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What is failure management and how to use failure to grow your business

Failure Management is a series of prospective and retrospective processes based on the fact that mistakes can and will happen.

Raquel Rojas
October 16, 2023
What is failure management and how to use failure for growth

What is Failure Management?

At Fuckup Inc, we understand Failure Management as the series of strategies that serve to embrace adversity by re-evaluating failure, exploring new goals and means, and examining various strategic options to improve. While risk management and crisis management are retrospective efforts, Failure Management is a series of prospective and retrospective processes based on the fact that mistakes can and will happen.

How to avoid failure when managing a business

Without awareness of the reasons behind our team’s mistakes, there can be no resilience and growth turns into a unicorn, a myth. Failure is inevitable in the course of conducting business, but how we deal with failure defines our culture and attitude as a team.

It is through failure that we learn what works and what doesn't. Failure allows us to refine our ideas and approaches, and to develop new and better solutions. Many of the most successful innovations have come about as a result of multiple failures. 

Don’t get us wrong: Failure should not be the end goal. Rather, it should be viewed as a necessary and expected step on the path to success. By embracing failure and learning from it, we can create a safe space that boosts productivity and innovation.

Understanding Failure as an Opportunity

isn't it true that it is often after a mistake or loss that we seek to make changes? And don't these changes bring new processes as a result?

Innovation and failure go hand in hand. As humans, an attempt to create something new and innovative is more than just about success, it can change our whole outlook in life. However, the same can be said about failure and yet, we learn way more from our failures than from our successes. How does that happen?

The mindset shift: Embracing failure as a learning experience for business growth

"Failure" is an ambiguous term that encompasses many different types of outcomes. One person's failure might be another person's success. But even when we consider only those events that are objectively negative -like a failed project, they can still lead to positive outcomes.

According to psychologist Karl Duncker, people who have experienced failure are more likely to come up with creative solutions than people who haven't had any failures at all. This seems counterintuitive at first but makes sense once we examine why people fail in the first place and what they learn from those failures.

For a business to innovate, people must be willing to take risks and learn from its mistakes. This can be difficult for people who have been conditioned by their education or upbringing to believe that mistakes are bad and should be avoided at all costs.

Fear of failure can stifle creativity and productivity, which leads to a culture where innovation fails to happen. To foster innovation within your organization it is crucial to rewire your thinking about failure and you must create an environment where people are encouraged to innovate, even if they fail to do so.

Successful innovators learn from their failures to increase the probability of future successes. To have an organizational culture that encourages innovation and doesn't focus on failure as a negative outcome, leadership must model appropriate behaviors throughout the organization.

How to learn from failure in business

Whether you're an entrepreneur venturing into the unpredictable world of start-ups or an experienced business owner managing a successful venture, failure is an inevitable aspect of business life. However, the concept of failure management is all about turning those setbacks into stepping stones. It's about utilizing failures as a learning tool that can propel your business towards growth, innovation, and productivity. So, let's dive into the art of learning from failure in business while focusing on these three integral aspects.

The first step in effective failure management is acknowledging failure. Failure is not a sign of defeat but an opportunity for growth. Consider each mistake as a lesson that teaches you something valuable about your business, your market, or even yourself as a leader. Remember, it's okay to fail, but it's not okay to continue making the same mistakes without learning from them. Embrace every setback as a chance to refine your strategy and reevaluate your approach.

Next, link your failures to innovation. You might wonder, "how can a failed venture foster innovation?" Well, innovation is often born out of necessity and failures create necessities. They highlight the inadequacies of your current processes or products and compel you to think outside the box to address them. By identifying the reasons for your failure, you can start to develop innovative solutions that not only prevent a recurrence but also give your business a competitive edge.

Finally, understand the direct impact of learning from failures on productivity. When you learn from your failures, you're able to eliminate unproductive strategies and practices, helping you to focus on what works. This not only enhances overall productivity but also promotes efficiency and sustainability in your business operations. Moreover, it cultivates a positive work culture where employees are not afraid to take risks or make mistakes, fostering creativity and further boosting productivity.

