Failure

1. The Art of FailureModels of FailureMonterey Institute of International StudiesEli Zelkhaeli.zelkha@gmail.com650-218-6789

2. Failure

3. Models of Failure • Engineering model: FMEA (Failure Modes & Effects Analysis) • Disease model: Collins “How the Mighty Fall” • Innovation Driven: Innovator’s Dilemma • Scenario based planning • Aviation Model: Checklist Manifesto • Incubator model: YCombinators “18 Mistakes that Kill”

4. FMEAFailure Modes and Effects Analysis

5. Engineering View of Failure Learn From Failure Iterate

6. FMEAFailure Modes and Effects Analysis An engineering methodology to analyze and discover: • All potential failure modes of a system • The effects these failures have on the system and • How to correct and or mitigate the failures or effects on the system. The correction and mitigation is (generally) based on ranking of the severity and probability of the failure. Source: NASA Lewis Research Center

7. FMEABenefits • Key tool for reliability analysis • Provides detailed insight into systems interrelationships and potentials for failure. • • FMEA and CIL (Critical Items List) evaluations cross check safety hazard analyses for completeness. • If undertaken early enough in the design process by senior level personnel, can have major impact on: • Removing causes for failures • Developing systems that can mitigate the effects of failures. Source: NASA Lewis Research Center

8. FMEAFailure Modes and Effects Analysis Procedure Flowchart Design Revise Design Perform FMEA, ID Failure Modes Get System Overview Establish Failure Effect Determine Criticality Source: NASA Lewis Research Center

9. Plan out 1-4 weeks work Meet daily Create product needs Review product Strategic planning Improve process FMEA: Take Away for EntrepreneursAgile Development Methodologies

10. FMEA Take Away for EntrepreneursTraditional Development Process • Customers only involved at beginning and end of process • No Iterations • Takes a long time. • “Make-or-break” • Rarely delivered according to plan

11. FMEA Take Away for EntrepreneursAgile Software Development • Early customer involvement • Welcome changing requirements • Deliver working software frequently • Business people and developers must work together • Face-to-face conversation. • Working software is the primary measure of progress. • Agile processes promote sustainable development. • Continuous attention to technical excellence and design enhances agility. • Self-organizing teams. • Constant tuning of processes

12. Agile Software DevelopmentCustomer Involvement and Rapid Iterations • Markets • Customers • Biz Models • Strategy • Portfolios • Funding • Customers • Sales • Marketing • Support • Upgrades • EOL/EOS

13. Jim Collins “How the Mighty Fall: and Why Some Companies Never Give In”

14. How the Mighty Fall Stage 3 Denial of risk and peril chasing things that are not part of your core, fail to see the problems.. Stage 2: Undisciplined pursuit of more Building from stage one is people chasing goals that take them away from their core, their competitive advantage all in the name of growth, or the grand strategy. Stage 4: Grasping for salvation The silver bullet, abandoning the flywheel and chase things outside the core. Stage 4: Grasping for salvation The silver bullet, abandoning the flywheel and chase things outside the core. Adapted from: Jim Collins, “Hoe the Mighty Fall and Why Some Companies Never Give In”

15. How the Mighty Fall Stage 3 Denial of Risk and Peril • Arrogance • Entitlement • Lose sight of what made success • Role of luck Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Stage 5 Capitulation to Irrelevance or Death Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

16. How the Mighty Fall Stage 3 Denial of Risk and Peril Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Stage 5 Capitulation to Irrelevance or Death • Overreaching • Stray from disciplined creativity • Leaps into unknown Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

17. How the Mighty Fall Stage 3 Denial of Risk and Peril Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Stage 5 Capitulation to Irrelevance or Death • Ignore negative data • Spin • Outsized risks • Risk denial Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

18. How the Mighty Fall Stage 3 Denial of Risk and Peril Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Stage 5 Capitulation to Irrelevance or Death • Previous risks become apparent • “Radical transformation” • “Cultural revolution” Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

19. How the Mighty Fall Stage 3 Denial of Risk and Peril • Accumulated setbacks • Eroded financial strength • Abandon hope Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Stage 5 Capitulation to Irrelevance or Death Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

20. How the Mighty Fall Recovery and Renewal Stage 3 Denial of Risk and Peril Stage 2 Undisciplined Pursuit of More Stage 4 Grasping for Salvation Stage 1 Hubris Born of Success Adapted from: Jim Collins, “How the Mighty Fall and Why Some Companies Never Give In”

21. Scenario Planning

22. The Background: Deal at Philips • Corporate venture capital and strategy for a major global consumer electronics player

23. Deliverables Background: Deal at Philips • Strategic plan unifying disparate units • High impact strategic venture capital investments • Forge strategic alliances • Develop transformative vision of industry future • Visionary “projects on the edge”

