Outward Insights Competitive Intelligence Web Log

Our Blog Has Moved!

2010-01-19T11:14:00.000-08:00

The Outward Insights blog has been up and running for about two years, and we have been very pleased with the level of engagement and activity with our readers. As we continue to improve the quality and provocativeness of the blog, we have moved it to a new platform to allow for even more engagement and interaction.

Please visit www.outwardinsights.wordpress.com to see our latest posts and to continue to participate in the conversation!

New Years Resolution Series: Perspective, not Precision

2010-01-08T10:12:00.000-08:00

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:

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

2009-11-04T07:35:00.001-08:00

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

2009-10-15T12:09:00.000-07:00

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

2009-09-29T07:57:00.000-07:00

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

2009-09-21T11:30:00.001-07:00

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

2009-09-16T12:34:00.000-07:00

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.

A New Paradigm for Competitive Intelligence Training?

2009-08-05T10:41:00.000-07:00

Within the past month, two clients have asked me to help them develop training in competitive intelligence for non-CI professionals. Neither of these companies manages a full-time, centralized CI function. Instead, each company's strategic marketing function wants to instill product, brand, and sales managers with core CI skills to enhance their job performance. These companies may, or may not, develop a dedicated CI team; for now, building CI-related skills and competencies among a broader community is more important.

They envision rolling out a series of short, "bite-sized" training modules on various aspects of competitive intelligence (competitor hypothesis generation, human-source network building, intelligence analysis), in some cases as part of a larger, internal training operation. The training would be delivered on-line, via WebEx or Live Meeting or some similar platform, and would include "homework" assignments that will require attendees to apply course material to their specific functions and needs.

The CI training needs of these two companies is emblematic of a broader trend: the decentralization and deprofessionalization of competitive intelligence. For many organizations, especially decentralized, multi-business-line companies, there is more value to be derived from embedding CI skills in other, more well established corporate functions, than from building a dedicated, professional CI program.

Is this wise? Does it further the promotion of CI, or limit it? For me, this deprofessionalization of CI may be a good thing. For one, it brings CI to the masses; there's no reason why professionals in functions related to competitive intelligence can't or shouldn't selectively apply core CI competencies to what they do, especially if doing so enhances decision-making at a variety of levels. It also engages more and more professionals in the conduct of competitive intelligence, potentially bolstering membership in the Society of Competitive Intelligence Professionals (SCIP) and enhancing the profession by opening it to new ways of doing business. One downside for SCIP, however, is that this new corporate approach to CI may make its proposed certification program meaningless.

To be sure, these decentralized approaches to CI will require stronger coordination and management of intelligence practices, the development of strong communities of practice, and other structural elements, to make it work. But, if more and more people are practicing the craft of intelligence, I see more upside than downside.

Separating CI From the Sleaze

2009-07-31T05:05:00.000-07:00

According to a recent article in USA Today, incidents of corporate espionage are on the increase, thanks to cheap, easy-to-use technology devices and increasing numbers of displaced and disgruntled workers due to the recession.

"Corporate espionage using very simple tactics — much of it carried out by trusted insiders, familiar business acquaintances, even janitors — is surging. That's because businesses large and small are collecting and storing more data than ever before. What's more, companies are blithely allowing broad access to this data via nifty Internet services and cool digital devices."

Meanwhile, the proper use of business and competitive intelligence by US companies is also on the increase. In a recent Outward Insights survey, more than seven out of 10 companies surveyed claimed to have an organized and systematic way to collect, analyze, and use competitive intelligence, a seven percent increase over results from a similar survey we conducted in 2005.

These two facts are completely unrelated to each other.

"Corporate espionage" will be with us in good times and bad. Any employee who feels she is "getting her due" by taking sensitive customer lists along after being laid off, or any sales rep who feels he is one-upping the competition by misrepresenting himself to a competitor at an industry trade show just to get information, are not emblematic of the thousands of companies that are practicing legal, ethical and effective competitive intelligence. These acts of lying and stealing are almost always one-off acts committed by ignorant people in the belief that they are securing valuable competitive knowledge, or exacting revenge on an employer who did them wrong.

And in most cases, the individuals committing these acts wind up unemployed, unemployable, or prosecuted. An individual cited in the USA Today piece who had infiltrated a competitor's email accounts was arrested. He subsequently pleaded guilty to felony wiretapping for tampering with the competitor's e-mail. He was sentenced last month to three months probation and ordered to undergo counseling. "There was nothing sophisticated about me getting into their e-mail," he said in an interview. "Honestly, I had no idea that it was illegal."

Individuals committing such foolish acts rarely are working within, or on behalf of, corporate competitive intelligence programs. Indeed, anecdotal evidence suggests that companies managing formal competitive intelligence programs are less likely to behave unethically, as these companies make clear what intelligence activities are acceptable and which ones are not.

The competitive intelligence industry has made great strides over the years disassociating itself from the sleaze of trade secret theft. But, occasional reminders are necessary that there is a stark difference between corporate espionage and competitive intelligence. The latter is an accepted and necessary business function; the former is just utter stupidity.

The Next Internet Revolution Isn't What You Think

2009-07-21T13:06:00.000-07:00

Ask any automobile dealer, insurance broker, or retail store manager what has been the single greatest threat to their margins and the answer will most assuredly come back: the Internet. The greater transparency of information and competition engendered by the Internet has transformed some industries for the better (who actually still goes to their local bank branch?), while leaving others in tatters (when was the last time you booked a vacation through a travel agent?).

But just as the dawning of the 21st century saw the Internet dramatically lower, and in some cases dismantle, traditional barriers to entry in a variety of industries, as this decade comes to a close, a new generation of web-technologies threaten to shake-up and squeeze yet another industry: enterprise software.

By now, everyone has heard of ‘cloud’ computing, a concept based upon the conceit that our work need not be tethered to an individual computer or operating system when a universally accepted web-standard allows otherwise. And while many would argue that the Cloud is the future of computing (Google has even recently announced a browser-based operating system called ‘Chrome’ that presumably will support accessing applications in the Cloud), Cloud computing‘s ascension as a feasible alternative will likely be delayed until cheap, high-speed, internet access is as ubiquitous as running water and electricity. Until that time, broad proliferation of Cloud computing will remain a dream.

So if Cloud computing isn’t the software revolution of which we speak, what is? Simply put, it is the advent of sophisticated, free or nearly free web-based tools that can emulate, and often exceed, the features provided by large, often bloated, certainly expensive, software platforms. The maturation of the internet has resulted in free and cheap tools so powerful that many individuals and organizations are foregoing spending tens or hundreds of thousands of dollars per year on platforms designed to achieve largely the same results as free or inexpensive, Internet-based applications. Surprised? You shouldn’t be; if there is one thing history has taught us about the internet, it’s that it dramatically drives down consumers’ costs.

The availability of free or low-cost web-based software tools are now widely available for competitive intelligence applications. When organizations evaluate traditional competitive intelligence software packages (which can run into the hundreds of thousands of dollars), they typically have many overlapping needs including: article summarization, automated competitor website tracking, government regulation tracking, team-based or work-group portals for sharing intelligence analysis and notes, CI workflow, and keyword search trend analysis.

While most CI software vendors can address most, if not all of these needs, few vendors are able to deliver every capability well. In software development, just as anything else, trade-offs are necessary and resources are often allocated towards those features that are most marketable, not necessarily those that are most useful.

That said, with a little research, CI professionals can likely piece together a suite of stand-alone, browser-based, platform-agnostic products that can often be easily integrated into existing workflows that address most, if not all, of their software needs. Indeed, we’ve found that nearly every capability that is offered by the large CI software vendors (including those functionalities listed above) can be easily and cheaply replicated (and in some cases even surpassed) by free or low-cost software offered online.

Granted, this method won’t be suitable for every organization, and it does come with its own drawbacks (such as lack of integration), but for the right CI group on a budget, free and nearly-free online applications can often replicate the features of larger, pricier options, providing an adequate substitute at a fraction of the cost.

Which is the Better Strategy?

2009-07-08T17:13:00.000-07:00

According to the New York Times, sales of GPS Navigation Systems -- devices that mount to an automobile dashboard or windshield that tap the Global Positioning System of satellites to determine directions and provide audio turn-by-turn directions and other features -- are on the decline as more smartphones are equipped with GPS capabilities (“Sending GPS Devices the Way of the Tape Deck?” July 7, 2009). Apple’s iPhone, for instance, comes with a map application that uses the phone’s GPS capabilities to do largely the same thing as larger, and often pricier, navigation systems.

Indeed, more than 40 percent of all smartphone owners use their devices to get turn-by-turn directions, according to Compete, a web analytics firm. For iPhone users, the figure is higher at more than 80 percent. Shipments of smartphones in North America are expected to grow by 25 percent this year, with more than 80 percent of them equipped with GPS, according to ABI Research.

Not surprisingly, sales of traditional GPS units from companies like TomTom, Garmin, and Magellan have fallen sharply. TomTom reports that it shipped 29 percent fewer GPS units in the first quarter compared with the same period in 2008. Garmin said that unit sales fell 13 percent in the first quarter compared with the previous year.

Garmin and TomTom, the two leaders in GPS navigation systems, have adopted radically different strategies to deal with this competitive threat. TomTom has announced plans to offer a portable navigation application for the iPhone that would include turn-by-turn directions and audio prompts. Unlike existing GPS apps for the iPhone, TomTom intends to charge a one-time flat fee rather than require users to pay a monthly subscription fee, according to the Times. Doing so makes TomTom available across different platforms, extending the product’s reach.

Garmin, meanwhile, has plans to develop and launch its own combination navigational device and cellphone, called the Nuviphone, later this year. It essentially intends to turn its navigation system into a mobile phone, with sophisticated navigation features that should far outpace current smartphone map applications. In doing so, it will leverage its expertise at developing, selling, and maintaining devices.

Which is the better strategy? On what assumptions do you believe each company’s strategies are based? What obstacles might each encounter as it attempts to respond to the decline in its core business? We’d love to hear your thoughts.

Don't Let The Recovery Catch You By Surprise

2009-06-26T13:15:00.000-07:00

It might be hard to imagine now, but a recovery will follow the recession in which our economy has been mired for the past 18 months. And, just like the onset and the severity of the recession caught many business leaders by surprise, so too will the extent, nature, and pace of the recovery. Is your business prepared?

It is impossible to predict the future, and any business that sets its strategy on a single vision of future market conditions knows one thing: that strategy will not withstand the uncertainty inherent in the future, because the hoped-for conditions will not materialize in the ways your company wants them to. Trying to predict precisely when the economic recovery will begin, how resilient it will be, and how competitors, customers, and other players will behave when it starts is foolish. A scenario planning mindset to the recovery will most likely better
position your company to benefit when it occurs.

Scenario-based strategic planning is a tool that enables organizations to create strategies by considering multiple plausible future environments in which the organization could be forced to participate. It operates under the premise that the future is unknowable and unpredictable, and setting strategy for a single-point vision of a “desired” future is risky. Doing so locks a company into pursuing a set of goals and objectives that may be out of sync with future conditions, and hampers a company’s ability to adjust to future market realities. Fundamental questions surround the nature of the economic recovery, and multiple answers exist to each of
them, underscoring the need for strategic resiliency and flexibility that a scenario-based approach can provide. For instance:

Will consumer attitudes toward thrift remain post-recession, or will consumers revert to the mass consumption lifestyles that characterized the 15 years before the recession?
Will long-term investment strategies become more risk-averse, or will investors assume the recession is a "once-in-a-lifetime" occurrence and quickly revert back to high-risk, high-reward strategies?
Will business trends that were in vogue before the recession, such as environmental sustainability and corporate social responsibility, return? Or, will companies shy away from activities they perceive as superfluous to their core business?

