During the first workshop of the Stanford Seed Transformation Program, we play a video featuring business leaders from past cohorts, titled "Problem Solvers". One thing they speak about is how often they've failed and how they learned valuable lessons from those failures. It almost seems like they're glorifying failure (you know, the regular clichés: "if you haven't failed you aren't trying hard enough"). This prompted me to think about how we should think about failure.
While there is merit to the idea that an organization shouldn't vilify failure, or punish someone for failing, Jesper Sorenson puts it well when he says "I don't have a problem with well-intentioned failure" (emphasis added). In other words, don't encourage an environment in which people are being reckless, or failing for the sake of failing. The failure must be well-intentioned, in that you thought you had the wrong answer, but it turns out you didn't.
Second, make sure that lessons from failure are well learned, throughout the organization. Any mistakes should (as far as possible), be new mistakes. If you shrug off failure, forgive people for failing, but don't adequately learn from the failure, then you've just flushed a lot of time and money down the drain. Have a process to learn from failure and to disseminate those lessons. Some organizations have a "Fail-faire" where they disseminate these lessons. The World Bank has an excellent blog post that covers how to organize such an event.
Lastly, make sure that any experiments that are likely to result in failure are circumscribed so that they don't take down the whole organization. SMEs have limited resources, and a significant failure may bring the whole organization crashing down. Don't experiment with that important client who is fussy and demanding; find a smaller client who is forgiving and willing to take a chance. Don't roll out that new initiative throughout the organization before testing it with a smaller part first.
By all means, go ahead and fail, but ensure that failure, if it were to happen, gives you the benefits you seek from it. Test new ideas, learn new lessons, create a culture of risk taking, but manage it well.
Executive, entrepreneur, investor and mentor to social entrepreneurs, golf and squash addict, author of thrillers... In short, an amateur dabbler in new experiences, and provoker of thoughts.