three leading hospitals, researchers found more than 350 medical errors.
  • The average patient can expect between one and two medication errors during every hospital stay.

Evasion at industrial level

However, half of the hospitals were reporting fewer than 5 cases of injury per 10,000 hospital visits. That is evasion at an industrial level. Which means that most of the errors remain unreported and are not analysed. There is no issue log or extreme transparency as applied in Bridgewater. The opposite. So we keep on dying in hospitals. Learning nothing.

The cost of those medical errors

The cost of medical error has been conservatively estimated at more than $17 billion in the US alone. As of March 2015, the NHS Litigation Authority had set aside £26.1 billion to cover outstanding negligence liabilities. If hospitals were airlines……

Failure is essential for success

A progressive attitude to failure turns out to be a cornerstone of success for any institution. Only by redefining failure will we unleash progress, creativity and resilience. Creating systems and cultures that enable organisations to learn from errors, rather than being threatened by them.

Get the full picture

The first is that you have to take into account all the data, including the data you cannot immediately see if you are going to learn from adverse incidents. If we edit out failure, if we reframe our mistakes, we are effectively destroying one of the most precious learning opportunities that exist.

Our defence mechanisms

We have an amazing arsenal of ways to deal with failure and avoid the truth:

  • Self-justification and the need to retain our self-image. Lying to oneself destroys the very possibility of learning.
  • Cognitive dissonance. We tend to become more entrenched in our beliefs.
  • Loss aversion, we hate to crystallise a loss.
  • Intuition. Our intuitions about what works are often wrong.
  • Self-handicapping. This is where the excuse is not cobbled together after the event but actively engineered beforehand.  So terrified of underperforming and create an alternative explanation for possible failure.
  • Selection bias. When we are presented with evidence that challenges our deeply held beliefs, we tend to reject the evidence or shoot the messenger rather than amend our beliefs.
  • Narrative fallacy, our propensity to create stories about what we see after the event. We are so eager to impose patterns upon what we see, so hardwired to provide explanations, that we are capable of explaining opposite outcomes with the same cause without noticing the inconsistency. We are going to trust our hunches, our existing knowledge, and the stories that we tell ourselves about the problems we face, rather than testing our assumptions, seeing their flaws, and learning.
  • Blaming. Blame undermines the information vital for meaningful adaptation. It obscures the complexity of our world, deluding us into thinking we understand our environment when we should be learning from it.
  • Memory, it turns out, is not as reliable as we think. We do not encode high-definition movies of our experiences and then access them at will. Memory is a system dispersed throughout the brain and is subject to all sorts of biases. We often assemble fragments of entirely different experiences and weave them together into what seems like a coherent whole. With each recollection, we engage in editing. That is why 75% of wrongful convictions are due to mistaken eyewitness identification.

Our legal system

The legal system is another sector where we refuse to learn from mistakes. For example, if cases were assessed by a judge just after he had eaten breakfast, the prisoner had a 65 percent chance of getting parole. But as time passed through the morning, and the judges got hungry, the chances of parole gradually diminished to zero. Only after the judges had taken a break to eat did the odds shoot back up to 65 percent, only to decrease back to zero over the course of the afternoon. The judges were oblivious to this astonishing bias in their deliberations.

Systems that learn from failure

All systems that learn from failure have a distinctive structure, one that can be found in many places, including the natural world, artificial intelligence and science.

Evolution

Evolution is a process that relies on a ‘failure test’ called natural selection. Organisms with greater ‘fitness’ survive and reproduce, with their offspring inheriting their genes subject to a random process known as mutation.There are many systems in the world that are essentially evolutionary by nature. Indeed, many of the greatest thinkers of the last two centuries favoured free market systems because they mimic the process of biological change.

Bankruptcy

The equivalent of natural selection in a market system is bankruptcy. Without the benefit of a valid test, the system is plagued by rigidity. In markets, on the other hand, it is the thousands of little failures that lubricate and, in a sense, guide the system. When companies go under, other entrepreneurs learn from these mistakes, the system creates new ideas, and consumers ultimately benefit.

