inteligência competitiva

Delivering Intelligence Through the Management of Weak Signals

IQPC ConferenceApril 1st, 2008, Sao PauloRainer Michaeli

Board Member dcif (Deutsches Competitive Intelligence Forum)Board Member SCIP (Society of Competitive Intelligence Professionals; 2003-2005)Director Institute for Competitive Intelligence (ICI)

IQPC_Weak_Signals.PPT - © Institute for Competitive Intelligence, Korngasse 9, DE-35510 Butzbach

Speaker Profile Rainer MichaeliEducation

Dipl.-Ing. Aeronautical Engineering TU Braunschweig/Universityof York, GBMBA (INSEAD) France

Professional ExperienceProject- and Product Management DIEHL GmbH & Co KGKey Account ManagerCOMPUNET AG

Founder and owner of DIE DENKFABRIK, Advisory Services in Business and Technology, since 1993Board Member SCIP (Society of Competitive Intelligence Professionals) 2003-2005Board Member dcif (DeutschesCompetitive Intelligence Forum) Director Institute for Competitive Intelligence (ICI) since 2004

Intelligence ExperienceMilitary OR studies500+ „Competitive Intelligence“projects for leading German and international companiesCI-Trainer for IIR, Euroforum, Management Circle, DGI, EAP (Ecole Européenne des Affaires, Paris), SCIPAssociate professor at the University of Applied Sciences Darmstadt on „Competitive Intelligence“ and „Dynamic Business Strategies“Various publications (including a 630 page textbook; Top 3 Financial Times Germany bestseller)

[email protected]


Remember?Competitive situations do not have to be like this …

… and do not have to end like this!

Bill‘s


AgendaWhat are “Weak Signals”?The Weak Signal Process

Information GatheringSources

DiagnosisBayes TheoremPittfallsEarly Warning Case Study

Strategy FormulationAwareness-Motivation-Capability Analysis

SummaryQuestions & Answers


What is Competitive Intelligence?The Academic Answer

” ... an analytical process which transforms disaggregated company, industry and market data into actionable strategic knowledge about the position, performance, capabilities and intentions of target companies”.

FilterScan

IntegrateClarify

CondenseEscalate

AnalyzeAssess

PrioritizeEscalate

Dis-seminate

Exchange of commentsDecision-making

DATA

new CI cycle toanswer new CINs

feedback; questionsinitiate new CI projects

Interest groupsIntelligenceExpert

"Gate-keeper"

IntelligenceManager

advice

KNOWLEDGE

discusscomment

Field operations &secondary sources


What are Weak Signals?In academic research "weak signals" may be understood as advanced, noisy and socially situated indicators of change in trends and systems that constitute raw informational material for enabling anticipatory action.There is confusion about the definition of weak signal by various researchers and consultants.

Sometimes it is referred as future oriented information, sometimes more like emerging issues. Within Strategic Early Warning the concept of “weak signals” (Ansoff, 1975) aims at early detection of signals which could lead to strategic surprises and to an event which has the potential to jeopardise an organization’s strategy. Detecting “weak signals” is achieved by scanning the organizational environment. The concept of environmental scanning (Aguilar,1967) describes a process whereby the environment in which an organization operates is systematically scanned for relevant information.


Weak Signals and Potential Applications

weak strongSignal Amplitude

Hor

izon

shor

t-ter

m

long

-term Early

Warning

RivalryAnalysis1

IssuesManagement

IndustryStructureAnalysis

Strategic Groupsin Industry

Rivalry between firms

1A-M-C: Awareness – Motivation - Capabilities


From Information to IntelligenceAny signal analysis combines indicators from various sources and aggregates them into meaningful signals. Signals are then analyzed an interpreted for impact on a company

Company

Products

Market

Marketing &Sales

Competition

Production

Suppliers

Finance

Data Input Signals

assessment

Analysis

Signals Event 1

Event 2

Event 3


Missed Strategic Signals …

Corporate Strategy Board; Strategic Intelligence (2000)

Agenda


How Are Weak Signals Managed? (1)The ideal weak signal process has three phases.

Bear in mind that every industry has its specific signal characteristicsSet up your individual set of sources and diagnosis techniques!

Pragmatic approaches should consider cost-benefit ratios per signal processWatch out for cognitive dissonances when processing and assessing signals!

