How To Innovate October 21, 2009, 11:31AM EST

Radio Flyer Learns from a Crash

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Radio Flyer stumbled with its Fold 2 Go Wagon, killing the product just a month before the ship date.

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"We then quickly came up with an innovative new tricycle called the Twist Trike," says Schlegel. "We also took the learnings from the Fold 2 Go Wagon project to create the Ultimate Family Wagon."

Based on that experience, the 92-year-old company has made changes to its culture, strategy, and process.

Pasin, 40, now holds a regular breakfast for new employees at which he impresses upon them the idea that failure is inevitable if you want to innovate and valuable if you can learn from it. (India's Tata Group, another company highlighted in our How to Innovate series, even gives Dare to Try awards to the teams behind ambitious failed projects.)

To make up for duds and boost its success rate, the company is taking more shots at new products. A folding tricycle, launched the same year the Fold 2 Go wagon failed, sold well, "making up for lost sales," says Schlegel.

The new strategy is evident in the company's four-stage product-development process. Schlegel puts 40 to 50 product ideas into the development funnel, and at every stage, the weakest are eliminated, with no individual or team branded with a scarlet F. Ultimately Radio Flyer presents 15 to 20 new products to retail buyers like Toys "R" Us, Target (TGT), Wal-Mart Stores (WMT), and Kmart (SHLD).

And after every project ends—whether the product has shipped or been killed—Radio Flyer is developing what Schlegel describes as an "autopsy without blame," in which everyone involved in the development of a product discusses four questions: What went well on the project? What didn't go well on the project? What did we learn? What are we going to do next?

Radio Flyer's 2008 revenues are impressive, says toy industry analyst Christopher Byrne of the ToyGuy.com. "There are more than 600 toy companies in the U.S., but I don't think there is any one that is such a part of our culture that is still independent."

What executives can learn from Radio Flyer

It's never too late to pull the plug. It's always better to kill a project than to ship a faulty product to retailers or customers. Even a good brand can be devastated by one bad product.

Construct prototypes to find problems early, and deal with them early, too. Start with quick-and-dirty models; as a project evolves, make prototypes that are accurate in terms of size and weight. Once design or engineering problems are uncovered, address them immediately. They will only grow bigger.

A failed project shouldn't be a career ender. Managers and teams alike can learn an extraordinary amount from failed projects. Smart companies will capitalize on that knowledge rather than punishing those involved.

Teach failure. Make managers and new employees alike know that failure is acceptable—and perhaps even expected. Otherwise, too many will play it safe, and the company might stagnate.

Jessie Scanlon is the senior writer for Innovation & Design at BusinessWeek, where she covers the intersection of design and business.