More on Early Warning

February 21, 2018

Fortune magazine recently did a piece on Shell, one of the pioneers in developing and using early warning systems. At Shell, the outputs are called “scenarios”.

The article indicated that the Shell early warning team “concluded that global demand for oil might peak in as little as a decade – essentially tomorrow in an industry that plans in quarter-century increments.” The piece goes on to detail what Shell is doing: “making some big strategic bets.”

What is of interest is that the rest of the oil industry now knows what She’ll is and will be doing. That raises an interesting issue: by acting and revealing what actions Shell, a dominant force in the oil industry, will take, Shell is giving its competitors, suppliers, and customers insights into its own contributions to making the oil industry look different from today. And that is also changing the future Shell has projected. That means that, if Shell is right about its scenario, by acting and broadcasting those actions, it may, nay will, cause the future to be different from what it would be absent it’s actions.

Of course, this means that, in a decade, when Shell measures it’s accuracy in predicting the future, it may find it was wrong. But, this is because it did\could not factor in the direct and indirect consequences of its response to what was then still in the future as well as the responses of others in this business ecosystem to its responses, etc. Yet, the scenario could still be extremely invaluable, even if they cannot prove it.

Is your brain still on straight? Welcome to a brave new world.


In Memory

February 14, 2018

My readers will have noticed that I did not post a blog last week. That was because the office of The Helicon Group was closed due to the death of Vito T. Vella, the father of founding Partner, Carolyn M. Vella.

I want to say a little about him, which includes a bit about CI.

Vito was also my father-in-law, and essentially my father for longer than my natural father. He was one of the hardest working people I have ever met.

He was born in 1921 in Utica, NY, the son of Sicilian immigrants. He joined the US Army during World War II as an enlisted man, serving in Europe, Africa, and the Indian subcontinent. After the war, he joined the newly-created US Air Force, where he retired as a Colonel after over 20 years. During his service he received the Legion of Merit and was awarded the Oak Leaf Cluster to it on his retirement. He always told us that they were for “keeping all of the numbers in neat columns”. But, among his assignments was work with the USAF’s then-infant computer operations.

Dad then worked for an additional 16 years with Honeywell’s Federal Systems (computer) operations.

After a second retirement, he did not stop. He quickly volunteered to do a “little book-keeping” at a local hospital’s gift shop. Years later, after over 10,000 hours of work with several hospital groups, he was recognized as Tennessee’s Hospital Volunteer of the Year. He was also very active with the Catholic Church locally, including managing the ushers and rising to senior ranks in the Knights of Columbus.

Several years ago, after putting together everything from texts he gave us from his studies at the War College (for advanced accounting?), to where he went during the Cuban Missile Crisis, and from recollections of having a “red phone” in quarters (for emergency multiplications?) to stories of where he served during the war, Carolyn asked, “You were in intelligence, weren’t you?” He said yes, and suggested Carolyn’s deep interest and important activity in competitive intelligence might just be related to that. (VBG)

CI owes a debt to Col. Vito T. Vella, USAF (ret.).


Early Warning

I am a proponent of the “early warning” use of competitive intelligence. However, any early warning program requires an inclusive, rather than selective, definition of competitors and what constitutes potential competitors.

Let’s look at a recent event from the perspective of the health insurance market.

“Two mega-health insurance mergers terminated” [1].

Would/could early warning pick that up? Almost certainly. Why? Because these transactions involved the 4 dominant players in the group health insurance market. Any/every health insurer should have been watching all 4 of these firms and should have been on top of the legal and financial drivers which might enable/hinder these transactions, probably without much additional research.

What about these two other recent events impacting the same market?

 “CVS Health [owners of the pharmacy company] to Acquire Aetna; Combination to Provide Consumers with a Better Experience, Reduced Costs and Improved Access to Health Care Experts in Homes and Communities Across the Country”[2].

“Amazon, Berkshire Hathaway, JPMorgan Chase to tackle employee health care costs, delivery”[3].

I doubt that any early warning mechanisms in this market  picked these up, for any one or more of several reasons (disclosure, before coming to CI, I previously worked in the health insurance industry):

It is unlikely that most firms in this market have heavily invested in early warning activities because their regulatory structure establish high barriers to entry. Firms regard this as virtually eliminating the entry of new or expansion of existing competitors, at least without some notice from monitoring filings with state regulators.

People move relatively freely from one competitor firm to another, producing an underlying sense that “we sort of know what is probably going on”. That undermines the effort to advance early warning, at least by limiting its focus to the “usual suspects”.

The focus of the industry has been on monitoring the political and regulatory activities at the state and federal level, inducing and supporting a short-term vision of structure and marketing. Short-term stress does not work well with long-term early warning.

The same focus would preclude any early warning system from considering the likelihood that non-insurance firms could/would take steps that might fundamentally change the health insurance industry.

The CI focus in the industry is most often on new products and their marketing, technology acquisitions, and changes in relationships with brokers and agents. Did you see the concept of structural change or existential threat? I didn’t.

Lesson? Come to an early warning system with as few preconceptions as possible. Recall the analogy of the lookout at sea: the lookout surveys all directions (not just on either side), constantly (not only periodically), and for anything that could become a potential threat (not merely any anticipated and identified threat).

[1] https://www.bizjournals.com/milwaukee/news/2017/02/14/two-mega-health-insurance-mergers-terminated.html.

[2] https://cvshealth.com/newsroom/press-releases/cvs-health-acquire-aetna-combination-provide-consumers-better-experience.

[3] https://www.usatoday.com/story/money/americasmarkets/2018/01/30/amazon-berkshire-hathaway-jpmorgan-chase-tackle-employee-health-care-costs-delivery/1077866001/. This event reportedly caused an immediate 5% drop in the stock prices of major health insurers.