More broadly, how will your business even know when the recovery is in full force? The severity of the recession has led some economists to believe that the recovery, by necessity, will be long and slow, and that there will be several head-fake economic improvements that will not, in fact, represent an honest recovery. The prospects of a “W” shaped recovery could be very real; have you considered the implications of a second downturn to your business strategy?

Our scenario planning work at Outward Insights has recently confronted these and other questions, and has helped our clients prepare for a range of circumstances. For instance, a financial services industry client has explored the conditions that would suggest a consumer
and investment “return to normal” -- with pre-recession mindsets toward risk, consumption, and spending returning -- alongside scenarios that build a case for a lasting thrift mentality long after the recovery is in full swing. By strategizing for both circumstances, the firm is
discovering strategies resilient under both sets of conditions -- suggesting that they will work almost no matter how the future unfolds -- while also preparing contingency plans to be deployed once there is greater clarity as to actual future industry and economic developments.

Don’t be caught unprepared by the economic recovery. Employing scenario planning to set a post-recovery strategy now can make your company more well equipped to thrive when the economy improves.

Good Reasons to Survive

2009-05-27T17:30:00.000-07:00

Competitive intelligence functions are in a ﬁght for survival. While competitive intelligence has always seemed to require an above average dose of justification to top management, it is now in a life-or-death battle with other corporate functions for an increasingly limited pool of budget dollars.

Over the past several months, I’ve written about the need for CI functions to make fundamental changes to what they produce and how they operate so that the can demonstrate value and survive the economic crisis. This month, I want to highlight what a few corporate CI functions are doing to not only weather their organizations’ budget cuts, but to thrive and expand their impact. Most of the examples that follow are taken from a lively discussion currently underway in the CI social networking platform Ning (http://competitiveintelligence.ning.com).

First, ensure that competitive intelligence is embedded in multiple, critical business practices and operations. At one European-based multinational company, the competitive intelligence function is interlinked in several crucial business planning processes, including pricing programs, marketing planning, customer relationship management procedures, and the like. The company’s Key Intelligence Topics are defined by standard business planning processes and are integral to the company’s market monitoring and early warning systems. These CI activities have become so crucial, 93% of its users have said that they cannot do without them, according to an internal survey conducted by the CI team. The result? Despite a 30% head-count reduction in the Corporate Marketing Group, the CI function has experienced no staff reductions and no cuts to its six-ﬁgure budget.

Second, CI programs may have to temporarily suspend their focus on the long-term and shift attention to current needs. Just like there are no atheists in foxholes, there is no “long-term” in severe global recessions. One CI practitioner who contributed to the discussion described how he identified where current external uncertainties are the greatest, and intervened immediately. Doing so requires a high degree of ﬂexibility. For his CI function, identifying the most urgent, current needs has CI supporting pricing programs one day, and then supporting deliberations regarding a prospective M&A opportunity the next.

Third, CI needs to stay close to the company’s revenue stream and help management focus on serving existing customers. Cost cutting alone won’t help most companies weather the economic downturn; protection of the top line is critical. Two CI functions are helping their organizations manage the top line by helping protect and secure more revenue from existing customers. CI functions can do so by examining whether current customers and revenue sources are threatened by competitive or other external forces, and whether existing rivals have any immediate weaknesses that can be exploited in ways that capture revenue from customers.

Fourth, CI functions should reexamine the utility of their CI products in the eyes of their C-level consumers. If top-level CI users ﬁnd your existing deliverables too long, not actionable, or simply unusable, the perceived value of the entire CI function is damaged. I have a consumer products industry client that fortuitously transformed its CI reports from long, ponderous market studies to short, warning alerts that provide actionable insights on emerging competitive and industry trends. The CI function aggressively marketed these products to the C-suite and within a matter of weeks had the company’s entire strategic leadership team addicted to these reports.

The current economic crisis need not spell the automatic decline of competitive intelligence. The examples offered here illustrate opportunities for CI functions to not just survive but thrive, and emerge from the current turmoil even more integral to the success of their organizations.

Change and Innovation

2009-05-08T09:41:00.000-07:00

Innovation is a competitive advantage that even the worst economic conditions in decades can't take away. Want proof? Take a look at the movie theater industry. Pundits for years have predicted the death of movie theaters as they came under threat from cable movies on demand, Netflix, pay-per-view, and Apple TV.

However, the movie industry today is on a tear. Ticket sales this year are up 17.5 percent, to $1.7 billion, according to Media by Numbers, a box-office tracking company. And, this surge is not due just to increased ticket prices. Attendance has also jumped, by nearly 16 percent. If that pace continues through the year, it would amount to the biggest box-office increase in almost 20 years.

Movie theaters have been able to defy their own death predictions and thrive in a deep recession by installing stadium seating, high-quality sound systems, better food, and abundant parking. They are also renting out theaters for other uses, such as comedy clubs and major sporting events. Answering complaints about cell phones ringing during movies, the industry is also looking into cell phone jamming and emergency-call-only technologies.

Creativity and innovation are corporate assets that can't be taken away, either by competitors or tough economic conditions. You cannot hope to succeed without being open to change.

Is The CI Industry In A Rut?

2009-04-24T06:41:00.001-07:00

More than 500 CI professionals have gathered in Chicago for the 2009 Society of Competitive Intelligence Professionals Annual Conference and Exhibition. On the program are sessions on how to build a CI process, common analytic models, ethics -- the usual fare. Which begs the question, are we in a rut?

Earlier this year, a question was posted to an online competitive intelligence network asking this very question. Few participants in that discussion -- and at an "active dialog" session that I led yesterday at the SCIP09 conference -- could point to any new innovation in our field in the last 20 years.

Does that mean that innovation is not occurring, or that it is occurring but not being shared within the profession? In some sectors -- consumer products, for example -- CI practitioners seem more willing to share their new tools and techniques than others, such as pharmaceuticals. Different industry norms regarding the nature of competition, assumptions about how industry participants operate, and other factors seem to influence the openness of CI innovation.

Still, forums do exist where CI practitioners come together in small groups to learn from each other. Examples include the Conference Board's Competitive Intelligence Council, and the Intelligence Leadership Forum. The existence of these groups, and the experiences of many seasoned CI professionals, suggests that innovation is shared only among small, semi-formal networks, not in large conference sessions. To innovate, then, is to be a superior networker, making personal connections with other practitioners with whom you can share and learn innovative ideas and practices.

Still, after 20+ years, isn't there a need for some new innovation that would benefit the entire CI profession? The answer is yes. The holy grail of CI innovation, I believe, is in determining a method to accurately measure CI's value. Several sessions at this year's conference have addressed this, but the general consensus is that our profession does not have a credible methodology for communicating the quantitative value CI brings to an organization. Whoever can offer such a model will truly advance our profession's innovation.

Scenarios for the Legal Industry

2009-03-30T07:39:00.000-07:00

The 23rd Legal Marketing Association annual meeting begins April 1, 2009 at the Gaylord Conference Center on the Potomac. Conference attendees will be tweeting from the conference at #LMA. LMA has asked speakers to share some of their materials with those who will be following these tweets. Good idea! And so . . .

On Wednesday morning, April 1, 2009, Bill Fiora of Nixon Peabody, Ann Lee Gibson (of Ann Lee Gibson Consulting) and I (Ken Sawka of Outward Insights) will lead a three-hour workshop on scenario-based strategic planning for senior law firm marketing professionals. Below is a summary of four possible futures we have developed for participants' use during the session. Working in small groups, they will identify core and contingent strategies for success under the different scenarios and challenge their own and others' assumptions and strategies. In doing so, they will explore how scenario-based strategic planning enables organizations to develop strategies for future competitive success that start with the premise that the future is unknowable and unpredictable. Instead of basing strategy on a single, preferred vision of the future (which has a zero percent chance of actually coming true), scenario-based strategic planning enables organizations to explore multiple, plausible futures, and to set strategies that address numerous threats and opportunities.

Each of the following scenarios describes a possible future for the legal industry intersecting somewhere between two dimensions: (1) timing of economic recovery (early 2010 vs. 2011-12) and (2) legal services delivery models (aggregated vs. disaggregated). The scenarios are summarized below.

Note to workshop participants: You will receive and work with scenarios that are much more detailed than the following summaries.

Scenario #1 -- The Great Pretenders describes a world where economic recovery begins in early 2010, the earliest anyone now hopes for. Global M&A activity, one of the earliest indicators of the recovery, surges as market-leading companies and those with large cash reserves acquire competitors and suppliers weakened by the recession. The strong are eating the weak and getting even stronger.

In this world, law firm leaders feel they have made it through the tough times and look forward to life as they once knew it. The recession was tough, but it encouraged necessary discipline and weeded out the weak. 2010 promises to produce the most law firm mergers and acquisitions ever recorded.

Scenario #2 -- Shattered! describes a legal industry dramatically altered by a perfect storm of events that created a PR nightmare for BigLaw. In this possible future, the recession’s impacts on the legal industry pale in comparison to other events that also grabbed the public’s attention. Inside BigLaw, the survivors of the 2008-09 layoffs still suffer from depression and guilt. In 2009, a runaway bestseller and a summer HBO TV series set the stage for a Wall Street BigLaw disaster fueled by debauchery and hubris. One of America’s most respected law firms has been brought very low, rocking New York society and BigLaw to its core. Law firms may never be the same.

As a result, the legal industry is reversing its bigger-is-better trend. Dozens of start-up law firms, prospering mid-sized and regional firms, mega-networks of telecommuting lawyers, and new legal vendors leap into the breach. It’s possible the growing economic recovery will allow BigLaw to repair its embattled reputation and rule again, but one thing everybody understands is that for the first time in a long time BigLaw has many serious competitors.

Scenario #3 -- The Big Chill is a future where the hoped-for 2010 recovery has not appeared and does not seem imminent. All governments and economists now agree the recovery will not appear until 2011 or later. Federal stimulus plans have dramatically slowed home foreclosures, but failed to thaw banks’ lending practices. The only bright spot in the corporate legal services market comes from the huge corporate M&A deals being struck in pharma, transportation, real estate, and energy at enormous fire-sale prices.

Corporate legal clients have much smaller legal budgets, but still face an overwhelming burden of legal issues, including bankruptcy, financing, litigation, and regulatory changes. In response, all firms survive by cutting costs to the bone and learn to compete on price. The largest companies discover they have no energy to deal with scores of smaller firms. The exchange of large amounts of commodity work for law firms and the BigLaw promise of safety for corporations becomes the two-ingredient glue that keeps big companies with big law firms. It is a painful time, particularly for legal vendors. Competition becomes cut-throat, pitting firm against firm—and in a surprising twist, some firms against some clients.

Scenario #4 -- Davids vs. Goliaths sees corporate legal clients having a radically different response to the continuing economic deep freeze. In a world already full of risk, they see little extra risk in moving from one law firm to another. All relationships are up for grabs. Some clients cancel their convergence programs, turning to procurement agents or consultants to deliver the best combination of price and expertise on each matter.

The legal industry is rapidly disaggregating. The fiction that big firms could develop and benefit from economies of scale is now seen for the naked emperor it always was. In BigLaw, some of the biggest rainmakers decide they’d rather not share their pie, and form their own boutique firms. In fact, new firms of all kinds are sprouting up all over. Technology vendors reorganize to provide turnkey services and compete directly with firms. Many law firms outsource everything but their most core legal services. Clients are buying legal services directly from India and China. The only certainty is that this is a time for pragmatists, not purists. Everyone who hopes to survive this era is now brutally scrutinizing their beliefs, styles, processes, and goals.

Surprise: Strategic Planning's Achilles Heel

2009-03-17T11:38:00.000-07:00

Think of all the ways your company manages its internal information – sales forecasts, ERP systems, and so on. Now, think about the resources spent tracking external events. If your company is like most, it is spending a fraction of its time and effort on the external as it is on the internal. Yet, isn’t the greatest source of strategic surprise found in the events and conditions that lie beyond the corporate walls?

