Facing Ambiguous Threats

Firms often ignore small signs that may—or may not—portend danger to their markets or reputations. Here is a systematic way to analyze and respond to weak signals.

by

and

Amy C. Edmondson

by

and

Amy C. Edmondson

From the Magazine (November 2006)

Summary.

Ambiguous threats differ from threats with obvious causes — say, a fire in the building — for which the response is clear. They also differ from unmistakable threats that may lack straightforward response paths (such as the frightening oxygen-tank explosion aboard Apollo 13). However, when the warning sign is ambiguous and the threat’s potential impact is unclear, managers may ignore or discount the risk. Companies that do a good job of dealing with ambiguous threats apply a rigorous set of detection and response capabilities that they have developed and practiced beforehand. In this article, the authors outline how to put such capabilities in place long before a crisis strikes: First, companies need to hone their teamwork and rapid problem-solving skills. Second, they must encourage teams to recognize and amplify weak threat signals. Finally, they should explore various threat response plans through quick, low-cost experimentation. Ultimately, preparing to face ambiguous threats boils down to building a culture that invites dissent and encourages everyone to question their underlying assumptions.

The Idea in Brief

Are you dismissing small signals that may portend danger to your business? Ignore these ambiguous threats, and you could imperil your company. Pharmaceutical giant Merck discovered this firsthand when it downplayed early unclear data linking its painkiller Vioxx with cardiovascular risks.

It’s frighteningly easy to underestimate ambiguous warning signs. When a threat isn’t obvious, we fall prey to mental biases (such as dismissing data contradicting our existing viewpoints) that cause us to minimize perceptions of danger.

How to protect your company in the face of murky signals that your company may come to harm? Develop a rigorous discipline for identifying, evaluating, and responding to ambiguous threats. Roberto, Bohmer, and Edmondson recommend this three-step process: 1) Hone your company’s rapid problem-solving and teamwork skills through practice. 2) Amplify ambiguous threats, encouraging people to ask “what if” questions about them. 3) Explore possible responses to threats through speedy, low-cost experimentation.

Apply this process, and you boost your chances of preventing disasters that can destroy your firm. Equally valuable, you enhance your company’s ability to acknowledge problems and separate significant signals from mere noise—two skills essential for making high-stakes decisions wisely.

The Idea in Practice

Assess Your Ability to Manage Ambiguous Threats

Is your firm prepared to deal with ambiguous threats? The answer is “no” if your company:

Spends more time responding to small emergencies than seeking to prevent them.

Lacks a clear process for detecting and responding to ambiguous threats.

Has a culture that discourages people from expressing concern when they spot ambiguous threats.

Manage Ambiguous Threats

Step 1: Practice teamwork under pressure. Stress and anxiety run high as ambiguous threats emerge and the clock ticks toward potential disaster. So don’t try to improvise during this time. Instead, regularly rehearse responses that you can apply to a wide range of threats. These “dress rehearsals” help people in your firm get to know each others’ strengths, weaknesses, and informal roles. If disaster does strike, participants will know who can provide an intelligent analysis and who will propose creative solutions. Example:

Morgan Stanley’s information technology group practices responding to a variety of threats—such as natural disasters, terrorism, and attacks on their network by sophisticated hackers—that could impair the firm’s systems capabilities.

Step 2: Amplify the weak signal. Initiate a brief but intense period of heightened inquiry about the ambiguous threat. Encourage people to ask uncomfortable questions about the potential threat and to explore its significance—without fear of retribution should the threat prove harmless. Example:

Many hospitals have created lists of early warning signs of potential cardiac arrest. When nurses spot such signs, they call in rapid response teams of critical care nurses and respiratory therapists to help them assess the signs’ significance. These teams quickly determine whether a warning sign merits further action and specialists’ attention. At some hospitals, these teams have dramatically lowered the number of cardiac arrests.

Step 3: Experiment. When a potential business failure looms, formal scientific inquiry into possible solutions may consume too much time or other resources. So, develop a less formal—and more rapid—process. Example:

Electronic Arts investigates consumers’ possible responses to a proposed video game feature by creating simple prototypes that mimic portions of the gaming experience for which the company wants feedback. Given the immense cost of video game development and the low probability that any particular project will yield a hit, this “mini-prototyping” enables the firm to identify and address potential problems more quickly and inexpensively than rivals do.

On February 1, 2003, the world watched in horror as the Columbia space shuttle broke apart while reentering the earth’s atmosphere, killing seven astronauts. An investigation revealed that a large piece of insulating foam had dislodged from the shuttle’s external tank during the launch, damaging a wing’s leading edge and causing the accident 16 days later.

A version of this article appeared in the November 2006 issue of Harvard Business Review.

MR

Michael Roberto is an assistant professor of business administration at Harvard Business School.
Richard M.J. Bohmer is a physician and a senior visiting fellow at the Nuffield Trust in London and advises health care organizations around the world. He previously was a professor of management practice at Harvard Business School. He is the author of Designing Care: Aligning the Nature and Management of Health Care and the forthcoming Managing Care: How Clinicians Can Lead Change and Transform Healthcare.
Amy C. Edmondson is the Novartis Professor of Leadership and Management at Harvard Business School. Her latest book is Right Kind of Wrong: The Science of Failing Well (Atria Books, forthcoming in September 2023).

Facing Ambiguous Threats

The Idea in Brief

Assess Your Ability to Manage Ambiguous Threats

Manage Ambiguous Threats

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