Even in the car industry, where conventional wisdom is strong, Hyundai's success with the Genesis suggests sharpening differences from competitors pays off. Genesis is Hyundai's entry into the luxury cars market. Unlike its competitors, though, Genesis costs around $13,000 less. It is marketed differently (only in a few markets), offering “trade down” opportunity in an industry where all marketing aims at persuading people to trade up. The car hides the Hyundai identity (only its name appears clearly). Combined with an offer to buy back from customers losing their jobs within a year, Genesis contributed to Hyundai's increased market share in the USA in 2009 as others' sales declined precipitously.
It is very hard to do things differently in the pharma industry. Choked by government regulations in each and every one of its areas, from product development to marketing to sales, pharma companies mostly imitate each other. However, one company, GlaxoSmithKline (GSK) has been bucking this trend. Since time began, the pharma model was based on a risky model, which according to risk-return economics, pays highly when successful drugs are discovered, and dearly when pipelines grow dry. The industry has always been obsessed with breakthrough drugs, those that force payers to fork large sums for lack of alternatives, and garner large fortunes (blockbuster drugs). But since 2008, GSK's new CEO, Andrew Witty started charting a new strategy aimed at de-risking his company, replacing large profits with more stable earnings. First went the obsession with blockbuster drugs (those selling a billion or more). Instead, he directed researchers to look for many more drugs, with small or large potential markets. Second went the reliance on rich payers. Witty began pushing big way into emerging markets, where most large pharma tend to play only in small (the wealthy) segments. Finally went the gamble with insurers and government. Witty began a practice of consulting with them on what they are willing to pay for, an unheard of practice in pharma. Witty is an economist in an industry dominated by scientists. His strategy demonstrates what type of intelligence can help executives.
Strategy based on creating and sustaining differences is subject to constant attack by imitators and subject to erosion as customers' preferences, technology, regulations and substitutes shift. It has been in vogue in the USA under the Democratic administration to vilify executives of large companies for being greedy yet strategically myopic. Few people have sympathy for highly paid CEOs such as Richard Fuld of Lehman Brothers, who bankrupt their shareholders. The truth, however, is that reading the tea leaves in an uncertain environment can be a much easier task from the sideline and in hindsight than in real time from the executive suite. Executives need all the help they can get, but it has to be clearly and forcefully related to the above concept of activity differences. Therefore, as long as CI focuses on competitors' minutia, it has no value for executives. If anything, being involved and informed in the fine points of competitors' every move is a distraction that will add nothing to their effectiveness. So, if you are a top executive, and you are told competitive intelligence is basically a close and detailed monitoring of your competitors, you would be completely justified in pushing it down in the organization.
The result of this simple dynamic has been to push CI down to the product-market level. Commensurate with this focus, many CI managers in corporate USA and Europe are relatively young and inexperienced. They are better suited for mundane information tasks such as collecting and disseminating raw competitor data than they are to sophisticated strategic intelligence analysis relevant to their leadership; hence the lack of familiarity of senior execs with their CI analysts alluded to at the beginning of this article.
One may argue that even at lower levels, collecting tactical competitor information is misguided. Even young and inexperienced CI managers can be trained to understand competitors well enough to make exceedingly accurate predictions of their next moves and countermoves, facilitate war games and in general provide much higher value added than disseminating hoard of useless market statistics. Companies spend a relative fortune buying reams of data from syndicated services (this is especially prevalent in pharma) that drill down to second decimal point on market share in Broward County in Southern Florida but yield no meaningful value to decisions makers. The real problem, though, is that this situation leaves executives deprived of the critical support of strategic intelligence, which they desperately need for their job. This is quite a travesty, since strategic intelligence has been the original intent of the creators of competitive intelligence processes. Strategic (i.e. competitive, not competitor) intelligence can have an impact magnitude larger than tactical competitor information, and its absence leaves executives vulnerable to strategic surprises and severe blind spots. The result of having no serious strategic intelligence capability for most of the Fortune 500s is that strategic decisions are made at the top with less reality check than one would expect from decisions that cost millions, make or break careers, and sometimes, can bring down the whole enterprise.
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