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Strategic intelligence: a concentrated and diffused intelligence model

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DOI: 10.1080/02684527.2020.1747004

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 Intelligence and National Security

ISSN: 0268-4527 (Print) 1743-9019 (Online) Journal homepage: https://www.tandfonline.com/loi/fint20

Strategic intelligence: a concentrated and diffused

intelligence model

Avner Barnea

To cite this article: Avner Barnea (2020): Strategic intelligence: a concentrated and diffused
intelligence model, Intelligence and National Security, DOI: 10.1080/02684527.2020.1747004

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INTELLIGENCE AND NATIONAL SECURITY
https://doi.org/10.1080/02684527.2020.1747004

ARTICLE

Strategic intelligence: a concentrated and diffused intelligence

model
Avner Barnea

ABSTRACT
Both the discipline of strategic intelligence at the governmental level and
the competitive intelligence discipline constitute accepted methods of
supporting decision in order to avert mistakes and prevent strategic
surprise. So far, research has focused on national intelligence and intelli-
gence in business separately however, it is possible to use experience
accumulated in the business field to improve intelligence practice in
national security and vice versa . The central innovation of this article is
that mutual learning can be utilized in the context of a model that makes
a distinction between a ‘concentrated surprise’ and a ‘diffused surprise’ to
provide a breakthrough in the intelligence field for better prediction of
the development of surprises.

Introduction
Daniel Kahneman has stated that “an essential aspect of our mental life is the capacity for surprise,
and surprise itself is the most sensitive indicator of our way of understanding the world and what we
expect of it.1“ Surprise exists not only in the personal domain but also in the organizational field. The
focus of this work is a comparison between the ways in which states cope, through their intelligence
organizations, with strategic surprises and the ways in which business organizations deal with
unexpected moves in their field. Based on this comparison, I will propose a new model which can
better address the challenge of avoiding strategic surprises.
The basic assumption on which this paper rests is that in both fields, national and business,
intelligence gathered about adversaries or competitors regarding changes taking place in the
external environment support the decision-making process. In each field, national and business
intelligence, this subject has been studied on its own without engaging in comparative analysis or
mutual learning. In both fields, there is a need for improvement. This objective can be achieved
through cross-organizational research, especially given that it is the decision makers who receive the
information and process it who tend to make mistakes and these mistakes are more efficiently
investigated in business organizations than in intelligence entities.2
The concepts of competitive intelligence3 and marketing intelligence4 were created in the 1980 s
and developed during the second half of the 1990 s. They were influenced, to a great extent, by
study of the experiences of national intelligence organizations, in combination with unique input
from the business sector.5 Michael Porter’s pioneering book from 1980, Competitive Strategy:
Techniques for Analyzing Industries and Competitors,6 was one of the most influential works in the
field of business strategy – and one in which the ‘intelligence cycle’ is a central basis of the
methodology – and helped drive the development of intelligence in business. The information
revolution and development of the Internet transformed the potential for obtaining, processing and
transmitting information and led to the rapid global use of digital business information. It also

CONTACT Avner Barnea avnerpro@netvision.net.il

© 2020 Informa UK Limited, trading as Taylor & Francis Group
2 A. BARNEA

generated further academic research in the fields of marketing and competitive intelligence.7 This
academic research in the field of business strategy had a broad scope but with an emphasis on the
competitive element as shaping the way decisions are made and the actions of business organiza-
tions in crisis situations.8
The aim of this article is to propose a framework that can help to avoid strategic surprises, as well
as improve understanding of complex situations, through mutual learning across the fields of
competitive intelligence and governmental (strategic) intelligence and support better intelligence
products to the decision-making process. It is rooted in the idea that the foundations of the
methodologies in both disciplines, national intelligence and competitive intelligence, are similar –
being based on ‘the intelligence cycle’.9 Examples of areas for mutual learning would include Michael
Porter’s Four Corners model from the field of business strategy,10 which provides a valuable frame-
work for predicting a competitor’s course of action. This can be applied to national intelligence to
analyze rival’s intentions. To take another example, Schoemaker and Tetlock,11 leading scholars in
business predictions, have developed an approach for developing ever-improving organizational
forecasting capabilities that have been applied in business. The US intelligence failure in the lead-up
to the invasion to Iraq in 2003 was a stimulus for them to claim that their research shows they can
help intelligence agencies to develop better predictive capabilities. Conversely, intelligence failures
in business12 were a trigger for the business sector’s adoption of the Early-Warning discipline13 from
national intelligence.14 As a result, the business sector moved to active scanning of the competition
to detect signals in the external periphery, particularly important in turbulent environments where
unexpected, outlying data might become more important.15

Intelligence failures and lack of warning

Early warning systems attract a relatively large amount of attention from both the national intelli-
gence and business intelligence fields. The way these systems are implemented in each respective
field, by huge investments in intelligence methods to receive early signals, shows that the challenges
each presents are fairly similar, and often depend on the interpretation of intelligence data and the
interface with decision makers.16 While the computer age and especially the recent digital era moved
gathering and analysis processes much further, understanding the minds and needs of the decision
makers remained challenging. I tend to believe that the fundamental problem of intelligence does
not lie in the lack of information but in organizational limitations – as viewed by Wilensky, ‘if
anything is clear it is that intelligence failures are built into complex organizations’17 – and also in
analytical failures together with problematic relationships with decision makers.
The phenomenon of intelligence failing to provide alerts,18 with the emphasis on surprise attacks,
has been studied since the early 1960 s when Roberta Wohlstetter published her research on the
1941 Japanese surprise attack on Pearl Harbor.19 For many years, military intelligence organizations
have been dealing with the question of how to improve their capabilities in order to prevent
strategic surprises. The main emphasis has been on enhancing intelligence gathering, especially
covertly, and during the past few years, overtly too, through research and also in ancillary fields such
as liaison between national intelligence organizations.
Research indicates that regarding most surprise attacks that have occurred since 1939, the
intelligence communities claimed prior to the attacks that no risk would transpire.20 This is the
reason why decision makers, following these attacks, turned an accusatory finger at intelligence
professionals, blaming them for not anticipating the attack and not providing an alert in advance of
it.21 Richard Betts has claimed that expectations that the increase in resources and means allocated
to intelligence in the last few decades would lead to an improvement in the quality of strategic
intelligence have not been realized. A significant advancement in the ability of the intelligence
communities of the US and Britain in the field of strategy has not been evident, whereas the reasons
for their failures stand.22
 INTELLIGENCE AND NATIONAL SECURITY 3

