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New Years Resolution Series: Perspective, not Precision

What a year 2009 was. As the US economy emerges from the worst recession in generations, how should strategy and competitive intelligence practitioners prepare to contribute to their company's growth and performance in the new year? While I'm not a big fan of new years resolutions, over the next few days I'll offer five ways you can improve your company's CI and competitive strategy capabilities in 2010. Here's number 1:

1. Commit to providing perspective, not precision. It is not the job of competitive intelligence to know, with three-decimal-place accuracy, competitors' market share, profitability, or cost structure. Nor is it the job of competitive strategy to tell the CEO that his company will achieve 12.46% CAGR growth over the next five years. It is our job to provide perspective on the types of competitive challenges and market opportunities likely to emerge in the months and years ahead that will directly impact the organization's growth strategy. Leave the quantitative precision for the guys in accounting. You should be speaking the language of strategic goals and objectives, competitive plausibilities, and future threats and opportunities.

Competitive Intelligence and the Balanced Scorecard Methodology

Popularized in the early 1990s by Robert Kaplan and David Norton, the Balanced Scorecard methodology (BSC) is a system of interdependent, strategically derived goals, measures, and activities that summarize a corporation, its strategy and its actions. Said another way, the BSC methodology is an integrative instrument for strategy execution comprised of a communication system, a measurement system, and a management system. The BSC helps an organization translate its often vague and easily misunderstood mission and vision statements into specific, results-oriented actions. Doing so engenders transparency, responsibility, and accountability within the organization with a view towards creating satisfied shareholders and customers, effective and efficient processes, and a motivated and engaged workforce aligned with the company’s strategic goals and objectives.

If one of the goals of a company’s competitive intelligence function is to inject intelligence into the strategic plans of the organization, it is important to position competitive intelligence as a critical component of the company’s balanced scorecard initiative. Because the initial stage of the BSC model requires that the organization identify specific strategies, measures of success, goals and targets, and activities required to reach those targets, positioning CI as an important component of organizational success is important.

For example, assume that an organization has identified four strategic goals: improving revenue mix, creating a “cutting edge” image for its customers, becoming the leader in industry research and development, and improving operational capabilities. In this organization, competitive intelligence can help evaluate competitor channel and promotion strategies, helping the organization optimize its revenue mix. CI can also help monitor and evaluate customer perceptions of the company compared to its competition, as well as identify competitor product pipelines so that the firm keeps on top of competitive research developments. Finally, CI can also help the organization evaluate the production efficiencies of its competitors to help the company establish operational baselines.

Competitive intelligence frequently supports the development of strategy in an organization, but if management fails to realize that CI can help the organization achieve its strategic objectives, then the organization is only realizing half the potential value of competitive intelligence. By integrating CI findings and outputs into the application of the BSC methodology can forge a stronger link between CI and the strategic success of the company. The Balanced Scorecard methodology thus provides a framework to measure the contribution and value of competitive intelligence in not just helping set strategy, but also from the company’s ability to meet specific strategic goals and objectives.

Achieving Actionability: How to Get Decision-Makers to Pay Attention to Intelligence

One of the greatest frustrations that routinely plague competitive intelligence analysts and managers is to deliver world-class actionable intelligence -- with clear strategic and decision impact to the company -- only to have management ignore it. Where does the problem lie: with the quality of the intelligence, or with how managers perceive it? The truth is, both parties share in the responsibility of ensuring that credible intelligence is recognized and used.

First, let's revisit what is meant by the term "actionable intelligence." This term has become so axiomatic that we may have lost sight of its true meaning. In his book Good to Great, author Jim Collins notes that companies that consistently out-performed their peers did not necessarily have access to more, or better, information than their comparison companies. Instead, Collins notes, "not in better information, but in turning information into information that cannot be ignored." Now, Good to Great has come under some criticism of late as many of his "great" companies today are sucking wind. Still, the notion of "information that cannot be ignored" strikes me as a good benchmark against which to judge actionability. (Collins, Jim. Good to Great: Why Some Companies Make the Leap, and Others Don't. Collins, October 2001, p. 79)

Why, then, does intelligence regularly seem to miss the mark? I believe there are three forces at work.