Antifragile

In “Antifragile”, Nassim Nicholas Taleb shows how the linear model is wrong (or, at best, misleading) in everything from cybernetics, to derivatives, to medicine, to the jet engine. The problems were often too complex to solve theoretically, or via a blueprint, or in the seminar room. They were solved by failing, learning and failing again.

AI

Humans can only search three or so moves per second. Deep Blue could search 200-million moves per second. The software that enabled it to learn from error was sophisticated, but its main strength was that it didn’t need to sleep, so could practise all the time. In other words, it had the opportunity to fail more often.

Simplification

It turns out, however, that there is a profound obstacle to testing, a barrier that prevents many of us from harnessing the upsides of the evolutionary process. It can be summarised simply, although the ramifications are surprisingly deep. We are hardwired to think that the world is simpler than it really is. And if the world is simple, why bother to conduct tests?

3M

In its early days, 3M, the technology conglomerate, relied on a team of product developers for new ideas. They would brainstorm, think deeply, and then when they had developed completed products, they would show them to end users to see how they reacted. It seemed like a rational process – but it was too slow. In the mid-1990s they transformed their approach by bringing early adopters into the design process itself. They asked them to try early prototypes, observed them as they used the products, noticed what they liked and what they didn’t. This enabled them to test their assumptions again and again.

A study published in 2002 found that using the active user strategy to identify and develop ideas generated an average of $146 million after five years, more than eight times higher than the average project developed using traditional, in-house 3M idea-generation methods.

Expectation levels

The problem today is that we still operate with a ballistic model of success. The idea is that once you’ve identified a target (creating a new website, designing a new product, improving a political outcome), you come up with a really clever strategy designed to hit the bullseye.

Smoking

Take a policy as simple as reducing the dangers of smoking by cutting tar and nicotine in cigarettes. It sounds great in theory, particularly when used in conjunction with a clever marketing campaign. It looks like a ballistic strategy perfectly designed to hit an important public health target. But when this idea was implemented in practice, it failed. Smokers compensated for the lack of nicotine by smoking more cigarettes and taking longer and deeper drags. The net result was an increase in carcinogens and carbon monoxide.

The target moves

And this is why it is difficult to formulate an effective strategy from on high, via a blueprint. The second problem is even more elemental. By the time you have designed the rifle, let alone pulled the trigger, the target will have moved. This is the problem of a rapidly changing world. Just look at how IT products are becoming obsolete even before they roll off the production line. This kind of rapid change is only likely to accelerate.

Learning = strategy

In the coming decades, success will not just be about intelligence and talent. These things are important, but they should never overshadow the significance of identifying where one’s strategy is going wrong and evolving. Has your company failed that often, and been honest enough to admit it? Has your school? Has your government department? If they haven’t, you are likely to be off target.

Test!

We should conduct tests, understanding what is working and what isn’t, and learning. Instead of trusting in a narrative, we should be wielding the power of the evolutionary mechanism.

More randomised control trials (RTCs)

We need more randomised control trials. After all, how can you learn from failure if you are not sure you have failed? Many areas of government have not been tested in any form whatsoever. They are based on a hunch, gut feel and narrative. The same is true of many areas outside government. We are effectively flying blind, without much of a clue as to what really works, and what doesn’t. It is quite scary.

Google

As of 2010, Google was carrying out 12,000 RCTs every year. This is an astonishing amount of experimentation, and it means that Google clocks up thousands of little failures. According to Google UK’s managing director, Dan Cobley, the colour-switch generated $200 million in additional annual revenue.

Capital One

Capital One, They have turned the company into a scientific laboratory where every decision about product design, marketing, channels of communication, credit lines, customer selection, collection policies and cross-selling decisions could be subjected to systematic testing and using thousands of experiments.  Capital One now executes more RCTs than all other kinds of institutions combined. It is one of the biggest changes in their corporate practice for a generation. You should follow.

Mindset

But a willingness to test assumptions is ultimately about a mindset. It is about intellectual honesty and a readiness to learn when one fails. Seen in this way, it is relevant to any business. In fact to almost any problem.

