Two years ago I participated in a disaster drill at Southwest Airlines. It was a simulation of a Southwest plane crash at the New Orleans airport. As part of the exercise, I boarded a plane in Dallas with Southwest employees assigned to assist victims and their families upon our arrival in New Orleans. Although Southwest has never had a fatal accident in its history, the odds are that it will sometime in the future. And the organization is ready to respond to what Max Bazerman and Michael Watkins would term a "predictable surprise."
For Bazerman and Watkins, as they describe in their new book of the same name, a predictable surprise has several characteristics. Among these are: (1) a large challenge that is knowable and will not solve itself, (2) something that is clearly getting worse over time, and (3) problems whose solution requires modest but certain costs in the short run versus large costs of unknowable certainty in the future. As examples of predictable surprises, they suggest such things as the rise of terrorism, compromises of auditor independence (and its implications for the general decline of trust in business), distortions resulting from government subsidies, global warming, rising medical costs (especially in the U.S.), growing retirement commitments (worldwide) and, on a more mundane level, the implosion of frequent-flyer mileage programs. (To this list, the authors of another new book, Seeing What's Next, probably would add the ability to predict industry change, especially that involving the development of disruptive technologies.)
Why do organizations led by people of vision fail to act upon such insights? Reasons advanced by Bazerman and Watkins are that organizations and their leaders: tend to undervalue risks, particularly those that lie in the distant future; are unwilling to make smaller investments now to prevent uncertain future risks with higher costs; have a bias for the status quo, regardless of how much they talk about the importance of change; and have a tendency to address problems after rather than before a predictable surprise.
Important trends are identified as part of nearly every strategic planning exercise. But the effort to address them too often stops there. If the ability to act in a timely manner distinguishes better performers from their competitors, what can be done to ensure that this happens? The authors suggest that once predictable surprises are identified, persuasive communication, coalition building (to mobilize people to confront the potential surprise), and structured problem-solving (to identify options and eliminate obstacles to action) are important. Finally, a crisis-response program may have to be devised, including the kind of rehearsals that I experienced at Southwest Airlines.
This work poses several questions for us. First, does it reflect your own experiences? Is there a bias to act on more immediate competitive threats while putting the longer-term but foreseeable demographic, social, and other trends aside? Does anyone in the organization have the responsibility to mobilize people to act on such trends (as opposed to identifying them)? What are the short-term incentives to do so? Can an organization systematically address this challenge given the pressures that it faces from investors for short-term performance? What do you think?
Note to readers: For your opinion to be included this month, please respond by or before Thursday, December 16th.
To read more:
Max H. Bazerman and Michael D. Watkins, Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them (Boston: Harvard Business School Press, 2004)
Clayton M. Christensen, Scott D. Anthony, and Erik A. Roth, Seeing What's Next: Using the Theories of Innovation to Predict Industry Change (Boston: Harvard Business School Press, 2004)
"Planning for Surprises" (HBS Working Knowledge interview)