Failure management, innovation, and productivity are interconnected pillars for business success. By adopting a positive attitude towards failure, fostering a culture of innovation, and channeling learnings into boosting productivity, businesses can transform their failures into opportunities for growth and success.

Failure Management Strategies

Organizations across industries have a hard time creating a track record of understanding and handling failure. Knowledge about failure is often nebulous, dangerously undocumented, imprecise, or simply ignored. In most cases, there is no framework of best practices.

Organizations have also failed to implement appropriate failure management systems or approaches to help foster an internal environment that supports growth and innovation. This is where we come in to help: we believe failure is the perfect port of entrance to create healthier work cultures and sustainable industries.

This is why we have considered to underscore two Failure Management strategies for business:

Evaluating and analyzing failures: Identifying root causes

At Fuckup Inc, we consider that Failure Management can be seen from a retrospective and/or a prospective point of view. Lee & Miesing (2017) propose that failure gives us valuable insight into the reasons behind our mistakes so that we can avoid repeating them in the future. Examining these causes of failure allows us to look back and identify the root of the problem. 

So, what causes failure? Well, for Lee & Miesing there are four types of failure based on two factors: (1) whether the action that led to the failure was purposeful or unguided, and (2) whether the consequence of that action was intended or not. These types include mechanical, accidental, intentional, and inadvertent causes.

Looking at failure from a different angle, we can see that it can stem from external or internal factors within an organization. These factors may include poor leadership, a lack of understanding of the organizational culture, or an imbalance within the team. It's interesting to note that entrepreneurs' lack of competence or experience can often be a more significant cause of failure than neglect, fraud, or disaster.

Furthermore, biased attributions are commonly observed in various areas and disciplines. For example, individuals tend to attribute their success to their personal abilities or internal factors, while placing the blame for their failures on external factors. On the other hand, managers tend to attribute others' success to external factors, but they attribute their own failures to internal factors.

So, by understanding the causes of failure and being aware of biased attributions, we can gain a deeper understanding of how to prevent and address failures in the future.

Amy Edmonson, Novartis Professor of Leadership and Management at Harvard Business School and author of Right Kind of Wrong: The Science of Failing Well proposes a spectrum of 9 root causes of failure. She argues that having a keen understanding of the reasons and circumstances behind failure can steer us clear of finger-pointing and instead, pave the way for an effective approach to learning from our mistakes. 

Edmonson points out that while there's no limit to the number of things that could potentially go awry in an organization, we can generally classify errors into three main categories: those that are preventable, those stemming from complexity, and those connected to intelligent actions. Let’s briefly review each of Edmonson’s causes of failure, from “blame-worthy” to “praise-worthy”:

Deviance:  An individual chooses to violate a prescribed process or practice.

Inattention: An individual inadver­tently deviates from specifications. 

Lack of ability: An individual doesn't have the skills, conditions, or training to execute a job. 

Process inadequacy: A competent individual adheres to a prescribed but faulty or incomplete

Task challenge: An individual faces a task too difficult to execute reliably every time. 

Process complexity: A process composed of many elements breaks down when it encounters novel interactions. 

Uncertainty: A lack of clarity about future events causes people to take seem­ingly reasonable actions that produce undesired results. 

Hypothesis testing: An experiment conducted to prove that an idea or a design will succeed fails.

Exploratory testing: An experiment conducted to expand knowledge and investigate a possibility that leads to an undesired result. 

One thing that Lee & Miesing and Edmonson have in common is the acknowledgment of uncertainty as part of the context in which failures happen. Edmonson (2023) says “Framing is something experienced leaders do naturally because they recognize that people need help to diagnose and recode the context to be most effective.” She continues:

“Situation awareness in failure science means appreciating the level of uncertainty and what it brings. (...)  It’s about learning to expect the unexpected, both to avoid preventable failures and to take enough risks to produce your share of intelligent failures. It’s also about remaining cognizant of what’s at stake.”

Types of failure and how to manage/take advantage of them

Edmonson (2023) proposes there are 3 different types of failure based on their number of causes (basic, complex, and intelligent) that can be combined with 3 types of certainty-based contexts (consistent, variable, novel) to create a Failure Landscape retrospectively. 

