Near-Sighted Corporate Intelligence Can Ruin You

Rival firms aren’t the only force that can take your company apart.

Political movements, societal pressures, economic shifts and technology breakthroughs can sneak up to derail even a longtime market dominator, according to George Day, a marketing professor at the University of Pennsylvania’s Wharton School.

Companies that have ruled their markets for years are especially at risk for overlooking “peripheral” forces that change the familiar landscape, says Day, who co-wrote a forthcoming Harvard Business Review article, “Scanning the Periphery.”

For example, Anheuser-Busch, SABMiller Brewing and Molson Coors initially missed the growing popularity of microbrews. In 1984, beer drinkers sucked up small-batch beers from Samuel Adams in Boston, Pyramid Breweries in Seattle and dozens of others in between. The big brewers didn’t realize that 1980s narcissism was a societal trend that would touch their business: Beer drinkers in the all-about-me decade wanted a beverage as distinctive as they thought they were.

When the number of microbreweries jumped from fewer than 50 in 1980 to 764 by 1996, the mass producers had to respond. They bought stakes in small brewers or acquired them outright. Anheuser-Busch, for example, paid $18 million in 1994 for 25% of Redhook. Independent brewers continue to appear, with an estimated 1,400 in business today.

Toyota and Honda, on the other hand, skillfully considered how U.S. environmental politics would touch them. The Japanese automakers picked up on consumers’ increasing interest in fuel-efficient hybrid cars, even before the Iraq war. Because they pushed ahead building their Toyota Prius and Honda Insight gas-electric cars, which get 60 miles per gallon, they were ready when car buyers en masse wanted hybrids. General Motors and Ford, meanwhile, continued making gas-gulping sport-utility vehicles. In May, Standard & Poor’s said sinking SUV sales helped convince it to downgrade the bonds of GM and Ford to “junk” status.

As Day explains, “scanning the periphery” for growing threats means actively looking for bad news—such as early backlash against once-popular SUVs on Web sites such as—and then bringing it back to managers who may not want to hear it.

Next page: Chief Paranoia Officer