A small-to-medium size business (SMB) is different from a large corporation in many ways (I don’t think that I am breaking any news by this statement). An SMB views the world differently.

Aside from the obvious facts that an SMB has smaller revenues, fewer people and (probably) a narrow product or service scope, there are other less obvious differences in strategy issues. Here are a five common strategy differences.

1. Strategy Responsibility: The responsibility for strategy is often shared among a small number of senior managers rather than vested in a named function (e.g., vice president of strategy). It is a part-time, diffuse task.
2. Strategy Definition: The company completes few formal strategy exercises. Emergent strategy is assigned much greater value. That is, strategy is “recognized” rather than prescribed.
3. Decision-Making: Decision-making speed is valued over reflection. Rapid adaptation and reaction are the currency of the day.
4. Tactical Activities: Day-to-day pursuit of customers, creating products, closing deals and operations consumes management’s time. In short, tactics dominate strategy.
5. Internal Focus: Attention to the external environment is narrowed to match the SMBs near-term customers and prospects. There is less attention paid to broad trends, unexpected competitive threats and tangent opportunities.

All right, what about the SMBs that do think that strategy and competitive intelligence are (or might be) important? What is a feasible set of practices for them to initiate and sustain over time?  For whatever stage of strategy and competitive intelligence maturity they find themselves, how do they move to the next stage?

Before talking about the stages, there are four meta-principles for SMB competitive intelligence practices.

I. Use a constrained, systematic development of competitive intelligence to support strategy decisions.

Why constrained – simply because every SMB deals with resource limitations. Typically, money is tight and management attention is precious.  The systematic approach identifies the important fundamentals and suggests an order for their development. Do certain things first and move to the next steps when you are ready is the key. Add to the ordered steps a sense of accountability. Accountability sets the bar for competitive intelligence to affecting important strategy decisions. Otherwise, why do it when there are so many other things to do?

II. Employ the power of a shared visual focus.

“Shared visual focus” means that it is incredibly useful to capture important thoughts in a manner that they can be seen and shared by many people. Then, those people have the chance to challenge, improve and adopt the ideas. This is essential for an SMB since there is a high cost for inefficient strategy. Many times the strategy inefficiencies could have been avoided with simple communication approaches.

III.  Avoid the perfection standard.

It is admirable to have high standards until those standards prevent you from starting something important. For instance, if you need “perfect” intelligence and nothing else will do, you are unlikely to get started when intelligence will only be “good.” An SMB might want to know everything, to never make a mistake and to eliminate all risk. These are lofty aspirations but the vast majority of competitive intelligence will fall short. It is far better to start moving with something “good enough” so that you can get to the “improving” part sooner.

IV. Be succinct.

Verbosity is not a virtue for an SMB.

In fact, an SMB seldom uses “heavy” processes (when there is a choice) or exhaustive documentation. These are luxuries (burdens?) that cost too much and deliver too little value. Instead, a short, to-the-point summary of critical information is preferred. Hence, when I talk about specific competitive intelligence practices, each can be done by hand (i.e., requires no tools or automation) and completely represented on a single sheet of paper. Ideally, a wall or whiteboard can hold all of the competitive intelligence information derived from the practices.

Five Practice Stages of Competitive Intelligence for SMBs

If you are already doing the first one or two steps, move to the next higher step to receive more value from competitive intelligence.

Step 1: Know Yourself

Perhaps this is an odd way to start thinking about competitive intelligence. After all, is not competitive intelligence about the environment? Are we not supposed to look at our competitors? The answer is “yes” to both of those questions. However, an SMB will soon discover that much competitive intelligence is relative. That is, the way to interpret the environment depends, in part, on comparison to a fixed position. For an SMB, the fixed position is their company. To the extent that the company, its vision, capabilities, plans, products, etc., are well understood, better lessons can be drawn about the environment and competitors.

Here are five questions to answer that will help an SMP “know itself.” (Remember that the answer to each question should require no more than one page.)

Step 2: Identify Competitors

There are two negative answers to “who are your competitors?” One negative, usually unhelpful   answer is to say that there are no competitors. The other negative answer is “I don’t know.” On the other hand, it is extremely positive to know how customers contemplate spending their money when they decide not to buy your products or services. The customer makes a financial choice that affects the SMB directly and knowing why can lead to changing a future customer decision. An SMB should start with their direct competitors. A direct competitor sells a similar product or service. “Alternatives” or substitutes are a little less obvious. They are choices that can be made instead of a product or service. For instance, two airlines are direct competitors. However, video conferencing over the internet to connect friends and family may obviate the need for travel for some people. Create one page for each of the following.

Step 3: Compare Strategies

One of the three fundamental competitive intelligence questions is “so what?” (The other two questions are “what?” and “now what?”) That is, having answered (at least partially) the “what is happening?” question, it is critical to move to the meaning of what is happening. Interpretation lays the groundwork for action (see the next step). One type of interpretation deals with the strategies of competitors and an in-depth comparison with the SMB’s strategies.  Here is what you do. Pick the most important competitors that represent the biggest threats to your success. For each competitor, complete a one-page summary of their strategy that covers four points. Do the same for your company. Review the strategy descriptions with the results from Step 2. This exercise helps refine the SMB’s value proposition and competitive positioning. It sets the stage for deciding what to do (better).

