Introduction to Strategic Intelligence

8/9/2019 Introduction to Strategic Intelligence

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INTRODUCTION TOSTRATEGIC INTELLIGENCE

GIA WHITE PAPER 2/2004


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GIA White Paper 2/2004 Introduction to Strategic Intelligence

Strategic intelligence (SI) is an important tool in

informing and supporting strategic managementactivities in different stages of the strategydevelopment. In short, Strategic Intelligence canbe defined as a systematic and continuous processof producing needed intelligence of strategic value inan actionable form to facilitate long-term decision-making. Customers of SI include individualsinvolved in strategic decision-making.

From the process perspective, Strategic Intelligencecan be seen as a part of Competitive Intelligence,as it is also a systematic and continuous processwith a purpose to facilitate decision-making with

needed and timely intelligence input delivered inactionable form. The major difference between SIand CI is that SI actions focus strictly on supportingstrategic decision-making by monitoring aspectswith strategic significance. Additionally, a SI timehorizon is broad and the focus is on all significantevents: past, present and future events.

In order to practice effective Strategic Intelligencecapable of meeting the needs of strategic

Executive Summary

management and introducing intelligence of

strategic value into the decision-making process,certain critical aspects should be considered. Theyinclude:

Appointing a strategic level process owner,preferably the VP for Corporate Strategy, and aseasoned SI Manager. It enables integrating thebest available internal senior expertise into theSI process.

Knowing and understanding the internal SIcustomers - individuals involved in strategicplanning.

Defining the SI priorities and properlycommunicating them (critical strategic themes,key players to be analyzed, early warningthemes).

Designing and producing SI products that servecustomers content needs and communicationneeds.

Building a network of Strategic Intelligencecontributors, both internal and external.


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This paper focuses on the relationship between

Strategic Intelligence and strategy. The aim isto provide readers with a definition of StrategicIntelligence (SI) and explain the role of intelligencein formulating and implementing strategy.

The role of Intelligence in strategy formulation isa critical one, especially now, given the quicklychanging business environment. As the paceaccelerates, it becomes more difficult for seniormanagers and decision-makers to adequately

1. Introduction

monitor, interpret, and respond to environmental

changes. This is where SI, a systematic processof collecting, analyzing and communicatingactionable strategy-oriented business information,can serve as input in strategic decision-making.

The paper begins with a discussion on strategyand attempts to define for readers the concept ofStrategic Intelligence (SI). Strategic Intelligenceas a part of Strategy Development will then bediscussed followed by some concluding remarks.

2. Strategy

The concept of strategy has been around for aslong as there have been organizations and wars.

Inevitably, there has been a huge amount ofstudies and writings on the subject. Today, thereare different ways of defining strategy and theconcept of strategy can be viewed from manyangles. The aim of this chapter is not to providea clear-cut definition of strategy but to givereaders an overview of strategy which can serve asa framework for studying the relationship betweenStrategic Intelligence, strategy formulation andimplementation.

As mentioned earlier the concept of strategy canbe viewed from different angles. Here are some,

but by no means all, dimensions that should beincluded in any unified definition of the conceptof strategy. These dimensions can provide aninsight on how thinking strategically can benefitour business.

Some traditional views:

Strategy as a coherent, unifying and integrativepattern for decision- making, a blueprint forthe whole organization that indicates theorganizations future destination.

Strategy as a means of establishing anorganizations purpose in terms of its long-

term objectives, action plans and priorities forresource allocation; aligning short term actionand resource deployment to be congruent withlonger term objectives.

Strategy as a definition of a firms competitivedomain including defining the businesses a firmis in or intends to be in, segmentation, strategicpositioning and how and where it is going tocompete.

Strategy as a response to external opportunitiesand threats and to internal strengths and

weaknesses; a means of achieving a longrange competitive advantage, and a favorablecompetitive position and adapting to meet thedemands of a changing environment.

Strategy as a logical system for differentiatingmanagerial tasks at the corporate, businessand functional levels; defining an overallmission and allocating resources with a senseof strategic priorities.

Strategy as a definition of the economic andnon-economic contribution the firm intends tomake to its stakeholders.


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From the unifying point of view, strategy becomesa fundamental framework through which anorganization can assert its vital continuity whileat the same time purposefully managing itsadaptation to the changing environment to gaincompetitive advantage.

Having a strategic thinking mindset does not, initself, always generate a fully functional strategyfor an organization. On the other hand,

Strategic planning does notguarantee strategic thinking.

Most strategic planning systemsrely on historical data and

numbers generated internally.

These systems often require long and exhaustiveanalysis. The result is an extrapolation of historyinto the future. Strategic thinking, on the otherhand, incorporates an assessment of both theinternal and external environment. The processinvolves a qualitative evaluation of the businessand its environment and is both introspective andextraspective.

When discussing strategic planning, strategicdesign or strategic thinking, it is important to giveconsideration as well to strategic management.Michael Porters statement The essence of

formulating competitive strategy is relating a

company to its environmenthighlights severalkey dimensions of strategic management.

