A CIA veteran’s lessons for CEOs

September 14, 2012, 4:06 PM UTC

Henry Crumpton

FORTUNE — Ambassador Henry “Hank” Crumpton has had a long and distinguished career in the CIA’s Clandestine Service, having led U.S. efforts in Afghanistan immediately after September 11, and later as the Coordinator for Counter Terrorism at the Department of State. Now CEO of the strategic international advisory and business development firm, Crumpton Group LLC, Crumpton and his team work with global corporations advising CEOs and top executives on the political, security, and commercial dynamics in emerging and frontier markets.

His experiences, captured in his new book,
The Art of Intelligence: Lessons from a Life in the CIA’s Clandestine Service
have more than a few lessons for even seasoned overseas excutives.  Opportunity, he believes, in emerging and frontier markets have never been greater – for those who are prepared.

Crumpton spoke with Fortune about his work at the CIA, how executives most often fail in emerging markets, and why CEOs should always travel with duct tape. Below is an edited transcript.

What are you finding to be the biggest differences being an entrepreneur from being in the clandestine services?

The differences are rooted in missions, authorities, and consequences. Unlike government, in the private sector profit is essential and, for some, the most important objective. While nothing can ever replace the sense of CIA mission, I learned that as an entrepreneur I can and should develop important missions that transcend profit. This was important for my partners, employees, clients, and certainly for me.

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We help clients bring great products, energy, infrastructure, financial services, and health care to emerging markets. We help clients manage risk in challenging environments. And our small firm provides good jobs. In other words, we make a positive difference in people’s lives. When starting our company, I underestimated the non-monetary value of these private sector missions and the accompanying sense of satisfaction.

Your career spanned historic disruptions – in the kinds of enemies we face, in the way governments interact (internally and abroad), and in technology. As you reflect about that both in government and in what you see with your clients today, what are the most central take aways?

The most important change on the global security and business stage is the empowerment of the individual and their ability to have inexpensive, exponential impact through technology and collaboration. This revolutionary development has led to an unprecedented shift in relationships, with a degree of asymmetric power never seen in the history of human conflict or commerce. There are micro actors with macro impact operating on a global landscape and they constantly challenge the status quo, and this trend is accelerating.

On 9/11, 19 terrorists armed with box cutters somehow compelled the United Sates to spend more than a trillion dollars in military response – that’s sadly ridiculous. An undergraduate student named Zuckerberg built a global network of almost a billion people, Facebook, in just a few years – that’s amazing.

These examples, one horrific and the other admirable, challenge nation states and business power structures in ways never before considered.

In these shifts, how do even experienced executives in emerging markets most often fail?

Firstly, CEOs (both at home and abroad) often think that security issues are the problem of the IT department, but the biggest lesson that I learned in terms of information security is that it is not just the hardware and software. People determine the degrees of security and people protect or compromise these systems. As a CIA operations officer, I breached adversary’s information systems with the help of those with access to these systems. CEOs have a responsibility to lead their people by example and ignoring or delegating information security to some functional silo, when it is about people across the organization, is a failure of leadership.

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Secondly, CEOs often underestimate the complexity technology has introduced to their understanding of the unique cultural and societal differences on the ground.  Executives need to acknowledge what I call an “expanding universe of ignorance” — our individual brains long ago lost the race to know it all, and the gap is growing.

To find new ways to improve their understanding and decision-making executives require a mix of humility, intellectual hunger, and unrelenting networked collaboration. No one entity has all the answers. Each day there is more and more information that can impact decisions, but not all CEOs know how to deal with this growing tsunami of data. We advise our clients to first determine what information is relevant to their objectives, and then sharply define their business intelligence requirements.

How they collect and analyze this intelligence of external variables depends on their industry, geography, and strategic objectives. But there are some characteristics that always apply:  the intelligence must be relevant, accurate, timely, and actionable. Intelligence should be able to inform decisions. CEOs should demand this. Evolving global markets require it.

Finally, executives in all global markets – not just emerging ones – need to acknowledge that there will be inevitable shocks to the business, which means CEOs must build in contingency planning, from basic systems that support the health/security of employees in any country to investments that build strong, resilient alliances that endure during times of stress.

What do you mean by “resilient alliances?”