• Drivers: What are the goals, values and needs of the company?
• Assumptions: What does the company assume to be true about the industry, competition and its own capabilities?
• Capabilities: What resources, assets and talents does the company possess to allow it to win?
• Strategies: How is a company actually competing to win?

Step 4: Develop Options

Understanding leads to options. Options are the basis for decisions and good competitive intelligence is a key foundation for a variety of decisions. In fact, though competitive intelligence may not be a separate function or a named assignment, it is hard to imagine an important decision being made without competitive intelligence (even if it is the ad hoc type). While there are many kinds of decisions, three types are particularly important.

• Defensive Tasks: The comparative nature of competitive intelligence helps the SMB to understand both its competitors’ value and its own value. The latter realization makes clear what assets need protection. An SMB needs to know explicitly what to protect and how to protect it. There are many protection methods and each incurs costs. Thus, an SMB needs to choose the right methods to protect what is most valuable.
• Monitoring: Some SMBs are satisfied with a competitive intelligence snapshot. While this may be valuable, it relevancy diminishes as changes occur in the environment. It is better to think in terms of an ongoing competitive intelligence “video.” A video captures the story and the changes. Investing in monitoring need not be expensive. Simple methods exist to watch for key competitive events. An SMB needs to decide what to watch for, when to make observations and how to review it over time.
• Gaps Closure: Sometimes an SMB leads, sometimes it follows. “Following” implies that one or more competitors have distinct advantages. For instance, the competitive products may be cheaper, more powerful, easier to use, etc. These advantages are “gaps.” An SMB needs to know which gaps are significant barriers to its success. That knowledge is the basis for intentionally devoting resources to close the gap. Competitive intelligence provides excellent insight into identifying gaps, their significance and the priorities for their closure.

Step 5: Measure Results

There are two categories of results attributed to effective competitive intelligence. First, there are quantitative financial results. For instance, revenues, profits or market share may increase due to competitive intelligence insights. Though this is an excellent outcome, it is sometimes an elusive goal to attribute all such improvements to a specific competitive intelligence insight. After all, even when competitive intelligence improves a strategic decision, there are many operational issues to resolve to realize the benefit of the insight. A second measure is qualitative. Has competitive intelligence improved the decision-making confidence of senior management? Did the competitive intelligence decrease important execution or resource allocation risks? How did focused competitive intelligence efforts improve the strategic alignment within the SMB? A positive answer for any of these questions is an endorsement for the value of competitive intelligence.

Conclusion

There you have it – an ordered set of competitive intelligence practices for an SMB. Doing all of them at once is a mistake when an SMB is beginning its competitive intelligence efforts. Start from a foundation and build up. Make sure that everyone in the company is aware. Evaluate the success by how competitive intelligence affects important decisions. And, whatever else you do, get started. If you do not, know that your competitors may be ahead of you because of the insights that they have gained.

The key is to recognize that SMB’s already are doing competitive intelligence whether this is recognized or not by management.

Their competitive intelligence efforts may be ad hoc, incomplete or ineffective. Nevertheless, competitive assumptions are made and used.

Could it be done better?

From this point, things move faster. It is easy to talk about the important questions that every SMB must answer. (My post “Competitive Intelligence Value for SMB’s” identifies these questions.) “Wouldn’t you like timely, credible information that helps you improve your results and decrease your risks?” I ask. That is easy for them to answer. “Of course,” they reply though there is some mystery about how such information can be obtained within their budget and capabilities.

“Not to worry,” I tell them. “Once you know your competitive intelligence priorities, you can allocate your time and resources according. Then, for the priorities that you act on, there are specific approaches that you can tailor to your budget.” (more about this in a later post)

I have their attention now. Before I suggest priorities, I set the context with some questions.

“Is your industry competitive? Does knowing about competitors and the environment help you decide your strategies? Assuming you had valuable information, would you use it?”

Again, it is easy to answer “yes” to these questions. Now the issue becomes how to apply limited resources more effectively. Hence, I have developed my Top 10 list of priorities for SMB’s. Competitive intelligence supports each one.

