The Overton Window, Social Capital & Risk Management

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“Only a crisis - actual or perceived - produces real change.  When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”[i]  Milton Friedman

Being right isn’t always enough.  Real change usually happens only when a crisis or major event forces people to reconsider their assumptions about the world. While Friedman was referring to economists influencing national policy, the same applies to Risk teams challenging organisations.  As with economists, Risk teams look across decision-making silos, are preoccupied with “edge cases” and atypical scenarios, and seek out weaknesses in decision-making frameworks. 

These moments of openness are “plastic moments” – periods where an organisation becomes willing to rethink its strategy, central business assumptions or behaviours.  Crises can create them, but so can leadership changes, strategic reviews, near misses, or new technologies. 

Alinksky’s three act play

Risk teams can engineer plastic moments through careful narrative building. Saul Alinksy, a community organiser, described successful social movements as following a three-act structure: “The first act introduces the character and the plot, in the second act the plot and characters developed as the play strives to hold the audience’s attention.  In the final act good and evil have their dramatic confrontation and resolution.”[ii] 

Risk teams rarely deal with good versus evil, but, as with social activists, if they try to jump straight to Act 3 they often face resistance.  Alinksy put it more poetically: “confrontation for confrontation’s sake - a flare up and back to darkness.”[iii]

When risks are spotted early enough, Risk teams can guide decision-makers through Acts 1 and 2 by raising awareness and building momentum.  However, when an issue is discovered too late, or if a critical tipping point is close or has already passed, Risk teams often face two bad options:

• Push hard and be ignored, or

• Watch events unfold from the sidelines.

The good news is that there is a middle ground between being all-prescient and impotent: cataloguing an organisation’s Overton Window and, where it has become too constrictive, shifting it before the crisis occurs.

What is the Overton Window?

The Overton Window refers to the range of ideas that are socially acceptable to publicly discuss. Joseph Overton theorised that an idea’s political viability depended mainly on whether it fell within this window.  Where an idea sits outside the window, politicians need to first propose a less extreme idea that sits on the window's edge. Once that gains acceptance, the window shifts.

Organisations also have an Overton Window setting out what ideas are acceptable for discussion, investigation and challenge.  Where an organisation's operating model works well, and the wider external environment is stable, relatively narrow Overton Windows can be Good Things: they stop inefficient, distracting discussions and enable management to focus on the most pressing items.  However, in times of change, or where there are fundamental issues with the operating model, the Overton Window can become too constrictive. 

Example 1: Blockbuster’s Overton Window

When David Cook founded Blockbuster as a VHS rental business 1985, thinking about “future digital distribution” would have been pointless.  However, by 2001, DVD players outsold VCRs in the US, just 6 years after they were invented.  With hindsight, at some point between 1985 and 2001, Blockbuster’s Overton Window should have stretched to include considering the impact of alternative media types on its strategic viability[iv].

An Overton Window can become overly constricted by a failure of imagination.  This can also happen because the implications of considering ideas outside the window's bounds are too uncomfortable .  DVDs didn’t just threaten the value of Blockbuster’s VHS inventory, they threatened the ongoing viability of it’s physical store business model, as DVDs were light enough to be posted. The postal rental model pioneered by LoveFilm and Netflix also threatened Blockbuster’s late fee revenue stream, which represented a significant portion of its profitability.

Example 2: Madoff's Ponzie Scheme

The most famous corporate frauds often seem obvious in hindsight and, on the face of it, it is hard to understand how they weren’t uncovered earlier.  Bernie Madoff built the largest Ponzi scheme in history.  When the fraud was finally uncovered it surprised his employees, and even his own family.

Financial analyst Harry Markopolos had warned the SEC in 1999 that Madoff’s returns were mathematically impossible. In 2001 Markopolos demonstrated that Madoff would have had to buy more options on the Chicago Exchange than actually existed.  Despite this, the SEC found the idea of a respected industry figure committing a fraud on this scale too extreme to seriously consider.  It was only in 2008, after many more analysts had added their support to Markopolos’ conclusions, that the SEC’s Overton Window shifted sufficiently to include a consideration of criminal activity.

