HD28
M414
Dewey
•
'"-rL
SEP
24
1985
XKic
ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
MANAGING THE CORPORATE INTELLIGENCE FUNCTION
Professor Sumantra Ghoshal
Sloan School of Management
August, 1985
WP# 1697-85
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
riANAGING THE CORPORATE INTELLIGENCE FUNCTION
Professor Sumantra Ghoshal
Sloan School of Management
August, 1985
WP//
1697-85
'MANAGING THE CORPORATE INTELLIGENCE FUNCTION,
Sumantra Ghoshal
Room E52-580,
The Sloan School of Management
Massachusetts Institute of Technology
50 Memorial Drive, Cambridge
MA 02138
The
author
is
grateful
for
the
comments and
suggestions of Eleanor Westney, Donald Lessard, and
Michael Scott Morton;
for help and assistance from
Seok Ki Kim and Yun Key Yun
in conducting field
research in Korea; and for financial support from the
Sloan School of Management, MIT.
-
page
-
1
GROWING IMPORTANCE OF ENVIRONMENTAL INTELLIGENCE
turbulence"
"Environmental
fashionable
obsession
descriptions
of
board
corporate
regulatory
changes
of
fears
in
competitive,
have
concerns of managers,
daily
the
about
and
environments
social
even
or
part
integral
an
Hopes
meetings.
discontinuous
and
technological,
become
a
hard-cover books, it has now entered the agenda
in
unpredictable
merely
From colorful
academics.
business
of
longer
no
is
particularly in medium and large enterprises.
A
number
responsible
for
regarding
need
the
environment.
changes
monitor
to
been
have
of corporate managers
awareness
enhanced
the
developments
inter-related
of
in
Three phenomena,
in particular,
of
globalization,
external
the
seem to have been
most critical.
First,
trend
the
business
environment
dominant
in
now
to
with
countries,
resource-bases
competition
even
seriously,
been
exempt
have
emerged
contend
from
in
from
different
cultural, administrative and physical
While
competencies.
firms
the
become increasingly
competitors
with
this trend of global
multinational
affected
has
has
in
Most medium and large businesses are
diffei-'f-nt
and
1970's,
the
1980's.
the
required
of
manifest
corporations
most
with purely domestic operations have not
its consequences as multinational competitors
businesses that have traditionally been purely
domestic in nature.
Such
societal
competition
origins
has
among
made
firms
the
with
need
vastly
for
differing
environmental
- page 2 -
intelligence
both
competitors
are based
currencies,
same
competitors
often
conscious
exchange
be
by
carefully
without
automatically,
global
such
as
competition,
any
contrast,
in
changes in relative wage rates,
rates or public policies of countries
differently and therefore need to
competitors
While
some of such information may be
routine course of business; not all are and
the
system
formal
and any change affects all
corm^on
With
watched.
in
incur costs in the
need not be explicitly
factors
almost
firms
interest
different
available
are
changes
rates,
of
When all
Besides, information on such factors are
effort.
environmental
affect
they
equally.
received
and more complex.
in the same country and
number
a
because
monitored
compelling
more
a
required to scan changes in the many national
is
environments which can potentially affect the firm.
Second,
has
between
a
firm and its environment
been eroded as life-cycles of products and technologies have
shortened.
become
an
buffer
the
defensively
To
explicitly
era
manifest
advantages.
The
is
changes after they have
to
no longer a feasible strategy in
competition
increased
of
react
and
enhanced
first-mover
benefits of early- warning and quick response
have increased enormously.
Finally,
of
most
traditional
competitive
are
absolute
determined
instruments
advantages.
almost
competence
the "catch-up" phenomenon has dulled
or
the
scale
hegemony
not
breakthroughs
on
in
and
the
the
of
distant
of
technological
operations.
No one enjoys
terms
in
their
relative
basis
durable
industries, major competitors
In most
indistinguishable
developing
for
the edges
competitive
positions
are
of a technological or commercial
past
but
could cope with the last wave of change.
by how well each firm
- page 3
-
CORPORATE INTELLIGENCE UNITS
A
for
organizational response to the increased need
common
external intelligence has been to create formal intelligence
units
monitoring
for
environment.
Such
Analysis
carry different labels
within
intelligence
special
some
corporate
the
planning
often
or
functional
departments such as R&D or marketing.
very
States
to
the
Environmental
few,
competitor
if
analysis
They are
departments,
functions such as technology
monitoring
are
:
Futures Group are some examples.
and
created
usually
though
units
interpreting different sectors of the
Research and Analysis, Strategic Intelligence, Country
Scanning,
Risk
and
are
integrated with
In fact,
there
any, large corporations either in the United
or abroad that do not have such an unit devoted full-time
tasks
of
acquisition,
interpretation
and
internal
circulation of environmental information.