Strategy guru Peter Drucker once said, “ninety percent of the information used in organizations is internally focused and only ten percent is about the outside environment. This is exactly backwards. “ At the heart of Drucker’s comments is the notion of competitive surprise. By failing to monitor external information, companies raise the likelihood of being surprised by external developments.

Research conducted by the Wharton School of Business found that two characteristics of surprise affect companies’ responses: the source of the surprise and the company’s ability to react. The source of the surprise can be looked at in two ways – is it from unknown sources (for example, terrorism) or is it a familiar surprise, such as the timing of a recession? While known threats such as recessions can be anticipated better than sudden ones, successful companies are the ones that can adapt to both.

Surprise acts as a risk-multiplier. It’s bad enough for companies to be confronted with an external development that complicates their strategy. However, if companies at least have an indication that such developments could occur, they can focus on remediation. When such developments happen by surprise, the company’s ability to act in a thoughtful and effective way is compromised. Surprise takes what could be a manageable – though perhaps unpleasant – situation and makes it almost completely unmanageable.

Why do companies do such a poor job of keeping tabs on information that has the potential to cause severe strategic disruptions? I believe there are two causes.

First, companies have a hard time knowing what to monitor. Given the wide range of industry participants and conditions that can be at the root of external threats, firms struggle just determining what is significant. As a result, many companies attempt to monitor everything, and build elaborate “environmental scanning” systems that crumble under the weight of the mountains of information they accumulate.

Second, even if companies are able to isolate those external conditions that pose a threat, there are few effective means by which to monitor those conditions. News alerts and filters usually are not precise enough to capture information that is truly diagnostic for assessing a developing threat. At the same time, knowledge management efforts that attempt to encourage employees to share information and observations related to strategic threats have for the most part been a failure.

The solution, I believe, lies in a system that combines structured analysis of plausible threat scenarios with a simple and effective approach to information monitoring. Both elements form the basis of a business early warning system that can allow strategy analysts to provide credible warning of external threats, thereby minimizing the effect that surprise has on executives’ ability to respond.

To start, a company’s strategic planning process should include a scenario-planning component, whereby the company can depict plausible future conditions that could confront the company within the planning timeframe. It’s important that companies follow a structured scenario development approach that identifies current industry variables and uses them as the “ingredients” for thinking about alternative future worlds.

From there, the scenarios play two roles. First, they create a planning context, enabling executives to game different strategic approaches in different conditions, and choose from among a set of resilient strategic options. For the purposes of building the early warning system, companies can also use the scenarios to identify indicators – industry developments, events, and circumstances that would have to occur for the conditions depicted in any one scenario to actually occur. These indicators then become the basis of focused external information monitoring.

The early warning indicators a company will monitor may include areas such as technology disruption, competitive shifts, regulatory changes, environmental factors, consumer or social changes, economic conditions and political influences. Analysts should collect industry information from a mix of published and human sources. The information collected can be further synthesized through an IT application designed for just this purpose.

As analysts determine that certain indicators are behaving in such a way so as to present a developing threat, they can generate early warning alerts that argue for a particular strategic option – ideally one considered during the scenario-planning phase. This way, the element of surprise is almost completely eliminated from the equation, and managers can focus on deploying a response.

Why Now Is The Time To Consider Scenario Planning

2009-03-13T11:19:00.000-07:00

Gotta love The Economist.

"With even short-term horizons as obscure as the San Francisco skyline during a summer fog, companies are finding their standard budgeting and forecasting of little use. The usual trick of plugging figures from operating units into spreadsheets appeals to number-crunchers, but can often generate misleading targets, especially when conditions change fast." ("Managing in the Fog, February 26 2009, at http://www.economist.com/business/displaystory.cfm?story_id=13184837)

Companies today are paralyzed. Most managers have never seen economic conditions like these. Short-term thinking prevails. From the same Economist Article:

"Faced with exceptionally volatile business conditions, senior executives are finding it harder than ever to gauge how their companies are likely to fare in the months ahead."

The risk, of course, is not having a clear strategy for growth once the recession ends, or worse, failing to position now for future opportunities. That's why cogent strategy development is more important now than ever before. With forecasts deemed virtually meaningless, and the future harder and harder to envision, managers need a tool for flexible and realistic strategy development.

"What can companies do? A few forward-thinking firms can provide inspiration. Hugh Courtney, a professor at the University of Maryland’s Robert H. Smith School of Business, thinks more companies should be using “scenario planning” alongside their financial models, which do not produce a large enough spread of possible outcomes to capture the flavour of today’s uncertainties. Sten Daugaard, the finance chief of Lego, a Danish toymaker, says his firm generated a number of different scenarios as part of its 2009 budget, the first time it had used such an approach. It has developed contingency plans for each scenario so that it can react swiftly whatever the coming months throw at it."

Scenario-based strategic planning is one such tool. Unlike most planning approaches, scenario planning starts with the assumption that the future is unknowable. Strategies designed for one vision of the future are almost certainly destined to fail, and managers usually cannot change course fast enough when the future they envisioned fails to materialize.

Instead of forcing managers to plan for the future they want, scenario planning forces corporate leaders to consider multiple, plausible futures that taken together represent a full range of threats and opportunities an organization may face in the future. Currently, we are using scenario planning to help a client develop a strategy centered around environmental sustainability, and to help another client set strategy for a major project category.

Too much short-term thinking now will make companies unprepared for the recovery. A little time spent thinking strategically now will pay dividends in the future -- whatever the future looks like.

Spotting Rivals' Vulnerabilities in the Downturn

2009-03-06T11:30:00.000-08:00

Let’s face it. CI functions are in survival mode. There’s little doubt that the very nature of your CI operations and output must change if your CI function will survive in these uncertain times. Senior executives’ appetite for strategic intelligence is virtually non-existent right now. If you have been working in a strategically oriented CI department, or have been trying to reposition your CI function to a more strategic posture, you probably need to change tack, and do so quickly.

One way to do so may be to emphasize good, old-fashioned competitor intelligence. One of the most beneficial CI outcomes that can affect how your company emerges from the economic downturn may be to deliver targeted, insightful, and real-time assessments of how the recession is affecting your competitors. Virtually no company is immune from the detrimental effects of the current economic crisis, and your competitors are doubtless figuring out how to shore up revenues, maintain share, and avoid crippling losses -- just like your company.

Indeed, according to a recent article in the Harvard Business Review, “It’s critical to understand your own strengths and weaknesses relative to those of your competitors. They will have different cost structures, financial positions, sourcing strategies, product mixes, customer focuses, and so on. To emerge from the downturn in a lead position, you must calibrate the actions you plan to take in light of the actions that your competitors will most likely take.” (“Seize Advantage in a Downturn” by David Rhodes and Daniel Stelter. Harvard Business Review, February 2008, p.52.)

How? For starters, CI practitioners examining publicly traded rivals should consider conducting a thorough competitor financial analysis. Ratio analysis, in particular, is a relatively straightforward technique that can spot weaknesses in your competitors’ financial position that could present opportunities for your firm. Look especially at the debt ratio (how leveraged is the competitor?), debt-to-equity ratio (how much debt is the firm carrying relative to its investors’ paid-in capital?), and the quick ratio (which demonstrates a company’s access to cash in the short-term).

Similarly, assessing a competitor’s free cash flow and comparing it to its cash positions one, two and three quarters ago can provide insights into whether the recession has caused a significant decline in the amount of cash your competitor’s operations generate. If you notice a serious decline, it could be a harbinger of future measures to cut costs, assuming any access to financing is choked off.

More qualitative techniques can offer insights into competitors’ weaknesses and help your company act opportunistically to exploit them. Qualitative methods are also beneficial for assessing the impact of the downturn on privately held competitors. If you haven’t conducted a Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis on your competitors in a while, now may be a good time. Compare today’s SWOT to ones you conducted six or 12 months ago and see if the recession has affected your competitors’ strategic positioning and intent. They may be unable to seize an opportunity -- providing an opening for your firm -- or conversely may be planning a bold move that could put your firm at risk.

Similarly, now may be a great time to conduct a targeted wargame. Select a handful of competitors and game their responses to a variety of future economic shocks and compare their responses to your own company’s contingency plans. How, for instance, would competitors react to an unemployment rate above 10%? What if there is a failure of a major bank, delaying the resumption of a freer flow of credit? Will any competitors benefit from the economic stimulus package recently passed by Congress?

Returning to the basics of competitor analysis can be an effective way to rapidly change the focus of your CI function and align it to helping your company navigate the downturn. And, it could improve the chances of CI function survival.

Why Is My Competitor Doing THAT?

2009-02-24T19:51:00.000-08:00

Many companies assume that because a competitor is pursuing a new market, lowering prices, or launching a new class of products, "it must know something that we don't." As a result, competitive strategy is often an exercise of imitating a competitor's actions instead of charting a unique course of action -- an approach that rarely results in a company establishing a leadership position in its industry.

Becoming a leader in any given industry requires not just knowing what a competitor is doing, but what it does well -- and what it does badly. Why? Would you rather compete head to head with someone where they are strongest, or identify, and then exploit, their weaknesses? Competitive intelligence (CI) is a systematic way of determining those strong and weak points.

In fact, the biggest mistake companies make when establishing a CI function is that they position it as a research function instead of a resource for informing strategic decisions. As a result, most of these CI functions often provide plenty of information but little genuine intelligence analysis, and hence they fail to deliver truly actionable insights about competitor behavior, strategy, and intent.

What can new CI functions do to get out of the information trap? The most important thing companies can do when establishing a competitive intelligence function is to develop a core set of analytic tools and models that help transform information into actionable insights. Such models can help companies understand the context behind competitor actions, assess rivals' strategic intent, and develop strategies that serve to out-maneuver, instead of copy, competitor actions.

Three types of intelligence analysis methods are particularly useful:

1. Competitor analysis tools that go beyond basic Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. For instance, the Four-Corners analysis developed by Harvard Business School professor and strategy guru Michael Porter is a model well designed to help company strategists assess a competitor's intent and objectives, and the strengths it is using to achieve them. By examining a competitor's current strategy, future goals, assumptions about the market, and core capabilities, the Four-Corners model helps analysts address four core questions: Is the competitor satisfied with its current position? What moves might it make? Where is it vulnerable? And what might we do that will provoke retaliation? From there, you can identify a competitive strategy that maneuvers around the rival's objectives and strengths, and that plays to your company's capabilities. A client of ours -- a major financial services conglomerate -- uses Porter's Four-Corners analysis regularly to ensure that it both fully considers competitor market positioning and devises a unique course of action that reflects its own strengths, not the competitor's.

2. Early warning analysis that helps spot and assess industry trends and facilitates a discussion of future contingency plans. By identifying, and then monitoring, a set of key industry and competitive events and circumstances, companies can anticipate the emergence of competitive threats and opportunities, and implement strategies to counter them. Indicator analysis lets companies anticipate future developments far more quickly than reading about them in the business press after they have occurred. This way, strategists spend less time trying to figure out what to do in light of competitor developments and more time executing preconceived plans. This is especially helpful in fast moving industries such as information technology and retail, where fast competitive execution is crucial.

3. Broad industry analysis techniques like scenario analysis that help spot relationships along a company's value chain -- changes affecting their suppliers and customers -- that can aid competitive strategy. Good competitive intelligence functions help companies get out of the trap of devising competitive strategies against a single-point prediction about future industry conditions. Because we can't predict the future, there is just one thing we know about such industry projections -- they are wrong. Competitive intelligence functions that employ scenario analysis as a way to consider multiple, plausible, competitive and industry circumstances help their companies develop contingency plans for each. A provider of employee insurance and retirement plans with whom we work regularly employs scenario-based early warning to inform management of the threats and opportunities inherent in key industry trends. Another client was able to make appropriate adjustments in one of its major products when it learned early on that a supplier had to stop making a key ingredient.

