We in the start-up world like to talk a lot about failure. Fail often, fail early, fail forward, and most importantly--don't fail to learn from failure.

But now, two lecturers at Berkeley's Haas School of Business, John Danner and Mark Coopersmith, have gone a step further. They argue in their new book The Other F Word that failure is not only nothing to be feared--it's actually a bankable asset.

"Some people look at failure as an isolated event or a potential management process," Danner explains. "We see failure itself as a strategic resource, on a par with the other resources businesses have available to them. Failure is the one resource everyone creates every day. When you look at it that way you suddenly begin to see its potential for telling you what you don't know and how to position your next cycle of decisions. It also helps you avoid getting caught up in your own belief system at the expense of reality."

Sound intriguing? In their book, Danner and Coopersmith lay out a seven-step process for capitalizing on your failure resources:

Before you fail:

1. Respect the power and likelihood of failure.

Many motivation experts will tell you to focus on the positive--on the successes you desire and not the calamities you fear. Do that, and you'll miss part of the value of failure, Danner says. After all, the question is not whether you will fail, but only when and how.

"Do you respect the inevitability of failure and recognize that it's uniquely valuable?" he asks. "If you start out with the attitude that failure is not an option, you blind yourself to issues that will come back and bite you."

2. Rehearse for your most damaging failures, to develop quick reflexes.

"We borrowed a page from high-reliability organizations such as nuclear facilities and emergency rooms that thrive on this kind of rehearsal," Danner explains. Most businesses don't rehearse for such things as a public relations failure or a bad hire--and they should, he says.

But rehearsing for a bad hire is different from holding a fire drill. How do you do it? The important thing is to figure out in advance who will identify the failure, who will decide that it is a failure, and who will pull the trigger on a response, Danner explains. "How do you handle a slow fuse failure?" he asks. "Who's going to make the call? Business leaders don't decide those things in advance and it leaves them vulnerable."

While failing:

3. Recognize early when a failure is underway.

Especially as a small company with little margin for error, it's important to catch a failure as soon as it starts happening. But sometimes it's hard to tell when failure is upon you--for instance you may think that doomed initiative is merely taking a long time to catch on.

So how do you catch failure early in the game? Start with metrics, such as falling sales figures, rising costs, or whatever is appropriate, that will automatically trigger your failure response so you don't have to decide while a crisis is actually happening. "It's not just a matter of tracking your internal metrics, but also your peripheral vision because the likely threats to your company are just offstage, such as a new technology or competitor," Danner says. It also helps, he adds, to have as many diverse viewpoints within your leadership as you can. "It's that odd question from an unusual angle that can give you the best insight as to where you're vulnerable."

4. React to the failure in the moment.

This is something some organizations excel at, while others struggle, Coopersmith says. "They organize the troops, apologize if appropriate, and work on the goodwill they have to move on." A great example, he adds, is Reed Hastings. After alienating customers with the announcement that Netflix would spin off its DVD-by-mail business into a new company inexplicably named Qwikster--one of the most boneheaded product launches of 2011--Hastings changed course and took it all back after only 23 days.

After you fail:

5. Reflect on the causes of your failure.

This does not mean assigning responsibility, Danner cautions. "The last question on your agenda should be whom to blame," he says. Instead, he recommends finding the how, where, why, and what of the failure.

"People look to how leaders handle the folks closely involved with a failure to find out whether the trial-and-error rhetoric really comes down to trial-and-terror," he says. "They watch closely to see how honestly and how fairly people are treated. This is something leaders sometimes squander in their recrimination stage."

6. Rebound with confidence.

"Some organizations spend too long focusing on the failure," Danner says. Once you've spent a little time reflecting and absorbed any wisdom you can from the experience, it's time to move on.

"You've got to get back in the game," he says. "You've just gone through a period of intense reflection. How are you going to use those lessons you've just learned?"

7. Remember the failure.

Commemorating failures helps build your company's culture and strengthens its ability to learn from them. "Leaders and organizations should create stories and relics of their failures, as a reminder that not every failure is fatal," Coopersmith advises.

"WD-40 is named that way because there was a WD-1 through WD-39," Danner adds. "Each of those was a small failure."