denotes premium content | Jul 24 2008 Feature
posted 1 Jun 2000 in Volume 3 Issue 9
Playing 'catch-up'? Competitive
intelligence in the UK
Although competitive intelligence is a growing field in the
UK, the evidence suggests that companies in the US and the rest of Europe are
ahead of the game. Ted Howard-Jones
asks whether, in this era of global competition, UK
companies are employing the right tools and techniques to enable them to rapidly
respond to competitive issues.
'We are in danger -
iceberg right ahead' - the immortal words uttered by Frederick Fleet, the lookout on board
the Titanic that fateful night in April 1912. Do UK companies need to 'hit an
iceberg' to prompt them to set up a business intelligence unit? A report by
APQC, which benchmarked 20 or so leading companies, concluded that management
needed such a 'wake-up call' before they recognised the value of systematic
competitive and market intelligence.
The APQC report profiled companies in
the US, the UK and Germany, but, like most studies in this arena, focused on US
companies, 24 of the 30 being US-based. While this type of report can show some
best practice examples, it cannot compare or contrast the effectiveness of UK
companies with overseas competitors. For this we have to rely on anecdotal
evidence from those who regularly work in the field, such as Robin Kirkby,
competitive intelligence consultant with IBM UK and formerly CI manager of BOC,
the large chemicals company.
'I normally wait for a steep change to
occur in the industry,' he says. 'If it is significant, it is just the right
kick that senior managers need to invest in CI. For example, in the month
following the Wal-Mart acquisition of Asda in the UK, I made contact with the
remaining major UK grocery retailers and most admitted they needed substantial
help with their strategic CI.'
My experience confirms this. The majority of companies I
speak to have rudimentary processes for competitor intelligence. While many of them gather
a lot of information - sometimes from their internal sources, but mostly from the press - very
few take the time to analyse the information into actionable intelligence.
The exception to this rule is companies that are trading in the US; they know that
they have to be highly 'competitor intelligent' if they are to survive. Jan
Herring, an American who has advised many of the world's largest firms on CI, has
found that a few companies - probably between 5 and 10% - implement a CI team based on
a vision of wanting to 'stay ahead' of the competitors. Most, he says, have to
be prompted into setting up a unit after an event - by which time it may be too
late.
In fact, market
or competitive intelligence is a well-established discipline in the US. Reports
vary, but there are thought to be at least 20,000 people involved in CI in
the US, some of them (estimates suggest less than 10%) have come direct from the
military or government departments to assist the US s leading companies.
Nearly 7,000 people belong to the Society of Competitor Intelligence
Professionals (SCIP). In contrast, less than 200 people belong to SCIP in the
UK, despite SCIP being a worldwide association with a London office to promote
itself in Europe.
Why is it that this aspect of marketing is so
poorly developed in the UK? Perhaps business schools can shed some light on
the matter. Professor Ian Turner, of the Henley Management College, feels that the 'old boy'
network has a lot to answer for: 'Some directors of UK companies think that they are
so well connected in their industry that they don't need an analyst telling
them what competitors are doing.' In the new global economy, where competitors can
use the web to market their products to any country, perhaps we need to look
at this more professionally. I asked Turner what else he feels prevents
companies from conducting CI. His answer is that some of them think it is
underhand, and therefore not very 'British': 'Some companies confuse ethical CI with industrial
espionage,' he says. As anyone who has looked into CI and the ethical issues
will attest, ethical CI has some clearly defined processes and
procedures.
Some commentators attribute the lack of CI units in the UK and
their lack of sophistication to the cut-backs that have occurred
in strategic planning departments over the past few years. The planning
function has typically devolved to business-unit level, and with it the responsibility
for tracking and anticipating competitor actions. 'I see less and less companies
investing in 5-year strategic plans. Many are adopting a 'sense and respond' attitude, and
CI helps immediately by identifying strategic moves by competitors and
recommending appropriate action,' says Robin Kirkby of IBM. 'I'm seeing about an acquisition
a day in the telecommunications sector. CI departments have got to be able to
respond to this pace of change. It's going to get more frantic, not
less.'
With downsizing now at the end of its life-cycle, the desperate quest for
competitive advantage has prompted UK companies to re-examine CI, and some are now
starting to build more formal units and train their staff. 'We are seeing a slow
but steady increase in the demand for our courses and materials,' according to
SCIP. 'While pharmaceutical and telecom equipment manufacturers have historically
devoted resources to CI, we now see a broader range of companies in the UK and
Europe looking at CI more seriously.'
