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Calling George Smiley

Forget James Bond. Modern business intelligence is closer to John LeCarre’s character; relying on persistent prodding and lateral thinking rather than flashy gadgets hidden in shoe soles. The best source for what your competitors are doing is often your own organization.

A number of years ago, the head of a prestigious European merchant bank heard that Britain had won an important military victory. Because the bank’s CEO encouraged his satellite offices to constantly feed market news back to the home offices, he received word of the British victory far earlier than his banking rivals. With this critical information in hand, he quickly decided to dump his British securities on the market. His rivals, thinking that this move signalled Britain’s losing the war, also sold their British securities. The next day, after market prices had hurtled downward, the CEO bought the investments back and made a killing.

What is fascinating about this story is that the CEO used his own intelligence-gathering savvy-rather than high-tech devices, and what’s more, it took place in 1815, over 170 years ago. The CEO was Nathan Rothschild, and the battle he received early warning of was Waterloo.

Bank One in Dayton, Ohio, has long encouraged employees throughout its network to contribute any information, including product literature they may receive at home from competing banks.

“Today, on my desk,” Bank One’s planning officer stated, “I have a mile-high pile of our competitors’ literature. In some cases, employees sent me photocopies, which means, of course, that they’re actually using the competitors’ products, ironically enough.” Strongly supported by the bank’s chairman, this broad-based, intelligence-gathering effort has resulted in better knowledge of the competition, their pricing and marketing strategy.

 LESSONS LEARNED

CEOs can learn a great deal from the lessons taught by the 19th century Rothschild and the 20th century Bank One, which is that timely, solid business intelligence can contribute to a company’s profit, as well as offer it considerable strategic advantages. In order to make competitor-monitoring work for both senior managers and their organizations, management must trumpet the importance of competitor information throughout the organization, backing those pronouncements with a firm plan.

Today, almost two centuries after the Rothschild story, large companies find it difficult to locate valuable intelligence assets and, if they do, they don’t know how to put this intelligence to use. Still, there are a few exceptions, such as the Xerox Corporation. Xerox has succeeded in mining its company’s hidden intelligence, and, in turn, in convincing its employees of the need for and usefulness of solid, timely, competitor information. It was Xerox’s senior management that encouraged the growth of a sweeping, company-wide competitor tracking effort.

A CEO can take several steps that will help the decision makers in his company.

THE HIDDEN INTELLECT

Before the CEO can help foster a more active intelligence-gathering atmosphere, he must first understand why and how intelligence hides within the organization.

Timely and potentially profit-making intelligence gets lost because either employees are not aware of the importance of varying information, or they are not given incentives to share important information.

Awareness-or the lack of it-is the greatest culprit when it comes to hiding vital business information. Clients, for whom we do research, are always telling us that they are sure many people in their company already have competitor information at their fingertips, but they’re not sure who those people are or how to find them.

The awareness problem begins and ends with how you and your organization define intelligence. Most employees think that the everyday information they carry around inside their heads is useful only to them or their immediate superiors. Since management has not alerted them as to which pieces of information might be useful to the organization as a whole, and which are not, they soon deposit their information in a mental trashbin.

I spent more than two years surveying some one hundred companies to try to find out who has useful intelligence and where that intelligence remains hidden. Following is a selective sample of the hidden-intelligence rabbit warrens that I have found:

Customer Service: M&M Mars, Owens-Corning Fiberglas and Johnson & Johnson know the value of market information picked up by customer service representatives. All three of these companies have decided to capture information by requesting that their customer service people fill out competitor information forms and have managed to turn this information into a strategic asset.

Legal: A marketing manager at Hewlett-Packard, for example, often phones the company’s legal department to request recent public filings on the competition. “I have found,” he said, “that our legal department collects a lot of publicly available, but ordinarily inaccessible, information on IBM and other competitors information that I have not been able to find elsewhere.”

Library: The Kraft information center built a data base that centralizes the many millions of dollars of market studies purchased by the company over the years. For the first time, company executives have one place to shop for a study they know should exist within Kraft, but which formerly could not be found. This data base saves Kraft hundreds of thousands of dollars in duplicate purchases, and gives them a single source for much of their competitor information.

