One of the hardest challenges facing leaders is making decisions in the face of uncertainties. To deal with the discomfort of uncertainty, some leaders turn their assumptions and beliefs into “facts” in their mind. That’s unfortunate. Stick blindly to ill-informed thinking, as some prominent leaders have done, and you’ve doomed your company to decline. Let’s look at some examples.
Ironically, it was a Kodak engineer (Steve Sasson) who invented one of the first digital cameras in 1975. Three decades later, Kodak’s leaders made decisions seemingly based on a belief that digital photography would have a slow uptake, even though by that time digital cameras dominated the marketplace. Why? Digital technology made saving and sharing photos effortless.
Blockbuster believed stores offered the most convenient video rental and purchasing experience. Its CEO turned down an opportunity to purchase Netflix in 2000. “Netflix doesn’t do anything we can’t… do ourselves.” Even if that was true, the company failed to invest in a way that would mobilize or capitalize on that capability.
My observation is that the more confidence you have about your assumptions concerning the external environment, the more likely it is you will be blindsided. And I suspect climate change is creating a long line of business leaders at risk. Case in point: Milwaukee BizTimes recently asked its readers, “Do you believe humans contribute to the causes of climate change?” Only 55% in the poll said yes.
The correct answer is “Yes.” It doesn’t take complicated models to prove mass industrialization increases world temperature. Fourier (1768-1830) discovered the principles of the greenhouse effect from laws of physics. Centuries of actual and derived data trends document the correlation between industrialization, CO2 levels, surface temperatures and rising ocean levels and acidity. Climate systems do adjust to achieve equilibrium, but these natural adjustments work at a far slower pace than we are increasing greenhouse gas emissions (2.3% last year). So nature can’t be counted on to minimize the impacts of global warming. It’s why 97% of scientists (and 57% of adult citizens) believe human activity is the leading contributor to climate change over the last century. (45% of BizTime poll respondents deny human activity is even a contributor.)
Admittedly, climate scientists do not fully understand how clouds, sunspots, and other factors impact a complex system. And it’s fair to note there is a stellar MIT expert in the tiny slice of scientific doubters. Even he agrees that industrial activity is increasing the earth’s surface temperature but predicts a far lower temperature increase than his peers.
When you ignore the fact that your beliefs about your business may be wrong, and you deny facts, you make three mistakes.
First, you miss risks to your business. Surely the executives of Sears Holdings would have made different decisions about resource allocation and investments if they had recognized that maybe, just maybe, people no longer put a high value on finding everything from hardware to appliances to underwear in a single store. Taxes and insurance costs will rise as climate changes. Carbon taxes may be imposed. Are you prepared?
Second, you miss the opportunities the changing marketplace creates. Forward-looking companies like Unilever advance sustainability agendas that lower costs and attract and retain today’s younger talent and customers. Milwaukee’s ZBB Energies exists to address storage issues of alternative energy sources. Companies can make money by selling carbon offsets.
Finally, when we deny the realities around us, we elect politicians who wear blinkers, the headgear that force horses to only see what is right in front of them. House Committee on Science, Space and Technology Committee Chair Lamar Smith (R-Texas) is one. He spent more time in his first year on the job holding hearings on aliens than on climate change. Far worse, he has proposed drastic cuts to NASA’s Earth Sciences research programs. Our nation’s future economic opportunities and our ability to understand and address climate change align directly with our investments in science. And we’ve got a closed-minded leader in a top spot.
The role of a leader is to anticipate changes in the external climate and make sure the leadership team is evolving its business model in light of these risks. In adopting an open mind, you better defend your market position, retain attractive margins and surface profitable growth opportunities.
Believe whatever you want to as a person. One-quarter of the US population (according to a recent NSF survey of scientific literacy) doesn’t accept the earth revolves around the sun. Thankfully, they’re not part of landing a probe on Mars. But as a CEO and business leader, remember that your people, your customers, and I’d argue your grandchildren deserve a reasoned and open mind.