Wharton Magazine: How did you develop the concept of what you call “brilliant mistakes”?

Paul Schoemaker: Two issues have always intrigued me. First, when the founder of Honda claims that success is 99 percent failure, I wonder why we label the necessary steps toward success in such a negative way. Failure and its twin sister “mistakes” often get a bad rap. Second, when executives tell me that they learned the most in their careers from mistakes, I wonder why they don’t make a few more. To learn maximally from mistakes, we need to commit more errors than we deem optimal as judged within the bounds of our limited rationality.

WM: How can companies leverage failure, strategically, into success?

PS: Companies that want to compete on innovation are well-advised to become more tolerant of errors in practice and develop better methods for capturing the lessons from mistakes. Such companies should also emphasize that managers (especially younger ones) who are involved in project failures are to be viewed as being on a fast learning track, rather than an exit track.

WM: What are some of the most surprising or unexpected findings or insights from your research?

PS: Successful people tend to have a different view about mistakes than most ordinary people. Not only are they more tolerant of them (in themselves and others), but they often embrace them. Another surprising conclusion is that people who are more risk-averse should make more deliberate mistakes because they can be used as hedges. This was counterintuitive to me at first. A strong portfolio case can be made for investing in mistakes. Similarly, a deliberate mistake can be viewed as a hedge against conventional wisdom, one that will have a high payoff when the majority view of the crowd happens to be wrong (but a loss otherwise in all likelihood).

WM: Any other issues you’d like to emphasize, regarding your new book?

PS: I describe a long list of past business mistakes—as judged by the conventional wisdom at the time—that proved to be brilliant. These include personal copiers, selling via pet stores, ATM machines, credit cards for students, organic food, fractional jet ownership and tobacco-free cigarettes. Just as these ideas were ridiculed at the time, there are many silly business ideas floating around today that will prove to be brilliant in the future. The challenge for managers is to recognize them, and this can only happen if leaders create sufficient space for productive mistakes to occur.

Editor’s note: You can buy Brilliant Mistakes at whr.tn/BrilliantMistakes.