Workshop: Weak signals that precede a crisis

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Workshop Weak signals that precede a crisis

• Joël Luyk
• Wednesday 14 October 2009
• Contact J.Luyk_at_tue.nl

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Presentation outline

• Why detect weak signals?
• Organizational weak signal detection model
• Case study Small fire at semiconductor plant
  with major consequences for Nokia and Ericsson
• Workshop Organizational filters

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Threats and crises abound

• Banking crisis
• H1N1 flu
• Terrorist threats (9/11)
• Infrastructural projects (Roermond tunnel A73)
• Climate changes

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What to do about it?

• The bad news

• An organization is incapable of preventing every
  imaginable crisis and will consequently remain at
  risk.

• The good news

• Reactive Learn from the past.

• Proactive Nearly every crisis is preceded by
  early warning signals or weak signals.

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Pro active crisis management
Mitroff's crisis management model, as presented
in Hensgen et. al., 2003 (Hensgen T, Desouza KC,
Kraft GD. Games, signal detection, and processing
in the context of crisis management. Journal of
Contingencies and Crisis Management
20031167-77).
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Signal detection

• An organization should detect both strong AND
  weak signals.
• Strong signal 'late' signal of impending crisis
• Response opportunity ?, response effectiveness ?.
• Detection through warning systems (process
  control system, management information system).
• Weak signal 'early' signal of impending crisis
• Response opportunity ?, response effectiveness ?.
• Detection?

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Weak signals

• Increased monetary transactions between banks ?
  banking crisis
• Nervous stewardess ? airplane malfunction
• Increased interest in stocks of company X ?
  take-over
• Hiker sees animals running away from forest ?
  forest fire
• Small deviation in process parameter ? plant
  explosion
• Absenteeism ? employee dissatisfaction

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Working definition weak signal

• Imprecise early indication of an impending
  impactful event from the perspective of the
  (human) receiver(s).

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Detecting weak signals

• Weak signals are detected cognitively and not
  through an automated system.
• Requires sensitivity and expertise on part of the
  observers.
• Cognitive processing of weak signals.
• Organizational weak signal detection model.

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Cognitive processing of weak signals
Signal receiver
Signal
Delivery
Attention
Compre-hension
Attitudes Beliefs
Moti-vation
Behavior Action
Non-action
Based on Wogalter's Communication-Human
Information Processing (C-HIP) model, presented
in Wogalter, 2006 (Wogalter MS. Handbook of
warnings. LondonLawrence Erlbaum Associates,
2006).
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Example 1 Stressful environment
Signal receiver
Signal
Delivery
Attention
Compre-hension
Attitudes Beliefs
Moti-vation
Behavior Action
Non-action
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Example 2 Experience with major crises
Signal receiver
Signal
Delivery
Attention
Compre-hension
Attitudes Beliefs
Moti-vation
Behavior Action
Non-action
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Organizational weak signal detection model
External environment
Internal environment
External Signal X
Strategic
Internal Signal Y
Tactical
Operational
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Case study Nokia versus Ericsson

• March 2000 Small fire in Philips semiconductor
  plant, Albuquerque.
• Signal "Minor supply disruption". Informally
  communicated to two major customers Nokia and
  Ericsson.
• However, fire had major consequences. Water
  damage and smoke contaminated millions of chips.
  Major cleanup operation was necessary. Supply
  disruption lasted more than 6 months.
• Initial informal communication was a weak signal
  of the major supply disruption.

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Nokia's response (1)

• Acted immediately on the weak signal, preparing
  for the crisis. In the end, Nokia was able to
  keep production on target.
• Several organizational filters strengtened the
  signal
• Nokia's supplier relationship
• Individual risk attitude
• Quick and open communication
• Responsibility/authority
• Culture

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Nokia's response (2)
Philips semiconductor plant, Albuquerque
Nokia
Action Internal resources committed Philips
executives notified of concerns.
Minor fire accident in plant
Nokia top management
Action put on monitor list communicate daily
with Philips. Offered help to Philips.
"Minor supply disruption"
Chief supply troubleshooter
Action communicate to troubleshooter.
Component purchasing manager
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Ericsson's response (1)

• Did not respond immediately to the weak signal.
  Even after the signal got stronger, response was
  slow. In the end, Ericsson came up millions of
  chips short and allegedly lost 400 million.
• Several organizational filters weakened the
  signal
• Individual risk attitude
• Cognitive bias
• Internal communication
• Culture

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Ericsson's response (2)
Philips semiconductor plant, Albuquerque
Ericsson
Ericsson top management
Minor fire accident in plant
No resulting action no communication to top
management.
"Minor supply disruption"
Middle management
Action Importance signal not comprehended
informal communication to middle management at
best.
Component purchasing manager
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Case study findings

• Weak signal detection and processing is essential
  for successful crisis management.
• An identical external weak signal can be
  strengthened within one organization (Nokia) and
  weakened in another organization (Ericsson).
• Organizational filters are active at all three
  levels Human Factors, Internal and External.
  They can either strengthen or weaken signals.
• An organization can affect weak signal detection
  and processing through its organizational filters.

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Workshop Organizational filters

• Case study indicated some of the organizational
  filters that influence organizational weak signal
  detection. However, which other filters can be
  identified, and what is their effect on signal
  strength?
• Goal workshop
• Identification of the most relevant
  organizational filters (Human Factors, Internal,
  External)
• Ranking of the identified organizational filters

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Identifying weak signals and filters through case
study analysis

• Analysis of real life case studies
• What was the (weak) signal?
• Which filters were active?
• Did the filters strengthen or weaken the initial
  signal?
• Examples from your own organization
• Have you experienced a situation in which a
  (weak) signal was either weakened or strengtened
  within your own organization? Which filters were
  active?

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Example Space Shuttle Challenger case
? O-ring memos

• What was the signal?
• Which Human Factors filter was active? Did it
  strengten or weaken the signal?
• Which Internal filter was active? Did it
  strengten or weaken the signal?
• Which External filter was active? Did it
  strengten or weaken the signal?

• Seven deaths
• Technical cause O-ring seal failed at liftoff
• Disregard of a strong signal prior to launch
  memos concerning O-ring
• Signal weakened no action deemed necessary

? Cognitive Bias
? Culture (Groupthink)
? Communication between NASA and Thiokol
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Examples of organizational filters

• Human factors filters Risk attitude, cognitive
  bias, personal characteristics of signal
  receiver
• Internal filters System coverage, system user
  interface, training, formal communication,
  responsibility, procedures, management
  commitment, vision, organizational learning,
  internal stakeholder involvement, management
  style
• External filters External stakeholder
  involvement, external communication channels