InformationGathering Diagnosis

Formulationof Response

Strategy


How are Weak Signals Managed?Phase 1 is characterised by the information gathering of “weak signals”, or trends and issues. Detecting “weak signals” is achieved by scanning the organizational environment. The concept of environmental scanning (Aguilar,1967) describes a process whereby the environment in which an organization operates is systematically scanned for relevant information. The purpose is to identify early signals of possible environmental change and to detect environmental change already underway.

The scanning itself relies primarily on examining various media sources, the technique of content analysis (Nasbitt, 1982). The scanning activity is complemented by monitoring trends and issues that have already drawn attention.

Retrieved from "http://en.wikipedia.org/wiki/Strategic_early_warning_system"



Strategy


Kit for the CI-AnalystFor meaningful signal analysis, we need to identify signals with powerful characteristics! Ideally they have been tried out alreadyMethodologies to find meaningful signals

Bayes’ Theorem(Structured) BrainstormingSystem Dynamics/AnalysisTimeline Analysis (“Propagation”/Analogy)Scenario Analysis (“signposts”)Environmental Analysis (STEEP, etc)


Propagation of News/Issues in an IndustryThink about the propagation of news/issues in your industry. Information flows from primary sources via media to secondary sources.

Track typical flows in your industry over timeHow many people do know the news/issues at a given moment of time?Try to set up networks at each of the typical propagation points

General Journals, Magazines

Consultants

Expert’s Magazine’s

Expert/Opinion Leader

Researcher forums (conferences, blogs, ..)

No.

of s

ourc

es a

war

e of

th

e ne

ws/

issu

es

Time

Researcher

Expert’s discussion forums (conferences, blogs, ..)

Hindsight Gurus

Politicians


How to Assess Signals?

List per issue potential signal as followsRank signals by sensitivity and specificity

Sensitivity: How good is the signal to indicate an upcoming eventSpecificity: How good is the signal to not raise false alarms?

Any day

18 months

2 months

Lead time (expected)

Dr. Tube/weekly5 Euro10%30%Domain name registered

Ms. Realit/quarterly

200 Euro80%60%Patents filled

Mr. Smith/monthly

100 Euro70%90%Competitor hires new Marketing Agency

Source/Update frequency

Costs to monitor

(per month)

Speci-ficity

Sen-sitivity

Indicator Name


Define Thresholds for SignalsDefine for each indicator threshold interval

Within this interval the signal behaves normalOnce the boundaries are crossed the signal is „active“

Time

Observed values

Tolerance interval (t)

Launch Checkpoints


Develop and MaintainInformation Networks

Sensors

CI Analyst

+ =

Communities of practices are key to retrieving and analyzing signals from multiple sources


Organisation of theSignal Retrival ProcessNetworks are key to success!

Sources

Sources

Sources

Sources

Sources

Sources

Sources

Sources

Region2Region1

Region3 Region4

Sources

Sources

Sources

Sources

External NetworkBrecht

Müller

Sources

Sources

NN

NN

Meyer

Continuous scanning of factorssignals and trends

Focused Projects

Scanning Network

DecisionMaker

International Network

Internal Network

NN Topic mappingTopic analysis

NetworksOperating by issue internal/externalOpportunity / Risk Monitoring

Key Intelligence Questions

Schulz

Kong

Tech 1

Tech 1

Tech 1

Tech 1


How to select „Sensors“ forWeak Signals Community?Internal Experts (technicians, scientists, marketers, sales reps, investor relation, HR, etc) have several years of experience in their given disciplineNominate experts in a formal selection process. Make sure they understand role, assignment and incentives (if any)External Experts (retirees, academics, consultants, representatives of associations) have a standing relationship with the EWS team. Select candidates for their technical expertise, market knowledge, industry experience)

Agenda


Exercise:List Potential Signals in Your Industry

ABCDEFGHIJKLMN

OPQRSTUVWXYZ


How are Weak Signals Managed?Phase 2

1) In-depth analysis of the trend or issue, examining the core and thevarious contexts of this phenomenon. The aim is to gain an impression of the possible potential development of an issue or trend. 2) The second step has several objectives.

The attempt should be made to think creatively about how the particular trend or issue could evolve. The nature of the contexts needs to be examined in order to cluster several trends or issues, thus providing an understanding of the mutual influences on and of trends and issues. It is important, due to the limited resources in any organization, to identify and select those trends and issues that are particularly relevant.




