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The type and the timing of response will differ among firms. Frequently, the response does not commence until after the threat has become a reality and the loss is substantial.  Once countermeasures are started, the loss is gradually brought to zero.  In the meantime, divestment of plant, liquidation of inventory, reduction of workforce, etc., incur extraordinary costs over and above the normal cost of operations.  Thus, while the threat is being arrested, two streams of costs accumulate, loss from unprofitable operations, plus the cost of liquidating these operations.


Thus, when a discontinuity begins to affect a firm, its impact typically remains hidden within the normal fluctuations in performance.  Thus, unless the threat/opportunity has been singled out by a special forecast, the initial response is to treat it by measures (cost reduction, efficiency, improvements, sales aggressiveness) which had in the past helped the firm to correct periodic reversals.


When the historically successful measures repeatedly fail to work, it becomes evident that the firm is confronted with a new discontinuous threat. This is the point at which cumulated data show, with a high degree of confidence, that decline of performance will not be reversed and that special countermeasures are required.


Some firms, typically small and led by young, aggressive management, do not engage in environmental surveillance or forecasting.  But they are quick to learn from the failure of conventional responses and are quick to `cut the losses'.


In many other cases, particularly in large, established firms which have enjoyed a long history of success, the mere presence of persuasive data frequently fails to trigger prompt response.  There are many historical cases of such firms which refused to recognize the `writing on the wall' of the impact of a novel technology (for example, replacement of drawn glass by float glass), or of a change in consumer preferences (for example, the shift of preferences from the `gas guzzling monsters' to the small, fuel-efficient cars), or of major political realignments (for example, the failure of many firms to pay attention to a scenario which predicted the `petroleum shock').


We can identify four contributing factors that are responsible for such delays:


Systems delay


A systems delay, which typically occurs in large firms.  It is due, in part, to the time consumer in observing, interpreting, collating and transmitting information to responsible managers.  In another part, it is due to the time consumed by these managers in communicating with one another and establishing a common understanding, as well as the time necessary for processing the decisions among the responsible groups and decision levels.


Verification delay


A verification delay may be invoked because some managers will argue that, even though the level of impact has reached unacceptable proportions, there is never an ironclad assurance that the threat is real and that the impact is permanent.  They will opt for waiting a little longer to see if the threat will `blow itself out.'


Political delay


A political delay may occur if certain managers, whose domain contributes to the crises, feel that recognition of a crisis will reflect on their reputation and/or will cause them to lose power.  Even if they are convinced that the threat is real, they will want to fight a delaying action to avoid becoming scapegoats, to gain breathing space to develop a line of defense, or to line up a line of retreat.


Unfamiliarity rejection delay


An unfamiliarity rejection delay would contribute to the other three if the managers are trained to trust prior and familiar experiences and reject unfamiliar ones as improbable and invalid.


All four delays will postpone the response past the rational trigger point and will substantially increase the total cost to the firm.  We shall refer to such response as reactive management.


Typically, neither the political resistance nor the unfamiliarity rejection are likely to be advanced overtly as the reasons for the delay, because both carry major implications for the concerned managers.  The justification is more likely to be given on the grounds of a need for verification, before a major organizational disruption is triggered off.


Both the decisive and the reactive behavior are after the fact: the response is triggered after the threat has inflicted tangible losses on the firms.  Such behavior is not surprising in firms in which the internally available information is confined to historical events.  Since a substantial percentage of firms still use historically based management information systems, decisive and reactive behavior are widely observable in practice.  In firms, which engage in forecasting, one would expect to find anticipation of threats and opportunities to be matched by anticipatory response.  But observations shows that many firms which engage in forecasting exhibit the same procrastinating behavior as the reactive firms.



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