When understanding the landscape as a system—seeing connections between parts— “you can begin to see ways to alter the most important systems in your life or organization to reduce unwanted failures and to promote greater innovation, efficiency, safety, or other valued outcomes. (...) System awareness also helps you feel less bad about some of the things that go wrong in your work or personal life. When you start to see systems more clearly, you understand better that you are not wholly responsible for most of the failures that occur. You can feel responsible for your contributions to them—and determine to do better next time—but suffer less from the delusion that you’re entirely to blame. System design is not just for preventing failures. Equally important is the opportunity to design systems thoughtfully to achieve particular goals.”

From Edmondson, A. C. (2023). Right kind of wrong: The Science of Failing Well. Simon and Schuster.

Lee & Miesing (2017) propose 3 other types of failure based on their side effects (deficiency, excess, and inconsistency) that can be combined with 6 purposes to use failure to produce a total of 16 ways in which organizations can use failure to their advantage in a prospective way.

“Given risk now or in the future, what can entrepreneurs do? They can try to either reduce the possibility of failure retrospectively or capture new opportunities created by failure prospectively. But such a prospective approach to failure has been vaguely dealt with. Without an understanding of the systematic patterns of the benefits of failure, its paradoxical impacts would still be managed impromptu. (...) However, we cannot always benefit from failure. (...) Failure alone is not a sufficient condition for the corresponding paradoxical benefits. Seeing an opportunity is one thing, but actually exploiting it is another. Failures can be beneficial only when they are treated in a certain way. So the failure management propositions are at least the collections of the necessary but insufficient conditions for the benefits of failure.”

From Lee, J., & Miesing, P. (2017). How entrepreneurs can benefit from failure management. Organizational Dynamics, 46(3), 157–164.

So, what are the main differences between Edmonson’s types and Lee & Miesing’s types of failure? Let’s dive in!

Failure based on the number of causes (Edmonson, 2023)

  • Basic failure: it has a single cause and happens in familiar contexts, like using salt instead of sugar in a recipe.
  • Complex failure: it’s multi-causal, and happens when multiple factors are lined up in the wrong way, like supply chain breakdowns during a global pandemic.
  • Intelligent failure: it’s the result of a well-designed experiment, it’s the best kind of failure because it means you tried and found out new information.

Failure based on it’s side effects (Lee & Miesing, 2017)

  • Deficiency: Missing out on an opportunity due to limited resources can be a blessing in disguise. By not chasing after an inferior opportunity, organizations could be saving valuable resources. It's better to prioritize and focus on the best opportunities that align with the company’s goals.
  • Excess: Surplus resources can be put to exciting new uses. Hidden assets can be carefully reassessed and unleashed to take advantage of fresh opportunities.
  • Inconsistency: Having inconsistent patterns of resources or information can be beneficial in reducing risk. One way to achieve this is by diversifying our products, customers, markets, suppliers, and technologies. This approach acts as a hedge against unforeseen variability and helps us stay prepared for any challenges that may come our way.

How to manage business failure

Failure Culture is one in which failures of all sizes are consistently reported and deeply analyzed, and opportunities to experiment are proactively sought.

An organization must have a work culture that promotes shared values, goals, and practices. Failure Culture is designed to help people learn from their mistakes in a supportive and structured way. Failure Culture leads to growth and improvement for both individuals and the organization as a whole.

Here are some best practices for organizations who want to start implementing a Failure Management strategy, based on our Failure Culture framework (Fear of Failure, Difficult Conversations, Psychological Safety, and Innovation):

Fear of failure

  • Being able to ask for help freely whenever mistakes are made is always a good sign of teamwork.
  • Taking failure as a human experience instead of only seeing the negative connotation makes us experience failure with a broader perspective.
  • Our mistakes don’t define our self-worth, practicing self-forgiveness is key when we fail. 
  • Sharing stories of failure as a team opens the way to vulnerability, empathy, and connection among team members.