Competitive intelligence methods such as these help companies know better how to leverage their strengths against competitor vulnerabilities, leading to strategies that are unique and based on core capabilities. Hewlett Packard's resurgence against Dell provides an interesting example. According to an article in The Wall Street Journal ("Hard Drive: How H-P Reclaimed Its PC Lead over Dell," June 4, 2007, page A1), in less than two years, HP bested Dell to become the world's personal computer sales leader. It did so not by copying Dell's highly successful direct sales model, but instead by leveraging its strengths in the retail channel and attacking a core Dell weakness.

HP concluded that it had been fighting Dell where Dell was strong, in direct sales over the Internet and phone. Instead, HP changed course and began to focus on its strength, retail stores, where Dell had no presence whatsoever. HP over the past two years moved quickly to fix logistical problems and build relationships with retailers, helping it surpass Dell in worldwide sales late last year for the first time since 2003.

Dell's response? To mimic HP and try to begin to compete in retail outlets, HP's current strength. That's likely a losing proposition.

"If all you're trying to do is essentially the same thing as your rivals, then it's unlikely that you'll be very successful," says Harvard Business School’s Porter. So ask yourself, what is your company's strategic focus, to emulate a rival's strengths, or to exploit its weaknesses?

Competitive Urban Legends

2009-01-21T14:36:00.000-08:00

We’ve all heard them. "Urban legends" are a sort of modern folklore consisting of stories often thought to be true but that, in reality, are usually false, exaggerated, distorted, or sensationalized. I’m sure you’ve heard the one about unsuspecting business travelers being anaesthetized and then waking up to find that a kidney had been harvested for surgical transplant.

For the most part, urban legends are harmless fun. But many can take on a life of their own and cause those reading or hearing them to think, just for a moment, that maybe if I’m at an ATM and sense danger, I can enter my PIN in reverse and summon the police.

Managers can hold similar myths, stereotypes, and distortions about competitors, industry conditions, or other business matters. It’s hard for executives, especially those who have been in the same industry or with the same company for most of their careers, not to develop deep-seated beliefs about their business environment. There’s always one competitor more aggressive and hungry than you are, or another competitor that certainly has a more favorable cost structure, or a supplier set to go out of business at any moment. These competitive urban legends are endemic to almost every company, and become reinforced over time as more executives buy into them.

Confronting your company’s urban legends with credible evidence may be the right course of action, but doing so can be fraught with risks. If your company is like most, the more deeply held and incontrovertible the urban legend, the more powerful and influential are the executives who espouse it. Challenging their perspective can be dangerous if not done in a logical and systematic manner.

Entering into a debate with a powerful executive places your credibility on the line. Losing such a battle can create personal and career casualties, and harm the overall perception and acceptance of competitive intelligence inside your organization. Still, when approached carefully and thoughtfully, confronting competitive urban legends is a better course of action than turning a blind eye to them.

Consider the following hypothetical example. A computer services firm found itself continually surprised by the actions of a set of competitors its managers thought they knew well. The competitors were underbidding the company for the provision of networking, systems integration, and other technical services performed for the company’s clients. The company was also pricing well out of sync with client expectations. In some cases, it underbid competitors when price did not turn out to be a prevailing decision factor for the customer. In others, it was increasingly losing bids on prices that were too high, sometimes submitting bids 20% higher than those from other competitors. Senior management scratched their collective heads. How in the world could this be happening? Confusion reigned.

During this competitive conundrum, the company’s competitive intelligence team began to hear statements made by management that seemed to be unfounded:

• "Our competitors are bidding on projects as loss leaders just to establish relationships with desired customers."

• "Competitors can’t be lowering their costs by locating their developers and technical staff offshore -- doing so would complicate services delivery and cause customers to lose confidence."

• "That competitor is in trouble; it’s losing money and is desperate for new revenue to avoid having to undergo a significant restructuring later."

Collected evidence did not suggest that competitors were adopting a loss leader approach. Furthermore, credible evidence indicated that a competitor was adopting a significant offshore strategy. And the competitor in alleged financial difficulty? No evidence indicated anything of the kind.

Furthermore, the competitive intelligence team worried that these perceptions not only clouded management’s ability to take action to correct the company’s sales decline, but also paralyzed management from taking any action at all. Strategy and sales meetings became exercises in frustration, with managers citing their company’s misaligned sales approach but remaining at a loss as to what to do about it.

For each competitive urban legend, the competitive intelligence team identified a set of intelligence requirements that, when fulfilled, would give them the evidence required to objectively and logically evaluate the truthfulness of each legend. Using this list of intelligence requirements, the team gathered published-source and human intelligence. They divided the collected data and information into two sets: one that refuted the legends, and one that supported them.

The challenge then became how to successfully (and safely) inform management that several of its competitive perceptions were no longer valid. Most competitive intelligence practitioners focus on the work behind collecting and evaluating information to create practicable intelligence, and sometimes give short shrift to thinking through a communications strategy. In this case, when you have to deliver intelligence that you know is at odds with your management’s prevailing beliefs about the competition, carefully consider the means by which you deliver that message to your decision makers.

In most cases, subtlety does not work.

When calling management perceptions into question, a direct approach usually works best. In this case, the competitive intelligence team first acknowledged the prevailing competitive perceptions, and then arrayed evidence both for and against the perceptions so management could see exactly how the analysts came to their conclusions regarding whether the legends were true. To get their point across, the team presented management’s distorted perceptions directly back to them, labeling them "urban myths." In doing so, the CI team established that a main purpose of the briefing was to call out, and refute, some of management’s beliefs.

In the management briefing, the competitive intelligence team clearly showed the pieces of evidence that supported the competitive urban legends and those that did not. For each legend, the briefing came down on one side or the other, designating a legend as a valid judgment or as an obsolete view of the competitive environment. For validated hypotheses, the competitive intelligence briefing addressed the implications of each for the computer services company’s sales and pricing strategy, and highlighted future circumstances that could change this rationale.

Communicating the competitive intelligence team’s assessment that discounted some of management’s incorrect urban legends was harder. The team stuck very closely to the evidence they presented and, in essence, allowed management to see for itself that their beliefs were no longer valid. Then, for each refuted hypothesis, the team offered alternative assessments that reconciled observed competitive behavior with the evidence collected and the unfavorable results of the recent lost sales.

For each alternative assessment, the team discussed the implications to the computer services company. They also reviewed a corresponding set of intelligence indicators that the team would continue to monitor with an eye toward warning management about future circumstances that could change these new conclusions.

Once you’ve completed your first urban legend analysis, what’s next? Like most competitive intelligence that management receives, a one-time report or briefing is not enough. To effectively prompt management to at least acknowledge that their competitive perceptions could be in error, competitive intelligence teams need a communications strategy that stresses a constant and ongoing review of prevailing hypotheses.

Consider delivering a quarterly update that confronts the competitive urban legends, offers new evidence that either supports or refutes them, and extends your analytic line. Informal reinforcement of your analysis is essential. Listen for comments by executives that are indicative of old, discounted perceptions. Find opportunities to reinforce your analysis that calls such perceptions into question. Urban legend analysis is not about aiming for one grand deliverable, but for finding opportunities to challenge and correct any distorted competitive assumptions on a continuous basis.

To be sure, confronting -- and ultimately changing -- management’s perspective on the competition is difficult, even when that perspective is out of date or based on assumptions and evidence that no longer hold true. Instead of ascribing to and reinforcing those perceptions, a better competitive intelligence strategy is to confront them head on, using inductive, hypothesis-based analysis. Remove debilitating perceptions from management’s mindset that cloud effective decision making. This will take time and persistence, but the benefits to your organization and your competitive intelligence program can be profound.

The Economic Crisis: Will Your CI Function Survive?

2009-01-06T08:32:00.000-08:00

Last October, competitive intelligence stalwart Merck & Co. announced that it was cutting 7,200 jobs and closing three research laboratories. At the same time, other blue-chip names – Ford, General Motors, Yahoo, National City – also have announced severe staff reductions. Payrolls fell 500,000 in December, bringing last year’s decline to 2.4 million, the most since 1945, according to the median estimate of economists surveyed by Bloomberg News. Anyone still keeping tabs on their 401 (k) knows that the credit crisis, gloomy earnings forecasts, and a sharp decline in consumer confidence sent stock markets down almost 40 percent in 2008.

What is perhaps most worrisome is that few saw the severity of the downturn as it was taking shape, and many top minds are at a loss to explain it. In a less-than-confidence-inspiring revelation, former Fed chairman Alan Greenspan summed up the economic situation this way, “We are in the midst of a once-in-a-century credit tsunami. Central banks and governments are being required to take unprecedented measures. Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity are in a state of shocked disbelief.”

In times of economic slowdowns, corporations look to cut excess costs. Many a support function – in particular strategic planning and marketing, to name two – are often the first to get whacked. And competitive intelligence, which for most firms is nothing more than a big old cost center in the eyes of the CFO, can have a big target painted on it.

Of course, nothing could be more foolish than to scale back or even eliminate the competitive intelligence function in times of economic uncertainty. If former Fed Chairman Greenspan is in a state of “shocked disbelief” over the the role lending institutions played in the financial crisis, imagine how CEO’s and other top managers are (or aren’t) coping with the impact of the downturn.

That begs the question: for those of you wringing your hands with fear over your CI department’s future, are you asking your managers about their degree of uncertainty regarding future competitive conditions? Now is the time to revisit the very reason why your CI function was established in the first place. Any need expressed by top management to better understand competitive forces, external industry shifts, and specific competitor strategies are magnified today, with an economy in severe decline.

That means that common CI outputs that consist of quarterly competitive landscape reports and monthly competitor profiles just won’t cut it any more. The survival of your CI function may depend on your ability to deliver unique, relevant insights related to helping your company navigate through a tough economy. Now more than ever, your CI deliverables have to go a few steps farther to truly help your management team navigate uncertain economic waters.

To be sure, budgets are shrinking on all but the most essential activities. So make sure that your executives know that CI is an essential activity. Ask yourself: are you providing warning of looming threats and opportunities? Can you clearly link your CI output to key strategic initiatives and objectives at your company? How are your CI efforts helping your company to meet its goals?

For the CI function to survive, cutting back on CI professional development, limiting access to CI best practices, and retrenching away from engagement with external CI experts is the last thing you should be doing. Upgrading your CI function’s output and making the most of challenging economic times requires ongoing access to CI best-practices, a fair degree of risk-taking on your part, and a demonstration of how a well running CI function can help your organization weather what is likely to be a long and deep recession. If you don’t have 110% of your energy focused in this direction, your CI function will not be seen as a valuable asset that is essential to navigating this challenging economy.

Coping Mechanisms for Future Uncertainty

2008-12-16T12:13:00.000-08:00

Frustrations abound over most organizations’ inability to effectively deal with future uncertainty, despite a general awareness of the sources of such uncertainty. How can organizations better counter unexpected external developments and surprises?

At the Frost & Sullivan Growth, Innovation and Leadership Executive Congress (San Francisco, September 15-16 2008) I asked 25 director, VP and C-level executives to identify the major sources of strategic surprise in their external environments. The key sources of surprise included:

Rapid technology advances

Unforeseen customer demands and needs

Economic conditions

Competitor activities and behavior

Perhaps as frustrating as the recurrence of such developments is the near-total lack of control companies have over them. Furthermore, there was widespread agreement that the time and resources firms spend on monitoring the external environment was grossly out of proportion with the time and money spend tracking internal information, further contributing to this “lack of control” feeling.

Similarly, the coping mechanisms companies use to deal with external surprise were fairly consistent -- but deemed, for the most part, to be ineffective. They include conducting ad hoc research studies, conducting one-off brainstorming sessions, and, sadly, doing nothing.

