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Open innovation vs learning from failure

By Christos Tsinopoulos, Karena Yan and Carlos Sousa - July 2019

In April 2019, when Google announced the closure of Google+, a social networking platform aiming to compete with the likes of Twitter and Facebook, most commentators focused more on the reasons that led to the failure and the fact that this vast organisation has not been able to compete in this space. Yet, Google has been there several times in the past.

According to killedbygoogle.com, a crowd-based website devoted to documenting Google’s past failures, there have been at least 163 botched projects abandoned by the company since 2002 - and these are only the ones that have made it to the public domain.

However, far from indicating a company’s limitations, having the ability and confidence to abandon such projects and to then learn from these failures can become a major factor for future success. As a result, innovation researchers have long been trying to explore how organisations can effectively deal with failure, and benefit from it. The general consensus is that new product development processes are more likely to be successful when they operate in
an environment where failure is not penalised but accepted, and lessons are learned – advocating company heads to take greater risks and embrace new ideas for the possibility of a greater reward further down the line.

Yet failure does not only affect single organisations. Modern industries operate through complex networks, meaning innovation processes are linked with many stakeholders: suppliers, customers, universities and even governments. Given the benefits often reported by those who engage in such open innovation initiatives, organisations are often encouraged to proactively involve external parties when developing new products. Google, for instance, has been known for having a distributed and relatively more open approach to developing new products. The success of its Android operating system, for example, is often attributed to the openness of its software.

However, as killedbygoogle.com documents, not all of these open innovation initiatives end in success or profit. This, therefore, leaves open a very critical question: Is engaging with open innovation good or bad for learning from failure?

On the plus side, open innovation can help organisations to bounce ideas off others and increase their propensity to learn about new sectors, markets and services from those who have previous knowledge and experience. By combining such skillsets, companies stand a greater chance of designing a successful new product or service than they do by going it alone. On the downside, abandoning a less than- successful innovation project may mean that suppliers and customers, whose future business may well depend on maintaining a future relationship with that organisation, would be less likely to share openly what they think went wrong, in case they face blame or risk opportunities for future collaborations.

Our research set to answer this question by exploring a large database of abandoned initiatives. We first found that, as expected, the experience of failure can positively affect an organisation’s innovation performance. Failure reveals information about how an organisation interacts with its environment, providing a wealth of learning opportunities for all involved. To take our Google example a bit further, despite abandoning the Google Glass, the company was able to reinvent it as a mechanism for guiding operators in manufacturing contexts. They were able to do so because, on reflection and through collaboration, they were able to better understand how the product most effectively interacted with its environment. Secondly, and potentially counterintuitively, we found that a strategy of openness at the time of failure is more likely to have a negative effect on how organisations learn. This is most likely due to managers selectively deciding which external members are going to learn from the experience.

This creates an ‘undersampling’ of failure, potentially limiting the opportunity for all to effectively learn from previous events and develop their ideas more effectively in future. As with Google, our research emphasises the need for organisations to start working on creating an open environment, where failure is accepted rather than shamed or hidden and is used as an opportunity to learn. Unlike Google though, they should be very careful about who they decide to learn from. Using the usual suspects or, for instance, a supplier that is looking for future work may only lead to learning the wrong lessons and repeating old mistakes.

To learn more about the research of the Centre of Innovation and Technology Management, visit durham.ac.uk/business/innovation-technology