(FORTUNE Magazine) – If ever there were a failure destined to kill a career, New Coke was it. Sergio Zyman was the marketing man behind the most disastrous product launch since the Edsel. Wounded, he left Coca-Cola a year later and spent seven years consulting, invisibly. What a strange twist it was, then, when Zyman bounced back into Coke in 1993, his ego intact and his title expanded. Now, as we sit in the elegant 25th-floor office of Roberto Goizueta, Coca-Cola's aristocratic CEO, with the roguish, risk-loving Zyman to his right, we ask: Whatever did they slip into your soft drink, Roberto, to make you put Sergio in charge of the world's most valuable brand?

"Sergio is a product of a change in our thinking," says Goizueta, who made Zyman chief global marketer. Goizueta goes on to indict corporate America, including Coca-Cola, in his rap: "We became uncompetitive by not being tolerant of mistakes. The moment you let avoiding failure become your motivator, you're down the path of inactivity. You can stumble only if you're moving."

Failure. Personal, humiliating, image-wrecking failure. It's not as bad as you think. Richard Miller, the chief financial officer of AT&T, Anne Busquet, the highest-ranking female line manager at American Express, and Bernard Marcus, the founder and CEO of Home Depot, are just some of the big names who have screwed up, misstepped, gotten fired, been demoted, or in some other way failed spectacularly.

Their stories resonate. Admit it. Isn't your biggest fear--besides death--the fear of failure? If you haven't failed yet, you probably will. And for the benefit of your career, you probably should. The rapid change that drives business today calls for unconventional thinking, action in the face of uncertainty--and occasional stumbles. Says Harvard business school professor John Kotter: "I can imagine a group of executives 20 years ago discussing a candidate for a top job and saying, 'This guy had a big failure when he was 32.' Everyone else would say, 'Yep, yep, that's a bad sign.' I can imagine that same group considering a candidate today and saying, 'What worries me about this guy is that he's never failed.' "

Bill Gates, who regularly tempts failure at Microsoft, likes to hire people who have made mistakes. Says he: "It shows that they take risks. The way people deal with things that go wrong is an indicator of how they deal with change."

History is littered with heroes who failed. An ad agency reportedly fired Walt Disney for a "singular lack of drawing ability," and Disney--not to mention Henry Ford--went bankrupt with early ventures before making money bigtime. Babe Ruth, who hit lots of home runs, broke the major league record for strikeouts: 1,330. In fact, you might call the Babe the original stretch-target man, since he believed that it's smarter to make bold moves and miss sometimes than to consistently hit singles. At General Electric, Jack Welch bombed early on. A pilot plastics plant that he managed blew up in 1966, and he was held accountable for design flaws. Procter & Gamble CEO Ed Artzt screwed up too. As a junior executive, he was assigned to get liquid Biz detergent to market quickly. The new soap crystallized in the warehouse and had to be reformulated, delaying the test market. Artzt fretted that his career was kaput. Tales of resurrection notwithstanding, most people view failure the way they do cancer--devastating, terminal, and too ugly to discuss. Compiling this story required months of pleading and letter writing to dozens of people who failed and came back. "If it weren't for the 'F' word, I'd talk," lamented one senior executive who got fired twice, reformed his know-it-all management style, and considered bragging about his current hot streak. Others cringed at hearing the word "failure" in the same breath as "your career." And who wouldn't be paranoid, what with companies chopping head counts and corporate boards chopping CEO heads? "You may be out the door more quickly today," notes psychologist James O'Connell, who works at the outplacement firm Drake Beam Morin. "But on the hiring end, getting fired isn't such a stigma. Five or ten years ago, if you got fired you were damaged goods. You were on the beach. Today, so many people have been on the beach."

Almost 200 people--executives, leadership experts, psychologists, coaches--who have studied failure or experienced it, helped Fortune determine what makes some people fall and flail and others rebound. The masters of resiliency, you'll see, believe in themselves, often when others don't. Some expose their suffering. Says Anne Busquet, who in 1991 got demoted at American Express for a bad-debt bombshell in the Optima Card unit: "You go through so many emotions. Guilt. Anger. You say, 'I made a mistake. I failed. I embarrassed the company in a big way. What was I really responsible for?' " Others, particularly men, bury their pain.

