The storied British banker and financier Nathan Rothschild noted that great fortunes are made when cannonballs fall in the harbour, not when violins play in the ballroom. Rothschild understood that the more unpredictable the environment, the greater the opportunity – if you have the leadership skills to capitalise on it.
Through research at the Wharton School and at our consulting firm involving more than 20,000 executives to date, we have identified six skills that, when mastered and used in concert, allow leaders to think strategically and navigate the unknown effectively: the abilities to anticipate, challenge, interpret, decide, align and learn.
An adaptive strategic leader – someone who is both resolute and flexible, persistent in the face of setbacks but also able to react strategically to environmental shifts – has learned to apply all six at once.
Most organisations and leaders are poor at detecting ambiguous threats and opportunities on the periphery of their business. Coors executives, famously, were late seeing the trend toward low-carb beers. Lego management missed the electronic revolution in toys and gaming.
Strategic leaders, in contrast, are constantly vigilant, honing their ability to anticipate by scanning the environment for signals of change. To improve your ability to anticipate:
• Talk to your customers, suppliers and other partners to understand their challenges.
• Conduct market research and business simulations to understand competitors’ perspectives, gauge their likely reactions to new initiatives or products, and predict potential disruptive offerings.
• Use scenario planning to imagine various futures and prepare for the unexpected.
• Look at a fast-growing rival and examine actions it has taken that puzzle you.
• List customers you have lost recently and try to figure out why.
• Attend conferences and events in other industries or functions.
Strategic thinkers question the status quo. They challenge their own and others’ assumptions and encourage divergent points of view. Only after careful reflection and examination of a problem through many lenses do they take decisive action. This requires patience, courage and an open mind. To improve your ability to challenge:
• Focus on the root causes of a problem rather than the symptoms. Apply the “five whys” of Sakichi Toyoda, Toyota’s founder. (“Product returns increased 5% this month.” “Why?” “Because the product intermittently malfunctions.” “Why?” And so on.)
• List long-standing assumptions about an aspect of your business (“High switching costs prevent our customers from defecting”) and ask a diverse group if they hold true.
• Encourage debate by holding “safe-zone” meetings where open dialogue and conflict are expected and welcomed.
• Create a rotating position for the express purpose of questioning the status quo.
• Include naysayers in a decision process to surface challenges early.
• Capture input from people not directly affected by a decision who may have a good perspective on the repercussions.
Leaders who challenge in the right way invariably elicit complex and conflicting information.