Keeping Your Head on a Swivel:
The Importance of Situational Awareness for Startup Executives
Recently, I realized that situational awareness (SA) is a critical, yet largely unacknowledged skill among decision-makers in startups. Situational awareness is a higher-level skill that encompasses three successive steps: (1) seeing all of the parts and interconnections related to challenges or issues the company faces, (2) comprehending the entire situation and all its aspects, and (3) possessing a 360º view of the anticipated future state of the challenges or issues.
In other words, SA is the ability to both comprehend the significance of a particular situation and predict/forecast that situation’s future state and sequences of related events. This understanding and perspective facilitates decision-making based on valuable insights. It also allows leaders to guide action and drive performance more effectively.
The word “vision” is sometimes used interchangeably with SA, but these terms are not interchangeable. “Startup vision” is the founder’s articulation of the future direction of a and its potential impact on a sector, an industry, or possibly society as a whole. It also includes a delineation of the critical activities required to make the vision a reality, as well as identifying which activities might be valueless distractions. In short, vision is not situational awareness.
In the real world outside of startups, SA is critical to the protection of human life and property. This holds true in a range of fields, such as air traffic control, emergency response teams, health care and medicine, military command and control, etc. It helps maintain an orderly society, bolsters important institutions, and literally saves lives.
In startups, SA can be applied to a wide variety of questions:
How can the company scale (i.e., hit $100 million in ARR)?
Which technologies should the company adopt? Which products should it engineer?
Which teams or new headcount are needed for the company to scale? Is the company making the right hires?
Should the company raise a round of financing now or should it be a priced round? If so, at what valuation?
How will the company achieve product fit, market fit, and address industry dynamics?
Which evolutionary changes should the company make with its Board of Directors?
How should executives analyze competing companies in light of recent funding events?
Obviously, these are not life-and-death situations, but solid SA leads to better communications and more beneficial decision-making by individuals, teams, the company and - in some cases - even an industry.
Consider SA in the context of these key positions in startups:
Board Members – Each board member actively exercises his or her best judgment in order to make decisions on behalf of the company. Each member must put the interests of the company before their personal and professional interests, as well as ensure that the company complies with the applicable federal, state, and local laws – all the while adhering to its mission.
SA produces better judgement, facilitates more thorough compliance, and results in a more complete understanding of fiduciary responsibilities.
Chief Executive Officer – A startup CEO is responsible for meeting the needs of employees, customers, investors, and communities. He or she also must ensure that the company and its employees execute strategy with the right GTM and Technology Roadmap in place. From zero stage through Series A and beyond, the CEO is the chief strategy, sales, product, and resource officer. As the company grows and matures, the CEO evolves into the chief scaling, exit, and morale officer. In many cases, the CEO is the ultimate decision maker on most consequential – and challenging – issues.
SA provides perspective, enhances judgement, and sharpens decision-making abilities, especially when issues or questions present multiple viable options.
Chief Technology Officer – The CTO is responsible for the company’s technology needs and research and development function. Therefore, the CTO is responsible for short- and long-term product plans and the technology roadmap. This means that the CTO is a key decision maker when it comes to engineering personnel, the technology the company uses internally, and the selection of technology partners. The CTO’s duties also include analyzing competitors and helping to perform due diligence in M&A initiatives and in support of the company’s exit. Often the CIO reports to the CTO, so he or she oversees that function as well.
SA leads directly to decisions on organizational structure, staffing, technologies, products, partners, M&A, and related departments and teams.
Chief Financial Officer – A CFO manages the financial side of the company, including tracking cash flow, financial planning and presentations. He or she is also responsible for managing the finance and accounting departments and taking corrective actions based on the company’s financial strengths and weaknesses. The CFO often has HR, legal, and even IT reporting to them. In many cases the CFO is the day-to-day chief decision maker on financial and accounting issues that have significant consequences.
SA provides perspective above beyond the numbers. SA would bring in technical and often complex knowledge to financial and accounting matters, and legal considerations relative to the larger picture.
Chief Revenue Officer – The CRO has the primary responsibility for driving new and incremental revenue for the company. Sometimes the CRO is responsible for inside sales and the marketing team and activities. He or she is also is responsible for business development, and for managing the company’s existing base of customers, sales channels, and partnerships. A CRO is the first company executive to usher in the first international customers, distributors, or resellers.
SA provides an outlook involving worldwide sales and growth prospects. The CRO’s SA is somewhat mitigated by the unpredictable realities of customer behaviors, supply chain disruptions, and other macroeconomic issues. Strong SA helps the CRO guide pipeline development, forecasting, personnel coverage, customer relations, and ultimately how the company is perceived in markets in the U.S. and abroad.
Taken together the board of directors and executive management team have to be attuned to SA given their responsibilities, and especially their individual and team decision-making dynamics.
How can a person improve his or her SA capabilities? Here are eight exercises that an individual can do to improve their SA:
List out all board members, executive leadership team members, employees, internal teams and business units within your company. Add to that list all your competitors, channel partners and distributors, and influencers around your company. Make connections between them - being mindful of who they are, what they do, and the relationships they can bring to the table. Use this network of relationships as a reference framework.
From this list, identify positive and negative influences on your SA. Detecting and observing the influence of people and companies in your orbit is crucial for your SA.
Categorize and prioritize situations that have hidden or partially obscured doorways to opportunities, unknown passages, and exit points. Identify potentially hazardous situations such as potential legal encumbrances. Understanding the complex interdependencies of the activities, events, and other elements of your situation is very important.
Run a risk analysis of current situations and emphasize direct causes or influences, as well as external linkages. Which ones are most risky, less risky, and risk-free?
Practice prediction by running “If-Then” scenarios in your head, on a whiteboard, or on paper. Add “If-Then-Else” when you get good at this approach to situations.
Stay vigilant and expect the unexpected. Keep in mind, however, that you are running a marathon, not a sprint.
Trust your instincts as you become more confident in your assessment of your current environment. Gavin De Becker summed it up: “Intuition heeded is far more valuable than simple knowledge.” (The Gift of Fear: Survival Signals That Protect Us from Violence.) (Hat tip: Jennifer Hoffman, U.S. Army vet) Trusting your analytical and predictive skills is based on trusting your feelings and being confident that you know the environment.
Practice, practice, practice. If there was ever a skill that calls for a coach, SA skills development would be it. In all fairness, however, you have to identify the situations that are most meaningful to you and test them first, then bring those specific situations to your coach. Spontaneous ‘SA’ing’ with a coach is not a productive exercise.
The drills for improving SA at the team level are more involved and require more preparation. Pursuing that typically involves bringing in an outside consultant who specializes in SA development. The consultant’s goal is to help build a new SA framework or expand or enhance your team’s existing framework. Team SA exercises are different from the individual SA exercises and often involve data, presentations, and background readings.
In any case, startups and their leaders can - and should - do a better job of developing their situational awareness and expanding its use in and around the company. Focusing on developing and refining this higher-level perspective can pay valuable operational dividends.