Denial, up to a point, is not a bad thing. Martin Seligman, a professor of psychology at the University of Pennsylvania, has done what he calls optimism studies of employees in 30 industries. Says he: "The people who bounce back are optimists who believe 'My problem is temporary, related to the particular situation I'm in, and not my fault.' Pessimists, who generally don't come back, see their failure as permanent, pervasive, their fault."

Resilient people are flexible; they know they cannot control their world. (Anathema, isn't it, to you high-achieving, type A perfectionists?) Adversity in childhood actually helps people adapt and rebound. The most successful at bouncing back view failure not like a cancer but, rather, like puberty: awkward and uncomfortable, but a transforming experience that precedes maturity. Here's how to handle it:

TAKE RISKS WITHOUT DREADING FAILURE. "The Wallenda Factor" is leadership expert Warren Bennis's name for the death-defying trait that propels most successful people. The Flying Wallendas are, of course, the world's most famous family of aerialists and wirewalkers. Bennis was fascinated 17 years ago when 73-year-old Karl Wallenda fell to his death while crossing a tightrope between two hotels in San Juan, Puerto Rico. Wallenda's wife later said that before he died, Karl had been thinking, for the first time ever, about falling instead of about making his way across. Bennis, who has interviewed hundreds of executives, says that, like Wallenda, the most successful seem unacquainted with the concept of failure. They view failures as "false starts," "stumbles," or steps to greatness.

With his lean, agile body, Sergio Zyman, 49, looks as if he could be a high-wire walker. He certainly is a high-strung showman: whimsical, sly, cocky. In the beverage industry he is known as "Sergio"--a marquee name--or "Aya-Cola," for his legendary vanity and abrasiveness. Getting Zyman (pronounced ZEE-man) to say that he goofed on New Coke is an exercise in semantic acrobatics. Was it a mistake? "No, categorically." A failure? "Softer no, but still no."A blunder, a misstep, a bust? "Another word between 'bust' and, uh, something else," he replies. "Now, if you say to me, 'The strategy that you guys embarked on didn't work,' I'll say, 'Yeah, absolutely it didn't work.' But the totality of the action ended up being positive."

Zyman, then head of U.S. marketing, was coming off his enormously successful introduction of diet Coke when he was assigned day-to-day responsibility for top-secret Project Kansas in 1984. The zealous Mexican insisted that Coca-Cola (or Co-Coola, as he pronounces it) must act boldly to reverse its 20-year market-share decline vs. Pepsi. Zyman, a former Pepsi marketer, argued that the correct strategy was to replace 98-year-old Coke with a better-tasting cola, label it "New Coke," and blare the news--which is exactly what the company did one decade ago this April. Zyman's greatest error, which some attribute to ego, was that he and his team failed to present the option of keeping old Coke on the market.

In defense of his man, Goizueta says, "Judge the results. We get paid to produce results. We don't get paid to be right." He has a point. The return of old-formula Coke 79 days after New Coke's launch produced the biggest ever one-year rise in the brand's sales, reversed the share decline, and, says Goizueta, taught important lessons about the emotional bond of consumers to the product. He says effervescently, "If I could have a New Coke situation every decade, I would. Absolutely."

Many leaders contend that failure often foreshadows success. Bernie Marcus, a poor Russian cabinetmaker's son from Newark, New Jersey, got fired from Handy Dan, a do-it-yourself hardware retailer, in 1978. It may be the best thing that ever happened to him; he went on to start Home Depot. Whenever he meets an entrepreneur, he asks a question: "Was there a point at which despair was a major part of your life?" Says Marcus, 65: "I've discussed this with 50 successful entrepreneurs. Forty had that character builder. Maybe a banker pulled money, or a partner double-crossed them. Most of these people carry their setback as a positive experience." Barry Diller, who created ABC's Movie of the Week, the TV miniseries, and Fox Broadcasting, says, "Every time I ever did anything, everyone said it was gonna fail. Every time." The reason, he says, is that "I always look to do things that are contrarian."

