True innovation requires leaders to adopt a venture capital mindset, accepting that roughly nine out of ten initiatives will fail. This high tolerance for failure, mirroring professional investment odds, is a prerequisite for the psychological safety needed for breakthrough results.

In operations, failure is a problem to be eliminated. In innovation, where new ground is being broken, failures are expected and necessary. Instead of being viewed as mistakes, they must be reframed as valuable data points that provide crucial learnings to guide subsequent experiments and decisions.

To foster a culture of risk-taking and speed, leaders must accept that their role is not to prevent all errors. Instead, they should focus on creating an environment where mistakes are surfaced quickly and corrected without punishment, which is a key artifact of empowerment.

When an experimental campaign failed, Edelman's CEO Richard Edelman protected the mid-level employee responsible. He framed the mistake as a necessary cost of innovation in a new field, explicitly telling the team to "keep pushing boundaries." This response fosters a culture where calculated risks are encouraged rather than punished.

Instead of blaming an individual for a failed initiative, ask what in the process could be improved. This shift removes fear, fosters psychological safety, and encourages team members to take creative risks without fear of personal reprisal.

To de-risk creativity, leaders should distinguish between internal (process) and external (market) failure. Internal failure should be encouraged as fuel for innovation. Leadership's role is to create systems that embrace internal stumbles while minimizing the chance of costly public failure.

To foster an innovative team that takes big swings, leaders must create a culture of psychological safety. Team members must know they won't be fired for a failed experiment. Instead, failures should be treated as learning opportunities, encouraging them to be edgier and push boundaries.

To foster innovation, leaders must give teams the freedom to experiment without fear of reprisal for failure. If every new idea is immediately judged by its short-term ROI, people will cease to try anything new. Psychological safety to test and fail is the prerequisite for a dynamic, evolving culture.

Menlo's culture operates on the principle that when mistakes happen, the system is at fault, not the individual. This approach removes fear and blame, encouraging the team to analyze and improve the processes that allowed the error to occur, fostering a culture of continuous improvement.