Conduct research. When faced with unforeseen external developments and an urgent need to take action, many companies retrench behind a facade of more information. Consultant studies, project-based research and other variations of data accumulation failed, according to the executives, to yield a greater understanding of the implications of the external events, nor a stronger sense about what to do. Instead, research and data gathering led to a state of “analysis paralysis” that further acerbated the feeling of frustration and hopelessness over companies’ ability to deal with external stimuli.

Brainstorming sessions. While the variety of strategy workshops, brainstorming sessions, and ideation groups tend to result in innovative solutions and approaches for uncertainty management, the transition from idea generation to implementation is weak. The main reason? Lack of clear ownership of response tactics targeted at addressing competitive environment surprise.

Do nothing. Not surprisingly, the least effective approach. Nevertheless, it is not uncommon for companies to ignore external surprises in the hope that they will simply go away.

What, then, can companies do? I believe there are three ingredients to maintaining an effective posture against future competitive uncertainty.

Avoid -- or at least minimize -- surprise in the first place. Companies can begin to reverse the imbalance between external versus internal information monitoring by pursuing an indicator-based intelligence early warning system. Such a process helps organize external intelligence gathering against a set of indicators, or signposts of future change, for which significance has been determined and a strategic response already decided.

Develop flexible strategies. By employing techniques such as scenario-based strategic planning, companies can pursue strategic plans that have flexibility built in, allowing for rapid responses to unforeseen developments within a consistent overall strategic framework.

Link intelligence analysis with strategy implementation. Organizations must ensure that intelligence insights can quickly be communicated to those responsible for owning strategic response implementation. Keeping intelligence gathering and analysis several layers beneath strategic implementation will ensure that relevant insights never get the chance to influence strategic response.

Competitive Intelligence Driving More Corporate Decisions

2008-11-06T08:13:00.000-08:00

It's a classic good news / bad news report: more US corporations are using competitive intelligence to drive critical strategic and tactical decisions than ever before, but an alarming number of companies still do not have structured way to deliver intelligence to decision-makers in their organizations. Is the chasm between companies that value CI and those that don’t growing?

Outward Insights conducted its second “Ostriches and Eagles” CI best practices survey, which gauges the effectiveness and use of CI among US companies across industries. The first survey was conducted in 2005. The biggest finding this time around? More and more companies are “getting” the value of competitive intelligence. Most reassuring was the growth among respondents who said that CI was “an integral part of operational or tactical decisions” over the 2005 survey.

Another positive finding was the 72% of respondents that claimed to use CI to “anticipate and thwart competitor strategies” compared with 64% in 2005. This uptick reflects the increasing value executives place in the early warning applications of competitive intelligence.
Among other key findings:

More respondents (28%) integrate likely competitor reactions into their plans for launching new products than in 2005 (21%)
The use of scenario planning nearly doubled from 30% in 2005 to 59% this year
The percentage of respondents who believe CI is “an integral part of the strategic planning process” was at 85%, the same as in 2005.

Despite these findings, obstacles still impede corporations from realizing the full value of competitive intelligence. For example, the survey found that nearly half of respondents say that their CI programs are not sufficiently funded. In addition, 37% of respondents said that CI does not have “sufficient stature” within their organizations. The gains that are evident in the strategic application of CI may be short-lived if these programs are not funded adequately and given proper stature in the organization. The survey also found that almost one in five executives believes that senior managers do not value the competitive intelligence they receive, and 24% of respondents said that their companies lack a formal CI process altogether.

There were some notable differences in the responses from the seven industry groups surveyed: consumer products, energy, financial services, insurance, high-tech, manufacturing, and pharmaceuticals. For example, consumer products companies were least likely to have an organized intelligence function (62% vs. 76% of all respondents), while energy companies were least likely to make CI an integral part of their strategic planning process (71% vs 85% of all respondents).

We conducted the survey in June and July 2008. The survey consisted of telephone interviews with 100 senior executives at US corporations. More than two-thirds of the companies participating had revenues of $1 billion or greater. To request a complete survey report, contact us at info@outwardinsights.com.

Holding On to Old Business Models

2008-10-20T07:03:00.000-07:00

IT’S NO SECRET that innovative competitors, new technologies, and regulatory conditions force industry leaders to adapt to new market realities. Why, then, when the writing is on the wall that paradigmatic shifts are occurring in an industry, do most market share leaders try to perpetuate obsolescing business models?

Consider Microsoft. The company announced last year that it would offer a free, Web-based service that works with Word, Excel, and PowerPoint to allow people to store and access files online, according to an article in the Seattle Post Intelligencer. (http://seattlepi.nwsource.com/business/333748_software01.html)

Clearly, Microsoft is embracing the shift from desktop-based software applications to web-based ones, right? It is responding to the launch in 2006 of Google Docs, a free application that allows users to create and edit word-processing and spreadsheet files online, inside a web browser. It no doubt knows that future growth prospects for its Office software lies in workplace use of Web 2.0 – the use of wikis, Internet delivery of applications, and Web-enabled collaboration – where hosted services, instead of desktop-based applications, are the wave of the future.

Not so fast. Microsoft’s online service, named Office Live Workspace, will require that editing and creating documents still take place on the PC desktop, requiring a regular version of Microsoft Office that users will have to purchase and install on their computers. Why? According to David Smith, an analyst with Gartner, a technology research firm, “They (Microsoft) certainly are not looking to push the envelope and be the leader in providing Web-based Office tools. They need to do it in a way that preserves their business.” Office is Microsoft’s second-biggest product behind Windows.

To be sure, abandoning a market or business model that has served a company well for years is challenging. No company wants to embrace a new business too soon and risk forgoing revenue from a legacy product that still has some life left. Still, holding on to an old business model for too long can cause a market leader to lose its dominant position, perhaps forever. The trick is to maintain market vigilance of indicators of significant change in a way that allows for maximum strategic flexibility.

Take photographic film processing. When was the last time you took a role of film to a local drug store or supermarket to have pictures developed? “Now you can bring your media card in and go to a kiosk and have it printed in a second. Or you can have it printed at a one-hour photo lab. Or you can upload the image to a wholesale facility on the Internet and have it delivered to a retail store,” says Bing Liem, senior vice president of sales for the imaging division of Fujifilm USA, as quoted in The New York Times. (http://www.nytimes.com/2007/10/09/business/09film.html?_r=1&oref=slogin)

So, how have photography companies responded? As its film business has tanked, Kodak has spent the last few years making a transition to digital technology. This transition balances embracing a new business model with a reasonable extension of an old one.

In the heyday of film, some 25 billion photographic images were not just captured but printed as well, according to the Times article. By 2009, as the use of digital cameras continues to grow, some 135 billion images will be captured, but far fewer printed. The challenge is getting people to print those images out.

According to the Photo Marketing Association, when digital camera owners in the United States do print out their digital images, they usually do so in stores rather than on home printers. So, Kodak is helping retail stores replace their old silver halide photo processing equipment with kiosks that consumers can use to print digital pictures.

Meanwhile, Kodak’s strategy for its film business now calls for targeting third world economies where home computers are less common. It is selling low-cost film cameras throughout Asia, according to a Kodak spokesperson. In August 2007, Kodak posted record sales in India.

By monitoring key indicators – in this case, the propensity of consumers to print digital images in stores rather than at home – Kodak has been able to reposition a key product, photo finishing equipment, to correspond to the obsolescence of film and the rapid growth in digital imaging. Meanwhile, instead of perpetuating its film business in mature markets that have moved beyond film, Kodak now is replicating a business model in markets not yet impacted by digital photography technical advances.

The best of both worlds, to be sure.

Could an early warning system have helped predict our current financial woes?

2008-10-15T17:59:00.000-07:00

Much has been said about the causes of the financial crisis to which we are all held captive. Politicians blame each other for the mess, citing varying degrees of under (or over) regulation depending on wind directionality, Wall-Streeters blame avaricious mortgage lenders and profligate home-buyers, consumers blame greedy executives and the politicians beholden to them, and media pundits blame everyone. The interesting question, however, isn’t so much who was to blame, but more, what were the signposts along the way that, had they been identified beforehand, could have helped authorities avert the disaster. In other words, could a unified financial early warning system have helped predict and forestall our current financial woes?

To be fair, foreknowledge of the current crises would likely not have been enough to avert it (excessive systemic risk is purged from markets in one way or another) but surely paying attention to the warning signs (of which there were many) would have allowed governments to shore up soon-to-be faltering banking systems or at least ensure that adequate policy measures were in place that would help to guide the flailing, seemingly haphazard decisions that policy makers have made in the last few weeks.

So what, exactly, would the harbingers of a doomed economy look like, and where would one look to find them? Well for starters at least, historically speaking the major economic downturns have been preceded by a marked uptick in panicky investor behavior. In other words: volatility. Well, you may ask, by the time investors and policy-makers have noticed that volatility is on the upswing, isn’t it likely far too late to take decisive action? That depends upon your definition of too late. To be sure, the tell-tale signs of volatility began appearing as early as July and August of 2007. In fact, the Chicago Board of Trade’s Volatility Index or VIX (often referred to as the Fear Index), began a series of what should have been alarming spikes on mounting concerns about, what was at the time, a growing credit crisis. Granted, increased volatility does not necessarily mean a marked downturn, but had policy-makers created an integrated system of early warning indicators that included volatility monitoring, a VIX spike could have put them on alert.

Remember those Wall-Streeters and bankers who were looking for someone to blame? Well it turns out that they had advanced warning of what was going on in the credit markets and broader economy as well. How, you ask? As we’ve all come to know, inter-bank lending is in many ways the life-blood of our economy. When the credit markets freeze up, banks stop lending to one another (well technically they don’t stop lending, they simply charge prohibitive inter-bank rates which in and of itself is a measure of risk and uncertainty in the overall economy). Often referred to as the TED Spread, the difference between Treasury yields and the London Interbank Offered Rate measures the degree to which banks feel that their peers will default on inter-bank loans, or counter-party risk. In fact, that summer the TED Spread saw a spike to levels it hadn’t seen since the Black Monday crash of 1987. So how far back did banks begin panicking? You guessed it, the same exact time the VIX was spiking towards the end of summer 2007.

These are but two of several examples of potential indicators you are likely to hear about in the coming weeks and months. Again, while any one of these signals doesn’t necessarily mean that an economy is doomed, had the right people, armed with a list of triggers or indicators, been paying attention, policy-makers could have taken steps much sooner. When you think about the hysteria of the last few weeks, the speed with which Secretary Paulson tried to cram the Emergency Economic Stabilization Act of 2008 through congress, the ensuing equity market melt-down, and about the shape of things to come, think about how different things might have been if those who hold the public trust had done their jobs.

On second thought, the really interesting question isn’t what the early warning indicators might have looked like, it’s why our leaders weren’t looking for them to begin with. Truth be told, governments should have begun taking action to quash the mounting crisis more than a year ago.

The Paranoid Still Survive

2008-10-02T19:12:00.000-07:00

Ten years after former Intel CEO Andy Grove wrote his best-selling book Only the Paranoid Survive, a report in USA Today (January 31, 2007) suggests a healthy dose of insecurity is still at the heart of CEO success. "I am driven by fear of failure," says Dennis Manning, CEO of Guardian Life Insurance of America, which has annual revenue of more than $7 billion. "It's a strong motivator for me. If I fail, maybe 50,000 people fail with me."

What do CEO's worry about? According to the PricewaterhouseCoopers 10th Annual Global CEO Survey, 37 percent of those CEOs interviewed worry about pandemics, 40 percent about global warming, and 50 percent about terrorism. The overall optimism expressed in the survey is also tempered by other considerations tied to obstacles to growth. CEOs cite the uncertain availability of skilled resources, overregulation, and low-cost competition as impediments to future growth. And, sources of future growth most often cited in the survey include penetrating new markets, M&As, and technical innovation, all areas with higher levels of risk than less venturesome options such as better penetration of existing markets.

