Embedding Competitive Realities in Early Stage Innovation Strategies

Many organizations fail to consider the impact of competition and competitive circumstances during early state innovation.  Typically, it is not until the eve of a new product launch that competitive conditions are evaluated, usually through a quickly conceived and poorly designed war-game, limiting organizational flexibility to adjust product design and features to account for competitive challenges.  In addition, the tools companies use to set product launch strategies are limited and not well suited for addressing innovation approaches and investments.

To effectively strategize against the competitive conditions likely to confront a new product introduction, companies must consider external forces, and come up with counter-strategies, far earlier in the innovation process.  A good time to start evaluating likely competitive forces and challenges is roughly one to two years before your targeted product launch date.  This timeframe ensures that your company will have adequate strategic flexibility to alter product design, features, or marketing strategies, but avoids considering competitive forces too early, when external variables are likely to still be in flux and subject to change.

There are a variety of methodologies available to organizations seeking to consider competitive realities earlier in the innovation process, including:

• Scenario Analysis, in which organizations can explore a range of plausible future conditions and identify strategies most likely to be effective against a wide range of external conditions
• Trend Impact Analysis, a forecasting method that permits extrapolations of historical trends to be modified in view of expectations about future events
• Effective war-gaming, in which game design is well thought out, uncovers and acknowledged weaknesses in product design, and/or launch and marketing strategies, and is intended to craft specific counter-competitive strategies that can be incorporate into the larger product development and launch strategy.

Using Word Clouds To Improve Competitive Analysis

There was a time – in the not too distant past – when the chief challenge among organizations was dealing with the dearth of relevant information about the competitive environment. Today, that challenge has largely abated, but it has been replaced with, what some would say, is an even greater challenge – managing the tremendous influx of information that inundates our inboxes, RSS feeds, and news alerts that results from our monitoring activities.

Thankfully the web is full of cheap – often free – utilities that can help intelligence professionals sift through the quagmire of noise to help them better understand the treasure trove of information that is readily available to them on a daily basis. One such product we’ve discovered, http://www.wordle.net — a free service — allows users to create on-the-fly word-clouds that can help analysts understand the thrust of a document by visually arraying the words or phrases that are used most commonly within it. All a user needs to do is to copy and paste relevant text into the text box on Wordle’s main page and within a few seconds an easy to read and interpret graphic appears. In fact, it only takes the site a few moments to parse through documents that can be dozens of pages long.

Using word-clouds in this fashion can make it incredibly easy to identify topics or issues that are most salient to the competition, an industry, or even an individual. In addition, it can allow intelligence professionals to glean insights into the mindset of the competition that would have been nearly impossible only a few years ago.

Here are some other tips on using word clouds to better understand the competition:

• Use Wordle on your competitor’s twitter feed by copying and pasting its text – this practice can often identify consumer facing themes and perspectives that can get lost in the sea of social networking, giving ci professionals a clearer window into exactly how a competitor firm speaks to its customers.
• Word clouds can help generate hypotheses about competitor intent, and help guide research planning to help analysts confirm or refute those hypotheses.
• Word clouds can also be used to identify relevant search terms for ongoing intelligence monitoring and early warning indicator development – just use a site like Wordle to parse through a market or industry research document.

One flaw of the Wordle platform is that it only lets users input text manually. In other words, there is no automation involved which makes tracking trends particularly difficult. Because of this, Wordle is best suited to one-off projects or those that only need periodic updating. There are however, paid products that will allow firms to automate Wordle-like functionality as well as track trends over time.

To be sure, while the use of word clouds themselves can’t answer important questions about the competition, they can be used to help us make certain that we are asking the right ones. And while days of information overload may be here to stay, that doesn’t mean that smart usage of new tools like Wordle can’t help make the information we get more relevant.

Educating the Consumer

Discount clothier Syms had a famous and memorable tagline: “An educated consumer is our best customer.”  What held true for cheap men’s suits holds true for competitive intelligence.  If you want to improve the effectiveness of competitive intelligence in your organization, educate your users on the benefits and limitations of intelligence.

