هشدار زودهنگام: استفاده از هوش رقابتی برای پیش‌بینی تغییرات بازار، کنترل ریسک و ایجاد استراتژی‌های قدرتمند

Executives of big companies should read this book because the proposed method looks like an effective tool for companies to stay big. Executives of small companies should read the book because their bigger competitors may be reading it, and maneuvering against a large competitor who has a good early warning system could be tough. So if you're planning an asymmetric strategy, you better know what you're up against. Anyhow, even without any offensive intentions towards bigger companies, the leaders of small organizations should look into this book since lack of early warning can ruin small and big companies alike. I also recommend the book to students of management as an insight into the tricky subject of how organizations build an image of their environment. Most of the literature on that field tends to be written in a researcher-to-researcher style, like books on organizational sensemaking or cognitive oligopolies. This book stands out since it's clear, solution oriented and written for practitioners. Moreover, the book offers some solution to the never ending discussion regarding deliberate versus emergent strategy making. The book shows how to deal with a complex environment by understanding and monitoring it, instead of planning yourself to death with irrelevant tools or not planning at all. The book also discusses organizational politics that might block a competitive intelligence function since it often lacks the direct access to decision makers that governmental intelligence agencies usually enjoy in their arena.

Chapter One

Surprise!

"Man's basic vice, the source of all his evils, is the act of unfocusing his mind, the suspension of his consciousness, which is not blindness, but the refusal to see, not ignorance, but the refusal to know." —Ayn Rand

Take a minute to carefully read the responses to the two survey questions in Table 1-1 on the next page. Then consider their amazing findings. Ninety-eight percent of respondents predicted their companies' exposure to business risk would increase over the next three years. Ninety-two percent reported that their company was surprised by at least one significant event in the past five years.

The first part is not surprising. There is a consensus in the business world that the environment has become much riskier over the past three decades. Executives lament about globalization, technology change, regulatory shifts, and consolidations making competitive pressures substantially higher. Yet, despite the fact that everyone knows the world has become riskier and expects even more business risk in the future, fully 92 percent of the managers surveyed reported that their company was recently (last five years) surprised by at least one event that was significant enough to affect their organization's long-term market position!

The survey was taken at the beginning of 2002. The respondents were middle managers working mostly in Fortune 500 corporations. How come their large, sophisticated organizations were surprised by events that posed a strategic threat?

The answer is not for lack of signs. Signs for emerging risk are almost always out there.

Surprise Attacks

Surprise plays a significant role in decision processes. In military history, for example, surprise attacks have almost always proved successful beyond expectations. From Pearl Harbor to the Allies' landing in Normandy on D-Day, from the Barbarossa offensive (Hitler's invasion of the Soviet Union in 1941) to the Yom Kippur War (the Arab attack on Israel in 1973) to the September 11 Islamic terrorist attacks on New York and Washington, surprise has enabled the attackers to achieve far more damaging results than what one would have expected from judging initial "objective" odds, taking into consideration relative strengths of the opposing parties, defensive measures, etc.

In business, surprise is as damaging. The failure of Jack Welch to foresee the determined resistance of European regulatory authorities to his plans to take over Honeywell resulted in significant loss of money and prestige by General Electric and Welch himself, who until then had been considered infallible. The swiftness with which doctors and hospitals moved away from using Johnson & Johnson's stents (medical devices that prop open clogged heart vessels) to using those made by Guidant took J&J by complete surprise, resulting in market share decline from 91 percent in 1996 to 8 percent in 1998, and prompting an analyst to describe it as "the most dramatic transfer of wealth between two companies in medical device history." The disastrous merger of Daimler-Benz with Chrysler and the surprise departure of most of Chrysler's management over the next two years cost Daimler billions of dollars and has shaken markets' valuation of the merged company.

However, surprise has a surprising side. Academic research into surprise military attacks spanning the last seventy years shows that their success was not due to cunning deceptions and lack of early signs. Instead, those studies found that surprise attacks were successful because the other side was the captive of obsolete assumptions and beliefs that led, in the absence of countermechanisms, to ignoring signs of risk.

