Vigilant organizations excel at seeing looming threats and embryonic opportunities sooner than rivals, which prepares them to act faster when needed. Four drivers distinguish vigilant from vulnerable organizations, which can be used to design a roadmap to improve organizational acuity and preparedness. The fulcrum of these changes rests with the leadership team by demonstrating a strong commitment to vigilance at all levels, and reinforcing this by making targeted investments in foresight capabilities. These strategic moves also need to be supported by corresponding changes in the strategy-making process and by ensuring accountability and coordination of vigilance activities throughout the enterprise.

In an increasingly complex world, the scarcest collective resource of the modern leadership team may just be the most important one: attention. In vigilant organizations, executive attention is leveraged for greater agility and advantage, whereas in vulnerable ones, misdirected attention creates blind spots, myopia and delayed reactions. In an excerpt from their latest book, the authors show that a deeper awareness about our own decision biases due to cognitive, emotional and social factors is critical in managing attention in any organization-and ensuring it is vigilant rather than vulnerable.

The world in which today's businesses operate has become not only riskier but also more volatile, uncertain, complex, and ambiguous (VUCA). Organizations that hew too closely to traditional ways of operating will be hampered in their ability to succeed. In contrast, those that focus on new product and process developments coupled with business model innovation will leverage their dynamic capabilities. An essential overlay is entrepreneurial leadership from top management teams. Strong dynamic capabilities are impossible without it. This article examines how business model innovations, dynamic capabilities, and strategic leadership intertwine to help organizations thrive in VUCA worlds.

Haas School of Business Professor David Teece and his colleagues created the Dynamic Capabilities Framework, showing that three capabilities-sensing, seizing and transforming-enable firms to sense opportunities sooner than their rivals, seize them more effectively, and support the organizational transformation that this entails. The authors take this theory a step further by adding two 'sub-capabilities' to each Dynamic Capability, including 'peripheral vision', experimentation and vigilant learning. They then provide a case study on DuPont's biofuel initiative, showing how all six sub-capabilities manifest themselves in strategy.

This is an MIT Sloan Management Review article. To succeed in the long run, businesses need to create and leverage some kind of sustainable competitive edge. Although the authors say that advantages can still come from sources such as lower cost, intellectual property, motivated employees, and strategic leaders, they argue that in the knowledge economy, strategic advantages will increasingly depend on a capacity to make superior judgments and choices. Intelligent enterprises today are being shaped by two distinct forces. The first is the growing power of computers and big data, which provide the foundation for operations research, forecasting models, and artificial intelligence. The second is our growing understanding of human judgment, reasoning, and choice. Decades of research has yielded deep insights into what humans do well or poorly. In this article, the authors examine how managers can combine human intelligence with technology-enabled insights to make smarter choices in the face of uncertainty and complexity and thus gain a cumulative advantage in business. They note five strategic capabilities that intelligent enterprises can use to develop an advantage over competitors: 1. Find the strategic edge. In assessing past organizational forecasts, home in on areas where improving subjective predictions can really move the needle. 2. Run prediction tournaments. Discover the best forecasting methods by encouraging competition, experimentation, and innovation among teams. 3. Model the experts in your midst. Identify the people internally who have demonstrated superior insights into key business areas, and leverage their wisdom using simple linear models. 4. Experiment with artificial intelligence. Use deep neural nets in limited task domains to outperform human experts. 5. Change the way the organization operates. Promote an exploratory culture that continually looks for better ways to combine the capabilities of humans and machines.

The dynamic capabilities framework identifies three components as critical for successful organizational adaptation: sensing, seizing and transforming. By contrasting two distinct business cases, a long-term biofuel investment by DuPont and Novartis's rapid deployment of digital technologies in marketing, this article assesses the managerial implications of each of these components. It develops an embryonic contingency model that illustrates why the relative importance of dynamic capabilities varies across firms. The article also highlights the critical role played by strategic leaders, who must selectively adapt and refine dynamic capabilities and also serve as a last line of defense in times of rapid change.