Real Estate: A director of project feasibility for the Westin Hotels noted, “I am able to get information on many of our competitors’ new projects and new hotel designs from our real estate department. For example, they supply me with cost-persquare-foot for my competitors’ new hotel properties. They can also, occasionally, provide me with actual drawings of the property itself. All this comes from public filings, which our real estate people keep handy.”

Research and Development: R&D departments are intelligence hotbeds. Xerox is noted for its ability to ferret out information from throughout its organization. Its R&D people determine a competitor’s cost of production, as well as the production process, by stripping-down a competitor’s copier. The strip-downs give Xerox decisive information about its competition-information that has directly led to product innovations and manufacturing changes. These changes, in turn, build more competitive copiers and win back some of the market share it lost a decade ago to Canon and other Far Eastern companies.

Sales: Sales offers the greatest intelligence cache. Digital Equipment Corporation and Faber-Castell are just two major companies that route their sales force’s steady intelligence stream to senior management in the form of competitor reports and briefings. Yet, another computer manufacturer reported to me that his firm ordered its salespeople to contribute the latest competitor-pricing information they had picked up before submitting a project bid. The result: the firm increased the number of winning bids by 50 percent the following year.

These cases are examples of vital intelligence sources senior managers often overlook. They see corporate marketing or corporate strategic planning as the only avenue for competitor knowledge. Yet, in reality, senior management can find timely, specific market information throughout companies. Marketing and planning tie the information together, not collect it. Management must seek out intelligence secreted throughout their organizations.

 BUILDING INCENTIVE

Aside from overlooking hidden intelligence sources, management may also lose valuable information because its organization has little incentive to provide it. The average commissioned salesperson will think, “Why should I bother to send information to some marketing or product manager? Time spent filling out forms is time away from sales. What’s in it for me?” It is the what’s-init-for-me syndrome that places artificial barriers between those who have the information and the senior managers who need it. A large number of U.S. companies have too many information gatekeepers creating communication roadblocks. Gatekeepers typically believe that information provides individual power, and by holding onto the information, they see themselves able to control others. Still, other gatekeepers see their ability to lock up information as some sort of job insurance. Unless corporations eliminate these information fiefdoms, they will continue to lose many business opportunities and revenue.

THE CEO AS CATALYST

A CEO can do much to break down some of these barriers and foster better communication of vital intelligence. He needs to nurture, as well as promote, the intelligence-gathering responsibility. He must spend time greasing his company’s intelligence-gathering skids, and help to raise his firm’s awareness of the need for this type of information.

There are several ways in which the CEO can raise his firm’s intelligence quotient.

Appoint a ringmaster: The CEO needs to do more than make a few speeches. He needs someone from senior management to offer daily encouragement, and to watch corporate expenditures and employee activity in this area                much like a circus ringmaster who directs the audience’s attention to one of the stunts in the ring, the ringmaster directs the company’s intelligence-gathering activities and its flow of information.

Faber-Castell, a leading pen and pencil manufacturer, appointed a strategic planner as its ringmaster. One of his jobs was to make certain that the sales force passed on any important information directly to senior management. “The salespeople often submit information they have learned on competitors’ products and pricing, as well as what dealers think of competitors’ products, he reports.

Offer recognition: Giving praise and offering recognition is one of the simplest and least time-consuming tasks a CEO can perform. Those throughout the organization need to know that someone at the top not only appreciates their monitoring efforts, but has also found them useful. A number of company presidents write notes or make a phone call to the intelligence contributor or his boss shortly after a particularly successful outcome. Such praise can electrify an organization. AST Research, a California computer/microcomputer manufacturer, regularly publishes “thank you’s” in a company newsletter for vital intelligence contributed by its staff.

Start a road show: The CEO should sponsor the intelligence staff as it goes around the company, speaking about the value of timely competitor information and how the organization uses it. A manager of competitive assessment at Kodak holds awareness meetings at various business units twice a month.

Encourage award programs: Many organizations present intelligence awards. Maritime Telephone of Canada presents an annual Golden Shovel award for the best digger of competitor information. Other companies often incorporate such awards into their annual sales meeting.

Bring in senior personnel to run your competitor intelligence operation: Senior employees have the three most valuable intelligence-gathering skills: experience, contacts and confidence. By involving them in your intelligence-gathering program, you have a far better chance of receiving information that you can use.