Often,
ineffective.
however, such
a
unit has proved to be singularly
The following are some of the more common reasons
of why they have failed
:
The
unit
is
headed by a bright, freshly- minted
PhD in economics or political science.
MBA,
or
a
the task as one of
In
the worst
sees
case, he
bunch of uninformed managers and
educating
a
starts bombarding everyone with highly academic
formidable tool-kit of
his
on
based
notes
analytical techniques.
These quickly degenerate
from being perceived as refreshingly different to
being seen as totally useless. Ultimately, the
missionary of new wisdom leaves the organization,
usually for graduate school or a consulting firm,
redemption.
firm is beyond
the
that
convinced
Otherwise he is fired. The unit, however, is not
wound up but is just forgotten about.
More typically, however,
such a person makes an
the organization and
understand
to
honest effort
its
information needs but gets little support from
as an outside
seen
He
is
the
line managers.
incapable of
expert
is
pre-judged
be
and
to
- page 4 -
understanding
Failing
to
managers,
the
strengths of
on
published
scenario takes
the
intricacies of the business.
line
obtain
the
support of the
new recruit
falls back on his own
producing academic monographs based
information and
the worst
case
over.
The
unit acts as
an
advisory body to top-level
comment on
is
asked
to
corporate managers and
proposals
at
the
last
stage, when
they are
By this time the
for
final approval.
received
intricate social and political processes through
large
in
at
arrived
decisions
which
are
organizations have played
themselves out:
views
about
the
proposal have hardened, sides have been
taken and
careers have been committed. At this
if
the unit
supports the proposal, it is
stage,
seen as
not contributing anything of value and if
the proposal, it is seen as an auditor
it
opposes
of
sorts
as
"nay-sayers" who are to be
challenged and overcome. Either way, it fails to
get
integrated with the rest of the organization
and
gradually
ceases to have any impact on
dec ision-mak i ng,
—
o
Information is a principal source of power and
To be effective,
recognition in organizations.
the
intelligence unit requires
information that
collected by managers
in different parts of
are
the
organization.
Managers, however, have no
information to the unit
incentive
for providing
since
it does not offer any appropriable benefits.
pass information along
instead,
to
They prefer,
their direct
reporting hierarchy, in exchange for
recognition, or to colleagues, through an informal
system of barter.
In other words, it is a classic
managers like to
all
problem of externality
have
information from the intelligence unit but no
one wants to contribute information to it.
—
These
effectiveness
the
discussed
formal
the
is
and
of
corporations.
large
be
but
are
intelligence
increasing
an
a
later.
few of the many problems that impede
a
formal scanning or intelligence unit in
a
There are many others, some of which will
The moot point is that simply creating a
unit
is
intelligence
rarely an effective means to meet
needs of
a
firm.
What is required
organization-wide sensitivity to the external environment
comprehensive
system
to develop corporate
intelligence.
.
- page 5 -
intelligence
The
information,
available
managers
to
interpretation
Each
special
body
so as to be
information,
such
and
its
of
line
in the intelligence unit, and
staff
managers
in
:
the
different functional areas.
these groups have different competencies with regard to
of
tasks
the
company
These activities must be performed
firm.
the
managers,
general
need
the
of
by three different components of the organization
collectively
top
who
within
acquisition
the
terms of the possible impact on the goals and
in
of
includes
circulation
its
performance
function
kinds
different
pathologies,
overall
interpretation
collection,
of
group,
no
and
To
circulation
of
information
overcome
need to be combined in an
competencies
these
all
system
information.
of
and
in isolation, can put
the whole
puzzle together.
understand
To
might
system
resource
built
far
has
of
the
kept
being
in
and
possess
External information is
a
key
companies and this particular company has
reputation
as
a
fast
growing
and
Its principal competitors are
the field.
in size, have
larger
business
over
player
comprehensive intelligence
a
Far East.
formidable
a
aggressive
the
trading
for
up
in
such
let us consider the case of a large trading
work,
based
company
how
considerably greater experience in the
more
extensive
networks of branches all
Yet, this company has competed successfully,
world.
up a remarkable growth rate and has built a reputation
nimble
very
on
its
feet in spotting and exploiting
opportunities
THE INTELLIGENCE SYSTEM IN SINSONG TRADING
Sinsong
trading arm of
(1)
a
Trading
(1)
is
the
primary
diversified business group that
disguised name
is
international
one of the
- page 6 -
50
largest
outside
companies in Fortune's list of the biggest companies
United
the
branches
States.
wholly-owned subsidiaries
or
world-wide
people
about
5000
third
country
trade
revenue of over
The
corporate
1984,
In
Sinsong
Trading
had
countries, employed
in 60
and conducted
import, export and
in over 120 countries generating an annual
billion.