As a result of the 11 September 2001 attacks (9/11) and the failure in assessment in 2002–2003
regarding Iraq’s weapons of mass destruction (WMD) – both intelligence failures that exemplify two
totally different types of errors,23 one in the field of counterintelligence and the other in the field of
positive intelligence – official investigations were conducted to determine the reasons why they
occurred.
The 9/11 attacks were blamed by the 9/11 Commission24 on the intelligence community’s failure
to ‘connect the dots’, and led to the creation of the post of the Director of National Intelligence (DNI)
and the centralization of the intelligence community as a response to the lack of cooperation leading
up to 9/11. On the other hand, the false intelligence on WMDs in Iraq25 was a case of connecting dots
that were not there, possibly due to pressure from policymakers and government officials. The
conclusion of the report on the U.S. Intelligence Community’s Prewar Intelligence Assessments on
Iraq was that ‘most of the major key judgments in the Intelligence Community’s regarding Weapons
of Mass Destruction, were either overstated, or were not supported by the underlying intelligence
reporting’.26
The recommendations to the Intelligence community were to continue to behave in the same
way, in the framework of standard intelligence practice on the national level, and to try to improve
their efficiency. There is no easy fix for intelligence and reforms often focus too much on failures in
intelligence rather than its many successes. Betts states that many reformers have very little knowl-
edge of the intelligence process and therefore lack the ‘perspective’ to solve the deeper problems
within intelligence.27 In the years before the 9/11 attacks, too, following deficiencies in assessment,
whose highpoint was the failure to give an early warning of the impending fall the Berlin Wall (1989)
and then of the collapse of the Soviet Union, the US intelligence community reached similar
conclusions; that it should make only minor changes. The firm opinion of the US intelligence
community was that only the most convoluted reasoning could turn the summaries and key
judgments of the Intelligence Community’s analysis of the Soviet Union in the 1980 s into a case
that the IC ‘missed’ the Soviet collapse.28 These changes did not actually enhance the quality of
intelligence analysis and assessment. At that juncture, there was no serious consideration given to
the possibility of conducting an ‘out-of-the-box’ study based on research practices that were already
known and used by the business and academic communities.
The lack of early warning of developing threats in the business field, such as the emergence of the
financial crisis of September 200829 or the crash of global companies (one example from many is the
fall of Nokia),30 constitutes a similar problem that has not received sufficient theoretical discussion
from the perspective of intelligence and warnings. Intelligence organizations, policy makers and
senior managers in the business field invest enormously in attempting to prevent strategic surprises
but they continue to be surprised.

Types of surprise: concentrated surprise and diffused surprise

Most research that has dealt with strategic surprise and intelligence failure at the national level has
focused on a certain type of strategic surprise, usually a surprise attack.31 This type of surprise can be
termed a concentrated surprise, given that it is a product of a directed effort on the part of one player
determined to prevent an adversary from knowing its intentions and real capabilities by conceal-
ment and fraud in order to gain an advantage. Well-known examples of this type of surprise include
the ‘Barbarossa’ surprise attack on the Soviet Union in 1941, the Pearl Harbor attack, the Normandy
landings of 1944, the invasion of South Korea by North Korea in 1950,32 the Yom Kippur War of 1973,
and Argentina’s invasion of the Falkland Islands in 1982. Since World War Two, there have been more
than a small number of strategic intelligence failures that have culminated in surprise attacks.33 9/11
was also a concentrated surprise attack34 but one by an organization rather than by a state. One of
the most blatant US intelligence failures during the Cold War (concentrated surprise) was in not
sounding a warning about the building of the Berlin Wall in August 1961,35 an event that for various
4 A. BARNEA

