Selling strategy and strategic thinking to a trial-and-error management team can make perfect sense. In fact, it not only makes perfect sense but it is a complementary antidote to inevitable blind spots of the most intuitive of people. Properly executed, a thorough strategy process balances perspectives to reduce the possibility of missing something important. Indeed, systematically eliminating unknowns (or, better, converting assumptions to facts) is an important cornerstone to discovery driven growth.

Eskimos, as the saying implies, are not the best customers for snow makers. Obviously, given where they live, snow and ice exist in abundance. Producing something that is already free seems unlikely to induce someone to make an incremental investment. Yet, an Eskimo depends on the ice and snow for traditional igloos and, perhaps more importantly, for maintaining an environment that supports their lifestyle. It is a hedge, maybe, to pay for something that often appears unneeded. However, the moment the temperatures rise, that hedge is all that stands between disaster and survival.

Strategy is similar. Most management teams get by on undirected intuition. They already “own” this and everyone has an opinion to assert. Sometimes, it works spectacularly well. After all, business owners and senior managers tend to be smart, experienced people. Other times, increased competition or environmental changes expose a lack of strategic problem solving. When that happens, business results suffer.

Recently, with Don Springer of the The Colton Group, I completed a survey of 22 business leaders of small-to-medium size businesses. Most of these businesses involve technology products and services. The demographics from the survey are shown in the following graphics.

Overwhelmingly, the respondents were CEO and/or owners. All of the other respondents held senior positions within their companies. How do these senior leaders get better at strategy? Looking at the results below, most simply employ trial-and-error approaches. The upside to this approach is that it represents an on-going learning mentality. This is good. The possible downside is that it reflects unstructured strategic thinking that impairs or inhibits growth. Also, note the importance of trusted relationships. Professional groups, mentors and friends were all sources for improvement.

They expected that their top five strategy activities in 2011 would be the following (I have added commentary for each activity).

1. Deciding the right strategy for the business. There are so many choices of where and how to apply resources. For small companies, a wrong choice may put the company out of business. Thus, it is unsurprising that this decision is most important. Interestingly, large companies have a different problem. They often “know” the right strategy and implement cultural and process barriers to dismiss objections or people that challenge untested assumptions.

2. Aligning the management team to support the strategy. Even the best strategies are impotent before implementation. A visionary, superbly intuitive genius needs other people. Hence, aligning the larger management team and then the rest of the employees around the decided strategy is absolutely critical. This is more critical during changes because changed strategies may affect culture, processes and people. These three dimensions are powerful when pointing in the same direction and destructive when they are not.

3. Balancing strategy and tactics effectively. Overwhelming, leaders and employees have a tactical mindset that drives them to near term accomplishments and results. The caution against “being penny wise but pound foolish” emanates from this predilection. Owners and senior management cannot afford this imbalance. They are responsible for both long and short-term thinking. Since most of the organization specializes in the tactics, it appropriately falls to the leaders to think strategically.

4. Deploying strategy within the company. As mentioned before, deploying a strategy internally is consequential. It may shift responsibilities and budgets, alter the organization structure, introduce new market or customer targets and set different incentives and goals. Poor deployment leads to chaos. Conversely, effective deployment leads to new energy that can stimulate growth.

5. Improving operational efficiency. Ah, the key internal success factor is costs. That is, the costs to run the business to produce the products or services. Aside from revenue and profit numbers, most senior managers measure costs for two good reasons. One, it is measureable (and other factors such as employee buy-in are not). Second, there is a stronger sense of direct control over costs versus externally driven metrics.

You can see the complete set of survey results and download the survey from the JTHawes Consulting website.

“How did things get the way they are?”

Usually they exchange glances that contain a wealth of information about possible answers to that question. They seem to calculate the pluses and minuses of each possible answer. Denial (a favorite response) ignores the obvious evidence and lack of alternative causes. Blame means admitting involvement though, of course, the intent is to deflect responsibility to the other party. Excuses attempt to substitute an inferior explanation for the correct one. Silence is stonewalling and an implicit appeal to mercy. Occasionally (just enough to restore my faith and hope), there is an admission of responsibility. Why is that so hard, I am left to wonder?

It is not so different in business.

We enjoy results that might be good (but not good enough) or we suffer through obviously unacceptable outcomes. Then the same question comes to us -“How did things get the way they are?” Confronting that question correctly often determines what comes next. If, on one hand, we attempt all of the responsibility evasions mastered by children in homes around the world, we risk worsening results. On the other hand, when we responsibly answer the question, we lay the foundation for a second important question.