Senior decision-makers who understand competitive intelligence processes and methodologies know how to make the most out of the intelligence they receive.  In speaking about the savvy government consumer of intelligence, former CIA Acting Director John McLaughlin said, “Policymakers who knew how to use intelligence generally had a realistic view of what it could and could not do.  They understood, for example, that intelligence is almost always more helpful in detecting trends than in predicting specific events . . . They were not intimidated by intelligence that ran counter to the prevailing policy but saw it as a useful job to thinking about their courses of action.” (John McLaughlin, Analyzing Intelligence, Washington DC, Georgetown University Press, 2008, page 72)

It’s probably not a stretch to say that most CEOs and senior managers are undereducated on the use of intelligence, and have no systematic understanding of their companies’ competitive intelligence function (if they even have one).  If so, then they are almost certainly ill equipped to ask the right questions about competition, market trends, and other external forces that could enable a competitive intelligence staff or consultant to provide meaningful and actionable insights.

Perhaps unfairly, the burden is on the competitive intelligence practitioner to provide the education necessary to make top managers better intelligence users.  How?  Corporate competitive intelligence practitioners ought to look for every opportunity to educate their consumers about what intelligence can and can’t do for them, such as:

• When taking an intelligence request.  Never, never take an intelligence tasking from senior managers at face value.  It is imperative that the intelligence provider and consumer spend time together framing and reframing questions, discussing what the organization already knows about the particular situation, and discussing what aspects of a competitive issue competitive intelligence can and can’t address.  Doing so will result in an intelligence project that is achievable and that will satisfy the consumer’s needs.  In the course of framing the request, the intelligence consumer can learn about the tools, methodologies and processes likely to be employed to address his or her needs.
• When communicating intelligence findings.  Look for opportunities to describe how certain pieces of information were gathered, or how certain conclusions were drawn, when communicating the results of an intelligence project.  Avoid getting into too much detail about methodology and process, and certainly never lead a briefing or presentation with a description of your methodology.  But, highlight certain nuggets of information or insights with brief description of how you got there.
• During the strategic planning process.  The annual planning cycle often creates an opportunity to discuss with your leadership the role intelligence can play in the strategic planning process.  It’s also a time when senior executives are in a frame of mind to talk about external forces and to brainstorm ways to learn about competitive conditions and fill information gaps.  Competitive intelligence practitioners can use the planning process as an opportunity to prepare a proposal of what competitive intelligence can do to support the process, describing the “hows” of that support along the way.

To be sure, educating the corporate intelligence consumer is an extremely difficult task.  However, by looking for opportunities to advance intelligence consumers’ education just a bit, competitive intelligence practitioners can bring more meaningful value to their organizations and avoid charges of “intelligence failures” that were due to nothing more than a failure of senior leadership to understand the capabilities and limitations of competitive intelligence.

What Preparing For the Unexpected Really Means

Recent economic, sports, and weather developments have redefine the term, “no one could have planned for that.”  Consider:

• The most-actively traded gold contract, for June delivery, rose $14.10, or 0.9%, on April 27 2011, to settle at a record $1,531.20 a troy ounce on the Comex division of the New York Mercantile Exchange.  Gold is seen as a safe store of value in troubled economic and political times and has been smashing records in recent weeks in response to rising global inflation.
• Geoffrey Mutai won the Boston Marathon in April 18 2011 and established a new record, crossing the finish line in 2:03:02.  The Boston Athletic Association, the race organizer, said after the race that although Mutai’s time is the fastest marathon ever run, it is not a world record because Boston is not a record-eligible course.  Still, there is now talk of the possibility of a sub-2-hour marathon in the not-too-distant future.
• Japan continues to recover from a devastating earthquake and tsunami, and the world has focused its attention on the disruptions to the global supply chain that has resulted.  Manufacturers of automobiles, electronics, pharmaceuticals, and dozens of other products now face uncertainty in the sourcing of key inputs to their production processes.

