In a crisis, leaders need to see the world as is, not how they wish it to be

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As we seek to understand what the current crisis means for our businesses in the short- and long-term, many have turned to past recessions and financial crises to find a road-map. Recently, Terry Howerton, CEO of TechNexus, had a chance to chat with John Chambers, former CEO of Cisco, to discuss the crisis we’re in and how we should be responding to it. In that discussion, John shared lessons learned from leading Cisco through half a dozen down-turns and disruptions.

One comment really resonated with me — “See and deal with the world as it is, not how you wish it to be”. The full quote from that conversation:

“What I learned from my parents who were both doctors — they taught me early on, deal with the world the way it is, not the way you wish it would be. Don’t spend a lot of time looking back other than to realize the mistakes you made that will help you manage going forward. Get yourself focused on surviving what you’re in…”

That pragmatism served Cisco well during his tenure — they anticipated the Great Recession (as well as its nadir) and took steps to prepare for it, despite on-going criticism. By viewing the world as it was and not just hoping the bull market would continue, Cisco was able to prepare for and take advantage of the situation.

The onset of the current crisis has been dramatically faster than the Great Recession and other past downturns. Most leaders find themselves in reaction mode — start-ups, small companies, and large corporations are slowing burn rates, seeking bridge financing, and exploring every option to stay afloat during this time.

How did this happen?

With the benefit of hindsight, we can now see there were initial signals that were either largely ignored or simply didn’t know what to do with the information. Many governments around the world, at all levels and political alignments, were alerted as early as January about the potential crisis that could materialize in the coming months. Instead of aggressively mobilizing a robust response they squandered their time advantage. They viewed the world as they hoped and wanted it to be, under-utilizing the time available to prepare for the coming crisis.

Why did so many governments, companies, and people fail to see things as clearly as they could have? It’s impossible to say for certain but it’s likely that multiple fallacies, biases, and data asymmetries came into play. Among them:

  • Denialism — avoiding the potential impact of COVID-19 because it is psychologically uncomfortable.
  • False equivalencies — looking to past potential pandemics like SARS, H1N1, H5N1, etc. as complete evidence the U.S. wouldn’t be impacted.
  • Confirmation bias — Only focusing on the evidence that supported a positive view of COVID-19 containment in early weeks.
  • Incomplete / Incorrect data — there is mounting evidence of incorrect and incomplete data that under-reported the initial spread in the early days. Additionally, the private sector had less information to leverage compared to government agencies.

However, there are cases of companies that took the information at hand, saw the world for what it would be, and started adapting (instead of just hoping and waiting). H-E-B, a supermarket chain based in Texas, started looking into impacts of the coronavirus in mid-January at the first hints of supply chain disruption. They pulled out a pandemic and influenza plan that was developed in 2005 to respond to H1N5 and other outbreaks. From there they started running table top simulations, engaged and communicated with their suppliers in China, and eventually activated their Emergency Operations Center well before any state mandated actions. H-E-B got ahead of many of the challenges faced by their peers, taking a pragmatic approach and seeking more evidence themselves. They weren’t perfectly prepared (especially for the run on toilet paper!) but they were in a much better position than most due to their realistic worldview.

What can we do going forward?

Once we get past reacting to the current situation, we need to establish an informed view of the new normal. Some business and government leaders are hoping things quickly return to normal but that is increasingly unlikely to happen. Some companies will temporarily or permanently benefit from the shifts and some will be permanently impacted. For example, the COVID-19 crisis has accelerated the in-flight shift from in-store shopping and these changes will never go back to where they were pre-crisis. (My colleague Brett Bivens wrote a thoughtful and thorough piece on understanding the impacts to your company that I highly recommend.)

To prepare your business for what comes next, here are some pragmatic steps to see your situation clearly and view the world as it is:

  • Be aware of the biases you (and others) bring into the process
  • Be skeptical of simplistic equivalencies
  • Run several scenarios and simulations under varying assumptions
  • Gather as much data as possible, giving much more weight to leading indicators than trailing ones
  • Employ a devil’s advocate to identify unfounded optimism
  • Enable a culture where people are comfortable voicing an opposing opinion

Once you’ve given yourself a clear and realistic understanding of the world (as much as possible) and its impact to your business and industry, the best advice that John Chambers (or I) could provide is to take a pragmatic approach to prepare. Even if you’re not right (nobody ever is entirely) you will at least be more prepared than by simply viewing the world as you wished it to be.

Sources:

  1. https://hbr.org/2008/11/cisco-sees-the-future
  2. https://www.usatoday.com/in-depth/news/nation/2020/04/21/coronavirus-updates-how-covid-19-unfolded-u-s-timeline/2990956001/
  3. https://www.texasmonthly.com/food/heb-prepared-coronavirus-pandemic/