The Business Book

(Joyce) #1


proactive. In 1974, US company
Barnes & Noble was the first
bookseller to advertise on television,
in 1975 it was the first to discount
books, and in 1989 it opened a
“book superstore.” Its innovations
helped it to hold a large share of the
retail market. By 1995 it had 358
book superstores—but by 1996, the
Internet had changed everything.
Amazon—a master at Internet
selling—suddenly outstripped it in
sales and market valuation.

Staying alert
Points of sizable change are hard to
spot, so executives must constantly
scan the horizon, like a ship’s
watchmen looking for an iceberg
that could sink the business.
Companies today use many
different approaches to monitor the
competition and market. Ty p ic a l l y,
a large organization employs a
team of people to scrutinize the
company’s sales, compare them to
the competition, and analyze market

trends. They may also have a team
responsible for risk management,
which covers far more than
operational risks (such as safety).
In recent times, such teams tend
to monitor far-reaching global
concerns, including weather
extremes resulting from climate
change, political change, and
human-rights issues.
Successful negotiation of change
relies not just on scanning the
environment, but also making sense
of the incoming information. Senior
executives need to be particularly
wary of understanding events and
making decisions based solely on
data or past events. In The Black
Swan: The Impact of the Highly
Improbable, Nassim Nicholas Taleb
explains how individuals,
businesses, and governments place
too much weight on the odds that
past events will be repeated.
Forecasting the future from the
past ignores the fact that the future
holds different possibilities, as yet
unseen. For example, if you have
only ever seen white swans, you
might assume that all swans are


white; unless you traveled to
Australia and chanced upon a black
swan. Taleb used the metaphor of
the black swan to discuss major
scientific discoveries and historical
events. These “black swan events”
combine low predictability and high
impact. Examples include the 9/11
terrorist attacks in the US and the
stock market crash of 1987. Taleb
states that companies can never
predict black swan events, but they
do need to build robustness against
potential negative eventualities,
and be ready to exploit positive ones.

Listening to the front line
Grove claimed that business data
(like white swans) is relevant only
to the company’s past, and cannot
be used to predict the future. He
suggests that when searching for
clues about how to deal with the
future, executives should look
elsewhere, such as scrutinizing
any misalignment between the
company’s strategy statements
and its strategy actions. What is
the difference between what the
company says it is planning to do,

Black swans are rare but they do exist,
which comes as something of a surprise
to people who have only seen white
ones. This demonstrates the error of
basing predictions on past experiences.

It is not the strongest
of the species that survive,
nor the most intelligent,
but the one most
responsive to change.
Leon C. Megginson
US management professor (1921–2010)

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