How Good Are Your Marketplace Insight Capabilities?

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Since posting Insight is Where the Game is Won and Lost, many have asked "how can we assess our insights capabilities to identify where to focus?" Building on both internal work I did in the early 2000s, and an article published independently by Herring and Leavitt in 2011,* here is a framework you can use to quickly evaluate your organization's insights capabilities. There are five dimensions to rate your organization on (directions at the bottom):

• Insights culture
• Sources used to generate the information base to help create insights
• Marketplace focus
• Personnel
• Early warning of emerging threats and opportunities

The organization's culture sets the tone for insights creation, which can address markets, customers, technology or competition. Initially reactive (Level 1), executives ask for data and task available personnel to gather information for a presentation or meeting, invariably sourced from easy-to-access published data, such as annual reports, existing market research or industry analyses. The initial focus is on traditional markets, customers, technology and competitors.

Soon, a frustrated executive or ambitious analyst determines that standardized profiles, newsletters and databases will improve organization awareness. Dedicated, often part-time individuals (becoming full-time as demand increases) standardize outputs, create delivery schedules and expand the fact base to include subscriptions to specialized industry publications, and start to focus on partnerships and alliances which impact growth and the ability to compete (Level 2).

Success begets more challenging questions, such as what does this data mean? how will the trends play out? and what emerging customers, technologies and competitors should we be concerned about? Improving capability requires teams of skilled analysts under a functional manager (Level 3). Since the answers are rarely contained in published data, analysts must incorporate validated opinion and observations from individuals who don't have the time to write it all down - customers, channel partners, R&D and sales personnel, their own executives, and industry observers and experts.

The expanding organizational knowledge base generates new requirements: what are the implications of these projections? what options do we have? what should we do about them? how might customers or competitors react? how feasible is a new technology? Mature organizations assign or recruit a senior leader to answer these, using increasingly sophisticated research and analysis techniques and a well-nurtured source network. And the organization expands its focus to better understand the interactions within the industry value chain and how these will play out (Level 4).

Finally, a radical shift occurs, from an emphasis on producing reports to facilitating dialog: the organization structures insights-driven strategic decision-making sessions (Level 5). Key executives interact directly with well-prepared internal and external experts, to determine how to best position the enterprise for future success. Topics might include identifying and evaluating the strategic risks of potential new initiatives, untapped sources of customer value, the next generation of customers, emerging competitive threats (frequently through business wargames) and new growth opportunities.

The importance of early warning. 

The organization's ability to avoid surprises - a major executive concern - increases with the sophistication of its insights capabilities. Fledgling operations frequently start by looking at any of a variety of "megatrends" (example here), "boiling the ocean" to try to find a something the organization can act on. They progress to tracking studies, targeted assessments of specific marketplace issues and systematic monitoring of the periphery (emerging customers, competitors and technologies). But real breakthroughs occur when organizations form heavyweight teams, consisting of both internal and external experts, to address critical emerging issues through innovation and new business models.

How good is your organization's insight capability? Identify where it is in each category, sum the associated levels, and divide by five. If it is:

• below 2.0, it is drowning, with little chance of a lifeline in the next round of budget cuts
• between 2.0 - 3.0, it is treading water, with increasing odds of getting a lifeline
• between 3.0 - 4.0, the shore is in sight, but beware of undercurrents
• above 4.0, the beachhead is secured and the insights function is capable of making a real difference

Now ask what will it take to improve? And, importantly, what will be the impact on the business?

* Herring, Jan and Judith Leavitt, "The Roadmap to a World-Class Intelligence Program," Competitive Intelligence, January - March, 2011 

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You Can't Find What You're Not Looking For

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Ask the right questions

Smoke detectors are programmed for early warning. But they don't detect CO2, equally as dangerous.

With a specific threat - or opportunity - identified, designing a system or capability to capture and process the relevant signals and issue an alert is pretty straightforward.

The challenge for companies is to articulate the potential business threat or opportunity. But in a dynamic marketplace, these are everywhere. Organizations simply can’t monitor every Bill and Dave or Steve and Steve in their garages or Jeff in his warehouse.