$3
intelligence
planning
function is the responsibility of the
department
Within
Sinsong.
in
this
department,
there are two sections that are devoted full-time to
this
viz.,
task,
the Research and Information (RI)
the Overseas Planning (OP)
The
available
general
information
agencies.
economic,
social,
country
products
and
suppliers,
following
section.
specializes
—
Its
in
dealing with publicly
mostly in printed form
publications
trade
and
government
every
section
RI
section and
by
and
objective
several
is
to
—
provided by
private
monitor
overall
cultural and political developments in almost
of the world, to review broad
trends in different
markets, and to analyze published studies on major
buyers
and competitors.
Its primary outputs are the
:
o
Two
fortnightly publications, one to circulate
significant economic and political developments
that
have taken place over the preceding fortnight
and
the
other a bibliography of all important
articles, pamphlets, books,
etc.
that have been
are
that
and
noticed
during the same period
considered as potentially relevant to the business
of
Both the reports are sent to each
the company.
and
every manager of the company and the managers,
circulate them among
in
turn,
are expected
to
their staff.
o
A
monthly consolidation of key economic statistics
approximately 100 countries in which the
company has significant business involvement. The
published as a pocket size booklet that
report
is
managers can always have in their possession for
Information contained includes,
ready reference.
for
every country, latest figures for imports and
of
levels
GNP,
rates,
interest
exports,
for
and
-
page
7
-
unemployment and inflation, and the exchange rates
for all major international currencies.
A
major
bi-annual
compilation
of
detailed
the world.
in
on 50 key markets
information
Titled
"Management
Environment",
report
the
brief descriptions of the countries,
contains
their
principal export and
import commodities
including major sources and destinations, external
debt and its implications on trade policies, trade
balance with detailed breakdown for most important
and
products,
GNP with category-wise breakup,
information about demand, competition and prices
on
number of specific products that are of
a
interest to the company. The publication is based
on DRI reports, OECD publications, Wharton Country
from BERI and Frost and
Reports, market reports
Sullivan, a host of journals including Euromoney
special reports
and
Investor,
Institutional
and
from private and public research institutions in
Japan, Europe and the United States.
o
Besides
maintains
out
periodic publications, this section also
these
the "data room",
on topics suggested by the top management
research
special
i.e., the company library and carries
of the company.
section
The
the
company,
was
national
major
managers
company
headed by
manager who, before joining
a
political and economic correspondent for
a
newspaper.
section
the
in
is
a
Neither he nor any of the other four
have
line experience within the
any
their entire career in the company has been spent in
and
the planning or other staff departments.
devoted
the
to
office
of
daily
report
five
thrice
the
company
the
intelligence
intelligence
(OP)
section,
function,
deals
this
to
employing
primarily
with
section
more than five people send
containing
about customers and competitors.
employees
every week.
branches
the second unit
data relevant for current business. Every overseas
environmental
than
Planning
Overseas
The
at
primarily
a
market
Offices with less
are required to send such reports at least
These reports are telexed by the managers of
the end of every working day.
Failure to send
- page 8 -
daily
the
reports
worst
days
missed
reports
The
reasons.
seriously
come
had
Beirut
the
office
and requires very good
in from Iran even during
the Iranian revolution.
of
by
taken
is
the
Not a single report was
when the city was under seige
—
being shelled by three different armies.
To
in
submit
require
turn,
there
and
must
these
field officers to turn in a daily report
all
an unwritten law in the company that officers
exists
information each day
include at least one item of external
their
reports
to
reporting
system,
a
in
reports the managers of the branches,
field
personnel
of
the
branch
great
deal
the
manager.
Through this daily
of pressure is exerted on all
company
to
actively seek information
through all their external contacts.
The
function.
interpretation
translates
On
a
the
same
communication
a
them
and
an
daily basis it summarizes the
from the branches,
into the local language, and circulates them to
important managers of the company.
read
the
both
has
items in the daily reports received
important
all
section
OP
Managers are expected to
report and to circulate it within their departments on
day.
The report usually contains just data, without
analysis or interpretation.
The
confidential
senior
analysis
report
is
which
communicated in
is
a
separate and highly
sent in sealed envelopes only to
managers who must read and destroy them immediately.
following is an actual example of such an analysis
:
"If Iraq is ordering
large quantities of army
such
uniform materials suddenly, fresh army recruitments in
a
large
This may mean that
scale can be anticipated.
an
escalation of the war is imminent. That, in turn,
implies
that
Iraq may
face
further strain on its
resources, particularly with regard to the availability
of
foreign
exchange
for
payment of non-defence
defer payment on such
therefore,
They may,
materials.
LC's
We are heavily
supplies,
even
if
are
opened.
building
materials,
them
with
supplying
involved
in
chemicals and
fertilizers.
Caution must be exercised
supplies and the payment situation must
on
all
future
be monitored very closely."
