If you want to remain competitive, you must learn to spot “directional shifts” in the making ahead of your rivals, write George S Day and Paul J H Schoemaker for MIT Sloan Management Review.
Until the late-1990s, RadioShack, a retailer specialising in electronics for hobbyists, founded in 1921, was successful, with more than 4,000 stores across the US, Canada, Mexico, the UK and Australia. Then, having failed to adapt to the brave new world of e-commerce, it filed for bankruptcy in 2015.
For Day and Schoemaker, RadioShack could have avoided this fate had it put the right systems in place to spot the shift to e-commerce earlier and been able to prepare for it.
Companies who are “actively engaged” in a process of “sensing” come out on top. “Their attentiveness to faint stirrings both inside and outside the business allows them to take timely action when threats or opportunities emerge,” write the authors.
FOUR STEPS TO GREATER AWARENESS
Following ten years researching 118 companies for their book See Sooner, Act Faster, Day and Schoemaker have highlighted four basic steps taken by the most vigilant companies, those with “systemic approaches to determining where to look and how to explore”.
STEP ONE: EXPAND YOUR SCANNING PROCESS
Leaders tend to limit their scanning to “comfort zones” – a big mistake, because “signals of transformative change often enter from left field, outside management’s focus”.
IBM didn’t foresee the rise of personal computers and, more recently, General Electric, Philips and Sylvania underestimated the impact of LED technology, forcing them to quit the lighting business.
To ensure your company is ready and able to prepare for the future, you must think three to five years ahead.
Set up a number of diverse teams, comprising independent thinkers both from inside and outside the organisation, each dedicated to sensing “weak signals” in different “zones” – for example, socioeconomic and political forces or emerging technologies. It’s also vital to look for risks within your own company.
“The purpose of strategic scoping is to start drawing the organisation’s attention to the most pressing matters so that relevant inputs can be garnered from employees at all levels,” write Day and Schoemaker.
STEP TWO: ASK QUESTIONS
It is up to you to be curious, to ask questions that “reveal the limits of the company’s current knowledge”. Larry Page, co-founder of Google, tells his development teams to focus on “what could be true”. This forces them to imagine potential threats that they might not otherwise have considered.
Day and Schoemaker have identified three categories of questions:
1) Learning from the past. Looking to the past can’t necessarily tell you what will happen in the future, but it might tell you how to improve in the present.
For example, the authors worked with a medical diagnostics that catalogued missed threats and opportunities in order to spot where its focus had been too narrow.
It’s also useful to look to other companies to see how they have dealt with threats similar to those your company could face. For example, Day and Schoemaker worked with a nanotechnology company who looked at how companies handled public concerns over GMOs in order to predict the potential reaction to precision-guided smart drugs.
Observing companies that have successfully anticipated and prepared for potential threats can also be useful. For example, Procter & Gamble retains retiring executives as part-time “ears and eyes” in their major markets.
2) Interrogating the present. “Many signals are waiting to be discovered, as if the future is whispering to you,” write Day and Schoemaker. “All you need to do is ask what they are and listen.”
Conduct post mortems on missed deals or contracts lost to competitors and monitor blogs, chat rooms and social media for unhappy customers.
3) Anticipating the future. Imagining how today’s potential threats might affect your business in the future will help you prepare for that future.
It is your job to ask questions that “stimulate scenario planning”. What surprises could hurt us (or help us)?
STEP THREE: ACTIVELY SCAN
“Active scanning is built on the scientific method: It starts with a set of hypotheses, which are then tested and revised based on the availability of new data,” write Day and Schoemaker.
In order for active scanning to function, you must embrace “divergent thinking” – that is, conflicting ideas.
“Staying open to different viewpoints can help leaders escape their own blinders and turn their eyes to information or solutions that weren’t previously considered,” says Hala Moddelmog, former president of Arby’s Restaurant Group.
But people aren’t always willing to disagree with the boss. “Maverick insights seldom come to the surface without explicit encouragement,” write Day and Schoemaker. You must encourage input from across your organisation and create safe spaces for ideas and observations to be expressed.
Avoid “groupthink” by challenging consensus and create what Ray Dalio, founder and co-chairman of hedge fund Bridgewater Associates calls “radical transparency”, practising and promoting open, honest discussion.
Try and see your organisation as your competitors and customers see it. How are our customers changing? What new needs are they likely to have? How will those needs be met?
STEP FOUR: FOCUS ON THE RIGHT SIGNALS
Through following steps one, two and three you will spot far more potential threats and opportunities than you can possibly act on. Fortunately, Day and Schoemake have developed a three-step system for “highlighting the most interesting signals”.
1) Canvas the wisdom of crowds. Research shows that groups make better decisions than individuals.
2) Leverage the extended network. “Organisations’ networks of partners, suppliers, distributors, researchers and consultants allow them to extend the reach of their sensing systems without the risk of overloading their own capacity to absorb weak signals,” write Day and Schoemaker.
3) Clarify by triangulating. Make sure each potential threat of opportunity is verified from multiple sources.
THE WORK IS NEVER DONE
“When environments are changing and filled with uncertainty, companies asking good questions have an edge,” write the authors. But this is not a one-time fix. You must make it “a continuous learning process that engages the entire organisation”.