By Sydney Finkelstein, Professor of Strategy and Leadership, Dartmouth College - Amos Tuck School
Are your commercial enterprises immune from failure?
Have you taken the necessary steps to help maintain your market position?
Are there people, systems, and processes in place to ensure that your enterprises retains this position going forward?
At some point, the officers and directors of Wang Labs, General Motors, Sony, and Enron would have all answered "yes" to these questions. All these firms had dominant market positions and were led by officers and directors with impeccable credentials.
What are the key differences between these successful companies that eventually failed and other very successful companies (such as Dell, Four Seasons Hotels & Resorts, and Thomson Financial) that have been able to keep their market dominance?
This research question prompted us to engage in a 6-year research study that examined the common causes of 51 corporate failures. The results of the study were summarized in the Amazon #1 2003 Business Best-seller, Why Smart Executives Fail. This
article goes to the next step, and introduces the Smart Early Warning Systemä for detecting vulnerabilities in your enterprise(s) while there is still time to do something about it.
A "SMART Early-Warning System™"
According to our research, most successful organizations fail because they choose to ignore vital information about their leadership, strategy, structure, or processes that becomes abundantly clear in hindsight or because they choose to focus on the wrong
information in the heat of battle. By contrast, SMART Organizations™ equip themselves with a corporate early-warning system that ensures that "lost signals" vital to the organization's long-term success are tracked down and monitored consistently.
The most enduring and successful organizations, like well-prepared battalion units, have a "SMART Early-Warning System™." This system - which constantly scans the environment for relevant information - benchmarks for an organization's senior
executives and directors the degree of risk they face, providing time-sensitive critical information on the barriers that prevent you from fully executing your stated vision and strategy. This Early-Warning System focuses on 3 pillars of the SMART Organization™:
SMART Leadership™
Do you have the right knowledge, attitudes, and behaviors among your Executives and Directors?
Do you possess the best Top Team/Board Structure & Process to optimize rigorous debate, minimizing risk to the organization?
SMART Strategy™
Have you conducted a Strategic Assumption Analysis™ to ensure that your strategy is on track, and not en route to obsolescence?
Are key organizational stakeholders aligned with the strategy or are you vulnerable to "blockers"?
SMART Process™
Is your organizational culture a contributor to your success or do you succeed in spite of it?
Where are the "hot-spots" within your organization where your employees are not as committed to your success?
It is questions like these that are critical to answer, in real time. Once completed, the "SMART Early-Warning System™" becomes an easily revisited process. It is only through carefully monitoring the key information outlined in the 3 pillars on an ongoing
basis that a SMART Organization™ ensures it will continue to stay on top. As the recent corporate disasters have demonstrated, taking your eye off the ball of these important indicators can have terminal consequences.
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