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Douglas Bernhardt is a visiting lecturer in Competitive Intelligence at Wits Business School and the University of Stellenbosch Business School. He also provides consulting and training services for firms in Africa, Europe, and the Middle East. Douglas previously served as Managing Director for the Geneva-based consultancy, Business Research Group SA. His last book, “Competitive Intelligence: Acquiring and using corporate intelligence and counterintelligence”, was published in London by FT Prentice-Hall in 2003. An American citizen, Douglas is now based in South Africa, and can be reached at stratcon1@hotmail.com
Copyright © 2009. Decision Processes International. All Rights Reserved.

Intelligence vs. Decision-Maker:
Who Cares and So What?
by Douglas Bernhardt
| AUTHOR, CONSULTANT, LECTURER “One of the chief errors of Western intelligence analysis during the Cold War was its frequent failure to take the long view. Had analysts remembered the tendency of autocrats through the ages to be told only what they are willing to hear, they would have found it less difficult to grasp the striking contrast between the frequent success of Soviet intelligence collection and the poor quality of Soviet intelligence analysis.”
— Christopher Andrew, Professor of Modern and Contemporary History, Cambridge University

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learly the most worrying aspect of so many of today’s business strategies is that they simply will not work. Put another way, the medium- to longer-term strategies of most large-scale companies in 2009 seem to more reflect the over-optimistic ambitions and projections of chief executive and chief operating officers than they do blueprints for building sustainable competitive advantage and superior returns. This is not good news. As managers everywhere continue to squirm under the uncomfortable realities of global recession—wholesale job losses, credit droughts, the collapse of formerly ‘invincible’ corporate icons, the resurrection of protectionism, and wide-

spread doubts over the very integrity of the free enterprise system itself, to name just a few—they continue to tell themselves, their shareholders, and the world at large that management have now fully atoned for their past sins, and that freshly crafted plans that virtually guarantee future commercial success are now firmly in place. Of course, they add, all they really need now to restart their corporate engines are rather large bucketfuls of government funds. Unfortunately, under-performing companies, and economies generally, are not basketballs; they do not bounce back quickly, or necessarily in the same shape. The reality is that managing for future competitive success will require

radically new approaches to strategic thinking and action. Equally, it will require significant paradigm shifts in organizational culture and business models. But perhaps the most difficult challenge of all for managers, many of whom are still wondering how and why they have been so unexpectedly plunged into “the worst of times” from “the best of times”, will be their willingness to accept that winning tomorrow’s competitive battles means, in part, that they must embrace, accommodate, and integrate “knowledge and foreknowledge” of the external environment into all aspects of high-level policymaking and planning. Executives, in short, must become eager, open-minded consumers of

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The Strategist
strategic intelligence; i.e., intelligence “designed to provide [them] with the ‘big picture’ and long-range forecasts they need in order to plan for the future.” After all, good intelligence ‘product’ is nothing less than “information that meets [their] stated or understood needs… and has been collected, processed, and narrowed to meet those needs.” And today, as we bear witness to the unhappy consequences of making decisions based on ‘gut feel’, instinct, unchallenged assumptions, or inadequate information, the alternative is to look inwards, dismiss the notion of intelligence as an essential component of strategic decisionmaking, and hope for the best. financial system and those charged with regulating it let us down badly, but it’s just too easy to blame “the banks” for all our woes. There can be little doubt that many corporate leaders have a case to answer for. Given that a major development or event—from a “surprise” competitor move to poor financial results—rarely, if ever, occurs ‘overnight’, one is compelled to ask: to what extent have corporate leaders focused on enhancing “the capacity of their organizations to recognize emerging threats, prioritise action, and mobilize available resources to mount… effective preventative responses”? In other words, are managers demanding and receiving the sort of intelligence on external threats and opportunities that government policymakers rely upon (or should rely upon!) as they consider their nations’ interests, plans, and strategies? It would appear not. To illustrate: McKinsey & Company, a consultancy, recently published the results of their 2008 survey on competitive behaviour, How Companies Respond to Competitors. Based on responses from a worldwide sample of business executives, their findings should make frightening reading for any shareholder or employee of the firms concerned. These include: • A majority of executives say their companies found out about a significant innovation—or price-related competitive move too late to respond before it hit the market • Companies are not doing a good job of conducting ongoing, sophisticated analysis of their competitors’ potential actions • Despite the potential for serious earnings drops when a competitor introduces a significant price change or innovation, executives say their companies assess surprisingly few options for responding • Any response to a competitive move tends to be rather slow The message is obvious: executives typically devote more time trying to improve operational effectiveness (‘doing the thing right’) rather that rethinking, or reconfiguring the firm’s strategic positioning (‘doing the right thing’). Ask yourself, when was the last time you tested the rigour of your own key assumptions? Indeed, when was the last time you instructed your company’s competitive intelligence unit, or an external intelligence consultancy, to investigate a major rival’s key assumptions about their business, their markets, or the industry? A principle aim of intelligence is to compel decisionmakers to routinely reassess their perspectives and their strategies. Intelligence has, of course, long been regarded as ‘part of the furniture’ in the national security arena and the military, where it serves as a powerful “force multiplier”. Indeed, whatever the political complexion of a nation state, modern intelligence agencies have, for some 100 years, been tasked to inform senior policymakers and warfighters in an effort to provide them with decision advantage. Some 18 years ago US President George H.W. Bush put it this way: “Intelligence remains our basic national instrument for anticipating danger, military, political, and economic. Intelligence is and always will be our first line of defence, enabling us to ward off emerging threats whenever possible before any damage is done. It can also be a means of anticipating opportunities.” A dedicated intelligence function, with a mandate to deliver objective, unbiased and forward-looking analyses, estimates, and warnings to corporate decision-makers is just plain common sense. Or is it? Organizations such as Johnson & Johnson, IBM, Microsoft, Nokia, and F Hoffmann-La Roche cer. tainly see it that way. But what about your company? How many managers do you know that actually welcome information and analysis that challenge their agendas and viewpoints?