What does all this mean for strategy and competitive intelligence? Lots. CEO intelligence needs are more complex than ever. Corporate CI practitioners have to maintain vigilance against a wide array of risks, from bird flu to offshore competitors. More importantly, against a wide array of risks, from bird flu to offshore competitors. More importantly, they have to continuously feed their CEO's paranoia. "Healthy doses of corporate insecurity help keep a company fresh and competitive and ensure that the leadership and drive . . . remain active," says Ciena CEO Gary Smith, as reported in USA Today. Intelligence reports and approaches to strategy that harness this paranoia -- by generating plausible future scenarios and corresponding strategy options -- can be highly successful. According to Martin Frid-Nielsen, CEO of telecommunications company SoonR, "Paranoid people often see problems long before their more complacent counterparts. A little bit of insecurity goes a long way to push a company toward perfection, especially when that insecurity resides in the CEO."

A dose of paranoia may be what this troubled economy needs.

Competitive Intelligence Lessons from Frost & Sullivan's 2008 Growth & Innovation Congress

2008-09-17T11:00:00.000-07:00

The most interesting learnings from attending this weeks Frost & Sullivan's Global Congress on Corporate Growth are results shared from an annual CEO Survey. The most striking highlights from a competitive intelligence (CI) practitioner standpoint include:

* CEO's number one priority is growth and overwhelmingly agreed that competitive strategy is the most effective growth strategy

* According to the same executives, the number one external challenge to growth is the competitive environment.

That is good news for us because it validates the role CI can play in shaping and executing resilient strategies in light of an increasingly competitive environment. But here is the discouraging news - only 37% of these companies involve CI in developing their firms growth strategy. A major disconnect but unfortunately a reality many of us have grappled with as practitioners and consultants.

Why is CI left out of these discussions? The same stigma that CI is more about data than insight and analysis seem to continue to plague the profession. The burden is on us to change this misperception. Our challenge is not that we can't do the analytical part of the job but instead that in today's economy with constrained budgets and resources, we are pulled in many directions including spending an inordinate amount of time collecting and managing data leaving little room for developing insights and true intelligence.

In light of the economic turmoil we find ourselves in, it will be interesting to watch if the remaining 63% of CEO's are compelled to draw on our expertise out of necessity.

Signaling Complexity

2008-09-05T10:28:00.001-07:00

Monitoring corporate signaling practices can and should play an important role in competitive intelligence practitioners’ repertoires.
Changes to dividend policy are often regarded as one of the most salient signaling mechanisms. More often than not, however, organizations will use a suite of signaling techniques tailored to meet the unique environment in which they operate. In other words, industry structure, competitive market forces, and the competition’s intent all play a role in management’s signaling strategies.

And this makes sense. There is real benefit to be had -- such as lowering cost of capital -- from disclosing relevant information about the directionality of an organization’s revenue streams. Fortunately, there exists a delicate balancing act that management must conduct when choosing between the benefits of releasing proprietary information and the associated costs. It is in this balancing act that insight can be had.

For example, consider firms that operate in industries with relatively low entry barriers. These firms are less inclined to rely solely on accounting disclosures as the cost associated with releasing proprietary information likely exceeds costs associated with stock repurchases and/or dividend policy alterations. So what might this mean for an intelligence professional?

For starters, an analyst whose knowledge of an industry is more robust might spend less time poring over SEC filings and annual reports, choosing instead to monitor changes in capital structure and alterations in an organization’s payout policy. Moreover, that same analyst might be more apt to recognize that a voluntary accounting disclosure represents a major signal about the future prospects of the organization, its strengths and weaknesses, or trigger a more detailed investigation.

Similarly, the nature of the competitive environment can play an important role in an organization’s signaling strategies. Firms operating in industries with high concentration ratios (a measure of the relative size of firms relative to their industry as a whole) often have higher political costs and will shy away from signaling via accounting disclosures to avoid government attention. In such cases, analysts would be wise to focus on a firm’s dividend and repurchase policies.

But that’s not all. Consider the insight that might be had from changes in payouts from a firm in a nearly monopolized industry. What might a substantial payout convey about the prospects of the organization, pending regulation, or the industry as a whole? While this question can’t be answered with signaling analysis alone, this new piece of intelligence can add depth and texture to competitor and industry assessments.

Just as an intelligence analyst should pay attention to industry structure and the competitive environment, she should also be wary of her competition’s short and long-term objectives. To be sure, organizations keen on delivering growth tend to re-invest excess capital. What if the proportion of excess capital retained begins to decline? Does that mean the organization anticipates slower growth? Again, the answer isn’t going to be apparent but if our analyst knows that the competition has stated that its goal is to grow for its share-holders, faltering re-investment rates may signal an important and/or deliberate organizational change.

Unfortunately, these are not hard and fast rules. Careful judgement must be exhibited when conducting signal analysis and individual data-points are not likely to yield epiphanous insight. Nevertheless, these examples illustrate two things. The first is that monitoring the suite of corporate signaling efforts can play an important role in garnering insight on the competition. Importantly, however, these examples also illustrate that signal analysis can be much more valuable if it is paired with complementary analytical techniques, industry and competitive awareness.

William J. Dragon
Will is a Senior Consultant at Outward Insights, a Boston-area strategy and competitive intelligence consulting firm. He can be reached at wdragon@outwardinsights.com.
© Copyright 2008 Outward Insights

Fly Swatting and Competitive Strategy

2008-08-29T06:57:00.000-07:00

Recent findings from a Cal Tech research study, published in the journal Current Biology, and reported today by the BBC, reveals interesting parallels between the neurological make-up of houseflies and effective competitive strategy.

According to the BBC report, researchers think that the fly's ability to avoid being hit by a flyswatter is due to its fast acting brain and an ability to plan ahead. High speed, high resolution video recordings showed that the insects quickly work out where a threat is coming from and prepare an escape route.

"Most people will have experienced the frustrating experience of carefully attempting to swat a fly, only to swing and miss while the intrepid insect buzzes off to safety. The research suggests that the best way of swatting a fly is to creep up slowly and aim ahead of its location," the BBC reports.

The article goes on to note that over the years there have been different theories put forward to explain the fly's uncanny ability to outwit human attempts to swat them, but the research says it is about quick-fire intelligence and good planning. Specifically, the researchers discovered that, long before the fly leaps, it calculates the location of the threat and comes up with an escape plan.

Any strategic planner frustrated at his or her company's inability to best a nimble competitor can empathize with unsuccessful human efforts to swat flies. What sets leading companies apart? A fast-acting, nimble nature, sound planning, and an uncanny ability to spot threats before they impact their interests. As with the fly, quick-fire intelligence and good planning are required if any company is to develop keen instincts and an uncanny ability to avoid threats and leap to a new, safe position.

Leaping Over the Intelligence – Decision Gap

2008-08-22T11:43:00.000-07:00

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. 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.

The identification of an issue champion can help. 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.

What other solutions can help to mitigate the gap between intelligence and action?

Why Now Is the Time To Take a Closer Look at Scenario Planning

2008-08-13T07:38:00.000-07:00

September is a common strategic planning time for many companies. With fall just around the corner, this is a good time to begin thinking about maximizing your strategic planning process. If your planning process is not fostering collaboration among corporate and business-unit managers, nor making best use of best practices -- two conditions that improve planning process outputs, according to a recent McKinsey & Company survey -- scenario planning may offer a solution.

Scenario planning helps organizations envision a future very different from the present and develop concrete strategies that ensure success in a number of different possible futures. Companies also develop specific, measurable indicators that provide an early warning of what the future may bring, and the opportunity to start preparing today. In doing so, scenario planning encourages that managers from different parts of the company collaborate to offer their unique insights about the external environment. It also facilitates the consideration of prevailing environmental trends, likely competitor behavior, and external threats -- planning best practices executives say they wish they could follow more judiciously.

Let us know if your firm incorporates scenario planning into the annual planning process.

Conferences and Trade Shows: Are Your Employees Saying Too Much?

2008-07-31T08:28:00.000-07:00

Conference and trade show intelligence is hot. Awareness of the opportunities for focused intelligence gathering at industry meetings, conferences, and exhibitions has perhaps never been higher. And rightfully so. Conferences bring together many people with valuable knowledge in one place to network and talk. With proper organization and advanced planning, companies can collect substantial amounts of competitive intelligence at such events.

However, for the same reasons that conferences and exhibitions represent such valuable intelligence gathering opportunities, they also pose intelligence risks. Just like other attendees, your company's employees attend such shows to meet new people, network, and talk. Natural human tendencies make it more likely that participants at a trade show or conference are disclosing more than they should about their companies.

People usually underestimate the value of the information they disclose, and want to demonstrate their knowledge and expertise, especially when surrounded by industry peers. These tendencies often lead to the improper disclosure of sensitive information, whether or not the employee was the specific target of an intelligence gathering effort by a competitor.

What, then, are ways to avoid the improper disclosure of information at conferences and trade shows?

First, know what not to say. Make sure that all conference attendees from your company know what questions not to answer, and what information your company considers confidential.
If you find that your employees are being asked the same question several times over, instruct them to direct all questioners to a single point of contact. Doing so helps coordinate a consistent, safe response. Your company can then also spot trends in the questions and identify who they are coming from, providing valuable insights into what your competitors want to know about your company.
Stifle your natural human tendencies. Watch out for attempts to use flattery, challenging statements, and misinformation as a means to prompt your employees to disclose proprietary information.

Can an Organization's Relentless Quest for Market Share Drive Employees to Break the Law?

2008-07-23T11:27:00.000-07:00

According to articles in The Wall Street Journal, a former Hewlett-Packard Co. vice president pled guilty earlier this month to stealing trade secrets after passing a confidential email from his previous employer, International Business Machines Corp., to senior H-P executives. According to an indictment filed June 27 in U.S. District Court in San Jose, Calif., Atul Malhotra was a director of sales and business development in IBM's printing-services division in March 2006 when he requested confidential pricing information about IBM services. In May 2006, the indictment says, Mr. Malhotra became a vice president of H-P's printing division. That July, the indictment alleges, he "sent an e-mail to an H-P senior vice president with the subject 'for your eyes only'" with an attachment including the confidential information. He allegedly followed it up with a similar email to a second senior vice president. Malhotra, 42 years old, faces a maximum of 10 years in prison, a $250,000 fine and three years of supervised release. A spokesman for the U.S. Attorney's office in San Francisco declined to say what penalties prosecutors would seek. A sentencing hearing is set for Oct. 29.

My first take on this incident was that it was the latest in a string of senior executives acting unethically in the false belief that doing so would afford competitive advantage. However, deeper inspection illustrates another more interesting explanation -- that ethical foul-ups are a symptom of companies’ misguided efforts to increase market share.

It has long been argued by strategists and economists alike that prudent corporations would be wise to compete on dimensions other than price. Because it is possible to segment out individuals, groups, and clusters of groups that share similar beliefs, goals, aspirations, needs, and desires, it is desirable for competing companies to target slightly different customer clusters and position their respective products accordingly, allowing multiple competitors to exist peaceably with each other. Look at Apple Inc., whose products are designed and positioned, not as commodities, but more as genuine appeals to a lifestyle. Apple’s reward? The company remains one of the only PC manufacturers able to sell every computer it produces at a profit.

If this is the case, why then, do so many companies destroy industry value by engaging in direct, head-to-head competition? One answer is likely found in the antiquated notion that market share is a legitimate measure of organizational success. In reality, market share is such a malleable, perspectivist metric (it is entirely dependent upon how one defines their market) that it is practically useless as a gauge of organizational performance, despite the emphasis organizations put on as a metric of their performance. Regrettably, to gain market share, firms often do what comes natural: they slash prices, a nasty side-effect of which is often the commoditization of their products, which, remember, the theorists argue is unnecessary.