Organizations and individuals are notoriously poor at judging the likelihood of uncertain events. Predictions are often colored by the forecaster's understanding of basic statistical arguments, susceptibility to cognitive biases, desire to influence others' thinking, and concerns about reputation. Indeed, predictions are often intentionally vague to maximize wiggle room should they prove flawed. But getting judgments wrong can of course have serious consequences. On the basis of research involving 25,000 forecasters and a million predictions, the authors identified a set of practices that can improve companies' prediction capability: providing training in the basics of statistics and biases; assembling teams of forecasters to debate and refine predictions; and tracking performance and giving rapid feedback. To improve prediction capability, companies should keep real-time accounts of how their top teams make judgments, including underlying assumptions, data sources, external events, and so on. Keys to success include requiring frequent, precise predictions and measuring prediction accuracy for comparison.

Entrepreneurs like Elon Musk, Jeff Bezos and Steve Jobs have exceled at demonstrating a highly valuable skill: spotting unmet market needs and figuring out how to serve them profitably. In short, they excel at anticipation. The authors describe three techniques for 'tuning in' to customer signals in order to better anticipate how tastes and needs are changing. They also describe the perils of 'tunnel vision' and provide three techniques for avoiding it.

Good strategic thinking and decision making often require a shift in perspective, particularly in environments characterized by significant uncertainty and change. What worked before may not apply in the future. The authors acknowledge that asking "what if"questions about the future may create discomfort. Asking such questions forces people to step back and challenge current assumptions. In the authors'view, the questions leaders pose can prevent them from solving the right problem or seeing more innovative solutions. Leaders are often too narrow or overly protective of the current business or assume that the old habits, business models and regulations will remain intact. This article builds on the authors'new book, Winning the Long Game: How Strategic Leaders Shape the Future. It encourages leaders to examine their businesses from multiple perspectives: to think "outside in"; to explore future scenarios; to be contrarian; to look for patterns; to create new options; and to learn from failure. Drawing on examples from companies including Google, Tesla Motors, Pixar, Netflix and DuPont, the authors discuss six questions: How well do you understand the implications of broad market trends and less visible undercurrents for your business and for upcoming strategic choices? How thoroughly have you analyzed major external uncertainties and future scenarios that could significantly impact your business decisions? Do you regularly seek out diverse views to see multiple sides of complex issues, and do you purposely explore important problems from several angles? Do you deploy multiple lenses to connect dots from diverse sources and stakeholders, and do you delve deep to see important connections that others miss? Do you generate and evaluate multiple options when making a strategic decision, and do you consider the risks of each, including unintended consequences? Do you encourage experiments and "failing fast"as a source of innovation and quick learning?

The more uncertain your environment, the greater the opportunity--if you have the leadership skills to capitalize on it. Research at the Wharton School and at the authors' consulting firm, involving more than 20,000 executives to date, has identified six skills that, when mastered and used in concert, allow leaders to think strategically and navigate the unknown effectively. They are the abilities to anticipate, challenge, interpret, decide, align, and learn. This article describes the six skills in detail and includes a self-assessment that will enable you to identify the ones that most need your attention. The authors have found that strength in one skill cannot easily compensate for a deficit in another. An adaptive strategic leader has learned to apply all six at once.

Taboos are a universal feature of social systems. Even the most avowedly open-minded organizations place tacit constraints on what can be said and even thought. Business leaders ignore these constraints at their peril. This article examines the role of the sacred, profane, and taboo in society, and links these phenomena to the psychology of moral outrage. In public debates, taboos are rarely as absolute as first assumed and can often be reframed as tragic choices. Leaders must performa delicate balancing act if they are to prevent taboos from blinding managers to either threats or opportunities. On the one hand, leaders who let their intellectual curiosity get the better of them risk paying a steep career price. On the other, leaders who bury their heads in the sand risk even worse consequences. Navigating this dilemma brings into sharp tension the policy prescriptions of advocates of authentic leadership (who see honesty as a trump virtue) and proponents of Realpolitik (who see organizational hypocrisy and obfuscation as unfortunate but unavoidable tactics necessary in an imperfect world.)

