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?

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.

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

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

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

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

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

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

Here are the survey questions.

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

There were ways to get around all of this noise.

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

Conversely, some approaches would only make the problem worse.

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

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

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

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

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

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

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

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

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

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.

Competition is a constant.

My son competes in basketball. His team has many challenges. Perhaps the biggest challenge is that they are a new team (formed this year) competing against established teams that have played together for multiple seasons. Moreover, the other teams have “serious” coaches that teach sophisticated offenses and defenses. Those teams execute plays with coordination, skill and timing that give them decided advantages against less prepared teams.

Here is an interesting point. My son’s team has talented athletes. In fact, they have enough talent to win any game (even against the best teams in the league). Talent alone, however, is not enough. They need to have better offensive and defensive plays. They need to make better adjustments during the game to react to what the other team is doing. They need to learn more from their opponents to make their team better.

Is business any different?

Companies are constantly competing in markets everywhere. Some of the companies are established players with all of the advantages derived from that position. Others are “new to the game.” They have fewer obvious advantages and have to capitalize on disruptive strategies to change the game. No matter their current positions, both camps have to react to change to stay (or get) ahead.

Just as in sports, sometimes the difference in outcomes is not solely due to talent.

There are smart people everywhere. Most of my career has been in the corporate world surrounded by intelligent and resourceful people that created new high technology businesses. Lately, I have seen more of the drive and ingenuity of the small business owner. Are there many things more difficult (or more fun) than starting something from scratch? Being talented is important but it is not enough when it is not applied intelligently.

Competitive intelligence is a way to compete better

During halftime at my son’s basketball games, he will stop by the stands to talk with me. We talk about how the first half went and what he needs to concentrate on during the second half. Usually, I have an idea for him to try. For instance, in one game, the defense was not covering the jump shots from the free throw line. Maybe he could fake a pass to his right, step forward to the free throw line and have an open shot. Indeed, that is what he did and he was open for a clear shot (missed it, though – more practice between games needed).

Businesses need “open shots” too.

It is not easy to find such conditions because the competitors are playing active defense to prevent openings. Here are three things to remember.

1. Systems are competing. When considering competition and what to do it, recognize that two (or more) systems are competing. Focusing on a constituent part may be easier but may also lead to less viable solutions. Analyze multiple “moving parts” of the systems. For example, consider not only the competing products but also the engines (i.e., intellectual property, R&D investment, alliances) behind the product development.
2. Every competitor has a weakness. We hold up certain companies as the epitome of success. Ten years ago, the list might have been Sun, Microsoft and Yahoo. Today’s roster of high technology companies would include Google, Apple and Amazon. It will not always be that way. As the environment changes, many successful companies cannot sustain their advantages. New companies recognize weaknesses and capitalize better than the established companies do. The only question is “when?”
3. Every change is opportunity. And, of course, every change is a threat. Forward-looking companies are constantly seeking to understand change so that they can shape or adapt their strategies accordingly. Change is particularly threatening to “static” companies. These companies decide a strategy and completely focus on execution. No attention is given to competitors, market changes or anything else that might challenge their initial assumptions. Conversely, alert companies are constantly adjusting. Their great advantage is seeing and reacting first.

My son’s team is getting better. All of the parents can see the players’ efforts. We know that they are close to breaking through against the established teams. They are actively learning while improving their individual skills. Their teamwork is getting better at overcoming their well-prepared opponents. Perhaps this weekend will see our first win. After that, the sky is the limit!

How about you? Do you have competitive intelligence challenges in 2010? Are there things that you should do to get better against your competition?

I have created a short survey about competitive intelligence challenges to get a sense of what others are facing. Click here to take the survey. It will require less than five minutes of your time. Thanks!

The respondents answered five basic questions about strategy facing their organization or work group in the year ahead. The fourteen organizations mostly represented high technology companies ranging in annual revenues from $30M to greater than $10B. However, there were also startups and nonprofits included.

Here were the questions that I asked.

1. What is your relationship to strategy decision makers in your company or work group?
2. What types of strategy do you influence or decide in your company or work group?
3. How would you assess your company’s or work group’s strategy effectiveness?
4. What critical strategy challenges does your company or work group face in 2010?
5. What types of strategy help would help you most?

From the (admittedly) small sample, several interesting responses jump out.

Most of the people were involved in strategies at the business or product level. The survey included fewer that had responsibilities for financial, mergers & acquisitions or alliance strategies.

Each person ranked their strategy efforts across a few categories on a scale from one to five (5 = best performance). The categories included developing strategy, communicating strategy, executing strategy, reacting to competitors and so on. I averaged the ratings across all categories for each company to produce a composite rating. The distribution is shown below. The fascinating (though not entirely surprising) finding is that more than 50% of the organizations were rated no better than average (3 = average performance). Average is not likely to be good enough in 2010 (if it ever was).

Looking more at the detailed ratings, it becomes clear that most organizations rated themselves higher on the front end activities of strategy (i.e., developing, communicating, executing) and lower on those on the back end (i.e., ongoing management, evaluating, reacting to competition). To the extent this is true, it reflects a great vulnerability that a strategy may start strong but finish weak in the organization or market place.

