I heard a speaker recently mention Type I and Type II failures. The way they described it was, a Type I failure is an irreversible failure and a Type II failure is reversible.
One might say that Kodak is a case study in Type I failure. A recent article in Harvard Business Review summed up the story pretty well. A generation ago, a ‘Kodak moment’ was something worth cherishing. Today, it represents the need for businesses to be agile. Kodak’s decisions about their business model had irreversible consequences to the organization.
A Type II failure can involve a range of situations. For example, an organization hires a new CEO only to realize they’re the wrong person for the job. Or a company spends thousands of dollars buying a technology solution that doesn’t work the way they wanted. Or a strategic marketing partnership between two companies that doesn’t yield expected results. All of these situations can be fixed by making a change. It doesn’t mean there wasn’t any damage done. But hopefully it’s reversible.
The point that the speaker was trying to make with the Type I and II failures is that organizations need to apply the right solution to the problem. Think about it. It applies in both situations.
How many companies make a big (but reversible) failure and decide they can no longer compete? They don’t take the lessons learned and apply them.
On the other hand, how many organizations make an epic (Type I) fail and don’t see the writing on the wall? They think they can fire the CEO and that will miraculously bring their customers back.
While there’s no sure thing to avoid failure, there are three actions that companies should consider:
- Don’t stop planning. There’s a benefit in strategic and operational planning. It brings people together for the sole purpose of discussion about the organization. People get to ponder, plan, and spitball ideas. Consider possible failure scenarios during planning. Just remember to savor the moment – planning is a necessity not an activity to be quickly shuffled through. And diversity of thought is the key to successful planning.
- Regularly monitor progress. Once a plan is in place, the work isn’t over. The plan is based on a set of assumptions. External factors can change those assumptions at any moment – especially in today’s work environment. Some things to watch for include customer comments, competitor activity, and government action. When changes happen or start to trend, it’s time to get people together to figure out if a response is warranted.
- Change or abandon the plan. It’s time to put egos aside and realize that sometimes it makes good business sense to alter or even stop the current plan of action. That is not an admission that the idea was bad or the implementation failed. It means the circumstances under which the decision was conceived have changed, and the organization needs to change along with it. It’s possible that, with a little tweaking, the plan could be stronger than ever.
Making organizational decisions is tough. Mistakes will be made. The question becomes, are the mistakes Type I or II and what can the company do when mistakes happen. It starts with using the right methodology so the proper solution is applied to the situation.
Image captured by Sharlyn Lauby just off Duval Street in Key West, FL0