reasons was not investigated by the US government. It must be noted that most strategic surprises
are concentrated surprises.
Less research attention has been paid, to date, to another type of surprise attack – the
spontaneous diffused surprise phenomenon. By this, we mean a development that surprises, yet
is not the product of a concentrated and organized effort to surprise but, rather, is a gradual and
spontaneous development that is difficult to recognize by an intelligence target that stands on the
side.
Two examples of diffused surprises – the Iranian Revolution and the first Palestinian Intifada – will
help to explain this type of surprise. In an effort to trace and explain Israel’s success in comparison to
US failure in correctly estimating the course of the Iranian Revolution in 1977–79, Uri Bar-Joseph36
has emphasized the objective difficulties involved in forecasting the course of spontaneous popular
revolutions and shown that Israel’s success in this case was mainly the result of the intimate
acquaintance of its representatives in Iran with the local language, history and culture, as well as
the ability to communicate with locals – tools which the Americans completely lacked. Bar-Joseph
has emphasized that while US intelligence relied on estimations by the Iranian intelligence services,
that in retrospect were found to be wrong (concentrated surprise), Israeli intelligence went in
another direction. Israel made successful efforts to identify the signals of change in better under-
standing the public and thus escaped a diffused surprise.
The first Palestinian intifada in 1987 began as an unarmed popular uprising which turned into
a comprehensive confrontation involving large-scale riots and attacks on the Israel Defense Forces
(IDF), developed spontaneously, and was a major surprise to Israeli intelligence. Israel’s security
control of the territories was the responsibility of the ISA (Israel Security Agency). Its main priority
was to prevent terrorist attacks by the Palestinians. The focus of the ISA was on the leaders of the
Palestinian organizations, mainly the Palestine Liberation Organization (PLO) which historically had
initiated most of the attacks. However, this uprising was not initiated by the PLO (which could be
a concentrated surprise) but developed spontaneously by the masses, who were not covered by the
ISA as they were not seen, based on many years of experience,37 as a potential source for an uprising.
Not only was Israel surprised,38 even the heads of the PLO, including Chairman Arafat, were
surprised. The first Intifada can be considered a diffused surprise because it was not the result of
organized PLO terrorist activity, as the defense establishment initially thought, and it continued on
and off until 1993.39
As this example illustrates, a diffused surprise can be a product of spontaneous and diffused social
and political processes that develop over relatively long periods of time until they ‘erupt’, which
makes identifying the threat even more difficult. The explanation for the failure to alert lies in the
surprise being diffused and not focused, as believed by those responsible for analyzing the data and
issuing the warning. In addition to the Palestinian Intifada, clear expressions of this type of event
include popular revolutions and revolts such as the Algerian rebellion (1954), the Iranian revolution
(1979 – see above), the ‘Arab Spring’” (2011) as well as the disintegration of the Soviet Union (1989)40
and, more recently, the revolution in Sudan (2019). An analysis of the events of the Prague Spring
(1968) and the attempted revolts in Poland and Hungary (1956) indicate that these too were diffused
surprises for US and Soviet intelligence. The popular revolts of the state’s citizens in East Germany
(1989) were a diffused surprise for East German (and Soviet) intelligence.41
One significant finding of my research is that in diffused surprises, intelligence organizations are
making mistakes in identifying the intelligence target which needs to be covered. When mistakes in
predicting a surprise occur, part of the answer to the question of why this happened lies in the failure
in assessing the intelligence target as the surprise element. When this happens, looking back to the
sequence of events shows that the focus on the Key Intelligence Topics (KITs) was incorrect and
consequently the intelligence gathering brought to the ‘intelligence cycle’ irrelevant data that led to
mistaken conclusions and the additional difficulty of formulating an alert. In the case of Iran, US
intelligence targeted (wrongly) the Iranian security establishment and did not find signals of change
while Israel targeted the crowds and obtained signals for major change that alerted the Israeli
 INTELLIGENCE AND NATIONAL SECURITY 5

government in time. As to the Intifada, the ISA was wrongly targeting the PLO leadership while the
signals came from the masses which were not covered. I have noted a similar phenomenon in
business when companies have wrongly identified their major competitor and left threats
unattended.42
For many years, Lanir’s differentiation between a basic surprise and a situational surprise has
stood.43 For Lanir, whereas a situational surprise is an event caused by a fault in gathering, analyzing
or disseminating information, a basic surprise is an event that exposes a deep misunderstanding of
developments, having far-reaching and significant consequences. Lanir called the cause of this
intelligence failure: ‘the lack of a relevant perceptional framework’.
Scholars have generally concluded that intelligence failure is inevitable, but diverging points of
view have existed with regards to the origin of failures. Some scholars focus on operational causes of
failure like deception, which results in missing the actions of the attackers in advance. The most
prominent example is Whaley, who examined the Nazi invasion of the Soviet Union in 1941. Whaley
argues that the critical factor in the surprise Nazi attack is what he calls stratagem: ‘A co-ordinated
campaign of deception to mislead the victim’s analysis.’ Levite disagrees44 with the dominant view
that intelligence failures are natural and inevitable, arguing that where there is sufficient intelligence
available one can take appropriate defensive actions. Handel argues45 that intelligence professionals
and decision makers often fail to arrive at the correct conclusion. He points that the main problem of
intelligence failure lies in cognitive issues of human activity. Dahl46 identifies three schools to explain
the causes of intelligence failure: the traditional school (intelligence agencies should have been
concentrating a on broader strategic intelligence mission), the reformist school (the fundamental
problems lie more in organizational and bureaucratic limitations), and the contrarian school (dis-
asters are most often caused by failures of intelligence collection than by problems of analysis or
organization), but my differentiation goes one step further.
According to the differentiation proposed here between concentrated and diffused surprises, we
are faced with two types of different and previously unknown surprises.
To take two examples from the business arena; first, the appearance of Apple’s iPhone (2007)
constituted a tremendous strategic surprise for Nokia – the world leader in the communications
field at the time. This surprise led to the demise of Nokia’s mobile phone division, despite its
intelligence unit seeing signs indicating Apple’s intention to enter this domain. Nokia’s manage-
ment, nevertheless, rejected the intelligence assessment regarding Apple’s intentions by claiming
that it was unreasonable.47 Second, the same happened with the management of Kodak, which
did not prepare itself for the digital revolution in photography and was shocked to find that Fuji
had taken over the minilabs market in the U.S.48 Nevertheless, it is only natural that anyone
planning a strategic move will do everything in his or her power to make it a surprise while those
tasked with preventing the adversary’s strategic moves or with sounding an alert will do their best
to thwart the surprise.
In addressing this, the business world adopted intelligence practices derived from government
intelligence and applied them to its requirements after making appropriate adjustments. From its
inception, competitive intelligence focused not only on tracking threats on the part of competitors
or monitoring significant developments (such as digital media that replaced CDs and DVDs; laser
printers that replaced ink printers; digital photography that replaced chemical film; plastic that
replaced metals and glass, etc.), but also on studying market trends, putting the emphasis on
understanding customers’ desires, in order to make decisions that built a competitive
advantage.49 Competitive intelligence and marketing intelligence are complementary: competitive
intelligence tracks, usually from a broad perspective, the external environment that can affect
corporations, while looking deeply toward the future,50 whereas marketing intelligence focuses on
existing markets.51 However, the lack of resources which are allocated to fulfill competitive intelli-
gence needs in corporations makes its scope more limited, and therefore leads to a smaller number
of issues under investigation and the processing of less information. Apparently, corporations aspire
to be in the position described by the executive chairman of Cisco, John Chambers, whereby: ‘We
6 A. BARNEA

