9 Ways to See Change Coming (Before it Kills Your Business)

THE STRATEGIC DECISION | Paul J. H. Schoemaker

To get a business going, you need entrepreneurial vision. To keep it performing at a high level day to day, you need intense operational focus. But to survive for the long run, you need a different kind of skill, one that I consider a core attribute of true strategic leaders. In my book with George Day, we call it peripheral vision. 

Sad to say, most companies aren’t very good at this. When new threats or opportunities emerge on the periphery of their usual business environment, they fail to notice them or misinterpret their import. Most leaders have a hard time with the weak and ambiguous signals that are often the only earning warning signs of impending change.

What Lego failed to see coming

There are many examples: Coors failed to see the trend toward low carb beer until it was too late. Michelin overlooked the crucial role of service stations for their new Flat Run tire.  Mattell's Barbie was blindsided by the popularity of the Bratz doll. Another notable case is Lego, which responded poorly to the electronic revolution in toys and gaming, and then went on to underestimate the squeeze that Wal-Mart and China would put on its pricing power.

As a business owner, you always face the temptation to focus on managing your current offering in the immediate business environment. Someone has to do this, to be sure, and giving unwavering attention to operations will often pay off in short-term performance. But by zeroing in on what’s in front of you, you naturally lose peripheral vision—and that can threaten your company’s long-term survival. 

Having peripheral vision means that you monitor what is happening around the edges of your business: You keep tabs on other industries, distant markets, new research, emerging business models, and remote demographic data that may seem to have little relevance to your portfolio. But strategic peripheral vision is about much more than simply anticipating change.  It is about sensing where to look more carefully for clues, understanding how to interpret weak signals, and having the courage to act when the signals are still ambiguous.

Mastering the art of anticipation

How do you master the art of anticipation? Our study of over 160 senior executives found that a vigilant attitude is the most important trait of strategic leaders who are good at anticipating and exploiting change. To break that down into a set of practices, we’ve found that such leaders do nine things well. They:

• Look for game changing information at the periphery of their business
• Search beyond the boundaries of current, prevailing views
• Recognize potential changes before the competition does
• Connect the dots of incipient trends by triangulating weak signals
• Entertain multiple hypotheses about causes of change
• Encourage mavericks in their company to say what they really think
• Organize “paranoia sessions” to tap wisdom inside their company
• Build wide networks inside and outside the organization
• Remain vigilant and curious about signals from many spheres

It’s important to note that there are two ways you need to look at your periphery. One way, just described, is to “mind” the periphery. This requires divergent attention and means that you pay attention to actions across many areas and connect the dots of trends that may present approaching threats or opportunities.

Don't just "mind" the periphery. "Mine" it, too.

But there are other sources of threat and opportunity you need to watch. Sometimes they originate in a well-defined part of the periphery, such as pending regulations or a specific technology. In such cases, you want to thoroughly “mine” for knowledge.  In other words, only a very close examination reveals the key insights, usually after triangulating multiple sources of information. This requires a strong convergent focus on a specific part of the periphery and rapidly developing the capacity to respond to it. 

The good news is, failures of strategic anticipation aren’t always fatal. After Lego experienced a deep crisis in the early part of last decade, the company changed its approach.  It improved communications with retailers and customers, viewing them as strategic radar and sources of new ideas.  Lego teamed up with outside inventors to create new products.  Other outside parties helped it create T-shirts, movies, books, toys and games.  Lego also developed robotic kits to replace its 1998 product, emphasizing intelligent bricks, a new programming language, motors and sensors, starter models and teaching materials for schools.

It was a happy ending, as it turned out. But it would have been much better, wouldn't it, had the company anticipated the changes before they nearly did it in. And if you’re serious about being a strategic thinker at your company, that's your job.