In other words, surprise is often not really such a surprise. This may sound like a trivial statement, but it may not be so trivial. It means that those whose responsibility it is to act early on—but not necessarily everyone else—ignore early signs of an impending "surprise." The failure is in lack of action, and in most surprise attacks there were indeed some who foresaw the risk and warned about it, but often they were simply ignored or dismissed as doomsday prophets. The existence of early signs is good news for those whose role is defending their enterprises from nasty surprises. It means that defending against surprise is not an impossible task. Instead, it may be a matter of having an effective mechanism to identify early signs of risk and forcing the decision makers to heed the warning. Not an easy task, but not as forbidding as trying to know the unknowable.

Naturally, decision makers must cooperate in order to have such an effective system. If you were a decision maker, wouldn't you like to have an early warning capability at your fingertips? The answer may not be as simple as it seems. Terry Smith, a famed British analyst with a large following who predicted the demise of the stock market bubble of the 1990s, says CEOs "often don't know what is going on in the business." To that we may add that CEOs often don't want to know.

The Supremacy of Internal Convictions

The finding that surprise is often a result of ignoring available signs of risk leads to the realm of executive judgment. In this realm, many books and articles document the supremacy of internal convictions over facts and findings. In the broadest sense, I call this a blindspot. "Blinders" worn by decision makers represent a critical source of failures in their judgment and decisions and are a major reason that organizations are "surprised." Performance failure is a direct consequence of bad surprises. The logical chain is straightforward: Obsolete internal convictions—blindspots—lead to the adherence to wrong strategies, ignoring market evidence that they should be modified or replaced, and then the company's sales or profits or market share "surprisingly" declines.

Ignoring signs of risk is a substantial problem facing all those planning for the future, be it in government or in business. Invariably, the people at the head of the pyramid, those who must accept or reject evidence for emerging risks, are the ones most susceptible to such a failure. For reasons that will be described shortly, leaders—especially business leaders—are those whose internal schemas are more prone to internal blinders than those of their subordinates.

If those whose duty it is to act on signs of risk look at the wrong things—or fail to look at the right things—disasters follow. When convictions of powerful leaders clash with evidence, the problem multiplies. This is because powerful leaders evoke powerful mechanisms to explain away the facts, sustain the denial, and dismiss the signals from the outside world that reality is changing. In the name of "team spirit" they encourage groupthink that further supports their views. They intentionally or unintentionally block internal debates from becoming too loud by limiting the forums available for subordinates to interact directly with the top (for example, by prohibiting them from going over a supervisor's head). They surround themselves with acquiescent consultants. This is how it happens, again and again, that smart and experienced leaders and commanders who turn a blind eye to what is happening under their noses "succeed" in leading their organizations toward decline and losses. When it happens in business, investors and employees pay the price.

Blind Executives?

A surprising number of powerful executives at the top of leading corporations are captive to a special class of internal convictions that relate to the future direction of the industry in which they compete. When these convictions and "visions" are out of tune with the evolving market, they obscure the ability of otherwise smart and knowledgeable executives to adjust their strategies accordingly. When a company's strategy no longer fits market reality, I call the situation "industry dissonance." The risk of industry dissonance is the risk that executive assumptions can lag behind industry reality and that companies' strategies therefore do not reflect the new conditions.

Inevitably, when industry dissonance arises out of changing industry conditions, new competitors, or more agile ones, take advantage of these changing circumstances to offer customers a better deal or a new route to serve their needs. Industry dissonance offers opportunities to some and grave risks to others. Such was the case when PC networks took the market away from large and expensive mainframes, and IBM, refusing to admit the new reality, suffered large losses. At the same time, it practically handed the market to Sun Microsystems. Such was the case when small, efficient Japanese cars took over the American market and left General Motors in the dust. GM simply gave the market away with its strategy of gas-guzzlers and old-style unreliable cars, despite technological changes, consumer changes, and supply-chain changes ("just-in-time inventory management," for example) that were already available to it.

