Strategy without intelligence, intelligence without strategy, страница 3

Another competitive force, the effect of substitution, one of five major forces in Michael Porter's industry model, is extremely powerful in explaining multitudes of business failures. Substitutes are not competitors. They are alternative ways to reach and satisfy the needs of customers that are not met by the industry as a whole. Kodak's decline from world dominance was not the result of Fuji (though Fuji did give Kodak a run for its money), but the rise of digital technology and Kodak's slow reaction. Kodak had a large and well funded “competitive intelligence” function which made no difference at all in Kodak's management refusal to accept a new world without film. The unit, though, did provide excellent details on all of Fuji and Agfa and other competitors' new products and pricing schemes as well as market statistics galore. Desktop makers' hard time in the twenty-first century is not the result of direct competition, though no doubt competition between HP, Dell, Acer, Lenovo and whoever else has been left standing reduces margins. The decline of desktop fortunes is the result of iPhone and iPad, and smartphones and netbooks – the technology that allows for the shifting of access to the internet from desktops and laptops to more mobile machines. It is also the result of the power of suppliers – Intel and Microsoft – in grabbing the main share of the profit pool in the PC industry. IBM once excelled with formal CI, but it did not change the fact that PCs never made sense inside IBM.

Then there is the issue of acquisitions, which brings so many companies to the brink. Under the excuse of synergies that fail to materialize, executives convince themselves acquisitions will save the day. Quaker acquired Snapple, only to discover its model of central warehouse distribution had no synergies with Snapple's independent and entrepreneurial distribution network. Would competitor watching have helped? Maybe. Pepsi and Coke and others who looked at Snapple, did not buy. But then, if William Smithburg, Quaker's CEO succeeded with the acquisition in giving Quaker a leg over the competition in sports/health drinks, he would have been hailed as a visionary. Alas, the consumer shifted away from teas as well into water. The strategic change affected all of the big players, not only Quaker. Similarly, Conseco, a life and health insurer, acquired Green Tree Financials, a mortgage lender, and choked on the acquisition. Watching its peers would have made no difference – the competitors' conventional wisdom was very similarly committed to the strategy of creating a broader portfolio of financial services. Just recall Travelers' disastrous acquisition of Citigroup.

Do not misunderstand me: competitors do matter. Dell took away customers from IBM. Pepsi and Coke pressured Quaker's Gatorade, and Arizona Tea contributed to Snapple's decline. Nokia and LG and Samsung and HTC killed Motorola (and Ericsson's) profitability. Competitors shrink margins, and staying ahead or on par with them is critical. But competitors do not fundamentally change industry dynamics, and a daily preoccupation with their every tactical move is not only unnecessary, but dangerous at the top level of a company. The above example of Conseco brings out clearly one of the main weaknesses in corporate practice of interpreting competitive intelligence mainly as closely watching competitors. The vast majority of companies misusing CI this way do it to imitate, benchmark, copy, follow quickly and otherwise do what seems to work for competitors, or what is “in vogue” in a given industry at the time. The irony is that those who do not follow competitors do better. As major lenders in the USA crumbled one by one, local banks such as Hudson City Savings Bank or North Jersey Community Bank in New Jersey and Hingham in Boston who did not join the party thrived (until the Obama's bailout made it clear that big banks were safer since the government will not let them fail). So if one is to monitor competitors, the aim should be the reverse: let's make sure we do not do the same things!