Kodak and digital cameras, Nokia and the smartphone, Sears and online retailing: the pages of business history are crowded with examples of companies that missed the boat. And you can expect more chapters to be written, considering the unprecedented levels of change and uncertainty today. It's become even harder to spot early warning signals, making vigilance an ever more critical leadership capability. Are you truly vigilant? And just what does that take?
We researched this issue by comparing vigilant and vulnerable companies. We wondered what is really the difference between say Charles Schwab, which was early to see and act on the promise of "robo-advisors," and Honeywell, which stumbled when Nest Labs debuted an internet-enabled thermostat? Or why did GM embrace autonomous cars before its traditional rivals?
We did not just want to understand why companies spotted or missed external opportunities, but also why some leaders got blindsided by internal problems that festered for years. Why did Wells Fargo, Volkswagen, Facebook or Boeing miss the trip wires or run through red lights that were flashing before scandals and disasters unfolded?
Whether it's a missed opportunity or threat, from either inside or outside the organization, the root cause is usually lack of organizational vigilance. We all miss signals due to limited attention, competing priorities, and, often as well, a lack of curiosity. What manager has not said "My plate is full", then ignore a signal of a potential problem, and later regretted it? In my new book See Sooner--Act Faster, co-authored with Wharton professor George Day, we identify the key skills and practices of vigilant organizations and leaders.
New Organizational Capabilities Needed
Traditional methods of strategic planning, risk analysis, and decision modeling are less effective today. This may seem odd, given the growing information processing capabilities available. But there is just too much uncertainty at the periphery and too little stability at the core.
To deal with this new reality, you're going to need a new set of skill-building tools, including: how to allocate the scarce resource of attention, detect weak signals and separate them from white noise, and respond strategically ahead of competitors. You can use the diagnostic survey at the end of our book to calibrate and benchmark current levels of vigilance in your organization. Then, follow the leadership agenda below to systematically build vigilance and agility throughout your organization.
A Roadmap For Vigilance
The following key steps can help you spot early warning signs sooner in order to act faster.
1. Scope to Determine How Widely to Look.
One way to set the scope is to assemble a diverse team of independent thinkers from both inside and outside the company. As one of our clients phrased it, "tap into the organization's paranoia." (Intel's late, great co-founder, Andrew Grove, titled one of his books Only the Paranoid Survive.) Invite everyone to voice hunches, concerns, doubts, or intuitions that would otherwise remain dormant. The leadership team can then spotlight issues that seem negligible now but may emerge as big ones over the next few years. Adopting a three- to five-year time frame will allow leaders to peer farther ahead than rivals, especially when few clouds are visible on the horizon now.
2. Focus Organizational Attention Via Guiding Questions.
Organize your questions into three categories: a) learning from the past; b) interrogating the present, and c) anticipating the future. Ask your team "Which rivals have a consistent record of seeing sooner and acting faster?" and "What is their secret?" Many companies interrogate the present by monitoring blogs, social media sites, and chat rooms for signs of brewing trouble with customers, but they may not really see ahead. Truly vigilant organizations, in contrast, track market changes by studying "edge cases" that signal opportunities or threats -- in engineering, the "edge" refers to cases that purposefully push the limits. Leaders should also develop different future scenarios that capture how today's major uncertainties might jointly play out in years to come.
3. Actively Scan to Explore More Deeply.
Active scanning is built on the scientific method: you start with a set of hypotheses, which are then tested and revised further based on new data obtained. Active scanning is rooted in a deep sense of curiosity and exploration. Doing this type of scanning, however, demands that you encourage diverse -- and even contradictory -- inputs to ensure that all sides of a complex issue are surfaced. To stimulate scenario planning, for example, leaders should pose such questions about the future as "What surprises could really hurt us (or help us)?" and "What future disruptions may be as big as those that we experienced in recent decades?" This means the organization must learn how to think from the outside-in rather than remaining captive by the status quo.
4. Decide Which Signals to Amplify and Clarify.
Through active scanning, organizations frequently identify many more signals than they can possibly digest. So, leaders need to develop ways that highlight the most interesting weak stirrings. Canvasing the wisdom of crowds is one approach. Research has shown that groups are often better than individuals at making accurate judgments. The reason is that individuals have at best partial information, which often allows diverse groups of people to be smarter than even the most informed in the team. A truly diverse crowd will reflect the varying experiences and views of numerous people, which thus helps cancel out random noise.
Each organization must craft its own approaches to becoming more vigilant. Google co-founder Larry Page, for example, challenged his teams to anticipate the future not just by asking what will likely be true, but also what could possibly be true, even if totally unexpected. Such guiding questions are a productive way to launch a broad scoping dialogue; his question gives the team permission to challenge conventional thinking without negative repercussions.
General Electric's senior healthcare group created a task force to process a wide array of weak signals about new opportunities for healthcare in India. These signals foreshadowed several nonlinear shifts, including a shortage of doctors and hospital beds, growing unmet patient needs, and an underdeveloped health insurance industry. But the team also highlighted growing digital connectivity and other emerging opportunities in India for GE. Unfortunately, GE failed to foster such prescience in its power division, which contributed to its recent mega struggles.
Procter & Gamble pursued yet a different approach to stay abreast of external changes. The company offered select retired executives in Europe a part-time retainer so that they would periodically report on interesting developments in, for example, private label or branded products. For P&G, this is a natural part of its "connect and develop" approach to innovation, which is about reaching far beyond its traditional networks for new insights. This approach helped it, for example, launch a highly successful rotating toothbrush years ago, inspired by lollipops for children in India that used a tiny toy battery to rotate the stick in their mouths.
These kinds of initiatives - and many others elsewhere - start with curious leaders asking penetrating questions beyond the usual drills and then empowering teams to explore them thoroughly. Over time, this will imbue vigilance into the fabric of your organization and hone its capacity to look around corners for new threats or opportunities.