Rick Miller, 53, then a turnaround hotshot and now AT&T's chief financial officer, didn't anticipate failing when Wang Laboratories recruited him in 1989 to save it from bankruptcy. But the computer maker turned out to be a much nastier challenge than Miller had envisioned. In 1992 he filed for Chapter 11, and several months later he left Wang. Looking to retest his mettle, Miller decided to climb New Hampshire's Mount Washington--which, if you're not a mountaineer (Miller wasn't either), you may not know is notorious for the earth's highest-recorded surface winds (231 mph) and more than 100 deaths. Says Miller about his solo trek: "I wanted to go at a time of year when you don't know what you're going to encounter."

The weather was kind that April day, and Miller reached the top in five hours. "But what if fog had rolled in, the winds had risen, and sleet had iced up the rock?" he asks. Told that he probably would have failed to reach the top, Miller replies coolly, "If I tried, isn't that success?" At AT&T, Miller asks young employees who worry about failure if they can "look in the mirror and say, 'I did my best.' If they can, no matter what the outcome, that's success."

SEEK A CRISIS. "There's no better therapy than to work at something where you have a clear goal and a sense of urgency," says Anne Busquet, who conquered her own mountain. Busquet is executive vice president for consumer-card marketing at American Express--a position some people thought she would never reach. In 1991, at age 41, Busquet was general manager of the Optima Card unit, leading Amex's first foray into the business of revolving credit. Known as a brilliant marketer with a ferocious, go-for-growth attitude, Busquet fell when five of her 2,000 employees were found to have deliberately hidden $24 million in losses on Optima Card accounts.

Following the most rigorous employee review ever conducted at Amex, Busquet was held accountable, but not responsible, for the misreporting. She lost her Optima job. "Of course I thought about leaving the company," says the compact, sturdy-looking Busquet, who grew up in Paris and speaks with a serious French accent. Her self-esteem shattered, she almost turned down an offer to try to salvage one of American Express's smaller businesses, merchandise services. "I could have failed again," Busquet says. But she realized that bouncing back--professionally and personally--required taking on a do-or-die challenge. Merchandise services had to become profitable or Amex would close it.

Busquet shrank the business, overhauled marketing and distribution, and restored profitability in two years. Says her boss back then, Thomas Ryder, who is president of establishment services worldwide: "One of the most exhilarating things was watching this woman's confidence come back. Ten times this year I've used Anne as an example of someone whose career was stalled but who had the courage to take on an incredibly difficult challenge. Too many people in corporate life look for the safe place, and as a result stay stuck in a band."

Managing a crisis can be liberating. Michael Bozic knows. He was tossed from the chief-executive perch at the Sears Merchandise Group in 1990, after 28 years at Sears. Bozic, 54, was viewed much like Sears itself: indecisive, process-oriented, and slow to act. After several months of job hunting with the help of an outplacement firm, McCommon Co. near Chicago, Bozic became CEO of Hills Stores, a bankrupt discount retailer in Canton, Massachusetts. An amazing thing happened. Bozic became a decisive, scrappy manager.

"Why one person can be effective one place and not somewhere else comes down to alignment," says Bozic. "In a bankruptcy situation, you have absolute alignment of purpose--of creditors, the board, everyone in operations." Jerked into action, Bozic blared the crisis siren. "For Pete's sake, we're in bankruptcy," he recalls telling Hills's managers. "I didn't use 'Chapter 11,' " he says. "I thought it was too clinical a term." Bozic, a sober boss with a rebel streak (he rides a Harley), swept out half of Hills's management, closed 63 unprofitable stores, and remodeled 150 others. Today, Hills remains a second-string player in a difficult industry, butting heads with Wal-Mart. But the company is out of bankruptcy, with sales ($1.9 billion last year) and net income ($40.4 million) rising nicely. Kmart's board noticed Bozic's success: He's a possible replacement for Joseph Antonini, who was recently ousted as CEO. Referring to lessons learned from his rout at Sears, Bozic says, "If I had one failure, it was not presenting to the board how serious the situation really was."

VISUALIZE THE NEXT BIG WIN. Jimmy Johnson, the legendary former coach of the Dallas Cowboys, says, "I was always emphatic that we wouldn't accept anything but being in the Super Bowl." He knows defeat. In 1989, his first season in Dallas, Johnson's record was 1-15, only a shade less humiliating than his career-launching 0-10 performance in 1966 as defensive coach of the Picayune High School Maroon Tide in Mississippi. Says Johnson: "At times people looked at me like I was a crazy man because we had the worst team in the NFL. But I never wavered in my attitude."