More Skills?

January 9, 2018

In Time, Harvard Professor Steven Pinker recently wrote about how the media impact human cognition (don’t yawn). Specifically, he points out that people tend to “see their lives through rose-colored glasses”. Yet, when discussing others (people, countries, etc.), they see “everyone is miserable…and the world is going to hell in a handcart.”

He attributes these “biases”, his word not mine, to the “bad habits” of the media as well as our own “morbid interest in what can go wrong”. The cure? Numeracy – literacy about numbers. That skill, he contends, helps to develop and maintain a quantitative mindset, which is not just “smarter” but “more enlightened:”.

Does this mean that quantitative skills should be added to the list that CI analysts, collectors, and even end-users should consider as “must haves” and not just “useful”?

I vote yes.


Reports versus Rumors versus Research

January 3, 2018

The December 2017 issue of Fortune discussed rumors and reports about what Amazon might buy – evidently an endless subject – including a “possible health care play” as indicated by “reports that the company was hiring people with pharmacy backgrounds”.[1]

So? If it is potentially important to you, good CI practice demands that you check this out and not just rely on this piece as “fact”. Remember, it is a report of speculation included in an article mentioning rumors. Sounds less great, no? It is not the reporter’s fault – he is laying it out, and quite fairly. It is still up to you to take it further.

How? Think about where the data that supports or undercuts this hypothesis might be found. For example, try using LinkedIn.com to see who is now working at Amazon who used to work at say, CVS. Now see if they are

  • recent hires or hires more than a year or so ago?
  • coming with experience or skills that are not easily transferable to Amazon’s existing businesses or are they bringing easily transferable skills and more generic management expertise?
  • are they now located in one area or are they distributed throughout the US?

That is the difference, taking it further.

[1] Jonathan Vanian, “Best Bogeyman: Amazon”, Fortune, Dec. 15, 2017, p 24.


Staging CI Development – From the Now to the Future

December 6, 2017

So, you want to grow your personal competitive intelligence expertise, or maybe grow what your CI team can do for your company? Doing that often takes you and your team through several stages of development, each of which requires additional skills and work, but which also provides increasing benefit to the ultimate end users of the CI.

Stage One

This is where you produce and use of CI to understand what and who is going on – here and now. You would be surprised (then, maybe not surprised) how little some companies know about their competition, or even who their major competitors are. Don’t believe me? Let relate a real experience with a client.

A business development manager at the client, a new hire, wanted us to help identify the firm’s top competitors in each of its 4 key markets. What she wanted to see was what strategic moves they had made in the past few years, and how well those efforts turned out. The goal was to learn from their successes and failures.

She told us that, when she went to senior managers, what she got was confusing and conflicted. (Everyone who is surprised, raise your hand) The executives did not agree among themselves who they were competing with and in which market niche.

So, we did our research and gave her a list of the top ten current competitors, by gross sales, for each niche. The results were interesting.

Of the 10 competitors, the senior managers, as a group, identified 6 or 7 in each niche. So far so good.

In each niche, they had identified 1 or 2 firms as competitors who were not currently competitors and had not been in that niche for a minimum of 2 years. Bad. Obviously, they were not paying close attention to what was happening in niche by niche.

What about the others, the missing 1 or 2 in each niche? They were firms that were current competitors that no senior manager, let me repeat that, no one, identified as in the top 10. Even worse, in 3 of the 4 niches there was one of these “stealth” competitors among the top 5! Talk about blind spots.

Stage Two

Now you begin to understand the history of the key competitors, which can lead to at least a partial understanding of its culture and its view of the world. Businesses and their executives and managers are molded by what they have succeeded (and failed) at. This stage should include a look at key executives, particularly those who have joined the firm in the past 2-3 years. They were hired for a reason. What was it?

Don’t think culture is important (or even real)? Consider the attempt by Kraft Heinz to acquire Unilever. According to a report in Fortune, one of the several reasons that the Unilever board rejected the offer was the radical difference in corporate cultures. [1]

Stage Three

This stage involves identifying the capabilities or potentialities of your competitors. What can they do that they are not doing how? How skilled is the workforce? How good/efficient is its supply chain? What strategic alliances do they have or might they logically create?

Stage Four

The final stage involves ascertaining your key competitors’ intentions. That is, now that you know where they came from, what they are really doing, and what they can do that they are not yet doing, you start analyzing available evidence to determine where they are going to go tomorrow. Now you are at the top of the CI food chain. Congratulations! From here, lies the world of early warning systems – another important topic.

[1] “Change World”, Fortune, Sept. 15, 2017, p. 82. “Unilever’s board rallied behind [the vision of ‘making sustainable living commonplace’] to help stymie an unsolicited takeover bid from Kraft Heinz.”


Toxic Environments for CI

November 7, 2017

In the past I have commented[1] on the fact that competitive intelligence cannot thrive in contexts where there is imperfect competition or an outright monopoly situation.

Now consider this observation from a recent issue of Time:

“[T]he leaders of other emerging powers – not just Russia but also democracies like India and Turkey – are following China’s lead in building systems where government embraces commerce while tightening control over domestic politics, economic competition, and control of information.”[2]

So, to the above environments where CI cannot thrive (or perhaps even function), add those situations where government is not only involved in controlling commerce, even without the presence of oligopolies and monopolies, but where it is also controlling much of the data, the raw material from which CI is developed.

“Withholding information is the essence of tyranny. Control of the flow of information is the tool of the dictatorship.” author Bruce Coville.

[1] See It Is What It Is and  Why No CI?

[2] “Advantage China”, Time, November 13, 2017, p 42.