Monday, November 18, 2013

Avoiding "Surprises"

Early Warning
Early Warning

Had these experienced commanders and executives (see the prior post, "Surprise") known what was coming, they could have redeployed assets and avoided catastrophic “surprises.” Today, of course, we can see that the available information provided sufficient early warning of clear threats - hindsight is 20/20.

But why is it these leaders couldn't see the signs at the time?

In retailing, it is not as if amazon.com and its offshoots were unknowns by the late 1990s. However, the prevailing view of traditional retailers was that marketplace success required opening as many stores as possible to both gain share and blunt competition. These built vast organization structures around site location, logistics, inventory, HR and downstream (promotional) marketing. And the most successful developed sophisticated information systems that reported operational performance variation in increasingly exacting detail. Have a hot selling item in one location? Easy - find excess inventory and load it on the next shipment. Poor performance in another? Schedule a performance review with store management to isolate and fix the root cause.

What they didn't have was an information system to warn of emerging strategic threats. No doubt these executives received information about the impact of Internet business models. But, unlike the internal information, it was unstructured, arriving initially in dribs and drabs. By the time clear trends emerged, the successful early Internet movers had learned from their mistakes and established defensible niches.

Caught in the daily exigencies of running an enterprise, these leaders simply weren't programmed to evaluate the nature of the available early warning intelligence within the context of their brick-and-mortar operational mindset and information expectations. And, eventually, when they did assess the threat, they were constrained by the amount of investments required to overcome the first-mover advantage, which would have required diverting significant resources from successful operations.

Waiting until information is absolutely certain (right hand side of the chart) results in a crisis, forcing leaders to rapidly rethink critical assumptions: maintaining outdated mindsets when bombs are falling or bankruptcy looms is suicidal. But it may be too late: they have very little flexibility in how to respond – you can’t re-position a fleet immediately or turn a brick and mortar operation into an e-commerce one overnight.

On the other hand, way back in relative time (the left hand side), leadership has more leeway in deciding where to deploy assets. However, the uncertain and often conflicting information makes it difficult, if not impossible, to challenge the existing organization mindset.

Avoiding “surprise” requires speeding up the processing of relevant information, moving the information certainty line upward and the intersection of the two lines to the left, when there is more decision-making flexibility.

Creating the intelligence necessary to challenge assumptions earlier requires choice and focus – every startup or new technology is a potential threat. And, perhaps perversely to some, the solution is not simply amassing and sorting through vast amounts of data. 

It requires asking the right questions.

Next: You Can't Find What You're Not Looking For

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