STANFORD KNOWLEDGEBASE | "Failure can be a huge engine of innovation for an individual or an organization - the trick lies in approaching it with the right attitude and harnessing it as a blessing, not a curse," writes Baba Shiv, Sanwa Bank, Ltd. Professor of Marketing at the Stanford Graduate School of Business. Shiv describes two mindsets around failure: Type 1 is is fearful of making mistakes, Type 2 is fearful of losing out on opportunities. How can organizations shift from Type 1 to Type 2 thinking?

The first approach is to engage in rapid prototyping. In rapid prototyping, failure is an acceptable, even necessary, since it is through failure that one can test what works and what doesn't and arrive at the most optimal final result.

Another approach is to apply desperation. "Necessity is the mother of invention," Shiv reminds us. In an interesting comparison, Shiv describes how many companies use inspiration to drive innovation, but it doesn't always work. Desperation (what others call "constraints") and inspiration together create the right balance for innovative ideas to fit practical needs.

The bottom line, Shiv says: Failure is not bad. The sooner companies realize this, the sooner they will be on the road to breakthrough thinking.

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