The Cowboys, of course, won the Super Bowl. Twice. Johnson, who has a college degree in industrial psychology, believes the turnaround hinged largely on positive thinking. Instead of telling a running back, "Don't fumble," he would say, "Protect the ball." He'd instruct a placekicker, "Make this," never, "Don't miss." Johnson, 51, quit coaching last year and now is a TV sports analyst and Miami restaurateur. In sports and in life, he's not much of a Monday morning quarterback. His post-game meetings in Dallas, he points out, concentrated on plotting the next win, "so we could put a loss behind us quickly."

Graham Thomas Chipperfield, a star lion tamer with Ringling Bros. and Barnum & Bailey Circus, got back into the cage nine days after Sheba, one of his 500-pound lionesses, mauled him. "It's always the trainer's fault," says Chipperfield, 26. His doctors, who sewed 80 stitches into his back, advised him to rest for two months, but Chipperfield says, "I knew that if I stayed out, I would never get back in." When Jan Leschly, the president of Squibb, was squeezed out after his company's 1989 merger with Bristol-Myers, he bid goodbye to corporate America for a year and took religion and philosophy courses at Princeton. But he never stopped focusing on his goal of being a CEO. Set tangible goals, Leschly advises. In the 1960s, when he was among the world's top ten tennis players, the tall, stalwart Dane recalls, "My goal was not to be world champion. It was to play singles at Wimbledon Centre Court. So every time I practiced, I would imagine it, smell the grass, hear the crowds." In 1969, Leschly reached Centre Court (he was defeated by Rod Laver, Wimbledon's champ that year). In 1994 he took the CEO's title at SmithKline Beecham.

Barry Diller, who last year lost the takeover fight for Paramount and then failed in his bid to run CBS, says that resiliency comes "if your curiosity puts you on a fairly wide road." Such a strategy paid off for Zyman after he left Coke. "That first year I consulted for 7-Eleven, an engineering company in France, Continental Airlines, and Jones New York," he says, laughing, apparently at the absurdity of a soft drink man advising a woman's apparel company. "But if you have guts, marketing is marketing." Usually as vulnerable as Schwarzenegger, Zyman confesses, "I didn't talk to anyone from Co-Coola for 14 months. It was lonely. My friends were inside the company, and I wasn't talking to them. It wasn't depressing, but lonely. So I just ran longer." Ever since he lost 110 pounds in 1971 (in under four months, he claims), Zyman has been running. He logs six to ten miles each morning, at a racer's pace of seven minutes or less per mile.

Drinking a 20-ounce orange PowerAde sports drink, one of Coke's new products, Zyman describes his seven-year stretch untethered to the corporation--exercising fanatically, skiing 60 days a year, and eventually starting Core Strategy Group with Scott Miller, a former Democratic consultant. Operating out of his Atlanta basement ("One Zyman Plaza," he jokes) with a computer, a phone, and a fax machine, Zyman built a good business advising clients such as Microsoft, Miller Brewing, and eventually Coca-Cola. His mantra: Think unconventionally, take risks, move at breakneck speed. Most clients, of course, couldn't think, much less act, quickly enough. Recalls Miller, still a friend: "One client said that I was the consultant and Sergio was the insultant." Richard Strup, a senior vice president at Miller Brewing, used to tell Zyman: "Sergio, talkin' to you is like talkin' to a blowtorch."

"In my wildest dreams I never thought the company would ask me back," says Zyman, who is delightfully undeluded about his image. Goizueta and his expected successor, M. Douglas Ivester, wooed Zyman two years ago by telling him that Coca-Cola's marketing was too focused on advertising and that they needed him to help shake things up. Zyman resisted. He liked the independence of consulting, earned more money than Goizueta would offer, and doubted that the company, so risk-averse after New Coke, was committed to ongoing change. Says Zyman impudently: "The biggest risk I've ever taken is coming back to Co-Coola." But Goizueta promised him almost total freedom. Typically, Zyman has pushed the envelope. He overhauled the marketing organization, spun out new products, transformed package designs, and sandblasted Madison Avenue by hiring dozens of new, mostly small, ad agencies.

