The Hard Truth About Innovative Cultures

Hint: great leaders are mistake tolerant.

Gustavo Razzetti
· 7 min read
Image licensed via Adobe Stock

“Only those who dare to fail greatly can ever achieve greatly.”

— Robert F. Kennedy

There are two kinds of innovative company cultures: those who make mistakes and those who lie.

Kenneth Lay and Jim Owens shared similar backgrounds. The former chairman of Enron and former CEO of Caterpillar grew up in humble households.

Each worked hard, took several jobs, studied at state universities, and earned PhDs in Economics. Both were successful — they became CEOs of Fortune 100 companies.

However, the careers of these two leaders finished quite differently. Their mistake tolerance played a significant role.

Owens acknowledged mistakes — he learned from failure.

Lay paid a high price for ignoring mistakes. He was formally indicted for his role in the Enron scandal. And his career ended in disgrace.

Mistakes are vital for learning, innovation, and growth.

But to learn from errors, leaders must first face them. They need to become mistake tolerant.

Innovative companies are mistake tolerant

Most organizations ask people to take risks, to experiment more, to be more innovative. Yet, they don’t have a clear approach to mistakes.

Building an innovative culture is not just about failing fast but failing smarter.

Organizations should start by establishing clear rules. People want to know what will happen if they make a mistake.

Are you encouraging people to celebrate errors or to bury them? Does your team feel supported or afraid of being punished? Do you focus on finding the lesson or who to blame?

A culture driven by fear kills innovation. If your company doesn’t encourage and reward mistakes, how can you expect your team to take more risks?

Unfortunately, failure still carries a lasting stigma in business.

A culture of perfectionism drives mistake avoidance — errors become unacceptable. Leaders worry more about not falling from grace than finding the lesson in disguise. )LINK).

Research shows that making mistakes boosts our memory and creativity. Neurological studies discovered that mistakes cause our brain to spark and grow.

Laurence G. Weinzimmer wrote:

“Smart people have the ability to see mistakes as feedback that will help them improve, and they become experts in learning how to learn from mistakes.”

Business leaders who do not fail are not taking enough risks. That’s the hard truth about creating an innovative culture.

Here are seven ways to build a mistake tolerant company culture.

1. Tolerate your own mistakes

Practice what you preach. Be the first to acknowledge your own mistakes. Lead with the example if you want others to tolerate their own.

The paradox of mistakes is that arrogant leaders are more likely to be punished for making them. People tend to forgive those who have an authority based on their expertise. But are ruthless with those who pretend to know it all.

Tim Harford invites us to use humility as a problem-solving technique.

To find a solution, we must first recognize our mistakes — not avoid them.

Accepting failure is a tool for uncovering a fresh perspective. And a unique problem-solving strategy for your company. Developing a mistake tolerant culture starts at the top.

2. Have a transparent mistakes policy

Clarity is everything. Especially when it comes to taking risks. People don’t want to take the leap if their bosses don’t have their backs.

I’ve seen companies pay lip service to failure mistakes, but then turn around and fire people.

Many corporations have borrowed the “fail faster” motto from the startup community. But what does it really mean? How will the company embrace that?

Here’s a simple guide I use with my clients: “Fail fast, learn faster, adapt smarter.”

A clear mistake policy is more than a motto. It’s about recognizing that mistakes are lessons in disguise. And that invites people to experiment — it feels safe to try new things.

Like every company rule, behaviors matter more than words. Encouraging people to experiment is useless if they will then be punished.

3. Adopt a trial and error approach

Experimentation is the path toward innovation. No first idea is ever good enough. We must keep building and trying until we find the best one.

It took James Dyson 5,127 prototypes until he found a design that worked for his bag-less vacuum cleaner. Not one or three attempts but thousands.

Each failure was a lesson. Dyson didn’t let failure disappoint him. His trial and error approach helped him evolve the design until he made it.

Recycling failures is another way to embrace trial and error.

Many products fail but can be repurposed for another problem. Take the AIDS drug AZT. It was a failed treatment for cancer. Viagra was once a failed hypertension medication.

A trial and error approach requires seeing mistakes as temporary stops, not as the final destination.