understand the market, our competitors and – most importantly – how our competitors think . . .
I have a pretty good idea what their next two moves will be.’52
It must be noted that the disciplines of competitive and marketing intelligence have always been
pioneers in developing significant capabilities to track social networks and using insights gleaned
from them as a tool to support decision making.53 The combination of data received via social
networks in real time and marketing intelligence54 and competitive intelligence, offers a detailed and
comprehensive picture that neither of these two fields can provide on their own. The use of ‘big data’
augments these capabilities. Already, a number of years ago, McKinsey & Company, the global
management consulting firm, demonstrated how the business world had developed advanced
analytical tools for mining business data from social networks, alongside data generated from
‘conventional’ sources,55 with the emphasis on its contribution to decision making.

Comparison between national intelligence and business intelligence using the

distinction between a concentrated surprise and a diffused surprise
At the base of this article there are three assumptions. First, the factors involved in intelligence
failures in the national and business areas are analogous; second, certain lessons learned in one area
can be used to understand the surprise phenomenon in the other area, using the distinction
between a concentrated surprise and a diffused surprise; third, this distinction facilitates improved
warning about a threat in both areas – in particular, in preventing a diffused surprise.
Strategic surprises, which usually stem from intelligence failures, do not generally originate from
a lack of data. In both fields, the national and the business, there is a large amount of data regarding
strategic threats and the risks of their materializing. Intelligence failures lie in the analysis of the
data’s meaning and in understanding the reality as an outcome of the difficulty in changing existing
assessments because of the analyst’s cognitive deviations and mistakes, ethnocentric approaches,
organizational reasons and the influence of decision makers. The outstanding Israeli scholar in the
field of military and security strategies, Yehoshafat Harkabi, among the first in Israel to formulate the
essence of intelligence work as an important tool in understanding the picture,56 said that the lack of
discernment of the essence of threats is the result of cognitive failures, which make it difficult to
build a picture of the reality.57

Similarity between the explanations for failures in the national and the business
fields
Navigating deeper into the similarities between intelligence failures experienced in the govern-
mental and in business fields, we can identify five major areas in which failure is typically located,
summarized in Table 1:
Distinguishing between a concentrated surprise and a diffused surprise offers an additional level
of explanation for intelligence failures in both areas. One explanation for the failure to warn of
a diffused surprise is that intelligence researchers operate according to the thought patterns of
concentrated surprises – which are not relevant. Given that in these circumstances it is difficult to
identify the threat, its capabilities and its intentions, the focus is on the wrong intelligence target
which only later on is understood to have been mistaken. While in a concentrated surprise, the
intelligence target is usually a recognized organization (an enemy, an adversary, a competitor) that
through its activities is a threat, in a diffused surprise it is difficult to identify the intelligence target
and, consequently, the risk of a diffused surprise increases.
The division of failures into concentrated and diffused allows for a strategic surprise to be
classified in one of four ways (see Figure 1), according to the type of surprise – concentrated or
diffused – and according to the type of environment in which it occurs – national or business.
Thus, every intelligence failure can be categorized according to two of these dimensions. The
explanation I offer, based on analysis of intelligence failures in the national and business fields,
 INTELLIGENCE AND NATIONAL SECURITY 7

Table 1. Explanations for intelligence failures in the national security and business fields.
Area
1 Intelligence gathering capabilities
2 Noisy information environment
3 Human factor failures
4 Organizational difficulties and
deficient cooperation
5 Intelligence-policy relationship
Common characterizes
Usually, there is no shortage of information as these capabilities have developed
considerably in recent years. Intelligence is proactive and strives to obtain
information, which can alert to changes that occur in the external environment and
their significance.
Difficulties in sorting and absorbing data even before the assessment stage, with
receiving due to large amounts of data, its ambiguity, and that it may contradict
itself in different areas.
The focus in the literature regarding assessment failures is usually on intelligence
professionals (analysts), and does not concentrate on the difficulty in identifying
the intelligence targets (the adversary), which are the objects of attention in
diffused surprises. Less attention is given to developing analytical abilities for
prevention of diffused surprises when such intelligence is unavailable.
Difficulties deriving from the complex structures of the organizations as well as inter-
and intra-organizational competitiveness, which harm cooperation and impact on
the non-exploitation of intelligence.
The relationship dynamics may cause estimates to be biased due to the innate desire
to please the policy/decision-maker. In addition, a dysfunctional relationship
between intelligence and policy may even prevent intelligence analysts from
sending and receiving intelligence to and from decision-makers in order to prevent
a conflict between the desired policy and the intelligence entities.