Given where companies rate themselves, where do they see the challenges in 2010? The number one response was that they needed ways to gain new competitive advantages. Would not that require above average strategy performance? Or, maybe it would require better competitive positioning. Then, throughout the year, would not strategies need to be evaluated better to support adjustments to the strategies? The net is that the recognition of the challenge is dead on but that current performance of many organizations inhibits them from successfully closing their strategy gaps.

Assuming that they could have anything, what kind of help would people like with their strategies in 2010? I speculated before the survey that most might want help formulating the strategy. For example, what are the new products to introduce and how should they be marketed? Perhaps many would want help analyzing the competitive environment. Neither of these two possibilities garnered the most responses. Instead, most people simply wanted someone with experience to talk with about their strategy and to reflect on their plans.

There are many smart people working diligently on business and competitive strategy in 2010. It is not news to them that the environment is tough or that their companies’ have high expectations about the strategies. Neither is it news that their strategy efforts need to improve. For those people, the best thing to do may be to talk to someone that they trust to reflect with them about what to do better.

There are also lists about negative things. For example, there are the top 10 political gaffes, the top 10 worst business deals and the top 10 awkward moments. It is fun to read such things because  mistakes often standout as much or more than accomplishments. The mistakes are sometimes funny, occasionally painful and almost always useful for learning (even when we did not make them ourselves).

It has taken me a long time to value mistakes in my professional life appropriately. Although they can still make me feel bad and they are never my goal, I finally have accepted that they are the inevitable but needed fuel for improvement. Why not embrace them, learn from them and move on? Thus, my new motto has become:

Try many things, fail fast, learn quickly and succeed sooner.

In that spirit, here are my top 10 competitive intelligence mistakes. (Perhaps I will write my top 10 successes later.)

1. Ceded the presentation. I once led a competitive intelligence team that produced numerous studies for senior management. For a variety of reasons, I did not present our results during senior management meetings. Instead, another person took that role after we did the work. Who do you suppose got the credit and exposure?
2. Missed the education. One organization that I served loved SWOTs and so I faithfully produced them. It turns out that they loved SWOTs because they did not know about any other model for presenting results. Moreover, they were using SWOTs incorrectly! I missed the early recognition that senior management may need education about various models and their suitability for an analysis problem. It came back to haunt me when I later tried to introduce new models.
3. Skipped the review. In one case, my job was to coordinate others that produced competitive intelligence analysis. The problem came when the final presentation was readied for senior management whenever the author resisted reviewing the report with me. As a result, they usually made many easily corrected mistakes when presenting to senior management. Who do you think got the blame?
4. Avoided the relationship. As an introvert, my idea of a good time is not found in new relationships (especially high stress ones). Since there was always a lot to do while sitting in my office, I once systematically neglected the formation and nurturing of relationships among senior management. Do you suppose that senior management shared information, concerns and needs freely with those that they did not know? Of course not and a competitive intelligence function (that was me) suffered as a result.
5. Muted the alarm. It is easy to be busy establishing infrastructure, monitoring news and responding to discrete requests. That took a lot of my time in one assignment. What I missed doing was proactively analyzing the competitive risks to the organization. The net effect of my choice was to fail to deliver the most valuable, integrated intelligence to senior management. Instead of being strategic, I was satisfied being tactical and therefore did not raise the proper flags. Did anyone care about my beautiful website then?
6. Avoided the courage. Once I got started in competitive intelligence, it did not take long to realize that I sometimes had sensitive information for senior management. It was sensitive because it was not what they wanted to hear (so I thought). Many times, I talked myself out of walking to their office to give them such news. Frankly, it scared me to imagine their displeasure with me if I did that. In retrospect, I had it entirely backwards. Had I delivered the news well (and I was capable of doing so), their respect for my team and me would have vastly increased.
7. Did not claim the victory. We had an assignment to analyze a geographical competitor. The analysis showed how they were winning. For good reasons, my company decided not to compete with them and withdrew from the market. This was a success! I should have found ways to appropriately publicize the success among my customers. I did not. This left open the possibility in some people’s minds that we were not contributing value.
8. Acted too passively. There is a healthy pattern whereby competitive intelligence should respond to senior management requests. However, over time, much more assertive actions are needed. In one case in a large organization, I waited too much, preferred “perfect” analysis over effective early alerts and assumed that senior management was happy. They were not. That unhappiness was reflected in their overall lack of support for competitive intelligence.
9. Assumed too much. Senior managers are typically smart people. I thought that most of them knew a great deal about competition, competitive analysis and early warning. I found out quickly that the knowledge is often quite product focused. I made two mistakes with this. First, I began trying to deemphasize product analysis by balancing it with other views. It sounds reasonable (even now) but management was not ready for that. Second, I assumed that senior managers were active learners about business and competitive models. Guess what? Many of them are not. Ouch.
10. Stopped too soon. I began my work in competitive intelligence focused on analysis. Quickly I realized that presentation was also important. Too late, I got it that decision-making and, ultimately, changes were the right goals. I cannot tell you how many times I left a meeting after having presented beautiful analysis with the sense that senior management was poorly served. I know why now. They needed help understanding what to do and I had not provided any such assistance.

Thankfully, I do not make these mistakes much anymore. Instead, I am on to my new set of mistakes. Perhaps next year I will only have enough material for a Top 5 list? Somehow, I doubt it.

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?