Coda - April / May 2008

Powerful Results from Weak Signals 

“The principal reason for strategic failure [is] the inability to interpret weak signals. Great growth opportunities and dangerous threats are rarely obvious at the beginning…[Managers must] determine which developments on the periphery of their corporate vision they can safely ignore, and which ones pack the disruptive potential.” – Paul Schoemaker, Wharton professor, author of Profiting from Uncertainty and Peripheral Vision.

When I took Wharton’s scenario-planning course taught by the extraordinary Paul Schoemaker, one of the requirements was to watch a video of college students tossing a basketball in an elevator lobby. Afterwards, he asked if we saw anything unusual and we hadn’t. Then he replayed it, only this time he told us to pay attention to the floor of the room, not the students passing the ball. Same video. Same group. This time we saw a man dressed as a large gorilla run pass the students and out the side door.

So, as in business, we see what we are programmed to see. This fundamental scenario-planning exercise tells us that boards, in their attempt to focus on what management puts in front of them, may not only miss subtleties and nuances, but even the large gorillas, particularly when shrouded in the mist of a sophisticated, programmed presentation. This falls under the arcane science known as “uncertainty.” Proxy advisers and exchanges should consider adding this discipline to their director training requirements.

10K is Not a Marathon 

Investors poring over their 10K tomes are reminding us of what Samuel Johnson said of Milton’s Paradise Lost: ‘Few read it, none wished it were longer.’ If only the rest of us could take a page from Warren Buffett’s annual report, which has the status of a bestseller among investors. Particularly, he is not writing for the regulator or the plaintiff bar shark–he writes for his owners. So we would like to point out to Chairman Cox that the 10K emperor is quite naked, and we would like him to inaugurate a review of the documentation requirements placed on companies–particularly when they do a disservice to the very investors they are designed to comfort. Let’s simplify the disclosures, reduce the arcana to chart form rather than text, and limit a 10K to 50 pages with addendum for quantitative data. Investors will gain, management will be clear, and boards will note carefully their promises.

Black Day 

If you like your heroes larger than life, Conrad Black fit the bill. He was a tycoon, rascal, statesman, author, and press baron in the Lord Beaverbrook tradition. And he has now fallen far and hard. The photo of Black on his way to prison, his glamorous wife, Barbara Amiel Black, by his side, sent mixed feelings. First, assuming the trial and deliberations were fair— and we have no reason to believe otherwise—the case causes one to marvel at our system of justice and how it dispenses its remedies without deference to fame or wealth—or lordships. But pride in the system is tinged with a feeling of, frankly, sadness. Black had the capacity for greatness, both as a businessman and leader. I met him at Davos, where I watched him joust over policy with the likes of Sumner Redstone, FCC Chairman Reed Hundt, and other notables. And his recent biography of Richard Nixon is such a study in irony: the likenesses of the two men and their fates are stunning. Looks like we won’t have Black to kick around any more.

Jeffrey M. Cunningham is chairman and CEO of NewsMarkets, the publisher of Directorship. He serves on the boards of Sapient and TheStreet.com.