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.

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.

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?

Consultants commonly face the challenge of doing a quick analysis of a new organization. We have to be ready with the right set of questions to discern what is happening and what might improve the outcomes. I suppose that this is true inside organizations when competitive intelligence is applied to a new problem or within a new business.

If you are lucky, you will have sufficient time to analyze before prescribing action. Whether it is a short time or a long time, the time is still finite. Therefore, the right focus is important.

All of this got me to thinking about what I would asked if I were limited to five questions. That is, what five questions would give me the best possible picture of the competitive intelligence status of a company and some idea of what might improve the competitive intelligence value?

Here are my five questions that I would address to senior leaders of the company.

1. What are your strategies?
2. What results are you getting from those strategies?
3. What factors do you think most affect your strategies?
4. What are the established givens and outstanding puzzles for you in the competitive environment?
5. What are you already doing to understand, track and respond to competitive issues?

What would be your set of five questions?

Wow. Who would have thought that we would see the death of strategy in our lifetimes?

After all, strategy has been employed in so many ventures over hundreds (thousands?) of years and now, apparently due to the recent economic issues, it is “dead.” This shocks me as much as seeing the Berlin Wall fall in 1989 or as seeing Sadat address the Israeli Knesset in 1977. Are we experiencing a radical transition to a post-strategy business era where reflexive actions completely replace strategic reflection?

I doubt it. It would be better for readers of such pronouncements to translate the death knell statements to what they really mean.

For instance, in my personal life, a surgeon once told me that a particular procedure that I needed was “impossible.” He implied that attempting the surgery would cause more harm (i.e. my death) than good. Luckily for me, we “translated” his statement from “it is impossible” to “I can’t do it” and reacted accordingly. We found a more experienced surgeon that could do what was needed. Had we accepted the first doctor’s words verbatim, you would not be reading this column.

Similarly, when someone says that strategy or strategic thinking is dead, there are possible translations that are important. You have to decide which one fits bests. Here are five options.

1. “Strategy is dead” might mean “we cannot sell our strategy services the same way.” This applies specifically to consulting companies that have large businesses around formal strategy processes. Typically these are high-dollar engagements with a specific sales process. In recent economic periods, that sales process requires adaptation.
2. “Strategy is dead” might mean “near-term survival requires emergency actions.” Many companies have experienced this since 2008. Meeting payrolls, managing cash flow and preserving customers became critical. Those concerns crowd out (temporarily) discussions and energy devoted to what might happen in 2011 or later.
3. “Strategy is dead” might mean “our old strategy does not work anymore.” This applies to both the specific strategy and to the strategy process. Some companies established a strategy that is now outdated. This happens all the time and often leads to a healthy reexamination of the strategy. The danger is when the need to revisit strategic thinking (a common fact of business life) unfairly implicates the strategy process. That is, the thinking might imply that since the strategy is no longer working, perhaps the strategy process is no longer needed.
4. “Strategy is dead” might mean “our strategy process is broken.” This often occurs when the old strategy process is too rigid, infrequently evaluated or poorly implemented. Some companies are good at grand strategies announced every three years. In between announcements, life goes on and many unofficial changes to the strategy occur. For those companies, this indicates that the blend of top-down, prescriptive strategy and the bottoms-up emergent strategies is not in balance. Usually a company needs some of both.
5. “Strategy is dead” might mean “we are not getting good results.” Some companies would be better off saying that “our strategy is ‘sick’.” They would be better off with a “healthy” strategy versus jettisoning strategic thinking. Several high technology companies are reporting excellent results this week. Apple, for example, just had their best quarter ever. Do they have a strategy? Does Google have a strategy? Even the most casual observer can discern that both companies do. Strategy is not dead for them.

Beware of those that do not speak clearly. Their messages of doom mask other realities. Translate what they are saying to something nearer the truth. Strategy and strategic thinking are most assuredly not dead.

These are challenges. They affect how we think, act and feel about ourselves.

Business challenges abound, too. Many of us face the new year with the same old problems. We need to introduce or market products better. We need to deploy a beautifully crafted strategy throughout the organization. We need to turn our slumping business around to attract new customers.

We know that we have to do something different in 2010 (how did 2009 go for you?). That is not the debate. The challenge is deciding what to do and moving forward with something that will solve the problems rather than perpetuate them.

That is where strategic thinking comes in.

Long needed solutions often come when the epiphany of a new strategy occurs. Then, instead of trying the old approach, we do something from a new perspective. The beauty of a new perspective is that often that view is freeing. That is, the barriers to movement are removed, the organizational energy returns and a sense of hope becomes evident again.

I am conducting a survey about 2010 Strategy Challenges. The survey has five simple questions. When I am finished, I will analyze and report the survey results on my website and in my Strategically Thinking newsletter.