It is exacerbated when organizations obsess on collecting reams of customer data or developing in-depth competitor profiles, especially when these focus is on what the customers wanted or what the competitor did. The often-unstated assumption – the mindset – is that the future will be largely like the past and, circuitously, the historical facts support the prevailing view.

But there are no “facts” about the future.

Creating the necessary insight requires asking the right questions:

• How will new technologies and business value propositions impact our customers, products, services, and business growth?
• Which industries, customer segments and offerings categories offer the best likelihood of future business growth?
• Who are the most threatening traditional, emerging and potential competitors? Why?
• Where are the greatest long-term profit streams according to the capital markets?
• What is required for future competitive success?

How many organizations have good answers to these questions? How many have the leadership that asks them?

You can’t find what you’re not looking for.

Next: Creating Crises

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Avoiding "Surprises"

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Early Warning

Early Warning

Had these experienced commanders and executives (see the prior post, "Surprise") known what was coming, they could have redeployed assets and avoided catastrophic “surprises.” Today, of course, we can see that the available information provided sufficient early warning of clear threats - hindsight is 20/20.

But why is it these leaders couldn't see the signs at the time?

In retailing, it is not as if amazon.com and its offshoots were unknowns by the late 1990s. However, the prevailing view of traditional retailers was that marketplace success required opening as many stores as possible to both gain share and blunt competition. These built vast organization structures around site location, logistics, inventory, HR and downstream (promotional) marketing. And the most successful developed sophisticated information systems that reported operational performance variation in increasingly exacting detail. Have a hot selling item in one location? Easy - find excess inventory and load it on the next shipment. Poor performance in another? Schedule a performance review with store management to isolate and fix the root cause.

What they didn't have was an information system to warn of emerging strategic threats. No doubt these executives received information about the impact of Internet business models. But, unlike the internal information, it was unstructured, arriving initially in dribs and drabs. By the time clear trends emerged, the successful early Internet movers had learned from their mistakes and established defensible niches.

Caught in the daily exigencies of running an enterprise, these leaders simply weren't programmed to evaluate the nature of the available early warning intelligence within the context of their brick-and-mortar operational mindset and information expectations. And, eventually, when they did assess the threat, they were constrained by the amount of investments required to overcome the first-mover advantage, which would have required diverting significant resources from successful operations.

Waiting until information is absolutely certain (right hand side of the chart) results in a crisis, forcing leaders to rapidly rethink critical assumptions: maintaining outdated mindsets when bombs are falling or bankruptcy looms is suicidal. But it may be too late: they have very little flexibility in how to respond – you can’t re-position a fleet immediately or turn a brick and mortar operation into an e-commerce one overnight.

On the other hand, way back in relative time (the left hand side), leadership has more leeway in deciding where to deploy assets. However, the uncertain and often conflicting information makes it difficult, if not impossible, to challenge the existing organization mindset.

Avoiding “surprise” requires speeding up the processing of relevant information, moving the information certainty line upward and the intersection of the two lines to the left, when there is more decision-making flexibility.

Creating the intelligence necessary to challenge assumptions earlier requires choice and focus – every startup or new technology is a potential threat. And, perhaps perversely to some, the solution is not simply amassing and sorting through vast amounts of data. 

It requires asking the right questions.

Next: You Can't Find What You're Not Looking For

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"Surprise"

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December 7, 1941

Nothing frustrates executives I speak with more than a crisis caused by surprise: a new competitor product or unexpected price cut, unexpected loss of a key bid or long-held account, or new technologies or shifts in buyer behavior that obsolete current offerings. And heads roll when these cause a miss in quarterly earnings or, worse, bankruptcy.

The question that always arises is how could we have avoided surprise?