First, decision-makers may have the wrong expectations for intelligence. For competitive intelligence to be useful in setting strategy, it needs to be anticipatory. That is, good intelligence should provide a reasoned judgment about future competitor, market, and/or industry behavior. Because predicting the future is impossible, managers have to take actions based on intelligence that is, by definition, speculative and subjective. For many managers, making decisions on anything less than hard facts is extremely difficult.

Second, I would contend that most intelligence deliverables that managers receive are heavy on facts and data, and light on insights and judgments. Despite their best intentions, competitive analysts have a hard time providing their opinions, assessments, and conclusions about the data they are examining. There are several reasons. Perhaps they have not been trained to do so, or the company does not value well-reasoned opinions, or they are unwilling to open themselves to criticism and disagreement. Whatever the explanation, intelligence that does not speculate about likely future conditions is bound to be ignored.

Last, even good intelligence is often communicated poorly. Business analysts have been conditioned to produce and present long, heavy reports that present fact after fact, and to deliver any conclusions or opinions only at the end of the report or presentation. Time-pressed managers simply do not have the luxury of plodding through page after page, or slide after slide, of graphs, figures, and quotes to reach a conclusion. If a piece of competitive analysis does not provide the chief conclusion and implications for the company right up front, chances are decision-makers will stop reading or listening before the analyst can get to the grand conclusion.

What, then, can CI analysts and company decision-makers do to increase the chances that intelligence will be taken into consideration and applied to corporate actions? First, senior executives and intelligence practitioners must together come to agreement on the pressing issues facing the company for which sound, forward-looking intelligence is necessary. This requires not only coming up with a list of key intelligence topics that reflect external business conditions, but also understanding the accountabilities, corporate culture, and personal objectives that influence how each senior executive makes decisions.

Second, intelligence analysts must address intelligence issues with a higher degree of rigor. This requires regularly using proven analytic methodologies to help move from summarizing facts and data to expressing judgments, opinions, and implications. Over time, this means that the portion of a competitive intelligence product devoted to facts and figures should diminish, while the share devoted to insights and judgments should increase.

Last, intelligence must be delivered more effectively. Analysts must be trained in expository writing techniques that clearly state conclusions up front, and support them with carefully selected facts and evidence that lend support to analytic reasoning. Intelligence reports and briefings must be short, to the point, and open to disagreement and debate. Taking the safe road and avoiding controversy in intelligence deliverables serves neither managers nor analysts well.

Achieving true actionability -- or providing managers with information that cannot be ignored -- is not far out of reach. If competitive intelligence practitioners identify or anticipate management's needs, present plausible judgments and assessments clearly, and offer decision options and alternatives, then I believe executives will listen, and will find it hard to ignore intelligence when setting competitive strategy.

Presenting Intelligence Findings

The hallmark of an effective corporate competitive intelligence function is how it communicates important CI findings to company decision-makers. There are a variety of ways to communicate key intelligence findings: newsletters, ad hoc reports, email, posts to a CI portal, to name a few. But, one of the most effective methods is a scheduled executive briefing.

Executive briefings offer the opportunity to engage your company's decision-makers on the most pressing intelligence issues. You can also observe body language, hear discussions among executives about the findings you are presenting, and receive questions directly from internal CI clients. Sadly, few competitive intelligence functions include executive briefings among their CI deliverables.

Why? For many functions, gaining access to executives is difficult. However, if competitive intelligence is to serve as a decision-support function, instead of just another research function, direct access to its internal clients is critical. Gaining this access won't happen overnight. CI functions need to demonstrate a history of offering compelling and provocative findings and assessments that directly address executives' concerns and issues. Once the CI function has done that, asking for time on meeting agendas becomes pretty straightforward.

Another reason why executive briefings are a relatively rare CI deliverable is because many CI professionals are not effective presenters. I have seen way too many CI briefings run too long, fail to coalesce findings into a few key themes, and mis-use PowerPoint and other presentation tools. Executive briefings first and foremost need to be short: CI practitioners must be able to condense their most critical findings into a short briefing.

This means potentially leaving considerable details out of the presentation. This is hard for many CI professionals to do. Because they have worked so hard on research and information gathering, they feel compelled to include every fact and figure they have unearthed. The reality is that there is a law of diminishing returns. Two or three pieces of evidence to support any finding is plenty; anything more actually may detract from the strength of the argument.

Executive intelligence briefings must be crisp, dynamic and to the point. PowerPoint slides should be minimalist -- few words, lots of graphics, and compelling. In an executive briefing, the CI professional, not the slide deck, should be the focus of interest. Executives want to listen to you, not read slides. The majority of the intelligence content must be in the presentation, not on in slides.