The problem, of course, is systemic in many industries (particularly IT), which brings us back to our friend at HP. It could be argued that the pressure to gain market share is so indelibly entrenched in the consciousness of some organizations, that their employees are compelled to take the low road in an effort to gain incremental share. Was the desire to help his organization achieve a stated goal what compelled Malhotra? Was it simply poor judgment or the prospect of personal advancement? Perhaps. But what if it was something more insidious. What if blind adherence to an antiquated metric created an environment so unrestrained in its single-mindedness that it prompted individuals to act without regard to creed, convention, or code of ethics. What if Malhotra is guilty of nothing more than toeing the party line? And if you can entertain this thought, then think of this: is your organization doing the same thing?

CI Practitioners Moving Beyond Five Forces...

2008-07-16T07:53:00.000-07:00

Most of us have used Porter's Five Forces model when analyzing their industry. But how many of us apply the rigor of Porter’s other analytical technique, the Four Corners model to scrutinize specific competitors?

Here’s our take: while less widely used, Porter's Four Corners is an extremely valuable tool that integrates an understanding of a competitor’s drivers, strategies, capabilities and assumptions to determine what players are likely to do and recognize the "why" behind their actions. It is an essential tool for CI practitioners to master.

The Four Corners model, developed by Michel Porter, a professor at Harvard Business School, is a model used to look at the behavior of an individual organization to predict competitor behavior. The model can also very useful in uncovering blind spots, assumptions that were valid at one time but no longer hold to be to true.

Examining all four "corners" of competitor activity enables a competitive intelligence professional to better understand what drives a firm to behave in a certain fashion and anticipate future actions. This insight then equips one to conduct the last step of Four Corners analysis, answering the Competitor Response Profile questions in the center of the four corners. The key questions include:

Is the competitor satisfied with its current position?
What likely moves or strategy shifts will the competitor make?
Where is the competitor vulnerable?
What will provoke the greatest retaliation by the competitor?

Hug a Librarian

2008-07-02T07:07:00.000-07:00

Anyone who has been practicing competitive intelligence for the past several years cannot have helped but notice the increasing role information professionals are playing in the CI discipline. Consider:

Membership in the Special Libraries Association CI division stands at over 700, up more than 25 percent in just two years. The Association reports that the CI division has been among the fastest growing divisions for the past several years.

Information professionals are becoming more experienced in CI. More than a quarter of SLA CI Division members have been involved with CI for over 10 years.

And, nearly half of the CI Division's members report dedicating more than half of their time to CI.

It's hard to imagine a successful CI function that is not accompanied by a solid information services function, either as an embedded part of the CI program or as an internal service provider to the CI function within the larger organization. Whereas information professionals were once limited to providing background research to more experienced CI human-source researchers and analysts, today's information professionals increasingly are involved in conducting intelligence analysis and preparing intelligence assessments for their organizations.

Why? Just as the lines between market research and competitive intelligence are becoming increasingly blurred, so to are the boundaries between what was once "the corporate library" and any organization's need for a unified and integrated view of its external environment. To be sure, a successful CI function must rely on more than just published-source information, and requires a solid human-source information network. Still, information professionals today have the expertise to tap a wealth of information sources to collect information that not long ago was the sole purview of primary source researchers, or that was not available quickly and inexpensively on the Internet. As a result, information professionals are now able to identify trends, define future outcomes, and determine competitive implications -- the very lifeblood of top-notch intelligence analysis.

2008-06-20T13:21:00.000-07:00

Despite the advances made in the
sophistication of many companies' strategic
planning processes, companies still cannot
develop models of the increasingly complex
environment in which they operate, according
to a recent Harvard Business Review article
("Strategy as a Wicked Problem," Harvard
Business Review, May 2008 pp. 98-106). The
article cites frustrations
expressed by several CEOs that they face
complex issues that cannot be resolved by
gathering additional data, defining issues
more clearly, or breaking them down into
smaller problems. Why? Because these
complex strategy issues aren't just difficult
or persistent, they're "wicked."

According to the article, wickedness is more
than a degree of difficulty. Wicked issues
are different because traditional processes
can't resolve them. What constitutes a
wicked problem?

The problem involves many stakeholders with different values and priorities
The issue's roots are complex and tangled
The problem is difficult to come to grips with and changes with every attempt to address it
The challenge has no precedent
There's nothing to indicate the right answer to the problem

I would contend that a well developed
competitive intelligence capability,
intrinsically linked to the strategy
development process, can help shed light on
wicked issues. Indeed, as we have observed
in the course of our consulting work, many of
our clients' Key Intelligence Topics -- the
complex external issues that carry
implications for a company that the CI
function must address -- embody wicked issues.
They include the persistent threat of new
entrants into an industry, unpredictable
regulatory developments, macroeconomic
conditions, and ongoing competitive
challenges.

While there are no set answers
to such topics -- and therefore no single
intelligence assessment or report that can
"answer" the issue -- it is the responsibility of
the CI function to provide the latest
insights and assessments of the impact these
issues are having on the organization.
Persistent intelligence deliverables that
don't try to solve wicked issues, but that
provide updates, a context, or judgments
about likely outcomes,
help management come to a common viewpoint on
the degree of impact of such issues, and to
help develop a strategic position on them.

2008-06-13T13:37:00.000-07:00

Careers in intelligence can be a blessing and a curse. I have learned that my analytical brain tends to lock on to whatever is available in the moment – much like you can find yourself blandly reading the same billboard at a stoplight over and over again.

So I noticed at some point that bathroom soap has a story to tell. “Wash your hands – with soap!” As a parent of young kids, I find myself uttering these words maybe ten times a day. Children are dirty creatures. I spend a lot of time waiting on little hand-washers in restaurants and other public places – so much time, in fact, that it depresses me to think of it. For the diligent neat freak, there is an endless supply of soaps to be found out in the world. Collectively, this surfeit of surfactants can reveal some useful information about businesses that house the places in which you lather and rinse.

Soap is a commodity that businesses must procure in the regular course of their activities. A washroom without soap is like a day without sunshine. Most businesses have shifted to liquid or foam soaps – solid bars are as rare as washroom attendants anymore. The range of soap options in the market reflects the range of procurement options available to managers:

Color. Most of the pastel spectrum is represented in the market. Anecdotally, I would say that pink is the most common color you see, and thus is probably among the least expensive. Upscale businesses seem to gravitate toward blue or yellow. Kimberly-Clark offers its institutional customers a bilious green bulk liquid soap that seems to make your hands retain the scent of the paper towel. Is this a desirable feature?

Bulk versus bottle. Larger businesses seem to prefer bulk soap, which will come in a sealed plastic bag with a funky connector specific to the dispenser. Now and then, you see a company that opts to stay with individual bottles. The example that comes to mind is the Outback family of restaurants, which appears to use Yardley English Lavender pump bottles in all of its locations.

Marketing relationships. If you see a brand name on a soap dispenser, usually it’s the name of the supplier or the institutional manufacturer. The presence of a consumer brand, like Yardley at Outback, may imply a marketing relationship. Restaurants affiliated with Wendy’s feature Safeguard liquid soap, and each dispenser has the Safeguard logo prominently stamped on its face.

Centrality of organization. Centralized organizations buy the same soap for all locations; decentralized organizations buy based on local requirements and decision-making.
I offer my two alma maters as examples. Carnegie Mellon runs a centralized organization, with all units sharing a common facilities management service. Washroom soap is the same everywhere on campus. The University of Pennsylvania allows each of its colleges to operate autonomously, with a different soap in every building.
The exception to the rule is franchise businesses in the retail sector, which often seem to buy their soap as part of their overall procurement agreement with the umbrella organization. McDonald’s locations all seem to use the same soap, irrespective of ownership structure.

Outliers. Disney has long used powdered hand soap in its Florida theme parks, while using liquid hand soap in is resort hotels. The theme parks are models of efficiency. Is there some operational advantage that Disney gains by using powder in high-volume locations?

I will admit that revealing all of this collected knowledge in public is… unflattering. You can imagine backing away from me slowly at a cocktail party while I rave about the tactile umami of the liquid Safeguard at Wendy’s. I’m more fun than this. Honest.

Still, I was delighted to discover several years ago that I am not alone in my observational obsession. In fact, there exists a lively trade in the kind of close inspection of the everyday world that has cluttered my mind with trivia. The ringleader of this circus is Harvard professor John R. Stilgoe, author of a remarkable book called Outside Lies Magic.

Turns out you can learn a great deal about history, culture, and even business from simple observation. Stilgoe explains that he has been teaching a course on exploration at Harvard for the past 20 years. His students and former students see interesting data everywhere:

“One has just noticed escape hatches on the floors of inter-city buses and inquired about their relation to escape hatches in the roofs of new school buses. … Yet another reports that he can separate eastbound and westbound passengers at O’Hare Airport by the colors of their raincoats. … Noticing dates on cast-iron storm drain grates and fire hydrants introduces something of the shift of iron-founding from Worcester and Pittsburgh south to Chattanooga and Birmingham.”

Soap can tell us many things – about the cost structure of a business, about its target audience, about its marketing relationships, and even perhaps about its organizational structure. You wash your hands every day. What are you learning about your intelligence practice in the process?

I’ve come to believe that thinking differently about how to find useful data might be a valuable analytical exercise all its own. I am careful to shield dinner guests from my creepy knowledge of institutional hand soaps. I have even learned that my wife will no longer even feign interest in the commonality of tail light designs among late-1990s Dodge vehicles, signaling the rise of “parts-bin engineering” among automakers. (Look at the Durango and the Caravan – identical!)

But quietly, in my cluttered mind, I know I’m on to something useful.

Contributed by Michael Sperger, Competitive Intelligence at SAP

Why Now is the Time to Bolster Your CI Network

2008-06-04T09:00:00.000-07:00

Concerns about a recession are looming as key indicators such as increased unemployment, shrinking payrolls and house price declines persist. According to The Wall Street Journal, "U.S. employers shed 63,000 jobs last month, the most in five years, reinforcing a widening view that the U.S. is falling into recession. Among economists and politicians, the debate is shifting to how deep the downturn will be and how to ease it." (WSJ, March 10, 2008)

In a soft market cycle, companies need to use every asset available to them, especially their intelligence assets. One of the most important and underutilized intelligence tools at your disposal is your own internal network of employees. Market-facing employees can provide insights on how a company can improve its competitive offerings to cross-sell, up-sell or introduce new products or services. The key for organizations is to harness these insights through a few key steps.

Identify key sources within your company and what information they have access to that can increase your intelligence on the competitive environment.
Develop a process that educates your employee network on how to share key insights that can contribute to the intelligence function.
Establish regular communication with our internal network to provide ample opportunities for sharing.

In a soft market, organizations need to be on top of their game. Companies cannot afford to overlook one of the most valuable assets available: their own internal network of employees.

Why CI Is Essential to Effective Thought Leadership

2008-05-30T07:30:00.000-07:00

A recent survey by the Economist Intelligence Unit shows that B2B companies are rapidly installing sophisticated global business intelligence systems. Indeed, 65% of survey respondents said that greater integration of external and internal business intelligence systems is the top change their companies will make to how they receive and share external information. (10 Megatrends in B2B Marketing, 2008, The Economist Intelligence Unit, March 2008)

Why? For B2B companies, demonstrating distinctive thought leadership has become the most effective marketing tool at their disposal, and survey respondents admit that richer sources of business intelligence that assess and validate industry trends are crucial for an effective and integrated thought-leadership campaign. Clearly, these executives believe that impact assessments of external information are valuable in setting their companies' marketing efforts apart from the competition. What kinds of intelligence are B2B marketers looking for? Four of the top six types cited include:

Industry analysis and forecasts
Analysis of news and key developments
Competitive intelligence
Regulations and business conditions

Whether your company provides B2B products and services or not, the implications of the survey results are clear. A systematic and thoughtful approach to competitive and business intelligence is essential if integrated marketing campaigns are to succeed.