Zyman is happy and has no plans to quit again. But if he did leave, he says, no problema. "I've always had destinations. I know what I'd do in the morning, how many books I'd read, where I'd ski [Vail]. The only time I haven't figured out is between 4:30 and six." DON'T PLAY GOD. You can't always control your environment. Such is the business philosophy of Bernie Marcus and his business partner, Arthur Blank. "I grew up with the notion that life is gonna be filled with some storms," says Blank, 52, Home Depot's president. Raised in a lower-middle-class neighborhood in Queens, New York, Blank ran with a juvenile gang and saw two of his close friends die; one was shot, the other stabbed. His father, a pharmacist who started a mail-order drug company, died when Arthur was 15, leaving his mother to keep the business going.

It was an April Friday in 1978 at Handy Dan's Los Angeles headquarters when Blank and Marcus got canned by Sanford Sigoloff, the retailer's new owner. The official reason was "unauthorized and unacceptable business practices," which related to employment of non-union workers. But personality clashes with Sigoloff were the real reason. The next day Ken Langone, an investor friend, told Marcus and Blank, "You've just been hit in the ass by a golden horseshoe. Let's go into business." Says Marcus: "Once I stopped stewing in my misery, I saw that Kenny wasn't crazy."

With $2 million in capital, Marcus and Blank began opening the kinds of stores they had dreaded competing against: hangar-size, no-frills outlets with high-grade service and a huge selection of products. Today, Home Depot (1994 revenues: $12.4 billion) tops the fast-growing home-improvement industry and hammers rivals on innovation. Says Marcus: "We're always looking for someone to crawl over our backs, to destroy us."

Unlike Marcus and Blank, some executives suffer from "a deity complex." Psychologist O'Connell of Drake Beam Morin says these people have an outsize sense of their own importance, downplay danger, let trouble build, and when they fall, CRASH! Think about Nicholas Leeson, the 28-year-old who broke the bank at Barings. What if Leeson had admitted error instead of trying to cover his losses by making bigger and bigger bets on Japanese stocks and interest rates? Leeson, who had never traded in a bear market, is like the young, egomaniacal F-100 fighter jocks who maneuvered into terrible corners in author Tom Wolfe's The Right Stuff: "To declare an emergency, one first had to reach that conclusion in his own mind, which to the young pilot was the same as saying: 'A minute ago, I still had it--now I need your help!' . Believers in the right stuff would rather crash and burn."

In a crisis, bend. Rick Miller, the mountain man at AT&T, learned early that you can't always get what you want. He grew up in an unhappy family, with an alcoholic father, and he struggled for nine years to get through Case Western Reserve University. By the time he squeezed off the waiting list into Harvard business school, he was focused on a finance career. He took his first job as a financial analyst and planner at Penn Central; 20 days later the transportation company derailed into bankruptcy. Two other businesses, RCA and GE's consumer electronics division, were sold while he was working to turn them around.

Unhinged again and again, Miller joined Wang in hopes of restoring a corporate dynasty. He considered bankruptcy a last resort. But after the recession hit, he caved in 1992. Since Miller sold off its manufacturing operations, Wang is now a shell of its former self. But it is profitable, and Miller has no regrets. When AT&T Chief Executive Robert Allen met Miller the first time, he said, "I view your Wang experience as a total plus."

LEARN TO SEE YOURSELF AS OTHERS SEE YOU. Adapting requires a shift in perspective, however humiliating that may be. Miller swallowed his pride at Wang. The Coca-Cola commandos brought back old Coke. Remember Intel's intransigence early in the Pentium debacle? CEO Andrew Grove now admits that Intel erred in not seeing the problem as his customers did. "Consumers resent it when a company presumes to judge the quality of its products on their behalf," he says. Chipperfield, the lion tamer, got eaten because he failed to see himself as Sheba did. "Lions always think the trainer is another lion," he explains. So when the Englishman bounded into the cage to break up a fight, Sheba figured he wanted to brawl too. Lesson learned. "That may be the injury that saved my life," says Chipperfield.

