The 3 Types of Failure and Why Celebrating Intelligent Failure is Essential for a Thriving Culture 🎉💡

Failure is often seen as something to avoid at all costs. But what if failure—when done right—was actually a sign of progress? Some of the most successful companies and innovators have learned to embrace failure, using it as fuel for discovery and improvement.

In fact, the Chief Scientific Officer at Eli Lilly famously held “Failure Parties” to celebrate mistakes that led to valuable lessons. Instead of hiding or punishing failure, these events encouraged scientists to share what went wrong, what they learned, and how those insights could be used to improve future research. By reframing failure as a stepping stone to success, they created a culture of fearless innovation. 🚀

But not all failures are created equal. Let’s break down the three types of failure and why embracing intelligent failure can supercharge growth.

The Three Types of Failure

1️⃣ Preventable Failure (Basic Mistakes)

These are the avoidable mistakes caused by carelessness, lack of preparation, or failure to follow best practices. Think of an airline mechanic skipping a routine safety check or a company launching a product without market research. These failures don’t provide much value and should be minimized through better training, systems, and accountability.

2️⃣ Complex Failure (System Breakdowns)

These happen in unpredictable environments where multiple factors interact in ways that are hard to foresee. Think of supply chain disruptions, cybersecurity breaches, or large-scale project failures. While frustrating, complex failures offer hidden opportunities to strengthen systems, provided they are analyzed and learned from. 🔍

3️⃣ Intelligent Failure (Innovative Learning Failures)

This is the failure we should celebrate. 🎉 Intelligent failures occur when people take calculated risks in the pursuit of innovation. They are well-designed experiments that test new ideas, push boundaries, and provide valuable insights—even if they don’t succeed.

Imagine a biotech company developing a new drug that doesn’t work as expected. While the trial may "fail," the knowledge gained can lead to the next medical breakthrough. These failures are essential for progress and should be rewarded, not punished.

Why Celebrating Intelligent Failure Creates a Thriving Culture 🚀

Punishing all failure equally stifles creativity and innovation. Instead, organizations that embrace intelligent failure build cultures that thrive on experimentation, learning, and continuous improvement. Here’s why:

🎯 1. It Encourages Innovation

Breakthroughs don’t happen by playing it safe. Companies like Google, Amazon, and Tesla have all experienced product failures, but their willingness to experiment is what keeps them ahead. When employees feel safe to try new ideas, they think bigger and bolder.

📚 2. It Accelerates Learning

Each failure is a lesson. The faster an organization learns, the faster it improves. A culture that encourages intelligent failure turns mistakes into stepping stones, leading to faster iteration and progress.

🤝 3. It Builds Psychological Safety

People do their best work when they feel safe. When failure isn’t punished but instead seen as part of the process, employees take initiative and share ideas freely. This kind of psychological safety fosters collaboration, engagement, and problem-solving.

🛑 4. It Prevents Bigger, Costlier Failures

Small failures help prevent catastrophic ones. Organizations that test new ideas in low-risk ways—such as pilots, prototypes, or simulations—identify weaknesses before investing heavily. This is why industries like aerospace, healthcare, and tech rely on continuous testing and iteration.

🏆 5. It Attracts and Retains Top Talent

Talented professionals want to work in environments where they can take risks and make an impact. If failure is met with blame and fear, employees become risk-averse and disengaged. But when failure is seen as part of the journey, people feel empowered to innovate and contribute.

How to Build a Culture That Celebrates Intelligent Failure 🎊

🔹 Clarify the Difference Between Failure Types – Ensure employees understand which failures are valuable and which should be avoided.

🔹 Reward Learning, Not Just Success – Recognize teams that take smart risks and extract insights, even if the experiment doesn’t succeed.

🔹 Encourage Small-Scale Experimentation – Allow teams to test ideas in low-risk environments before making large commitments.

🔹 Foster Psychological Safety – Leaders should model vulnerability by sharing their own intelligent failures and lessons learned.

🔹 Analyze and Share Lessons – When failures happen, discuss them openly to ensure the entire organization learns and grows.

Final Thought: Reframe Failure as a Stepping Stone to Success

Not all failure is bad—but all failure teaches something. By distinguishing between preventable, complex, and intelligent failures, organizations can create a culture of learning, innovation, and continuous improvement.

Instead of fearing failure, the best companies embrace it, learn from it, and use it to fuel progress. Just like the Chief Scientific Officer at Eli Lilly did with Failure Parties, we should celebrate failures that push boundaries and lead to new discoveries. 🎉

The real question is not “Did we fail?” but “What did we learn?” 🔥