In strategic planning, organizations are pressed to “think the unthinkable.”  This is often interpreted as a need to predict specific and discrete future events, such as $1,500 gold or the time and location of a natural disaster.  To do so is to miss the point.  When you think about it, the fact that gold cleared $1,500 an ounce this month is a single event, but the cause and effect of that event is what business strategy needs to consider.  Indeed, for strategic planning purposes, single events are irrelevant; the implication and lasting effects of such events are what should be the focus of strategic planning.

The fact that an earthquake and tsunami caused Japanese factories to close and global supply chains to be disrupted is not important.  This could have been caused by labor unrest or countless other triggers. Does your organization’s planning process focus on the event, or on the cause and effect?  In other words, are you trying to predict the earthquake, or are you trying to devise a strategy for the aftermath?

A Scenario Basis for Intelligence Early Warning

Given the economic and geopolitical events that have affected businesses over the past several years, trend monitoring and environmental scanning are once again in vogue.  However, given the abundance of information available on just about any topic imaginable, how can organizations efficiently monitor external developments that matter most to them without collecting and processing terabytes of information? A scenario-based intelligence early warning system can help strategy and competitive intelligence practitioners identify the most meaningful future trends and developments for which to monitor, and do so in a way that is focused and systematic.

Developing a set of industry scenarios that describe plausible future external developments related to the behavior of competitors, customers, distributors, suppliers, and other market participants helps reveal which of the countless trends and developments an organization can monitor are the most significant.  In particular, this approach can identify those “low probability, high impact” events that may defy traditional trend monitoring approaches.

A scenario-based intelligence early warning system can not only identify otherwise unforeseen future trends that are worth analyzing, but can also reveal different facets of known and even obvious trends.  For example, a health insurance provider with which I recently worked used a scenario-based early warning framework to organize its efforts to keep tabs on the implementation of the 2010 Patient Protection and Affordable Care Act, otherwise known as healthcare reform.  While it may seem obvious that a health insurance provider would want to monitor such ground-breaking legislation, the scenario development process revealed uncertainties related to the establishment of key facets of the legislation that were highly variable.  In addition, the scenario approach allowed the health insurance provider to examine the impact of different provisions of the law on changeable and volatile local market circumstances.

Organizations that have pursued the scenario-based early warning approach say that their information gathering and analysis efforts are more focused, compared to traditional, unstructured methods for environmental scanning.  Because the methodology requires analysts to pre-determine the significance of industry and competitive developments for their organization, it becomes easier to identify the key pieces of information — the indicators — that must be monitored for, allowing an organization to place less emphasis on gathering lower-priority information that carries a lower degree of relevance.

Competitive Intelligence Analysis: Learn the Industry, or Learn How to Think?

GovernmentExecutive.com earlier this month reported the results of a National Research Council study that says, to attract the best analysts, the intelligence community must shift from an emphasis on traditional qualifications like formal education, and focus more on an individual’s raw cognitive ability. Knowledge of a specific country or region of the world and technical expertise are important traits in an intelligence analyst, but they essentially can be taught, according to the report. The way a person thinks — how he or she gathers information, analyzes it and spots trends and patterns in the information — are better indicators of success in the intelligence field, the study said.

The parallel here, of course, for competitive intelligence analysts is whether is wiser to hire an analyst who comes with deep industry expertise, or someone who demonstrates critical thinking skills and  cognitive abilities similar to the ones cited in the National Research Council study.  I have observed that most organizations value industry knowledge first, and are somewhat less concerned about a candidate’s natural analytic competency.  This may be a bias for deep industry or technical knowledge, or it may be easier for hiring managers to test for industry knowledge more than cognitive abilities.