1. Know your customers. Miss this and you will “wander in the wilderness” for a long time. Nothing is more important. Competitive intelligence clarifies what customers care about, how they make decisions and where to find them.
2. Establish a viable business model. One success is difficult enough. Sustained success is much more so. The business model is about enabling long-term success. Competitive intelligence characterizes possible models, establishes way to measure success versus the competition and helps manage threats to the chosen approach.
3. Create your product and/or services. An SMB makes big bets on their offerings. If chosen wisely, they fill a valuable customer and market need. Otherwise, a good idea may languish due to its poor fit or uncertain use. Competitive intelligence compares what is possible with what exists. A methodical analysis then points toward valuable differentiation.
4. Identify the current competitors. Customers have choices. Sometimes they chose a similar offering from another company. Other times, they have alternative ways to spend money to accomplish what they want. Competitive intelligence explains why customers chose competitors and suggest ways to overcome their advantages.
5. Find new opportunities. A big part of new opportunities is finding new customers for the existing offerings. After that, the challenge is to find new markets for the offerings. Competitive intelligence maps adjacencies and shows how they are being served today. Next steps for the SMB emerge as gaps are identified.
6. Test your strategies. Being right in every decision seems impossible. Given the likelihood of mistakes, it is important to recognize them as soon as possible and make a new decision. Competitive intelligence suggests external measures of success for strategic decisions by observing customer and marketplace reactions.
7. Align the organization. When people have the same vision, understanding and goals, they work together better. Since, by definition, SMB’s are smaller than large companies are, effective alignment of every person is more critical to survival, never mind success. Competitive intelligence describes competitive challenges succinctly, explains how employees must be involved in data collection and highlights measures of competitive success.
8. Balance your approaches. SMB’s have an overwhelming operational challenge. Their challenges force them to be tactical, internal and short term in focus. Therein a considerable danger exists. That is, the company may ignore or devalue the external environment. Competitive intelligence counters this tendency by asserting that the external environment must be understood, explaining how the company can do so and suggesting models that can be maintained describing the competitive environment.
9. Map your industry. One day the SMB broadens its ambitions. The focus shifts from a small number of competitors to a larger set. Furthermore, other factors become important including trends, suppliers, substitute products and channel partners. Competitive intelligence frameworks put these industry factors into context in a way that makes confident decisions possible.
10. Track important changes. Most people recognize that changes occur constantly. Indeed, it is the successful responses to change that distinguish successful SMB’s from the unsuccessful ones. Even better, those SMB’s that anticipate change and/or react fastest gain great advantages. Competitive intelligence tracks environmental changes, emerging threats and competitive gaps to give management the maximum time to adapt.

My suggestion to SMB’s is to define a list of priorities similar to this Top 10 list. Then, as their resources permit, they should address them (starting from their first priority) sequentially.

SMB’s need competitive intelligence. Far from being something to be feared or avoided, it is a critical component for their continued success. It is not spying. It is not something just for large companies. And it is not optional.

What do you think?

There is another world that is quite different.

Lately, I have spent more time with small-to-medium size businesses. These companies have emerged from the start-up phase and may have revenues between $10M-$100M. Their issues are different from the conglomerates. Typically, the product line scope is narrower. The markets served are fewer. Access to capital is sometimes difficult. While some business processes are beginning to emerge, they remain less important than the leadership’s intuition. There is an ever-present sense of vulnerability to competitors. Employees are stretched to perform multiple roles. Documentation, standards and overhead are minimized whenever possible.

Though they are different from large companies, SMB’s face challenges that require an understanding of the competitive environment. Competitive intelligence is important for SMB leaders.

Commonly, there are five critical strategic imperatives for SMB’s. Competitive intelligence, properly tailored, provides value for each imperative.

1. How to connect to customers. This is the most important task for an SMB. Often the first set of customers is the most difficult since there is no well-known brand backing the first products. Finding a customer and closing a sale dominates management thinking. Competitive intelligence helps to clarify a market need and determine how that need is presently being served. In practical terms, this means understanding how existing and potential customers perceive the currently available products and/or services. With that understanding, an SMB may refine their own offering to provide something valuable to customers.
2. How to focus to resources. Smart, motivated people run SMB’s. They are capable of doing many things and serving many types of customers. However, unchecked, that versatility is often a trap. The temptations to do more, expand quickly, address multiple markets prematurely – spread the company too thinly – have sunk many businesses. Competitive intelligence helps to determine the right ways to focus and the right time to grow. For focus, determining and refining the SMB’s value proposition and all that flows from it is critical. Equally important, is illustrating the market potential of focus. CI analysis can analyze profit pools and suggest how to exploit competitor vulnerabilities that justify patient focus.
3. How to grow to the next stage. On the other hand, the impulse to grow is powerful and, at the right time, is appropriate. The question is not whether to grow. Rather, the key questions are when and how. Extending the core capabilities, customers and values of the SMB by choosing the right timing and strategy to build on what already is established is key. Competitive intelligence can support growth plans through examination of adjacencies. Finding the right adjacencies to the company’s core is a fundamental principle for successful growth. This involves characterizing the existing business and comparing it thoroughly to markets, customers, products, services, etc., that are related but different. Identifying and assigning relative risks to each growth possibility is a critical CI service to SMB management.
4. How to protect current business. Conditions change rapidly. Competitors offer alternatives regularly to existing SMB customers. Customers, for their own reasons, constantly seek better terms and value from suppliers. Meanwhile, an SMB yearns for revenue and profit stability. Growth feels like a luxury when the current business is being attacked and retaining hard-won customers is essential. Competitive intelligence helps by identifying and describing competitive threats. Knowing the significance and likelihood of a each threat is invaluable since it allows an SMB to defend its business across a narrower front. Concentrated defense is far more effective and, in reality, is the only practical approach for an SMB.
5. How to prosper the business. At the end of the day, most SMB’s are concerned with cash flow and profit. After all, without adequate cash flow, it is impossible to meet the payroll. Without profit, an SMB cannot survive for long. This concern is different from the one about growth. Many SMB’s fail when they pursue growth without profit. Competitive intelligence is used to benchmark business models. Understanding how similar competitors are profitable can be instructive for an SMB. More fundamentally, competitive intelligence helps determine effective strategy. The classic determination of low cost versus differentiated is informed, in part, by an understanding of the competitive landscape. An SMB with a clear understanding is more likely to make the right choice.