Communication & Difficult Conversations

  • Communication is also a factor to take into account since it allows transparency and clarity in the development of any project, and those involved will be able to convey their needs and worries better, thus avoiding preventable failures.

Giving and receiving feedback

  • Recognizing vulnerability and identifying weaknesses in your team will benefit your initiatives. In every professional environment, it is fundamental to receive timely feedback to make sure we are on the right path to achieving organizational goals.

  • If you are a leader, offer constant feedback to your team. Do not wait until something goes wrong: a huge snowball effect will be difficult to control later. If, on the other hand, your team is doing well, reward, recognize, and motivate them so that they can continue to develop effectively. 

  • Celebrate every win, and point out opportunities for improvement on time. Remember, recognition is to be made in public while observations on mistakes and areas of opportunity are to be made in private.

  • If you are part of a team, approach the team leader openly to clear up any doubts and ask for advice on areas of opportunity. A flexible company will always maintain a horizontality that nurtures effective, open, vulnerable communication.

Psychological safety and Vulnerability

Vulnerability is at the very heart of the feedback process. It's like the secret sauce that makes the whole process work. All parties involved need to be willing to embrace uncertainty, take risks, and let their emotions run wild. It's all about bearing it all, no holds barred. There's no need for protection here because we're diving headfirst into the wild world of emotions and uncertainty.

Foster a culture of shared accountability

  • Mistakes in a workplace are unavoidable, and pointing fingers to shame others is useless and detrimental to psychological safety at the workplace. Promoting a culture of both shared and personal accountability is a practice to be shared with everyone.

  • Each person has an impact on the production and/or administrative systems of a company, and if errors arise, it is necessary to inform managers and leaders and get actively involved in solving them. If we cannot be vulnerable, we will hardly be willing to admit that we have failed and we will not hold ourselves or others accountable.

  • More important than reporting errors is to reduce their incidence. For this reason, it is crucial to know the strengths and areas of opportunity of our team, so that the assignment of tasks is made based on this knowledge. 


  • Having different points of view within an organization is always a good thing when analyzing the corporate culture of your company. 

  • The fact that individuals in the organization can be themselves without fear of being judged is a good sign that we can have diverse opinions in the company which would lead us to have much more innovative solutions.

  • Innovation in processes or solutions is negatively impacted by the leader’s resistance to change, particularly when it comes to failure.

  • A change in perspective, truly opening up about the company’s or leadership's failures will not only encourage innovation but also make employees feel empowered to own their mistakes and report anything that could turn into a failure early in the creation of a new product or initiative.

How can management help when a failure happens

Leadership plays a crucial role here, as it can effectively turn these setbacks into learning experiences and opportunities for growth that drive the organization to its ultimate success. After all, the way an organization's management handles failure can say a lot about its ethos and resilience.

Leaders should possess a unique set of skills to facilitate failure management. This includes the ability to calmly analyze the situation, identify the root cause, and strategize the best course of action to overcome the issues. By communicating transparently about the failure, managers can foster an environment of trust and teamwork, which is paramount in tackling the failure at hand. And fostering a culture where mistakes are viewed as opportunities to learn and grow can have profound effects on an organization’s morale and productivity.

But that’s not all. Strong leadership also encompasses the ability to prevent failures as much as possible. This can be achieved by investing in regular skills development and training programs for the team, which ultimately results in better decision-making, problem-solving, and risk management skills. Furthermore, leaders should also be adept at keeping the team motivated and resilient, ensuring that failures do not lead to a drop in team spirit or productivity.

While failures are part and parcel of any business journey, good failure management can turn these challenges into stepping stones towards success. A capable leader must harness their skills to guide their team through these failures and impart valuable lessons for future growth. This kind of leadership not only manages the failure but also strengthens the team's skills and resilience for a more prosperous future.

How can poor management lead to business failure

Poor management can be a direct route to business failure if not promptly addressed. Different aspects of management, especially leadership, play a pivotal role in steering a business towards success or demise. Poor leadership choices can lead to a lack of direction, unclear goals and objectives, and unsatisfied employees, all of which can tear down an otherwise promising business.

