Paul Schoemaker is the founder and chairman of Decision Strategies International, Inc., a consulting and training company specializing in strategic planning and executive development. He is also a co-founder and chairman of Strategic Radar Inc. and serves as Research Director of the Mack Center for Technological Innovation at the Wharton School. He specializes in decision making and strategic thinking, working with companies worldwide. His books include Decision Traps with J. Edward Russo, Wharton On Managing Emerging Technologies that he co-edited with George S. Day, Winning Decisions (with Russo), Profiting from Uncertainty, and most recently, Peripheral Vision co-authored with Day.
I conducted this interview a few years ago. Since then, Paul has published Brilliant Mistakes (Wharton Digital Press, November 8, 2011)
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Morris: Before we get into a discussion of some of your specific books, Paul, please explain what the Mack Center for Technological Innovation is and does.
Schoemaker: As we explain at our Web site (http://emertech.wharton.upenn.edu/), in May 1995, the Wharton School established the Emerging Technologies Management Research Program to address the need for new best practices, strategies and competencies in the field of emerging technologies…under the supervision of a Core Team of senior Wharton faculty and staff representing management, marketing and strategic planning. In 2001, the program was brought under the newly created the Mack Center for Technological Innovation, with a broad mandate to continue and expand our research and to communicate our insights to firms around the world, and to help prepare tomorrow’s future business and technology leaders being educated at Wharton.
The goals of the ET Program are to:
• Provide research-based insight and guidance to firms competing in emerging technologies
• Identify (and where necessary, develop) new best practices and competitive strategies, to replace traditional practices that no longer apply to emerging technology-based industries
• Offer the Wharton School as a respected neutral venue for open discussion of critical issues and problems in emerging technologies
• Report the results to corporate and academic communities
• Include the results in classroom curricula, to be shared with faculty and students in undergraduate, graduate and executive management education.
We believe that emerging technologies represent a “different game” that doesn’t fit the culture and business approaches of most established firms. Many traditional management principles and methods do not address the high risks and uncertainties that characterize emerging technologies. Better practices and strategies are needed. General and specific insights come from studying patterns of success and failure across a wide variety of emerging technology-based industries. The best performing companies are those that are willing to abandon old technologies and embrace new ones. Early stage success does not assure eventual success in development and commercialization of emerging technologies.
Morris: You co-authored a book about “decision traps” with Jay Russo. What exactly are these “traps”?
Schoemaker: Typically, people fall victim to solving the wrong problem, being overconfident, shooting from the hip, repeating the same mistake (i.e. not learning), assuming that groups or team necessarily make better decisions, etc. Dividing the decision-making process into discrete stages can provide that map to avoid these landmines. These four stages provide the backbone of any decision process, and consciously or not, every decision-maker goes through them. Here they are:
1. Framing. Framing determines the viewpoint from which decision-makers look at the issue and sets parameters for which aspects of the situation they consider important. It determines in a preliminary way the criteria that would cause them to prefer one option to another.
2. Gathering intelligence. Intelligence gatherers must seek the knowable facts and options and produce reasonable evaluations of “unknowables” to enable decision-making in the face of uncertainty. They should avoid such pitfalls as overconﬁdence in their current beliefs and the tendency to seek information that conﬁrms their biases.
3. Coming to conclusions. Sound framing and good intelligence don’t guarantee a wise decision. People cannot consistently make good decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic approach—particularly in group settings—leads to more accurate choices, and it usually does so far more efficiently than hours spent in unorganized thinking.
4. Learning from experience. Only by systematically learning from the results of past decisions can decision-makers continually improve their skills. Further, if learning begins when a decision is ﬁrst implemented, early reﬁnements to the decision or implementation plan can be made that could mean the difference between success and failure.
In real life, of course, the process is not as linear—or as distinct—as our four stages suggest. Indeed, information discovered in the intelligence-gathering stage may inspire you to go back and reframe your issue. Moreover, a complex problem (the relocation of your business, for instance) may entail a series of smaller decisions, each of which may involve several framing decisions, several intelligence-gathering efforts, and several coming-to-conclusions steps.
Morris: Now please shift your attention to Peripheral Vision that you co-authored with George Day. Important business books are often written in response to a compelling question. For example, Jim Collins and his research associates set out to learn how a good or even mediocre company could become great. Was there such a question that you and Day attempted to answer in Peripheral Vision?
Schoemaker: Yes. We need to ask: “Why do so many organizations get blindsided – in terms of threats as well as opportunities – and how can they avoid this?”
Too often we overlook events unfolding at the far edges of our business because signals from the periphery are usually weak and ambiguous at first. Sometimes, however, these early signals foreshadow major problems––like new competitors or products that threaten the company––or they could present significant opportunities. Managers and their organizations build a superior capacity to recognize and act on these signals before it is too late.
Morris: What is a “vigilance gap”? How can it be avoided or at least diminished?
Schoemaker: In a survey of senior executives, we found that less than 20 percent of firms possess sufficient peripheral vision to stay ahead of rivals and potential threats in the future. The following five steps can improving your peripheral vision: (1) Setting the scope right, (2) Using multiple methods to scan, (3) Avoiding common traps to interpret peripheral signals, (4) Knowing when and how to probe further, (5) Understanding how to act judiciously to stake out options early. In addition, leaders can (6) enhance their organization’s capacity for peripheral vision and (7) become more vigilant themselves.
Cases we describe in our book include Anheuser-Busch’s anticipation of low-carb beers, the impact of Bratz dolls on Mattel’s Barbie dynasty, the BBC’s response to the digital revolution in communications, and strategies of Philips in addressing the emergence of LED technology in lighting.
Morris: For those who have not as yet read your brilliant book, please explain what the “Strategic Eye Exam” is and why you and George Day recommend that it be taken.
Schoemaker: While peripheral vision is more important than ever, there are strong indications that many organizations are not up to the task. A survey of 140 corporate strategists found that fully two-thirds admitted that their organizations had been surprised by as many as three high-impact competitive events in the past five years. Moreover, 97 percent of the respondents said their companies lacked any early warning system to prevent such future surprises.[i] A survey we conducted with more than 100 global senior managers found that the growing need for peripheral vision continues to outstrip the capabilities of organizations, resulting in a “vigilance gap” as shown in Figure 1.[ii] Over 81% of the respondents perceived their future need for peripheral vision to be greater than their current capacity.
Whether or not your organization’s peripheral vision needs change depends upon your current capability as well as the need for peripheral scanning in terms of your strategy, the nature of your business, and your industry environment. The “strategic eye test” helps an organization assess its future need in peripheral vision relative to its current capability.
Morris: Looking ahead is always perilous but if we do so with peripheral vision, we can at least recognize “weak signals” which are especially significant. In your opinion, where are we most likely to find them?
Schoemaker: At the edges of your business; look at five key domains, namely social, technological, economic, environmental or political.
Morris: Given your response to the previous question, here’s a question you are probably asked all the time. How can peripheral vision help us to recognize those “weak signals”?
Schoemaker: Develop good external information networks, create a prepared mind, and insist on multiple interpretations for weak signals.
[i] Leonard Fuld, “Be Prepared,” Harvard Business Review, November 2003, pp. 1-2.
[ii] A self-assessment on a scale of 1-7, based on responses from participants in senior management programs at Wharton and INSEAD. Details of this diagnostic “Strategic Eye Exam” used to estimate these results may be found in Appendix A of our Peripheral Vision book. Readers can take the eye test themselves at www.thinkdsi.com.