When uncertainty increases, top performers stay ahead by knowing where to look for warning signs and how to explore their environment.

The costs of being slow to sense threats and opportunities on the competitive horizon can be devastating. Just ask RadioShack, a pioneer in catering to electronics hobbyists. After jumping into mobile phone distribution in the 1990s, the U.S.-based retail chain with more than 4,000 stores didn’t respond quickly enough to the rigors of e-commerce and failed to find a way to connect with the new generation of electronics tinkerers and makers.1 Following multiple attempts to regain its footing, the once-thriving company filed for bankruptcy in 2015 and never recovered.

Businesses can avoid such perils by spotting directional shifts ahead of their rivals. In our research on 118 companies in the past decade, we found that what sets the most vigilant ones apart are not the tools and methods they use but their systematic approaches to determining where to look and how to explore. They tend to take four basic steps. First, they strategically scope the environment, often scanning beyond their comfort zones, to begin identifying where relevant signals may come from. Second, they formulate guiding questions that direct the organization’s scarce attention to the places most likely to spawn threats or opportunities. Third, they conduct targeted analyses to better understand the sources and meanings of any weak signals they pick up. Finally, they track the most intriguing signals, amplifying and clarifying them sufficiently to act decisively when the fog clears.

Embracing this process doesn’t mean that organizations will identify every important signal; many signals remain weak or ambiguous for some time, and some may just be missed. But in our experience working with dozens of companies, organizations that are actively engaged in sensing are better prepared for things that might happen and are able to bounce back faster. Their attentiveness to faint stirrings both inside and outside the business allows them to take timely action when threats or opportunities emerge.

Step One: Scope to Decide How Widely to Look

References

1. J. Brusten, “Inside RadioShack’s Slow-Motion Collapse,” Bloomberg Businessweek, Feb. 2, 2015; and “Lessons from RadioShack: To Stay on Top, Figure Out What Got You There,” Knowledge@Wharton, Feb. 15, 2015, https://knowledge.wharton.upenn.edu.

2. M. van Tartwijk, “Philips Sells Majority Stake in LED Components, Automotive Business,” The Wall Street Journal, March 31, 2015; and M. Egan, “GE Can’t Get Rid of Its Light Bulb Business,” CNN, May 22, 2018, https://money.cnn.com. Osram Sylvania has refocused its lighting business on opto-semiconductors, automotive, and digital applications; see “Annual Report of Osram Light Group Fiscal Year 2018,” 2018: 5.

3. E. Schmidt and J. Rosenberg, “How Google Works” (New York: Grand Central Publishing, 2014).

4. M.H. Bazerman and M.D. Watkins, “Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them” (Boston: Harvard Business School Press, 2004).

5. D. Franklin, “Megatech: Technology in 2050” (London: Economist Books, 2017).

6. Psychologists have studied why consumers often rank various risks very differently than experts who have studied the statistics. They found that risks over which people have little control (such as flying versus driving yourself) or those that people poorly understand (radiation versus slipping in the shower) are considered more threatening by ordinary citizens. The concentration of risks (airplane crash versus highway death) and whether the threat has a halo of dread (Ebola versus a broken leg) also shape consumers’ perceptions. See P. Slovic, “The Perception of Risk” (Abington-on-Thames, England: Routledge, 2000).

7. P.J.H. Schoemaker, “Scenario Planning: A Tool for Strategic Thinking,” MIT Sloan Management Review 36, no. 2 (winter 1995): 25-40; and K. van der Heijden, “Scenarios: The Art of Strategic Conversation” (New York: John Wiley, 1996).

8. V. Venkatraman, “How to Read and Respond to Weak Digital Signals,” MIT Sloan Management Review, Feb. 22, 2019, https://sloanreview.mit.edu.

9. C.J. Nemeth, B. Personnaz, M. Personnaz, et al., “The Liberating Role of Conflict in Group Creativity: A Study in Two Countries,” European Journal of Social Psychology 34, no. 4 (July/August 2004): 365-374.

10. R.L. Martin, “The Opposable Mind: Winning Through Integrative Thinking” (Boston: Harvard Business Press, 2009).

11. J. Goudreau, “Eight Leadership Lessons From the World’s Most Powerful Women,” Forbes, March 21, 2013, www.forbes.com.

12. A.S. Grove, “Only the Paranoid Survive” (New York: Currency, 1996).

13. Diversity plays a key role in fostering outside-in perspectives. See S. Saeed, S. Yousafzai, A. Paladino, et al., “Inside-Out and Outside-In Orientations: A Meta-Analysis of Orientation’s Effects on Innovation and Firm Performance,” Industrial Marketing Management 47 (May 2015): 121-133.

14. D. Baer, “Five Brilliant Strategies Jeff Bezos Used to Build the Amazon Empire,” Business Insider, March 17, 2014, www.businessinsider.com.

15. R. Dalio, “Principles: Life and Work” (New York: Simon & Schuster, 2017).

16. J. Gapper, “Bridgewater Is Troubled Over ‘Radical Transparency,’” Financial Times, Feb. 10, 2016.

17. M. Zenko, “Red Team: How to Succeed by Thinking Like the Enemy” (New York: Basic Books, 2015).

18. J. Surowiecki, “The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economics, Societies, and Nations” (New York: Random House, 2005).

19. P.J.H. Schoemaker, G.S. Day, and S.A. Snyder, “Integrating Organizational Networks, Weak Signals, Strategic Radars, and Scenario Planning,” Technological Forecasting and Social Change 80, no. 4 (May 2013): 815-824.

20. P.R. Kleindorfer, Y. Wind, and R.E. Gunther, “The Network Challenge: Strategy, Profit, and Risk in an Interlinked World” (Upper Saddle River, New Jersey: Prentice Hall Professional, 2009).

21. See M. Michalko, “Cracking Creativity: The Secrets of Creative Genius” (Berkeley, California: Ten Speed Press, 2001); and see M.J. Gelb, “How to Think Like Leonardo da Vinci: Seven Steps to Genius Every Day” (New York: Dell, 2009).

22. S. Krupp and P.J.H. Schoemaker, “Winning the Long Game: How Strategic Leaders Shape the Future” (New York: PublicAffairs, 2014): 104-105.

23. W. Ury, “Go to the Balcony,” (2016 Dawson High school Graduation address, June 12, 2016).

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