Make No Mistake: Seeking Perfection Harms Innovation

At the moment, investors and politicians are trying to put out the firestorm of corporate crimes that came to light after the Enron collapse.

They are insisting not only on intensive investigations and accounting reforms but punishment of the wrongdoers. In response, the business community has become nervous and fearful. This may turn out to be more damaging than the scandalous behavior itself.

Caution and accountability are replacing the expansiveness that once characterized American business. In the long run, this could be the most destructive consequence of book-cooking by the likes of Enron and WorldCom.

Long before news of corporate scandals broke, Americans were already on an accountability binge. Especially in our schools, but also in other institutions, we have been demanding tests and standards and answerability. The stunning misbehavior of the darlings of our investing public has only intensified that attitude.

As Ambrose Bierce noted almost a century ago, accountability is “the mother of caution.” In a climate of fear, we tend to insist more and more on tests and measures. In the process we become increasingly risk-averse.

Taking risks, however, is precisely what is needed now, more than ever.

Risk is the only avenue to innovation. And the demand for innovation in the current fast-paced, globalized and technologized economy is constant. We need continual innovation in both product and process.

Instead, we are seeing a pulling back, a move toward tightening up, toward making sure no mistakes are made.

Today’s most popular management fad is a quality-control approach known as “six sigma,” a term borrowed from statistics that means that the work done by our business and government institutions must be as close to perfect as possible. No mistakes.

This impulse to seek perfection takes us in the wrong direction, robbing us of what is perhaps our most important national strength: the ability to innovate. Other countries may occasionally have taken markets away from us, but there were always more where those markets came from because we had the power to innovate by taking chances and, in the process, to create new markets.

Mistakes and failure are the inevitable consequences of taking risks. One measure of genuine risk-taking is the amount of failure generated. That’s why IBM’s Thomas Watson Sr. said, “If you want to increase the probability of success, double your failure rate.”

The great innovators from Thomas Edison down to the contemporary entrepreneurs in Silicon Valley have operated on the same principle. They understand that failure and success are intimately connected, interdependent, sometimes indistinguishable. One has always led to the other.

Microsoft’s Bill Gates was recently depicted in Fortune magazine as a risk-taker whose success grew from the realization that, in the words of a colleague, “you have to try everything, because the real secret of innovation is to fail fast.”

To allow the current revelations of disgraceful corporate behavior to make us hunker down in a mode of caution could cause us to lose our edge in the highly competitive global economy.