Marginal gains

It is all about marginal gains. Marginal gains, as a philosophy, absolutely depends on the ability to detect and learn from small, often latent weaknesses.

Break it down

The approach comes from the idea that if you break down a big goal into small parts, and then improve on each of them, you will deliver a huge increase when you put them all together. As a philosophy, marginal gains has become one of the hottest concepts not just in sport, but beyond.

By breaking a big problem into smaller parts, it is easier to cut through narrative fallacies. You fail more, but you learn more. Having a grand strategy was futile on its own. You also have to look at a smaller level, figure out what is working and what isn’t. Each step may be small, but the aggregation can be huge.

Marginal gains are not about making small changes and hoping they fly.  It is about breaking down a big problem into small parts in order to rigorously establish what works and what doesn’t. Clear feedback is the cornerstone of improvement.

Sky

The marginal gains mentality has pervaded the entire Team Sky mindset. They make sure that the cyclists sleep on the same mattress each night to deliver a marginal gain in sleep quality; that the rooms are vacuumed before they arrive at each new hotel, to deliver a marginal gain in reduced infection; that the clothes are washed with skin-friendly detergent, a marginal gain in comfort.

They use the first test not to improve the strategy, but to create richer feedback. Only when they have a deeper understanding of all the relevant data do they start to iterate. ‘You improve your data set before you begin to improve your final function; what you are doing is ensuring that you have understood what you didn’t initially understand,’

Mercedes

Mercedes clocks up literally thousands of tiny failures. As Toto Wolff, the charismatic executive director of the team put it: ‘We make sure we know where we are going wrong, so we can get things right.Mercedes see weaknesses with a different set of eyes. Every error, every flaw, every failure, however small, is a marginal gain in disguise.F1 is an unusual environment because you have incredibly intelligent people driven by the desire to win,’ he said. ‘The ambition spurs rapid innovation. Things from just two years ago seem antique. Standing still is tantamount to extinction.’

There are limitations to marginal gains. Often in business, technology and life, progress is not about small, well-delivered steps, but creative leaps.  The deepest and most overlooked truth is that innovation cannot happen without failure. Indeed, the aversion to failure is the single largest obstacle to creative change, not just in business but beyond.

Creativity is hard work

People think of creativity as a mystical process. The idea is that creative insights emerge from the ether, through pure contemplation. Something that happens to people, normally geniuses. But this could not be more wrong. Creativity is something that has to be worked on, and it has specific characteristics.

Dyson

Dyson has applied for more than four thousand patents. Dyson is an evangelist for the creative process of change, not least because he believes it is fundamentally misconceived in the world today. A number of things jump out about the Dyson story.

Creativity is a response

The first is that the solution seems rather obvious in hindsight. That is often the case with innovation.The creative process started with a problem, what you might even call a failure, in the existing technology. Moreover, he would have had no intellectual challenge to sink his teeth into. Creativity is, in many respects, a response. This aspect of the creative process, the fact that it emerges in response to a particular difficulty, has spawned its own terminology. It is called the ‘problem phase’ of innovation.

Creativity needs a problem

That is perhaps why creativity seems so ethereal. The idea is that such insights could happen anytime, anywhere. It is just a matter of sitting back and letting them flow. But this leaves out an indispensable feature of creativity. Without a problem, without a failure, without a flaw, without frustration, innovation has nothing to latch on to. It loses its pivot.

Creativity needs debate

You need debate.  The encouragement of debate – and even criticism if warranted appears to stimulate more creative ideas. And cultures that permit and even encourage such expression of differing viewpoints may stimulate the most innovation.’

Put the baby in the boxing ring

Imagination is not fragile. “The science of serendipity” calls it putting a baby in the boxing ring. It feeds off flaws, difficulties and problems. Insulating ourselves from failures – whether, via brainstorming guidelines, the familiar cultural taboo on criticism or the influence of cognitive dissonance is to rob one of our most valuable mental faculties of fuel.

Creativity needs contradictions and mistakes

Contradictory information jars, in much the same way that error jars. It encourages us to engage in a new way. We start to reach beyond our usual thought processes (why would you think differently when things are going just as expected?). When someone shouts out the wrong colour, our conventional mental operations are disrupted. That is when we find associations, connections, which might never have occurred to us.