That’s too bad, because I tend to agree with the National Research Council study that it’s easier to learn about political regions, industries, or business subjects such as finance or supply chain management than it is to learn how to think.  I have seen individuals with little knowledge of particular industries thrive as competitive intelligence analysts because of their ability to formulate hypotheses, digest large quantities of information, spot patterns and trends, and reach objective, well reasoned judgments.  At the same time, I have seen individuals with deep industry or technical knowledge struggle as intelligence analysts because of their inability to master these cognitive tasks.

To be sure, training is available on matters of intelligence analysis, critical thinking, and the like, and it can be beneficial.  But, at the end of the day, I’ll take someone who has the solid cognitive skills, and work to help him or her learn an industry, over someone who may be an expert in his or her field, but struggles to formulate logical and objective conclusions from qualitative and quantitative data.

To be sure, testing for such skills is challenging.  What do I look for when hiring intelligence analysts, beyond their educational and work experience?

• The ability to communicate.  Crafting clear, concise assessments that take a reader from point A to point B in a logical, well reasoned way is critical for success as an intelligence analyst.
• The ability to go beyond the data.  Can an individual draw logical conclusions from information, or can he or she simply summarize what he or she has read?
• The ability to handle incomplete or contradictory information.  Analysts who can use judgment to fill in data gaps, or who can compensate for conflicting pieces of information tend to make good intelligence analysts over individuals who are flummoxed by such data inconsistencies.
• The ability to consider alternative outcomes.  Rarely does information point to a single, certain outcome.  Good intelligence analysts can think about alternatives and identify the future circumstances that must be present for a particular outcome to occur.

Can you teach someone how to think like an an intelligence analyst?  Add your comments below.

The Evolution of Competitive Intelligence Software

Just as organisms and species evolve to meet the ecological requirements and environmental conditions in which they thrive, so too do dominant business models necessarily adapt to the changing landscapes of the operating environments in which their firms compete.  Just look at the evolution of the software industry over the past few years. As the technologies upon which software systems were intended to run evolved over time, the dominant business model (installed, server-based solutions) gave way to more streamlined and more narrowly focused “apps” that perform very specific functions. These targeted apps proliferated mainly in web-based Software as a Service (SaaS) models, and their popularity carried major implications for traditional software providers.

Often, when we think of competitive intelligence software, we can’t help but recall the sophisticated full-scale packages that dominated the CI software space until recently. As a breed, these full-service software suites proclaim to be a panacea for almost all your CI needs. From planning and information collection to analysis and reporting, these suites offer a host of tools that are able to address nearly every stage in the CI life-cycle. Interestingly, the all-inclusive nature of these packages, responsible for their greatest strengths, is simultaneously the root of their greatest weaknesses.  They are often cumbersome to install and costly to maintain, they carry a steep learning curve, and require jumping through corporate IT procurement policies and lengthy roll out procedures.

For a variety of technological reasons, full-service CI software packages evolved in an environment that rewarded large, installed, server or mainframe-based technology packages. As Internet bandwidths increased over time and the SaaS model began to gain traction, CI software firms (like many others) were slow to get in on the ground floor. This opened the door for a cavalcade of hosted CI solutions that were more dexterous, functionally targeted, and easily implemented. In fact, because the operating environment began to favor the hosted solution model, the large, full-scale software solutions, though admittedly more feature-rich, have been put at a disadvantage.  As the costs of development dropped — due to outsourcing and new programming languages — there was no longer the need to be everything to everyone.  Developers can now focus on very specific tools that don’t have to sell for a lot of money to be profitable.  App stores and platforms like SharePoint have accelerated this as well, and this trend is likely to continue for the foreseeable future.

To be sure, the giants of the CI software space became dominant for a reason – they were able to offer services and features that no other tool could match in a way that made sense within the operating context in which they evolved. But just as the lumbering dinosaurs came to recede from a rapidly changing ecology, so too has the software environment evolved, causing some to question whether the time has come for the giants of the software world to concede their place to a novel, more nimble generation of CI software solutions.