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Tuesday, July 16, 2019

Preventing Failure

Gleb Tsipursky :
When was the last time you saw a major project or critical process fail? Such disasters can have devastating consequences for high-flying careers and successful companies. Yet they happen all too often, with little effort taken to prevent failure.
For example, many leaders stake their reputations on key projects such as successful product launches. However, research shows that most product launches fail. Nike's FuelBand, launched with much fanfare in 2012, flopped on arrival. By 2014, Nike fired most of the team behind FuelBand, discontinuing this product.
One of the most important types of projects for a business is a merger or acquisition. Yet 70 to 90 percent of mergers and acquisitions fail to create value, and CEOs who lead failed M&As are frequently replaced. For instance, Microsoft's CEO Steve Ballmer left in large part due to the tensions around his push to acquire Nokia, which eventually led to Microsoft writing off $8.4 billion.
Process failures can be just as bad. Safety failures led to the recall of over 20 million pounds of food across the US in 2018; from 1996 to 2017, more than 390 million cars and other motor vehicles had a recall, along with 154 million motor vehicle parts.
Japanese airbag maker Takata Corporation, with revenue of $6.6 billion and over 50,000 employees in 2016, declared bankruptcy in 2017 due to the costs of a recall and lawsuits over faulty airbags. Boeing's engineers knew that the 737 Max aircraft display alert system software failed to meet requirements, but failed to do anything about it before the deadly October 2018 Lion Air crash. The grounding of Boeing's 737 Max aircraft after that crash and the March 2019 Ethiopian Airlines Flight 302, caused in large part by the display alert system software, cost the company over $1 billion.
Of course, while examples from big companies make the headlines, mid-size and small businesses have their share of catastrophic project and process failures. Such mistakes largely come from the many dangerous judgment errors that result from how our brains are wired, what scholars in cognitive neuroscience and behavioral economics call cognitive biases.
Cognitive biases result from how our brain is wired, and mostly stem from us going with our gut reactions. Our gut is adapted for the ancestral tribal environment, not the modern world. Yet prominent business media venues tragically present misleading advice to go with your gut in business. People also use their gut to make personal financial decisions, as shown by a survey of consumer shopping behavior by Top10.
Fortunately, recent research in these fields shows how you can use pragmatic strategies to address these dangerous judgment errors and prevent failure by choosing the best possible options in daily decision-making as well as on critical decisions. The most relevant scholarship is on prospective hindsight, meaning looking back in advance, to help you anticipate and avoid threats as well as notice and seize opportunities, so that you can defend yourself against failures and maximize the likelihood of success in major projects and critical processes.
8 Steps to Preventing Failure
"Failure-Proofing" is a pragmatic and easy-to-use strategy for obtaining the benefits of prospective hindsight. Having developed this technique based on behavioral economics and cognitive neuroscience studies, I then tested it on the front lines over my 20 years of experience consulting and coaching leaders in large and mid-size companies and nonprofits to avoid project or process failures. I wrote it up so that anyone - not only the people who hire me - can avoid such failures and maximize success.
Use Failure-Proofing after you decided to start any significant project and to check in regularly on existing processes. Don't use Failure-Proofing on smaller, day-to-day decision-making, since doing so would take too much time. For those decisions, use the "5 Key Questions" technique instead. The failure-proofing technique is best done in teams, and should involve representatives of all relevant stakeholders; you can also do this technique by yourself, but consider showing your results to a trusted adviser for an external perspective.
Step 1: Gather
Gather all the people relevant for making the decision in the room, or representatives of the stakeholders if there are too many to have in a group.  A good number is 6, and avoid more than 10 people to ensure a manageable discussion.
Make sure the people in the room have the most expertise in the decision to be made, rather than simply gathering higher-up personnel. The goal is to address what might go wrong and how to fix it, as well as what might go right and how to ensure it. Expertise here is as important as authority. At the same time, have some people with the power to decide how to address problems and seize opportunities that might be uncovered.
It's very helpful to recruit an independent facilitator who is not part of the team to help guide the exercise. You can get someone from your Advisory Board, someone from another part of the organization, your mentor, or a coach or consultant. If you are going through this technique by yourself, write out various stakeholders that are relevant to the project or process, even different aspects of yourself that have competing goals.
Step 2: Explain
Explain the exercise to everyone by describing all the steps, so that all participants are on the same page about the exercise.
Step 3: Next Best Alternative
Then, develop two Next Best Alternatives (NBAs) to the project or process you are evaluating. Have each participant on the team come up with and write down one NBA anonymously. Anonymity is critical to ensure that unpopular or politically problematic opinions can be voiced ("perhaps we should wait for a better opportunity rather than acquiring this company").
