We all have blindspots as individuals. Thousands of books in psychology explain why that is the case. But why do organizations have blind spots? When you put people together, they should be able to cancel out each others’ blind spots. Isn’t that the reason why organizations are far superior to individuals in achieving major goals? But the more I study firms, the more it becomes clear to me that companies have well-developed blindspots. Due to this, companies are unable to see a part of their environment and the threats emanating from there. These blindspots is a key reason for the failure of firms and this is where the best and the brightest are most vulnerable.
Examples of Blind Spots
Let us take some examples of organizational blind spots. Steve Jobs went ballistic when he came to know that Google was entering the smartphone industry. Until that news broke, there were interlocking board seats between Google and Apple. Why didn’t Jobs see that Google had at least some likelihood of entering the smartphone space? Or take the example of Microsoft. Why did it not see that GoogleDocs was emerging as a key threat to Microsoft office? These otherwise successful firms and business leaders developed massive blindspots.
Can an Industry Develop a Blind Spot?
Sometimes, it is not one company but an entire industry that suffers from blindspot. Consider the current panic in the mutual fund industry. There is a massive outflow of investor’s money from active funds to passive funds. This move makes it harder for mutual fund houses to continue to make high profits. But this is not a new phenomenon. It started back in the 1970s, and few took it as a serious threat until the turn of the century. And since then it has been over 15 years. Industry participants continue to deride the index fund idea as a worthless. The index fund is a prime example of how the industry suffered from a major blindspot. I wrote in considerable detail about this story in my book The Dark Side of Innovation. When firms develop blind spots, they pay for this mistake.
Why do Blind Spots Emerge?
To understand blind spots better, let’s take an example of driving a car. When your car is stationary, you can spend any amount of time looking at various directions around the car. You do not suffer from a blind spot. When you start moving at slow speeds, you can still do so, but the front of the car takes most of your attention. When you increase the speed a lot, your ability to check your blind spot becomes even less. But once you get into the formula one car racing speeds, your blind spot become much larger. As you can notice, your blind spot is a result of your speed.
The same holds for organizations too. Well established and well-run companies focus on serving their customers. The business leaders in such firms are no different than a race car driver. They move from issue to issue and decision to decision to keep running their business as 200 mph. To succeed in this game, they have to focus on a tiny number of things. If they focus on too many things, their performance will decline.
Complexity and Speed As Conditions for Blind Spots
Many years back, I managed an organizational transformation project at P&G. I had over 50 people in my team distributed all over Asia for this initiative. This team had to bring the entire back office in every country to a single location in Manila. We were transforming a country run organization into a globally run organization. When I took over this role, we were tracking over 50 project measures. I realized that 50 proxies were too many and diverted my attention from people management which was the most important aspect of that job. I selected only five measures to look at on a daily basis and let someone else in my team track and work on other 45. By focusing on the most critical five measures, I was far more effective than if I had concentrated on all 50. In fact, in faster-paced environments, you can focus on even fewer things than in slow moving situations.
The best managers driving large businesses have to develop a blind spot to succeed. It is the same way as the race car driver has to develop a tunnel vision to win a fast car race. In a sense what makes business leaders successful is precisely what makes them vulnerable to a blind spot.
Blind Spot Management
Although leaders and firms are prone to blind spots, there is a way out of this situation. Companies need to manage blind spots in a systematic manner. Just because the race car driver has to develop a tunnel vision to succeed doesn’t mean that the organization cannot compensate for that tunnel vision.
I developed a process of systematically scanning the environment to understand the threats emanating from different parts of your industry. Many have termed it as the Tsunami alert system that can help firms avoid their blind spots. It involves undertaking a regular scanning of the industry, conceptual modeling of the drivers of an industry, and envisioning emerging futures ahead of time. Those who are interested in reading more about this process can access the book here. A two part audio summary of the book is also available on my website. You can listen to part I here and part II here.
Lessons in Blind Spot Management
Here are some lessons in blind spot management from the Dark Side of Innovation:
- A separate person or group is usually better off with blind spot management than every business doing it themselves
- Most firms have processes to manage traditional threats but often fail at picking up non-traditional threats. In this age of disruption, companies need to learn to recognize nontraditional threats.
- Most firms are geared towards identifying strong signals of emerging threats but fail in recognizing weak signals. Conceptual modeling skills are critical in picking up weak signals.
In short, the most successful organizations and the best managers are more prone to blind spots than others. It is the cost of success, but firms can build superior blind spot management systems to deal with this issue.
Every successful company needs to rebuild a tsunami alert system that picks on non-traditional threats. The best firms need it more than anyone else. And they need it today more than at any time in out history.