Strategy


The Signal Diagnosis Loop

Primary &SecondaryData from

multiple sources

ImpactReports

Check: Abnormalities?Discontinuities?Irregularities?

Emerging Trends?

DB

Needs of theUsers

Analysis: Escalation?

Threats?Patterns?Clusters?

StandardCI-ReportsDB - data base

Make sure to establish a rigid routine to manage signals!


Signal Analysis Basics:The Bayes‘ Theorem

One way to think about Bayes‘ theorem is that it provides a mechanism to update prior probabilities when new information becomes available –

.... sounds like an blue-print for signal analysis, right?Let‘s work through an example and learn how to apply the Bayes‘ Theorem

Properly understood, Bayes’ theorem is the fundamental law governing the process of logical interference, of deciding what conclusions we can make and the degree of confidence which we can make them, based on the totality of relevant evidence available. The theorem of Bayes is the mathematical equivalent of “logical” and “rational” thinking. It therefore possesses all the power of logic itself.


The ChallengeBoss: „Find out, whether our competitor ALPHA will launch a new product! No

rocket-engineering analysis, no fancy intelligence riddles, no mind games, just your defendable assumption about the likelihood of their product launch. Isn‘t that what I pay you for?”

What should you do?

...guessing?

... ask 5 experts?Might end your CI career earlier than you desire ...

marketentry

yes

no

(A)P

)A(P

?%Luckily enough you remember Rev. Bayes,

some basic stats and .... this workshop

?%


The Approach

marketentry

yes

no

(A)P

)A(P

?%

Rather than trying to guesstimate the absolute probability P(market entry), one can more accurately estimate the conditional probability of a market entry, given that an indicator was observed, denoted as P(A|I)

P(A) is the probability of event A (here: market entry of ALPHA)= P(not A) = 1-P(A), i.e. only two possible outcomes. The sum of all

possible outcomes must add up to 100%

?%

Signal I:ALPHA hires a new marketing agencyOur HUMINT team learned that ALPHA is dissatisfied with their existing agency; ALPHA’s marketing manager indicated in a speech that ALPHA will never use their old agency again for a major product launch; however, they might continue to work through the existing marketing agency under new terms & conditions ...

)A(P


How to determine the Entry Probability?

Hire newagency

marketentry

marketentry

Yes -?

Yes -?

No - ?

No -?

What your boss wants to know

Event “A“

no

yes

Indicator “I“

I)|(AP(I)P

)I|(AP

)I(P

P(A|I) ... probability of A given I (conditional probability)

(A+, I+)true positive“sensitivity“

(A+, I-)false negative

Event yes“A+“

(A-, I+)false positive

(A-, I-)true negative“specificity“

Event no“A-“

Indicatoryes “I+“

Indicatorno “I-“

Decision Tree 2x2 table


The Solution: Bayesian Analysis

Bayes Theorem is used to “flip” the left tree, i.e. to determine the probability P that an event “A” occurs, when indicator “I” was observed:

)AP(I|)AP(P(I|A)P(A)P(I|A)P(A)P(A|I)

⋅+⋅⋅

=

Hire newagency

marketentry

marketentry

Yes -?

Yes -?

No - ?

No -?

marketentry

Hire newagency

Hire newagency

known(CI analyst/expert knowledge)What we need to know

“Event“

yes

nono

yes

“Indicator“

I)|(AP A)|(IP(A)P

)A|(IP

)A(P

(I)P

)I|(AP

)I(P

“Event“ “Indicator“


Note!

What‘s the difference betweenP(A|I) and P(I|A)?

Probability that indicator I (new marketing agency) will occur if event

(market entry) will occur -This should be known by experts!- Indicators will have a lead time,

otherwise they are not useful

Probability that event A (market entry) will occur if indicator I (new marketing agency) was observed

- This is the fundamental question in any signal analysis!


Bayesian Analysis (2) - PrevalenceWhat do we need to know for the Bayesian Formula?1) P(A) = ? Probability that event “ALPHA market entry” will occur based only on the prior

information (i.e. NO ADDITIONAL INFORMATION / OBSERVATION AVAILABLE – a dull world without CI), called the a priori probability

Note:This might very often be a rough estimation or simply a 50/50 assumptionIt could sometimes be based on track records of past behaviour: How many times in the past did “Alpha” enter a new market once the opportunity was given? Say in 3 out of 9 cases, i.e. we associate an empirically derived probability of 33%.Good idea to maintain a fact sheet of past events (time-line analysis) ...P(A) is often called the “prevalence” of the event A

We take P(A) = 33% based on our track record of similar events


Bayesian Analysis (3) - SensitivityP(I|A) = ?