Would you give me your opinions?

Click here to take the survey. It will require less than five minutes of your time. Thanks!

The archetypical strategy story goes something like this …

“A small gathering of senior leaders is convened at a secluded site. The atmosphere is serious. An important decision is needed. Everyone there knows the competitors. They are attacking. Some of their attacks have been beaten back. As for the others, well, that is why the meeting is so urgent. The leader stands to speak. We must counterattack. Our stockholders and employees depend on our decisions. The organization must be aligned around a common strategy. What is that strategy to be? So many actions, priorities and resources must be congruent with it. It is time to act. Here is what we are going to do.”

When this scenario (or one like it) occurs, some days or weeks later various parts of the organization get their new assignments. Sales must target new customers. Perhaps their incentive programs are adjusted to reflect the new priorities. Marketing must adapt the product line messages to feature new attributes of the augmented product. Engineering must invest in different technologies to support new product features. Meanwhile, competitive intelligence gets new marching orders to track and report on new competitors and markets.

This is top-down strategy development. Sometimes this works spectacularly well.

Consider the case of Intel. As recounted in the book “Strategy is Destiny” by Robert Burgelman, Intel followed a top-down strategy process that, starting from the early 1980’s to about 1998, relentlessly focused the company on microprocessors. More specifically, Intel created, promoted and sold ever-increasing performance for the Intel Architecture instruction set. Because of their focus, scale and ecosystem (think of the WinTel “alliance”) of software developers, Intel reaped incredible profits. Within the organization, everything was subordinated to this mandate. Andy Grove and other executives explicitly understood and reinforced this top-down strategy. Because the strategy was dictated from the top, all supportive processes (including competitive intelligence) became similarly top-down in nature. As long as there was growth, profits and market share, this worked well.

Interestingly, despite the executive mandates, other businesses emerged from within Intel. Some will recall the RISC (the x86 is CISC) architecture and products (i860, i960 processors) that were produced for a few years. Andy Grove spoke about the strategic dilemma that this caused.

“We now had two very powerful chips that we were introducing at just about the same time: the 486, largely based on CISC technology and compatible with all the PC software, and the i860, based on RISC technology, which was very fast but compatible with nothing. We didn’t know what to do. So we introduced both, figuring we’d let the marketplace decide. … our equivocation caused our customers to wonder what Intel really stood for, the 486 or i860?”

Eventually the dilemma was resolved in favor of the CISC based x86 architecture product line.

However, another example from Intel points out the positive possibilities of emergent strategies. It involved the design and production of motherboards that contained the Intel microprocessors. At one time, partners primarily performed this task. Intel provided information to them and sold components. PC manufacturers bought the motherboards from Intel’s partners. As the processors became more complex and performance more critical, many of the partners could not design and build the motherboards that would highlight (and differentiate) the Intel microprocessors effectively. This was a threat to Intel because it meant that AMD and others could credibly market similar products. Within Intel, an unscripted response to this threat emerged. Simply, Intel began designing and manufacturing the motherboards. Though it started small and without a top-down strategy mandate, it became a significant business for Intel in the 1990’s.

What does all of this have to do with competitive intelligence?

Because competitive intelligence is a supportive strategy function, the structure and processes used by the competitive intelligence people often reflect the business strategies. That is, when strategies are well known, competitors are confidently identified and threats are well characterized, the competitive intelligence function is organized to reflect those realities. Its role is to reliably produce accurate information to help answer the fundamental question, “How do we continue to execute our successful strategy to maximize our results?” Commonly, the competitive intelligence team leans toward repeatable processes supported by comprehensive infrastructures to answer this question for strategy decision-makers. When a strategy is as successful as Intel’s, this is a valuable service to a company. However, few technologies companies have such sustained runs. Thus, a competitive intelligence function must consider more than what is well known or established within the company.

For instance, take the more common case where the strategy does not have a 15-year lifetime of enormous growth and profit. In those situations where strategy changes occur more often or competitive threats are less predictable, a top-down structure for competitive intelligence has some risks. The risks are evident when the top-down strategy prevents or discourages a balanced view of the competitive environment. You can observe this happening when assumptions about the environment prematurely harden or business model risks go unmonitored.  Sometimes the thought of disruptions (both opportunities and threats) may be devalued since this “distracts” from near term strategy execution.

What is the antidote? It is simply to balance the highly structured, top-down competitive intelligence efforts with an intentional focus on “emergent” competitive intelligence.

“Emergent” (bottoms-up) competitive intelligence is disruption focused, less structured and (somewhat) untied to the established business strategy for the company. It cannot be fully described ahead of time in the form of key questions. Instead, it refers more commonly to thematic threats in the competitive environment. It requires different thought processes. For example, rather than receiving questions from strategy leaders to direct activities, emergent competitive intelligence must identify new key questions and supply them to the strategy decision-makers. A key role of emergent competitive intelligence is to stimulate strategy refinement by supplying valuable and unanticipated competitive intelligence information.

