Tag Archives: strategy

Three Videos on Forecasting and Strategic Surprise

Many people are either beginning their  holidays or are already in the midst of them.  If you’re the type of person who  reads a blog like this, you probably already know what you’re hoping to read on your break.

Therefore, I thought I’d try a different approach and offer a summer watching list rather than summer reading list.  This list recommends three videos that you might consider for your travels or during your “down time”.   All address different aspects forecasting, uncertainty, strategic surprises and decision-making.  When you feel like a break from reading, give them a try.

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Business and Intelligence Techniques: the Role of Competing Hypotheses

I get a lot of requests to discuss further the application of intelligence analysis to business, so today I’ll discuss the uses and limitations of a common analytic technique.

One tool that I teach at IE is the Analysis of Competing Hypotheses (ACH).  ACH is an analytic tool originally developed by Richards J. Heuer at the CIA, but it is remarkably useful in business as well.  ACH uses a deceptively simple framework to use ideas from the scientific method, cognitive psychology and decision analysis to overcome a common but immensely important bias:  the fact that we tend to perceive what we expect to perceive rather than what actually exists.  To illustrate this tendency, read the words in the three triangles below:

If you’re like most people, the phrases “written” in the triangles are familiar.  To find out what’s actually written in each triangle, refer to the bottom of this entry (or try the old proof-readers trick of reading them backwards).

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We have met the enemy and he is, er, forecasting

There is no doubt we are terribly bad at forecasting. Even the smartest among us are. Even the best and the brightest, whom we have tasked to save the world from financial annihilation, are.  Take Ben Bernanke, Chairman of the Federal Reserve. In 2004, he declared, in a speech ominously titled “The Great Moderation”: “One of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility. This […] makes me optimistic for the future.” You might want to read the full transcript of the “Great Moderation” talk here because it is for a fascinating reading on how wrong experts can be at forecasting. And it’s not just Ben. In fact, political, economic and business histories are littered by forecasts and predictions that turned out to be ridiculously wrong. From the commercial potential of the Xerox machine or of Nespresso, from the possibility of heavier than air flight to the market for mobile phones, from prosperity at the corner of the street to Japan as number One. Our hopelessness at forecasting is a confirmed fact.

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Framing: a key concept in the management of uncertainty and disruptions

The fog of war, a long 2003 interview of Robert S McNamara, shows that how one frames an issue has an influence on how a question can be solved. As soon as they got engaged in Vietnam, the US presented the conflict as a fight between freedom and communism. This happened in the late fifties, after China had become communist and right after the Korean war, in a context in which the communist world seemed to progress inexorably. The domino theory, introduced by the Republican US president  Eisenhower in 1954, stated that once a country fell and became communist, neighboring countries also would. Hence it became crucial to defend any country facing a communist insurgency. As David Halberstam mentions in his book “The best and the brightest”, the US national context also played a role later in the Vietnam process: Harry Truman, Eisenhower’s Democratic predecessor, was accused during the cold war to have “lost” China in 1949 and to have been weak against the communists, particularly during the Mccarthyst period. A longstanding reputation of “Democratic weakness” persists to this day as a result. In the early 60s, the democrats were still traumatized by these accusations that were systematically used by their Republican adversaries. This is the initial cognitive frame with which the Vietnam question was analyzed by President Kennedy’s administration. Right from the beginning then, the administration was prisoner, without being aware of it, from a frame that was in effect imposed by their adversaries. Despite their doubts and mounting skepticism, they would remain unable, right until the very end, to get rid of it.

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How firms fail to act on a disruption and fall as a result: the case of AT&T in 2005

A central tenet of innovation research is that firms often fail to act on a disruption that threatens their business, and falter as a result. A case in point is AT&T, the 120 year-old subsidiary of Bell Telephone Company, child of Alexander Graham Bell, an American icon.

In 2005, AT&T was sold to SBC Communications. It was in a way a family story, as SBC Communications started in the mid-eighties as the smallest of the seven “baby bells”, the companies created after the regulator ordered the AT&T break-up.  But what a story !

AT&T introduced many innovations, and not small ones:  first commercial radio (1922), first television transmission (1927), first mobile phone (1946 !), first transistor (1947), first telecom satellite (1962).  AT&T has long been a giant of the economic landscape:  one million employees at the beginning of the 80s, and not so long ago a market value of $180 billion (1999).

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Crossing the Hudson to Spit: Moore’s Law, Steam Engines and Genetic Technology

One of the features of our age is the idea that business suffers from a unique level of technological disruption, an attitude that I call  Techno-Egotism.  Businesspeople are told routinely that they operate in an era of “unprecedented” technological change; as a result, they feel very Modern (and rather sorry for themselves).  They also, however, end up lacking perspective, and that can be a strategic liability.

I believe that if posterity registers our age’s Techno-Egotism at all, they will find it rather quaint.  This thought struck me with great force last week as I drove across the George Washington Bridge, from New York to New Jersey, specifically in order to spit legally into a tube, and then mail that tube.

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How to Think like an Intelligence Analyst

To follow up on Philippe’s post about Thinking in Time:  at IE I teach a course called “Geopolitics” to Masters in Advanced Finance students, and “The Multinational Firm and Geostrategy” to Masters in Management students.  Students in those classes sometimes ask me to recommend books to help them “think like an intelligence analyst” and apply intelligence methods to analyzing business decisions.

I provide extensive bibliographies as part of my course syllabi, but often students want me to boil my recommendations down to a few key texts.  Call it a “getting started in intelligence for businesspeople” reading list.

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