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84 © 2001, Elsevier Science Inc., 1040-6190/01/$ – see front matter PII S1040-6190(01)00171-3 The Electricity Journal Competitive Intelligence: Spending Is Increasing, but Benefits Can Be Elusive Rigid organizational silos, an inward-looking decision- making process and the “kill the messenger” syndrome can prove inimical to efforts to develop a meaningful competitive intelligence capability. John Egan ompetitive intelligence (CI) has been “discovered” by the electric utility industry. The manifestations are numerous. Staff is being hired. Conferences are being held. Consultants are being retained. Databases are being purchased and populated. Scenarios are being analyzed. Reports are being generated. Warnings are being issued. Cross- functional working groups are being formed. Internal battles for legitimacy are being waged. CI briefings are a regular feature at some utility Board meetings. While electric utilities are spend- ing more to collect and analyze information on their changing external business environment, it is also clear that many companies are not realizing significant value from their investments. 1 What lies behind this anomaly? Longstand- ing issues of corporate structure and culture are a significant part of the answer. The highly dynamic state of restructuring also injects uncertainty into CI investment plans. The absence of visible com- petitors, or their departure from a particular market, provides many executives with a false sense of security. There is also a time-lag factor, as many companies only started funding CI initiatives in the late 1990s. Lastly, CI professionals themselves may bear some blame, particularly if they are reluctant to ask questions that cause discom- John Egan directs research into strategic and marketing issues at E Source, a Boulder, CO-based energy research and analysis firm. Prior to joining E Source, he spent four years as a senior competitive intelligence analyst at Salt River Project (SRP), a Phoenix-based water and power organization. In that role, he created intelligence to inform SRP’s leaders about competitors, support SRP product launches, and assist in development of its customer segment plans. Prior to that, he directed SRP’s media relations activities for four years. Before joining SRP, he was a reporter and editor at The Energy Daily, based in Washington, DC. He holds an M.B.A. from Arizona State University and a B.A. in political science from the University of Chicago. C

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Page 1: Competitive Intelligence: Spending Is Increasing, but Benefits Can Be Elusive

84

© 2001, Elsevier Science Inc., 1040-6190/01/$–see front matter PII S1040-6190(01)00171-3

The Electricity Journal

Competitive Intelligence: Spending Is Increasing, but Benefits Can Be Elusive

Rigid organizational silos, an inward-looking decision-making process and the “kill the messenger” syndrome can prove inimical to efforts to develop a meaningful competitive intelligence capability.

John Egan

ompetitive intelligence (CI) has been “discovered” by

the electric utility industry. The manifestations are numerous. Staff is being hired. Conferences are being held. Consultants are being retained. Databases are being purchased and populated. Scenarios are being analyzed. Reports are being generated. Warnings are being issued. Cross-functional working groups are being formed. Internal battles for legitimacy are being waged. CI briefings are a regular feature at some utility Board meetings.

While electric utilities are spend-ing more to collect and analyze information on their changing external business environment, it

is also clear that many companies are not realizing significant value from their investments.

1

What lies behind this anomaly? Longstand-ing issues of corporate structure and culture are a significant part of the answer. The highly dynamic state of restructuring also injects uncertainty into CI investment plans. The absence of visible com-petitors, or their departure from a particular market, provides many executives with a false sense of security. There is also a time-lag factor, as many companies only started funding CI initiatives in the late 1990s. Lastly, CI professionals themselves may bear some blame, particularly if they are reluctant to ask questions that cause discom-

John Egan

directs research intostrategic and marketing issues at

E Source, a Boulder, CO-based energyresearch and analysis firm. Prior to

joining E Source, he spent four years asa senior competitive intelligence

analyst at Salt River Project (SRP), aPhoenix-based water and power

organization. In that role, he createdintelligence to inform SRP’s leaders

about competitors, support SRPproduct launches, and assist in

development of its customer segmentplans. Prior to that, he directed SRP’s

media relations activities for four years.Before joining SRP, he was a reporter

and editor at

The Energy Daily

, basedin Washington, DC. He holds an

M.B.A. from Arizona State Universityand a B.A. in political science from the

University of Chicago.

C

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March 2001

© 2001, Elsevier Science Inc., 1040-6190/01/$–see front matter PII S1040-6190(01)00171-3

85

fort to their managers, directors, and vice presidents.

CI is an ongoing and disciplined business process used by thou-sands of companies in competitive industries. CI analysts create intel-ligence about their company’s external business environment from disparate bits and pieces of information on competitors, tech-nology developments, customer attitudes, supplier actions, com-modity prices, and political, regu-latory, economic, and demo-graphic trends that affect—or may affect—a company’s operating environment.

ut information and intelli-gence are not the same

things. In fact, there are important differences. Information is one-dimensional data, a bland set of facts. Intelligence interprets facts, integrates information, and asks (and answers) this question: “How could this affect my company, and what can we do about it?”

Intelligence differs from infor-mation in the same way that a novel differs from a dictionary. Information and the dictionary are both flat, static, and fact-based, with a high level of cer-tainty. Each serves a useful (if lim-ited) purpose, but each also serves as a necessary ingredient in the creation of something larger, more sweeping, something with greater impact. Without a dictionary, it would be impossible to write a novel. The novel and the dictio-nary are both composed of words, but a novel is the more enjoyable read because it tells a better story with its words.

It is the same with intelligence.

