“We just never saw it coming” brands the tombstones of many insolvent companies that have faded into history. But why couldn't they see the dangers lurking in the not-too-distant future?
And it’s not just companies that get blindsided, but governments do too. Consider the countries and economies unprepared for Covid-19, Russia’s invasion of Ukraine, the ensuing supply chain crises, inflation, and further bifurcating world order.
Organisations benefit disproportionately if they see looming threats or embryonic opportunities sooner than rivals. However, to do so, we require leadership teams that orchestrate vigilance at all enterprise levels.
Many management consultants emphasise the growing need for agility, mindfulness, resilience and care. However, only a few address how to achieve this in practice. I was recently interviewed about the concept of vigilance – what is it and how to execute it.
Here are some of the Q&As that resulted:
Q1: All organisations get surprised at times. What are some of the biggest internal and external surprises you have seen?
External surprises related to digital disruption tripped up Kodak, Nokia, Blackberry and many other IT firms. Likewise, many executives were unprepared for the serious supply disruptions that followed the Covid-19 outbreak in 2020. Facebook is another example of unpreparedness when nefarious actors abuse its platform, followed by media and PR storms.
Remember that the leadership skills needed to avoid internal surprises, like safety violations, may differ from those required to see external ones such as regulatory changes.
It's also useful to distinguish between threats and opportunities since they entail different competencies. Leaders who are good at seeing the promises of new distribution channels, emerging technologies or ecosystem enhancements will not excel at handling threats related to abuse of power, discrimination, fraud, espionage, kickbacks, cyber risks, rogue operators, or any other problem festering inside the firm.
Still, some traits generalise across most cases, such as being curious, open-minded, listening to weak signals and showing courage when pursuing potentially unwelcome news.
Q2: Some people in the organisation usually know about any given surprise. But leaders didn't know who knew, and those folks usually did not realise that the leaders needed to know. Why is leadership sometimes last to know?
The root problem here is “distributed intelligence”, where one part of the system doesn't know what another side knows, which is why systematic “knowledge management” is so important.
But then, organisations may run into the problem of information overload, as the Nobel-winning economist and political scientist Hebert Simon noted when he said “a wealth of information creates a lack of attention.”
There is also the problem that bad news doesn't always travel well – especially upward. Think about it, who in Russia's top echelon will tell President Vladimir Putin upfront that his military strategy is deeply flawed or that his sense of history is slanted and self-serving? Not me, comrade.
Great leaders can surface weak signals, such as rumours of a pending merger or new legislation gaining traction. Weak signals can easily be overlooked or dismissed as white noise. To interpret them properly usually requires finding more dots and connecting them.
This is why vigilant leaders must also tap into informal channels, from water cooler conversations to what people talk about in grapevines outside the company. More controversial methods exist for this, such as codifying all e-communications (anonymised for privacy as needed) and using based text analysis to mine for subtle shifts in organisational attention and sentiments.
The paradoxical bottom line here is that any big thing that surprises an organisation typically has multiple precursors; there are often weak signals and sometimes people in the know. Surprises seldom come out of the blue, although early warning signals typically first appear at the edges of the business. Leaders need to scan the periphery and look around corners for faint stirrings.
Q3: Some firms are better than rivals at interpreting weak signals of looming threats and latent opportunities. What are some of the factors that distinguish these vigilant organisations?
It’s not just about seeing sooner, but acting faster on that information while keeping your options open.
Vigilant organisations are self-learning enterprises that build a collective vigilance capability and mindset buttressed by curiosity, openness, and interest in diverse inputs. This also requires a cultural willingness to challenge superficial assumptions and outdated conventional wisdom. Vigilant leadership teams invest in tools and training so that managers will act faster when the time is right.
Leaders who fail to foster such vigilance are typically late in comprehending early warning signals and often forced to react in haste. By then, they will have lost valuable degrees of freedom to manoeuvre and risk choosing from inferior options.
Our research surfaced the following four drives as most crucial for organisational vigilance:
1. Leadership commitment to vigilance is demonstrated by an openness to weak signals from diverse sources while encouraging others in the organisation to explore issues beyond their immediate domain. It requires all-encompassing awareness for the entire organisation, and the ability to think outside the box.
2. Investments in foresight are often made through centralised units for scanning and using strategic dashboards to monitor plausible future scenarios.
3. Strategy-making processes must be flexible and agile, adopting 'outside-in' thinking and 'future-back' analysis. Outside-in thinking starts with understanding how the outside world is changing rather than focusing on the current plan. The future-back review asks what it takes to win long-term and how to plant sufficient necessary seeds ahead of time.
4. Coordination and accountability when interpreting weak signals are also key, supported by an organisational norm of sharing information readily across silos. This last driver is what it takes for the other three drivers to flourish.
Q4: Do vigilant companies outperform their rivals?
A study of 85 European multinationals in 2008 by Rohrbeck and Kum assessed the "future preparedness" of each using a detailed organisational survey. The researchers then waited seven years to determine each firm's market capitalisation and profit gain.
For 36% of the firms judged to be highly vigilant in 2008, the average gain in stock price was 75% in 2015 – nearly double the stock gains of the more vulnerable firms. These attentive firms were also 33% more profitable in 2015 than others.
Further corroborating evidence, using other outcome-based field research, is that building vigilance indeed pays off with the right investments and tools.