The phrase “situational awareness” is most often used in reference to military or paramilitary engagements or when people are in a dangerous environment. It means having a critical awareness of the surrounding environment and using that information to make decisions that could have life or death consequences.

In most businesses, you won’t be forced into making life or death decisions, but you may experience times when the success or failure for your products or services hinge on those decisions.

In the mega-hit film, The Borne Identity, the main character (played by Matt Damen) has amnesia and can’t remember his name, where he’s from, or why his safe deposit box has stacks of cash, six passports, and a gun, but he says, “I can tell you the license plate numbers of all six cars outside, I can tell you our waitress is left-handed, and the guy sitting up at the counter weighs 215 pounds and knows how to handle himself.” That’s situational awareness.

It is important for leaders to develop a similar situational awareness, a knowing and an understanding of current operations and environment in order to make day-to-day decisions without negatively impacting their teams or their business.

Situational awareness means knowing where you are, what the current market is doing, what your competitors are doing, and what your customers want or need. It’s knowing where you are financially in your business (cash flow, profit margins, etc.) and where you want to be.

Every decision has consequences. Being able to think long-term is crucial. You need the ability to take stock of your current situation, understand the circumstances that got you there or the environment that made it possible. As a leader, you need to know the strengths and abilities within your company that can help you overcome the situation, take advantage of opportunities as they present themselves, and know what you need to do to get back on track.

Situational awareness can be learned through practice. Study your markets, know your teams and your competitors. Understand your strengths, weaknesses, opportunities, and threats (SWOT analysis). Prepare your leadership team by asking “What if” questions and talking through various business scenarios. Knowing how you will respond to situations as they arise is good. Being able to read the environment to predict threats and opportunities is what sets the great leaders apart.