A "new" industry of bottled water replaced cola drinks for many younger people, while Coke fixed its attention for many years on its hated rival, Pepsi. Canon took global leadership away from Xerox with, first, smaller and cheaper machines, and then with better features and reliability while Xerox stuck to its failed strategy of expensive-to-service leased copiers, and later an empty theme of "the document company." Such was also the case for Kodak, which was busy with a disastrous diversification strategy, including a misguided venture into the pharmaceutical industry, all the while assuming its lead in film technology would be sustained indefinitely. Fuji came from behind and took over the global lead, damaging Kodak's monopoly in the U.S. market as well. Polaroid rested on its laurels, selling high-margin instant cameras and film and refusing to see the new digital age as the end for its instant film market, until Sony and HP and Canon and Fuji and Kodak's advanced digital products bankrupted it. Industries do not stay static, and companies that fail to see the dynamics of change and adapt to it are overrun by others who do.

The failure to identify the risk of industry dissonance and act on it is not related to a specific industry, company size, or even how slow or fast a market changes. It does relate to the culture inside a company, its market position, and the organizational mechanisms it uses to identify and control strategic risks. Dominant players and arrogant cultures are always more susceptible. In Table 1-2, I present a very partial list of companies that suffered severe performance crises when their leaders failed to bring their expectations up-to-date with reality.

Executives who are trapped in their obsolete assumptions often refuse to believe the intelligence flowing from their own people, who deal with the markets, the customers, the suppliers, and the competitors on a daily basis. In the absence of a formal system capable of overcoming their convictions and alerting them to dissonance risk early enough to make a difference, they wake up only when the crisis hits and performance is down. By that time it is often way too late for them, their companies, their employees, and their shareholders, who often pay the price of blindspots.

Can Companies Do Better?

Senior executives could overcome some of the obstacles to "staring reality straight in its face" if they assumed responsibility for the active management of industry dissonance. The mere admittance that this risk is a strategic issue—their issue—and requires specific attention, resources, system, and culture to handle can bring many companies to do a better job of identifying and reacting to early signs of change. The system approach outlined below provides an effective relief for most companies. It replaces an empty slogan of "external focus" with specific activities aimed at bringing the outside world inside.

Middle managers can do even better. Because the convictions that trap most large organizations and their powerful leaders do not usually apply to the individual manager in a mid-level position, the tool offered in this book can serve to substantially improve his or her performance on the job. Free of many of the limitations confronting senior executives, such as large egos, insularity from negative intelligence, and a public commitment to a "vision," and equipped with a tool to assess and track risk to their products, areas, or projects, individual managers can largely avoid nasty surprises and the resulting performance disasters. Since the signs of risk are out there, and since the problem is a mindset, a systematic approach that attacks "fixated" mindsets head-on can save jobs, wealth, and the mental health of many managers.

Mind you, I do not offer a panacea. Many powerful decision makers are prisoners of their own convictions and proud history, and no method will change their view of the future or their unshakable belief in the validity of their strategy. No book and no system would have made Mike Armstrong of AT&T admit he was wrong as his vision for an integrated phone-cable company crashed about him, bringing AT&T's stock tumbling down and sending its debt skyrocketing. But for most readers and most companies, following the straightforward process suggested in this book, which has been tested in high-risk environments for many years, will mean a better preparedness to face the future. As the French scientist Louis Pasteur once said: "Luck favors the prepared mind."

The toolbox presented in this book is based on a sophisticated and tested military doctrine of early warning. Just as the U.S. Air Force can detect missile launches thousands of miles away and warn of an impending attack on the United States, businesses can detect signs of strategic risks (and opportunities) years ahead of time and prepare to act on them. A few leading corporations, such as Citigroup, Shell, Daimler's DASA, Astra-Zeneca (United States), and Visa, facing changing environments and markets, have in recent years applied this approach to create a line of first defense against nasty market surprises. Their systems quickly interpret intelligence from the market about emerging trends that pose substantial future risk to the company and in a feedback loop bring this intelligence to bear on their company's planning. The essence of these systems is the seamless marriage of planning, intelligence, and action, integrating them across products and markets, coordinating and systematizing them all the way to the top. In many cases, the output of the early warning system forces action upon senior management.