Training in CI is taken more
seriously outside of the UK. The Swedes have long since recognised business
intelligence (which includes CI) to be a basic part of the business process. The
University of Lund has been teaching CI for some 30 years as a fundamental part of
its business courses. In France, there are a vast range of courses that include
or concentrate on BI, as shown by research carried out by Karen Frykfors
Von Hekkel. 'France is ahead of the US in the academic teaching of business
intelligence and has European leadership, while the UK market is under
developed, representing a BI business development opportunity to explore,' she
says.
The UK government talks a lot about the 'competitiveness' of UK industry,
but is it addressing the issue of equipping UK companies with CI?
Discussing this with various civil servants at the Department of Trade and Industry,
I didn't come away with any confidence that they had ever
contemplated competitor intelligence as a vital business function. Mr Arnott, of the DTI, says: 'The
business schools do not seem to be addressing this; it is a problem of the business
schools and thence of the UK plc. Fortunately, some academics are now realising
that there is an opportunity to teach the subject. Henley Management School and
De Montfort University are the only academic institutions in the UK that have a
CI component to their courses.' Ian Turner, at Henley, agrees: 'The art and process
of competitor intelligence has not been taught in the UK in the past, although
it is well established in the US. With the right training, a good CI analyst
will bring new insight to a director, that is both actionable and useful.' When
asked why he had decided to include CI as an element of the new MBA at Henley,
he says: 'Because we believe that UK business has a lot to gain from
competitor intelligence - most companies in the UK haven't yet realised its
potential.'
Return on investment
So, if UK companies invest in training
and setting up CI units, what return can they expect? The potential of CI is
very real. 'Studies have shown, and my experience backs this up, that the return
on investment, or ROI, of a CI programme is typically in excess of 300%. In some
cases the ROI is much higher,' says Jan Herring, former head of CI at Motorola
and now a leading speaker on CI. But is CI too expensive or difficult to
develop?
'In
the first few years of the life of a CI function, trying to measure the ROI of
CI capability is difficult,' admits Kirkby. 'I try to persuade senior managers to
measure the added-value of a CI function in terms of the decisions the CI team
has been able to influence. After a few years, you can measure the cause and
effect, and hence justify the ROI. Most established CI functions are in the
300-500% range.'
Jan Herring feels slightly different: 'If you take a project approach to
CI, and early-on in the project definition, capture what the decision you are
supporting is about, you can usually find some type of metric to measure it by.
It might be market-share, cost avoidance or a number of factors. I normally
advise clients that CI can be measured in the early months as the team focuses
on specific projects, but as the function becomes more established and has to
answer more ad hoc requests it's often difficult to maintain such clarity of
value.'
Gathering CI need not be expensive. Herring continues: 'Between 70% and
90% of the intelligence information you need on any given intelligence
task is already within your company. Successful intelligence programmes are
very proficient at acquiring this internal information before having to go outside
the company to acquire the remaining intelligence.' A classic KM application
then. 'The weakest part of the CI programmes I have looked at is normally the 'human
intelligence' aspect. That is, the ability of the CI team to tap both people inside
and outside the company for information directly. At Motorola we hired an
ex-CIA officer to set up our human intelligence network. After a year on the
road visiting our sales teams and regional offices, this guy had a tremendous
network in place and a stream of high quality information flowing into the CI team.
It meant that at any time we could identify an 'expert' in the company to help us
answer a tough question about a competitor.'
If only UK companies would follow
the lead of Motorola, though very few take it seriously. 'It's much safer for a CI
analyst to download facts from the Internet or other electronic sources. It's
much harder to find experts and elicit intelligence from them. So the average
analyst relies on electronic sources, while the exceptional analyst taps into
their network of human intelligence,' confirms Kirkby.
Gartner Group, an analytical
firm, sums up the current situation: 'Few enterprises have adequate CI in place; they
are at risk of losing market position. By year end 2001 more than 60% of Fortune
1000 companies will formalise and systematise CI. Enterprises should act now to
build a CI capability to preserve and enhance their market position.'
Although most firms have
not progressed beyond basic intelligence gathering, a few have. So who is
carrying out 'world class' competitor intelligence and how are they doing it?