Utilities are information-intensive. They are voracious consumers of data, whether contained in news stories, government reports, eco-nomic analyses, laboratory tests, technology assessments, legal and regulatory decisions, consultants’ studies, industry conferences, or customer information systems. Numerous types of data are tracked over long periods of time. Relationships are quantified when-ever possible. But by relying so

from the quantitative world of data analysis.

s a utility CI practitioner, and during the course of

researching CI in the utility indus-try, I have explored the state of utility CI with numerous in-house practitioners as well as external consultants. There was substantial overlap in many of their stories, and more than a little frustration, anger, and sadness. Cultural or organizational forces have under-mined many well-intentioned utility CI investment decisions, in some cases unconsciously. Some of the clashes between CI and cul-tural or organizational forces are summarized below. I believe that these brief snippets go a long way toward explaining why utility CI spending is rising, but CI’s impact in the utility industry has been modest, to date.

“Get me everything you have on Competitor X.”

Many managers, conflating information and intel-ligence, routinely ask CI practi-tioners to “get me everything you have on Competitor X.” But they are often unwilling or unable to say why they want this informa-tion. Is there a vital strategic decision that must be made, or is the manager going to play golf with his counterpart from Com-petitor X next week? The need determines the content of the intelligence.

“Can’t you find it on the Inter-net?”

If someone doesn’t know the difference between information and intelligence, they are more likely to believe that answers to critical questions are contained in a database somewhere, or on the

Relying heavily on fact-based data, utility veterans can be uncomfortable with competitive

intelligence.

heavily on fact-based data, utility veterans can be uncomfortable with competitive intelligence, pre-cisely because creating intelligence requires making qualitative judg-ments, and that carries inherent uncertainties.

Information answers the ques-tion of what happened yesterday. Competitive intelligence is con-cerned with what might happen tomorrow, and how a company could position itself positively vis-à-vis those potential outcomes. To answer the question, “What might tomorrow bring?” requires a will-ingness to ponder “what if” sce-narios that may be far removed

B

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The Electricity Journal

Internet. The Web is good for find-ing discount airline tickets, not meaningful insights into your competitor’s strategy.

“We have no competitors, so why do we need CI?”

CI initiatives have been delayed or abandoned when state regulatory panels delay or abandon restructuring efforts. But quality CI is a long-term effort, and it can’t begin the day markets open. Utility manag-ers may be forgetting that mean-ingful processes take time to set up and fine tune.

“We know who our competitors are, so why do we need CI?”

For the last century, this has been true—the “competitor,” as such, was an adjacent utility. The next-door utility is only one type of competitor—the direct competi-tor. But utilities are facing numer-ous other types of competitive pressures—from suppliers and customers, new entrants, and sub-stitute providers.

2

The business landscape is littered with the decaying shells of dead or dying companies whose fatal mistake was to define their businesses—and their competitors—too nar-rowly. Utilities risk repeating the costly mistakes made in prior decades by airlines, financial ser-vices firms, computer companies, and consumer product firms, all of whom relinquished market share to upstarts that had been undetected or underestimated.

“I agree that the world is chang-ing—but why do I have to change

?” Few utility employees would dis-agree that their world is under-going fundamental change. Utility leaders generally talk a good game

about change, and how things will be different in a restructured busi-ness environment. But even as they acknowledge change, many are unwilling to discard their tra-ditional ways of doing things. For example, most utility leaders have pledged that the customer will be the driver of their business in a restructured environment. But rather than investing in marketing and customer service initiatives, including CI, many utilities have instead chosen to bulk up their regulatory, legal, and lobbying efforts, which suggests that their efforts to “manage” the transition to competition is in reality a multi-pronged effort geared to resist it, delay it, or kill it.

“Can’t you do it from your desk?”

To do CI well, the practi-tioner must build and sustain an active network of contacts within his or her company as well as industry. A high level of ongoing interaction with members of this network is necessary in order to obtain hard-to-get information. When a utility key account man-ager participates in a request for proposal or visits a large commer-cial customer, he or she has access to an enormous amount of com-petitive information. But the man-ager may need help recognizing the importance of the information or the range of people within the organization who could be inter-ested in that information. To help make that happen, the CI practi-tioner needs to mingle with his or her sources.

Many aspects of a utility’s decision-making process are inim-ical to CI. Rigid organizational

silos beget knowledge hoarding. An inward-looking decision-making process means that infor-mation from outside the corpora-tion is viewed with suspicion. The “kill the messenger” syndrome remains alive and well in all too many companies. A manager’s determination to have the “right” answer blinds him to the range of possible interpretations of a par-ticular event.

roperly created and used, CI can enhance profitability and

develop or extend a competitive advantage over rivals. CI can shape decisions about market entry, product development, pricing, customer relations, mergers and acquisitions, and other vital areas that contribute to an organization’s overall prof-itability and competitive profile. Utilities do not need to spend lavishly on CI in order for it to have a meaningful impact on cor-porate performance. But before making a CI investment, utility leaders must think carefully about what they want from their investment, and how the impact of that investment could be reduced by internal cultural or organizational factors.

j

Endnotes:

1.

See John Egan,

Driving Decisions and Shaping Strategy with Competitive Intelli-gence

, E Source Report ER-00-17, Nov. 2000.

2.

The “Five Forces” model, developed by Harvard Business School’s Michael Porter, is an elegant and powerful ana-lytic tool that summarizes the types of actors that exert competitive pressures on an industry. See his

How Competitive Forces Shape Strategy

,

Harvard Bus. Rev.,

Mar.–April 1979, at 137–45.

P