At the most basic level, the CEOs who seek external business intelligence only from internal company sources, embrace hard-line and inflexible hierarchies, and place profit above all else – their path will be even more perilous, perhaps leading to existential crisis. It is short term and really untenable in today’s environments.

Genuine commitment to understanding and working with the communities on the ground – networks of alliances not only on how to do business, but to engage and be respectful to the communities there – makes all the difference in both the short and long runs. Like technology security, “corporate social responsibility” is not some functional office, but a necessary part of engagement in emerging countries throughout ones’ organization.

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Having lived in Africa for 10 years, I witnessed billions of dollars wasted of aid programs that never appreciated the importance of such engagement. As an example of what works and builds a sense of mutual trust, smart companies build basic skills education for prospective employees; this is not only invaluable to their investments but is a tangible manifestation of their commitment to the community at large. Other companies have provided off-grid energy generation for communities in areas of operation; this can improve security, increase communication, and boost education – all which also help the company.

Another essential and effective element of social responsibility rests in the empowerment of women whose role in long-term social development cannot be understated and will, in turn, create thriving middle class markets.

I’ve seen the failure to engage in the local communities cause business failure across every industry. Paradoxically, some of the new social media CEOs who understand networks and have grown global, some in the matter of months, often do not recognize the need for local knowledge. What works in Palo Alto may not work in Lusaka.

I love some of the quotes you used at the beginning of your chapters. One Lincoln quote stood out in the context of engaging on the ground:  “I do not like that man. I must get to know him better.” What does that mean for executives? 

I cannot emphasize this enough. Executives need to meet a wide range of people – by the way especially not just other executives — and seek out those who challenge their assumptions, even those who hold adversarial views. This is especially relevant in emerging markets where interaction with diversified stakeholders can inform decisions, especially personnel decisions.  Ask locals what they think, what they need, and what they prefer. A firm’s local representative and local allies can determine success or failure in that market.

In my experience, so many businesses think the hard part is entering a market, but under-estimate the time and complexity of the follow-through. 

I see this regularly. The first requirement of intelligence and market entry is to think through:  What is the end-game? What are the exit strategies? What are the contingency plans? Many CEOs demonstrate an unrelenting optimism, because by definition they have succeeded, and you must imagine big success to ever get there. But, success can have many off ramps. CEOs sometimes think more about going faster and farther than exit plans, and sometimes speed and distance comes at a cost.

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To acquire an empathetic understanding of allies, vendors, and customers, a CEO must share their environment and experience. That’s hard to do in a boardroom or on a corporate jet. Empathy informs understanding which improves decisions. That is deep intelligence, something far more valuable than just data.

I learned repeatedly that self-awareness often comes from experiencing new environments and new people that challenge our paradigms of reality. This means getting out of our comfort zone, testing ourselves, reflecting upon our experiences, and following through with determined, deliberate practice that improves our mental habits and ultimately enables our ability to build alliances and beat the competition.

Another great quote you used in your book was from the Harvard economist, Thomas Schelling in reference to the Japanese Attack on Pearl Harbor:  “There is a tendency in our planning to confuse the unfamiliar with the improbable.”

The Schelling quote serves as a poignant reminder that we must constantly explore new terrain, so we can imagine and recognize the unfamiliar and thus be prepared for the improbable.   Risk comes in many forms, but usually the biggest risks involve surprise and shock.  Such events can challenge our decision making, whether it be the response to 9/11 or a CEO reacting to the loss of an employee in some disaster, a cyber attack, or a foreign joint venture partner defecting to a competitor.

Given the exponential growth of risk/opportunity variables and the concomitant complexity, CEOs must prepare for more of the unfamiliar and, sometimes, deal with what they had thought was improbable, perhaps impossible.

And, finally, in your book you noted that you never travelled without duct tape. Would you advise every CEO to do likewise? 

Yes, duct tape, safety pins, bandana, hand sanitizer, small first aid kit, penlight, a good book, pen/notebook, and always a contingency plan.

Christopher M. Schroeder
is a Washington, D.C. and New York-based angel investor and former CEO of the online content and social platform start-up healthcentral.com, which he sold last January. He is writing a book on innovation and start-ups in the Middle East.