Diffused Concentrated
Surprise Surprise

Natinal
Intifada 9/11
intelligence

2008
Intelligence
financial IBM
in Business
crisis

Figure 1. Case studies according to type of surprise and the surprise environment.59

demonstrates that use of the two types of strategic surprises – concentrated and diffused – can help
us better understand the reasons for intelligence failures and thereby add to existing explanations
that are usually correct only when explaining concentrated surprises. Classification according to the
above four dimensions has not been done in the past and, as such, this typology examines the
subject of intelligence failure from a new perspective and may aid in preventing forecasting mistakes
by enabling more accurate predictions based on differentiating between a concentrated surprise
pattern and a diffused surprise pattern.
Intelligence failures at any stage expose states or companies to surprises. The best-run companies
and national intelligence agencies can get blindsided by disasters they should have anticipated. In
terms of national intelligence, this is exactly what happened to the Israeli intelligence assessment
regarding the strengths of President Mubarak in Egypt during the Arab Spring, a few days before he
was removed from office. While Israeli and US intelligence were focused on the intentions of the
Egyptian military and the security establishment (a concentrated target) which strongly supported
the regime and at that stage was untroubled, the surprise emerged from the spontaneous public
uprising (diffused target), which was not covered by Israeli intelligence for historic reasons. In
a business context, Polaroid was one of America’s early high-tech success stories. By the 1960 s
8 A. BARNEA

and early 1970 s, Polaroid held a monopoly in the instant photography market with no real
competitors. However, as digital cameras flooded the market, Polaroid did not anticipate the
challenge from competitors (concentrated target) that could endanger its position. When customers
abandoned print, Polaroid was taken by surprise and in October 2001 filed for bankruptcy. The
company culture had a bias against electronics and was unable to make the transition to digital
photography and adjust to new market realities (diffused target). Polaroid had early warning when it
began losing some of its big customers in the real estate, insurance, and photo identification
businesses, which was ignored. While Polaroid was more worried by potential competitors (con-
centrated target), if it had better recognized its customers (diffused), it could have adjusted and
made the transition to digital photography in a timely manner and so avoided diffused surprise. The
fate of Motorola, the world leader in the mobile phone market was similar, and it was forced out of
this market.58
Intelligence failures and strategic surprises are also investigated in the business field to prevent
competitors, through a concentrated attack, from gaining a significant advantage. Further, a great
deal of experience in identifying broad phenomena of market changes among consumer audiences
and disruptive technologies to prevent diffused surprises has accumulated. There are plenty of
companies that failed to compete and recognize dynamic changes to their market. Intel was
surprised in the mid-1990 s to discover that its DRAM (dynamic random-access memory) technology
was no longer relevant as microprocessors became the preferred technology. As a result of its
advanced technological capabilities, Intel could change fast and survive, almost at the last minute.60
Netflix initially understood better the opportunity to enter and dominate the market that included
DVD sales and rental by mail and later through the Internet, causing Blockbuster to file for bank-
ruptcy. Dell Inc. also read properly the market signals and created a business model to build personal
computers faster and cheaper, by moving to direct sales, long before its competitors like Gateway,
Data General, Honeywell, Compaq, IBM and many others, who later faced diffused surprise and did
not survive. Intel, Netflix and Dell were among those corporations that read correctly the changes in
the marketplace such as trends, technology changes and customers’ needs beyond monitoring
competitors and thus avoid surprises (diffused).
Failure in intelligence has always attracted more attention than success and the numerous studies
of intelligence failure have tended to focus on a particular aspect of national intelligence failure, the
failure to detect or prevent a surprise attack. In the words of Walter Laqueur; ‘One of the major
functions of an Intelligence service, is to shield those it serves against surprise.’61 In a field where
a great deal of emphasis is placed on reducing uncertainty,62 it would be somewhat disheartening to
accept that failures may be inevitable, yet the possibility of failure is an inherent aspect of
intelligence.63
Over the years, there have been many suggestions for improvements to national intelligence
from scholars, inquiry commissions, and from within intelligence organizations but there was no real
attempt to learn from what was happening in other relevant fields, such as in the world of business.
David Steele64 argued already in the mid-1990 s that to deal with the new threats in the 21st century
the intelligence community must realize that intelligence is much more than just secret information;
it is an advocate for OSINT which was well developed, firstly, for business. However, he was ignored
by the US intelligence community.65
Following the surprise of the ‘Arab Spring’ intelligence entities in the US and other Western states
began looking to the business field for solutions to enable them to develop intelligence capabilities
that would alert them in time about social unrest, via changes in trends and the mood on the street
that presage political changes. David Shedd, former Deputy Director of the Defense Intelligence
Agency (DIA), referring to the failure of the intelligence community to predict the events of the ‘Arab
Spring’, said: ‘The analysts failed to note signs that would have indicated to us, shown us, that there
was a growing dissatisfaction . . . in the general population. We missed that.’66 These events led US
and Israeli intelligence agencies to investigate relevant business experiences, while analyzing the
viewpoints of broad audiences (i.e., crowd sourcing), in combination with academic and many global
 INTELLIGENCE AND NATIONAL SECURITY 9

companies, among which are Intel, Hewlett-Packard (HP), Dell, Google, Eli Lily, Proctor and Gamble,
General Electric and others. The outcome was a decision to implement advanced technologies of
monitoring and extraction of information from social media into the national intelligence-gathering
systems, as corporations have been doing for quite a long time.
Thus, since the 2011 Israeli intelligence failure to predict the stability of the regime in Egypt, the
Israeli intelligence community has become much more aware of the added value of intelligence
coming from social media in order to better analyze the domestic situation in Arab states. Israel is
intensively using expert platforms to enable better gathering and analysis from these sources.67 This
is also the situation with US intelligence.68
Failures in assessing intelligence targets also occur in the business world; however, business and
marketing intelligence are aware of this possibility, and in contrast to national intelligence, do not
focus only on understanding the targets’ (competitors’) intentions. They also monitor large popula-
tions (publics and audiences) in order to reach insights on trends, customers, technology and the
marketplace that will help decision making.

