Does Your Company Have an Intelligence Problem?

Thursday Mar 15th 2007 by Rob Enderle
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As high profile examples from IBM to HP demonstrate, sometimes IT leaders fail to get the information they need – with disastrous consequences.

Executives like good news, and people like to give it to them. For instance, Steve Jobs used to have the reputation of firing people in the hallway just because he could – all you had to do was look at him wrong.

It was called “being Steved.” Most may not be that bad but it often seems like the concept of “not killing the messenger” is lost on many, and it sure is a lot more fun telling executives what they want to hear. Only problem is, a company lives or dies on what a decision maker needs to know.

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It amazes me how few firms formally do market, business, and competitive intelligence outside of that needed to prepare marketing collateral (which corrupts the integrity of the process anyway), and then wonder why new products fail in the market. It isn’t just Microsoft nor is it just in the tech industry.

The biggest problem is that when I do see market research being done it is typically done to promote a product or service. That type of work is heavily biased yet, I often find, executives use the results as if it was valid information. When you create an artificial reality to sell something and don’t realize that what you are looking at is your own creation – and not real – you will likely make some incredibly stupid decisions.

In addition, because you have a study, the checks and balances that might prevent the bad decision will be overcome by the corrupted research.

Time Warner: Blu-Ray vs. HD-DVD

For instance, I reviewed a study done by Time Warner a few years ago that was clearly corrupted by design. It was on Blu-Ray vs. HD-DVD, and Time Warner based their decision to back HD-DVD exclusively on the result of the study. They had two samples, one that was presented with Blu-Ray information and the other with HD-DVD, and the folks were vastly more excited about HD-DVD.

I’m very skeptical of studies so I asked them to walk me through the methodology. For Blu-Ray they provided what was on the Blu-Ray web site to the site reviewing that product, but for HD-DVD they developed custom marketing collateral and provided that to the HD-DVD sample. In effect they “convinced” the HD-DVD sample to like HD-DVD while they put no effort into doing the same for Blu-Ray. All they proved was that if you “sell” someone they will prefer the product they were convinced to prefer. The results were invalid with regard to consumer preference.

Shortly after pointing this out, very publically, Time Warner took the right path and went agnostic, supporting both Blu Ray and HD-DVD. The company currently sells far more High definition movies than it otherwise would.

Asking Questions

Executives that should be asking critical questions aren’t, either because they are afraid to look stupid or because they are distracted, or because they simply don’t know what questions to ask (in effect they ARE stupid, but that is curable).

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This problem is not new and was considered by Sun Tzu, who is quoted as saying: “All these five (referring to core intelligence tenants) no general has not heard; one who knows them is victorious, one who does not know them is not victorious.”

Whether you are a CEO, a manager, an employee, or the President of the United States, if you don’t assure clean uncorrupted intelligence you won’t win. And, I believe, if this were the only thing Microsoft fixed, the others would actually fix themselves. This is true of any troubled company from Sony (who desperately needed better intelligence) to Netscape to Novell (particularly in the 90s) to Lotus. Even IBM’s fall in the 80s can largely be tied back to bad or corrupt intelligence (and, in some cases, really bad managers).

Hurd and Fiorina

Look deeply at Mark Hurd in HP. What is the one thing he clearly has fixed that Carly Fiorina, his predecessor, ignored? He gets good intelligence and he takes the time to understand it.

According to those who reported to Carly, she often didn’t ask, and when she got the information she didn’t assure its accuracy nor was she often interested in understanding it. Despite her feeling that she was largely fired because she was a woman, in reality she was fired because she didn’t know enough to do the job. She wasn’t stupid, yet the lack of good intelligence, particularly about her own board, made her ignorant.

One of the difficult parts of all of this is that executives seldom know, until it is too late, they are being misled, and then it is too late to do anything about it. I remember the stories of IBM's fired CEO, John Akers, and his realization that he had been largely lied to for some time before he was fired. I’m sure he would have appreciated an earlier wakeup call, but because he didn’t own his intelligence, his wake-up call was a pink slip.

Watch Michael Dell

Dell has always had an excellent internal business intelligence system. Executives moving there from other firms in the 90s were astounded at the level and quality of information they got on internal performance metrics. Still, they were blindsided in the late 90s, and again earlier this decade, by failing customer satisfaction numbers. They clearly missed both the need to use AMD in critical units and the consumer move back to retail PC purchases.

They now have a new CEO and Michael Dell is back with a vengeance, bringing in top experts to take over key businesses as he both resets his business and lays the groundwork for his successor.

Look at how intimate he is getting with the business. He is engaged and appears to tracking personally the key initiatives necessary to restore his company. While there is a danger of micromanaging there is, as yet, no evidence of it and the firm appears poised for recovery. These things take time though so we probably won’t know for sure until after 4th quarter numbers are reported.

In any case, he clearly isn’t isolated and appears to be trying many of the things that others have found successful.

Corporate Intelligence

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I’ve played in different phases of corporate intelligence, running specialized post-acquisitions teams, internal audit teams, and competitive analysis teams. In looking back I think the power of aggregating the information about a company’s actual performance and comparing it against competitive and environmental intelligence to form strategies can be incredibly powerful. The only industry I’ve seen this done is in Pharmaceuticals, but I understand it may be done by a number of defense contractors as well.

Often the responsibility for providing intelligence is in the hands of executive aides, but they are easily (as was the case with John Akers at IBM) misled because they aren’t formally connected with the information gathering process – which, as I mentioned, generally has more to do with selling products than true accuracy.

I think it is time to consider a formal intelligence role for companies in industries that don’t have them. There are opportunities to derail hostile legislation, avoid the emergence of new competitors (particularly overseas), and to better target current opportunities that could be more often enjoyed if there were focused people ensuring that outcome.

Don’t Wait to be Told

Don’t wait until too late to open your eyes and check to see if the information you are getting is the whole truth and nothing but. It may be nice to hear good news, but sometimes knowing the bad in time can save your career or, in the case of a medical problem, your life.

Make sure the “good” in news always also applies to accurate, because good (trustworthy) bad news is generally much more valuable than bad (untrustworthy) good news.

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