The Idea in Brief
Are you dismissing small signals that may portend danger to your business? Ignore these ambiguous threats, and you could imperil your company. Pharmaceutical giant Merck discovered this firsthand when it downplayed early unclear data linking its painkiller Vioxx with cardiovascular risks.
It's frighteningly easy to underestimate ambiguous warning signs. When a threat isn't obvious, we fall prey to mental biases (such as dismissing data contradicting our existing viewpoints) that cause us to minimize perceptions of danger.
How to protect your company in the face of murky signals that your company may come to harm? Develop a rigorous discipline for identifying, evaluating, and responding to ambiguous threats. Roberto, Bohmer, and Edmondson recommend this three-step process: 1) Hone your company's rapid problem-solving and teamwork skills through practice. 2) Amplify ambiguous threats, encouraging people to ask "what if" questions about them. 3) Explore possible responses to threats through speedy, low-cost experimentation.
Apply this process, and you boost your chances of preventing disasters that can destroy your firm. Equally valuable, you enhance your company's ability to acknowledge problems and separate significant signals from mere noise--two skills essential for making high-stakes decisions wisely.
The Idea in Practice
Assess Your Ability to Manage Ambiguous Threats
Is your firm prepared to deal with ambiguous threats? The answer is "no" if your company:
- Spends more time responding to small emergencies than seeking to prevent them.
- Lacks a clear process for detecting and responding to ambiguous threats.
- Has a culture that discourages people from expressing concern when they spot ambiguous threats.
Manage Ambiguous Threats
Step 1: Practice teamwork under pressure. Stress and anxiety run high as ambiguous threats emerge and the clock ticks toward potential disaster. So don't try to improvise during this time. Instead, regularly rehearse responses that you can apply to a wide range of threats. These "dress rehearsals" help people in your firm get to know each others' strengths, weaknesses, and informal roles. If disaster does strike, participants will know who can provide an intelligent analysis and who will propose creative solutions.
Morgan Stanley's information technology group practices responding to a variety of threats--such as natural disasters, terrorism, and attacks on their network by sophisticated hackers--that could impair the firm's systems capabilities.
Step 2: Amplify the weak signal. Initiate a brief but intense period of heightened inquiry about the ambiguous threat. Encourage people to ask uncomfortable questions about the potential threat and to explore its significance--without fear of retribution should the threat prove harmless.
Many hospitals have created lists of early warning signs of potential cardiac arrest. When nurses spot such signs, they call in rapid response teams of critical care nurses and respiratory therapists to help them assess the signs' significance. These teams quickly determine whether a warning sign merits further action and specialists' attention. At some hospitals, these teams have dramatically lowered the number of cardiac arrests.
Step 3: Experiment. When a potential business failure looms, formal scientific inquiry into possible solutions may consume too much time or other resources. So, develop a less formal--and more rapid--process.
Electronic Arts investigates consumers' possible responses to a proposed video game feature by creating simple prototypes that mimic portions of the gaming experience for which the company wants feedback. Given the immense cost of video game development and the low probability that any particular project will yield a hit, this "mini-prototyping" enables the firm to identify and address potential problems more quickly and inexpensively than rivals do.
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Copyright 2006 Harvard Business School Publishing Corporation. All rights reserved.
Harvard Business Review
by Michael D. Watkins and Max H. Bazerman
This article provides additional insight into the vulnerabilities that blind managers to early warning signs. Examples include a desire to see the world as we'd like it to be, not as it is, and the common organizational phenomenon of fragmented and incomplete data flows to decision makers. The authors also offer suggestions for ferreting out threats and preventing them from turning into disasters. Tactics include scenario planning (creating scenarios for surprises that could emerge, then designing preparatory measures), risk analysis (estimating future events' probabilities, costs, and benefits), and creating cross-functional teams of insiders and outsiders to synthesize industry intelligence.
Harvard Business Review
by David A. Garvin and Michael A. Roberto
Garvin and Roberto recommend three practices for making people feel safe in asking uncomfortable questions about ambiguous threats. The practices: 1) Encourage constructive conflict. Foster vigorous debate over the weak signals you're seeing, and ask people to assume the perspectives of individuals in functional or managerial roles different from their own. 2) Practice consideration. Convey your openness to new ideas and willingness to accept different views. Avoid indicating that you've already made up your mind. 3) Achieve closure. Bring the decision process to a close at the appropriate time, avoiding deciding too quickly or too late. Accept that you'll never have complete, unequivocal data while making decisions about ambiguous threats.
Harvard Business Review
by Norman R. Augustine
No matter how promptly your company spots and responds to an ambiguous threat, that threat may still metastasize into a crisis. This article provides suggestions for managing crises. For example: 1) Contain the crisis. When disaster strikes, act decisively--and quickly. State the facts you know, as well as what you don't know. Identify one individual as your company spokesperson. Keep customers, employees, and suppliers informed. 2) Resolve the crisis. Quickly do whatever it takes to repair the damage and secure your firm's long-term reputation. 3) Profit from the crisis. Recoup crisis-related losses and look for ways to benefit from the situation. For example, Johnson & Johnson's smart handling of the cyanide-tainted Tylenol incident strengthened its reputation.