I admire people that run SMB’s. This task is not one for the faint of heart. It is complex, risky and requires more personal growth than most corporate jobs. However, few things are as invigorating as creating something from scratch and making it successful.

Competitive intelligence is useful for SMBs. Later I will talk specifically how an SMB might do competitive intelligence within their financial, time and resource constraints.

What do you think?

It is the way of the world, at least in knowledge positions within today’s economy.

There is another side, of course. Some people are completely convincing without the knowledge or experience to support what they advocate. Their self-confidence radiates within a room and casts a spell. People agree with this kind of person implicitly and are willing to follow him or her. Later, it may be clear that their confidence was misplaced. Then, a sense of betrayal replaces the false confidence. Convincing, yes, but (in the long term) they are not credible.

Competitive intelligence professionals routinely deal with knowledge. There are facts about the competitive environment, advanced data collection tools, powerful analytical models and insightful interviewing approaches. Awash with information, a competitive intelligence project usually ends with some type of report or presentation. Then, the facts, interpretations and recommendations are displayed for a sometimes-skeptical senior management audience. Attitudes of “convince me” and “prove it” often challenge the competitive intelligence professional’s performance and credibility. The obvious temptation is to emphasize expertise and exclude doubts, right? After all, is not humility a sign of weakness?

Unsurprisingly, there should be a balance between honest humility and expressed expertise. This balance is not contrived. Rather, it reflects what is true for most people. That is, the more that we know, the more we realize that we do not know. Put another way, whatever we know today, it will not be enough for tomorrow. Hence, we need a way to live with ourselves while delivering valuable services to others. We need to be able to explain what we do not know with as much credibility as we covey our certainties. (See my article on “The Right Answer to the Trap Question” for one approach.)

How do we do that? Here are seven guidelines that I use to balance my expertise and my humility.

1. Know a Lot – This may seem like an odd way to start the guidelines but there is no way to dance around the simple fact that you must know a lot about your business, customers and competitive intelligence. Knowledge is essential for long-term survival and you should set specific objectives for acquiring it over time. Complacent ignorance will not work.
2. Learning Disposition –For the many things that you do not yet know, you should demonstrate a ready willingness to learn. Insecure people are embarrassed when others point out their ignorance. Instead of blushing, practice sincerely thanking people that identify gaps in your knowledge. Follow the thanks with a request for them to help you learn about what is missing and then commit to integrate the new information as soon as is possible.
3. Discover Boundaries – This might sound a little defensive and it is surely a sensitive task to execute. Simply, find out what others do not know. Gently compare their knowledge gaps with your own. Offer to help them gain important knowledge with the implicit thought that they can return the favor. In short, build a relationship that focuses on moving forward together.
4. Assess Confidence – I have heard it said that we are only certain about the past. That is not true. You need only read competing histories of some major personality or event to understand that even reputable historians cannot agree on one account. Even more, the future is unclear. Therefore, practice succinct assumption summaries for each communication. Then, give a confidence assessment for each major analysis and recommendation. These steps will relieve you from mistakenly asserting certainty and involve others in richer discussions of meaning and trustworthiness.
5. Convey Proactively – I know from watching courtroom dramas that the smart lawyer anticipates the toughest questions for his or her client and intentionally asks them first. That approach blunts the dramatic confrontation and shifts attention to the rest of the story. In competitive intelligence, why not feature first what we might fear most. That is, convey proactively the weaknesses of the analysis or recommendations. This only works when there is a concomitant plan to remedy the weaknesses.
6. Live for the Long Term – It is easier to think of a question that has no current answer than to have answers for every possible query. Thus, everyone will experience the moment when a good question is asked but no good answer is known. Take a long-term view and do not dwell on the incident. If you are adhering to the other guidelines, you either have or will build the personal credibility that makes survival possible. Understand that sustained performance usually trumps an awkward moment.
7. Accept Limitations – Finally, feeling peace in your role means that you accept that satisfying all customers is unlikely. Most people and organizations have finite resources and bandwidth. One customer’s priorities may be mysterious or unwise to other equally high-ranking people. When appropriate, appeal to common values of the organization and express interest in working with others later. Be sure to keep open communication because today’s critic may be tomorrow’s funding customer.

Humility and expertise are not opposites. Both exist in a competent competitive intelligence professional. When demonstrated appropriately, they signal an authenticity to customers that they trust and value. On the other hand, overemphasizing one to the detriment of the other actually signals weakness.

Keep them in balance and prosper.

So, we mourn the passing of Palm- subsumed into the HP technology behemoth. How did this happen? What are the implications for HP? How does it affect others? Competitive intelligence plays a role in answering such questions.

