Using CI to avoid costly mistakes

Food giant Nestle made a $500-million-dollar mistake in 2015 after failing to monitor and respond adequately to a safety recall in India. A batch of its popular product, Maggi noodles, was tested for high levels of lead and caused the company to lose $277 million in sales. They also paid $70 million in fines and suffered brand damage that some experts estimate could reach as high as half a billion dollars. Plus, it opened the door for competitors to swoop in and launch their own alternative products.

This was a preventable mistake, and competitive intelligence (CI) could have been a key tool in providing early warning and mitigating the subsequent fallout. Instead, Nestle’s competitors took over a market where Nestle once dominated. Many companies tend to take a narrow view of CI as a way to get a leg up on the competition, but the information and data gained though CI research and analysis can also help companies assess their value chains, plan for future scenarios and guard against potential pitfalls. While CI cannot catch all potential problems, it can and should play a strong role in planning and risk mitigation.

CI is more than the competition

Your intelligence function is a powerful and cost-effective tool to use to benchmark your own operations, build your organizational culture or scope out potential business partners. For example, the data gathered can help determine the true value of a company before undertaking a more costly due-diligence process to determine if a merger or acquisition is worth the time and effort. It can help you measure if a process or product should be altered or scrapped to gain more customers and market share. CI can also help a company manage cultural change, which can give it a competitive edge.

Benjamin Gilad wrote in the Harvard Business Review that, “CI is a perspective on changing market conditions.” In other words, instead of taking the information presented in the research at face value, the analysis should give the company a view of market conditions now and in the future, and how the company can best adapt to meet those potential changes. If the company has offices worldwide, an intelligence analyst should combine input from global markets into a market intelligence report to give executives a feel of risks or opportunities around the world, not just now, but in the future.

It is important to focus on competitors, but it is equally important to focus on your complete competitive environment, which encompasses a larger set of forces and players. By looking at just the companies that share or lead your market, you are narrowing the potential to grow or take over those spaces. It also keeps companies from moving blindly into problems that could cost money, jobs, reputation and public trust.

Bridging the gap between intelligence analysts and decision makers

Decision makers within a company use CI to help determine what next steps to take – so that CI needs to speak to leadership priorities and answer their questions in a way that is accessible and relevant to them. Intelligence that is not in line with the company’s culture or fails to answer those key questions fully and completely could spell trouble for a business.

Benjamin Gilad and Magnus Hope write that one way to ensure management receives CI is to make sure the intelligence team and decision makers work closely together. This may include having analysts involved in executive meetings, locating their offices near management or giving analysts a chance to review a decision before it becomes final. Analysts and executives should be on the same page to benefit the trajectory of the company.

The authors also state that the intelligence team should disseminate information that helps foster a change in management perspective. At the same time, the company should look for ways to use the intelligence within the company to help change the culture and avoid a potentially costly mistake down the road. Making a change from the inside out can help executives see what direction the company is heading and determine if that is the path it wants to continue on.

Staying ahead of the competition

While some of the focus should be on the market and company culture, that is not to say that competitors should be completely ignored. Knowing how the competition may react to certain conditions or what they are planning is also essential to keeping your business running. As in the Nestle case, one slipup could be what other companies need to take over your share of the industry and cost your company millions of dollars. It is important to think like your competitors and plan accordingly, and that is another area where effective CI research can help.

Here again, you can avoid some common pitfalls that can leave you blind and vulnerable. Returning to Gilad’s article in the Harvard Business Review, the following are some planning errors and oversights that could harm your competitive edge.

Focusing only on the big names in the industry. You can name all the major players in a certain industry, but that doesn’t mean they are the only threats to your business. In focusing on them, you may miss other suppliers, such as the small, local company in India that pounced on the noodle business when Nestle had to recall the Maggi noodles. It’s proof that your next threat could be a start-up or small business that was not on your radar.

Keeping an eye on federal regulations while ignoring local laws. Federal regulations are more widely reported, but don’t forget to look out for state and local laws, not just where you live but around the world. What may start out as a seemingly small new rule could catch on and spread throughout the particular area or nationwide. Also, regulations in other countries can affect the ability to import and export products, buy property, or break ground on new facilities.

CI research can give so much insight into your company as well as the competition, but only if you use it correctly. Be better prepared to handle challenges with help from a research and intelligence team.