Lack of knowledge is not the problem. “We now live in a world where knowledge transfer and information exchange are tremendously efficient, and where there are numerous organizations in the business of collecting and transferring best practices. So, there are fewer and smaller differences in what firms know than in their ability to act on that knowledge.”*

Said another way, surprise rarely occurs due to a lack of signals. Information on the Toyota Production System was available to the US auto industry for decades, and traditional retailers certainly had time to absorb intelligence on amazon.com’s business model well in advance of having to declare bankruptcy. In the military sphere, “an analysis of surprise attacks suggests that the intelligence community seldom fails to anticipate them owing to a lack of relevant information.” And a US Congressional Subcommittee that examined several critical US political crises pointed out that “in no case had lack of data been a major factor in the failure to anticipate the crisis.”**

Take Pearl Harbor – why did the US navy fail to detect anytime in advance the movement the most powerful fleet in history? It was not as if Japan’s blue water fleet was a surprise – in 1905 it destroyed the Russian Pacific fleet. Nor were Japan’s expansionist intentions a secret – it invaded Manchuria in 1931. And it’s not as if the US Pacific Fleet wasn't concerned about the Imperial Japanese Navy: it knew it was the only real threat to those intentions. Finally, beginning in early in 1941, there was a slew of signals that the Japanese navy was targeting Pearl Harbor.

Given this, “intelligence officers could perhaps have foreseen the attack if the US, years before, had…flown regular aerial reconnaissance of the Japanese navy, put intercept units aboard ships sailing close to Japan…or recruited a network of marine observers to report on ship movements.”***

Did the US Navy create its own surprise?

Next: Avoiding "Surprises"

*Pfeffer, Jeffrey and Robert Sutton, The Knowing-Doing Gap, Harvard Business School Press, 2000
**Kam, Ephraim, Surprise Attack, Harvard University Press, 1988
***Kahn, David, "The Intelligence Failure of Pearl Harbor, Foreign Affairs, 70, no. 5 (Winter 1991/1992)

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Rice, Autos and Online Retailers

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Winning Marketplace Strategies

The biggest threat to success comes from failing to understand and incorporate all aspects of a winning marketplace strategy.

Success arises from differentiation in one or – better – more of three domains:

• Customer strategy (identifying and meeting unmet needs, branding – not just advertising – or finding new ways to go to market); 
• Factor strategy (raw materials, supplier relationships, logistics, manufacturing, technology); or
• Organization strategy (new business models, different systems and processes, new culture).

Many marketers focus exclusively on the first. But because differentiation is critical, marketing, perhaps surprisingly to some, has a significant, if not dominant role to play in understanding buyer behavior through the second and third, and then driving necessary changes through the organization.

To many Americans, rice is a simple foodstuff, something we eat in place of potatoes or bread, and as a side dish in Asian restaurants. And, like many, I grew up on Uncle Ben’s, Rice Krispies and Rice-a-Roni. Yet a master sushi chef in Japan might insist on Uonuma Koshihikari, which costs an order of magnitude more than the rice you’ll find in supermarkets (you can buy a 5kg / 11lb bag online for $130).

In 2009, both GM and Chrysler (for the second time) declared bankruptcy. Yet in 1990 – 20 years before – three MIT academics, James Womack, Daniel Jones and Daniel Roos published The Machine That Changed the World, a book detailing the Toyota Production System (TPS) that simultaneously cut costs and increased quality. Worse, intelligence on this radical new production and organization system was available to Detroit in the 1960s – the ideas that led to the TPS came from Ford, which opened its doors to extensive benchmarking by Toyota executives in the 1950s.

And new internet-aided business models can inhibit if not completely destroy your business. Perhaps the best known examples are the bankruptcies of Circuit City and Borders 2011 and, just this month, the announced closing of the remaining Blockbuster stores, driven by online retailers modeled on amazon.com, founded in 1994, almost 20 years ago…

Rice retailers, restaurants and food processors have multiple factor strategies to choose from, influenced by and influencing their customer strategies. And imagine if, when Chrysler first declared bankruptcy in 1979, US auto marketers had focused on understanding the role of Toyota’s factor and organization strategy on consumer behavior. Finally, only a radical shift in strategy to embrace an Internet business model confounded expert opinion that Best Buy would soon follow Circuit City.

Next: Surprise

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Generating meaningful insights

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with Liam Fahey

Intelligence that makes a difference – that creates insights – is almost always the result of collaboration between intelligence professionals and decision executives. Neither one alone can create and leverage intelligence. 