Case studies according to type of surprise and the surprise environment

To establish the basis of the proposed theoretical approach, four case studies have been examined
using the distinction between a concentrated surprise and diffused surprise in the national and
business fields (see Figure 1). Two of the case studies are from the field of failed national intelligence
and two are from the field of failed intelligence in business.
In each of the fields a concentrated surprise case study and a diffused case study were selected.
Prominent examples of intelligence failures in both fields were chosen. They represent characteristic
cases of intelligence failures in both fields, from a long list of possible examples. A comparison was
made using the following elements: type of environment in which the failure occurred (national or
business) and type of surprise (concentrated or diffused). This comparison enables us to better
understand the phenomenon of intelligence failure and explain the success or failure of predictions
in one field in the other field and thereby expand the explanations for predictive failure.
To recap, in the case of the first Palestinian Intifada the Israeli intelligence community was surprised69
(diffused surprise) as this initiative did not come from the intelligence target (concentrated) of many
years – the PLO – but from the Palestinian public70 through spontaneous revolt that led to a civil uprising
which had never happened before and lasted until 1993 and the signing of the Oslo Accords between
Israel and the Palestinian Authority. As mentioned before, the intelligence absorbed by the ISA was
wrong as a result of targeting the wrong objectives based on past experience.
9/11 was a concentrated surprise to the intelligence community initiated by al-Qaeda, and
although the U.S. intelligence community had good indications about their intentions,71 the 9/11
Commission pointed to a lack of information-sharing and an erroneous estimation of the threat.
Unlike in business, in government intelligence, information sharing is one of the most problematic
issues and emerges as an important lesson from the 9/11 Commission report. While the business
sector has developed a whole discipline of sharing business information internally to support
process that helps lead to better business results, this discipline was not implemented and absorbed
in the US Intelligence Community. The 9/11 Commission thought that the reason for not sharing
critical intelligence that could prevent the terrorist attack was not security compartmentalization but
rather the lack of an organizational culture of sharing.
The near-collapse of IBM (1993), which was saved at the last minute, was a major surprise
(concentrated surprise) to the board of IBM.72 IBM missed the fact that the market was changing
dramatically: main frames were becoming less relevant as customers adopted new PCs manufac-
tured by new competitors (Digital, Compaq, Toshiba, Dell, etc.) who were able to give customers
better value. A new industry of minicomputers (Data General, Digital, Honeywell, Prime, etc.) invaded
the business market, and their services for these were more affordable than for the mainframes.
10 A. BARNEA

Although the nature of the new competition was known to IBM, it did not respond, while its
management did not identify the meaning of the of new threats in time.
At the end of the 1980 s and the early 1990 s, IBM’s profit margins suffered a steep decline.73
During this period IBM became a follower of technological developments giving Microsoft and Intel
extremely profitable portions of the industry while retaining less profitable portions itself. Also, at the
same time, it lost touch with the interests and concerns of its customers, alienating them.
Subsequently, the new Chairman, Lou Gerstner, and his new top management team redirected
the company. IBM embraced an innovative approach to computing and bringing out products and
services that fit into its new model. Gerstner and his team saved IBM from collapse and began to
reverse its fortunes.
On 15 September 2008, the American financial system imploded after the collapse of the Lehman
Brothers investment bank and the crisis became global. An examination of the crisis using the
intelligence discipline indicates it was a diffused strategic surprise, an unpredicted threat to the
financial system that caught the American administration and the world unprepared. It was never
investigated from an intelligence point of view. The agencies responsible for the financial stability of
the United States had a great deal of information about the developing threat, but the chances of its
occurring were considered low.74 All prognoses, including those of the Federal Reserve, did not
accurately assess the significance of the threat and its ability to turn into a financial crisis, so no
resolute measures were taken to prevent it. The decision makers received no warning and reacted
too late, after the crisis had seriously impacted on the financial system’s stability, first in the United
States and then globally. Relying on warning from the Fed was a failure.75
The 2008 global financial crisis was a strategic surprise (diffused surprised) to the Fed. The crisis
rapidly developed into one of the most devastating in history, the worst since the Great Depression.
The initial assessment, including that of the Fed, was that no financial crisis could be expected and
that if there were a recession it would be limited in time and extent. However, the financial risk
developed gradually through the careless behavior of countless financial institutions, not just the
few whose collapse the Fed was prepared for and ultimately believed it could handle. The Fed failed
to recognize in time the accumulated danger and did not react until the economic collapse
materialized. The use of the intelligence discipline enables the creation of early warnings, before
the explosion of a large economic event such as the 2008 financial crisis,76 which changed the face of
the global economy. This is also correct vis-à-vis strong corporations that have not perceived
changes their competitors are introducing and strategic market fluctuations – which leave them
no chance of survival.
Given that at the base of the new approach presented in this article rests the distinction between
a concentrated surprise and a diffused surprise and that this underscores the difficulties in identify-
ing correctly an intelligence target, especially if dealing with a diffused surprise, a different way of
observing events, unrelated to what had been studied previously, was required.
According to the two diffused surprise case studies (the first intifada in 1987 and the financial
crisis in 2008), the organizations that were surprised ignored the attitudes and behaviors of
audiences and organizations whose cumulative activities caused the diffused surprise. In both fields,
business and national, intelligence officers were prepared, as per usual, for a concentrated surprise,
usually by recognized rivals or competitors. Intelligence in government and business would make
special efforts to anticipate the intentions and capabilities of the other side, while carefully watching
their activities. Only after being surprised did intelligence discover that the known targets did not
supply the necessary intelligence, as the surprises came from other directions, usually new ones
(diffused) that were not recognized at the time of the crisis. In the case of the Intifada, intelligence
was looking at the PLO while the source of the surprise was the crowds. In the case of the financial
crisis, the source of the surprise was the careless behavior of countless financial institutions
(diffused). To handle a diffused surprise, particularly in the national field, the complex structural
and ideological components must also be deeply investigated in order to better focus intelligence
gathering.
 INTELLIGENCE AND NATIONAL SECURITY 11

Analysis of the two concentrated surprise case studies (the 9/11 attack, the collapse of IBM) shows
that the intelligence failures stemmed from ignoring essential signs indicating adversaries’ activities,
non-sharing of data and incorrect threat assessment. The reasons for the failures in these cases are
similar to the known cases of concentrated surprises: mainly human factor failures, organizational
difficulties and deficient cooperation and the intelligence-policy relationship.
The comparative study of intelligence failures in the national and business fields and the
concentrated and diffused frameworks can add to existing explanations that are usually correct
only when explaining concentrated surprises. This framework can also contribute to improving
the preparedness of states and businesses for coping with strategic surprises in the national and
business fields. By early acquaintance with the distinction between concentrated and diffused
surprise, analysts may act differently upon receiving initial indicators for potential threat. They
will be expected to be more skeptical and fully aware of covering the right intelligence target
which, in the case of mistakes, can introduce into the intelligence system irrelevant information.

