1. The Art of Failure Models of Failure Monterey Institute of International Studies Eli Zelkha

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. FMEA Failure Modes and Effects Analysis

5. Engineering View of Failure
Design
Plan for Failure
Test It Break It
Learn From Failure
Iterate

6. FMEA Failure 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. FMEA Benefits 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. FMEA Failure Modes and Effects Analysis
Procedure Flowchart
Design
Revise Design
Perform FMEA, ID Failure Modes
Get System Overview
Establish Failure Effect
Determine Criticality
Procedure:
Get an overview of the system:
Determine the function of all componentry
Create functional and reliability block diagrams.
Document all environments and missions of system
ID all potential failure modes for each component
3) Establish failure effect on the next level of the system
Determine failure detection methods
Determine if common mode failures exists
4) Determine criticality of the failure, ranking & CIL (Critical Items List)
Develop CIL
Corrective actions rationale
5) Provide suitable follow-up or corrective actions
Source: NASA Lewis Research Center

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

10. FMEA Take Away for Entrepreneurs Traditional 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 Entrepreneurs Agile 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 Development Customer Involvement and Rapid Iterations
Markets
Customers
Biz Models
Strategy
Portfolios
Funding
Customers
Sales
Marketing
Support
Upgrades
EOL/EOS

13. “How the Mighty Fall: and Why Some Companies Never Give In”
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 Stage 2 Stage 4 Stage 1 Stage 5
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 Stage 2 Stage 4 Stage 1 Stage 5
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 Stage 2 Stage 4 Stage 1 Stage 5
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 Stage 2 Stage 4 Stage 1 Stage 5
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 Stage 2 Stage 4 Stage 1 Stage 5
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 Stage 2 Stage 4
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. Background: Deal at Philips
Deliverables
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%
Before I dive into the scenarios, let me re-iterate some of the fundamental concepts of scenario planning.
1) We believe that when it comes to long-range planning, a company should imagine a range of possible outcomes, not just one forecast for the future.
2) We also believe that the consumer electronics industry has too many variables--such as industry structure, business models, competitors, technology, regulatory environment, consumer demands, etc.-- affecting the future to reasonably entertain them with one forecast.
3) And finally, we believe it’s better to be roughly right about a committed direction for Philips, than to be precisely wrong. That is, we think there’s a lot of value in making decisions that move us in a direction, even before we “know” that the decision will have a perfect outcome.
Compare scenario planning to a traditional strategic planning model….the primary difference is comparing knowns and unknowns, that is predictable events and unpredictable oones. And forecasts vs. stories...
So, the simplified scenario planning process is a three-step process… First, identify what the world outside of Philips might look like. We do this by analyzing trends and uncertainties that Philips can not control--and we develop several snapshots of those worlds 5-7 years in the future. Next, we imagine what would make that world come about--what are the concrete headlines that would occur in the years leading to the snapshots? And finally we analyze what Philips’ current strengths and weaknesses are. With each of these steps completed, we’re ready to identify where the gaps are between what we’re good at today, and what we believe may be important in the future.
Of course, I’m over simplifying here. There are all kinds of statistical models that my partner sometimes uses to test correlation between forces. And there are sophisticated planning tools for identifying existing capabilities. But, the main process take-away here is: scenario planning is a highly structured process for deciding on how a company can close the gaps between what it is today, and what it wants to be in the future.
Knowns
TODAY

26. Scenario Planning: An Overview
Forecast Based Planning
TODAY
Scenario Based Planning
Unknowns and uncertainties
Unknowns
Knowns and trends
Knowns and trends
-10%
+10%
Before I dive into the scenarios, let me re-iterate some of the fundamental concepts of scenario planning.
1) We believe that when it comes to long-range planning, a company should imagine a range of possible outcomes, not just one forecast for the future.
2) We also believe that the consumer electronics industry has too many variables--such as industry structure, business models, competitors, technology, regulatory environment, consumer demands, etc.-- affecting the future to reasonably entertain them with one forecast.
3) And finally, we believe it’s better to be roughly right about a committed direction for Philips, than to be precisely wrong. That is, we think there’s a lot of value in making decisions that move us in a direction, even before we “know” that the decision will have a perfect outcome.
Compare scenario planning to a traditional strategic planning model….the primary difference is comparing knowns and unknowns, that is predictable events and unpredictable oones. And forecasts vs. stories...
So, the simplified scenario planning process is a three-step process… First, identify what the world outside of Philips might look like. We do this by analyzing trends and uncertainties that Philips can not control--and we develop several snapshots of those worlds 5-7 years in the future. Next, we imagine what would make that world come about--what are the concrete headlines that would occur in the years leading to the snapshots? And finally we analyze what Philips’ current strengths and weaknesses are. With each of these steps completed, we’re ready to identify where the gaps are between what we’re good at today, and what we believe may be important in the future.
Of course, I’m over simplifying here. There are all kinds of statistical models that my partner sometimes uses to test correlation between forces. And there are sophisticated planning tools for identifying existing capabilities. But, the main process take-away here is: scenario planning is a highly structured process for deciding on how a company can close the gaps between what it is today, and what it wants to be in the future.
Knowns
TODAY

