Blind spots in a car are the areas of the road that the rearview and sideview mirrors do not show. A driver must constantly be aware of them — and of the potentially deadly perils they can conceal.
Businesses can have blind spots, too — and they can be equally costly, causing companies to overinvest in risky ventures or fail to take advantage of emerging opportunities. Successful leaders are careful to identify their company’s blind spots and introduce mechanisms to ensure that no harm comes from them.
One common source of businesses’ blind spots is judgment bias. This arises when executives have overly narrow views of their industry, underestimate their competitors’ capabilities, or fail to see how the competitive landscape is changing.
Illustration: June Hsu
A good example of a company that suffered from this kind of blind spot is Nestle. For decades, the Swiss multinational defined itself strictly as one the world’s leading food companies. The label created a self-imposed restriction, constraining Nestle to sell a relatively narrow range of products.
However, in 2010, the company’s CEO, Paul Bulcke, redefined Nestle as a “nutrition, health and wellness” company. It was a brilliant strategic decision, allowing the firm to offer dozens of new product lines and services.
Many executive teams are overconfident about their company’s competitive strength. In front of their board, they rattle off exaggerated claims about where the company stands; about 80 percent of annual reports claim that their company is “the leader in the market.”
Unfortunately, this kind of arrogance can lead to complacency and competitive failure.
Many financial institutions, for example, are inadequately prepared to confront the new players entering their markets.
Google, which is quietly testing the car-insurance waters, holds a banking license. Meanwhile, Square, Paypal and the start-up company Affirm are already processing a large share of online payments.
In today’s fast-paced world, it takes only a single technological improvement, price advantage, or great viral advertising campaign for a competitor to leap ahead. New players can materialize seemingly out of nowhere. The taxi company Uber did not exist five years ago; it is now valued at more than US$40 billion. The rapid expansion of Alibaba threatens Western retailers that never expected to face a Chinese competitor. Driverless cars and pilotless planes will soon transform many industries.
Another frequent cause of companies’ blind spots is historic bias, or what psychologists call an “anchoring bias” — the assumption that something that was true in the past will continue to be true in the future. A long track record of success can warp executives’ analysis, distort their decisionmaking and leave them blind to incipient paradigm shifts or rapid changes in a market.
When the US retailer Target opened its first store in Canada in March 2013, its management assumed that the recipe of its success in the US could be replicated north of the border. Instead, just 22 months later, the company announced that it would close all of its 133 Canadian stores and lay off 17,000 people. Target’s US experience turned out to be a bad predictor of what it could expect in Canada.
Overcoming historic biases requires questioning an industry’s taboos. For example, if the creators of television series like Game of Thrones, the most pirated show in history, stopped fighting copyright infringement, they could seize an opportunity. Advertisements directly embedded in the show would reach five million additional — illegal — viewers, in effect doubling their audience.
The television industry is not alone in failing to question and revise its traditional models, methods and operations. The postal industry, for example, could learn a lesson from airlines, train companies, travel agencies and hotels, all of which increase their prices during periods of high demand. The assumption that the price of mailing a letter or shipping a package should remain constant throughout the year is ripe to be challenged.
Guarding against blind spots takes careful thought, but executives and boards can put processes in place to protect against them.
For starters, companies should diversify their talent pool. Managers should ensure that they have access to people who think differently from them. Iconoclasts and outside experts should be invited to share their views. At least 20 percent of a company’s board should be composed of individuals from outside the industry. Views from other generations and other parts of the world should be sought and solicited.
Executives should make special efforts to break taboos, examine unchallenged assumptions and question their businesses’ most sacred rules.
Even simple methods, like writing down and challenging every assumption on which a company has based its strategy, can yield valuable insights.
Every company should assign someone to play the role of “dissenter.” Sometimes called the “China breaker,” this person should be given time during board meetings to throw the good dishware against the wall and see what can be made of the pieces.
Industries are becoming increasingly complex and global competition is mounting. The companies that will be best placed to survive will be those that took the proper precautions to avoid being run off the road.
Estelle Metayer is founder of Competia and an adjunct professor at McGill University.
Copyright: Project Syndicate
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.
As Maldivian President Mohamed Muizzu’s party won by a landslide in Sunday’s parliamentary election, it is a good time to take another look at recent developments in the Maldivian foreign policy. While Muizzu has been promoting his “Maldives First” policy, the agenda seems to have lost sight of a number of factors. Contemporary Maldivian policy serves as a stark illustration of how a blend of missteps in public posturing, populist agendas and inattentive leadership can lead to diplomatic setbacks and damage a country’s long-term foreign policy priorities. Over the past few months, Maldivian foreign policy has entangled itself in playing
A group of Chinese Nationalist Party (KMT) lawmakers led by the party’s legislative caucus whip Fu Kun-chi (?) are to visit Beijing for four days this week, but some have questioned the timing and purpose of the visit, which demonstrates the KMT caucus’ increasing arrogance. Fu on Wednesday last week confirmed that following an invitation by Beijing, he would lead a group of lawmakers to China from Thursday to Sunday to discuss tourism and agricultural exports, but he refused to say whether they would meet with Chinese officials. That the visit is taking place during the legislative session and in the aftermath