The
- page 9 -
While
main
information
only
ones.
are
foreign
markets.
report,
covering
of
report
information
made
information for the
submit
a
detailed tour
market(s), his conjectures
the
that may or may not be related to
also
and
collected
significant piece of
any
by him during the tour.
A
circulates through the manager's chain of
copy goes directly to the OP section where
and
incorporated
in
the
daily
In 1983, Sinsong headquarter managers
700 business trips abroad, generating over 4000 pages
over
These were, in many cases, the richest source
reports.
tour
must
about
appropriate.
as
of
only what he did during the tour but also
analyzed
is
source
manager
information
another
but
reports,
of
Each
not
the OP section, they are not the
reports of headquarter managers visiting
possibilities
this
command
the
major
responsibilities,
environmental
copy
other
impressions
business
own
his
for
tour
the
general
about
sources
The
section
his
daily reports from overseas branches are the
the
of information for the OP section.
The
years
the
OP
had spent over eight
section
in the headquarter and
divisions
in major international
before being transferred to the corporate intelligence
branches,
All
unit.
of
operative positions in the company, both in
different
in
product
manager
other managerial staff in the section had
a
minimum
of five years of field experience within the company.
THE TWO COMPONENTS OF ENVIRONMENTAL INTELLIGENCE
The
quite
environmental
typical
particularly
decomposes
of
in
the
the
intelligence
similar
Far
systems
East.
environmental
In
system
in
many
effect
intelligence
of
Sinsong is
large
such
function
a
firms,
system
into
two
distinct
components, one for analysis of the general environment
and
overall
the
business
climate and the other for monitoring
the specific business situation.
-
- page 10
This
kinds
two
purposes.
—
environment
is based
environmental
of
different
on the view that a firm uses
information
Information
day-to-day
decisions.
general
the immediate business
from
Information
social,
kinds
two
the
are,
useful
of
on
—
about
political and technological changes,
contrast, utilized primarily for long
in
information
The distinction is fuzzy and
clearly
overlap.
But it seems
make this distinction since the systems for acquiring
to
interpreting
and
is required
the broader environment
from
economic,
—
—
both operational and strategic
taking
for
planning and strategy-making.
term
related but
about current competitors, existing technologies,
basis
instance
for
two
for
product-markets in which the firm operates
and
a
distinction
kinds
two
the
information
of
differ
significantly. For instance:
The information sources are different
Figure
1
shows
information
sources
environmental
information.
practices
managers
of
companies
largest
participated.-^
represents
the
environmental
bar
in
represents
relative
the
It
relative
based on
of
importance
information;
the
a
bar
each
of
from 16 of the
Korea
of
kinds
survey of scanning
managers
111
Republic
height
The
is
which
The
in
different
acquiring
for
in
importance of different
(South
in
the
Korea)
diagram
the particular kind of
of
height of each component of the
the relative usefulness of the particular source
providing such information.
This
into
the
picture
organization
of
may
how
environmental
differ
in
information flows
different countries and
Full details of this study can be found in the author's PhD
" Environmental
An
Scan ning
axui
thesis,
Ind ividua]
Organizational Level Analysis ". MIT, 1985.
:
o
Z
Z
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r
m
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z
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o
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o
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2
- page
industries.
similar
However,
12 -
pattern
the
broadly consistent with
is
studies conducted in a range of industries in the United
States.
Information
available
usually
business
associates
such
as
Some of
available from public sources but by the time they become
is
public,
provide
become
also
they
differential
much
useful
less
as
a
source of
Even consultants, though many exist to
advantage.
such information, are not very effective since generally
information that is stale and not appropriable for
provide
they
from
only
suppliers, trade associations, bankers, etc.
customers,
it
about the immediate business environment is
immediate business purposes.
Information
political
and
obtained
from
publications
tanks
changes,
special
General
domain.
or
about broad technological, social, economic
and
contrast,
sources
and
reports
consulting
in
trade
from
that
are
exist
journals,
academic
organizations
are
most
efficiently
within
the public
special
government
institutions,
among
the
think-
principal
sources for such information.
Similar findings, based on his study of scanning practices
U.S.
firms
in the chemical industry, have been reported
Frank Aguilar
in
Scanning
the
Business Environment
R.F.Collings
and W.J.Keegan
New
York,
1967.
McGraw-Hill,
investigated
scanning behavior of American managers in the
multinational
in
industry
and
services
financial
corporations, respectively, and their descriptions of usage
sources were also generally
information
of
different
For
consistent with the analysis presented
in Figure 1.
on
studies
references of these and many other research
"
Scanning
scanning,
see author's PhD thesis,
Environmental
An Individual and Organizational Lpvel Analysis". MIT, 1985.
of
by
.