Probability that indicator I “hire a new marketing agency” will occur if event “ALPHA market entry” will occur Often called the “sensitivity” of an indicator (“how good is the indicator to indicate an upcoming event”)

no -?marketentry

Hire newagency

Hire newagency

No- ?

yes

no

yes -

yes -?

?A)|(I =P

A)|(I1)|( PAIP −=

?)A|(I =P

)A|(I1)|( PAIP −=

CI-analyst’s judgement: P(I|A) = 90% (i.e. a strong signal/high sensitivity)How to generate such probabilities?

Human judgement (interview experts revealing relevant data; mind games)Simulations (statistical/dynamic)Experience of the CI Analyst

90%

10%


Bayesian Analysis (4) - Specificity

Probability that indicator “new agency” will NOT be observed if the event “market entry” will not occur

Often called the “specificity” of an indicator (“how good is the indicator to not raise false alarms?”)

(ALPHA might hire a new agency simply for legal reasons or they might have intended to launch the new product, hence hired the new agency, but later had second thoughts about the launch)

Notes: We give credit to the fact that we learned about ALPHA’s general dissatisfaction with their recent agency); i.e = 70%

marketentry

Hire newagency

Hire newagency

No- ?

yes

no

yes -

yes

no -

90%A)|(I =P

10%A)|(I1)|( =−= PAIP

30%)A|(I =P

70%)A|(I1)|( =−= PAIP

)A|(I1)|( −= PAIP

)A|(I1)|( −= PAIP

=?


Bayesian Analysis (5) – So what?P(A|I) = (0,33*0,9) / [(0,33*0,9) + 0,66*0,3)] = 0,6

Rather than having to use the a priori probability of 33% likelihood of market entry the observation of the indicator “new marketing agency” increases the likelihood of occurrence to 60% (a posteriori probability). There’s only a 7% probability that ALPHA will enter the market, despite the fact that the indicator was not observed (makes you sleep well!)

The difference between the a posteriori and the a priori probability is called the “predictive gain”, here 60%-33% = 27% (that’s what you are paid for!!!)

Hire newagency

marketentry

marketentry

Yes: 60%P(AI I)

Yes: 7%

No: 93%

No: 40%marketentry

Hire newagency

Hire newagency

Yes: 90%

Yes: 30%

No: 70%

No: 10%

known(CI analyst/expert knowledge)What we need to know

yes

nono

yes


Bayesian Analysis forSignal Analysis (1)To design early warning systems or secure our findings, we can combine several (conditional independent) indicators.Calculation is usually done with a decision analysis software

20%50%M&A

80%30%Press Release

70%90%New Marketing Agency

SpecificitySensitivityIndicator

Calculation in software with indicator “New Marketing Agency“ only


Bayesian Analysis Tree With Several Indicators

Full tree with 3 indicators

69% (60%) – increase of likelihood, if all three indicators are observed!

6% (7%)

Agenda


How are Weak Signals Managed?Phase 3 describes the formulation of an appropriate strategy to react to the trends and issues which have been identified and labeled as relevant.

Use the Awareness – Motivation – Capabilities Analysis for Formulating Dynamic Responses in direct rivalry situations




Strategy


Competitive DynamicsCompetitive strategies are executed on the interfirm rivalry: Action – Response with direct impact on customersCI-Professionals should be aware and proficient in managing these activitiesKey to understanding competitive dynamics are signal analysisTypical operational competitive activities are

Change in pricesAcquisitionsEntry into new markets (regions or product segments)Launch of new productsInternal organizational restructuringsR&D initiatives Global purchasing measuresetc.


Economic Returnsfrom Competitive ActionsAdvantages based on competitive activities will be negated over time by competitive responsesIf a competitor‘s response follows quickly to an initiative then exploitation phase has a limited duration. An aggressor should strive to optimize the entire trapezoidal area constituted by TS, TN, TA .

