Often a failed project is a critical step in getting to success. Once or twice a year, at our product meetings, I ask all of our managers to complete a simple form outlining their bets from the last few years, divided into three categories: bets that went well, bets that didn’t go well, and open bets. Then we break up into smaller groups and discuss the items in each category and what we’ve learned from each bet. This exercise reminds everyone that they are expected to implement bold ideas and that, as part of the process, some risks won’t pay off. They see that making bets is not a question of individuals’ successes and failures but rather a learning process that, in total, catapults the business forward. It also helps newer people get used to admitting publicly that they screwed up on a bunch of stuff—as we all do.

2. DON’T MAKE A BIG DEAL ABOUT IT

If you make a big deal about a bet that didn’t work out, you’ll shut down all future risk-taking. People will learn that you preach but don’t practice dispersed decision-making… Reed’s reaction is the only type of leadership response that encourages innovative thinking. When a bet fails, the manager must be careful to express interest in the takeaways but no condemnation. Everyone in that room left with two major messages in mind. First, if you take a bet and it fails, Reed will ask you what you learned. Second, if you try out something big and it doesn’t work out, nobody will scream—and you won’t lose your job.

3. ASK HER TO “SUNSHINE” THE FAILURE

If you make a bet and it fails, it’s important to speak openly and frequently about what happened. If you’re the boss, make it clear you expect all failed bets to be detailed out in the open… It’s critical that your employees are continually hearing about the failed bets of others, so that they are encouraged to take bets (that of course might fail) themselves. You can’t have a culture of innovation if you don’t have this. At Netflix, we try to shine a bright light on every failed bet. We encourage employees to write open memos explaining candidly what happened, followed by a description of the lessons learned.

Note that healthy attributions about failure not only stay balanced and rational, they also take account of the ways—small or large—that you may have contributed to what happened. Maybe you didn’t prepare sufficiently for the interview. This is not to beat yourself up or wallow in shame. Quite the contrary; it’s about developing the self-awareness and confidence to keep learning, making whatever changes you need so as to do better next time. Each of us is a fallible human being, living and working with other fallible human beings. Even if we work to overcome our emotional aversion to failure, failing effectively isn’t automatic. We also need help to reduce the confusion created by the glib talk about failure that is especially rampant in conversations on entrepreneurship.

Practices for Learning from Failure

To Avoid

Don’t Say

Try

Skipping the analysis

I'll try harder next time.

Thinking carefully about what went wrong and what factors might have caused it.

Superficial analysis

It didn’t work. I'll just try something else

Analyzing what the different causes of the failure suggest about what to try next.

Self-serving analysis

I was right, but someone or something else messed it up.

Digging in to understand—

and accept—your own

contribution (small or large)

to the failure.

Whether tragic (a lost life) or silly (spilled milk), waste can be reduced through the diligent application of good failure practices. Basic failures are the most preventable of the three types. Excellent companies strive to prevent as many basic failures as they can. The chances are that you wish to do so as well. This is why we cannot afford to ignore mistakes. Basic failure’s ubiquity. serves as an invitation to strive to minimize it. My goal is to make basic failures fewer and further between. (It’s the opposite of how we think about intelligent failures, which I believe we should strive to increase, to accelerate innovation, learning, and personal growth.) But behaviors and systems that prevent basic failure can save lives, create immense economic value, and bring personal satisfaction.

3.3. How to Handle Mistakes

Mistakes are an unavoidable part of life. Even the most skilled people make mistakes, because there are so many factors beyond our knowledge and control that impact our success. This is true especially when we’re pushing the boundaries of knowledge or potential. On the frontier of what we can know or do, there are no wagon tracks to follow, no familiar landmarks, no mile markers, no road maps to guide us. We’re moving forward without the benefit of anyone else’s hindsight. Mistakes will happen. Part of taking command of our lives is managing those missteps when they do happen.