This is an MIT Sloan Management Review article. Talking about "green technology"gets people excited. It's thrilling to think that a new wave of inventions and discoveries will revolutionize the way we live, halt the degradation of our planet, and conserve resources for future generations. And it's more than just talk: investors are committing real dollars. As the level of activity increases, however, discussions about green technology raise as many questions as they answer. Addressing the key questions is complicated by the fundamental uncertainties that are at the heart of the green technology market. The evolution of this market space depends on forces that are beyond the control of any individual entrepreneur or investor: government policies; availability of capital; and wild cards such as oil price volatility, geopolitical conflicts, the rate of economic growth, and public attitudes toward warnings of global climate change. History shows that the road to technological innovation is a long and winding one. Between 2005 and 2007, runaway enthusiasm led to the proliferation of hundreds of new green technology ventures, many of which ran into trouble during the great recession. Green technology companies need to develop staying power. In addition to understanding the opportunities, they need to get ahead-and stay ahead-of competitors.

The periphery -- that 'fuzzy zone' at the edges of your organization's focus -- is where early signals of both threats and opportunities can first be sensed, the authors argue. Their study of more than 300 global executives found that 80 per cent felt that their organizations had less capacity for peripheral vision than they needed, and the majority of leaders in another study said that they had been surprised by as many as three high-impact events in the past five years alone. They describe how 'network reach', 'network capture', 'network speed' and 'network resilience' can be harnessed to contribute to strong peripheral vision.

We now live and work in a 'butterfly effect' environment, the notion from Chaos Theory that the flapping of a butterfly's wings in China might cause a hurricane on the other side of the world. As a result, the authors argue that today's leaders must develop 'vigilance' - the ability to scan the periphery of their environment and spot opportunities and threats before their rivals. While investors don't expect prescience, they do rely on a leadership team to sense and act on early warning signs. They describe the three primary qualities that distinguish vigilant leaders from those in the majority, who strive primarily for operational excellence.

This is an MIT Sloan Management Review article. Managers will never be able to predict the future as clearly as The Amazing Kreskin. But by making a deliberate effort, they can develop the clairvoyance they -and those around them -already possess into a potent competitive weapon. Because their antennae are always aloft, executives naturally detect weak signals as they drift in and out of range from the outer edges of their marketplace. How they find, keep and make sense of those faint clues can make all the difference when it comes to getting an early start on confronting a threat or exploiting an opportunity. In this article, the authors draw from their research into companies that learn from the future. They outline the specific skills managers need to develop--and those they had better lose--to correct their fuzzy vision of what's ahead. First, the authors identify the different breeds of biases that most managers don't even realize they have, and provide them with the tools to rout out such distortions. Then they outline nine proven and practical strategies managers can use to find, understand and make use of the most meaningful distant data. Confronting reality isn't as straightforward as hushing hunches in favor of high-minded analysis; there has to be room for both. Finally, the authors encourage executives to consider new information within the context of as many wider views of the future marketplace as they can find -tapping the farsighted folks at their company and in their industry. By learning how to extract meaning, managers will grow to understand that the future is plainly ours to see, no matter what the song says. What takes work is piecing those glimpses into a plausible panorama so that managers can see where their company strategy fits -before anyone else does.

This is an MIT Sloan Management Review article. Vigilant leaders are those who make a practice of being abundantly alert and deeply curious so that they can detect, and act on, the earliest signs of threat or opportunity. They seek to nurture equally vigilant employees by modeling such behavior and by providing incentives for managers to look for -- and interpret -- weak signals. While such icons as Andy Grove and Jack Welch exemplify vigilant CEOs, the trait remains in short supply. That is a conclusion the coauthors reached after surveying 119 global companies about their overall capacity for diligence. Among their findings: Just 23% of the businesses were run by CEOs who tried to pick up weak signals from the periphery. Most leaders, they theorize, rise to the top by demonstrating superior operational skills. To help leaders recognize and develop the habit of vigilance, the researchers examine in detail the three traits that characterize vigilant executives: focusing externally, applying strategic foresight and encouraging exploration by others. They also capture such leaders in action and provide examples in which a distinct lack of vigilance has led companies such as The Coca-Cola Co. to "miss the boat" by overlooking big opportunities. Companies like General Electric Co. and Johnson & Johnson have instituted systematic programs to instill employees with the qualities of vigilant leaders. The CEO of Denmark-based Novozymes A/S is curious, fast and enterprising, an attitude he nurtures in his workers. Organizations may encourage vigilant leadership by hiring specifically for it or by openly rewarding displays of it. Whatever strategy CEOs choose, the authors find that it is critical for them to set an example. After all, it is only through vigilance that companies can avoid hidden dangers -- and discover opportunities ripe for innovation.