:
-
Managers
who
acquire
can
page 13 -
the
kinds
two
information are
of
different
Information
be
acquired
only
on
immediate business environment can
the
managers
by
who
have
direct access to the
grapevine, i.e.> line managers who meet representatives
industry
of
customers,
on
a
suppliers, competitors and other industry members
Membership
of
reliability
network
the
within
oneself
and are hooked to the appropriate network.
basis
regular
but
flow
this
is
experience
through
only to position
required
not
also
judge
to
trial
and
relevance
error.
and
and
Staff
neither receive such "hot information" from the market,
managers
can they readily discern their implications because of being
nor
divorced from the context.
For
acquiring
more
or
political
intelligence
social
contrast,
specific
sources
information
must
manager
a
that
general
be
are
technological,
public
from
economic,
sources,
in
specially trained to know of the
most useful for particular kinds of
must also be able to interpret the implications
and
general
developments on the specific businesses of the
firm.
Academic
training, analytical skills and access to such
sources
are
such
of
information
useful
in
both
intelligence
special
and
acquiring
interpreting such
and
staff
are
particularly
suitable for both purposes.
The information-acquisition processes are different
task-related
Specific
surveillance,
through
sensitive
by
picking
Often,
quite
or
a
the
by
i.e.,
information
is usually acquired
operative
by
managers
being
the continuous flow of information around them and
to
up
what
most
chance,
customer.
they consider to be relevant and reliable.
important
in
piece
of
information is picked up
the course of a discussion with a reseller
14 -
- page
is
General
environmental
usually
acquired
through
general
pre-determine
needs
its
political
concerned,
must
wants
more
through
active
surveillance.
economic,
it
intelligence, on the other hand,
as
search
In other words,
far
focused
and
surveillance
than
firm must
social,
informations
are
identify the sources and must acquire what
through structured research.
directed
a
broad
such
as
technological
and
rather
than
monitoring
and
the
much
The process
is
relatively
passive
through
which
much
of
task-related information is collected.
As
would
description
managers
roles
the
can
different
two
almost
operating
the
system
preceding
of Sinsong, line
intelligence staff play very different
circulating,
interpreting, and using
kinds of environmental information (see
exclusively
disciplines
such
relevant
very
economics,
as
from
by
limited
the corporate
involvement
can
sources
political
science or the
directly
acquire
principal
the
interpretation
of
such
such as publications, university
consultants and research organizations.
carry
of
Expert intelligence staff, skilled in
technologies,
information
with
dealt
with
unit
managers.
contacts,
from
The task of monitoring the broader environment
2).
be
intelligence
acquiring,
intelligence
also
the
and special
in
Figure
of
manifest
be
They can
responsibility for analysis and
information
such
in
terms
of
the
potential
impact
can
be circulated by them to operating managers so as
also
to serve as
the
monitoring the immediate business environment,
other
acquisition
lie
with
the principal responsibility for both
hand,
information
of
operating
intelligence
circulation
The processed information
inputs to the long term planning process.
For
on
firm.
the
on
unit
of
and
managers
and
becomes
one
such
its
interpretation has to
the main function of the
information
of
communication
within
the
and
company.
INTELLIGENCE
IMMEDIATE
BUSINESS
ENVIRONMENT
BUILDING
TASKS
INFORMATION
ACQUISITION
INTERNAL
CIRCULATION
interpretation/
USE
LINE MANAGERS
BROAD
BUSINESS
CLIMATE
- page 16 -
However,
serve
to
even
day-to-day
operational
intelligence
unit
who
might
the
intelligence
role
as
a
intelligence,
corporate
PABX for
managers
of
the
need the ability to relate the information to
business
possible
their
this
profit
implications
In other words, managers of
having it.
from
to identify managers
and
responsible for maintaining the internal
unit
specific task-related information need to have at least
flow
of
some
experience with the businesses of the company
analytical
skills
;
academic or
not as important for meeting the demands
are
of this role.
ENVIRONMENTAL INTELLIGENCE AND THE DECISION MAKING PROCESS
most
The
that
decision
viewpoint,
problem
intelligence
resulting
the
actual
vexing
in environmental analysis is
rarely
is
Considered
making.
from
used by firms for
a
very
practical
information and intelligence, irrespective of quality
or
appropriateness,
in
the
worthless unless used.
are
Unfortunately,
of my research on the environmental intelligence
course
confronted
repeatedly
the situation of
function
of
managers
busily engaged in developing increasingly sophisticated
firms,
computer-based
oblivious
of
such
reports
they
are
to
techniques
the
within
anyone
the
for
that
fact
firm.
analyzing
environmental change,
reports are rarely used by
their
In many cases operative managers keep
within easy reach and are lyrical about how useful
making difficult judgement calls.
for
recall
I
the
contents,
even
On being asked
however, it becomes manifest that the
opened.
Junior managers feel that the
reports
are
not
reports
are
useful for top managers, top managers are confident
that
junior
effect,
the
managers
whole
are
benefiting enormously from them.
exercise becomes
a
In
fashionable symbol of the
firm being "progressive", and is carried out for its own sake.