HP’s Palm Plans May Leave Microsoft Out in the Cold

There are many reasons to acquire a company. It could be that the target company has many desirable customers, unique access to certain market segments or a valuable brand in a specific customer demographic. Who tracks such things about competitors or potential acquisitions? Apparently, HP does. (Asset Tracking, Four Corners Analysis, Intellectual Property Evaluations)

“We looked to acquire them for the WebOS” and Palm’s portfolio of patents, Todd Bradley, the executive vice-president in charge of HP’s personal systems group, told Bloomberg News the day the acquisition was announced. HP has said it wants to make Palm’s WebOS, which has been praised for its intuitive user interface and ability to run several applications simultaneously, the basis for a new generation of smartphones and tablet computers that would compete with Apple’s (AAPL) iPhone and iPad, as well as smartphones from Research In Motion (RIMM) and Nokia (NOK).

Suppose you were an HP partner, would you care about this acquisition? Microsoft and others should care. (M&A Analysis, Key Personnel Tracking, Executive Relationships)

HP’s acquisition of Palm is the latest speed bump in the complicated relationship between Microsoft, the No. 1 PC software maker, and HP, the world’s largest computer maker. HP has developed its own user interface technology for desktops and laptops that run Windows, in a bid to make computers easier for consumers to navigate. Now it’s poised to pursue its own direction in the smartphone and tablet markets at a time when Microsoft is trying to gain share in the growing categories.

Why buy and maintain their own OS instead of using something like Android? HP-Palm buy FAQ

According to HP’s Todd Bradley, Executive VP of the Personal Systems Group, HP believes that webOS will be the basis of several classes of mobile devices — smartphones, touch tablets and potentially netbooks all of which are generating big consumer demand. HP thinks it can offer a unique HP experience across all of them, tied into emerging cloud-based services.

Was this acquisition foreseeable? There are several reasons why this might have been forecasted.

1. Palm declining fortunes has been obvious for some time. Their market share has been eroding since the heyday of the Palm Treo. With a declining market share and the ascendency of Apple, Palm had very little space to operate. They had to do something. (Five Forces Analysis)
2. Palm’s carrier relationships (very critical to market success in the US) were weak. The launch on Sprint of their latest smartphones was a sign of weakness. Even though Verizon eventually offered the Palm smartphones, it was too little too late. (Ecosystem Map)
3. Palm continued to innovate despite its poor financial performance. The WebOS product and multitouch display technology (fielded despite patent threats from Apple) are valuable. (Financial Analysis, Patent Portfolio Tracking)
4. Many key people at HP have Palm roots. Never underestimate the importance of relationships since deep relationships often lead to new business opportunities. (Relationships Map)
5. HP had a need. Despite a history of Microsoft-based phones, it does not have a very successful smartphone strategy. Consider how Android-based products (not just phones) are emerging, the sputtering Microsoft mobile products and it becomes apparent that HP either had to make a move to own its destiny or move lock-stock-and-barrel to Google’s camp (i.e., Android). (Five Forces Analysis, Scenario Planning, Strategy Map)

What is next? Look for Dell to make a move. Since their acquisition of Perot Systems, Dell is starting to act more like HP though they do not yet have the scale or scope of products enjoyed by HP. Also, watch what HP does around an online store (a la iTunes). They risk marginalization by Apple, RIM and Google without a convincing applications strategy for consumers.

What do you think?

For example, take the recent New York Times article, “Apple Buys Intrinsity, a Maker of Fast Chips” at http://www.nytimes.com/2010/04/28/technology/28apple.html, about Apple. Apple, flush with cash and the serial hits of the iPod, iPhone and iPad, purchased a chip design company. What does this mean? How does it fit with previous Apple moves? How does it confirm or change Apple’s perceived strategy? What might their next move be?

These questions are fundamental questions for someone competing with Apple and the core domain of competitive intelligence professionals.

To answer the questions, start with some background observations.

1. Apple processor choices are strategic decisions. Remember when Macs used Motorola (and then IBM) processors. As Intel processors began to outpace PowerPC in price/performance tradeoffs, Apple switched. The impact has been significant for Apple and its products. For the iPhone, Apple chose an ARM-based design (manufactured by Samsung). This was also strategic (but not differentiated) because the low power ARM architecture is the de facto standard for low powered, wireless devices.
2. Apple prefers to control design. Indeed, it is easy to argue that attention to design issues primarily differentiates Apple. This shows up in everything that Apple does from software to packaging. Related to design, Apple prefers a high degree of vertical integration. That control allows for specific performance and functional capabilities that are difficult for less integrated companies.
3. Apple has mastered media commerce. Starting with the iPod and music, now continuing with the iPhone (apps, video) and through to the iPad (eBooks), Apple uses the iTunes model to aggregate content, simplify the consumer experience and enable developers. Along the way, Apple takes its share of each transaction while driving sales of its own devices. The next logical expansion of selling ads to the captive Apple audience has already been announced.

What does all of this have to do with Intrinsity?

In 2008, Apple purchased PA Semiconductor. Even though PA Semiconductor specialized in PowerPC architectures, it was thought that Apple wanted their low power design expertise for future wireless device processors. Also in 2008, Apple purchased an architecture license from ARM. This meant that Apple has the rights to the internal design information for specific ARM cores and had the right to extend or modify those designs. (Others companies such as Texas Instruments and Qualcomm have architectural licenses for some ARM cores.)

