Your Competitive Advantages Are Your Early Warning System

How Strong Organizations Detect Disruption Before It Forces a Reaction

Organizations often begin thinking about disruption only when something has already gone wrong. Revenue softens. A competitor emerges. A technology shift accelerates. By that point, options are limited and decisions feel reactive.

The most effective time to prepare for disruption is when business is strong.

I was reminded of this while delivering a keynote at a client’s annual strategy summit earlier this year. The company builds and services datacenter infrastructure and is in the midst of a remarkable period of growth: record backlogs, aggressive hiring, and a confident leadership team. Rather than focusing on performance, the discussion centered on a more uncomfortable question:

What would need to be true for this growth to continue indefinitely? And what signals would tell you that your assumptions should start to change?

Organizations that ask those questions early gain something invaluable: time.

Start With What Makes You Win

When executives hear the word “disruption,” the instinct is often to scan the horizon for threats. That is rarely the most productive starting point. Before looking outward, organizations should first look inward.

The foundation of any effective disruption strategy is a clear understanding of competitive advantage. Not marketing language or positioning statements, but the real reasons customers choose one company over another.

This matters for two reasons.

First, industry disruptions happen when historical competitive advantages are no longer held. Sometimes they erode over time, other times they crumble seemingly overnight. You can’t effectively evaluate a potential disruptor until you have a critical understanding of your own competitive advantages. Second—and often overlooked—these advantages are also what can be leveraged when disruption creates opportunity. Organizations that understand the true sources of their advantage can more easily distinguish between meaningful signals and background noise.

This understanding becomes a filter. If a development does not materially affect a company’s competitive advantages, it may not require immediate strategic response. If it does, leadership should pay attention quickly. Without that filter, every headline can feel urgent. With it, leaders can focus attention where it matters most.

Building a Strategic Early Warning System

Once competitive advantages are clearly defined, organizations can begin building a strategic early warning system.

This approach draws from the Indicators and Warnings (I&W) methodology used in the intelligence community. It focuses on monitoring four domains that tend to drive disruption:

• Technology
• Market structure
• Regulation
• Customer demand

The goal is not to track every possible development. It is to identify specific indicators that would signal meaningful change relative to a company’s competitive position.

Not every signal requires action. The discipline lies in determining the appropriate response posture:

• Monitor when indicators exist but are not yet moving
• Plan when signals begin to converge
• Act when predefined thresholds are crossed

This framework helps organizations respond proportionately rather than reactively.

Interpreting Signals in Real Time

During the summit, we examined a recent example that had affected the datacenter industry. In early 2026, NVIDIA announced that its next-generation chips could be cooled with warm water, potentially reducing the need for traditional chillers. Within hours, stocks tied to datacenter cooling declined and headlines suggested a major disruption to the sector.

For companies involved in datacenter cooling infrastructure, the reaction was immediate and personal.

However, when evaluated through a competitive-advantage lens, the implications were more nuanced. The announcement primarily affected chiller systems, not liquid cooling infrastructure more broadly. For organizations with strong capabilities in liquid cooling, the development could represent an opportunity rather than a threat.

This distinction is difficult to see when reacting to headlines alone. It becomes clearer when organizations understand precisely what drives their success and monitor changes accordingly.

The Real Challenge: Organizational Discipline

The methodology for anticipating disruption is straightforward. The more difficult challenge is maintaining organizational discipline.

This includes:

• Encouraging open discussion of inconvenient information
• Maintaining strategic focus during periods of strong performance
• Avoiding the tendency to dismiss signals that challenge current assumptions

Strategy thinker Dr. Roger Martin has noted that if leaders are entirely comfortable with their strategy, there is a strong chance it is not a very good strategy. Effective strategy requires ongoing testing of assumptions and awareness of emerging change.

The goal is not to predict the future with certainty. That is rarely possible. The goal is to create time: time to evaluate signals, time to develop options, and time to respond deliberately rather than react under pressure.

Organizations are often most vulnerable when they feel most secure. Those that thrive over the long term are willing to examine potential disruptions while they still have the flexibility and resources to act thoughtfully.

Peter Grimm
Managing Director, Strategy & Operations
Fahrenheit Advisors, a Smith+Howard company