27. Scenario Planning: An Overview
TODAY
Scenario Based Planning
Unknowns and uncertainties
Unknowns
Knowns and trends
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
Before I dive into the scenarios, let me re-iterate some of the fundamental concepts of scenario planning.
1) We believe that when it comes to long-range planning, a company should imagine a range of possible outcomes, not just one forecast for the future.
2) We also believe that the consumer electronics industry has too many variables--such as industry structure, business models, competitors, technology, regulatory environment, consumer demands, etc.-- affecting the future to reasonably entertain them with one forecast.
3) And finally, we believe it’s better to be roughly right about a committed direction for Philips, than to be precisely wrong. That is, we think there’s a lot of value in making decisions that move us in a direction, even before we “know” that the decision will have a perfect outcome.
Compare scenario planning to a traditional strategic planning model….the primary difference is comparing knowns and unknowns, that is predictable events and unpredictable oones. And forecasts vs. stories...
So, the simplified scenario planning process is a three-step process… First, identify what the world outside of Philips might look like. We do this by analyzing trends and uncertainties that Philips can not control--and we develop several snapshots of those worlds 5-7 years in the future. Next, we imagine what would make that world come about--what are the concrete headlines that would occur in the years leading to the snapshots? And finally we analyze what Philips’ current strengths and weaknesses are. With each of these steps completed, we’re ready to identify where the gaps are between what we’re good at today, and what we believe may be important in the future.
Of course, I’m over simplifying here. There are all kinds of statistical models that my partner sometimes uses to test correlation between forces. And there are sophisticated planning tools for identifying existing capabilities. But, the main process take-away here is: scenario planning is a highly structured process for deciding on how a company can close the gaps between what it is today, and what it wants to be in the future.

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
Scenario planning is the application of visual dialogue. It is a way to structure and facilitate strategic thinking in management teams and multi-organizational corporations where there is increasing uncertainty in the business environment.
The beauty of scenario thinking is that it allows us to tell each other stories about how the world might work. The key element is not whether we are "right" or "wrong," but rather, that we dig deep down to understand that it is our assumptions and perceptions that underpin the imaginations in each scenario, and evaluate their plausibility, their credibility. Scenarios are not linear or mechanistic, they are displays of exponential connections.

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
The pace of change in large corporations has reached stunning speed. And this speed is matched equally by the scale and scope of decisions being made by management-decisions that often change the very nature of the company, and may even alter the structure of its industry and markets. Many decisions are needed to be made, and some are rather important. How are such momentous decisions actually made in large businesses?
What usually happens is that executives test a critical decision against their mental model of how the business and their market works. We each carry mental models in our heads; they are the products of our accumulated individual experience. If the decision is compatible with our mental model, we act on it.
When we read objective reports and forecasts, we interpret them through the filter of our experience. This is acceptable in relatively stable industries, where the wisdom inherent in an experience-based mental model has lasting value. But this approach can be extremely dangerous in fast-changing environments. The biggest pitfall is obvious: An experience-based mental model is based on past knowledge and may not be carrying critical new information. If the rules of competing in the market change, a past-oriented mental model will not be able to acknowledge the shift, and wrong decisions will be made.
A critical task of planning is to provide tools that adjust managers' mental models to reflect the rapid changes in their competitive environment. A key success factor is how fast the whole company--not simply individuals--can learn. In fact, this is the central management challenge of the 1990s. The corollary, of course, is the requirement that the organization be able to forget the outmoded information and concepts. Adjusting mental models has everything to do with KM, learning orgs, and future scenarios.

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

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

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

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

47. Create/Evaluate Alternative Approaches
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. Create/Evaluate Alternative Approaches
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!

51. Intelligent, Fast Failure
The “New” Way
Inception

52. Intelligent, Fast Failure
The “New” Way
Inception
Idea Generation Rapid Prototyping

53. Intelligent, Fast Failure
The “New” Way
Choose
Inception
Idea Generation
Rapid Prototyping
CustomerFeedbackc
CustomerFeedback
CustomerFeedback

54. Intelligent, Fast Failure
The “New” Way
Choose/
Re-Design/
Re-Test
Choose/
Test
Inception
Idea Generation
Rapitd Prototyping
Customer
Feedbackc
CustomerFeedback
CustomerFeedback
CustomerFeedback
CustomerFeedback
CustomerFeedback

55. Intelligent, Fast Failure
The “New” Way
Choose/
Re-Design/
Re-Test
Range Of
Outcomes
Choose/
Test
Inception
Idea Generation
Rapid Prototyping
Customer
Feedbackc
CustomerFeedback
Go To Market
CustomerFeedback
CustomerFeedback
CustomerFeedback
CustomerFeedback

56. Intelligent, Fast Failure
The “New” Way
Choose/
Re-Design/
Re-Test
Range Of
Outcomes
Choose/
Test
Inception
Idea Generation
Rapid Prototyping
Customer
Feedbackc
CustomerFeedback
Go To Market
CustomerFeedback
CustomerFeedback
Fallback Strategy
CustomerFeedback
CustomerFeedback