Embracing the “fail fast and learn fast” mindset: conceptualizing learning from failure in knowledge-intensive SMEs

“Fail fast and learn fast” is a principle commonly advanced to quickly grow and scale startups and SMEs. However, the literature lacks detailed insights into how such learning is organized. The paper aims to investigate how knowledge-intensive SMEs learn from failures through organizational learning processes. To answer this question, we present in-depth case studies of three SMEs that operate in a dynamic context where quick adaption to changes, failures, and learning are natural modes of practice. Our findings present the learning from the failure process, which includes three phases: (1) failure recognition, (2) interactive sensemaking, and (3) organizational adaptation. We condense our insights into a framework disentangling how SMEs succeed and fail and how they can learn from failures through their underlying learning processes. We contribute to prior literature on organizational learning in SMEs by focusing on knowledge-intensive SMEs and practices that enable effective learning from failures. The “fail fast and learn fast” mindset provides an opportunity for an organization not only to experiment, make mistakes, and fail but also to learn from this experience and use it for future success. However, research has not yet managed to provide detailed insights into how such learning can best be organized and facilitated. In this article, we investigate how knowledge-intensive SMEs learn from failures through organizational learning processes. We show that SMEs should strive to learn from failure and that this learning can be organized over three phases: failure recognition, interactive sensemaking, and organizational adaptation; each with underlying sub-activities and principles. We contribute to prior literature on organizational learning by focusing on knowledge-intensive SMEs and describing practices that enable effective learning from failure. We also provide insights for managers on how to facilitate rapid learning from failure in their knowledge-intensive SMEs.