In a study of 135 multinational firms over an eight-year period, vigilant organizations had 200% higher growth in market capitalization and were 33% more profitable than their vulnerable rivals.1 This field study built on an earlier Harvard Business Review assessment survey of ours to classify organizations as vigilant, vulnerable, neurotic or focused.2
What success formula have vigilant firms seized upon?
In our new book, See Sooner Act Faster, we share how vigilant firms do exactly that – see sooner and act faster than others.3 The reason vigilant firms stand to rack up a disproportionate percentage of the financial rewards is because they are better prepared to navigate digital turbulence. The root of this turmoil is often the rapid convergence of disruptive technologies like blockchain, Internet of Things (IoT), Artificial Intelligence (AI), mobility, virtual reality and more.
Our book describes how leaders get blindsided when two or more of these technologies, some of which may still seem to be on a distant horizon, suddenly coalesce and produce fast technological change. Organizations are often ill-prepared to foresee and navigate levels of combinatorial complexity that few have experienced before.
Amazon is a good example when they used the cloud to rapidly scale around the globe. They developed machine learning algorithms for customer recommendations, mobility to enable new processes for ordering and delivery, and voice interaction for Alexa devices. Their continual stream of disruptive moves kept many other retailers, logistics, transportation and technology firms on the back foot, just as Walmart had done decades earlier.
Peripheral Vision. Seeing sooner is about spotting and probing signals from left field to notice patterns that foreshadow change, risk or opportunities in the marketplace. Leaders of vigilant firms invest in, and commit to, corporate foresight which our research shows is a key discriminator. Only leaders can create a corporate culture that encourages every employee to listen and look for signs – even very weak ones – that hint at shifts in customer preferences, competitor moves, technology applications, or market conditions. Vigilant leaders acknowledge, and visibly reward, employees for sharing faint warnings of change up the chain of command and across business units and functions, without fear of speaking truth to power.
Vigilant leaders also demonstrate abundant curiosity by looking far beyond their own organization for ideas bubbling up in other industries or from partners as well as academic or research institutions. They utilize their corporate mavericks to push the boundaries of conventional thinking. Leaders in vigilant firms also encourage people to challenge assumptions, experiment-to-learn, and deploy flexible strategies to keep the enterprise agile. Also, they manage their own time and attention so that they have the capacity to look further ahead and see more possibilities.
While leadership commitment to foresight is the essential success factor, vigilant firms also orchestrate systems deep down that enable a disciplined search for opportunities, continuous small experiments, customer workshops, and global scouting teams that explore other players’ innovations beyond their own industry. Ultimately, vigilant leaders must architect and implement the necessary components of organizational preparedness so that they see more options and are ready for multiple futures with contingency plans.
In contrast, vulnerable firms focus on what they are good at. ‘What else can we do with what we have?’ They want to leverage their current hand of cards rather than create new ones. This inside-out view seldom brings to light truly new insights about what customers are lacking; they don’t mine latent needs enough. Leaders in vulnerable firms place too much emphasis on short-term priorities and allow their attention to be trained on established routines and getting work done. When confronted with evidence of change, they frame issues so that they mostly “see what they expect to see.” Teams in vulnerable firms often engage in wishful thinking and confirmatory explorations which bias their search for solutions in favor of the status quo.
Seizing Opportunities. But even the best efforts to see sooner only take organizations halfway. It is one thing to bring the horse to water and another to make it drink. Some of the new sensing insight may naturally fit with the organization’s modus operandi and be properly acted upon. But responding to discontinuous change may not find a natural home inside the enterprise, in terms departments, budgets, goals and champions. To reap the full rewards of foresight and vigilance, leaders must have the will and courage to do things in a different way. Leaders may also need to transform the organization first before it can act fast and wisely. Timely organizational reshaping often goes hand-in-glove with remaining vigilant.
A first step toward acting faster requires connecting new information with existing know-how through scenario planning or war gaming to raise the collective knowledge base inside the company. The goal is to raise everyone’s ability to notice additional relevant “soft” signals that matter, and this crucially depends on the state of their current know-how. Just as new drugs can only deliver their intended benefits if the body has sufficient receptors to absorb the molecules, new external developments – say in emerging tech, overseas markets, or regulatory initiatives – can only be interpreted properly if enough people are knowledgeable about them.
Vigilant firms pursue rapid, iterative tests to build on what they’ve learned. They identify ways to place small strategic bets and let their multiple hypotheses play out in light of new data obtained. They make room to pursue new opportunities sooner, often with partners or through joint ventures, in proactive ways that will avoid defensive overreactions later. They shift resources adroitly to higher-value activities as soon as they compile sufficient evidence that a promising solution is ready to become a calculated investment risk.
Our book illustrates through a variety of case studies how vigilance has led to sustainable strategies at companies like Intuit, Adobe, MasterCard, Vanguard, and Telecom New Zealand. It also offers examples at Mattel, Wells Fargo, Toys-R-Us, Radio Shack, and Yellow Cab where leaders missed important signals even though the signals were there to be spotted. But since they are seldom presented on a gold platter, leaders must encourage people to look around the corner, connect the dots and follow up initial hypotheses with discriminating pilot experiments.
The Leader’s Agenda. Our book See Sooner-Act Faster also offers much practical advice about how to build a leadership teams’ vigilance muscles in systematic ways. This would include the following activities and capabilities:
- Interrogate the past, present and future
- Encourage divergent thinking
- Explore from the outside-in
- Amplify interesting signals
- Triangulate multiple perspectives
- Run, probe and learn from experiments
- Generate competing hypotheses
- Develop multiple future scenarios
- Conduct exploratory experiments
- Change how strategy is formulated
Leaders at most companies will readily acknowledge that they’ve been surprised by competitive moves or industry changes at least two to three times within the last year. And they may hope that the relevant lessons will have been learned. But then the organization gets surprised again by failing to spot early signs of important changes. Only by periodically conducting audits about what was missed or seen early, and why, can leaders pin point systemic weaknesses in the organization. By emphasizing that past blind spots are usually not just random but a function of how information is gathered, shared, interpreted and acted upon, leaders can architect vigilance. Building a vigilant organization and culture, led by a committed leadership team that invests in foresight, is the best way to assure that the company will have a healthy future in a changing world. As the data show, it pays to do so.
1 Rohrbeck, Rene and Kum, Menes Etingue,“Corporate foresight and its impact on firm performance: A longitudinal analysis,” Journal of Technological Forecasting & Social Change, 129, 2018, 105-116.
2 Day, George S. and Schoemaker, Paul J. H., “Scanning the Periphery” Harvard Business Review, Nov. 2005, pp. 135-148.
3 Day, George S. and Schoemaker, Paul J.H., See Sooner–Act Faster: How Vigilant Leaders Thrive in an Era of Digital Turbulence, MIT Press, 2019