Robert "Dusty" Staub, a psychologist who counsels executives, says the No. 1 cause of failure is lack of intimacy. This means you can't step outside your skin and adopt the viewpoint of others, whether they are your employees, your customers, or some lion rattling your cage. A lack of self-awareness was the nearly fatal flaw of Anne Busquet at American Express. When she ruled at Optima, her subordinates viewed her as an intense, sometimes frighteningly confrontational manager. Busquet's bosses had warned her about her style, but, she says, "Somebody says to you, 'You're an intimidating manager.' You say, 'What do you mean?' I never understood the impact I had on people." Many who worked with Busquet believe that her subordinates were so fearful of reporting bad news that they lied to make their numbers. Busquet cringes at the notion that her style caused the Optima mess: "I don't believe it," she says. "But that doesn't matter. Perception is reality."

Busquet's failure was a call to action for herself and, remarkably, for her company. As a result of the problems at Optima, American Express expanded surveys and training programs aimed at helping managers communicate. The company also implemented 360-degree feedback for all managers, not just senior executives; they are evaluated by their bosses, subordinates, and peers. "What I realized," Busquet says, "is that I have extremely high standards, and I need to be much more understanding of lesser readiness levels." An ombudsman's office opened for employees to anonymously report information that they'd rather not tell their boss. Busquet herself learned to solicit bad news. "When the Optima numbers looked good, we got all excited and didn't press why they were so good," she explains. "Now I question why numbers are good as well as why they're not."

Busquet is still emotional, still a perfectionist, but Thomas Ryder, her former boss, says, "The new Anne is much more patient and a better listener. She's careful not to wound." Her comeback is not so surprising to Staub. He says that women who are encouraged to face their failures usually bounce back better than men. "Women excessively blame themselves, so there's always a danger that failure will make them too cautious, even paranoid, about risk taking. But women are taught that it's okay to ask for help, so they respond better to feedback. Women learn faster. Men deflect mistakes. Men are taught, of course, never to show any weakness."

SO GO AHEAD AND DO IT. ASK FOR HELP. People like Staub are members of a multiplying group of experts--call them leadership consultants or workplace psychologists--who help managers face failure and fix themselves (see box). Busquet went through a program run by KRW International, an outfit with offices in Minneapolis and Winston-Salem, North Carolina. Over the course of a year, she shared her problems with psychologists and a half dozen other executives who gathered for multi-day therapy meetings in Phoenix, Brussels, and other cities. Dusty Staub, who heads Staub-Peterson in Greensboro, North Carolina, says he likes to get inside a company, interview employees, and counsel an executive intensively for six months. This, plus follow-up over two years, costs $15,000 to $20,000.

What do you get back? Psychological gobbledygook, certainly, but also new and improved managers. Staub helped rescue Barry Johnson, director of marketing research at the respiratory division of Glaxo. Johnson was failing in his job because he was Mr. Nice Guy--a common problem for managers. "I'm one of those people who lives to be loved," says Johnson, 45. "My inability to deal with conflict was ripping my group apart." After a year of counseling, he learned that "you hurt people more if you can't give them constructive feedback." He has toughened his style and for the first time developed the courage to fire people. His group's morale, once rock-bottom, is up.

Another rebounder is Robert Weber, 44, a vice president in the residential lending division of First Union Mortgage in Wilmington, North Carolina. Weber's boss, Debra Warren, says she considered firing Weber in 1993, when First Union's volume exploded because of low mortgage rates. Weber, a broad-shouldered, likable fellow who has spent his career at First Union, dealt with the pressure of "refi-mania," as it was called, by yelling, berating his staff, and making life hell for some of his 300 employees. Working with Farr Associates, a Staub-Peterson competitor, Weber came to realize, "I'm the only person I can control. I've learned to be calm." His performance, measured by subordinates' written evaluations, has improved, particularly in the areas of communication and listening. Says Warren: "For a while people were wondering, 'Is Bob sincere, or is he just acting differently to save his job?' He's won them over." Weber recently bought his first pair of jeans since childhood, lost 32 pounds, lowered his blood pressure, traded his 1983 Olds Cutlass for a Lexus, and miraculously overcame his fear of flying.

Sweet are the uses of adversity, as Shakespeare said. Failure remade Bob Weber, saved Anne Busquet, prodded Bernie Marcus, energized Mike Bozic, carried Rick Miller to the mountaintop, and positioned Sergio Zyman as a strange-but-true model for the new world. Failure is a vital thing. Learn to live with it.