The facilitator gathers what people wrote - thus ensuring anonymity if the facilitator is not part of the team and doesn't know people's handwriting - and voices the alternatives. Then, have team members vote on the choices that seems most viable, and choose two to discuss. Make sure to give them a fair hearing by having two team members - including at least one with authority - defend each NBA.
After discussing the NBA, take an anonymous vote on whether the NBA seems preferable to the original project or process under discussion. If the original project or process still seems best (which is what happens in the large majority of cases), consider if the project or process can be strengthened by integrating any components of the two NBAs into your plan. If you are going through the technique by yourself, get outside input at this stage if you have difficulty generating an NBA.
Step 4: Reason for Failure
Next, ask all the stakeholders to imagine that they are in a future where the project or process definitely failed (an approach informed by the Premortem technique). Doing so gives permission to everyone, even the biggest supporters of the project or process, to use their creativity in coming up with possible reasons for failure.
Otherwise, their emotions - which determine 80-90% of our thoughts, behaviors, and decisions - will likely inhibit their ability to accept the possibility of project or process failure. That's why simply asking everyone to imagine potential problems works much less well. Supporters of the project experience a defensive emotional response that leaves their minds much less capable of creatively envisioning possible problems.
After giving such permission, have each participant anonymously write out plausible reasons for this disaster. Anonymity is especially important here, due to the potential for political danger in describing potential problems ("the product launch will fail because the marketing department overhyped it, leading to unhappy consumers). Ask everyone to come up with at least three most plausible failures, while highlighting that the reason for coming up with these failures is to address them effectively.
These failures should include internal decisions under the control of the project team, such as cost and staffing, as well as potential external events, such as an innovation introduced by a competitor. Encourage participants to focus particularly on reasons they would not typically bring up because it would be seen as rude or impolitic, such as criticizing someone's competency, or even dangerous to one's career, such as criticizing the organization's strategy. Emphasize that everyone's statements will remain anonymous.
The facilitator gathers everyone's statements, and then highlights the key themes brought out as reasons for project failure, focusing especially on reasons that would not be typically brought up, and ensuring anonymity in the process.
If you are going through this technique by yourself, write out separate reasons for project or process failure from the perspective of each relevant aspect of yourself.
Step 5: Most Likely Problems
Discuss all the reasons brought up, paying particular attention to ones that are rude, impolitic, and dangerous to careers. Check for potential cognitive biases that might be influencing the assessments. The most significant ones to watch out for are loss aversion, status quo bias, confirmation bias, attentional bias, overconfidence, optimism bias, pessimism bias, and halo and horns effect.
Then, assess anonymously the probability of each reason for failure, ideally placing percentage probabilities. If doing so is difficult, use terms like "highly likely", "somewhat likely", "unlikely", and "very unlikely." Also, consider how harmful each reason for failure might be, and pay more attention to the ones that are most harmful.  Here, the expertise of individual members of the team will be especially useful.
The leader or person assigned as note-taker writes down all the problems brought up, as well as assessments of the probabilities. If you are going through the technique by yourself, get outside input at this stage.
Step 6: Fixing Problems
Decide on several failures that are most relevant to focus on, and brainstorm ways of solving these, including how to address potential mental blind spots. Also, discuss any evidence you might use that would serve as a red flag that the failure you are discussing is occurring or about to occur. For this step, it is especially important to have people with authority in the room.
The leader or note-taker writes down the possible solutions. If you are going through the technique by yourself, get outside input at this stage.
Step 7: Maximizing Success
We addressed failure: now let's make sure you not simply avoid failure, but maximize success! Next, imagine that you are in a future where the project or process succeeded far beyond what you expected. Have each participant anonymously write out plausible reasons for this success. Next, have the facilitator highlight the key themes.
Discuss all the reasons, and check for the same cognitive biases as above. Evaluate anonymously the probability of each reason for success, and decide which deserve the most attention. Then, brainstorm ways of maximizing each of these reasons for success.
The leader or note-taker writes down the ideas to maximize success. If you are going through the technique by yourself, get outside input at this stage.
Step 8: Revising Project
The leader revises the project or process based on the feedback, and, if needed, repeats the exercise.
Conclusion
Make sure to use the "Failure-Proofing" technique prior to any large project and to evaluate existing processes and systems to prevent failures. To see case studies with in-depth guidelines of how you can apply this strategy as an individual or a team, see the Manual on Failure-Proofing.

(Gleb Tsipursky, Ph.D., is an assistant professor at Ohio State University).