4. Distinguish errors from stupidity

Creating an innovative company culture requires experimenting with a purpose. It’s not about sending a proposal to a client full of errors. Or to repeat the same mistake over and over.

Innovation is not all fun and games. It requires discipline and purpose.

Becoming mistake tolerant doesn’t mean that all mistakes are okay. We want people to fail with a purpose. To learn and grow. We are not rewarding stupidity but a trial and error approach.

Many organizations fail because they want to embrace failure without a process or discipline. Taking smart risks should be rewarded. Stupidity should not.

5. Liberate time to experiment

Experimentation requires time. And your team is probably overworking. That’s one of the most deceiving manifestations of resistance.

What looks like laziness is always exhaustion.

As the Heath brothers explain in Switch, change wears people out.

You cannot expect people to try new things on top of their current duties. Liberate time so they can experiment.

At Spotify, developers enjoy a ‘10% ‘hack time.’ They can work on anything they want. Google used to have the 20% rule: employees could spend 20% of their time on self-initiated projects.

Liberating time for experimentation resulted in the creation of products such as Gmail, Google Maps, and AdSense.

6. Learn to kill your ideas

Not moving past our errors can be as harmful as ignoring them. We must learn to get rid of our mistakes — even if they don’t look so bad.

When Steve Jobs returned to Apple as CEO, his first goal was to review the company’s product line. He found a diversified and confusing offering — many products seemed to overlap.

By using the “Which ones do I tell my friends to buy?” question, Jobs reduced the number of Apple products by 70 percent.

A trial and error approach doesn’t mean piling up all our mistakes. At some point, you have to kill your darlings. Focus is everything.

Learn to kill your ideas. Not everything lasts forever. When in doubt, visit the “Killed by Google” graveyard. From the YouTube Video Editor to Google Glass, a great reminder of all the products that now rest in peace.

7. Celebrate mistakes publicly

Failure is a gold mine, according to Tata Group’s chairman Ratan Tata.

He believes in celebrating — and rewarding — mistakes as a way to increase learning and innovation. “The best-failed idea” is a prize that rewards that.

At the Johnsonville Foods factory, they had a “Mistake of the Month Club.” This public initiative stimulates discussion about mistakes and the learning from them.

Like Tata’s prize, Johnsonville has the “Shot in the Foot Award.” It recognizes who made the biggest mistake from which others learned the most.

Honest admissions of failure from CEOs or senior managers send the right message to employees.

English social media consultancy NixonMcInnes created a public ritual to celebrate mistakes. The Church of Fail is a monthly event where any employee can stand behind a pulpit and share their mistakes.

The experience is not only liberating, but everyone learns from their teammates. The benefit of making mistakes public is ensuring that no one will repeat the same error.

Fuckup Nights is a now a global movement and event series born in Mexico in 2012. It started with a group of friends who wanted to share business failure stories.

Friends brought their friends and so on until it became a movement. People were done with picture-perfect leadership stories. They wanted to listen to real ones. They wanted to learn from mistakes.

Turn failure into an ongoing conversation.

Adopting a trial and error approach shouldn’t be limited to ideation sessions. Innovative companies promote a failure tolerant culture along the entire process.

Interviews, for example, present a great opportunity. You can learn a lot about how potential employees deal with mistakes. Rather than focusing on their achievements, inquire on how they deal with failure.

Truly innovative companies embed mistakes into their culture.

That’s the case of Finder. One of their values, “Go Live” is all about encouraging people to experiment, fail fast, learn, and tweak.

As Fred Schebesta, CEO and co-founder of Finder.com, says, “I often remind my crew that they haven’t made enough mistakes lately, which means they aren’t pushing themselves to think and do outside the square.”

Creating a company culture that embraces and learns from failure is not easy. Start by owning your own mistakes before expecting others to do so.

A little bit of inspiration always works. Attend your local Fuckup night event. Listening to other people’s mistakes will make you feel more tolerant of yours.


Gustavo Razzetti is a change facilitator who helps leaders and teams drive positive change. He advises, writes, and speaks on personal growth, team development, and culture transformation.

This article was originally published on Liberationist blog.

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Gustavo Razzetti

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I help people and teams become the best version of themselves. CEO @ liberationist.org Top Writer. Subscribe → bit.ly/ChangeInsights

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