Why You Don't Need to Fear -- and May Even Want to Embrace -- the F Word: Failure

Rewards Don't Come Without Taking Risks

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The very word makes us squirm. At a time when the C-suite scrutinizes return on investment and Wall Street expects steady, quarterly performances, failure can be death.

But it can also be very necessary. In this digital world, when products and messages can be prototyped, put into market and quickly tweaked or pulled, marketers had better get more comfortable with failing—and learning from it.

"There are some macro shifts happening in corporate America," said Wendy Clark, senior VP-integrated marketing communications and capabilities at Coca-Cola. "For a long time, it's been acceptable to make a career on neutral outcomes. No one ever got fired for being middle of the road." But "in this environment, with so much conversation, neutral is the enemy. I'd rather fail than have no impact."

Indeed, with marketing budgets spread across a myriad of paid media, social media, promotions and contests, it's becoming expected that not everything will work perfectly—even in the traditionally risk-averse consumer-packaged-goods space.

Gatorade's mission control unit enables brand to spot issues early on.
Gatorade's mission control unit enables brand to spot issues early on.

"Muhtar [Kent, CEO of Coca-Cola,] says "It's okay to fail once, but not to fail twice at the same thing,'" Ms. Clark said. "When we started talking about digital and mobile and social and big data three years ago, there was very little muscle memory. The only thing we could do was fuel a feeling in the company that we had to make these bets and some would fail and we'd learn and we'd build muscle memory."

Now at Coca-Cola, a 70/20/10 model is employed. Seventy percent of budgets go toward "blocking and tackling, doing what we know drives business," Ms. Clark said, while 20% is reserved for innovative ideas that have some knowledge behind them. Ten percent is dedicated to high-risk, high-reward bets.

Execs say the key is to identify the level of risk that 's acceptable and create a culture in which failure happens fast. Crocs, which CEO John McCarvel candidly admits had a "near-death experience," has embraced failure wholeheartedly, outlining in the company's "Creed, Code, Culture" document that employees should "Have courage. Embrace change. Be fearless."

"We want people to take risks and don't want them to fear that if you fail, you pack up your office and leave," Mr. McCarvel said. "I grew up in San Jose and worked in high tech for the first 25 years of my career. If you haven't been fired or your company hasn't gone bankrupt twice in your career, then you're not pushing yourself hard enough."

Richard Fine, CEO at Help Remedies, also pointed to the technology arena, noting that rapid-fire prototyping has been crucial to the success of innovative brands in that space. That's drastically different from what he observed during his time as a consultant working with consumer packaged-goods companies that were spending millions of dollars to develop new products.

"I often wondered if rather than trying to research things and get things right prelaunch, if there could be a better use of money," Mr. Fine said. Instead of spending $100,000 on focus groups, for example, why not spend $10,000 each on 10 different ideas? "Is it better to have 10 ideas with small budgets than one idea with a lot of research? With 10 ideas, you're more likely to have something take off."

Creatively, Mr. Fine said it is best not to water down ideas with a lot of testing and modeling. "There's value to just putting things out there," he said. "A lot of things are going to flop, and you have to accept that ."

For Gatorade, giving marketers a "safety net" -- in the form of Mission Control, the brand's hub for monitoring digital and social media -- has helped it become more comfortable with failure in recent years. And that , said Morgan Flatley, VP-marketing at Gatorade, is quickly setting it apart.

"Willingness to fail is going to be a competitive advantage of consumer packaged-goods companies, but all brands really," Ms. Flatley said. "The real differentiator will be failing quickly and minimizing the size of failure, which is what Mission Control allows us to do."

Mission Control enables the brand to quickly spot and correct potential problems with marketing or new products. For example, a Gatorade recovery shake was reformulated within a year of its launch to address flavor complaints picked up by the Mission Control team. Mission Control also identified negative reactions to the voice-over in a TV campaign launched last year.

"The voice-over was rubbing people the wrong way" because it sounded too robotic and futuristic, admitted Steve Moffat, director of digital and experiential marketing at Gatorade. "Five years ago we wouldn't have known until three to six months later. We were able to uncover that within 24 hours, and within 72 hours we had a new spot in the market."

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