The difference between where we are and someone else is at the moment is a “gap”. The gap could be positive (that is, we are in a better position) or negative (our position is worse). In competitive intelligence, we study gaps (especially the negative ones) because we want to know and explain what our competitors are doing to create a significant advantage for themselves.

(See a video presentation on this topic by clicking here.)

So, we study and communicate the gaps and then we are done?

Nope. Identifying the known gaps (though not necessarily easy) is only the first step in a robust gap analysis process. Here are the 5 steps to comprehensively think through gaps, to create simple tracking methods and to ultimately get to the actions that will close the gaps.

1. Start with the “known” gaps.

“Known” gaps are the ones for which there is general agreement about their identity and significance. For instance, we may know that competitor X is about to introduce their new product which is 20% faster than any product that we have. Since there has been a press announcement, live demonstrations which seem to confirm the claims and an established track record for the competitor, we can firmly believe that the product and the claims for it are real. Furthermore, we know that our customers highly value performance. Hence, this is a gap that is well characterized and is significant to our competitive position.

To assemble a starting list of known gaps, solicit input from the management, business development, marketing and sales teams. For each gap that they identify, make sure that it is specific and well described, that the impact is estimated and each competitor which is better is noted.

There will be some of these gaps which cannot be fully described. These are the “potential” gaps.

2. Create a backlog of “potential” gaps.

“Potential” gaps do not meet the full criteria to be considered as known gaps. There may be information missing about the exact nature of the gap or its impact. Using the preceding example, if we hear that our competitor is introducing a “faster” product sometime in the future, we might conclude that this could be significant to us. However, it could make a large difference if it is 10% faster in three years or 50% faster in six months. Without more information, it is also very difficult to assess the potential significance of the gap. Still, knowing the competitor well may lead us to believe that “where there is smoke, there is fire.” The proper action is to keep track of the potential gap and to assign someone (e.g., the competitive intelligence function) to collect information about it. Then, when the uncertainty threshold is crossed and the evidence is more substantial, the potential gap can be escalated to a known gap status.

How do we look even further back in time to find things that lead to the potential gaps?

3. Make a list of triggers which may lead to gaps.

Triggers are not gaps. Instead, they are events, activities, announcements and such that may signal gaps in the future. Why are they important? They are important because companies rarely operate in a vacuum. Public companies, especially, signal much of what they plan to do through all types of disclosures. If we are attuned to these disclosures, we get hints of future strategic directions. Continuing the faster product example, it is entirely possible that the competitor had made patent filings years before the product was announced. They may have purchased the assets of another company with specific technology competencies. They may be actively making venture investments in small companies with complementary products. In an ongoing business, all of these types of triggers are predictable. A trigger list can serve to organize the monitoring of such triggers. Then, when several of them have “tripped”, it may be reasonable to investigate whether or not a competitive gap is imminent.

Triggers are often driven by broader forces in the market.

4. List the key trends which affect the market.

It starts to get a little fuzzier in this category. Nevertheless, tracking demographic, technology, product, legal and other areas is important. In technology, the broad trends of things getting smaller, faster, cheaper and more communicative is not a revelation to most people. More recently, the trends toward more social media, lowering energy consumption, increasing recycling features and more emerging market support are becoming important. The key to trend monitoring to find the ones that most affect customers (and, therefore, their buying decisions). After an important trend is identified, then it is critical to understand the rate at which the trend is being responded to in the market. The goal is to eventually identify the triggers (see step 3) which more concretely describe when and how competitors might gain some advantage.

How do we maintain all of this information? Simple. Create four spreadsheets and track the known gaps, potential gaps, triggers and trends. Last, establish action plans.

5. Assign actions for all areas.

Known Gaps

Assign each one to a person that must define and execute an action plan to close the gap. This usually must be a manager with sufficient authority and ability to work across organizations because all know gaps must be “significant.” Put another way, these are hard problems to solve but their resolution is critical to a company’s competitive position.

Potential Gaps

Assign these to the competitive intelligence function and require a periodic report to a responsible manager. The goal is to actively determine whether to demote the gap if it is insignificant or to escalate it when it can be fully characterized. The escalation process must be a part of a regular review cycle or it could become ineffective due to its irregular or inconsistent use.

Triggers

Assign these to the outward facing functions of your organization. These may be the business development or product marketing teams. Their responsibility is to look for the specific trigger information and feed it back to a coordinating competitive intelligence function. The CI team then coordinates the evaluation of the triggers and decides when a potential gap has been identified.

Trends

Assign these to the market research team and the technology team. Their mission is to help the organization understand when a trend accelerates to the point where there are specific, compelling market responses occurring. Once the responses are being seen, then triggers are identified for each competitor to understand how they intend to act.

