This December the world watched the hacking drama at Sony Pictures unfold, and the real world handed us a “disruptive event” we couldn’t have made up.
When we use business simulations to teach strategic finance and strategic thinking to senior leaders, we often add a disruptive event to a final round to really challenge the participants’ strategic agility. Of course, one of the concerns with this approach is that it can seem unrealistic to suddenly encounter an unforeseen event with business changing short- and long-term consequences. Even when we do, our clients usually tell us, “Nothing like that could happen here.”
Until now.
The Pattern of Response: From Financial Impacts to Behavioral Considerations
Not only did the event meet all the criteria we try to build into our simulations—a one-time disruption with definable financial consequences, potentially larger behavioral impacts, and the necessity to change long-held assumptions—it also mirrored the response patterns we see in the classroom.
The first articles in the business press after Sony cancelled the release of The Interview discussed the financial trade-offs the company faced: scrapping the entire film caused a significant write-off, but a fair amount might have been recoverable from insurance—as long as the film wasn’t released at all, including no secondary release on DVD or Video on Demand. The press also covered topics like canceling marketing events, navigating agreements with theater owners, and managing liabilities related to leaked employee data.
We see this pattern in our classes as well: Participants initially focus on easily quantifiable costs and concentrate on categories that are already measured.
Expanding the Lens: Beyond the Obvious Costs
As the magnitude of the Sony situation became clearer, the conversation shifted to less obvious—but potentially larger—behavioral impacts. Leaving aside the national security and free speech issues that eventually dominated the headlines, Sony faced critical questions:
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What is the impact on the company’s reputation if it is seen to give in to threats?
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What will make the company’s employees feel safe?
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What is the company’s responsibility to theater owners?
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How can one communicate candidly in a digital world?
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How much data security is enough?
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How do you weigh the value of artistic expression against the risks of provocation?
And the list goes on.
The Broader Lesson: Measuring What We Don’t Measure
In our simulation debriefs, the discussions about these “disruptive events” are always lively and thought-provoking. By the end, participants generally expand our list of potential impacts. Inevitably, it becomes clear that quantifying what we don’t traditionally measure—the behaviors of our clients, employees, suppliers, and neighbors—is essential to understanding the full business impact. Often, the size of these impacts dwarfs the costs seen on this quarter’s income statement.
The Value of Iteration in the Real World
Unlike in our simulations, where participants have one chance to react and their decisions lock in both the short- and long-term consequences, companies like Sony have the ability to keep adjusting in the face of a crisis. They can evolve their approach as their understanding and the situation unfold—an advantage that real life thankfully provides.