Furthermore, a business running under incompetent management tends to lack psychological safety which is the bedrock of a healthy work environment. Employees must feel empowered, respected and safe to voice their ideas without the fear of any negative consequences. When this is missing, it creates a hostile environment that fosters fear and apprehension, discouraging innovation and collaboration. A team without these elements can hardly thrive, leading to poor productivity and eventually, business failure.

However, every downfall presents an opportunity to learn and grow. Failure management, while potentially devastating, can bring about important lessons learned. Business leaders can take the downfall as a wake-up call to examine their leadership style, management strategies, company culture, and decision-making process. This introspection could reveal some hard truths and identify areas requiring immediate changes.

Business failure is often a symptom of deeper issues, with poor management being one of the primary culprits. It's crucial for anyone in a leadership position to create a safe, positive, and engaging work environment for their team and to learn valuable lessons from any failures along the way. By doing so, businesses can bounce back stronger, wiser, and ready to conquer the market.

How to develop a failure management strategy

Failure management is a concept that goes beyond the idea of simply dealing with failure when it occurs. Instead, it's about proactively taking steps to manage and learn from mistakes systemically. The idea behind failure management isn't to avoid failure completely, but rather to understand that failure is an integral part of growth and innovation, a stepping stone rather than a stumbling block. 

Systematic failure management involves adopting strategic steps and practices that make the most out of each failure. This might include meticulously analyzing what went wrong, identifying the factors that led to the failure, and finding ways to avoid such occurrences in the future. It also involves cultivating a positive mindset towards failure, embracing it as a chance for improvement rather than a debilitating occurrence. 

In essence, failure management is all about creating an environment where failure isn't feared but rather seen as an asset. It's a proactive approach that acknowledges the constructive role of failure in driving progress and success in both personal and professional arenas.

Want to kick-off your failure management strategy? We have an online course and also a workshop that you and your team can attend either virtually or in-person. Fill out this form and we'll be with you every step of the way!

Frequently Asked Questions

What are the key tasks for failure management?

Failure management is a crucial aspect of leadership that encompasses the ability to learn from mistakes and foster an environment of psychological safety. This requires a nuanced and sensitive approach, focusing on three key tasks: identification, analysis, and learning.

The first step in failure management is identification. Leaders must develop a keen eye for spotting failures, both small and large, within their teams or the overall organization. They need to embrace a non-punitive culture where individuals feel safe to disclose mistakes without fear of retribution. This culture of psychological safety is a prerequisite for effective failure management, as it encourages transparency and promotes trust within the team.

The next step is analysis. Once a failure has been identified, it calls for careful, objective, and insightful evaluation. Leaders should work to understand the root causes and contributing factors that led to the failure. This involves investigating the failure from multiple perspectives, looking beyond the obvious to uncover deeper, systemic issues that may have played a role.

Finally, the most important task in failure management is learning. Failures, while unfortunate, are invaluable opportunities for learning and growth. Leaders should facilitate a thorough analysis of the failure, draw out constructive lessons, and incorporate these lessons into future strategies and plans. This is where the real value of failure management lies – in turning setbacks into stepping stones for future success.

In a nutshell, effective failure management requires strong leadership. Leaders need to foster psychological safety, promote transparency, and turn failures into learning opportunities. By doing so, they can drive their teams towards continual improvement and sustained success.


Lee, J., & Miesing, P. (2017). How entrepreneurs can benefit from failure management. Organizational Dynamics, 46(3), 157–164.

The Science of Failing Well | Amy Edmondson. (2023, September 5). Good Life Project.

Edmondson, A. C. (2022, November 7). Strategies for Learning from Failure. Harvard Business Review.

Edmondson, A. C. (2023). Right kind of wrong: The Science of Failing Well. Simon and Schuster.

Editado por

What is failure management and how to use failure to grow your business
Raquel Rojas
Marketing & Comms Manager
Neurodivergent, antiracist, queer, feminist, vegan for the animals, mother, sister, lover, Mexican, immigrant. Fan of music festivals by the beach, gin tonics, and annoying people with her unsolicited unpopular opinions.


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