Regulatory Intelligence (part 3)

January 29, 2014


Continuing on regulatory intelligence, there are two more aspects of regulatory intelligence which intersect significantly with competitive intelligence.

The third one is where the focus of the regulatory specialist is on regulations, in particular proposed but not yet enacted regulations, to establish what impact these regulations will have on the competitive environment. The most important thing this analysis can highlight is look at those outside the market space rather than those in such market space – that focus is the responsibility of the second aspect.

What you have to do is have someone help the regulatory specialists evaluate these proposed regulations on making into your market space more difficult in the future, such as by increasing capital requirements or adding to the number regulatory reports – that is costs.

On the other hand, there should also be careful evaluation of the regulations, and again by this we mean proposed legislation as well as proposed regulations, that may make future entry into the market space easier. Here, think “deregulation”. These regulation schemes almost always result not only in market chaos, which may be a good thing, but in a change in the nature of companies in the market space as well as the identity of these companies. Certainly your regulatory specialists, even aided by others, cannot perfectly predict who might come into or leave your market space, when or why. But they can alert you to the fact that the new regulatory scheme enhances the likelihood of these extremely important changes.

The fourth intersection is much more difficult, as it calls for an analysis of the trend of regulation, projecting it forward. The idea here is to look for the beginnings of a major regulatory trend as well as for key junction points in such a trend.

Let me give you an example: consider the current situation with the Affordable Care Act (ACA) or “Obamacare” as it is more commonly known. I do not want to get into the pros and cons of this, merely to use it as an example.

Whatever your feelings about the ACA, it is certainly changes the entire face of the health insurance market, possibly even more than it is changing the face of the healthcare market, in the United States. Could or should the health insurance industry have seen this coming? The short answer is yes.

The vulnerability of the US health insurance industry to federal intrusion can certainly be seen in the proposed, but never enacted, 1993 health care reform initiative under President Clinton, colloquially known as “Hillarycare”. At that time, regulatory specialists should have been warning the health insurance companies that the fact that this initiative did not work did not mean that pressures to adopt similar regulatory schemes had gone away.

In fact, the federal presence in private health insurance has been growing, often only gradually, over the years. I will not bore you with some of the details of it, but I will point out one matter which might well be critical for a regulatory specialist to know to communicate the likely enactment of Obamacare.

The federal government, in June, 1980, adopted legislation specifying what kind of health insurance could be sold, and what could not be sold, to supplement coverage it provided to senior citizens through Medicare. Prior to that point, the regulation of this had been left entirely to the states, but this legislation established federal standards for state regulation.

So it was in some ways an early warning of Obamacare. But there is more. That 1980 law was known in the health insurance industry as the “Baucus Amendment”, named for its proponent, a then rising politician, named Max Baucus. Baucus had previously been in the state legislature and US House of Representatives. His legislation, it can be argued, began the growth of the major direct federal presence in previously state-regulated health insurance. An interesting historical note is that now US Sen. Baucus is chair of one of the committees working on predecessors to the ACA and has been quoted as saying that the Affordable Care Act initiative is “a train wreck”.

Admittedly this is a long view, but that is what this fourth aspect demands.

Regulatory Intelligence (part 2)

January 21, 2014

As I noted in my last blog, regulatory intelligence has several aspects where it intersects with competitive intelligence. The first and most obvious is when you have someone analyze both newly proposed and newly enacted regulations for their impact on your firm and its ability to compete.

Now to be fair, this job ends up almost always in the hands of an attorney or a paralegal (in fact, it is a job I once held). That is not bad, because they are trained to understand the regulatory process and how to read regulations. However, to be effective, they need to communicate more than just “The department has issued a new regulation which requires…” They have to be trained about your business and your market space(s) so that they can add value to these summaries.

The value can be expressed first by adding “This regulation now means that…” To that should be added a specific analysis such as “This will increase our capital costs on future planned construction”, or, “If adopted, this proposed regulation appears to be the first of several steps of increasing regulation over the performance of our products and services…”

If those analyzing regulations do not understand their impact, then they should be trained to understand and then to communicate that impact. If such individuals add value to their analysis of the regulations by adding an analysis of the effect on the competitive environment and/or competitors, they are providing a great service to your business.

The second aspect where regulatory intelligence intersects competitive intelligence is when the regulatory specialists are looking at the same proposed or new regulations for their immediate and near-term impacts on your competitors. Here, your regulatory specialists, or your trade association, if you are relying on that, have to understand and to communicate impacts on the entire market space as well as on particular companies within that market space.

