The role of accidents in business

A In 1894 Dr John Kellogg and his brother Will were supervising a hospital and health spa in Michigan. The patients were on a restricted diet. One day, the brothers left cooked wheat unattended for more than 24 hours. When they returned, they saw what they had done. It was no good to eat, but they decided to run the stale wheat through rollers, just to see how it would turn out. Normally, the process produced long sheets, but they were surprised to discover that this time the rollers created flat flakes. They baked them, and then tried the same thing with corn. From this accidental discovery came the cornflakes that generations have now been eating for breakfast.

B Accidents happen; there is nothing predictable and orderly about innovation. Nobel laureate Sir Alan Hodgkin, who discovered how nerve cells transmit electrical impulses between the skin and the brain, commented: "I believe that the record of my published papers conveys an impression of directedness and planning which does not at all coincide with the actual sequence of events."

C The same rule applies in business. The mistake that gave us cornflakes keeps repeating itself in the history of disruptive innovation — the kind that transforms markets. Louis Daguerre, for instance, discovered the technique that gave us photography in the 1830s when drops of mercury from a shattered thermometer produced a photographic image. The microwave was discovered when Percy Spencer, a scientist with Raytheon, was testing a new vacuum tube and discovered that the sweet in his pocket had melted. The artificial sweetener saccharin was the unintentional result of a medical scientist’s work on a chemical treatment for gastric ulcers. While working for the firm 3M, researcher Art Fry had no idea he was taking the first steps toward Post-It Notes when he used bits of adhesive office paper that could be easily lifted off the page to replace the scrap paper bookmarks that kept falling out of his hymn book.

D Breakthrough and disruptive innovation are rarely driven by orderly process. Usually they come out of a chaotic, haphazard mess, which is why big companies, full of managers schooled in business programmes designed to eliminate random variation and mistakes, struggle with them. In these sorts of environments, accidents are called failures and are discouraged.

E Research by British economist Paul Geroski and London Business School’s Constantinos Markides found that companies that were skilled at innovation were usually not that skilled when it came to commercialisation — and vice versa. Their book Fast Second divides businesses into ‘colonists’ and ‘consolidators’. Small and nimble, colonists are adept at creating market niches but are terrible institution builders. Consolidators, with their strong cultures of discipline and cost control, know how to take clever ideas from other firms and turn them into mass-market items. Microsoft is a prime instance of this.

F With companies spending billions on research and development, US academics Robert Austin and Lee Devin examined how managers can encourage productive slip-ups. In their article Accident, Intention and Expectation in the Innovation Process, they argue that business processes actually prevent helpful mis-steps from occurring. According to their catalogue of accidents, not all false steps and mishaps are equal. Accidents, they say, come from unlikely mental associations such as memories and vague connections, looking for something and finding it in an unexpected way, looking for one thing and finding something else — and not looking for anything but finding something valuable.

G Accident-prone innovation, they say, requires companies to get outside the "cone of expectation." It means throwing together groups from diverse backgrounds and combining ideas in unpredictable ways. Other strategies also include having systems that watch out for accidents and examine them for value, generating them when they do not happen often enough, seizing on the useful ones, capturing their valuable features, and building on them to add value and give potential for useful accidents.

H All this requires thinking that is often counter-intuitive to the way businesses operate. It runs counter to the notion frequently pushed by consultants that you can harness creativity and direct it to line up with intention. The cost of accidents in business, people tend to call such efforts failure.

I There are signs that more companies are starting to realise that failure can lead to commercial gain and that this is part of the risk-taking that underpins innovation. Australia’s largest brewing company, for example, made a bad error when it launched a new beer called Empire Lager, pitched at younger consumers. Having spent a fortune creating a sweeter beer, designing a great-looking bottle, and a television campaign, Foster’s was left with a drink that no-one wanted to buy. The target market preferred brands built by word of mouth. Instead of wiping the unsuccessful product launch, Foster’s used this lesson learned to go on and develop other brands. One of them, Pure Blonde, is now ranked as Australia’s fifth-largest beer brand. Unlike Empire Lager, there has been almost no promotion and its sales are generated mainly by word of mouth.

J Other companies are taking similar steps to study their own slip-ups. Intuit, the company behind financial tools such as Quicken, holds regular “When Learning Hurts” sessions. But this sort of transformation is never easy. In a market that focuses on the short-term, convincing employees and shareholders to tolerate failure and not play it safe is a big thing to ask.