Fast forward to 2010 when the new iPad included an Apple-labeled A4 processor. It all makes sense. The PA Semiconductor team must have designed an ARM based processor for Apple. (Technical Intelligence, Product Teardowns, M&A Activity)

The people familiar with Apple’s situation say that efforts to create a new chip for mobile devices from the ground up are stalling. In 2008, Apple purchased another chip maker, called PA Semi, for $278 million. That start-up also specialized in making fast, low-power chips.

But wait. Maybe all things are not well for the PA team at Apple. (Key People Tracking, M&A Activity, Competitor Strategy)

But a number of the PA Semi employees have left Apple — many of them disgruntled about their compensation, according to people with knowledge of the situation who were not authorized to speak publicly. Google, in fact, bought a start-up called Agnilux earlier this month filled with PA Semi engineers.

And how did outsiders first notice that Apple might be doing something new or different? (Key People Tracking, News Tracking, Primary Source Relationships)

Word of the acquisition began to leak out after technology trade publications noticed earlier this month that a number of Intrinsity employees had started to list Apple as their employer on the social networking Web site LinkedIn. Neither company, however, would discuss their relationship.

Now things get a little clearer and two things become apparent.

First, it is important to realize that although Apple has marketplace momentum and popularity, they are not infallible. It appears that they have the common difficulty of integrating acquired companies successfully into their strong culture. A strong counter move for its competitors is to attract the key leaders of the acquired companies. Who is good at doing this? Google. Google does many more acquisitions than Apple and has a more open culture.

Second, Apple has shown a willingness to spend money to increase its vertical integration in ways that similar companies do not. For instance, RIM, arguably Apple’s biggest smartphone competitor, does not have chip design capabilities. Buying Intrinsity means that their technology is no longer available to Apple competitors. Locking competitors out of performance enhancing technology gives Apple a competitive advantage. The Intrinsity resources also may mitigate the people moves from the PA Semiconductor group.

What is next?

Remembering that Apple is a media company, look for them to purchase companies that enhance media delivery or performance. For instance, a prime target for Apple would be the vendor of the graphics acceleration core in the A4. Acquiring Imagination Technologies would have a profound impact in the mobile space since many other semiconductor vendors rely on their accelerators. (Technology Trends, Early Warning, Scenario Analysis)

The story goes on and on. Apple, Google, RIM, Samsung, TI, Qualcomm and others are engaged in a fascinating commercial contest in the Wireless business. Each makes moves and the others counter. All have patterns, capabilities and limitations. Wrestling with each results (hopefully) in a winning formula.

Competitive intelligence is critical throughout the process. It helps weave a story through the seemingly random events over time. It helps explain what is happening, why it matters and what counter moves are possible. It helps leaders lessen surprises, gain confidence in decisions and get better results for their companies.

Although competitive intelligence might help with cost saving decisions, its better use is to support strategic growth decisions. After all, strategy is forward-looking, intimately concerned with competitiveness and inseparable from significant risk/reward decisions.

It is easy to find books on growth strategy -many more, in fact, than for competitive intelligence. However, this disparity in academic or executive treatment does not obviate or lessen the need for competitive intelligence. Indeed, strategy books are replete with references to the role of competitive intelligence in strategic decision-makings.

Take an example from Chris Zook’s series of books on growth strategy. In three books – Profit from the Core, Beyond the Core and Unstoppable – Zook synthesizes ten principles of core growth and redefinition.

1. Start by Defining the Core
2. Obsess on the Full Potential of the Core
3. Fully Value Leadership Economics
4. Map Out Adjacencies to the Core
5. Recognize the Power of Repeatability in the Core
6. When Lost, Return to the Core Customer
7. Remember the Focus-Expand-Redefine Cycle of Growth
8. Exploit the Power of Hidden Assets
9. Think of Capabilities as the Building Blocks of Renewal
10. Don’t Underestimate the Power of Focus

Clearly, some of his principles have an inward focus. For instance, defining the core is self-examination of what a company fundamentally does best. Note that Zook expands the notion of core competencies to include the basis for strategic differentiation, the sustainable economic model and the boundaries of the core.

However, most of the principles include (at least implicitly) a requirement to understand the competitive environment. For example, understanding the full potential of the core requires an assessment of the commercial prospects of the core business. This is impossible in isolation. Thus, competitive intelligence can contribute essential understanding of the competitive environment to scope the opportunity. This is more than a total available market calculation since it includes an overlay of other forces that affect potential success.

In almost every principle, understanding the competitive environment adds confidence to the strategic decisions made by management.

How does a competitive intelligence person or group contribute this value? Here are three important steps.

1. Relationships. There is no substitute for knowing the strategy decision-makers and being trusted by them. If either of these conditions is not true, stop reading and start working to remedy the problem.
2. Context. Make sure that you understand the same strategic context as management. Services offered in the shared context are valued. Similarly, brilliant but unlinked analysis is not tolerated by busy managers. It wastes their time and damages your credibility.
3. Models. Competitive intelligence professionals have a rich set of models that aid in understanding the competitive environment. Study and apply the tools described in the Bensoussan and Fleischer books. Whenever you can bring clarity and insight to the decision-maker, your input will be valued.

When there is not a formal competitive intelligence input for strategy, it means that the decision-makers are doing competitive intelligence informally. It is possible that they are doing a great job. In my experience, it more likely means that they are missing valuable insights. Competitive intelligence, well practiced, can be incredibly helpful to them.