For example, if a company doing business in one way, say marketing over the Internet, will end up facing higher costs than a “bricks and mortar” competitor, make sure to say that. If your regulatory intelligence comes from an internal source, if at all possible, have it identify which competitors are impacted and how. This does not have to be a 12 page single-spaced document – in fact it should not be!

By highlighting, in a short and easily understood way, the winners and losers of a regulatory change (or proposed change), regulatory intelligence can make a critical contribution to your firm becoming a more effective and nimble competitor.

Regulatory Intelligence (Part 1)

January 17, 2014

 An interesting week, in that this topic came up twice – once in my review of the proceedings of a major competitive intelligence conference held last fall, and once in discussions with a client.

What do I mean by regulatory intelligence? Taking first things first, by regulation, I mean not just rules adopted by what are known as regulatory agencies, such as the Environmental Protection Agency, but the entire body of law that supports the issuance and the enforcement of regulations, at the federal state and local levels.

To put it in context I should disclose the fact that, before I became involved with competitive intelligence, I was an attorney and, for part of that career, I was a specialist in the federal regulation of insurance. So I’m not surprised to see people wondering if there should be some connection between parts of the business, or outside counsel, tracking present and future regulations, and those doing competitive intelligence. There should – no must – be.

Back to the question. Regulatory intelligence means using the process of analyzing and tracking current proposed and potential regulations to assist in developing competitive scenarios and profiles on current and future potential competitors.

Really this breaks down into several parts.

  • The first is analyzing regulations, particularly newly proposed or enacted regulations, for their impact on your firm and its ability to compete.
  • The second is analyzing that same body of regulations for its immediate and near-term impacts on your competitors. That is, which of them will be adversely impacted by what is being proposed and if so how? Will others benefit, and what does that mean to you?
  • Third is analyzing the same body of regulations, particularly proposed, but not enacted regulations, to determine what impact it will have on the competitive environment, particularly in the sense of encouraging or even assisting new entrants or, conversely, making future entry into your market space more difficult.
  • Fourth is analyzing the regulatory trends, that is the past, present, and future flow regulation to determine what may happen over a period of years. Here, you are looking to provide input to strategic planning and into supporting an early warning system.

In the next several blogs, I will discuss each one of these parts.

Getting your arms around it

January 8, 2014


I was talking the other day to a friend who raised the question of how to get an idea of the size of the market in which their firm operates. The market is not so large or so trendy that there are a half a dozen syndicated research reports easily available.

To compound the problem, she indicated that there were two estimates of the size of the market: one from a trade magazine covering this market and half a dozen adjacent markets, and a second from a research service (reputation unknown to her) that publishes a multi-thousand dollar study every several years. The estimates of the gross size of market differed by 100% between them.

The first thing we explored was why the difference. The most likely reason is that the smaller estimate deals with sales by the businesses in this market to distributors and retailers and the second deals with the retail sales of the same products. An alternative is that the smaller study deals only with a select group of manufacturers and not the entire market space. Yet another issue may be how the two sources define the “market”. As it turns out there was a small but growing electronic segment which “traditional” participants in the market consider separate and do not generally aggregate when talking about the “market”.

From here, the only options are to contact the publication and talk to the vendors of the study.

The second thing we explored with how to figure this out without spending a lot of money, i.e., not buying the study, what to do if there are no studies. Here, there are several fairly good options:

  •      The first is to buy back issues of the trade magazine reporting on the market and read them to understand its exact definition of the market as well as its methodology.
  •      The second is to contact the magazine and obtain an advertising kit for the publication. From time to time these kits will actually include information on studies or surveys the publication has done to show potential advertisers not only the magazine’s grasp of market space but also the importance of the market the magazine serves.
  •      The third is to determine if there is somewhere a trade association that covers this market space. The odds are the trade association covers this market space and many more, but may have research materials available to its members, and occasionally the public at large, on this particular market.
  •      A fourth is to search for U.S. Department of Commerce studies and surveys about retail and wholesale markets. This is a bit of a longshot as those studies tend to encompass more rather than less and also tend to be anywhere from 2 to 5 years old.
  •      The fifth is to search for a research center or even an academic studying this market space. Occasionally such resources will do their own research which may be valuable to look at, if they let you.


In any case, to generate your own “horseback” estimates, it may be necessary to assemble a bit from here and a bit from there to get a partial look at a market space.

Here is where a real problem arises for those not comfortable with competitive intelligence: they tend to look at their results and say that they are incomplete, they are partial, they are only estimates, they cover a range, or something similarly negative. What they forget is the starting point was they knew virtually nothing about the market space; now they know something, and they also know where their blind spots are.