.
-
- page 17
There
many
are
between
environmental
Business
systems
analytical
effects
techniques,
reductionist
and
their
in
are
usually
approach.
They
contrast,
of reality and are therefore ignored
oversimplify
the
richness
managers
who
have to take
by
are facts and values.
as
in
For
performance are
business
of
disentangle,
to
analysis
Environmental
making.
highly complex and involve processes that
and
difficult
extremely
decision
and
multidimensional and causally confused.
causes
firms,
most
intelligence
are
heterogeneous,
are
for this permanent separation
reasons
holistic view of situations and
a
unlike some economists, cannot assume reality away.
Besides,
the
making process has
decision
information
files
clearly
stored
that
is
files
or
and
evaluating
alternative
will
systems
is
mostly
action.
of
courses
has
Information
for packaging
used
initiating
for
or
Going from
data-bases
relational
learning
for
and
Most environmental
reality and assume that managers
this
ignore
information
use
computers
rarely
proposals
analysis
on-line,
the problem but has not overcome it.
eased
in
far higher chance of use than
a
stored within the organization.
user-friendly,
to
that is received in the course of
information
available in storage.
Managers, alas, do
not
Usually,
late
decision
making
hierarchy.
firms
in
processes
acceptance.
has
already
serious
follows
and
By
the
acquired
internal
use
environmental
top
managers
is
a
too
much
consequences.
perhaps
the
by internal social and
complex
and
convoluted
and
final
proposal reaches senior levels, it
time
analysis as
too
too high a level in the
momentum-building,
initiation,
of
at
influenced
highly
considerations
political
and
provided
is
been widely documented, decision
has
As
is
intelligence
process
decision
the
in
environmental
momentum to be changed without
As
a
I
have suggested earlier, to
special intelligence source for
single most common reason why it
ceases to have any effect on decisions.
- page 18 -
Finally,
between
information
information
piece
there
a
from
the
why
environmental
set of interactions
influences
that
and acted upon by managers.
the way
The same
differently when it is received
seen
favorite and trusted subordinate than when it is received
manager
intelligence
of
such
section,
is
either
discussions
information,
with
managers
collection
managers.
Such
suggestions
acceptability
experts
seen
are
business,
develop
to
outsiders
as
ray
their biggest problem is not
acceptability is
difficult
is
:
In all
intelligence function, this
analyses to be used.
or
the
their personal acceptability to
but
personal
because
not trusted.
or
the
in
information
of
is
the manager of the intelligence
respected
not
ignored
is
come out quite clearly
has
A major reason
the intelligence section.
of
provider
their
is
complex
a
source
its
perceived
is
from
point
and
information
of
exists
who
pre-requisite for
a
In most cases,
because
do
not
such
intelligence
understand
the
auditors who come in the way of getting work done,
as
and as lackeys of top managers with great nuisance potential.
How
There
are
problem
in
answers
analysis
to
be made more useful
this question.
?
However, the
of the ways in which firms have tackled the
some
are
:
Making,
1.
simple
no
following
environmental
can
special efforts to involve iunior and middle managers
operative functions
most
In
actually
carry
:
situations,
out
the
junior
and
middle managers, who
day-to-day operations of the firm, are
the
most important sources of environmental information and also
the
most
managers,
can,
about
important
in
a
external
intelligence.
Top
while, produce the dazzling coup of finding out
forthcoming
confidential
also
of
through their network of high-level personal contacts,
once
a
consumers
plans
change of government policy or some highly
of
customers or competitors.
At
times they
initiate major strategic moves and can greatly benefit from
page 19 -
-
advice
of
butter
intelligence
the
of
the
information
from
obtaining
on
levels of the company and in
operative
lower
depends
function
intelligence
the bread and
However,
expert.
available environmental intelligence to the same level at
making
which most proposals are initiated.
mechanism
One
in
company
the
as
been
over
and
assigned
and
units
the
and
the
these task forces
through
from
normal
by
unit
the
all
on to the
them
pass
and
collate
They
duties.
they also disseminate all intelligence reports
headquarter
the
to
other
managers
within the
this activity takes up about an hour of their
Normally,
day but most junior managers look forward to the task
each
because
both
force
assignment
their
performance
is
between
task as an additional responsibility,
their
above
headquarters
time
the
intelligence
corporate
the
routed
are
this
acquired
unit.
and
communication
intelligence
received
in
temporary structures constituting junior managers who
are
have
unit
department
intelligence
departments
task forces have been created which act
the
All
department.
or
In each subsidiary of
major
all
in
as
temporary
between
links
which
well
as
headquarters,
functional
different
in
manufacturing multinational.
large
a
involvement is to
such
Such a mechanism has been successfully used
units.
geographic
forces
task
intelligence
create
developing
for
is
a
positive signal about
also because of the moderate budget that
and
available
made
it
force
task
the
to
entertainment,
for
subscription to journals, and other miscellaneous expenses.
experience
are
extremely
forces
The
sensitivity
to
intelligence.
intelligence
hand,
they
needs
of
useful
in
creating
organization-wide
the environment and also in involving junior and
managers
middle
of the company so far is that such task
They
function
educate
operational
acquiring
both
in
create
bridge
using
between
the
the rest of the company.
and
the
a
and
intelligence
units
and,
on
external
corporate
On the one
staff on the information
the other,
they foster
a
-
better
appreciation
among
page 20 -
line managers regarding the function
served by the intelligence unit and also about the ways in
being
which the intelligence department can be of help to the unit.
