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Luck Plays Huge Role in Turbulent Markets, says LBS' Sull

Don Sull of the London Business School is a popular and familiar voice on the Back to B-School blog. He was recently cited by Fortune as one of the "ten new gurus you should know." In today's post, you'll get to know more about him and his new book, The Upside of Turbulence: Seizing Opportunities in an Uncertain World. In the final installment of our four-part conversation (you can start with the first part of our discussion), we discuss the role that managers at different levels in an organization can take to adapt to turbulence and how luck affects a business's success.

BNET: What are the first few steps a manager might take to reform an organization if he or she recognizes a hardening of strategies and practices during turbulent times?

Sull: That's a terrific question. First, of all, it depends who you are in the organization. If you're on the board, there are many things you can do to help if you introduce the discussion about hardening of practices. I think outside directors in general don't do nearly enough in their role as a check on institutional blind spots. If you are a CEO -- especially one brought in specifically to make changes -- you have to quickly find out who among your direct reports gets this issue of hardening of processes and practices, realizes the danger, and sees the importance of fixing it. If they don't see what you see, you may have to let a couple of people go and bring new people on.

The tricky place is when you're a middle manager: You're running a good-sized piece of the business, but you are three to four levels down from the CEO. A lot of people think, "There's nothing I can do." That, I think, is complete nonsense; it's a cop out. You should start to look for a cohort of people and articulate your combined story on what you think the priorities of the company should be and what you should do to react to the turbulence you face. That's the first step to finding sympathetic executives more senior in the organization. There are also great opportunities to have an impact from this kind of position when a CEO is replaced. Often when a new CEO comes in, he will meet with the top 50 to 100 managers to get a read deeper into the organization. I know of some people who have had great impact on these occasions when they had a compelling analysis prepared.

BNET: Your book takes on the role of luck. Could you lead us through how much impact than can have?

Sull: The role of luck in business is systematically under-discussed in management books. In Good to Great Jim Collins does a good job of consolidating some common sense observations. But he claims he's discovered the eternal laws of physics of organizations, stating, "If you do these things, you'll have a great organization." I think that's half the equation. The other half is "what threats and opportunities are presented to you by the external context?" I think the reality is, for most managers, you can't predict or dictate the timing, magnitude, or form of opportunities.

In The Upside of Turbulence, I've tried to bring luck and external opportunities back into the equation. Listen, there is stuff you just cannot predict; luck can help you or hurt you. However, there are things you can do to increase the odds that you'll spot an opportunity that others miss -- and increase your organization's ability to seize opportunities in a timely and effective manner.

BNET: What are some of those things managers and companies can do?

Sull: In broad strokes there are three approaches: anticipation, agility, and absorption. Anticipation is a firm's ability to collect and process real-time data on the situation, explore surprising results, and identify emerging opportunities and threats. Agility is a firm's ability to consistently identify and exploit opportunities more quickly and effectively than rivals. Absorption refers to the structural factors -- including size, diversification, resources, balance sheet strength -- that allow firms to weather shocks in the market, and live to fight another day. At a time when few firms have a triple A credit rating, companies that can master anticipation, agility, and absorption will be well positioned regardless of what the future brings.

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