How to Build a Company Culture That Fosters Innovation and Embraces Failure
Failure is a common experience, and history shows that it’s often key to major breakthroughs. When we experiment, failure becomes a possible outcome, but it’s also essential for innovation. The real question is: When failure happens, does your company just fix the problem, or does it learn from the experience and apply those lessons in the future? More importantly, does your company allow room for failure as part of its culture? In this article, we’ll explore what a culture that embraces failure looks like, the difference between failure and mistakes, and how to create a culture that not only tolerates failure but also benefits from it.
What Is a Culture of Innovation and Failure?
Unlike solely relying on tried-and-true solutions, a company that encourages innovation allows its people the time and freedom to find new, better ways of doing things. It never assumes that the current way is the best forever. This kind of culture is always questioning the status quo, asking, “Why do we do things this way?”
In addition to metrics like ROI and customer satisfaction, companies that encourage failure also value learning and experimentation. Employees are asked to reflect on challenges, how they overcome them if so, and share what they’ve learned from them.
In this type of company, failure isn’t something to be swept under the rug. Leaders openly discuss their own failures, showing how those setbacks shaped the organization for the better. This openness, from the CEO down to the managers, creates an environment where failure is seen as part of the journey to success.
Failure vs. Mistakes
It’s important to distinguish between failures and mistakes. Failure happens when someone tries something they believe could work, but it doesn’t. Mistakes, on the other hand, are often due to neglect, poor judgment, or doing something wrong. Failure leads to learning and adaptation, helping individuals and teams improve. Mistakes, depending on their severity, might need to be addressed with training or other corrective measures.
Key Principles of a Culture That Embraces Failure
Whilst not being an exhaustive list, here are some key principles that guide a company culture where failure is part of its growth:
Leading by Example
Leaders should share their own experiences with failure and encourage their teams to try new approaches, even if they don’t always work. Employees look to management to understand what’s acceptable, and failure should be on that list.
Follow Up & Learnings
After a failure, it’s important to not only solve the immediate problem but also apply what’s been learned to future situations or departments. Teams and all stakeholders involved or affected should discuss how they’ll handle similar challenges if, and when, they arise again.
Encourage Problem-Solving
Employees should be encouraged to come up with potential solutions when presenting problems. While managers can guide the process, they shouldn’t be the ones solving every issue themselves.
Promote Transparency
In an open culture, people feel comfortable talking about their failures and how they overcame them. Sharing these experiences encourages others to take risks, knowing they won’t be penalized for failing. Transparency is also about trade-offs. Sometimes failure happens because of limited resources – time, money, people. Ask after each failure what were the compromises, how they made those decisions, and what would they do differently give a new opportunity.
Fail Fast
Encourage employees to test new ideas quickly, in the early stages. If something isn’t going to work, it’s better to find out sooner rather than later. This way, they can adjust or move on before investing too much time or other resources in the idea.
Simulate & Test
When practical, new ideas should be tested in a simulated environment or with real possible users. Whether it’s a situational or production-based simulation, it gives teams the confidence to experiment, fail, and iterate faster.
Eliminate Penalties
Failure should be accepted and encouraged without drama or penalties. Even a small reprimand can discourage innovation. A blame-free culture builds trust and makes room for genuine experimentation.
Learning from Others: Companies That Weathered Failure
Target
In 2013, Target experienced a massive security breach, compromising 40 million credit and debit card details. The incident cost the company over $100 million in settlements, and the CEO resigned in 2014. However, Target used this failure to strengthen its security systems, becoming a leader in threat intelligence. Instead of quietly fixing the issue, Target was transparent and invested in long-term improvements, turning failure into a learning opportunity
British Airways
In May 2017, British Airways canceled all flights from two major London airports, affecting over 75,000 travelers. The cause was human error—a contractor had accidentally turned off a critical power supply. While it’s tempting to blame individuals, British Airways’ failure was rooted in the design of its systems. In a culture that embraces failure, such issues are seen as opportunities for systemic improvement, not personal fault.
In July 2019, Facebook experienced a glitch that caused photos to appear blank on Facebook, Instagram, Messenger, and WhatsApp. During routine maintenance, an issue was accidentally triggered, but the company quickly fixed the problem and communicated transparently throughout the process. Their timely response and clear communication turned what could have been a major issue into a manageable one.
Lusha
Lusha, a tool for sales teams, has been struggling with technical issues that remain unresolved, despite repeated contact with their support team. This kind of failure—focusing on sales without delivering on service—demonstrates the risks of ignoring customer needs. A culture that embraces failure doesn’t just focus on selling but also listens, responds, and improves based on customer feedback.
Final Thoughts
Creating a culture that encourages failure is not easy, and there’s no one-size-fits-all approach. But by addressing each failure individually and fostering an environment where employees feel safe experimenting, your company can turn failures into valuable learning experiences and drive innovation for the long term.
