Be Prepared

“Why didn’t we see this coming?” As an executive, that’s the question you never want to ask. And yet most companies act in ways that make it impossible to avoid. In a 2002 global survey conducted by the Fuld-Gilad-Herring Academy of Competitive Intelligence, fully two-thirds of 140 corporate strategists polled admitted that their organizations had been surprised by as many as three high-impact events in the past five years. Moreover, the vast majority—a staggering 97%—stated that their companies have no early warning system in place. A staggering 97% of corporate strategists surveyed said their companies have no early warning system in place. That’s a shocking admission from people who surely would say that predicting the future and responding to competitive threats are crucial parts of their job. Even with the best intentions, it’s easy to get bogged down by the vast amount of data available—from market reports to trade journals to surveys to blogs. The trick is separating the wheat from the chaff, and that’s where a sophisticated early warning system comes into play. Building one takes three steps. Anticipate specific futures. Scenario analysis can help a company create long-term strategy, investment, and development plans. In the late 1990s, for example, Visa International was facing new Web-based competition—“emerging payment solutions,” which let consumers bypass credit cards altogether through on-line peer-to-peer (P2P) transactions. Wall Street analysts predicted that such services heralded the demise of the plastic credit card. Visa itself projected its market share losses to be as large as 10% in the short term, which could mean a loss of tens of millions of dollars in transaction fees. To determine the best course of action, Visa’s strategy and intelligence group identified four future scenarios (ranging from the possibility that venture-backed upstarts would attack the U.S. market immediately to the prospect that the start-ups would simply fail.) Each of these scenarios, literally drawn up on storyboards, pointed to specific rivals and defined outcomes. Visa tracked several signals that might indicate which of the scenarios was most plausible—such as the number of merchants signing up for the new P2P offerings, the level of advertising expenditures by its P2P competitors, and the amount of capital being raised by these new rivals. By early 2001, Visa noticed that several signals had diminished in strength—and the company had avoided making a costly strategic mistake based only on premature concerns. But the intelligence Visa gained about the P2P threat was valuable nonetheless. For instance, the company beefed up its consumer education on Internet transactions and developed and promoted secure on-line technologies. Appoint sentries to watch the signals. Once the scenarios are created, businesses must be alert to signs indicating which ones are unfolding, and certain technologies are making that easier than ever. One large telecommunications company, for instance, uses swarm intelligence technology (named for the way insects pass along information and modify their behavior to fit the environment) to capture what its many employees are hearing and seeing. When one staff member attended an obscure industry meeting, he heard a rival talking about how his company was dedicating resources to stunt the telecom’s initiatives. The staffer quickly wrote up a conference report and logged it into the company intranet, which serves as the window to the telecom’s swarm intelligence network. The intranet carries constantly updated news feeds and reports throughout the day. Employees can access the information at any time and can post additional data or responses for others to see. Employees can also vote on-line about the degree to which the shared information poses a threat to the company. Those votes are continually updated and tallied for senior managers, with specific thresholds triggering different coding of the information. A gray flag, for example, means keep an eye on something. A red flag indicates the need for more serious action. In this case, senior executives had heard about the competitor’s plans before but didn’t take action until they noticed the change in the hive’s collective threat level. The swarm intelligence technology turned hundreds of employees into informal sentries, warning the company to react to changing competitive conditions. Expedite decision making. Intelligence is an asset only if it is used. And even though every company dreams of beating its competitors to new markets, new products, and new customers, it’s shocking how many of them are slow to react to early signs of trouble or opportunity. A mere 7% of corporate strategists said that management acted fairly soon after receiving an early warning, and only 13% claimed management had a method of “forcing quick action.” Playing war games can speed up the decision-making process by stripping away the bureaucracy. It forces managers to react to competitive-intelligence data (on-line and off-line reports, industry anecdotes, and the like), pool their thinking, and critique all the information in a systematic way before deciding how to respond to threats or opportunities. While scenario planning offers executives a broad framework for anticipating what may happen, war games serve as a tool for dealing with threats or opportunities once they’ve become reality. In the mid-1990s, playing war games helped Best Foods launch a salad dressing to extend its well-known Hellmann’s mayonnaise product group. The team staged mock battles to try out various pricing and rollout scenarios and to predict competitors’ reactions. They ranged from the Scorch the Earth campaign, in which entrenched rivals spent lots of promotional dollars to keep Hellmann’s out of the dressing market, to the Inertia campaign, in which rivals couldn’t react because they were constrained by limited budgets and resources. The product team combined these various futures and mapped out a successful pricing, discounting, and promotional strategy—achieving a 7% to 8% market share in an already crowded product category. Companies will always face threats—from fluctuations in the stock market to a competitor’s new breakthrough technology. But successful executives will use sophisticated intelligence tools to ensure that they’re never left asking, “How did this happen to us?”

Be Prepared

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