1. The first part of the statement, the essenceof formulating, indicates that there must

be a process at play. Whether structured orunstructured, formal or informal, rational orirrational, the organization must proceedthrough a number of steps before it can arriveat a strategy. This dimension of strategicmanagement, which looks at the how ofstrategy, is referred to as the strategy process.

2. The next part of the statement, competitivestrategy, indicates that the strategy processmust result in a strategic outcome. This outputof the strategy process is a course of action tobe followed by the company that will allow for

the fulfillment of the companys objectives inthe face of competitive pressure. This dimensionof strategic management, which looks at thewhatof strategy, is referred to as strategycontent.

3. The final part of the statement, is relatinga company to its environment, indicatesthat strategies are developed to suit varyingorganizational and environmental contexts. Thisdimension of strategic management is referredto as strategy context and looks at where, when,who, and why.

Lets now have a look at the basic elements of

strategic management elements which attemptto provide insight into the strategy process (how),strategy content (what) and strategy context(where, when, who and why):

Environmental scanning includes both externaland internal scanning. The external environmentconsists of the task environment and the societalenvironment. The task environment (also referredto as industry) includes competitors, customers,suppliers, interest groups etc. The societalenvironment includes more general forces such

as technological and political-legal forces. The

internal environment includes the corporations

structure, culture and resources.

Strategy formulation includes the corporatemission/vision, objectives, strategies andpolicies.

Strategy implementation is a process by whichstrategies and policies are put into action (e.g.programs, budgets and procedures).

Evaluation and control: corporate activitiesand performance results are monitored so thatactual performance can be compared with desired

performance.

EnvironmentalScanning

Strategy

FormulationStrategyImplementation

Evaluationand Control

Figure 1. Four basic elements of strategic management


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3. Definition and Tasks of Strategic Intelligence

Competitive Intelligence (CI) is often defined as

knowledge and foreknowledge about the externaloperating environment of the organization. Thepurpose of CI is to facilitate proactive decision-making by producing the needed businessinformation into actionable form and making itavailable at the right time. The orientation andutilization of CI is tactical and to some extentstrategic. The CI time horizon focuses on presentevents and, to some extent, on past and futureevents as well. Some CI processes are designedto serve the strategic level, while some focus onoperative monitoring or both.

Strategic Intelligence is a type of Competitive Intelligence produced for strategic purposes.Customers of SI include individuals involved instrategic decision-making.

From the process perspective, Strategic Intelligencecan be seen as a part of Competitive Intelligenceas it is also a systematic and continuous processwith a purpose to facilitate decision-making with

needed and timely intelligence input delivered in

actionable form.

The major difference betweenSI and CI is that SI actionsfocus strictly on supportingstrategic decision-making by

monitoring aspects with strategicsignificance.

Users of SI are primarily individuals involvedin strategy development. Additionally, a SItime horizon is broad and the focus is on allsignificant events: past, present and future events(Figure 2). In short, Strategic Intelligence canbe defined as:

A systematic and continuous process of producingneeded intelligence of strategic value in anactionable form to facilitate long-term decision-making.

Levels

Events

Competitive Intelligence

StrategicLevel

CompetitiveLevel

MarketLevel

Past Present Future

Strategic Intelligence

MarketIntelligence

Figure 2. The Scope of Strategic Intelligence. Source: McGonagle & Vella, 1996


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Strategic Intelligence has to be highly need-based. Here, need refers to content needs as wellas communication needs of the content (format,timeliness etc.). Typically, the higher the strategicanalysis level, the more interactive the intelligencecommunication and the less information quantity

are required. Some typical, content relatedstrategic intelligence needs include:

Impact-analysis/so-what analysis: how doesa certain phenomenon affect the companysbusiness

Business driver analysis: what are the main drivingforces affecting the business environment

Scenarios with probable outcomes/long rangeviews of battlefield developments

In-depth competitor and key-customer analyses

instead of company profiles

Birds eye view of the business environment:overall battlefield illustrations

Relevant macro issue and trend analysis andtheir impact

Analysis of critical strategic themes

3.1. Strategic Intelligence as a part of Strategy Development

What are the roles of SI activity in strategic decision-making? Six basic roles can be identified:

1. Describing the competitive environment:Intelligence analysis must define the currentcompetitive arena in which the company operates.

An intelligence assessment must be made of theforces and factors that make up the companyscompetitive environment. The figure 3 belowshows a generic model of a strategic businessenvironment/competitive environment.

Scope

Value Chain Dimension

Marke

tRegio

n

General Trends

Supplier

Industries

BusinessEnvironment

Industries

CompetitorsSuppliers Customers

CustomerIndustries/Segments

Own

Industry

Companies

Interest Groups

Figure 3. Strategic Business Environment


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2. Anticipating the future of the competitiveenvironment: The intelligence departmentshould be able to provide forecasts regarding thecompetitive environment in which the companyis likely to find itself in the future.

The future is about change: some of the future ispredictable, most of it not.

Scenario planning should be usedas a means of supporting strategicplanning by identifying emerging

competition, technologies andcustomer needs well in advance

in order to formulate a predictionthat can initiate an early change of

direction.