'Soft' Competitive Intelligence in the 21st Century

2008-05-21T06:21:00.000-07:00

Blogs, wiki’s, and virtual worlds creates new opportunities for gathering intelligence. What is unique about these venues is that they are not additional published sources but a form of primary intelligence available through the 21st century’s latest electronic media.

What sets these vehicles apart from more traditional sources is that the individuals participating in these media are freely volunteering their opinions. Folks are usually more open when they believe they are interacting with their peers. The information shared in such venues is honest and raw, and not usually uncovered in traditional surveys or phone interviews, which can feel more like an official contract than an open dialogue.

So what exactly can blogs, wiki’s and the rest reveal from a competitive intelligence standpoint? Plenty. If analyzed properly, they hold insights into a wide variety of customer’s views including that of your and your competitors’:

 products, both likes and dislikes
 unique issues and challenges
 unmet needs and more.

Furthermore, the information shared is not outdated. In fact you can watch a real-time conversation unfold before your eyes on the Internet. And what’s more, you can join in on a conversation to dig deeper and learn more about a topic.

The intelligence you uncover is more of a “soft intelligence” than solid facts and figures. It reveals opinions, feelings and possible reasons and explanations behind the actions of consumers.

This type of intelligence can be just as important as hard-core statistics that come from more traditional market research. Why? It can not only provide insights into the underlying assumptions of consumers - which can explain their behavior today - but also how they are likely to act in the future. Combined with qualified market research and secondary data, it can create the ultimate holistic view of the needs of customers.

The 21st century is fast and furiously here. Don’t fall behind and miss out on some of the softer intelligence gems that can help you outsmart your competition today.

The Evolution of CI Software

2008-05-16T10:09:00.000-07:00

Just as organisms and species evolve to meet the ecological requirements and environmental conditions in which they thrive, so too do dominant business models necessarily adapt to the ever changing landscapes of the unique operating environments in which their firms compete. Just look at the evolution of the software industry over the past few years. As the supporting technologies upon which software systems were intended to run evolved over time, the dominant business model (installed, server-based solutions) has begun to give way to a more stream-lined, web-based hosted solution. Commonly referred to as ‘software as a service’ (SAAS), the new model carries major implications for traditional software providers.

Often, when we think of competitive intelligence software, we can’t help but recall the almost dauntingly sophisticated full-scale packages that dominated the CI software space until recently. As a breed, these full-service software suites proclaim to be a panacea for almost all your CI needs, from planning and information collection on to analysis and reporting, these suites offer a host of tools that are able to address nearly every stage in the CI lifecycle. Interestingly, the all-inclusive nature of these packages, responsible for their greatest strengths, is simultaneously the root of their greatest weaknesses as they are often cumbersome to install, costly to maintain, and often require a steep learning curve not to mention the need to jump through corporate IT procurement policies and lengthy roll out procedures.

For a variety of technological reasons, full service CI software packages evolved in an environment that rewarded large, installed, server or mainframe-based technology packages. As Internet bandwidths increased over time and the software as a service (SAAS) model began to gain traction, CI software firms (like many others) were slow to get in on the ground floor. This opened the door for a cavalcade of hosted CI software solutions that were more dexterous, functionally targeted, and easily implemented. In fact, because the operating environment began to favor the hosted solution business model with its low installation and maintenance costs, shorter learning curves, and ability to bypass corporate IT departments, the large, full-scale software solutions, though admittedly more feature-rich, have been put at a disadvantage.

But while proponents of SAAS will have you believe that the shift towards a new business model is paradigmatic rather than fad, the new generation of CI technology tools has much ground to cover if it is to completely displace installed, server-based solutions. Critically, most new solutions do not offer support over the entire CI lifecycle, virtually ceding the market for those in need of an end-to-end solution to companies that offer full-service suites. In addition, newer hosted solutions tend not to be able to address the needs of complex CI functions as a result of their often-limited functionality (though this appears to be changing). Nevertheless, SAAS in the CI sphere may well be the future, but CI practitioners in need of a product that covers the entire range of the CI cycle may well have to wait for such a product to show up.

To be sure, the giants of the CI software space became behemoths for a reason – they were able to offer services and features that no other tool could match in a way that made sense within the operating context in which they evolved. But just as the lumbering dinosaurs came to recede from a rapidly changing ecology, so too has the software environment evolved, causing some to question whether or not the time has come for the lumbering giants of the software world to concede their place to a novel, more nimble generation of CI software solutions.

William J. Dragon
Will is a Senior Consultant at Outward Insights, a Boston-area strategy and competitive intelligence consulting firm. He can be reached at wdragon@outwardinsights.com.
© Copyright 2008 Outward Insights

Surprise: Strategic Planning's Achilles Heel

2008-05-09T12:46:00.000-07:00

First, companies have a hard time knowing what to monitor. Given the wide range of industry participants and conditions that can be at the root of external threats, firms struggle just determining what is significant. As a result, many companies attempt to monitor everything, and build elaborate “environmental scanning” systems that crumble under the weight of the mountains of information they accumulate.

Second, even if companies are able to isolate those external conditions that pose a threat, there are few effective means by which to monitor those conditions. News alerts and filters usually are not precise enough to capture information that is truly diagnostic for assessing a developing threat. At the same time, knowledge management efforts that attempt to encourage employees to share information and observations related to strategic threats have for the most part been a failure.

The solution, I believe, lies in a system that combines structured analysis of plausible threat scenarios with a simple and effective approach to information monitoring. Both elements form the basis of a business early warning system that can allow strategy analysts to provide credible warning of external threats, thereby minimizing the effect that surprise has on executives’ ability to respond.

The early warning indicators a company will monitor may include areas such as technology disruption, competitive shifts, regulatory changes, environmental factors, consumer or social changes, economic conditions and political influences. Analysts should collect industry information from a mix of published and human sources. The information collected can be further synthesized through an IT application designed for just this purpose.

As analysts determine that certain indicators are behaving in such a way so as to present a developing threat, they can generate early warning alerts that argue for a particular strategic option – ideally one considered during the scenario-planning phase. This way, the element of surprise is almost completely eliminated from the equation, and managers can focus on deploying a response.

The Problem With Competitive Intelligence Training

2008-04-15T10:23:00.000-07:00

As the Society of Competitive Intelligence Professionals (SCIP) 08 Conference gets ready to kick off this week, it has me thinking -- can we improve the ways corporate CI practitioners are trained? Finding the right CI training formula has been one of the most persistent challenges of the CI community for a long time. No one seems to have been able to come up with a consistent approach to training new practitioners, and further developing experienced ones. A good CI training program has to transfer and reinforce the skills necessary to excel at CI, and provide employers with well developed CI practitioners. To date, the profession's approach to training has been inconsistent to say the least, comprising a mix of one-off courses, informal networking, and other piecemeal approaches.

What can we do to fix this? Do business schools need to be more involved? Should SCIP become a certifying body for the CI profession? What are the essential skills all CI practitioners need to possess? We welcome your thoughts.

When does a brand become a piece of Americana?

2008-03-31T12:41:00.000-07:00

In marketing strategy courses throughout the country students learn the importance of managing a brand or product by its stage in the product life-cycle. It is drilled into their heads that every product will inexorably move through each stage of the cycle until it is ultimately cast into the dustbin of irrelevancy. They learn that investing heavily in advertising and promotion in a product's introductory and growth stages is an important determinant in whether the new product will get off the ground. They also learn that cutting back ad spend as the product progresses on through maturity and eventual decline is often just as important. But what they don't learn -- perhaps because it countervails existing dogma or simply because it is seen as anomalous -- is that some brands are so indelibly linked to our unique American consciousness that their absence from the marketplace is near unfathomable.

In fact, we recently came across such a phenomena with a client in whose portfolio resides a brand so iconic that it is difficult to imagine a world in which it does not exist. This raises a variety of questions: Do iconic brands prevail simply because they have stood the test of time? In other words is it inertia that keeps these brands alive? And if so, how immune to the product life-cycle are they? (And perhaps more importantly, how do I get a job as one of these tried and true products brand manager?) Jocularity aside, what does it take to create a brand so strong that it becomes inextricably linked to our collective consciousness? We know there is such a thing as 'too big' to fail. Is there such a thing as too old to fail? And if so, what does that mean for the organizations that own these brands? What responsibility does that thrust upon them?

We spent many a night pondering such imponderables (and came up with largely nothing to show for it) and now we would like to pass them on to you. So in a nutshell: what does it take for a brand to become a piece of Americana?

CI in a Down Economy

2008-03-20T07:29:00.001-07:00

We just published our March CI and Strategy newsletter, Looking Out. In it, Karen Rothwell had a piece on the importance of maintaining CI capabilities in a down economy. What role is CI playing in your companies amid the economic uncertainty we are facing? Is CI becoming a more important tool to help navigate through a possible recession, or is the CI function on the budget chopping block?

--Ken

How to Reinvigorate CI Skills

2008-03-18T13:59:00.000-07:00

If you'll allow me to indulge a bit, I just want to say that today, I am more physically fit than I ever have been, having just completed a Marine Corps style outdoor boot camp. I performed more push ups, squats and sit ups that I cared to do in one lifetime. Why? Not because a six-foot-tall ex-Marine drill sergeant was yelling at me, but because I decided that my old workout routine wasn't helping me achieve my fitness goals, and that it was time for a change to avoid getting complacent.

Do you rely on the same analytical techniques you have used since college or worse, none at all? Then, it's time to revamp your competitive intelligence "basic training." CI Analysts must constantly look for ways to enhance their skills through different, and more challenging, training. Consider giving your mind a new training regimen that won't involve chin-ups or running but instead a refresher on the basics or an introduction to new tools that will whip it up into the best shape possible, ready for any intelligence challenge that comes your way.

Most of us have experience with some of the core analytical techniques such as Porter's Five Forces analysis. But, what about some of the less popular analysis techniques that provide tremendous value in certain situations? Consider win-loss analysis, a straightforward technique for analyzing what approaches and strategies help your firm win or lose business against competition. Both techniques, and others, can help your company benefit from novel strategic insights that your "tried and true" methods may be failing to deliver.

2008-03-14T08:16:00.000-07:00

I'd like to attend David Rogers CI Financial Intelligence class, I've heard good things about his session. Also interested in hearing Tata Group speak on 'Technology possibilities at the bottom of the pyramid."

SCIP 08

2008-03-11T08:49:00.000-07:00

Who's going to the SCIP 2008 conference in San Diego (April 14-17, 2008)? What sessions look good? For those who have been to SCIP conferences in the past, how do you think this one will compare to past sessions?

Welcome to Outward Insight's Competitive Intelligence Weblog

2008-03-07T12:43:00.001-08:00

Welcome!

Outward Insights is an intelligence and strategy consulting firm that provides its clients the skills, tools, and counsel they require to anticipate external threats, identify opportunities, and develop strategies to achieve leadership positions. We believe that organizations have tremendous opportunities to use internal and external information more effectively, and we equip our clients with cutting-edge tools and methodologies to assess external information, derive insights, and formulate winning strategies. We work in a way that fosters teamwork, skills transfer, and continuous learning. We measure our results by how well we enhance our clients’ skills and capabilities. An important piece of which is creating a forum through which our expertise and insight can be conveyed to our clients. As such, Outward Insights will be regularly posting to this blog to offer what we hope will be valuable insight to our clients and anyone else who may be interested in Competitive Intelligence.

We urge readers to participate in the discussion and will do our best to respond to questions and comments regularly.

Once again, welcome. We hope you enjoy!

~ Outward Insights