Panos Panay: Failure Is Essential to Building Great Products

Panos Panay, Amazon’s Senior Vice President of Devices, Alexa, and Leo, addressed an audience of startup founders at TechCrunch Disrupt in San Francisco with an unconventional message: failure is not a risk to minimize but a prerequisite to success.

Panay’s authority to make this case rests on direct experience. During his tenure at Microsoft, spanning more than 19 years, he oversaw product divisions that achieved substantial scale and market dominance. He also lived through one of the company’s most public and expensive product failures.

His talk centered on a single principle: founders who have never experienced significant failure have likely never pushed their products or strategies to the boundary of what is possible.

“You have to be willing to fail, and actually, not just willing, you actually have to go fail,” Panay said. “If you haven’t failed, you probably haven’t pushed the boundary. It’s literally about harvesting the lessons learned when you fail.”

The Surface RT: A Billion-Dollar Education

The specific failure that shaped Panay’s thinking involved the Surface RT, Microsoft’s first tablet computer. The device was a commercial disappointment that triggered a write-down of nearly $1 billion for the company.

The public aftermath of this failure was particularly striking. Panay’s name appeared on the front page of major newspapers, paired with the word “failure.” In corporate environments, such publicity often ends careers or relegates executives to smaller roles.

Panay’s framing of this moment is instructive. He did not dwell on the public humiliation or the financial loss as defining aspects of the failure. Instead, he treated them as secondary to the actual work of understanding what went wrong.

“I remember being on the front cover of a newspaper, and it just said failure,” he said. “But, here’s the thing, it was easy to admit failure. The trick was, and always is, did you harvest the learnings and understand what happened?”

The Decision Chain Behind the Collapse

Rather than attributing the Surface RT’s failure to a single mistake or market condition, Panay traced it back to a series of decisions made approximately two years before the product’s launch.

“All right. What did you learn? Because the failure wasn’t that moment. It was decisions that led up to it two years before that, whether the software wasn’t complete or the inventory was wrong or how we balanced into retail. There were all these steps along the way,” he explained.

This approach shifts how organizations typically discuss product failures. Instead of treating the failed launch as the primary problem, Panay identified multiple decision points upstream that created the conditions for failure. This reframing has practical implications: it means the same failure could potentially have been prevented or mitigated at multiple earlier stages.

Vision Continuity and Recovery

After Surface RT’s collapse, Microsoft did not abandon the tablet market or the vision behind the product category. Instead, Panay and his team used the failure as a learning opportunity and continued iterating.

“You want to succeed, yeah? You take that failure, but you don’t let go of your vision. That’s it. Surface has done pretty well. You don’t let go of your vision. You don’t break it,” Panay said.

The Surface line eventually became a significant business for Microsoft, generating billions in revenue across multiple product lines. This outcome was only possible because the organization chose to preserve the core vision while discarding or revising decisions that proved flawed.

The Framework for Learning

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Panay outlined a specific approach that founders can apply after experiencing failure. The framework rests on accepting the failure, identifying what led to it, preserving the vision, and making calibrated adjustments.

When he discussed how to move forward after failure, he rejected the idea that course correction must mean complete strategic reversal.

“Usually, it’s not 180 degrees. Usually, it’s just 30 degrees. Take your lessons learned, change a little bit, adapt your vision where it needs to be, and then go,” Panay said.

This 30-degree adjustment concept has implications for how founders should think about pivoting. A dramatic reversal suggests the original vision was fundamentally flawed. A smaller adjustment acknowledges that the vision had merit but the execution, timing, or specific tactical choices required refinement.

The Persistence Trap

Panay identified a specific failure mode that affects many founders and leaders: persisting with a failing strategy not because of genuine conviction but because they have not psychologically accepted that failure has occurred.

“I believe there’s people that hang on too long, but it’s because they haven’t accepted the moment of failure at all,” he noted.

This observation points to a psychological hurdle that precedes strategic decision-making. Before a founder can make a deliberate course correction, they must first move through the stage of accepting that the current approach is not working. Some founders never complete this step, which locks them into repeating the same approach despite mounting evidence of failure.

Learning Speed as Competitive Advantage

Panay connected his framework on failure to a broader strategic principle: the speed at which an organization can learn from setbacks translates into competitive advantage.

Organizations that rapidly process information from failures and make course corrections operate from updated data. They avoid repeating mistakes. They can test new approaches faster than competitors still defending the original strategy.

“It goes back to the same fundamental, like, have you learned? Were you learning along the way? Because if you were learning, then you just change your vector,” Panay said.

This represents a reframing of failure in startup culture. Rather than treating it as inherently noble or inevitable, Panay positioned failure as a source of information and a tool for acceleration. The founders who succeed are not the ones who never fail but the ones who extract maximum learning from each failure and move on quickly.

Source: TechCrunch