This aligns with Alinsky’s three-act play model.  Markopolos provided the first act, introducing the character.  The second act involved a greater cast of analysts generating a stronger consensus that something fishy was going on.  The third act resulted in the SEC action that brought the empire of fraud crashing down.

Overton Window within Organisations

Blockbuster and Madoff are extreme examples, but a similar effect can be seen within organisations. 

Consider a revenue producer who beats their plan for the first three years and then has two years of losses.  The goodwill generated from their early years’ success often means that it is more difficult to gain acceptance for challenging the fundamentals of their business model than for someone who has alternated between profit and loss over the same period.  The acceptance of the legitimacy of challenge will vary by individual within an organisation, and is often inversely correlated to the level of social capital maintained by that individual or team (more on this point below).

Overton Windows vary over time.  When a transformational project is initiated, the Overton Window is broad: the future is not yet set, the project design and purpose is still up for debate.  As key goals are agreed and the project design is delivered the Overton Window starts to shrink.  Once the project is delivered the Overton Window often moves close to zero – no one within the organisation wants to entertain the idea that elements of the project should be rethought or redesigned.  Over time the Overton Window will start to gradually expand again until, often years later, the organisation will once again tolerate real challenge to the justification, scope, process or outcome of the project.

Social Capital & Status

Social capital refers to the personal networks and goodwill people hold.  Individuals with high social capital are more effective at advancing their goals.  Risk teams must account for this, because challenging powerful stakeholders at the wrong moment can reduce the likelihood that challenge will be constructively engaged.  Further, failed challenge can reduce the Risk team’s credibility.

Social capital helps individuals gain influence by:

• Drawing attention to their ideas,

• Encouraging more positive engagement with those ideas, and

• Making it easier to build alliances within the organisation.

But – and this is key – social capital corresponds to organisational power only where an individual’s actions fall within the organisation’s Overton Window. A study looking at the importance of the “status”, or social capital, of politicians in the US House of Representatives demonstrates this point.  It found that “status converts into greater influence only for actors whose ideology falls within what is considered mainstream within the organisation.  The more an actor’s ideology deviates from mainstream ideology, the less her status translates into increased organisational influence”[v]. 

How this all relates to Risk strategy

There are two main parts to Risk teams’ challenge activity: the visible and the invisible.  Visible challenge is about highlighting risks to the organisation that it is ready to hear about, using accepted tools and frameworks.  This aligns with Act 2 of Alinksky's play - developing character and plot.

Invisible challenge is about identifying where the Overton Window is too narrow, and building a strategy to widen it.  This is critical when the risks are likely to materialise but the organisation isn't ready to acknowledge them. It's also important when Social Capital is concentrated in ways that limit the Risk team's ability to challenge effectively. This aligns with Act 1 of Alinksy's play, introducing the characters.

When developing scenarios, Risk teams should prioritise viable ideas that fall outside an organisation's Overton Window as it will be unlikely to be considered during decision-making by the management team.

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Hopefully that has sparked some ideas.  I am hoping to start a discussion with this blog.  If you find it interesting, please share! If you would like to contribute or share feedback, please comment below or message me on LinkedIn!

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[i] Monetary Policy: Theory and Practice, Journal of Money, Credit and Banking Vol. 14, No. 1

[ii] RULES FOR RADICALS A Practical Primer for Realistic Radicals, 1989, SAUL D. ALINSKY, 0-679-72113-4

[iii] RULES FOR RADICALS A Practical Primer for Realistic Radicals, 1989, SAUL D. ALINSKY, 0-679-72113-4

[iv] https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/

[v] Collet, F., Carnabuci, G., Ertug, G., & Zou, T. (2022). Ideological Boundaries of Status Advantages: Legislative Effectiveness in the United States House of Representatives. Organization Studies, 43(1), 35-57. https://doi.org/10.1177/0170840620907201