How to Succeed in Business Using Surprise

Surprise plays a significant role in decision processes. In military history, for example, surprise attacks have almost always proved successful beyond expectations. From Pearl Harbor to the Allies’ landing in Normandy on D-Day, from the Barbarossa offensive (Hitler’s invasion of the Soviet Union in 1941) to the Yom Kippur War (the Arab attack on Israel in 1973) to the September 11 Islamic terrorist attacks on New York and Washington, surprise has enabled the attackers to achieve far more damaging results than what one would have expected from judging initial “objective” odds, taking into consideration relative strengths of the opposing parties, defensive measures, etc.

In business, surprise is as damaging. The failure of Jack Welch to foresee the determined resistance of European regulatory authorities to his plans to take over Honeywell resulted in significant loss of money and prestige by General Electric and Welch himself, who until then had been considered infallible. The swiftness with which doctors and hospitals moved away from using Johnson & Johnson’s stents (medical devices that prop open clogged heart vessels) to using those made by Guidant took J&J by complete surprise, resulting in market share decline from 91 percent in 1996 to 8 percent in 1998, and prompting an analyst to describe it as “the most dramatic transfer of wealth between two companies in medical device history.”  The disastrous merger of Daimler-Benz with Chrysler and the surprise departure of most of Chrysler’s management over the next two years cost Daimler billions of dollars and has shaken markets’ valuation of the merged company.

However, surprise has a surprising side. Academic research into surprise military attacks spanning the last seventy years shows that their success was not due to cunning deceptions and lack of early signs. Instead, those studies found that surprise attacks were successful because the other side was the captive of obsolete assumptions and beliefs that led, in the absence of countermechanisms, to ignoring signs of risk.

In other words, surprise is often not really such a surprise. This may sound like a trivial statement, but it may not be so trivial. It means that those whose responsibility it is to act early on—but not necessarily everyone else—ignore early signs of an impending “surprise.” The failure is in lack of action, and in most surprise attacks there were indeed some who foresaw the risk and warned about it, but often they were simply ignored or dismissed as doomsday prophets. The existence of early signs is good news for those whose role is defending their enterprises from nasty surprises. It means that defending against surprise is not an impossible task. Instead, it may be a matter of having an effective mechanism to identify early signs of risk and forcing the decision makers to heed the warning. Not an easy task, but not as forbidding as trying to know the unknowable.

Naturally, decision makers must cooperate in order to have such an effective system. If you were a decision maker, wouldn’t you like to have an early warning capability at your fingertips? The answer may not be as simple as it seems. Terry Smith, a famed British analyst with a large following who predicted the demise of the stock market bubble of the 1990s, says CEOs “often don’t know what is going on in the business.”  To that we may add that CEOs often don’t want to know.

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