Blast from the Past: Market Intelligence for the Strategy and Planning Process

By Hans Hedin,
Markko Vaarnas,
and Ville Vanhala

Global Intelligence Alliance

Developing a market intelligence (MI) capability that provides valuable input to organizational strategy and planning processes is of major importance in today’s turbulent business environments. The output of that market intelligence process represents a combination of past, present, and future-oriented outlooks of an organization’s business environment. The most advanced companies have institutionalized the market intelligence process. But what many of them lack is a process for continuously tracking strategic issues.

Market intelligence as applied to the strategic planning process can be broken down into three separate but interrelated sub-processes: future watch, strategic planning, and the early warning/opportunity system. These sub-processes differ in their objectives, focus, and analytical approaches. Their output serves as an input to communicate the strategy through the development of dialogue with different stakeholders.

The sub-processes also differ from each other in continuity and timing. The future watch process is normally conducted as a starting step in creating input for the planning process, whereas the strategic planning work takes place throughout the year. The early warning/opportunity system (EWOS) and issue resolution activities build on the output of these first two processes and provide continuous monitoring and feedback regarding changes in the organization’s business environment.

FUTURE WATCH

Since strategy generation calls for an understanding of the future business environment, to some extent it requires visionary skills. Each model has its own specific merits and shortcomings and in some cases they need to be combined to be effective.

Political, economic, social, technological, environmental, and legal (PESTEL) analysis identifies trends and uncertainties for scenario and trend analysis. The certainties in the PESTEL analysis can be an input to trend analysis, and the uncertainties as a contribution to scenario analysis. In this way, these three methods can be triangulated very effectively.

Forecasting identifies causes and effects and uses statistical models to predict the future. It works best in stable industries that operate with a low level of uncertainty. Yet from a historical perspective, relying solely on forecasting, particularly over the long term, is not very successful.

Trend analysis provides a good overview of present and future trends inside and outside an industry. It often provides a good cure for management’s business blind spots. Many companies are now intensifying the analysis of general trends that might affect their industry directly or indirectly.

Scenario analysis provides a broad framework for defining the future business environment. With various scenarios you can “test” existing and potential strategies against different futures. To extend scenario analysis, identify key indicators for each scenario and track them within an early warning system. Scenarios can also provide a basic framework for value chain analysis, war games, and competitor analysis.

An interactive war game helps you understand competition on short- to medium-range future activities.

Competitor profiles, trends, and scenarios serve as an input to this process. War games focusing on competition normally work best on a two- to five-year time horizon. They are a powerful way of creating involvement, insight, and high morale in the organization’s intelligence work. Finally, formal risk analysis helps you draw conclusions across all the different analysis methods and provides a high-level summary of the different future watch methodologies.

STRATEGIC PLANNING

Common market intelligence products are market attractiveness analysis, market size and share analysis, mergers and acquisitions analysis, industry landscape analysis, key player profiles, and strategic themes impact analysis. These methods build on one another. A market attractiveness analysis can include some or many of the other methods, such as market size and share analysis, profiles, and an industry landscape analysis.

Most companies focus heavily on market size and market share analysis, since those factors are included in the organization’s strategic communication to investors and other stakeholders. In addition, salespeople and the executive team are often evaluated by market share and the related sales targets.

An industry landscape review provides a 360-degree analysis of the industry, creating a comprehensive fact pack for input into the strategy process. It can also bring everyone up-to-date regarding the external business situation. Without this overview, executives, managers, and other employees may have a fragmented picture of the external business situation.

Applying these comprehensive analysis methods provides a detailed description and knowledge of important business environment issues. Implementing the full range of analysis methods takes a relatively long time. Normally, you would update the material continuously throughout the year.

Use different analysis methods and a varied selection of market intelligence products to cover the whole range of strategic themes.

EARLY WARNING/OPPORTUNITY SYSTEM

The early warning/opportunity system (EWOS), based on the future-oriented work and the strategic decisions made during the planning process, identifies precisely which scenarios, risks, and forecasts will actually materialize. Without such a comprehensive follow-up system, the strategic analysis conducted remains an intellectual exercise.

Based on scenarios, risks, trends, or forecasts, EWOS indicators alert the organization to how the future is developing and identify critical issues, high-profile risks, and opportunities. These indicators and issues require constant monitoring and information collection to identify changes. The information then informs decision-makers about future directions. Ideally, the analysis facilitates proactive strategic action toward the upcoming event.

The EWOS process is essentially an advanced current awareness tracking in which the analysis levels can differ enormously. Some organizations have a very thorough indicator analysis with thresholds. When an indicator deviates from this threshold, the analysts alert the organization. They then follow up with an analysis showing the reasons for the indicator deviation and the expected implications for the industry in general and for their own organization.

ISSUE RESOLUTION

The issue resolution process is an ad hoc approach to handling unforeseen issues. The process can also be initiated by a need to do in-depth analysis of a strategic theme that has not been thoroughly analyzed before.

Some organizations view an issue resolution ability as equivalent to an intelligence capability, but it is only one of the capabilities needed for a comprehensive strategic intelligence process. Companies relying only on issue resolution fall into an “ad hoc” trap that produces a totally reactive intelligence capability. Reactive problem solvers are the corporate SWAT team, instead of the intelligence

team that picks up the signals and prevents the issue from becoming a major problem.

The early warning/opportunity system approach provides systematic tracking of all vitally important strategic issues. Without this, the scenario analysis output sits on the shelf or becomes buried in databases. Without EWOS, something bad must happen before issues are looked at further. Organizations lose time and the possibility of acting proactively. The issue resolution component, an important addition to the EWOS, covers emerging issues that perhaps no one has thought of before.

Organizations need a comprehensive set of methodologies, analysis models, and systematic information management to provide meaningful input to the strategy and planning process. Make a balance between models that are focused on past and present time horizons and those that are more future-oriented.

The market intelligence function helps management create robust strategies, and challenges these strategies by providing evidence of the old strategies’ inability to be successful in the future business environment. This is often a politically challenging task. An institutionalized process can raise awareness of any market evidence of threats or opportunities upon which the company management should act.

This article originally appeared in Competitive Intelligence Magazine, Vol. 10, No.6, November-December 2007.