Executives influence the direction of intelligence work. They shape the context for the work: they identify the current and emerging issues and decisions, questions they want addressed, areas and topics they would like explored, and, the nature of the dialogue they desire with the intelligence professionals. 

Intelligence professionals create understanding and meaning out of disparate and always incomplete data, disconnected viewpoints and perspectives, and an ever-changing competitive environment. 

When they work in tandem, they co-create an understanding of change and its business implications. This understanding influences what the organization thinks about (e.g. which emerging opportunities or risks need attention), how it thinks (e.g. identifying, challenging and refining core assumptions), the decisions it makes (e.g. what strategic moves to make, what business unites to support) and the actions it takes (e.g. where to allocate resources).

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What an intelligence-driven organization looks like

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with Liam Fahey

What an Intelligence-Driven Solution Looks Like

Insight is where the game is won and lost notes that "Intelligence as an influence on decision making has not yet fully bloomed in many companies," listing a number of reasons why.

To address these challenges, today’s most successful intelligence teams have adopted a post-industrial, networked model, co-creating insights with decision makers, not just producing documents, powerpoints and spreadsheets. They build and sustain an intelligence capability that delivers real business results by:

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Insight is where the game is won and lost

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with Liam Fahey

Intelligence enables superior decision making when it generates insight

Every organization faces a critical need: to understand the emerging and future world better and faster than rivals.

All rivals are looking at the same world, so the real battle is to determine who “sees” the underlying change more incisively than the competition. Capturing “change insight” before rivals creates the potential for competitive advantage: knowing where the marketplace opportunities may be, where the risks or vulnerabilities may be and, importantly, knowing what to do. In short, without superior insight, winning over time is simply not possible.

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A 400-year advantage

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In "Google Maps announces a 400-year advantage over Apple Maps," blogger Mike Dobson writes

If you go back over this blog and follow my recounting of the history of Google's attempts at developing a quality mapping service, you will notice that they initially tried to automate the entire process and failed miserably, as has Apple. Google learned that you cannot take the human out of the equation. While the mathematics of mapping appear relatively straight forward, I can assure you that if you take the informed human observer who possess local and cartographic knowledge out of the equation that you will produce...a failed system (emphasis added).

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Oh brave new world: Re-imagining EVERYTHING

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"After 244 years, Encyclopedia Brittanica announced the end of print editions in 2012," notes Kleiner Perkins partner Mary Meeker in what businessinsider.com terms an "incredibly insightful presentation."

While you may already know this, and that Kindle is replacing books, Pinterest is replacing scrapbooks, NetFlix and YouTube are replacing Blockbuster and, one of my personal favorites, Yelp is replacing the Yellow Pages, did you know about:

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Life or death communications: lessons from Lord Nelson

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Lord Horatio Nelson

For several decades now, I've been a student, observer and participator in strategy (corporate, branding and marketing) and organization - getting these right is, of course, critical to success. But I've seen many cases where carefully prepared plans and their support structures have not resulted in the desired results.

Reading To Rule the Waves, a gripping history by Arthur Herman, I was struck by the role communications played in two Royal Navy engagements, 25 years apart, each of immense strategic consequences: Yorktown in 1781 and Trafalgar in 1805.

Communications dictated the outcome of each, one a failure that lost a continent and one a victory that established naval pre-eminence for more than a century. The lesson: everyone in the organization must understand what needs to be done for a plan to be successfully executed.

Trapped by the French fleet

Yorktown

In late 1781, "a British army under General Cornwallis had been driven back across Virginia to Yorktown at the mouth of the James River. A French squadron of 26 ships of the line under Admiral de Grasse had cut off Cornwallis. The North American [British] squadron under its new commander Thomas Graves had come down into the Chesapeake Bay to drive de Grasse away; at Virginia's Cape Henry the fleets joined battle on September 5."

It was a fight the British should have won. Grave's subordinate, Samuel Hood, wrote to [Lord] Sandwich, 'Yesterday the British fleet had a rich and most delightful harvest of glory presented to it, but omitted to gather it." Instead, a confusion of signals (Graves had run up the signal for close action at the same time as the flag for keeping the line of battle), and de Grasses's skill in avoiding a more decisive engagement cost Graves the battle and sent him back to New York. By the time he returned, Cornwallis had surrendered. The American War of Independence had been won and lost."