To that end, I want to share venture capitalist Guy Kawasaki's 10-20-30 rule for PowerPoint presentations. Kawasaki is a managing director of Garage Technology Ventures, an early-stage venture capital firm, and a columnist for Entrepreneur Magazine. Although his 10-20-30 rule was developed for VC presentations, I think it applies to CI executive briefings as well.

Leaping Over the Intelligence - Decision Gap

We all know, intuitively, that competitive intelligence isn’t really intelligence unless it is actionable. If a piece of intelligence doesn’t compel a decision-maker to take action, we are told, it is just another piece of information. But what constitutes action? And, what is the process by which competitive intelligence prompts a decision or strategy that is implemented and subsequently managed? Frequently, even companies that possess world-class competitive intelligence functions struggle with turning credible, insightful, actionable intelligence into a clear strategy, decision, or course of action.

Why is good intelligence often not incorporated into strategic plans or operational decisions? The problem, I believe, rests with reluctance among management to clearly define the role it expects intelligence to play in company decision-making, to define key decision components that are influenced by intelligence, and to track progress against them.

Too often, strategic planning is an exercise in reaffirming what is known or comfortable, or what has worked in the past. Similarly, decision implementation is often an exercise in executing what has worked before. In today's uncertainty, companies are hard-pressed to take new, bold, and decisive action even when all the intelligence “signals” point to the wisdom of pursuing a new course of action. To understand how competitive intelligence can improve both sides of this problem, we need to consider each separately.

CI and Strategic Planning

The successful integration of competitive intelligence into a company’s strategic planning process requires that strategic planning be based on a well-defined framework that clearly defines the role competitive intelligence is expected to play. It doesn’t matter whether the framework is based on popular techniques like scenario planning, is based on ones invented and perfected by your company, or has a particular objective – such as growth – in mind. With a well-defined planning framework, it is easier to define CI’s specific role, and how CI will be considered when developing and implementing the strategy.

What if your company has no identifiable planning framework, or no strategic planning process at all? In these cases, CI can do little more than provide general industry or competitor assessments in the hope they will generate questions that result in a more disciplined approach to strategic development.

CI and Decision Execution

Frequently, competitive intelligence points to the need for a specific decision that is not necessarily a part of a pre-conceived strategic plan. Intelligence early warning, for instance, that describes new competitive developments not directly addressed during the strategic planning process can require managers to make decisions “off plan,” and do so quickly.

In these cases, it is important for the CI manager to identify an issue champion. This is an individual in a decision-making or leadership role whose corporate function is most impacted by the intelligence. For the issue champion to successfully act on new intelligence, the CI manager must brief him or her on the content of the intelligence, and discuss the implications for the company and for his or her function directly. Sometimes, the prospective issue champion will defer to someone else, or include others in the initial discussion about potential decision options once the intelligence is delivered.

The appointment of the issue champion is hardly based on a formal process. The means for identifying the issue champion will differ from issue to issue, and is based on candid conversations between the competitive intelligence manager and the intelligence function’s consumers. One thing, however, is certain. The issue champion must have the authority to determine a course of action based on the intelligence, marshal and manage appropriate resources for decision implementation, and then oversee its execution.

In sum, effective decision implementation following the delivery of an intelligence report requires a sound framework for strategic planning, and the appointment of a decision-level issue champion charged with the task of marshaling the resources for effective decision execution. Simply preparing good intelligence reports is not enough; companies must pay close attention to particular strategic planning frameworks, and how to oversee decision execution over an extended period of time.

An Interview with the US National Intelligence Officer for Warning

Kenneth Knight describes his job as helping the president of the United States and his administration "avoid surprise." As the national intelligence officer for warning, Knight oversees a small team of analysts who serve as an institutionalized safeguard against risk-monitoring and challenging the analyses and assumptions of the broader intelligence community. In this interview, he discusses evaluating threats, overcoming cognitive biases, and constructing scenarios -- challenges familiar to most private-sector strategists. McKinsey's Drew Erdmann and Lenny Mendonca spoke with Knight in Washington, DC, in June 2009.

Outward Insights' business early warning services are modeled on many of the same techniques as used by the US Intelligence Community, including scenario building, indicator definition, and the proactive communication of warning assessments.