“strategy without intelligence isn’t strategy, it’s guessing.”
Considerable evidence exists to support the argument that one of the major causes of strategic failure on the part of once revered industry goliaths—AIG, Chrysler, General Motors, Lehman Brothers, Royal Bank of Scotland, Woolworths UK, and scores of others—was the unwillingness of their management to anticipate, monitor, and understand the changing nature of environmental forces that have such a decisive impact on their businesses. The surprising thing is that while executives are rightly expected to know in advance the waters into which they steer their corporate ships, it seems that over the past decade or so they have spent rather more time dining at the captain’s table than looking out from the helm. How else can one explain the mess that prevails in an ever widening array of companies globally? Yes, the

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How many executives are you familiar with that are prepared to suspend their egos when confronted with “bad” or uncomfortable news and information that indicate a ‘course correction’ might be the smart thing to do? And how many aging corporate leaders can you think of that are willing to modify their decisions or behaviour based on what they are told by a 29 year-old intelligence analyst whose evidence, logic, and conclusions suggest that current policies and strategies are, at best, sub-optimum? Let’s face it, virtually every element of today’s competitive landscape—competitors, changing customer preferences, discontinuities in the economy, technology advancements of all kind, and much more— tend to evolve very differently than senior business leaders expect or hope for. The truth is often hard to take. In my introductory remarks to MBA students that I teach at South African and European business schools, I suggest that “strategy without intelligence isn’t strategy, it’s guessing.” Think about it: if your organization did not have competitors, if it was a monopoly, why would you need anything more than relatively short-term operational plans? If, on the other hand, we accept Professor Michael Porter’s proposition that “The state of competition in an industry depends on five basic competitive forces”—i.e., the threat of new entrants to the industry; the threat of substitute products or services; buyer power; supplier power; and the intensity of rivalry among existing competitors—it should take no great leap in imagination to understand that the corollary to this implies “the need for an organized mechanism—some sort of competitor intelligence system” to collect, analyse, and disseminate the intelligence that managers require. Next, consider Professor Gary Hamel’s argument that “competition is no longer between products or services, it’s between competing business concepts.” The implication here is that managers are duty bound to seek as deep an understanding as possible of

rivals’ business models, let alone their own. Ask yourself, can you describe, in any detail, the most important aspects of your major competitor’s core strategy, customer interface, strategic resources, and value network? What about the critical economic, political, social, and technological forces which affect your industry and your marketplace every day and everywhere? And last, is your company’s intelligence unit tasked to continuously monitor these and related topics, then report back to management with impartial, evidence-based analysis that may, on occasion, help ‘save your bacon’? Or is your intelligence team used mainly for ‘putting out fires’ when all other attempts to meet critical information requirements fail? If you’re ready to suspend your ego, and place your bets on informed strategy, rather than ‘educated guesses’ in your company’s race to the future, it is your job to take intelligence seriously. Even the best intelligence—and it can never be perfect—will not tell you what to do, but it will certainly paint more accurate, more dynamic, and more up-to-date pictures of the competitive realities you confront than those you’re probably seeing now. So what are the metrics of relevant intelligence deliverables? Here are the top three: 1. Accuracy. Since no data on the future exists, the accuracy of intelligence depends largely on the reliability of sources—including human sources, or HUMINT— and the quality of analysis (which involves judgments). 2. Relevance. Relevant intelligence answers the proverbial “so what?” question for the user, or set of users concerned. It has a clear and direct bearing on the intelligence consumer’s policy agenda. It makes a difference to the consumer’s thinking and behaviour. It may provide early warning of threats. It could take the form of unbiased assessments of current problems. Or it might be a

longer-term estimate of future developments likely to have an impact on the firm’s objectives, strategies, and interests? 3. Timeliness. Intelligence delivered too late has no value; it’s just information. Ultimately even intelligence units whose products consistently meet the basic tests for accuracy, relevance, and timeliness are simply wasting their time if their output is ignored or rejected altogether by users who simply cannot “abide analysis or reporting that [runs] counter to their own view.” Intelligence which is not integrated into the mix of factors that influence the thinking of decision-makers represents little more than intellectual impotence. As this author argued in an earlier paper, the most overwhelming challenge faced by intelligence teams and their users (i.e., decision-makers) is what I refer to as the “consumer-producer disconnect”. The underlying problem is that decision-makers and intelligence analysts are very different. Although united in common purpose (i.e. the success of the organisation), as individuals they have very different missions and very different world views. At best, this state of affairs leads to healthy debate and helps sharpen thinking. At worst, it leads to counterproductive arguments about “what’s right”, or “who’s right”, as the lines between evidence, facts, and opinions become ever more blurred. If Competitive Intelligence is to make a difference to organisational performance, it is management’s responsibility to integrate intelligence into the firm’s strategic processes. Equally, it is a joint responsibility of decision-makers and analysts to recognize and overcome the very human differences that exist between them. Overcoming the “disconnect” is tough, but it’s not impossible and it’s certainly something managers should care about. Why? Because intelligence does make a difference; often the difference between winning and losing, and between survival and failure.

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