Creativity needs synthesis

The act of creativity was an act, above all, of synthesis. Much of the literature on creativity focuses on how to trigger these moments of innovative synthesis. The first is when we are switching off: having a shower, going for a walk, sipping a cold beer, daydreaming.

Creativity needs dissent

The other type of environment where creative moments often happen, as we have seen, is when we are being sparked by the dissent of others.And this helps to explain why cities are so creative, why atriums are important; in fact why any environment which allows disparate people, and therefore ideas, to bump into each other, is so conducive. They facilitate the association of diverse ideas and bring people face to face with dissent and criticism. All help to ignite creativity.

Creativity needs context

Innovation is highly context-dependent. It is a response to a particular problem at a particular time and place. Take away the context, and you remove both the spur to innovation and its raw material.

The myth of the idea

The eureka moment is not the endpoint of innovation. It is the start of perhaps the most fascinating stage of all.  In all, it took an astonishing 5,127 prototypes before Dyson believed the technology was ready to go in the vacuum cleaner. The creative leap may have been a crucial and precious thing, but it was only the start of the creative process. The real hard yards were done patiently evolving the design via bottom-up iteration. Read “The myth of the idea

Disciplined focus

Creativity, then, has a dual aspect. Insight often requires taking a step back and seeing the big picture. It is about drawing together disparate ideas. It is the art of connection. But to make a creative insight work requires disciplined focus. What was the key ingredient that characterised the winners, the companies that may not have come up with an idea first, but who made it work? The answer can be conveyed in one word: discipline.

Operating excellence

Winners require innovation and discipline, the imagination to see the big picture and the focus to perceive the very small. ‘When you marry operating excellence with innovation, you multiply the value of your creativity.

Iteration

It takes around twelve thousand storyboard drawings to make one ninety-minute feature, and because of the iterative process, story teams often create more than 125,000 storyboards by the time the film is delivered.

In fact, iteration is vital for both. It is not an optional extra; it is an indispensable aspect of the creative process. To spark the imagination and take our insights to their fullest expression, we should not insulate ourselves from failure. We should engage with it.

Interplay

It is an interplay between the practical and the theoretical, between top-down and bottom-up, between creativity and discipline, between the small picture and the big picture.

Culture

The crucial point – and the one that is most dramatically overlooked in our culture – is that in all these things, failure is a blessing, not a curse. And learning from those mistakes. It is about organisational culture in general. When we are dealing with complexity, blaming without proper analysis is one of the most common as well as one of the most perilous things an organisation can do. When a culture is fair and transparent, on the other hand, it bolsters the adaptive process.

The attitude to failure

When we are testing assumptions, we are pushing out the frontiers of our knowledge about what works and what doesn’t. Penalising these mistakes has a simple outcome: it destroys innovation and enlightened risk-taking. The evolutionary process cannot function without information about what is working, and what isn’t.  One of the problems in our culture is that success is positioned as something that happens quickly. But success in the real world rarely happens in this way. It demands a willingness to strive and persevere through difficulties and challenges.

Grit

James Dyson worked his way through 5,127 prototypes while his competitors didn’t get through the first 100, not because he was more intelligent, but because he was more gritty and resilient.

It is hard work

And this is really the point. A growth-orientated culture is not a happy-clappy, wishy-washy, we-are-all-winners approach to business or life. It is a cutting-edge approach to organisational psychology based upon the most basic scientific principle of all: we progress fastest when we face up to failure – and learn from it. When we see failure in a new light, success becomes a new and exhilarating concept.

The rally cry

We need to create a revolution in the way we think about failure. We have to conceptualise it not as dirty and embarrassing, but as bracing and educative. We should harness the incalculable potency of the evolutionary mechanism.

If mistakes and failure are used with an eye to context and are fused with a growth-orientated mindset, they set the stage for an endlessly powerful process: cumulative adaptation. Learning from failure expresses a profound moral purpose. It is about saving, sustaining and enhancing human life.

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