The worst casualties happen when a company is blindsided by innovations and new players its managers never even imagined. Though Rumsfeld was talking about military threats, business threats that seem to come out of nowhere can likewise be the most dangerous. ![]() And…it is the latter category that tend to be the difficult ones.” But there are also unknown unknowns-the ones we don’t know we don’t know. We also know there are known unknowns that is to say we know there are some things we do not know. As he explained: “There are known knowns there are things we know we know. defense secretary Donald Rumsfeld made famous in 2002. ![]() One way to describe these unanticipated risks is “unknown unknowns”-a phrase former U.S. Often, it’s some brewing development that will redraw the lines of competition for the future. And unfortunately, it’s not just obscure corners of underperforming operations that CEOs are oblivious to. Their bigger problem is getting information they haven’t demanded because they don’t know to ask for it. It might not arrive as fast as they’d like, but eventually it gets there. ![]() Persistent CEOs almost always get the information they request. They venture off the beaten path and, in the process, discover challenging new questions that fuel important insights. They deliberately seek out strikingly different situations where they are more likely to encounter the unexpected. “When you’re in a box in an office, you’ve got to invent a way out of the box,” says Amazon’s founder, Jeff Bezos. Those executives work hard to break down the walls surrounding them. But more tellingly, I’ve also seen that at firms that are highly successful innovators, leaders are especially attuned to it and committed to overcoming it. In the course of conducting more than 200 research interviews with senior business executives over the past few years, I’ve come across hardly anyone who did not identify with this problem (including founders of fairly small firms). When a dramatic shift is on the horizon, the first indications usually appear in ambiguous events on the fringes of the market. ![]() This is problematic in an era when competitive markets change quickly. “Everyone tells you, ‘It’s all right-there’s no problem.’ And the next day, everything’s wrong.” And if it’s hard for word of internal troubles to penetrate the CEO bubble created by power and position, it can be nearly impossible for signals from outside the organization-especially early, weak ones-to get through. “If you’re a leader, you can put yourself in a cocoon-a good-news cocoon,” he notes. Nandan Nilekani, a cofounder of Infosys and recently a senior Indian government official, understands the dangers of this phenomenon. Walt Bettinger, the CEO of Charles Schwab, calls this dilemma his job’s “number one challenge.” As he explains, it takes two forms: “people telling you what they think you want to hear, and people being fearful to tell you things they believe you don’t want to hear.” Managers at all levels experience some form of this challenge, he points out, but “its grip is most intense in the top office.” Ironically, to do what your exalted position demands, you must in some way escape your exalted position. Yet your power and privilege leave you insulated-perhaps more than anyone else in the company-from information that might challenge your assumptions and allow you to perceive a looming threat or opportunity. Indeed, no bold new course of action can be launched without your say-so. When you’re the CEO of a large organization-or even a small one-your greatest responsibility is to recognize whether it requires a major change in direction.
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