CI Professionals should be able to predict types and impacts of actions and responses – Signal analyses is key to achieving this goal

Exploitation Decline

Competitor‘sResponse

Ret

urns

/Adv

anta

ge fr

omC

ompe

titiv

e A

ctio

n

TL

Launch

TE TD

Time


Characteristics of Competitive Actionsand Responses

Use these attributes to describe competitive actions Likelihood

The probability that a firm will initiate an attack or that a defender will retaliateSpeed

The timing of the action or response, in terms of announcement speed and execution speed

TypeStrategic or tactical action or responses a) Pricing b) Marketing c) New product offerings d) Capacity-related and scale-related types of action e) Service and operation change f) Signaling

MagnitudeDesignates for instance, % of price cuts, the increase in advertising expenditures, or the number of products involved in an action or response

ScopeDesignates for instance, the number of product lines or geographical markets involved in an action or response

LocationThe market(s) where the action or response is taken, with special emphasis on whether a response is offered in the same or different market(s) where the action is initiated


Action and Response SpeedCompetitors can be characterized by their action and response execution speedOften competitors use initial announcements to manipulate customers, competitors and industry observers (i.e. Microsoft – 18 months leadtime to announce vaporeware)

A‘sAnnouncement ofIntended Action

B‘sAnnouncement of Intended Response

A‘sAction Execution

B‘sResponse Execution

a1 b1 a2 b2

Action Execution Speed

Response Announcement Speed

Response Execution Speed


Prediction of Competitive ResponsesUltimate goal of the Analysis of Competitive Dynamics is the prediction of the response time b1 and b2 and the actual type of reaction!Essential for this is to understand how a competitive action affects the internal behavior of the defending organization. The A-M-C (Awareness, Motivation, Capability) perspective provides an integrated understanding of the three key components of internal behavior that eventually define a competitor‘s response. For some industries it has been advisable to maintain a log-book where actions and reactions are traced.Especially deviations from typical patterns might signal a change in competitive behavior.


A-M-C Model:Awareness

Knowledge about competitor actions and the relationship to the attackerIf a company simply does not know that it is under attack, than no response can be expectedIf a company is well informed about competitors intentions than a response is likely and fast

Actions that generate high awareness includeWidely advertised price cutsAggressive, name-calling advertising campaignsThe global launch of a new product or service offeringPublicly announced ambitious growth targets and strategiesAcquisitions and mergers with other competitorsAcquisitions of key suppliers or retailers

Actions that result in low awareness includeIncremental improvements in service and product qualityImprovements in operational efficiencyInternal reorganizationsInvestments in primary research projectsAgreements with suppliers or retailers


A-M-C Model:MotivationWhat is the motivation for a defender to react? Usually the motivation for a response is high if the expected financial rewards are high (or losses are significant without a response i.e.

Attack on Cash Cows products triggers responsesAttacks on Dog products are ignored

If a company is highly motivated than a response is likely and potentially fast

Attacks that generate a high motivation to respond Direct attacks on a competitor’s core or central markets (e.g., largest, most profitable, or strategically most important markets)Direct attacks on a market that is noncore, but holds great potential for growth and future expansion

Attacks that generate a low motivation to respond Attacks on noncore marketsAttacks that establish a strong presence that would be difficult to dislodgeSituations in which a response would result in a damaging battle (e.g., price war) that destroys returns for all players


A-M-C Model:Capability„Capability“ refers to the capability of a defender to accumulate resources for a response and the ability to organize a response within the organizationA response can be expected, if it is easy, economical and without any organizational restructuring, i.e.

Price adoptions are easily achievedProduct developments might require complex processes and ties resources

Attacks that are more difficult to respond to includeOnes that leverage proprietary technology, skills, or resources to which competitors may not have accessOnes that involve complex coordination between various functions within a companyOnes that involve alliances with external partners

Attacks that are easier to respond to include:Price-cutsAdvertising campaignsPromotions


Asymmetrical Competitive InformationBear in mind that every competitor might have a different A-M-C perspectives on its environment. Reasons might stem from asymmetrical information or from skewed perceptions of available information

Boeing and Airbus, direct competitors for passenger aircrafts had completely different perceptions for the future of long range, long haul aircrafts. Consequently developments (A-380), announcements and signaling to customers were quite different.

Asked about his key competitors, Scott McNeil CEO and founder of Sun Microsystem answered, “IBM, DEC and HP“

When asked why he didn‘t mentioned NCR, twice the size of Sun and a global top 5 PC manufacturer, McNeil answered:

“We never see them“


Lessons Learned fromAttack and DefenseHow should attacking and defending companies behave?