What do you think?

Beware of consultants (like me) that tell you that they know what to deliver and how to deliver it to your organization. Be especially cautious when the consultant knows a lot about competitive intelligence but only a little about your situation. Maybe, after you have talked with them awhile, it is more reasonable to accept the opinions of an outsider but only after they have demonstrated knowledge about your competitive challenges.

And what are your competitive challenges? Who cares most about these challenges?

Common challenges are growing the business, reacting to a competitors’ initiatives, clarifying a product or market strategy, deciding a business strategy question and cutting costs effectively. In many organizations, strategists of one type or another are the decision-makers. They are responsible for overcoming these important challenges and, thus, are the customers of the related competitive intelligence.

Competitive intelligence has a significant role in addressing all of these challenges.

Whether or not an organization recognizes or values a distinct competitive intelligence person or group, they still must consider competitive intelligence issues. Of course, this often happens in an opaque, ad hoc fashion in the decision-maker’s mind. This can be quite effective or disastrous depending on the expertise of the strategy decision-maker and the complexity of the challenge.

Which leads me to the fundamental response taught to me many years ago by my graduate school marketing professor.

His answer in response to any question we asked was, “it depends.” You might ask him how to create a new product line. His answer, “it depends” rather than “apply these five steps to succeed.” How do we select the right pricing strategy – it depends. We suspected that he gave this answer so that he could appear to be knowledgeable about any question. Indeed, this was a disorienting answer for most of us and we did not know how to respond to him effectively. Later, we understood that the key was to simply say, “it depends on what and to whom?”

The answer to that question unleashed a series of relevant dependencies that taught a superior lesson versus the simple recitation of some magical five-step formula. (Maybe he was smarter than we thought at the time.)

Effective competitive intelligence is similar. Understanding and responding credibly to dependencies is the great value to CI customers. Furthermore, describing, delivering and contextualizing the information in the right way for each customer determines how successfully the information is used. Because good competitive intelligence helps decision-makers make better decisions, the customization skills are essential for successful CI practitioners.

Consider first the case when little or no customization occurs. A CI practitioner may employ prescribed approaches for many problems. Having trouble with a competitor, take two SWOTs and call me in the morning. Trying to understand the industry, cite Michael Porter and all is well. Need to monitor the news, nothing is better than filtered RSS feeds. While there are many standard and helpful solutions (and each has its place in a comprehensive CI toolkit), rote problem solving approaches consistently are not nuanced enough for complex business decisions.

The problem comes because no dependencies are considered and insufficient customizations occur.

Imagine that you (or a consultant) attempts to complete a CI project without knowing the answer to one or more of the following questions (there are many more questions like these).

• What puzzles them about the competitive environment?
• How does the customer like to receive information?
• What has worked (or not worked) for them in the past?
• What analytical techniques do they know and trust?
• What is their decision-making style?
• Whom do they trust (and not trust)?
• What information do they already have?
• What decision are they trying to make?
• What constitutes personal success for them?

Which answers seem optional to you? Would having all of the answers be useful in organizing and executing the CI project? Assuredly, they would be useful because they would help customize everything you do to make success more likely.

There is no substitute for understanding the CI customer intimately.

Mounds of data, pretty slides, impeccable theory, automated tools and common solutions are profoundly less important than understanding and reacting to the critical dependencies of the customer. His or her biases, needs and challenges ought to drive how we provide competitive intelligence. All of that gives us the opportunity to customize competitive intelligence for the decision-maker and their challenges.

Customization makes it more likely that the CI is used to decide strategic questions.

(See my article “The First, Best Competitive Intelligence Project” for more information about how to understand what to do.)

Is “always” too strong a word for this subject?

I would be pretty happy if I could say that all of my problems were due to those that garble the definition of competitive intelligence.  If customers would just understand what I do better, then my business would boom, my clients would prosper and the long awaited vacation home in the Colorado mountains would be a reality!

Fairness compels me to admit, however, that poor definitions are only the beginning of the issues faced by me and, perhaps, by others that practice competitive intelligence.

Another significant problem has to do with marketing competitive intelligence. (I have previously written about “The Failure of Competitive Intelligence Marketing.”) Undoubtedly, there are exceptions but my sense is that it is common for CI professionals to face difficulties in marketing their services. Why? One reason might be that previous successes are problematic to share. If I deliver outstanding insight to a client, it is reasonable for them to want exclusive access to that insight. Thus, I cannot ethically share this story to help me get my next client. Another reason might be that it is often hard to capture discrete, numerical benefits directly attributed to competitive intelligence. Testimonials help, of course, but the holy grail of benefiting a company’s bottom line is often elusive.

Finally, there is the issue of increasing personal value over time. How does a competitive intelligence professional get better at his or her job? Admittedly, there is no substitute for numerous client engagements to support on-the-job learning. Still, the absence of a well-established competency framework (though some are in work) to guide or certify professional development in the industry is a clear community weakness. In absence of a framework that has a commercial meaning (i.e., customers value the framework and use it to make buying decisions), how does a CI professional manage their own skill development? There is no lack of opportunities but how do you decide what to do. And, after taking advantage of some of those opportunities, how do you translate the improved skills into increased value for customers?

