Good Things Come to Those Who Actively Wait

1GoodThingsCometoThoseWhoActivelyWaitDonaldSullDonaldSullisaprofessorofmanagementPracticeinStrategicandInternationalManagementandFacultyDirectorofExecutiveEducationatLondonbusinessSchoolwherehedesigned,directsandteachesanintensiveweek-long“boot-camp”tohelpseniorexecutivesthriveinturbulentmarkets.1.InHighlyvolatilemarkets,acompany’ssuccessorfailureisoftenattributedtoluck.Turbulentmarketsthrowoutopportunitieswhosetiming,natureandmagnitudemanagerscanneitherpredictnorcontrol.Thesameholdstrueforthreats.Insuchacompetitivecasino,youplaceyourbetsandhopeforthebest.Itisbettertobeluckythangood.2.ForthepastsixyearsIhavestudiedmorethan20pairsofcomparablecompaniesinunpredictableindustriessuchastelecommunications,airlinesandenterprisesoftwareincountriessuchasChinaandBrazil.Bypairingsimilarcompanies,Ishowedhowtheyrespondeddifferentlytothesomeunforeseenthreatsandopportunities.3.Ifoundthemoresuccessfulcompanieswereluckier,inthesensethattimeandagaintheyrespondedmoreeffectivelytounexpectedshiftsinregulation,technology,competition,macroeconomicsorothervolatilefactors.Suchluckistooimportanttoleavetochance.Themostsuccessfulcompaniesexemplified“activewaiting”,anapproachtostrategyinhighlyunpredictablemarketsthatconsistsofanticipatingandpreparingforopportunitiesandthreatsthatexecutivescanneitherfullypredictnorcontrol.4.Achiefexecutiveissometimeslikenedtoaship’scaptain,peeringintothedistanthorizonandsettingacourse.Inmanymarketsthatfutureisfoggyandfindingaclearviewnearlyimpossible.Inthetelecommunicationsindustry,forexample,shiftingregulations,continuoustechnologicalchange,entrybynon-traditionalrivalssuchasSkypeandshiftsinconsumerpreferencesthrowoutasteadystreamofunforeseenopportunitiesandthreats.DemandsforcarsinChina,forexample,arosefromtheconfluenceofincreaseddisposableincome,governmentinvestmentininfrastructure,risingmiddle-classaspirations,easycreditandthedemiseofemployer-providedhousingneartheworkplace5.Butallopportunitiesarenotequal.Involatilemarkets,companiesfacecountlesssmallandmid-sizedopportunitiesandtheperiodicgoldenopportunity---achancetocreatevaluedisproportionatetoresourcesinvestedinashortperiodoftime.TypicalgoldenopportunitiesincludeacquisitionofNatWest;explosivedemandinanemergingmarketsuchasChinaorIndia;orpioneeringanewproductorservicesuchastheiPod.6.Goldenopportunitiesoccuronlywhenexternalcircumstancesthrowopenseveralwindowsofopportunityatthesametime.Considertheopportunityformiddleware—softwarethatlinksacompany’sapplications---whichIBMandBEAconvertedintobillion-dollarbusinesses.Severaldevelopmentsoccurredatonce:theInternetcreateddemandforsoftwarethatcouldgetapplicationstotalktooneanother;availabletechnologywasuptothetask;earlyleaderssuchasNCRandNovellweredistractedbyothermarketsandthepaucityofventurecapitalfundingpreventedmanystart-upschasingthesamemarket.7.Timingiseverythinginthesecircumstances.HadIBMandBEAenteredthemarketayearortwoearlier,customers’painwouldhavebeenlessacuteandthetechnologyfixlessdeveloped,Afewyearslater,newentrantsflushwithventurecapitalcashmighthaveestablishedalead.28.Managerscanneitherpredictnorcontrolgoldenopportunities.Buttheycanpreparetheircompaniestocapitalizeononewhenitarrives.Thetrickliesnotinheroiceffortsinthemiddleofagoldenopportunity,butinthequietactionstakenduringperiodsofrelativecalmbetweenthestorms.9.Keeptheprioritiesclear:Inunpredictablemarkets,managersoftentrytohedgeagainsteverypossiblecontingencybyrunningcountlessexperimentsandlaunchingaflurryofnewinitiatives.Thisisabigmistake.Employeesandmanagersareoverwhelmedbymultiple,oftenconflicting,priorities.Inattemptingtopursuetoomanyprioritiessimultaneously,executivesdissipateresourcesandhinderco-ordinationacrossunits.Managersmustexerciseruthlessdisciplineinchoosingasmallnumberofobjectivestopursuefirst,puttingothervalidconcerntoonesideforthetimebeing.Equallyimportant,theymustdecidewhattostopdoingtofreeuptime,attentionandresourcestomakesurethetrulycriticalobjectivesaremet.10.Conductreconnaissanceintothefuture:Prudentexecutiveswillconsciouslytakestepstoinvestigateafoggyfuture.First,theyshouldsendoutprobesinafewdirectionstobroadenthesearchforopportunitiesratherthanstakingeverythingonasinglewayforward.Exploratoryforaysincludeinvestinginorpartneringwithstart-ups,orrunningsmall-scaleexperimentstotestthemarket.Second,whenconductingreconnaissance,managersmustremainalerttoanomalies---newinformationthatsurprisesthemorconflictswithexpectations.Inturbulentmarkets,amanager’smentalmapquicklybecomesoutdated,andanomaliesprovidecluesastowherethemapiswrong.11.Reconnaissancecanbepicturedasaprocessofprobingalongawallofresistancelookingforgaps.Mostofthetime,acompanyencountershardsurfaces:competitorswhowon’tgetoutoftheway,customerswhodon’twanttobuyortechnologiesthatwon’twork.Executivesshouldprobeforgapsinthemarketwhentheyfindone,theyshouldswarmit,pullingotherresourcesintheirwake.12.Keepareserve:Duringperiodsofrelativecalm,executivesshouldbuildawarchestofcashtodeployquicklywhenagoldenopportunityemerges.Thisrequiresrestraint.Spreadingacompany’schipsacrosstoomanypr