Demystifying Business Intelligence

By Sawka, Kenneth A. | Management Review, October 1996 | Go to article overview
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Demystifying Business Intelligence


Sawka, Kenneth A., Management Review


It's time for American business executives to come out of "intelligence denial" and embrace business intelligence as a corporate necessity.

It's hard to pick up a corporate annual report that doesn't cite "intense competition" as a critical business challenge. Yet most American managers tend to cringe at the very mention of gathering intelligence. A grossly inaccurate image of intelligence lingers on in the minds of many U.S. executives despite endless accounts of European and Japanese corporations employing their well-developed intelligence skills to beat their American counterparts in a variety of countries and markets.

Corporations need an intelligence capability today more than ever. The hypercompetitive nature of most industries, combined with the radical changes taking place in business has created an urgent need for businesses to keep several steps ahead of the competition. American industry has moved past the point where planning can occur within the safe confines of corporate headquarters. It's the external influences on an industry, not the internal company capabilities and measurements, that are the determinants of success-- today and tomorrow. Only through good intelligence can these external influences be digested and understood. Yet most companies fail to adequately understand these external factors, opting in- stead to stick their heads in the sand.

A recent survey by The Futures Group bears this out. Although more than two-thirds of the companies surveyed have an organized approach for feeding information to decision makers, 42 percent of the respondents still do not have a business intelligence system. Even worse, those who have implemented such systems give them only "so-so" marks for effectiveness, which begs the question of just how "systematic" these systems actually are. Respondents also said that they value certain kinds of information, most notably information about competitor activities and changing market structures, the same areas for which respondents said they would like better information.

Our European and Asian competitors got the message long ago. Not only do they not fear intelligence, they warmly embrace it as a business necessity. For them, intelligence is a natural part of doing business, just like marketing or research and development. According to several reports, one Japanese electronics company provides headquarters, on a daily basis, a quantity of intelligence on its U.S. competitors equal in depth to the content of the New York Times.

It is difficult for most American CEOs to really appreciate the significance of this aspect of their foreign competitors. According to the White House Office of Science and Technology, intelligence collection by foreign companies and governments is costing U.S. businesses an estimated $100 billion a year in lost sales. What's more, 74 U.S. corporations reported more than 400 incidents of suspected foreign targeting against them last year, according to a recent survey of U.S. businesses conducted by the National Counterintelligence Center and the U.S. Department of State. Upon introducing a bill in the Senate last year designed to protect U.S. companies against foreign economic espionage, Senator William Cohen (R-Maine) said, "When France, Germany, Japan and South Korea are included in a list of nations, we automatically assume that this must be a list of America's allies-- our military and political partners since the end of the Second World War. Unfortunately, this is not only a list of America's trustworthy friends, it is a list of governments that have systematically practiced economic espionage against American companies in the past--and continue to do so to this day" Indeed, the French intelligence service recently admitted that it operates a special unit devoted to obtaining confidential information about U.S. companies.

Truth or Consequences

Despite the overwhelming and unanswerable evidence to the contrary, the majority of U.

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