LSB professors Dino Dogan and David Versailles presented the findings at Mindforest’s premises on Tuesday morning. Data was collected both through interviews and questionnaire with 119 respondents--including executives in SMEs, intermediate firms and business units of large, established companies--only 76 of which were actual early warning signal (EWS) users.
As Professor Versailles has previously , “Early warning signals are a part of environmental scanning required for the elaboration of corporate strategy. They represent meaningful leads that can be used to anticipate opportunities, risks, and threats.” Nevertheless, companies still need to have certain processes and skills in place to be able to transform those into meaningful foresight.
Among the main findings of their study is that one of the most neglected EWS for businesses are those related to supply chains--despite the impact the pandemic and geopolitical tensions have had on them. Additionally surprising, given that sources like predict worldwide supply chains will likely be exacerbated in 2023.
As Dogan and Versailles pointed out, the most important focus for companies when it comes to EWS is on customers, technology and macroeconomics, less so on supply chain and society/sociological topics. (Although a sectoral analysis was not conducted in this particular survey, the two professors added the sectors questioned were “broad”.)
However, “SMEs don’t deal as much with macroeconomic EWS,” explained Dogan. Nevertheless, “we react when it starts to be painful. But then it may be too late.”
Efforts, sources to collect EWS
The findings reveal that nearly 50% of those surveyed spend between 1-5% of their total workload to the collection of EWS. Roughly 25% spend between 6-15% of their time on this--“a fairly good result”, according to Dogan. Yet, despite the fact that the greatest share of participants (16%) found EWS from third-party sources to be “very useful” (versus 10% when received from colleagues/subordinates), “no one is only working on EWS in our sample,” Dogan noted.
In fact, one of the CEOs surveyed said he neither knew about nor cared about EWS. On the other hand, Dogan explained that one of the larger companies (which had to remain anonymous) had “James Bond” level EWS dashboards which could quickly produce new output with tweaks to the models. And, although most companies had technology high on the agenda, Versailles and Dogan emphasised that IT tools should be just that--tools which play into a bigger picture for a strategic decision maker.
In her work as a Mindforest senior consultant, Marion Malchair said that in some companies, she has seen working groups trying to mitigate elements like bias. “We put our own biases into algorithms, and you can have the same problem with AI,” she explained. “EWS, before data, depends on mindsets, culture, etc.” in order to help interpret that data.
The main sources of data used to collect EWS included market trends, economic and marketing forecasts innovation dashboards; specialised media (e.g., Bloomberg, Factiva, Oxford economics, etc.); and general press (Google news, online search engines, daily press briefings, etc.). However, as Versailles pointed out, it’s “counterintuitive” that those working with such EWS sources “can’t hierarchise the data”.
Best practices, future steps
Among some of the best practices put forth by the EWS survey results include encouraging active listening, being willing to prepare and learn and that individual recognition of EWS means nothing if you can’t get management’s attention. Large companies have formal processes in place normally, and lessons learned are normally easier to translate inside organisations that already have to cope with certain regulations.
Successful companies not only have a way to transfer EWS information within their organisations, but they also make such info easily digestible with data visualisation tools.
Although the sample in this particular study was relatively small, the organisers plan on further expanding it, even later to the greater region.
The team also plans on publishing a white book about the initial study in January 2023.