Why brilliant people fail brilliantly

Kate Hodsdon speaks to Lionel Hill and lan Bromwich.

 

When we think of failure, most of us would prefer to avoid it. From exams to driving tests, and interviews to promotions, success is the goal. When it comes to innovation, failing is not always a bad thing, as we learnt in our interviews with two transformation leaders.

 

Lionel Hill is the Global Chief Technology Officer at the private equity firm Permira. Prior to joining Permira, Lionel worked for Revantage Europe, a Blackstone company, as Europe CTO for three years. Prior to that he spent six years with CBRE and 10 years with UBS in technology roles.

 

How do you view failure within the context of innovation?

 

It's hard to imagine a scenario where you can have a genuine ground-breaking innovation without failure having been part of that story to some extent. Far from being undesirable or something to try to avoid, failure should be accepted as inevitable in the process of innovation.

 

When managed properly, failure is an opportunity to learn something new, but the key is to recognise what's failed and to do so quickly. Think about scientists: they won't necessarily learn something from a successful experiment, other than that their initial hypothesis wasn't flawed. However, during an experiment, when something fails and you realise you've got something wrong, you can take failure as a concrete piece of information that shapes what you do next. With technological innovation, you must look at it in the same way.

 

Failure is cast iron proof that you've got something fundamentally wrong, or that there are a set of circumstances that you need to rethink before moving on.

 

Do you think the 'fail fast, fail often' mindset that's embedded in start-ups translates to established organisations, or publicly traded companies?

 

It is absolutely something that's applicable to a corporate mindset, but there's context that needs adding to it to be relevant.

 

I would say there are three pieces to that mindset: one, fail fast. Two, fail cheaply. because who wants an expensive failure on their hands? And third, never fail to learn. Whatever they are, these failures must be lean and quick, not huge existential failures. Learn from them, then move on, and don't repeat the same thing over and over again.

 

How you relate to failure should be relative to where you are in your innovation cycle. Central to this is knowing who you are, and what you're supposed to be doing as an organisation.

 

How have you navigated the organisational context when innovating?

 

Most of my experience has been within financial services organisations and they have a particular context that is important to understand. There's a significant operational element in FS where excellence and doing things efficiently are a given (or should be). Yet, fundamentally, financial services as a business is all about risk taking. If somebody has a particular attitude to risk on one side of a transaction, and they're trading that risk with someone else with a different attitude. then that creates a market. That's why FS organisations are well versed with risk-taking. But that's just one element of the context.

 

Understanding an organisation's tolerance for innovation risk and how this tolerance can change over time is important. It's possible to increase a firm's tolerance for innovation risk by being mindful of two things.

 

The first is to take small risks to begin with, not huge, existential risks that can topple a service line or entire growth strategy if they go wrong. Smaller risks don't matter if they fail. provided you learn from them. The second thing is to build up a successful innovation track record, little by little, as a team within your organisation.

 

How does this alter the attitude to technological risk? It's logical: if you take a small risk, and it's a win somehow, maybe next time you'll have permission to take a slightly bigger risk, and a slightly bigger one after that. as the cycle of innovation develops.

 

Pivotal to this approach is to always remain within the context of something that's permissible and doesn't risk jeopardising the firm as a whole.

 

"Culture" is a highly disputed notion. How do you appreciate the meaning of culture as it relates to innovation?

 

Culture is often created from the top down. As a leader, you can define the culture, but you also have to live it, bring it to life, and do it in a way such that everyone else recognises that you walk the walk as a leader. This is also true in the context of risk-taking within innovation.

 

An environment where there's complete transparency and honesty is fundamental to this. When something goes wrong, you must make sure very quickly that everyone is informed and aware of it. This ties back to ""failing fast".

 

If a culture doesn't encourage transparency and there's a fear of speaking up early on. you'll fail slowly, incur greater costs and damage cultural trust when innovating next time.

 

So, some are quite low risk, well documented and likely to succeed and you need quite a few of those in your portfolio. Then you'll need some that are a bit risky, but more innovative (just not too many of those). And finally, you need a couple of wild cards that could win big. but if they don't, what you lose is manageable.

 

I think of it as a hierarchy of innovation needs: at the bottom are the absolute basics of operational infrastructure which must be robust, but their evolution shouldn't risk disrupting an entire organisation when replaced or developed. In the middle sits efficiency or optimisation, where the gains are modest but highly predictable. And at the top of an innovation strategy is business transformation - higher risk but also higher reward. I recently heard someone describe these three types of investment as: Fear - the things you must do; Fact the things that you understand well; and Faith - the things that you believe will make a big difference to your business.

 

As a business leadership group, then, the thought process becomes ensuring that you have the right balance across the different types of investment - Fear, Fact and Faith. And to optimise this, it's all about knowing your innovation context and creating the right culture where failure is never failure. but is learning as you grow.