By Don MacRae Many companies are traveling 90 miles an hour in a fog and heading directly for a brick wall. For the moment, they're healthy. But they'll soon be dead -- blindsided by cataclysmic events. Observers have warned of this phenomenon for some time, and the latest comes from Jim Harris, a management consultant and author of Blindsided (Capstone Publishing, 2002), an exploration of the whats and whys of getting caught unawares.
Harris cites a number of supposedly healthy businesses that couldn't quickly recognize and respond to change. They were so preoccupied with confusing new technology challenges, shifting government regulations, or rapidly evolving markets -- not to mention the shrill demands of analysts and shareholders -- that they were ruined by threats they overlooked.
Polaroid is one familiar example. Founded in 1932 by legendary innovator Edwin Land, the outfit grew to be the No. 1 maker of instant cameras worldwide, with peak sales of $2.3 billion in 1994. By then, however, it had lost its competitive edge. And just six years later, one-hour photo-development shops and digital cameras had eclipsed Polaroid's products. On Oct. 12, 2000, the corporation filed for Chapter 11 bankruptcy protection -- from No. 1 worldwide to dead in less than a decade. Other such crashes may be looming today, thanks to dot-com disintegrations and telecom implosions. Keep an eye on Nortel, Lucent, and perhaps even Motorola.
GREAT TO DEAD. How does a seemingly healthy business go from king of the hill one minute to roadkill the next? Harris offers a couple of explanations -- both, in my opinion, a reflection of lousy corporate leadership. That sounds a little harsh, but isn't it the leader's job to ensure that an organization is prepared for the future?
How can an outfit avoid running aground when its pilots are blind to both impending danger and new opportunities? How many times have you or your lieutenants sat down with groups in your company to discuss the early signs of a future demise -- such as market threats that seem to have appeared out of nowhere? Have you thought far enough ahead to identify preventive measures? Have you installed systems that give your organization the ability to recognize and respond to changed circumstances quickly and well -- especially changes that could put the entire outfit at risk? What are you waiting for?
The first reason Harris offers for why corporations are caught unawares is expressed in the old saying, "nothing fails like success." In the context of being blindsided, this means that businesses are reluctant to alter a formula that has worked for them in the past. They've invested tremendous effort and resources to get where they are, created systems and structures and their own little culture, all of which seem perfect. Then, when a new technology or business model comes along, hewing slavishly to those outmoded pillars of strength becomes a weakness. An all-too-typical corporate antipathy to foreign ideas or behavior -- the "not-invented-here syndrome" -- makes the status quo king. Unfortunately, the status quo is the prime ingredient in fog.
BLIND LEADING THE BLIND. Harris' second explanation is that weak leaders have difficulty separating important "signals" from meaningless "noise" when trying to understand their competitive environment. Hundreds of trends can catch a CEO's attention: New technologies, nimble competitors, extraordinary new products, shifts in customer behavior. They're all part of the rich mix of ideas that corporate leaders must parse as they strive to identify the signals that matter most -- trends that will have major consequences. These include complex future challenges or opportunities that require serious analysis -- and that can't be dismissed with simple answers and a quick fix.
Most of the time, missed signals reflect a leadership problem. It's the leader's job, after all, to stamp out the not-invented-here syndrome and to sensitize subordinates to the need to take signals seriously. Even more important is the leader's responsibility to ensure that methods are in place for identifying new trends and realigning the organization with the evolving reality. If this isn't happening in your organization, you might consider the following suggestions, drawn from Harris' recommendations and my experiences preparing organizations for the future:
Create a "think group" to explore directions and initiatives you haven't fully explored -- or even imagined -- that might be relevant to the future of the business. The mandate isn't to dream up new products but rather to identify new opportunities or threats.
Stop looking for simple answers to complex issues and problems. Put a task force together to analyze and understand root problems, such as lack of innovation or the failures that come from consistently focusing on cost-cutting more than revenue enhancement. These troubles are a sure sign that imagination, boldness, and nerve are in short supply in the corner office. Stop treating symptoms, in other words. Make the focus "problem-seeing," rather than "problem-solving."
Create a "competitive-intelligence group" that should identify -- and thoroughly understand -- existing and potential competitors, including their sales, profit, market share, and new-product trends. What are their strengths, weaknesses, and strategies? You'll need a way to house collected intelligence and share it across the organization.
Create a "key-customers group." Have it identify your top 25, 50, or 100 customers. Survey them to determine the value-added services you could offer to increase their loyalty. Ask their opinion on their future needs, the signals they're noticing in the competitive marketplace, and potential brick walls they see ahead that could hurt your business.
Involve the executive team -- your right-hand execs. Divide it into three groups. Have each outline a scenario in which the company is blindsided in three years. Each group should identify and analyze why the outfit ended up in the fog, the triggers that could have served as warning signs, the impact of being caught off guard -- and how the organization should have prepared to avoid the situation. The goal of this exercise isn't to predict the future but to prepare for it.
CHANGING ANSWERS. There's a story of the time Albert Einstein was about to give his university class an exam. A worried teaching assistant, no doubt aware that students often prepare by reviewing past tests, pointed out to Einstein that the questions were exactly the same as the previous year's. Einstein responded that though the questions were the same, the correct answers were different.
So it is for corporate leaders: The questions are the same each year: How do we make the company grow? How to increase profits, or serve customers better? But the answers change faster than you can say blindsided. The key to an organization's future is its ability to recognize when external factors are changing more rapidly than its ability to keep up -- and then to know how to adjust. Job one for corporate leaders is to make sure that they and their businesses are up to that task. Are you? MacRae is president of the Lachlan Group, a management consultancy in Toronto. He has taught and worked with corporate leaders for the past 25 years