Here are thoughts about doing emergent competitive intelligence effectively.

1. Reserve time, energy and resources. It is critical to get senior management agreement to spend time on emergent threats. One way to argue for this latitude is to assemble a set of case studies about how surprising developments have upset successful strategies. Both business and military history is replete with such examples.
2. Develop appropriate processes. Highly repetitive, structured processes solve important problems. However, looking for the unexpected requires processes that deal with more competitive noise because the sources are more diverse and the “signal” is, by definition, less well characterized. The right information filters are required.
3. Emphasize networks. Primary sources are important for all types of competitive intelligence. They are even more important for emergent competitive intelligence. Cultivating an effective network is often the only way to get early insight into the unexpected. The network must be constructed intentionally to be forward looking and early adopter oriented.
4. Activate the organization. The first network is within the organization. In my opinion, a successful competitive intelligence function involves more than a small team. Activating the organization means creating an early warning system that systematically attempts to identify, discuss and characterize competitive threats. Emergent competitive intelligence facilitates early warning systems and gives key contributors product ways to participate.
5. Tolerate higher risk. We are certain only about the past. However, some business results seem predictable based on momentum. Emergent competitive intelligence looks beyond the current momentum and that is why risk tolerance must increase. When the competitive intelligence team or management cannot accept this uncertainty, then they will forego potentially great advantages.

Emergent competitive intelligence complements “top-down strategy driven” competitive intelligence. A highly successful team balances the two perspectives. It uses different processes and tools to be effective for each perspective. When done well, an organization gains great benefits from both.

Do you find the description of “emergent competitive intelligence” applicable to your company or business?

A General Manager must decide the complete range of activities to implement to enter a new market segment. Does she need competitive intelligence?

The Marketing vice president struggles to clarify the winning proposition for the key brand of the company. Does his organization need competitive intelligence?

It is easy to answer “yes” to these scenarios. Each decision-maker faces choices that affect their organizations and, ultimately, influence their chances for success. However, the choices are rarely simple. For example, favoring one approach means that another must be deemphasized leading to disruptions in the organizational roles and responsibilities. Changes often imply new investments, processes and skills. These things cost precious money, time and energy that must be deducted from a finite “bank” within the company. Moreover, other stakeholders assert their importance along vectors independent of competition. For instance, owners, regulatory agencies, communities and others regularly inject their priorities into the mix considered by senior managers.

Since competitive intelligence is only one of the voices in the mix, how can it be effective (and not be unwisely drowned out)?

Here are three ideas to consider.

1. Identify with the decision maker. This means that all of the competitive analysis activity should be focused on the values, terminology, models and methods used by the person making the ultimate strategy decision. Commonly that implies that the analysis be multi-variant (i.e., considers the many dimensions important for making the decision versus simple analysis), the presentation be “big number” focused (i.e., large impact versus details) and the overall process be tailored to what the decision maker is prepared to support (i.e., centered on effectiveness versus elegant but unused analysis).
2. Master strategy models. While it is true that many decisions are made independent of formal models, knowing those models sensitizes the competitive intelligence professional to critical strategy issues. For instance, understanding Clayton Christiansen’s resources, process and values characterization of an organization’s capabilities gives both a framework and a readymade set of examples to explain the range of possible responses from a competitor. Kaplan and Norton’s Balanced Scorecard is an excellent way to visualize and represent the critical dimensions of successful strategy implementation. The list goes on.
3. Embrace the politics. Many people will disagree with this point. For them, the primary role of competitive intelligence is probably analysis and presentation. That is, figure out what is happening and clearly express that to someone. My view is that these steps alone are insufficient to enable meaningful change or decisions. However, that is exactly what is needed in most strategy discussions. The politics are important because the decision-maker does not exist in a vacuum. His or her decisions are complex precisely because they must balance so many factors including internal winners and losers. Of course, the competitive intelligence person does not make those decisions yet considering that the issues are present in the decision-maker’s mind can increase the effectiveness and richness of the information supplied to him or her.

The CEO, General Manager and Marketing Vice President need help to make good decisions on difficult strategy topics. Competitive intelligence can be quite helpful to them when framed appropriately. A first step is for the Competitive Intelligence person to make some fundamental decisions about how to approach and support the decision-makers.

Do you agree? What other key ideas are important in your experience?

What about the “ultimate player” in Competitive Intelligence?

I submit that there are three fundamental categories of skills for competitive intelligence.

