THE BLOG
02/11/2011 12:56 pm ET Updated May 25, 2011

The Cairo Condition: Waiting for a Crisis to Make Changes Is a Bad Idea

Question: What do Spiderman director Julie Taymor, Egyptian President Hosni Mubarak and entrepreneur Kenneth Cole have in common?

Answer: Each is being tested by a crisis of his or her own making.

Taymor is battling technical glitches and artistic miscues of a supernatural scale on Broadway. Mubarak, meanwhile, is reeling from a civil uprising that has shaken Egypt to its foundation. As for Cole, a respected fashion icon, he is trying to repair his reputation after embarrassing himself with an ill-advised message sent via Twitter. "Millions are in an uproar in #Cairo. Rumor is they heard our new spring collection is now available," he tweeted.

While these crises vary dramatically in scale, they share at least one thing in common: each could have been avoided. But they were not, which begs the question, "why?" Surely Mubarak, no matter what you may think of his regime, would have considered reforms more seriously had he realized how deep the animosity for him was inside the country. Yet he appeared caught off guard by the chaos that ensued.

Was Mubarak out of touch? Did the dictator not heed the warnings of his lieutenants or take seriously the consequences of his actions?

In a much different sense, one could ask the director and the designer similar questions. How could Cole, for example, send out such a cavalier message at a time when his own company was preparing to shutter stores and reshuffle its management team?

It just doesn't make sense. And it never does when powerful people wait for a crisis before enacting change or reform. Yet many do. Take the housing bubble, which triggered the economic meltdown of 2008. As early as 2004, officials began raising concerns about the potential dangers that over building and real estate speculation would create. But little was done in Washington or on Wall Street to avoid the crisis, which cost the nation hundreds of billions of dollars in losses and millions of people their homes.

In my experience, most crises follow a similar pattern. They are foreseen by a few forward-looking individuals, then ignored by management only to be returned to after the full weight of their impact is felt. Think about the last time your organization faced a crisis: did it anticipate it before hand? Was it slow to implement change? Did your leaders vow afterward to react differently next time? If the answer to all three of these questions is "yes," then the following can help you better manage if not avoid your next crisis.

First ask yourself if you have any formal team or mechanism in place to monitor potential threats. Not sure? Then try to put together a briefing for your organization that includes the following: 1) a detailed overview of performance and capabilities of your top three competitors; 2) a summary of any new legislative or regulatory acts that impact your company; 3) a status update on your relationships with your top customers and most important partners; and 4) an analysis of any technological or business developments that might impact your industry. If you can't amass this information in less than five working days, then you have an insufficient understanding of the things that can threaten your company and send it into a full-blown crisis.

Next, take a look at the flow of information and influence within your organization. Even companies that have proper mechanisms in place to monitor threats often fail to empower these entities to enact change or at least communicate vital information to those who can. For a crisis response team to be truly effective, it must be empowered, connected and tuned in. The latter is especially important in this day and age when a threat or challenge can come from almost anywhere--literally.

Consider Toyota. Despite complaints that its floor mats were contributing to sudden acceleration problems in the United States, the car maker's management team in Japan was slow to enact changes. While a recent government investigation exonerated Toyota for certain acceleration problems, the company still forfeited an incalculable sum in terms of prestige, market share and customer influence. Had it been able to fully grasp the scale of the problem, Toyota could have avoided the crisis. But it apparently didn't have the mechanisms in place to collate information and analyze it appropriately.

Finally, condition your leaders to let go of their arrogances and dispense with their intuitions that may have outlived their usefulness. Contrary to popular convention, things do change. Technologies become more powerful. Business models become out-moded. And economic climates evolve. What worked in one era won't necessarily work in another. If your management team insists otherwise, it won't listen to reason, respond appropriately to challenge or react deftly to avoid trouble. Instead, it will cling to what it knows until a crisis arises.

By then, of course, it could be too late--but hopefully not for you.

Remember: effective leaders don't wait for a crisis before enacting change. To them, crisis management is a skill to be leveraged in a pinch, not a leadership style to be practiced every day. The distinction may seem subtle to the uninitiated, but not to those who know better.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Author proceeds from sales of Doing Both go to charity. Follow Inder on Twitter at @indersidhu.