Within a decade, however, the British Navy would introduce a new communications system so revolutionary that it would change the way naval battles were fought, and result in a victory so decisive that Britain would would dominate the world's oceans for over a century.

Historically, admirals could communicate with their captains by the placement and color of flags raised and lowered from the flagship's (hence the name...) masts. Unfortunately, the captains couldn't communicate back and, worse, the admiral couldn't change plans in the heat of the battle. That changed in 1790, when

Richard Howe introduced a new numerical system for signalling his captains, with 10 flags of standard pattern and color (the basis of the International Code of signals still used by ships today). They could now be used in combination to form more than 260 separate messages, from the admiral to his ships but also now from his ships to the admiral. There was even a signal for telling the admiral his signal had been seen and understood, resolving a confusion that had plagued every naval commander since the Spanish Armada - and which had lost Britain the battle of the Chesapeake, and the American Revolution.

Trafalgar

The Treaty of Amiens, signed in 1802, had two results: it ended the the hostilities between France and Britain during the French revolutionary war and, more importantly, made Napolean the military master of the continent of Europe. Only Britain stood in the way of his perceived destiny.

So when, inevitably, war with Britain resumed in May 1803 (the pretext was Britain's refusal to evacuate Malta as promised), Napolean focused his energies on the achievement that had eluded everyone since William the Conqueror: the invasion and defeat of Britain...Like Philip II two centuries earlier, he summoned all the resources of his continental empire. Napolean assembled at Boulogne the battle-hardend veterans of a dozen campaigns into a force of 160,000 men, which he dubbed the Grand Army. He poured over maps and chose the location for his beachhead lading: the northeast coast between Deal and Ramsgate, where his invasion force could anchor in the Downs in the shelter of the Goodwin Sands. He had his engineers design special boats that could get across the Channel in a dead calm.

HMS Victory at Trafalgar

The only obstacle was the Royal Navy, and in particular the Mediterranean fleet under the command of Horatio Nelson, and his flagship, Victory, which would become the most famous man-of-war in British history.  His goal was "'to keep the French fleet in check, and if they out to see, annihilate him.' To do this, Nelson would use a new kind of blockade, not close but loose - so loose, in fact, that it might tempt the French to break out and then fall into his trap. He had a tool to help him: the new navy signals." By 1799 the Admiralty had adopted and expanded the system to more than 340 messages, giving an admiral unprecedented tactical control.

Over the next two years, British and French naval forces played a game of cat and mouse in the Mediterranean, Atlantic and Caribbean, each trying to gain an advantage that would seriously cripple the other. In September 1805, Admiral Pierre de Villeneuve, commander of Napolean's fleet, was preparing to go to sea from Cadiz, Spain to try to secure the English Channel when an order arrived from Napolean: his enemies were gathering in central Europe and the fleet now needed to return to the Mediterranean to land troops and supplies in Naples. As the French fleet set sail on October 19,

The [British] frigate Sirius was the first to spot them. It immediately sent the news on to Blackwood's Eurylalus [using 26 flags: 'To Eurayalus: Enemy have their topsails hoisted.'...which] relayed the message on to the next frigate, the Phoebe, and so on until it reached the Mars 48 miles away. Lt. William Cumby of the Bellerophon then caught the Mars signal; his captain was planning to dine with Nelson on the Victory that very morning. Now Captain Cooke had more exciting news to pass on to his commander in chief: the French were coming.

Two days later, the enemy fleets engaged and the British won a decisive victory that, in their minds, buried any chance of Napolean's invasion of England, even though it was later learned that he had called off the invasion. However, the victory did ensure that Britain would remain unchallenged as it established control of the oceans for the better part of the next century. While tactics, bravery and luck - good and bad: Nelson lost his life - played an important role, as in any armed conflict, the ability of the British fleet to act swiftly on intelligence that would not have been able to be communicated a decade before was crucial.

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