When Signals Make You Paranoid

A few years ago an Israeli co-worker commented on a political event here in the US. And he was surprised about the kind of reaction he had and the question that he asked himself. “What does this mean for Israel?” was his first thought.

His reaction is that kind of paranoia that is embossed in any Israeli, understandable, given their history. Every major or minor event in the world is put through a thorough analysis, driven by the basic premise, that this somehow may have an impact on the country, and this could be good or bad for Israel. A missed signal can endanger the whole nation, and Jewish people had enough of those moments in their past.

What seems as overreaction for non-Israelis, who have not had that constant danger of existential threat over the course of history, is something that the corporate world should take as inspiration for reflecting on signals that are precursors to trends that may become existential threats for a company.

Paranoia Types

There are two types of paranoia, both of which are important and should be balanced. The first type comes in shape of a threat, meaning this form sees a signal and immediately goes into an all defense mode: “How bad is that signal for me? Is it going to threaten me?” This paranoia form type is mainly reacting, with the goal to avert any threat.

The other comes in shape of an opportunity, going out instead looking for signals that offer chances to exploit. It’s an action-driven, grabbing-new-chances type of approach to a signal.

Applying the threat-form only is not healthy for a company’s culture in the long run. It creates a constant mode of imminent danger, that conveys the feeling of never being in control of a situation. It can burn out people. Using only the opportunity-form may miss real threats and never build up a defense.

Both modalities need to be in a balance, like in  sports such as soccer or football. You can’t expect to win with the best offense, when the defense is non-existent. And without offense you’ll never score a point.

The Paranoia Net

Coming back to my Israeli co-worker. Let’s consider at what signal he had looked. While political developments in the countries at Israel’s borders get an immense focus in signal observation, signals from across the globe are given a similar treatment. Fishing for signals makes Israel cast a wide net.

This is a lesson to learn for companies. You can’t just look for signals in your own industry. You need to cast a wider net and look in adjacent industries and industries far away from your own field. Sure, there is no way to follow all industries a lot of even a bit, but your own and adjacent fields is a must, as well as industries that you may consider ‘interesting’ and ‘innovative’.

Working with companies from a variety of industries, one surprising revelation is that the executives know their industry pretty well – on a kind of deep and superficial level at the same time. They know their immediate competitors, and their latest efforts of how to gain ground on the others, but more often than not their are unaware of new players in their own markets and unaware of innovation models in other industries. Even if they are aware, they dismiss them as irrelevant or not sustainable.

Unaware of new players in their own markets

An insurance company realized with a visit in Silicon Valley that right under their nose in their own home market an insurance startup was doing stuff that the behemoth was completely oblivious about. The startup did nothing that seemed new, but the way they did it was compelling. And they had just missed it.

While a small entrant can be ignored for a while, larger entrants may not. When Apple introduced the iPhone, not just the usual suspects in this industry like Nokia or RIM had near-death-experiences, companies from other industries like TomTom, a navigation device maker, just saw its business disappear from one moment to the next. Adding insult to injury, TomTom was not even considered a competitor for Apple. TomTom was just roadkill.

Unaware of models in other industries

By monitoring only their own industry, companies become too certain that ‘proven business’ models are not going away. But something like business models from other industries applied to yours may change the industry forever.

Instead of making money with razors, Gilette made money with blades. Instead of buying a car, customers lease it, or order an Uber. Instead of paying for software, customers use a freemium model, where software is free and they pay only for certain features or the pro-version of it.

A software company that offers its software today through a license model, underwent an exercise in one of my workshops, where the executives had to change roles. They stepped into the shoes of Google and Amazon and had to attack their own company. It quickly became clear with that role reversal that already today, both Amazon and Google offer services that overlap with the company’s software products. While for them the current model was the livelihood, for Amazon or Google it’s considered an additional offering to serve their current customer base better with services they were making a lot of money. The executives realized that one of these software giants could threaten their business just by pulling a switch and offering the very service for free.

Not just medium or small companies could suffer. Even Microsoft’s Steve Ballmer became blindsided in new business models that competitors introduced.

Dismissing new models/entrants as irrelevant

Imagination is a problem, when companies are lacking it. The thought that a small electric vehicle maker could turn your own world upside down, was inconceivable for big German automakers. And yet that is exactly what Tesla did to them.

Every model or entrant has a chance of questioning the status quo. Some more, some less. Feeling to sure about a forecast may prevent companies from adjusting the chances of them becoming more. That’s why being able to imagine alternative futures is becoming important. And this is achieved by role reversals, more diversity, and constant monitoring of signals, among other techniques.

Freemium in the software industry has been around for a decade, but freemium in a restaurant is disruptive. Imagine food in a restaurant is free? How would the restaurant would make money? Renting the tables, using a time-share model, a membership, part of a larger all-inclusive package that comes with your rental apartment?

The Paranoia Paradigm

To recognize trends before they are trends, before they become disruptive to you, you need to implement a framework to detect signals form your own and other industries and disciplines. Cast a wider net than you are used too.

A healthy and balanced amount of paranoia is tantamount to the approach. Your feeling must be that you are missing a chance or a threat. The most dangerous way to react is to shrug. The Israeli paranoia paradigm always asks “What does this mean for <EnterYourCompanyName>?” If you can answer that question, the ball is in your field. If you cannot answer the question, you are missing information and need to get better in signal detection and the interpretation of signals.

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