Empirical studies seem to indicated specific rules per industry when competitive interaction and its outcomes are investigatedFinal results: Profits, Growth, Mkt. Share, stock pricesUse these insights to implement attack/defense patterns in your competitive arena – based on the signals you analyze

Defender

Attacker

Time

Action Repertoire


Impact of Action-Response (1)Higher profitability for attacker expected, if defender‘s response is slow and unlikely

Action Characteristics

Implementation Req.Irreversibility

Radicality

Bet

ter P

rofit

abili

tyfo

r Atta

cker


Impact of Action-Response (2)The potential market share gain increases, if complexity of measures increases and if several responsive activities are required. If the response speed is slow, market share gains increases

Mar

ket S

hare

Gai

n

Action Repertoire Characteristics

More Actions

Complexity

Faster Avg.Response Speed


Impact of Action-Response (3)Potential market share gain increases with attack volume and attack duration

Attack VolumeAttack Duration

Mar

ket S

hare

Gai

n

Action Repertoire Characteristics


Impact of Action-Response (4)Potentially market share gains increases if attacks are simple or complex and if …… attacks are easily predictable or unpredictable

simple complexExtent of Attack Complexity

Mar

ket S

hare

Gai

n

predictable unpredictableExtent of Attack Unpredictability

Mar

ket S

hare

Gai

n


Impact of Action-Response (5)If attacks are intense and continuously exercised than stock price development are positively influenced i.e. number and density of TV spotsIf attacks bear an element of surprise, then stock prices of rivals tend to decline

Stoc

kPr

ice

Sporadic,Infrequent

Intense,Sustained

Number of Actions within SustainedAttack per Unit Time

Predicable,Inertia

Extent of Change in Focal Firm’s Sequence of Actions

Unpredictable,Change

Riv

al’s

Stoc

k P

rice


Impact of Action-Response (6)The stock price will be positively impacted if variation of attacks actions are either simple or complex

Simple ComplexExtent to which Focal Firm’s Attacks

Consist of Actions of Many Types

Stoc

k Pr

ice


Impact of Action-Response (7)Overly aggressive competitors might end up with a declining profitability –despite gains in market shares. CI Professionals should be knowledgeable to provide guidance for sustainable profitability! Insight knowledge into Awareness – Motivation – Capabilities of Competitors are key to success

Competitive Aggressiveness

Perfo

rman

ce

Market Share Gains

Profitability


Audit with A-M-C (1)Awareness refers to a defender’s cognizance or knowledge of a specific

competitive action (or attack) and its understanding of the implications of the action for its own company and the industry as a wholeShould the action formally announced? If so, by whom and under what circumstances? How extensive should the industry and press coverage be about the action? How much information about the action should be made available?To what extent should the action he kept secret before being introduced? (Gillette’s Mach3, under development for eight years, was not even known to Gillette largest shareholder, Warren Buffet, until nine months before its release.)Is the defender taking any major strategic or organizational initiative that might distract it from paying due attention to the action?Does the defender share similar assumptions about the industry outlook and competitive situation?To what extent is the defender cognizant of the short- or long-term implications of the action for itself and other competitors?


Audit with A-M-C (2)Motivation refers to the incentives that drive a firm’s decision to respond to a

competitive action. It centres primarily on gains and losses.1. How specific is the attack? Does the action target a specific competitor, or is it a

general move without any target?2. From a financial and investment perspective, how important is the market(s) or

business(es) under attack? How dependent is the defender on the market(s) und attack? A defender may consider a market (or business) critical for a variety of reasons: e.g., revenue or profit streams, market share, growth potential.

3. From a strategic and organizational point of view, how critical is the market(s) or business(es) being attacked? How vital is the market(s) given the defender’s current strategy?

4. Symbolically, how vital is the market(s) or business(es)? (e.g., a company’s original business may be deemed vital.) Have any of the firm’s senior executive ever been in charge of (or made his/her career in) this market or business?

5. Is success (or failure) in the market central to the defender’s reputation?


Audit with A-M-C (3)Capability refers to a defender’s organizational or financial readiness to mount a

response1. Does the defender’s organizational structure permit an effective response, if it

decides to react?2. Does the firm have the required war chest to retaliate? Would it be able to

continue the war of attrition should its self-defense generate a counter response?

3. Does the firm have access to the resources and skills necessary to respond?4. Are the opportunity costs of responding so high that the defender will forfeit-i.e.,

not undertake a response?5. Does the defender have the drive to fight back? Does it have the management

talent for an effective response?