Summary
In both government and in business, the intelligence discipline is a decision support system. The use
of an intelligence approach is an important way of assisting chief executives in both fields in
avoiding mistakes in the process of deciding what to do next. It leads to a more careful evaluation
of alternatives and dimensions in a comprehensive way. The key insight and theoretical innovation
presented here may lead to better understanding of one of the most worrisome phenomena for
intelligence organizations, state leaders and the business world – strategic surprise – and thus
perhaps reduce prediction mistakes. The differentiation between concentrated surprises and dif-
fused surprises also has the potential to help prevent prediction and assessment mistakes through
mutual learning between the two fields.
National and business intelligence entities do not stop being surprised. For example, the aggressive
actions taken by Russian intelligence during the 2016 US presidential election campaign were
a (concentrated) surprise for US intelligence, especially for the FBI.77 Jawbone, a world leader in the
field of wearable communication devices, did not prepare itself for changes in the competitive environ-
ment, especially for actions by rivals Google and Apple (concentrated surprise) and went bankrupt in
2017.78 In the field of diffused surprise we can cite the popular revolt in Sudan that ousted its president,
Omar al-Bashir (2019), after massive spontaneous demonstrations that surprised the regime, and the
closing of Sears, the US department store chain, in 2018 which could no longer compete.
It is necessary to build links between national intelligence officials and executives in business to
discuss the mutual benefits that can accrue from learning from each other. It is possible to overcome
the issue of secrecy, which characterizes national intelligence, by being clear in advance that
discussions will be focused on methodology without violating state secrets. This is a major challenge
when trying to achieve mutual learning around intelligence.
The identification of concentrated and diffused surprises is not only in the classification into two
types. It starts in the appearance of a diffused surprise whose leaders and development over time
intelligence organizations have difficulty in identifying. The present study, especially that of
diffused surprises, continues and it is already clear that we are talking about a dynamic phenom-
enon. In other words, further on, at a certain stage after the civil revolt and the events of the
diffused surprise, strong organizations take over and move it in their direction. In the Iranian
revolution, Khomeini and his supporters took over; in the intifada, Fatah and Hamas took the lead;
in the ‘Arab Spring’ in Egypt, the Muslim Brotherhood; and in the case of the collapse of the Soviet
Union, Gorbachev returned to govern for only a short period following the putsch of August 1991.
Accordingly, we also have the hypothesis that identifying a diffused surprise allows its future
direction to be better anticipated.
12 A. BARNEA

Notes
1. Kahneman, Thinking Fast and Slow.
2. Sage, ‘Human Judgment and Decision Rules’; Kahneman and Tversky, ‘Choices, Values and Frames’; and Busenitz
and Barney, ‘Differences between Entrepreneurs and Managers.’
3. Competitive Intelligence (CI) is the collection and analysis of information to anticipate competitive activity, see
past market disruptions and dispassionately interpret events. https://www.fuld.com/what-is-competitive-
intelligence/.
4. Marketing Intelligence: Primarily external data collected and analyzed by a business about markets that it
anticipates participating in with the.intention of using it in making decisions http://www.businessdictionary.
com/definition/marketing-intelligence.html.
5. Walle, Qualitative Research in Intelligence Marketing.
6. Porter, Competitive Strategy.
7. Prescott, ‘The Evolution of Competitive Intelligence’; Tianjiao, ‘Scanning for Competitive Intelligence’; Vedder
and Guynes, ‘A Study of Competitive Intelligence’; Dishman and Calof, ‘Competitive Intelligence’; and Wright
and Calof, ‘The Quest for Competitive.’
8. Carmeli and Schaubroeck, ‘Organisational Crisis-Preparedness.’
9. Johnston and Johnston, ‘Testing the Intelligence Cycle’; Smith, Encyclopedia of the Central Intelligence Agency;
and Omand, Securing the State.
10. See note 6 above.
11. Schoemaker and Tetlock, ‘Supercasting.’
12. Watkins and Bazerman, ‘Predictable Surprises.’
13. Wohlstetter was the first to introduce the idea of the signal-noise ratio.
14. Schoemaker and Day, ‘How to Make Sense of Weak Signals.’
15. Day and Schoemaker, Peripheral Vision.
16. Miscik, ‘Intelligence and the Presidency’; Gilad, Early Warning; and Grabo, Anticipating Surprise.
17. Wilensky, Organizational intelligence.
18. Gentry and Gordon, Strategic Warning Intelligence.
19. Wohlstetter, Pearl Harbor.
20. Kam, Surprise Attack.
21. Bar-Joseph and McDermott, Intelligence Success and Failure.
22. Betts, ‘Fixing Intelligence.’
23. Betts, ‘Two Faces of Intelligence Failure.’
24. The 9/11 Commission Report.
25. Report on the U.S. Intelligence Community’s Prewar Intelligence Assessments on Iraq.
26. Ibid., 14.
27. Betts, Enemies of Intelligence.
28. Berkowitz, ‘U.S. Intelligence Estimates of the Soviet Collapse.’
29. Damon, ‘Top US Officials Vastly Underestimated 2008.’
30. Alcacer, Khana, and Snively. ‘The Rise and Fall of Nokia.’
31. See note 21 above.
32. Ibid., 143-183.
33. For example, the former head of the Mossad, Tamir Pardo, said of the extreme delay in recognizing the Syrian
nuclear reactor that ‘here there was a resounding (intelligence) failure’. https://www.ynet.co.il/articles/0,7340,
L-5185184,00.html, 21 March 2018. In Hebrew. The same conclusion was established by the State Comptroller in
one of his reports (Alex Fishman, Yediot Aharonot, 23 August (2018). In Hebrew.
34. The emergence of ISIS can be viewed as a concentrated surprise that was the result of a wrong assessment of the
organization’s capabilities and intentions. See Michael Brenner, ”Intelligence Failure in Iraq”, Huffington Post,
30 June 2014. https://www.huffpost.com/entry/intelligence-failure-in-i_b_5544340.
35. Kamp, Berlin 1961.
36. Bar-Joseph, ‘Forecasting a Hurricane.’
37. Only once before had the Palestinians initiated a popular revolt. The Arab uprising of 1936, during the British
Mandate in Palestine, was a spontaneous popular revolt that surprised the intelligence entities of the Jewish
settlement as well as British intelligence. The Arab leadership was not aware of the outbreak and was not
included in it. See Gelber, The Roots of the Lilies.
38. Shiffer, Warning Lights.
39. Barnea, We Did Not Anticipate That.
40. Detailed explanation of each event in the field of national and business intelligence according to their
classification as a concentrated or diffused surprise can be found in my book; We Did Not Anticipate That.
41. Bruce, The Firm.
42. See note 12 above.
 INTELLIGENCE AND NATIONAL SECURITY 13