2.
Dependina more on gestalt than on storage
In
Strategic
fact
a
large
a
U.S.
Intelligence
section,
quarterly
of
presentations
managers
the
of
range of topics to the senior
a
He started with profiles of competitors
demographic
next
years,
25
presentations
within
continued
part
to be
of
operated
shared
his
to
delight
that
his
at the level of the CEO.
What he wrote
ignored but what he presented became an integral
context
which
in
managers
of
the
learning from this experience was simple.
becomes
useful,
at
attention
time
a
conferences
it
or
effective
most
organizational
actually
gestalt.
firm
and
active
his
information,
of
when
make
To
it
to
meetings
becomes
such
large
solution
not
minds of managers.
in
to
a
widely
intelligence
—
ensure
—
through
presentations,
that those few topics receive wide
Those discussions then become
memory of the organization by becoming
a
External
far better to focus on a few important
is
within the firm.
memory
words,
found
and
firm's prospects over
on the
.
intelligence
the
even
shared
the
His
topics
patterns
were being widely referred to in business meetings
firm,
the
Soon he
broader subjects, such as the possible effects
covering
changing
the
the
firm.
on
these briefings he made
In
gradually the attendance in such meetings improved.
started
of
being frustrated by the
after
briefings.
audio-visual
of
Fortune 100 firm, the manager of the
that his reports seemed never to be read by anyone, started
system
and
:
number
of
key individuals.
a
part
part of
a
In other
the problem was to store environmental
files
or
computer data-bases, but
in
the
- page 21
3.
Focusing
Information
on
-
"Wants"
not
and
on
Information
"Needs"
There
need
the
what
and
often wide gaps between information managers
are
information
They do not receive all
get or even want.
they
want
they
or
and they receive
need
information
they
do not either want or need.
information
they
need
diagrammat ically
Most
that
premise
the
information
information,
see
This is represented
to environmental analysis are based on
manager
needs
then
and
to
provide
that
The assumption is that managers will
needed.
of the information they really need even if
usefulness
the
They also receive
objective of the analysis is to identify
the
a
as
not want.^
lot of
Figure 3.
in
approaches
the
do
but
a
they did not want it at the beginning.
and
overlooks the complex set of cognitive
assumption
This
issues that underlie a manager's determination of
political
required.
It
perhaps naive to assume
what
information
that
information, by itself, can change the complex "world-view"
that
determines
is
information wants.
is
To an extent, environmental
analysis fails because of that assumption.
Environmental
if
it
currently
as
strike
can
want
a
and
intelligence
can prove to be more useful
better balance between information managers
information that analytical methods suggest
their real needs (even if we assume that such methods somehow
determine
the
needs
quite
accurately)
.
There
is
usually
a
substantial area of overlap between information wants and
^
This
concept
Business
was suggested by Frank Aguilar in Scanning the
Environment
.
McGraw-Hill,
also reproduced from this book.
1967.
The diagram is
BOX 1
:
INFORMATION A
MANAGER RECEIVES
BOX 2
:
INFORMATION A
MANAGER WANTS
BOX 3
:
INFORMATION A
MANAGER NEEDS
FIG
3
:
INFORMATION MANAGERS RECEIVE, WANT AND NEED
page 23 -
-
needs
that are currently not met and
Converting
the
be
of
focus,
on this area that the
initially.
least
at
systems
interpretation
or
of
environmental analysis function, but it
the
term objective to be achieved incrementally,
long
a
gradually
is
that they want what is really needed must be one of
so
objectives
should
maps
cognitive
the
managers
must
intelligence
for
search
it
chipping
away
This
margin.
the
at
will
make
intelligence much more use-driven instead of being
environmental
either need or availability driven.