Example for Competitive DynamicsGilettes product launch of the new „Sensor“ raisors January, 28th, 1990 (Super Bowl Sunday)

ProbabilityExtremely high probability that the main competitors Schick and BIC will react

SpeedSimultaneous launch in 17 countries

TypeStrategic – Introduction of a new product linePricing – 25% premium price compared to conventional blades

Magnitude175 M$ Marketing spendings

Scope17 countries

Location„High-tech“ Segment


… and ReactionBIC does not react at all – Sensor blades are not perceived as a threat to the disposable BIC productsSchick launched a new razor product „Trazor“

SpeedOnly 8 months after the Sensor - launch

TypeIndirect, operational reaction – targeted towards the conventional low-end Segment. One might conclude insufficient resources prevented a direct response to the high-tech blade segment

MagnitudeOnly fractions of the Sensor launch budget

ScopeUSA, then other countries – Looks like damage control, defensive operation

Venue„Low-tech“ Segment

By analyzing reactions one can assesscompetitive positions and guesstimate about resources


… and ConsequensesLaunch of Sensor blades were a huge success for Gilette, obviously competitors were taken by surpriseWhen the Mach3 blades were introduced in 1998 Gilette followed the Sensor launch patternRivalry was extremely high …

[…] in 1997, the FBI arrested Steven L. Davis on five counts of wire fraud and theft of trade secrets. Davis had been working for Wright Industries, a principal subcontractor for Gillette. Despite having signed a confidentiality/nondisclosure agreement, Davis attempted to sell trade secrets behind the Gillette MACH 3 razor design to BIC Corporation (Gallagher, 1998)

Agenda


Thank you forattending!

Any questions?


Case Study„Early Warning Systems“


Weak Signals and Early WarningThe aim of an Strategic Early Warning System (SEWS) is to assist organizations in dealing with discontinuities or strategic “surprises”. By detecting “weak signals” (Igor Ansoff, 1975), which can be perceived as important discontinuities in an organizational environment, SEWS allows organizations to react strategically ahead of time.The underlying assumption of SEWS is that discontinuities do not emerge without warning. These warning signs can be described as “weak signals”. The concept of “weak signals” (Ansoff, 1975) aims at early detection of those signals which could lead to strategic surprises and to an event which has the potential to jeopardise an organization’s strategy. Furthermore, the concept of a SEWS is intended to constitute an important part of a strategic management system, operating real-time in an organization, and assisting in identifying the new, which emerges as “weak signals”.



Benefits of an EarlyWarning System (EWS)More lead time allows better reaction!

time

Even

ts/a

ctiv

ities

in th

e m

arke

t

Spread of IssueOpportunity to react

Decision without EWS

Identification

without EWS

Decision

Decisionwith EWS

Impr

oved

re

actio

nop

tions

Signal launch

Identification

with EWS

Improved reactiontime


Case Study:DaimlerChrysler Aerospace AG (DASA)DASA (Munich, Germany-based aerospace company with $10 billion in 1999 revenues), a division of DaimlerChrysler AG, recognizes the need to anticipate and rapidly respond to competitive events in the marketplace.DASA integrates future-focused scenario planning activities with continuous, strategically focused monitoring activities that rigorously track environmental and market events and report critical shifts to senior decision makersDASA‘s strategic early warning system succeeds in forecasting the 1997 merger of two significant U.S.-based competitors (Boeing/McDonnell Douglas) by continually gauging the event‘s probability, allowing senior executives time to proactively formulate an effective strategic response.


DASA‘s Early Warning System ProcessThe Strategic EWS integrates monitoring activity with scenario development exercises to create specific „signposts“ that enable early identification of events with strategic implications.

Designated expert scanners report „trigger“events to a cross-functional group of VPs who, in turn regularly present distilled strategic intelligence reports to top executives.


DASA: Identification of Emerging Industry Consolidation

Agenda


Group DiscussionWhy does your company need an Early Warning System?Do you operate an Early Warning System already?

If yes:Which indicators do you use? Who has selected them? Based on which rational?How do you operate this system? Sketch information and reporting flow in your organization.How do you measure the performance of your EWS?

If not: Why not?Are you often surprised by competitors? Can you guesstimate the value of earlier insight?

Agenda

inteligência competitiva

Business

meaningful signals

concept of weak signals

academic research weak

competitive situations

definition of weak signal

agenda institute

director institute

ideal weak signal process