For the past 60 days or so, one of the prime topics of conversation has been the BP oil spill. This situation (fiasco? debacle?) is a great way to being discussion about our perceptions of risk (poor, at best). But, I will leave that concept for another day. Instead, I will discuss our ability to analyze our abilities to determine success.
Prior to 20 April, we thought we have solved the problem of deep-water drilling. After all, we were recovering billions of barrels of oil from the Gulf of Mexico for a long time. Had we written our history books on the 19th of April, they would all laud our ability to solve these problems.
Likewise, until 2009, Toyota was considered a technological marvel, a paragon of attention to customer needs. Books HAVE been written about its success. Alas and alack, they were a day early and way off the mark. (Actually, in Toyota’s case, they were not off the mark for most of the period. Instead, Toyota changed its business rules and concepts- to the detriment of its brand.)
This is exactly how we analyze most things. Those of us who start companies (or are hired to run them) all take great comfort in how well things run (generally). And, when they run well, we crow about how well we managed to design our business models. Unfortunately, many of these businesses are more lucky than well run. Moreover, because it is not clear how much luck played a part in the venture’s success, it is hard to assess “lessons learned”.
No, we learn far more from our failures than our successes. I admit, some of our failures could be due to luck. But, because we failed, we analyzed. We determined (assuming we were totally honest) what role everything played in our demise. And, then, we developed new systems to insure that a repeat performance was not among our future repertoire.
We may not all be guilty like BP/TransOcean/Halliburton. (I list all three because each one contributed to the disaster; the ultimate culpability will be determined later). To be honest, the biggest problem was overconfidence. We had been doing it forever; we were really smart and could start looking for ways to make more money by cutting corners. Oops- not true.
This is exactly what Toyota did. It’s what our mortgage bankers did. And, it’s what we could do just as easily. We need to take the time to analyze all potential failures- each time we change a process- business or production or technical.
As another example, many years ago, we hired an individual who was talented- and overqualified- for the position advertised (and for which he was ultimately hired). But, he was desperate for work (we were a technical firm in a small town; entities such as ours were not prevalent in the area, and he loved the area). So, we hired him.
As his experience with us (and ours with him) developed, we gave him more leeway and authority. He was working on our team to develop a new method to pasteurize (sans heat) apple cider. Our bench testing and our pilot plants all showed that our design was on the mark. We gave this individual the chance to scale up the process and oversee its installation at the actual facility.
It wasn’t a big project (as our projects went), but the next phase was worth about two to three times his salary. He was thrilled. And, he made a mistake- one that cost us about four times his salary to fix (and to vex us until we completed the redesign/reinstall).
He- and several of us- effected a complete post-mortem, after the client was satisfied. We determined where the errors were made, why the choice was incorrect, and what we could learn from this for all of our designs.
The key point is that individual managed to become the COO  of one of our operating companies. He knew the costs of failure, learned to examine “obvious” facts that are often wrong, and how to anticipate and correct deviations.
That never would have happened if his project management had proceeded without a hitch. And, from that error, we learned much and he learned much, so much so that he helped us generate more than 50 times his salary for the next decade.

Continue reading Our success may be due to luck- so we learn way more from failures. →

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