These questions are a puzzle for me and are the subject of a short survey that I am doing in March. The survey has five questions. It will take about two minutes to complete.

Would you give me your responses? Click here to take the survey. I will post results on my website and blog by March 31^st. Thank you.

Here are the survey questions.

1. How well do you think that your CI customers or clients understand the definition and value of competitive intelligence?
2. Which statement best describes your success in describing competitive intelligence to prospective customers or clients?
3. How well does your organization assemble and market competitive intelligence success stories?
4. Which of the following development steps do you regularly take to improve your competitive intelligence skills?
5. Which skills, if substantially improved, would have the greatest impact on your competitive intelligence success? I would like to be better at …

There were ways to get around all of this noise.

• You could take advantage of the times that the factory shut down. That removed all of the background noise. Unfortunately (if your goal was talking instead of production), this happened very infrequently.
• If you knew exactly who to talk to, you could move close to them and speak loudly. If you were the listener, the right strategy was to focus on the speaker’s words while ignoring the barrage of other sounds.
• If you wanted to “overhear” something, then the only recourse was to become involved in the conversation. That, of course, depended on the acquiescence of the other participants. Thus, you were unlikely to hear much of value accidently.

Conversely, some approaches would only make the problem worse.

• You would not want a goal of hearing everything that was being said in the factory. That would simply complicate the problem of separating an important conversation from the background machine noise. Lack of focus was a sure way to hear nothing of value.
• You would never want to amplify the sounds in the factory. Though this might increase the volume of the speaker’s voice, it would also increase the sounds from the machinery.
• You would not want to encourage people to whisper. Obviously, this made it harder to hear since the level of noise would overwhelm the conversation

Both of these lists could go on and on. They illustrate the common problem that we have of separating the important from the unimportant. The difficulty arises because every important communication is surrounded by background (i.e., contextually unimportant) noise. The world (much like the factory) is full of noise. What we want to hear is typically competing with so much that is unimportant (or less important). Furthermore, sometimes we want to “overhear” or discern things not originally meant for us. The background noise makes that task especially hard.

Thus, we get to the fundamental task in competitive intelligence. That is, targeting the signals that we desire to hear, decreasing the “volume” of the background noise and, finally, interpreting the important signals correctly.

Unfortunately, many CI organizations apparently follow a different strategy. That is, there is little strategizing about the right signals, the methods employed are often designed to amplify rather than mute noise and precious little time is spent on excellent interpretation.

Some people say that competitive intelligence is fundamentally about early warning. Seena Sharpe expands this to say it is also about forewarning. My sense is that it is those two things plus supporting effective business strategy decisions. That extension mates the predictive function of warning with the proactive improvement of business approaches and results. After all, what good is competitive intelligence if it does not affect the bottom line?

Okay, here are some thoughts about improving the signal to noise ratio for your competitive intelligence.

1. Check to see if you are intentionally identifying critical signals. A good early warning system process exists for exactly this purpose because its key recurring question is whether you are looking at the right things. Management will be involved in this process with the competitive intelligence team. Their shared question is this, “What is coming that might affect our business prospects or strategies and how can we know, as soon as possible, when it might occur?”
2. Make sure that you are not increasing the noise. In my opinion, there is a seductive risk for many in competitive intelligence. That seduction is the indiscriminate love of data and tools. Our world is awash with data and easy ways to get to it. However, when we disproportionally are attracted to accumulating data, enamored with presentation or convinced that data (alone) causes positive changes in strategies, we are increasing noise at the expense of important signals. Perhaps there should be a limit on data collection activities especially when the cost of collecting more information decreases the time for meaningful interpretations. Thus, the next thought.
3. Rebalance your activities to favor more and better interpretations. Data availability is rarely an issue. History is replete with examples where the information existed, it was known by decision makers and, yet, opponents were able to “spring” surprises. Think of Pearl Harbor when the United States already had broken many of the Japanese diplomatic codes and was reading their classified messages. A retrospective view showed that, due to the sensitivity of the information, no one reviewed the complete sequence and context of the decoded messages. (Avner Barnea recommended an excellent book to me on this subject – “Pearl Harbor – Warning and Decision”.) The Japanese strategy (and possible actions flowing from that strategy) disastrously was missed.  Consider the 1973 Yom Kippur War. Israeli intelligence knew a great deal about the Egyptians and Syrians war plans but did not choose to mobilize in time to repel the initial attacks. Why? In part, there were multiple misinterpretations of the preparations for war. An excellent book on this topic is “The Yom Kippur War: The Epic Encounter That Transformed the Middle East”. This occurs frequently in business too. We accumulate hoards of readily available information using rapidly improving tools but poorly relate that information to strategy decisions. We present abundant data often yet seldom help decision-makers. Not a good combination when it is true.

There is much more to discuss about improving signal identification, decreasing noise and interpreting information better. As Stephen Covey says, begin with the end in mind. If the end is a more successful businesses, then improving strategies by helping strategy decision-makers requires better competitive intelligence signal-to-noise ratios.

The world is noisy. That is not news to anyone. Like the factory that I used to work in, the noise is indicative of activity. However, our challenge is to amplify and interpret the right signals so that others can make good use of the resulting insights.