These experiments offer companies and individuals a method for fighting future uncertainty and the risk associated with industry changes better than existing methods of planning. Short of having a crystal ball, cultivating a culture of early warning can be companies' best defense against performance decline.

At times, managers may be able to compensate somewhat for the failure of risk management in their company's executive suites. Using their own early warning process, managers can prevent surprises in their corner of the world despite an inferior organizational early warning system, blinded leadership, and a growing industry dissonance. They may not be able to forestall an eventual decline if their company does not address the risk they expose, but at least they will be regarded as smart enough to have identified it early on. If they do it five minutes before everyone else does, this book will pay for itself many times over.

Manager's Checklist

Early signs always precede surprises. The problem is that they are ignored as often as they are recognized.

Many research studies show that when reality and convictions are at odds with each other, convictions often win. This is the risk called a blindspot, and it is the gravest risk for planners.

Industry dissonance is the risk that as the industry changes, the company does not.

Many businesses lose out to more agile competitors not for lack of early signs of risk, but because of their executives' mindsets. Executives and managers can avoid lagging behind simply by addressing the mindset issue head-on with the help of the straightforward process offered in this book.

The essence of the new business-based early warning system is the integration of strategy planning, intelligence, and action in an unprecedented, seamless way. In many cases, an early warning system "forces" action upon management.

(Continues...)

Excerpted from EARLY WARNING by Ben Gilad Copyright © 2004 by Benjamin Gilad. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site. In the turbulent waters of business, companies run the risk of being blindsided - and sunk - by unexpected developments. "Early Warning" reveals the key to staying on (or successfully changing) course: a CEW, or Competitive Early Warning system, which interlocks strategic planning, competitive intelligence, and management action. Such systems let companies manage risk more effectively and prevent "industry dissonance" - when corporate strategies are not in touch with market realities. Effective competitive intelligence (CI) is a critical competency which many organizations are still sorely lacking."Early Warning" is filled with "horror stories" of failed (or nonexistent) CI at one-time world-beaters such as Lucent, Levi Strauss, Polaroid, and AT&T. The book then features case studies of CI success in companies using the author's methodology, including Citigroup, Pergo, DASA, and Shell. It describes the three phases of a CEW: identifying risks and opportunities; intelligence monitoring; and management action and shows how to design and implement them. Each section ends with a Manager's Checklist of key points, and includes charts, tables, and other tools. It shows how to implement "war games" as part of risk analysis, and explains why companies should use their own people to conduct them - instead of expensive consultants or software products.

Surprise is rarely a good thing in business. Unexpected developments range in their effects from inconvenient to disastrous. To avoid being blindsided, companies must develop a Competitive Early Warning system, or CEW, which combines strategic planning, competitive intelligence, and management action. Such systems let organizations manage risk more effectively and prevent "industry dissonance" — when market realities outpace corporate strategies. Early Warning reveals how to:

• Change strategy to meet new realities

• Learn from the mistakes of others via the book’s eye-opening stories

• Avoid common tactics like benchmarking and using consultants, which may do more harm than good

• Tell executives what they need to know — not what they want to hear

Each chapter ends with a Manager’s Checklist of key points, and the book includes numerous charts, tables, and tools. With strong opinions and wry humor, world-recognized expert Gilad reveals how to anticipate and react to early signs of trouble.

"The corporate landscape is littered with tales of once-strong companies that would still be dominant forces had they used a competitive early warning system (CEW). Gilad offers a powerful one-two punch of detailed examples (from companies like Microsoft, Procter & Gamble, IBM, General Electric, Daimler Chrysler, Shell Oil, and more) and clear parameters by which to measure CEW capabilities and shortcomings in your company." "When strategy falls out of step with market realities, the result is a condition the author calls "industry dissonance." Whether because of head-in-the-sand executives, "we've-always-done-it-this-way" culture, or the sudden success of a competitor, industry dissonance has been the death knell for many once-powerful corporations, as well as the people who ran them and untold thousands of employees. Competitive intelligence, deployed and interpreted through a strong CEW system, can mean the difference between dominance and irrelevance for any company - including yours."--Jacket