Environmental Analysis More Business-oriented
4. Making
form
a
training
of
oriented
analytically
The
used.
clearly
be
makes
gradually
that
both
from
a
firm
more
responsive to external change.
more
and
This
processes
leads
of
intelligence
managers
top
and
invested
unwilling
to
information
cut
is
from
the
But the
back
intelligence
because
always useful.
both on the part
results of their
see no direct returns from the
who
the
in
visible
no
find
—
of
a
function
vague
but
feeling
are
that
Such rationalizations severe the
loops between environmental analysis and the mainstream
feedback
firm's business and such feedback is required to prevent
the
intelligence
Providing
useful
function
intelligence
of
from
becoming an academic exercise.
information must be the principal objective of
environmental
ground
who
staff
resources
the
environmental monitoring.
of
to self-defeating rationalizations
it
efforts,
arising
benefits
making such benefits an explicit objective is that
with
trouble
important argument and there can
an
is
"mind-stretching"
organizational
the
argument,
the
activity is therefore useful even if the intelligence is not
directly
of
heard
academics and from managers that environmental analysis
business
is
repeatedly
have
I
:
unit
directly
system.
intelligence
must
strive
supporting
assumed
and
untestable
culture
or
orientation.
claims
to
earn
The
corporate
its legitimacy on the
business performance and not on
of
changing the organization's
This is not to claim that the process
- page 2A -
benefits
that
of intelligence-gathering do not exist but to highlight
benefits
those
can
be
achieved
if this principal
only
objective is effectively attained.
CONCLUDING NOTE
At
environmental
competitive
firms
advantage
managerial
BEWARE
paper
this
of
~
had
I
intelligence is rapidly becoming
that
are
era
an
in
increasingly
competencies
operations.
building
beginning
the
U.S. FIRMS
:
and
conclusion,
In
the
let
major source of
global competition among
of
similar
in
a
argued that
technological
in
size
and
scope of their
and
me sound the warning that in
effective intelligence systems, U.S. firms start from
a
considerable disadvantage.
In
term
the
country,
this
"intelligence" has
context
intrigues
and
covert
expected
to
indulge
intelligence
building
organizations
and
extremely
the
U.S.
have
activities.
It
triggers images of
activities that responsible firms are not
This
in.
is
is
unfortunate
essential
an
illegitimate
rare.
modes
activity
because
for
all
of acquiring information
But, given the connotation, many firms in
have thrown away the baby along with the bathwater and
avoided any explicit action to build corporate intelligence
problem
systems.
The
anti-trust
laws
their
very unsavory connotation when used in
a
corporate
of
are
perhaps more than anywhere else, the
been
exacerbated
by
the fear of
and many firms, occupying dominant positions in
industries,
intelligence,
has
have
meticulously
particularly
competitor
avoided
any
mention
intelligence,
of
anywhere
within the organization.
Firms
have
in
other countries, particularly those in Japan,
always considered effective intelligence as
resource
and
a
key corporate
have built up extensive organizational systems for
- page 25 -
monitoring
actions
Today,
competitors,
customers,
as
long-term
other
and
governmental
technologies,
socio-political
developments.
intelligence have become increasingly important, these
investments
are
paying
corporations
have
not
off
for
putting
started
even
American
many
while
them
a
comprehensive
intelligence system in place.
Past
hegemony in most major industries is another
U.S.
for the relative underdevelopment of intelligence systems
reason
Traditionally, U.S. firms had no need
in
American corporations.
to
monitor anything except other U.S. corporations and therefore
had
experience of scanning beyond their home-shores.
no
other
hand,
Japan
but
been normal practice for firms not only in
has
it
On the
in Europe to monitor developments in the United
also
they
learnt
have
the
of
arts
that
process
multinational
scanning
and
emergence
of
global competition, this past history has become
liability
for
States.
In
companies
American
the
With the
analysis.
environmental
a
an asset for their
and
global competitors.
Besides,
fragmented
very
Up
American
to
60's
their
70's,
the
the
and
and
corporations
usually
have
narrow view of environmental intelligence.
reacting to the wave of expropriations in the
oil crisis of ^73, most U.S. corporations focused
environmental
analysis
efforts
only
on
the regulatory
environments,
particularly in developing countries.
inundated
the
by
environmental
and
Japanese
and
more
and
intelligence
firms,
in
comprehensive
Since then,
wave from Japan, they have switched to
tidal
competitors
monitoring
taken a
technologies
gathering
as
activity.
their
sole
Both European
contrast, have usually taken
a
broader
approach, monitoring both the immediate
environment as well as the larger social, political,
competitive
technological and economic environments in which they operate.
I
am
corporations.
not
Some
suggesting
of
that
this
is
true for all U.S.
them such as IBM and GE have developed
- page 26 -
environmental
competitors
environmental
point
strong
now
intelligence
all
over
the
intelligence
systems
are the envy of their
that
But, in general, gathering
world.
quickly
and
of the typical American
accurately
firm.
is
not
Unfortunately, even
the realization of this shortcoming seems to be limited.
develop
an
involves
often
putting
effective
internal
intelligence
processes
For
contradictory.
such
a
that
system
a
takes
time
To
for it
are complex, interactive and
the firms that have not yet started
system in place, it is perhaps not too late yet
but soon it might be.
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