A friend of mine flies airplanes as a hobby. As a smart person, he doesn’t like taking unnecessary risks.
Every month he reads a monthly publication that includes the forensic analysis of every plane crash that has happened in the United States.
Unlike car crashes that aren’t always investigated, the Federal government investigates every plane crash to determine what caused the crash.
After reading hundreds of crash report summaries, what he learned is fascinating.
Amongst crashes of small aircraft, the overwhelming cause of the crash is pilot error.
When it comes to pilot error, it’s usually multiple errors in a row that cause a crash.
If you make a single error (and you’re aware of it), you can often recover from it.
However, if you make one error (and don’t realize it), that often leads to a second error (which compounds the first error), then a third and fourth error.
At this point, you end up in an unrecoverable situation, and the flight ends in a crash.
In speaking to him about this topic, he said, “It is shocking to me how much the pilots lacked situational awareness.”
In flying terms, "situational awareness" means knowing what your plane is doing and where the plane is located in time and space relative to the surrounding environment.
Examples would be:
- The plane cargo load is too heavy for the plane but the pilots don’t realize it.
- The plane is descending at a rate of speed faster than the pilot thought.
- The pilot gets disoriented in poor visibility and either doesn't believe what the instruments are saying, or the pilot is so panicked he or she forgets to look at the instruments.
- The fuel level is lower than what the pilot thought.
In most cases, what the pilot assumed to be true was not.
When I look at “crashes” in businesses and businesses careers, I’ve found the lack of situational awareness to be quite prevalent.
- An industry professional gets fired and is shocked. He doesn’t realize he offends all of his peers and people hate working with him. (Lack of situational awareness)
- A CEO grows sales over 100% per year and bankrupts the company. She didn’t realize that her sales growth rate exceeded the maximum allowable growth rate given the amount of working capital available. (Lack of situational awareness)
- A technically brilliant software developer gets passed over for promotion to manager -- not realizing the importance of people management skills as a manager and her weakness relative to others in that area. (Lack of situational awareness)
- A CEO’s "lowest price in industry" strategy is now wildly unprofitable; he didn’t realize he no longer has the lowest cost structure in the industry and can’t be profitable at these prices. (Lack of situational awareness)
When I’m asked to diagnose a company’s situation, the very first thing I do is get objective data on the company, the competition, and the customers (notice the similarities here to the case interview business situation framework).
I usually ignore a lot of what the CEO says about the company. I want to develop my own awareness of the situation.
This also happens to mirror exactly what happens in the first few weeks of a McKinsey engagement with a new client.
We get facts:
- Sales were X.
- Margins were Y.
- Segments A, B, and C were X%, Y%, and Z% of last year’s revenue.
- We confirm market shares of competitors. We plot how market share has shifted over time.
- We interview customers.
- We interview prospects who aren’t customers.
We develop as accurate an assessment of the current situation as we can.
When you lack situational awareness, you’re prone to doing two fatal things:
1) Making a major mistake;
2) Not realizing you made a major mistake.
#1 you can recover from. #2 you can’t -- especially if it leads to multiple, rapidly occurring, downstream mistakes.
So, what’s your current situation?
Are you sure?
Is there a way you can obtain an objective, unbiased assessment of your current situation?
These are great questions to be asking yourself constantly.