Here is an excerpt from an article written by Doug Sundheim for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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“We need more innovation around here. We need people to think more creatively and be more entrepreneurial. I’ve been saying this for the last couple years, and yet very little seems to be changing. It’s very frustrating.”

This was a recent lament from a client, a senior leader at a medium-sized professional services firm. He was frustrated that even though his organization was encouraging people at every turn to take chances on new ideas, too few were actually stepping up to do it.

I pushed him a little further and asked him what he meant when he said he was “encouraging people at every turn to take chances.”

He explained that the need for innovation was a thread running through all communications these days. Senior leaders of the firm were relentlessly making the case that they needed to innovate or they’d lose their footing. They shared specific places where they’d missed market opportunities and were now playing catch up. A few more of these missteps, and they feared they’d lose their market leading position. The frustrating part was that, for the most part, people around the organization “got it” — yet behavior still didn’t change.

Then I asked him how he treats failure in his organization. He wasn’t sure how to answer the question. He hadn’t really ever considered it before. His first off-hand response was, “As something to be avoided.” He immediately saw the inherent problems with his answer as soon as the words came out of his mouth.

Unfortunately, my client’s story is all too common in organizations these days. There’s a strong logical need for more innovation efforts, yet weeks, months and years go by they don’t happen. The reason for this is simple; it’s an emotional, not logical problem. Innovation efforts are risky and can (by definition) fail. And failure can sting. So if you haven’t figured out how to take some of the sting out of failure, you won’t get innovation.

Start by defining a smart failure. Everyone in your organization knows what success is. It’s the things you put on a résumé: increased revenues, decreased costs, delivered a product etc. Far fewer know what a smart failure is — i.e. the type of failures that should be congratulated. These are the thoughtful and well planned projects that for some reason didn’t work. Define them so people know the acceptable boundaries within which to fail. If you don’t define them, all failure looks risky and it will kill creativity and innovation.

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To read the complete article, please click here.

Doug Sundheim is a leadership and strategy consultant with over 20 years experience in helping leaders drive personal and organizational growth. His latest book is Taking Smart Risks: How Sharp Leaders Win When Stakes are High (McGraw-Hill, January 2013). You can follow Doug on Twitter @DougSundheim and find out more about his services at www.clarityconsulting.com. To check out his HBR articles, please click here.