Before I get to the second question, it is useful to remember three fundamental abilities required for management as described by Jerry Weinberg in his Quality Software Management, Volume 1. These abilities allow a manager to meaningfully decipher and respond to difficult situations including “messes” encountered at work.

The three fundamental abilities for quality management include:

1. the ability to understand complex situations (thus allowing you to plan a project and then observe so as to keep the project going according to plan – or adapt the plan).
2. the ability to observe what is happening and to understand the significance of your observations.
3. the ability to act congruently in difficult interpersonal situations, even though you may be confused, or angry, or so afraid you want to run away and hide.

Much of the work of competitive intelligence professionals deals with the first question. They help pose questions, create models, collect and interpret information and then propose options and recommendations for management. Appropriately, management is saddled with deciding what to do. That leads to the second question.

“How can we make things better?”

Few in business would admit to wanting anything other than a better future. A better future might mean more sales, high market share, more successful products and, of course, greater personal rewards. Everyone I know aspires to some version of this better future. What makes answering this question so challenging for many people?

Interestingly (to me), it often is impossible to answer the second question well without a superior answer to the first question. That is, without a firm understanding of the competitive environment, the impact of past strategies and actions and a clear acceptance of responsibility, how can leaders move confidently forward? They cannot. Instead, they might be tempted to repeat past approaches (imagining that they will somehow get better results), avoid acting altogether or silently hope for others to change to make life easier. These things rarely happen and are the refuge of the confused.

A better recipe might be the following.

1. Answer the first question well.
2. Decide (or clarify) your business vision.
3. Create a strategy rooted in reality and cognizant of the competitive environment.
4. Practice measuring strategy and making midcourse adjustments.
5. Always assume responsibility.

Over time, things happen. No one has uninterrupted success in life or in business. What matters is our responses to difficulties. Those responses show our character, resilience and problem-solving abilities. Before we can make things better, we have to face directly the factors, circumstances and actions that got us to where we are.

Answer the first question well to unlock your potential and to enable actions to change your future results.

As I wrote about in “The Three Basic Competitive Intelligence Questions”, the simple formulation of “What? So What? Now What?” regularly resonates. People tell me that they finally understand competitive intelligence after internalizing those three questions. While that is encouraging, the questions are a framework with only the hints of specific actions.

“Just tell us what to do,” they say. “You’ve convinced us that competitive intelligence is important and that there is a lot to know about doing it right. Give us a three step approach that we can wrap our arms around and remember. We want something tangible to do!” they demand.

“Okay, okay, I’ll give you some steps,” I say. (Unsurprisingly, these steps correlate to the three questions in the framework.)

Here are three tangible steps that most anyone can take to get moving. If these issues are well covered, then there is a good start at competitive intelligence. Furthermore, after one pass through these steps, a company will understand competitive intelligence far better than most any simple formulation.

1.  Make Sure You Know Where You Are and Where You Want to Go: It is surprising how many companies cannot articulate their strategy. Or, if senior management can locate the strategy statement, it is common to find that many others are misunderstanding or misapplying the strategy. Strategy helps an organization understand its direction. And, at least with competitive intelligence, it is a critical point of comparison with the competitive forces in the environment. A poorly understood strategy baseline means that an unmanageable number of factors must be considered. Conversely, a clear strategy narrows the focus into something workable.

2.  Aim At Something Valuable:  I often hear of companies collecting gobs of information that goes unused. Sometimes, that unused information contains incredible value. The problem is often that no one posed the right question at the beginning. The “right” question has attributes of value to strategy decision-makers, answerable in the needed time with acceptable risk and potential to drive change. Poor questions, on the other hand, yield unused answers.

3.   Do Something With the Good Answers: There should be a high bar for competitive intelligence that affects strategy. Quantity of data is not enough. Quality is not either if it is misdirected. However, a “good” answer cannot be ignored when it is the result of a methodical, targeted competitive intelligence process. Hence, from the beginning of the effort, there must be an implementation mindset activated by a good answer. “Activation” means that it changes strategy in a way that, ultimately, is measureable. I like to ask this question, “Assuming that I could provide an answer with acceptable risk, how would you use that information in your strategy decisions?” When a customer cannot answer that question, it points to a potential failure point.

There is an incredible amount of detail for each of these three steps. A mature competitive intelligence group knows to do much more than I have listed. However, for companies or work groups that are just starting, three simple steps will work well for them to gain experience and get something valuable. The goal is not to be perfect. Rather, the goal is to actively make better strategies through competitive intelligence.