24. About Scenario Planning

25. Scenario Planning: An Overview Forecast Based Planning Knowns and trends -10% +10% Knowns TODAY

26. Scenario Planning: An Overview Scenario Based Planning Forecast Based Planning Knowns and trends Unknowns and uncertainties -10% +10% Unknowns Knowns Unknowns Knowns and trends Unknowns TODAY TODAY

27. Scenario Planning: An Overview Scenario Based Planning Unknowns and uncertainties • Scenarios are alternative visions of the future • Scenarios are generated by analysis of what we don’t know, not just what we do • Scenarios are used to envision and “try out” multiple futures • Scenarios are used to work backwards in time to today Unknowns Unknowns Knowns and trends Unknowns TODAY

28. Rethinking Industry Dynamics Industry Sales Embryonic Growth Mature Aging Time • Philips has a sophisticated way of planning for the future when operating in a mature industry environment • But there are emerging forces that threaten to disrupt--and recycle-- the entire industry, and the current view of dynamics • Forecast-planning is sufficient for a mature industry. But it’s inadequate when industry transformation is taking place

29. Breaking Out of our Preconceptions • They are stories that help suspend disbelief in possible futures • We have a tendency to fixate on one future, or at most, two • Scenarios are a powerful tool for forcing us to abandon previously fixed ideas • Scenario-based planning allows managers to deliberately try to break the rules of their business • Scenarios are about the world, not about us

30. How they help us • They enable us to “practise” for different futures • They are a tool for envisioning, not predicting • They suggest the strategies, deals and alliances that we would need to prosper in different worlds • The process of creating scenarios makes you smart about a space

31. Scenarios • Tool for embracing uncertainty • Tool for play & provocation • Tool for envisioning value creation & migration Tool for upsetting the world (within our minds & outside) & strategic transformation

32. Checklist Manifesto

33. Checklist Manifesto • Atul Gawande • Checklists allow one to manage complexity and cognitive overload. • Roots in aviation industry • Wide use in medicine emerging

34. Checklist Manifesto • Checklists are the means, during complex situations, to consistently apply the knowledge that is available in our minds but that we might forget to use. • Checklists permit us to manage the assembly and integration of knowledge that is held by different members of an enterprise when facing a complex situation.

35. Just A Routine Operation • http://www.vimeo.com/970665

36. Checklist Manifesto Objections • Call for a broad checklist regime would be counterproductive — fraught with all the dangers of bureaucracy • Spontaneity and imagination are important in many jobs

37. Checklist Manifesto • YC’s 18 Reasons Startups Die as Checklist?

38. Redefining Failure Seth Godin

39. Common Types of FailureSeth Godin • Design Failure.If your product or service is misdesigned, then people don’t understand it, don’t purchase it, or may even harm themselves when they use it, and you have failed. • Failure of Opportunity.If your assets are poorly deployed, ignored, or decaying, it’s as if you are destroying them, and you have failed. • Failure of Trust. If you waste stakeholders’ goodwill and respect by taking shortcuts in exchange for short-term profits, you have failed. • Failure of Will.If your organization prematurely abandons important work because of internal resistance or a temporary delay in market adoption, you have failed.

40. Common Types of FailureSeth Godin • Failure of Priorities. If your management team chooses to focus on work that doesn’t create value, that’s like sending cash directly to your competitors, and you have failed. • Failure to Quit. If your organization sticks with a mediocre idea, facility, or team too long because it lacks the guts to create something better, you have failed. • Failure of Respect. If you succeed without treating your people, your customers, and your resources with respect and honesty, you have failed. • Failure to See. And, of course, the most self-referential form of failure is the failure to see when you’re failing

41. END

42. Learning From Failure“Fast Failure”

43. Learning From Failure The Traditional Way Idea Inception

44. Learning From Failure The Traditional Way Create/Evaluate Alternative Approaches Idea Inception

45. Learning From Failure The Traditional Way Create/Evaluate Alternative Approaches Idea Inception Choose Alternative

46. Learning From Failure The Traditional Way Create/Evaluate Alternative Approaches Build Full Product and Go To Market Idea Inception Choose Alternative

47. Learning From Failure The Traditional Way Range Of Outcomes Create/Evaluate Alternative Approaches Build Full Product and Go To Market Idea Inception Choose Alternative

48. Learning From Failure The Traditional Way Range Of Outcomes Create/Evaluate Alternative Approaches Build Full Product and Go To Market Idea Inception Choose Alternative Feedback Too Late No Resources left No Fallback Position No Useful Learning

49. “Fast Failure” The “New” Way • Failure = Normal = Good. • Reward excellent failure. • Punish mediocre success. • Fail faster. Succeed sooner. • Fail. Forward. Fast. • Educate for Risk-taking, Creativity, Independence. • The Great Comeback • Video Link Source: Tom Peters

50. “Fail Early and Often” The “New” Way • Theory of Small Failures • Test components, not the whole thing • Control the environment – don’t risk everything, e.g. small test markets • Expect failure • Gain feedback • Redesign component • Embrace market reality by testing assumptions against realities • Save resources for fallback position!