The voluminous body of literature on themanagement of change explicitly proposesthat strategic intelligence is a pre-requisite forchange.

3. Challenging the underlying assumptions -asking the right questions: A very importantrole for intelligence is identifying and challengingunderlying assumptions held by management(economic, political, technology-related, as wellas market and customer related) which may impactstrategic thinking.

4. Identifying and evaluating companyweaknesses against market opportunities andthreats: Intelligence can be used to identifyand assess a companys own weaknesses andvulnerabilities; a process often reserved forcompetitors.

5. Using intelligence to implement andadjust strategy to the changing competitiveenvironment: Once a companys strategy has beenformulated, it will go through two distinct phasesof implementation. The first phase is during itsinitial implementation, when competitors begin tosense and react to the strategys salient features.Good intelligence on how the competitor isresponding and adjusting to the strategys initialimplementation is very valuable, both to test itseffectiveness and to begin making adjustmentsthat compensate for any countermeasures thecompetition is likely to initiate.

6. Determining when the strategy is no longersustainable: Once a successful strategy has beenput in place and it has survived the initial phasesof implementation, it is important that an ongoing

reporting and collection program be establishedto monitor the competitors actions.

All these SI roles inform and support strategicmanagement activities in different stages of thestrategy development. During environmentalscanning SI has a pivotal role in assessingthe competitive environment. During strategyformulation SI assists decision-making by makingforecasts about the competitive environmentand by challenging underlying assumptions- asking the right questions and identifyingand compensating for exposed weaknesses. SI

supports strategy management activities duringstrategy implementation by using intelligence toimplement and adjust the strategy to the changingcompetitive environment. During evaluation andcontrol of the actual strategy, the role of SI isto determine when the strategy is no longersustainable and to support any counterintelligenceactivities/changes required.

3.2. Critical Strategic Themes

An important aspect in strategic development andin the nature of required SI is critical strategicthemes (CST). Critical strategic themes have a majorimpact on the strategic business environment andthe change therein.

Moves and changes which arenot observed cannot be reactedto. SI plays an important rolein controlling these moves and

changes.

Critical strategic themes should be based on acompanys strategy, mission and vision statements.Every organization should be able to identify thosethemes that require monitoring and analysis sothat the company retains its competitiveness andimproves its position in the marketplace.

Typically, a strategic theme covers a wide rangeof issues to be analyzed. An example of sucha theme would be long-term changes in thedistribution logic due to the development ofelectronic channels. Industry consolidation is


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yet another generic strategic theme for manycompanies. In particular, companies in traditionalindustrial sectors need to go beyond typicalcustomer information and dig into the valuechain more thoroughly to analyze their customerscustomers and their respective industries in orderto understand the real drivers of their business.

Some generic themes are presented in Figure 4below. Critical strategic themes will differ for eachcompany, depending on the business environmentthey are in.

Scope

Value Chain Dimension

Marke

tRegio

n

General Trends

SupplierIndustries

BusinessEnvironment

Industries

CompetitorsSuppliers Customers

CustomerIndustries/Segments

OwnIndustry

Companies

Interest Groups

New standars & legislation

Changes in value chains

Consolidation

Concentration

Surprises

Price changes

Convergence

New needs

New applications

E-business

Globalization Environmental issues

Figure 4. Examples of Critical Strategic Themes


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In order to practice effective Strategic Intelligence

(SI) able to meet the needs of strategic managementand introduce intelligence of strategic value intothe decision-making process, certain criticalaspects should be considered.

Appointing a strategic level process owner,preferably the VP for Corporate Strategy, anda seasoned SI Manager enables integratingthe best available internal senior expertiseinto the SI process. The SI Manager shouldbe equipped with in-depth understanding ofthe battlefield and be respected as an expertin the organizations business and markets.

He/she should also participate in the strategyprocess.

Knowing and understanding the internalcustomers. SI customers are individuals involvedin strategic planning.

Defining the SI priorities and properlycommunicating them (critical strategic themes,key players to be analyzed, early warningthemes). It is important that the criticalstrategic themes be clearly communicated toeveryone who is expected to contribute inputto strategic analysis.

Designing and producing SI products that

serve the customers content needs andcommunication needs. Here, products referto highly interactive management briefings andvisual actionable intelligence information packsas opposed to massive static reports.

Building a network of Strategic Intelligencecontributors, both internal and external.

In the future, building SIcapability together witheffective scenario planning will become more andmore important especially when restructuring thetraditional strategy processes to meet the needs ofconstantly changing business environments.

When discussing the roles of SI in strategydevelopment and the relationship between SIactivities and the companys strategy, SI couldbe described as asonar, searching for underlyingopportunities and threats that cannot easily beobserved (monitoring critical strategic themes)and a radar helping the company on its roadto the future, supplying intelligence aboutturning points (promoting a change in direction,forecasting what is ahead, developing scenarios)for the enterprise.

4. Conclusion


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1/2004 Introduction to Competitive Intelligence

2/2004 Introduction to Strategic Intelligence

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Documents

Introduction to Strategic Intelligence