Early warning for your competitive intelligence

I just attended a presentation sponsored by Frost & Sullivan that discussed the importance of creating an "Early Warning" system for companies so that they can effectively manage and prepare for possible events. While most of the presentation was pretty academic and vague there was one topic and slide that left a mark.

Here we go...

The graph, shown above, illustrates a valid concept. It was part of a piece shared by Ken Sawka of the firm Outward Insights. Essentially the concept states that the closer one gets to a "decision threshold", the less flexible his or her options are.

What does that mean?

He gave the following example to illuminate the point. Let's say you are a weatherman. If you receive intelligence that indicates that there will be rain in three days you can adequate prepare for the coming weather. However, if you receive that news as you are leaving for the office, you probably couldn't even of had time to grab an umbrella. Your options are limited. Point made?


What does that mean, specifically, for your business?

It is best to be able to take a longer term perspective of the threats and opportunities that surround you. By doing this and setting up potential contingency plans you can be adequately prepared should those anticipated events come to pass. It's this type of planning that could of helped....I don't know....British Petroleum.

Threats or opportunities can come in the form of many things. Deregulation, competition, technological changes, supply chain, or larger economic events are all examples of things that can drastically change your competitive environment. And the closer you get to these anticipated events the less able you are to deal with them.

So be a good boy scout, be prepared, and stay on top of your market.

Smart Segmentation

By now we know that we can't treat all of our customers the same. We understand the value of segmenting our market into relatively homogeneous groups based on things like Geography, Demographics, Psycho graphics, Purchase History, or Behavioral Responses.

We also have a wide array of tools, online and otherwise, that make the task of understanding your market much easier. The top companies are not only utilizing these tools and techniques, they are also creating an analysis-driven culture.

What are leading companies doing that the others can follow? In the fall of 2008 the Aberdeen Group published a great white-paper that outlined the characteristics of customer analytics efforts of top organizations.

The following framework is a good starting point for organizations that are beginning to lay out their road map.













At the end of the day, the linchpin of success for any analytic based solution is the quality of input data. To that end the top companies have a centralized database of customer information so that they can ensure a single view of the customer. That old and over-used adage, "garbage in- garbage out" rings very true.

With a quality infrastructure in place your organization can do fun and beneficial things like RFM and Propensity Analysis. That's where the real value and profit is.

Turning data into gold

The internet has been both a blessing and a curse for those of us who are in the business of turning data and information into actionable intelligence. On the plus side, we have more and more information than we could have ever wanted. Not surprisingly, this is also the downside. Plus we will also need to spend more time validating discovered information because most of it is second rate.

Here is the standard hierarchy associated with knowledge management within firms. (From least to most important)

1. Data: Facts and Observations. Ex. 1st Qtr Sales for company X are up 5% over last year.
2. Information: Collection and some synthesis of the data. Ex. The sales growth was attributed to the launch of product Y.
3. Knowledge: The mix of information, experience, and context obtained in a value adding process. Ex. The launch of product Y by Company X represents an aggressive strategy towards attacking a new market and taking on a new set of competitors.
   

An experienced practitioner of competitive intelligence will know how to effectively mine information and data so that a solid hypothesis can be created and tested. These hypotheses will ultimately guide and direct strategic decision making.

More importantly, companies need to create an environment where every employee is capable of contributing to the overall knowledge management mechanism. This involves creating an appropriate culture, providing in the necessary infrastructure, and enabling efforts through the right IT support.

A previous blog entry mentioned the Chatter tool by Salesforce.com as an excellent platform for information gathering and sharing. We've also talked about the importance of promoting information gathering and sharing through every aspect of business activity. Finally, has the organization made the gathering and synthesis of information as easy as possible for employees through a proper infrastructure.

This graph, taken from McKinsey, outlines a proper framework for designing the appropriate knowledge management or competitive intelligence program.