A case in point: A major chemical producer assembled its intelligence department from its senior employees who specialized in various areas of expertise, ranging from chemical engineering to marketing and sales. Their combined knowledge gave them almost limitless contacts throughout the company and within the industry. The information they collected was of the highest quality and was taken seriously by senior management, having little trouble overcoming the organizational roadblocks encountered by most competitor intelligence operations.

Force a constant flow of information: Senior management must prime the intelligence-communications pump throughout the year-not just during the time of strategic planning. Your competition does not hibernate after you have completed your strategic plans. Therefore, you must find the means to update the organization on competitor events.

Establish intelligence forums: A number of major U.S. companies have established intelligence forums to encourage the exchange of market information among different strategic business units. These forums alone have accomplished far more than any single newsletter or speech to foster the awareness and necessity of intelligence gathering.

Support training programs: A company’s training and education department should include a training module on competitive strategy and competitor monitoring. Digital Equipment has added a series of audio tapes to its training curriculum that regularly updates employees on DEC’s intelligence hotline and intelligence-gathering services.

 WHAT THE CEO SHOULD AVOID

In my experience, I have learned that more mistakes are made with how the information is handled rather than how it is collected. The ringmaster or other senior managers need to know what pitfalls they may encounter-or create.

A number of large corporations surveyed by my firm thought it best to centralize the entire intelligence-gathering effort. This might work for a small company, but it results in near failure for the large, multinational corporation. By centralizing the intelligence-gathering operation, the senior staff actually isolates the company’s satellite offices and divisions. Instead of buying into the program, these divisions now see the central intelligence department as an ivory tower. Hence, they contribute little information and get nothing in return.

Monitor your intelligence programs. The most successful monitoring programs allow the divisions to collect and store much of the operational data, only sending the highlights back to corporate headquarters. Should the CEO need more details, he need only call the intelligence manager at the satellite office.

Beware of overzealousness, and undefined boundaries: While the vast majority of information can be had through perfectly ethical and legal means, employees can get carried away. In one major consumer goods company, the company’s researchers punctuated their reports with such words as “G2″ and “surveillance.” In reality, they conducted honest and ethical research, but their language, peppered with James Bondian phrases, gave quite another impression to the employees.

Stick to legal department guidelines: Make sure your legal department issues a clear statement, describing any anti-trust or trademark restrictions employees must take into account when conducting any research on the competition or on the overall marketplace. While the free market does give the intelligence gatherer much research latitude, the company needs to impose legal and ethical limits. As the senior legal counsel for one of America’s largest companies once told a group of researchers in my presence: “Don’t do anything stupid. Don’t do anything you may later regret.”

Avoid fuzziness: Unfocused intelligence-gathering goals lead to unfocused monitoring of programs. Research staffs, as well as the company, need a clear research direction. Senior management must make their intelligence gathering tie into their strategic goals; otherwise, middle management will try to collect unnecessary information.

Avoid high-tech solutions: Too many CEOs have read about large computer-based systems that collect the universe of business information only to be surprised at their expense and awkwardness.

The most often-cited high-tech system is the Motorola data base, called MIRIS (Motorola Intelligence Research Information System). Started in 1983, it was built to monitor the competition, as well as the political, business and economic environment for the company’s worldwide interests. While the system did deliver certain valuable information, Motorola’s management also believes that the system had fallen short in delivering what was originally promised. Within the last two years, it appears that Motorola has changed its approach, investing more time in intelligence gathering and analysis, and not in data-base building.

THE ROI OF AN INTELLIGENCE SYSTEM

The key to any successful intelligence program is simplicity. The more complex and technology-based the system becomes, the higher the cost. The expensive systems generally raise management’s expectations, as well as raise the anxiety level of those who manage the system. The result: Companies with expensive systems do not give these intelligence programs time to mature and grow.

As Nathan Rothschild might have said, “You can never tell where and when a profitable piece of information will come from; therefore, cast your intelligence-gathering net wide.” Senior management must build a grass roots, low-cost intelligence system and nurture that system over time. To rely on the same old information sources will increase your chances of making poor business decisions. On the other hand, a solid, well-thought-out intelligence program may help you avoid your Waterloo.


Leonard M. Fuld is president and founder of the Cambridge, Massachusetts-based Fuld & Company which provides research services through the use of competitor intelligence. Fuld has authored two books on the subject, and his articles have been published in the Wall Street Journal, Marketing News and Canadian Business Review.

About leonard m. fuld