Gap analysis can be a straightforward, organization energizing and fruitful process. The keys are to discriminate the different types of information, assign the responsibilities correctly for each and establish a process of regular review with management.

A more complete treatment of Gap Analysis can be found at http://tinyurl.com/yk8fcq6 or on my website at http://www.jthawes.com.

business strategy, CI techniques, Competitive Intelligence, Early Warning, future focus, gap analysis, management, strategy, Strategy Effectiveness

I was thinking about cooking and strategy today. An odd pair of topics I know but they actually have a lot in common.  Let me explain.

Even if you are not a chef by training, you know some things about cooking.

• First, you probably know that a lot of people cook but not many are masters. For instance, I count as cooking almost any time that I intentionally apply heat to raw food. There is not much nuance or sophistication to my definition (and you would rightly deduce that I am not a master chef). You probably wouldn’t want to eat many of the things that I have prepared but I can do some basic things well. Meanwhile, a master chef brings training, creativity and versatility to the kitchen.

• Second, cooking usually involves multiple ingredients. A proficient cook understand the purpose of each ingredient, when to add them and how much to add. Maybe they have a recipe to start with but they trust their judgment as the dish is being prepared. A little more salt, a little less butter they might decide along the way. A novice either ignores the recipe (and creates disasters) or slavishly adheres to a set of directions with no understanding of when or how to creatively deviate from the prescription.

• Third, and this is getting much more involved, a master cook understands that a meal is far more than the mixture of ingredients according to some recipe. Indeed, a meal includes the presentation of the food, the drink to accompany the meal, an artful display on the table and maybe some music for enjoyment. The “full meal” to the master is an encompassing sensory experience that is meant to satisfy those that partake. (A novice wonders why paper plates aren’t good enough for most meals.)

Strategy is similar to cooking.

• Almost anyone can claim to be a strategist for basic topics but not many are masters.

• Master strategists understand fundamentals and tools but know when to apply their intuition and experience to improve on both.

• An accomplished strategist provides a complete strategy which provides value at many levels to the organization.

Separate the “microwave strategists” from the master practitioners.

If you are in management, a primary task that you have is to distinguish between titles and capabilities. The title of “strategist” means little when you need to know if they can handle difficult assignments. Of course a microwave strategist (think of someone that handles simple assignments quickly) might be quite helpful for certain business topics (there are many “popcorn” topics in everyday business). However, they are not nearly as suitable for complex business strategy, competitive intelligence or early warning systems that make a difference to the company. In these cases, you have to look for the right kind of thinking (e.g. clear, integrative), specialized training and creativity in someone that has a strategic mindset. Everyone can be a type of strategist but only a few are suited for the complicated subjects of business.

Fundamentals first and then the important deviations.

The famous football coach of the Green Bay Packers, Vince Lombardi, said that football was “nothing more than blocking and tackling.” His point was that the fundamentals, consistently and effectively applied made the most difference in the outcome of a game. It’s worthwhile pointing out that his teams would have failed miserably if he really stopped with the fundamentals. They needed to have offensive and defensive plays that gave his team advantages. A strategist, like Coach Lombardi or any master chef, must know what is basic to the craft. However, the breakthrough value often comes from the intuitive leaps that signal a departure from the norm. In strategy work, this places a premium on the strategist’s ability to gather clues from the environment (much like a chef tastes the food as it is being prepared) to determine how to make adjustments to the basic tools. How do others understand the tools? How should an approach be customized for the various strategy audiences? When is it time to introduce or adapt a competitive model? These process deviations (or customizations) make the difference between simply completing a task and making an impactful change to the business.

The total strategy experience matters.

A confession is in order at this point. Many times in my career it seemed like the end point of a strategy effort was a gorgeous PowerPoint presentation impressively delivered to management. That’s it, I’m done I regularly exclaimed after some high level presentation. I was wrong.

When done effectively, strategy work engages the organization on many levels. First, it helps define a direction. Second, it signals how others will be involved in that direction. Third, it suggests steps along the way to the destination. Fourth, it may well include the external impacts on partners, suppliers and customers. Fifth, it equips the organization with the proper tools to implement and measure the strategy. Sixth, it includes new or refined definitions that become part of the lexicon. (See my blog entry “Grading Your Business Strategist” for more information.)

I can become a better cook (my family hopes this happens sooner rather than later). Maybe I can even earn the title of “chef” if I dedicate myself to learning and applying the craft. Until then, the kind of meals that I can reliably prepare will be the basic ones.

Your strategists may be of the microwave variety. They can handle what is simple and quick. Where they need help is in the “full meal” experience. See my complete set of articles at http://tomhawes.wordpress.com for many ideas about how to move them forward in their competencies.

Bon Appétit

business strategy, Competitive Intelligence, Early Warning, strategy