43. Lanir, Basic Surprise: Intelligence in Crisis.

44. Levite, Intelligence and Strategic surprise.
45. Handel, ‘Intelligence and the problem of the strategic surprise.’
46. Dahl, Intelligence and Surprise Attack.
47. Lecture by Gordon Murray- Smith, Head of Strategic and Competitive Intelligence, Nokia. 7th November, the SCIP
2012 European Summit, Dublin, recorded by the author.
48. Fuld, The Secret Language of Competitive Intelligence.
49. Herring, ‘Key Intelligence Topics.’
50. Jaworski, Macinnis, and Kohli. ‘Generating Competitive Intelligence in Organizations.’
51. Dishman and Calof, ‘Competitive Intelligence’; and Barnea, ‘Competitive Intelligence in the Defense Industry.’
52. Swartz, ‘Cisco’s Chambers: 2 days with man on a mission at CES’, USA Today (9 January 2013), http://www.
usatoday.com/story/tech/2013/01/09/cisco-ibm-oracle-hp/1791255/.
53. Fleisher, Wright and Allard, ‘The Role of Insight Teams’; and Topi. Handbook of Social Media Intelligence.
54. Data about what happens in markets at the level of the here and now – price, location, sales and product
promotion, in order to understand the state of the markets. https://www.questionpro.com/blog/market-
intelligence/.
55. Harrysson, Métayer, and Sarrazin. ‘How “Social Intelligence” Can Guide Decisions.’
56. Harkabi, Intelligence as a Government Institution.
57. Harkabi, Foundations of the Arab-Israel Conflict.
58. D’Aveni, ‘Mapping Your Competitive Position.’
59. For complete details see in Barnea, We Did Not Anticipate That.
60. Grove, Only the Paranoid Survive.
61. Laqueur, World of Secrets.
62. Lowenthal, U.S. Intelligence: Evolution and Anatomy.
63. Betts, ‘Analysis, War, and Decision.’
64. Steele, ‘The Importance of Open Source Intelligence to the Military.’
65. Steele, ‘Open Source Intelligence.’
66. Dilanian, ‘U.S. Intelligence Official Acknowledges’; and Note that the US intelligence community also did not see
the signs that indicated an impending civil uprising among the population of Iran against the Shah’s regime in
1979. See MacEachin, and Nolan, ‘Iran: Intelligence Failure or Policy Stalemate?’
67. Epstein, ‘This is How the Military Intelligence.’
68. Barnes, ‘U.S. Military Plugs Into Social Media.’
69. Erlich, ‘Whom did the bells ring?’
70. Tal, ‘Ten years to the Intifada.’
71. See note 46 above.
72. Gerstner, Who Says Elephants Can’t Dance.
73. Quinn, ‘The Decline and Rise of IBM.’
74. Wyatt, ‘SEC Puts Wall St. on Notice.’ New York Times, April 19. 2010. https://dealbook.nytimes.com/2010/04/19/
s-e-c-puts-wall-st-on-notice/?mtrref=www.google.co.il&gwh=96CFA4CAEED2CCA1D1F8110F985C9A4C&gwt=
pay&assetType=REGIWALL.
75. Ahir and loungani, ‘Can Economists Forecast.’
76. Walton, ‘The 2007-2008 Financial Crisis’; and Barnea, ‘Financial Crisis as an Intelligence Failure.’
77. Zegart, and Morell, ‘Spies, Lies, and Algorithms.’
78. Sumerville, ‘Jawbone a victim of its own success in tech wearables.’

Disclosure Statement
No potential conflict of interest was reported by the author.

Notes on contributor
Dr. Avner Barnea is a Research Fellow at the National Security Study Center (NSSC) at the University of Haifa. He is also
a lecturer at the School of Business Administration, the Netanya Academic College. He is a former a senior member of
the Israeli Security Agency (ISA). He holds a Ph.D. in Intranational Relations from the University of Haifa, Israel. Barnea is
the author of the book: We Did Not Anticipate That: Comparative Analysis of Intelligence Failures in the National Field and
the Business Field Tel Aviv, Resling Publishing, 2019. (in Hebrew).
14 A. BARNEA

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