Before the breakup of the Bell System, U.S. telephone companies were permitted by law to ask for security deposits from a small percentage of subscribers. The companies used statistical models to decide which customers were most likely to pay their bills late and, thus, should be charged a deposit, but no one knew whether the models were right. So the Bell companies made a deliberate mistake. They asked for no deposit from nearly 100,000 new customers randomly selected from among those who were considered high risks. Surprisingly, quite a few paid their bills on time. As a result, the companies instituted a smarter screening strategy, which added millions to the Bell System's bottom line. Usually, individuals and organizations go to great lengths to avoid errors. Companies are designed for optimum performance rather than for learning, and mistakes are seen as defects. But as the Bell System example shows, making mistakes--correctly--is a powerful way to accelerate learning and increase competitiveness. If one of a company's fundamental assumptions is wrong, the firm can achieve success more quickly by deliberately making errors than by considering only data that support the assumption. Moreover, executives who apply a conventional, systematic approach to solving a pattern recognition problem are often slower to find a solution than those who test their assumptions by knowingly making mistakes. How do you distinguish between smart mistakes and dumb ones? The authors' consulting firm has developed, and currently uses, a five-step process for identifying constructive mistakes. In one test, the firm assumed that a mistake it was planning to make would cost a significant amount of money, but the opposite happened. By turning assumptions on their heads, the firm created more than $1 million in new business.

Companies often face new rivals, technologies, regulations, and other environmental changes that seem to come out of left field. How can they see these changes sooner and capitalize on them? Such changes often begin as weak signals on what the authors call the periphery, or the blurry zone at the edge of an organization's vision. As with human peripheral vision, these signals are difficult to see and interpret but can be vital to success or survival. Unfortunately, most companies lack a systematic method for determining where on the periphery they should be looking, how to interpret the weak signals they see, and how to allocate limited scanning resources. This article provides such a method--a question-based framework for helping companies scan the periphery more efficiently and effectively. The framework divides questions into three categories: learning from the past (What have been our past blind spots? What instructive analogies do other industries offer? Who in the industry is skilled at picking up weak signals and acting on them?); evaluating the present (What important signals are we rationalizing away? What are our mavericks, outliers, complainers, and defectors telling us? What are our peripheral customers and competitors really thinking?); and envisioning the future (What future surprises could really hurt or help us? What emerging technologies could change the game? Is there an unthinkable scenario that might disrupt our business?). Answering these questions is a good first step toward anticipating problems or opportunities that may appear on the business horizon. The article concludes with a self-test that companies can use to assess their need and capability for peripheral vision.

This is an MIT Sloan Management Review article. Among the many tools a manager can use for strategic planning, scenario planning stands out for its ability to capture a range of possibilities in rich detail. By identifying basic trends and uncertainties, a manager can construct a series of scenarios what help to compensate for the usual errors in decision making--overconfidence and tunnel vision. Through case studies of Interpublic, an international advertising agency, and Anglo-American Corp. in South Africa, the author describes how to build scenarios in a step-by-step process and how to use the resulting stories to plan a company's future.

Under increasing pressure to make better decisions in less time, managers often use the quickest and easiest decision-making method: going on "gut feel." But recent decision research shows that intuition is much less reliable than most people believe. Managers need to use more sophisticated methods. This article describes a series of increasingly accurate (and demanding) decision-making approaches. It starts with purely intuitive choices, which are quickest and least accurate, and then examines heuristic shortcuts and rules of thumb. It then discusses more demanding and reliable methods, such as bootstrapping and value analysis. It examines the strengths and weaknesses of each approach in terms of speed, accuracy, and justifiability, with illustrative applications to managerial practice. Finally, the authors offer practical advice for managers on how the more sophisticated techniques can be incorporated into the organization.