Failure is an option: How failure can lead to disruptive innovations

We analyze how a failure-embracing mentality can lead to disruptive innovations. Grounded in the extensive data obtained from the study of space industry leader SpaceX and its revolution of reusable rocket boosters, we suggest that appropriate organizational processes can be highly effective in generating technological disruptive innovations. Our results mainly contribute to the identification of the foundational elements that need to be in place, as well as to the definition of sequential actions to be executed, for a successful innovation cycle. In the former, the organization must ensure that appropriate knowledge management mechanisms have been implemented, and that the individuals involved are prepared for the innovation process. In the latter, the detection and analysis of failure, followed by an optimization of further experiments and an adjustment of the roadmap, must proceed iteratively and sequentially to build upon the cumulative experience gained. These findings are important because they suggest that successful disruptive innovation is not fortuitous but can be achieved through systematic processes. Moreover, we bring a different perspective to a popular literature stream which to date had focused on why incumbent firms were successful or not in responding to disruptive innovations, rather than on how failure can be leveraged to successfully introduce in the market a disruptive innovation. In addition to the contributions to the learning by failure and disruptive innovation literatures, this work also adds to the very limited managerial studies of the fast-growing and increasingly relevant New Space Economy.