They simply need to “just do it.”

The official definition helps remind us of the foundational principles for the domain. The foundational principles distinguish competitive intelligence from similar but different areas (e.g., market research) while pointing practitioners and customers toward the great value possible from competitive intelligence.

Meanwhile, the practical definitions help connect the possibilities to near and dear value needed by key customers. The practical definitions are less formal but very powerful when they illustrate effectively what competitive intelligence can do. (Read more about this at “Competitive Intelligence: What Seems to Click.“)

This short video covers both types of definitions.

This video is my humble attempt at remedying the problem. Indeed, at a recent company presentation, these three questions “stuck” more than the process information, analytical techniques or strategy implications of competitive intelligence.

Competitive intelligence is sometimes a similarly difficult topic for some businesses.

Competitive intelligence does three things that can be painful.

1. It forces an organization to look externally. Indeed, in my experience, most organizations admit that their focus is intensely inward. They are concerned about operations, execution and tactics. The more experienced people sheepishly concede that their balance is out-of-whack. The pain comes from admitting that they have been missing important information from the competitive environment.
2. It asks why an organization is getting the results it sees. Every company that I talk with wants to improve. Either they want to turnaround a mediocre (or failing) business or they want more growth. Hence, the management creates strategies to improve the results. Competitive intelligence methodically puts those strategy decisions in a competitive context. The pain comes from exposing the leaders’ decision-making thought processes.
3. It requires new approaches. Especially for companies that have not done competitive intelligence, starting CI will change them. The changes include new allocations of time, augmented strategy decision-making processes and a shift in the culture. These are not trivial changes. The pain comes from seeing that the solution requires long-term changes.

I suppose that there are other real and imagined barriers to competitive intelligence.

Commonly, people that recognize that there is a deficiency do not know where to start to improve. They need guidance and are unsure where they can get it. A lack of support within the organization sometimes stymies even motivated people. They feel that they do not have the latitude to begin competitive intelligence. I have also seen that there is a shock for some when confronted by the difference between what they are doing and what they might be doing (or their competitors are doing). Actions that follow shock are rarely bold. Rather, as with a serious medical diagnosis, the first reaction is often to become more conservative (i.e., avoid starting new things).

If any of this is true for you, your company or your clients, there are some common sense ways to decrease the fear.

1. Realize that you probably have some time. Medically speaking, only a few conditions are extremely time-critical. For instance, heart attack victims must get immediate attention. For most conditions, however, the time criticality is different. It is acceptable to proceed more methodically. Similarly, a lack of effective competitive intelligence does not happen in one day nor is it “cured” in one day. If you have an on-going business, you probably have some time to reflect on what to do before action becomes essential.
2. Even a few actions can be beneficial. It is easy to become overwhelmed. When confronted by a new and uncomfortable reality, the complete solution to “make the problem go away” may seem beyond reach and that belief leads to decision paralysis. Overcoming paralysis is simple – you simply move. Practically speaking, “moving” means that you identify a small number of useful actions. Think of this as your “top 3” list of competitive intelligence priorities. The truth is that once you are moving, your mindset will shift from feeling overwhelmed to problem solving.
3. There are many people with experience available. There is a unique vocabulary for every medical condition. The practitioners (i.e., doctors, researchers, insurance companies) use the terminology to communicate. Until you master the lingo, important concepts, possibilities and applications remain elusive. The good news is that there is little new under the sun. Many people and resources exist to educate and guide someone through most every complicated topic including competitive intelligence. There are training classes, many consultants and several organizations that can educate an organization.
4. If you are improving, you are likely ahead of most competitors. Sadly, most people do not change. That is why you see overweight people continuing to overeat despite serious medical issues. Smokers continue smoking despite ample evidence of the risk of cancer. However, a few people do confront their lifestyle habits effectively. They standout even when they are simply making progress. Likewise, a company’s cultural habits are hard to change. Because a great number of companies do not include competitive intelligence as an integral part of their culture, any steps that you take will make you standout. Overtime, with persistence, your advantages will increase.

Fundamentally, for medical conditions, the tests do not cause the disease. Rather, they help pinpoint what the current state is and how it should be addressed to improve the patient’s condition. Fearing the tests or the testing process is misplaced fear.

Competitive intelligence is a bit like those medical tests. It highlights the company’s competitive condition and shines a light on possible treatments. Instead of being feared, it should be recognized as an incredibly useful diagnostic tool essential for good performance. When there is fear, thankfully, there are simple steps to ensure that the focus gets past the fear and back on the strategic problem solving that is so important for long term health.

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.