According to a report entitled Ostriches and Eagles, published by the Futures
Group, which evaluated the companies others perceived to be the discipline
leaders, Microsoft, Motorola, IBM, Procter & Gamble and General Electric are
the top performers. However, this study didn't look in depth at each firm to see
if they really were carrying out CI on a world class level. More recently, the
APQC benchmarking study identified Compaq as having a world class CI unit. The
APQC study admitted that there were likely to be just a handful of companies
carrying out truly world class CI. The report highlighted four stages of a CI
unit, from pre-startup to world class.
Case Study
The US division of Boehringer
Ingelheim, the German pharmaceutical firm, was identified as a company who have
rapidly risen to the 'established' phase in the report, and reported that they
had the following advice for the recent start-up of their CI effort:
Companies that want to improve their CI can take a number of
approaches. They can develop internally or they can work with specialists who
have experience. According to Kirkby: 'When a company forms a CI capability, one of
the hardest issues is to establish the roles and responsibilities of the CI
function.'
Cipher
Systems, one of the providers of consulting and technology for CI departments
has embedded the workflow process developed by Herring while he was at Motorola,
the 'Key Intelligence Topic' process, into an application that runs on either
Microsoft's Exchange or Lotus Domino. Called 'KnowledgeWorks', the system helps
analysts work together as a team, even if they are located in different country
offices.
So what
resources do you need for CI? In 5 different studies covering over 500
companies, the average budget varied from a high of $651,000 per year, to a low
of $350,000. The average number of staff is between three and six (from
benchmarking study undertaken by Lackman, Saban and Lanasa of Duquesne
University, CI Review, p.22, q.1 200).
In terms of what type of staff
to hire, Kodak says that it hasn't quite pinned down what it takes to do
CI effectively, but they look for experience in the company, a strong sense
of curiosity and a lively interest in external forces. 'We look externally in the
future rather than internally backwards,' is the line taken. Kodak wants
courageous people who will stand up for things. And the company requires
imagination, tenacity, and networking skills.
' When I'm helping companies recruit
staff, I advise them to seek experienced analysts from outside their industry.
It is always easier to teach an analyst the industry than it is to teach an
internal employee how to be an analyst,' says Kirkby.
Herring added that when he
is helping clients to hire people for their CI teams he looks for two types
of personality. Researchers, who specialise in gathering information - these can come
from within the company or outside. They need to be 'people centric' and not
afraid of calling people they don't know or 'mixing' at a conference. Analysts, on the
other hand need, to be capable of in-depth analysis and interpretation. Herring
believes that it's best to have an industry-insider in the analytical role: 'Too
often I see analysis being done by fresh young MBAs with great analytical
skills, but little feel for the industry or its dynamics.'
So what is the bottom-line
impact to the senior management team? Hans Gieskes, CEO of Lexis Nexis,
the information service, sums it up: 'In rapidly changing and consolidating industries,
you're managing chaos - lots of input happening all the time. CI is a vital element for
finding the right strategies, and for executing strategies in the right way. Two
years out we'd like to know who the players will be, what their strategies will
be, and how that could impact our business. We no longer plan 3 or 5 years ahead
because 18 months is a long planning horizon in the web world.'
The rapid pace of change
is putting more and more pressure on CI units; they have to be efficient and
well resourced. An ad hoc approach to CI will no longer work in UK industry. 'A
week is a long time in the IT and telecommunications industries at the moment.
You've got to aim to get a special intelligence briefing out in about 4 hours,
including your analysis and recommendations. Any longer and you might as well be
relocated to the corporate library!' says Kirkby. Without the right team,
processes or technology to support them, rapid turnaround of actionable
intelligence reports is impossible. Shooting from the hip, or going on 'gut
feel' might have been acceptable for decision makers in the past, but in a
global economy with multinational competitors, it is no longer
acceptable.
At the official inquiry following the sinking of the Titanic, the
lookouts - stationed in the bows of the ship - said that they might have been able to see
the iceberg if they had been equipped with binoculars, but these were reserved
for officers on the bridge. I hope that the UK plc will learn from other
countries and not, for lack of foresight, planning, methodologies or the tools
for the job, suffer a similar fate as the Titanic.
Ted Howard-Jones is co-founder of
European Management Group, a company that consults in the field of competitor
and business intelligence. He can be contacted at:ted_howard-jones@emgltd.com
