In the UK and Europe, we are living in a time that is both extraordinary and turbulent. The UK government reports creation of over 660,000 start-ups over the last 12 months, which is an alarming number for a country that historically has not supported entrepreneurship. It is likely that many start-ups will not survive past the early micro stage, but some will achieve a degree of success. This raises the question about why most larger corporations are not agile enough to encourage some level of entrepreneurial spirit within their enterprises. Their own internal processes often squash external opportunity identification.
Some corporations pay disproportionate attention to inward focused control mechanisms, and, as a result, miss the opportunity landscape. This can be a serious problem for companies that operate in intensely competitive environments where the need to look outward can be overlooked.
Inward focused control mechanisms include management information systems, key performance management, control by KPIs, dashboards, spreadsheets, risk management, big data analytics, internal audit committees, and accountants. These tools are often used in silos and functionally discourage individual employees from collaborating across departments. In contrast, external focused control mechanisms include outward looking opportunity/capturing mechanisms, the intelligence cycle, strategic market mapping, black swan analysis, grey rhinos analysis, technology play mapping, company radar room, and embracing VUCA.
The strategic goal of most for-profit businesses is profit and market share. This may seem simplistic, but if increasing profit was easy, companies such as Saab, Kodak, Blackberry, Monarch Airlines, and most recently, Carillion plc in the UK would still be market leaders. History and hindsight shows there were many signals predicted that these companies were in trouble and close to disaster.
While hindsight is accurate, foresight is more difficult. By embracing the intelligence cycle, Severin Schwan, CEO of Roche, was able to leapfrog his rivals with the early announcement of its combination trial results. At present, it is unknown which rivals also made this prediction and took appropriate action. To track competitive activity and market developments, the analyst must work with inward looking control mechanisms and incorporate external factors.
Recently, the need to monitor external signals with news was highlighted by an announcement that Informa is attempting to purchase UBM. The acquisition will create a $12.5bn exhibition and events organization. I wonder how many rivals predicted this one year ago and used competitive simulations to think about what the acquisition could mean, or how they should react if it happens. Equally important, if they did run simulations, did they actively share the intelligence within their organizations? Many company staff members operate within silos and feel surprised when their rivals outwit and out-manoeuvre them. However, time spent on reconnaissance is seldom wasted. It is imperative to examine a real situation first-hand to understand the scale or impact of an issue, the human impact, and the true context. In military parlance, this is called reconnaissance. In the news industry, there are reporters out in the field speaking to people, collecting primary data, and checking the veracity of sources prior to open reporting. In the legal sector, there are teams of investigators supporting the legal teams.
For those familiar with the TV show, The Good Wife (a show based on the legal system), Kalinda provides field and human intelligence. Decision makers commission external intelligence gathering to increase their capabilities, and support their cases and previous assumptions. The findings often surprise their adversaries in court and lead to better outcomes. Of course, in the case of lawyers, adversaries operate within the context of a courtroom with a protocol of accepted rules, and there is a judge to apply the rules in the quest for justice. Within an intensely competitive marketplace, even if it is highly regulated, there is no referee, and the rules are less clear.
Is the Kalinda character equivalent to the Tenth Man or Woman contributing to the intelligence cycle by providing valuable nuggets of intelligence to support the execution of strategy? The Tenth Man is a strategy used to challenge the assumptions, lead with questions, predict the future, and share with management the truth. In the corporate world, there is a name for this process – the strategic intelligence cycle. However, if organizational silos exist and employees are not expected to cross them, the intelligence cycle cannot work and surprises happen. Unfortunately, most surprises are not positive.
Some of the most successful CEOs have simplified their complex business models and focused on executional excellence, organizational design, culture, superior employee engagement, strengths-based leadership, transformational learning, and customer centricity to benefit stakeholders. The norm for these CEOs is to combine sophisticated tools with true insights and identify alternative scenarios.
Within large public organizations, why wouldn’t highly engaged market insights/research professionals talk to competitive strategy professionals and discuss their needs and challenges? Why don’t more analysts from one silo share or discuss issues with peers from another silo? Do these employees understand that history suggests their employer has a less that 65% chance of surviving the next five years unless they embrace change and re-invent themselves? Within 10 years, without constant innovation and reinvention, business survival rates are even lower.
In the mid-90s, the most innovative companies operating in highly competitive sectors embraced collaborative tools. The tools broke down silos and allowed creative ideas and intelligence to flow across key stakeholders – across the organization and the hierarchy. Over the past two decades, there have been many examples of serious institutional failure which provides evidence that corporate hierarchies often contribute to their own decay. Great ideas or vital concerns are trapped, lost, or paralyzed in power struggles, turf wars, or career fear. Only rare organizations, like 3M, proactively encourage ideas to flow from employees and create processes to embrace, qualify, and escalate them.
Successful leadership teams are paranoid about monitoring external intelligence. They combine external knowledge with internal data, and expect key experts to challenge and share their views. Being average no longer guarantees employment security. How many executives employed by the BBC (founded in 1922), would have predicted that they would become embroiled in damaging gender wars while Netflix (founded in 1997), redefines the global broadcasting paradigm? Some executives embrace a form of willful blindness. When leadership teams are not even aware of their blind spots, then there is only one possible outcome. The severity of these challenges will vary, but the consequences are clear.
Kalinda – and her equivalent in the corporate world – would not rest until all stakeholders are fully equipped with the required intelligence to unlock discretionary effort to help leapfrog rivals and gain commercial advantage for their battles ahead.
Gordon Donkin is senior business advisor at thevaluespace.