A “three tool” competitive intelligence professional will be competent all of these areas. When that is true, their value to their organization or clients is great. Admittedly, each category covers a multitude of skills. Moreover, mastering even one set of skills will make you valuable to someone. However, being proficient at all three makes you and your services standout.

Here are my three skill areas, or categories.

I. Table stakes. These are the basic skills needed by anyone conducting competitive intelligence. Grouped in this category are analytical techniques, modeling approaches, data collection and interpretation, presentation delivery, project management and more. A useful list of skills and knowledge is contained at John Prescott’s Competitive Intelligence Book of Knowledge. Here is a diagram from his PDF file.

I have a similar taxonomy that I have described in 10 steps for competitive intelligence. The diagnostic questions for each step are listed in this file. Neither framework is sacrosanct. Their importance is that they attempt to describe completely fundamental tasks and skills.

Acknowledging that skills are critical, this category, in my opinion, gets a disproportionate amount of attention from Competitive Intelligence professionals. Although it makes sense to start with these skills, the inordinate preoccupation with them causes us to starve our other needed learning. Would it be better to become simply proficient and then move on?

II. Change management. Many times competitive intelligence professionals consider an analysis, well presented to be their services end point. That is, once the information is interpreted and given to senior management, the competitive intelligence task is over. No doubt that some organizations prefer and enforce this boundary. However, for competitive intelligence professionals, separating meaningful change from the analysis responsibility is a recipe for irrelevance. Why does an organization need great competitive information if it is disconnected from debate and devoid of influence in strategy discussions? The short answer is, “they don’t.”

The more powerful and compelling view of competitive intelligence is one that is recognizably useful in strategy discussions. The usefulness metric is a function of potential improvements to strategy. By definition, improvements imply change and change affects constituencies in the company. This involves people that are often found in prominent positions and have well developed opinions and biases. Therefore, the common challenge is to change the minds of powerful, well-placed people. The (usual) lack of positional authority for competitive intelligence people compounds the challenge. So, what skills are needed to persuade others to change? Here is a short list.

1. Political awareness – There are decision-making rules (formal and informal) that are followed in any organization. Deciphering the informal ones is especially important because they affect how people behave. Mapping influential relationships often illuminate what otherwise seems opaque. This (and more) all matters greatly for accomplishing changes.
2. Marketing – Every competitive intelligence professional needs to be good at telling stories. This is different from “presenting data” because stories are meant to convey more than information. Good stories are memorable, make an emotion connection for the listener and convey truth. Yes, they also transmit information but information transfer alone is a modest, unsatisfactory goal.
3. Alliance management – Pity the competitive intelligence person that works by him or herself. Yet, many slave away doing web searches, monitoring Twitter and constructing PowerPoint slides in their office hoping to produce something of value. It may be possible to do so but it is unlikely. It is far more powerful to work with and through networks of people (inside and outside the company). The amplifying effect adds credibility. Building, nurturing and harvesting information from networks is critical.
4. Change artistry – It is fine to spot the need for strategic change. Someone skilled at competitive intelligence may identify multiple strategy modifications. Which ones should be advocated? What is the most propitious timing for change? Who is emotionally, intellectually and spiritually ready to risk supporting the change? A change artist learns to plan actions in context of answers to those questions.

III. The Customer’s Mindset – My definition of competitive intelligence involves helping strategy leaders make better decisions. The strategy leaders are my customers. (See my series on Competitive Intelligence Notes.) Certainly, there can be many different strategy roles in an organization at different levels. No matter which role is served, their issues, problem solving tools, priorities and ways of thinking are critically important. Without that understanding, the distinct strategy dialect that practitioners and senior leaders use may be confusing to outsiders. “Non-strategy speakers” will find communication difficult and positive results consistently illusive. It is quite possible to learn how to speak the dialect if one invests to learn what the strategy leaders already know.
Many competitive intelligence people stumble with these skills especially when they intentionally of inadvertently position themselves separately from their customers. Of course, a competitive intelligence person cannot unilaterally promote himself or herself to senior management. What they can control, however, is their own education.

That is why the third tool for a complete competitive intelligence professional is proficiency in their customer’s mindset. Often this means that the missing education concerns strategy models, formulation, trends, techniques and more. If the customer is in a different role, then the list of training should mirror whatever they do most.

The value of getting an education in the customer’s area is that a competitive intelligence professional can better translate from their knowledge domain to the customer’s. That is when communication becomes effectively and positive change becomes possible. Without the sensitivity for the customer’s viewpoint, the delivery of interpretations is a hit-and-miss proposition.

The three tools go together. The table stakes are expected competencies. The change management skills have more meaning with effective analysis. Finally, the customer’s mindset shapes the application of table stakes skills and change management possibilities.

Would it not be better to be a “three tool” competitive intelligence professional?