Targeting intelligence gathering in a dynamic competitive

environment
J. H. PO\\1lW'·. J. P. Bradford"
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CurTVIl lllanagertll'1I1 llpProllCht$ to T~urcz.bascd ~lralegy and oore o»mpctcnl:e tblnkmg ~Ulte
nlen ,>e I"lclli~ gat~nn& to ensure lhal COrTe<;{ U1umpllOD5 art be;n, mlIdc: about lhe cn'lrOnmml
:lIlll COmllCtil...."'· C8p:a bllillCS. Wilhoul liuch inlelliaeBee any altempts ltJ ok.'elop. mainlain and In many ~
c"en identify lhe key assets Knd compelencn ~rc na ..'ed Oflcn the wty prople ...ho art be1t plallCd to carry
OO( inlelligence appraisal!; an: those contributinll Strongly 10 mllinlinc bU!llncu acli"llta of technology
dt~lopmenl and bU!lRC$$ winning. 8ccItu~ of Ihil potenlillJ oonftict the mtelliacllCe proem mUll be
efflCocntly tarae1ed Exl$lInll m<:ll\od!i of inteUiaenoe C(IOOCnlrate 00 the prOOClll of IDlelllg.e1"lO::e ptber·
ina. frequently 113m. mihtaty analopel- To lbc C),tenl thaI a eomptti!i'e 'l.tem model ca.n be tlUtod
tIleR e:xt>.tlill apfll\>al:hel Olll be made more dirt:Ctcd In Ibcir ~pplic:al>on and lhemoxe ITIOIl: c:fficieDt m
tb:lr U!iC of >~l""blc m«:>mpany fCSO\Il"(le$ Morw":r. tbt: "\'I)' u ~ of a eompetj(I\"c i) tcm mo4o:I
can Impro,e tilt appr.lIW pr~ luelf. 1lw: applicabililY ~ a Jrneral 1)~em mudelhlll tedullque..
IIlIed utemi.dy III blml'lCSl poOLCU modelling and klX'l'll'n I.J quabtat~ S)stCllU 4}1Wl\1C$ IQSDI IS
~ aDd ,,* appIK:aboluy to lhe tnlelli....,.., tl.l'Jdlftl pl"oblo:... is Clammed Ihroup lhe IIX of" case
~tud} II IS ~. !hit tile n'll:lhod iI ~bk and ~nt 10 WD:IpctitI~e IDltI"gt:nC1C pl"obbM. An
e...mrk from ~ tbt: compct>lfW arsalywa;of a ~ 'DttrnlIUODaJ dcfeooe compall'. IS silo'" Lit IlIIC1:n
Lbal the le>"d ol.oaI}"5U (da,a poi:rrb. procea undC'fSlandlft!. ')"SItTlDC tnowkdFI rdala ctoedy to lbe
elt:altDlJ oIlbe ~rsttm IDCdd and this OODOOrdaJlce "il;b tal'JdlftJ. ~ :!ODD ~oer $c:iealz LId AD riP15
reser-led.

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I. Till" eonl~xt and importance of e()lllpttitivt illtcllig~nce to the firm

One of ttl<: most integrating and almost ubiquitous threads of current managcmellt thillking
emphasises the lmpl'mance of a resource-based view of the compa"y (BJrnc)'. 1997; GranL 1991:l;
Markides & Williamson. 1994~ In th~~ approach thc dcvelopment of the firm isexpocted to be buill
lirmly upon its cxistin~ key assets and distinctlvc competellCl:S. These assets and compctences arc
characterised and Indeed idellliflCd by comparison wilh the assets and oompetcu~ ofcompetitors,
and conventionally are required to possess three allribut~ (Prahalad & Hamel 199Qi:
• access to II wide variety of markets,.
• a significant contribution IQ lhe perl,"eive<J customer bcnc6ts Qf tbe cnd product.
• dlffJ<:ult for competitors 10 imlt..l.lte.
With this perception, then. thc conventional situational appraisals of strengths, weak~,
OPP'OrtllUitics ltnd threat {SWOn analy$C$ :Ire informed by the need 10 m:l'nlain these: corc
competences in tht faoc of the dc\elopment by competitors of tllelr own corc compelcn=;: and key
assets (Hal & MaJluf, (996), Such dc\'clopmentlhen fonlls a centrnl part not only ollhe relatively
localiscd producland market dc\'eJopmenl strnlcgJes of the firm. but alw a centra] agenda han in
the horizontal Strategy ollhe (Ofllp<lny. whereby an important parI ofthe governance of lhe finn is
$Cen to COnsist of the engcndering of ..n appropriate en\'ironment for the development lind
mainlenance of these 'crown jewels' of key asstts lind (ore (()mpeteoccs.
Within such a schema. then. compctitin: JlItclligenCt' c:l!l be St.,;:n to be of vital strategic impor-
tance In a number of ways;
• If we are to assess our own key assets and core compctenccs in comparison with those of our
competitors, we are obli~ to ha\'e some view of whallhose competitor compcli:Ul-e! are.
• The imitabiJity of our own putative core competences can only be assessed to the ellten! that we
know the capacity of competilors 10 imitate.
• We would WIsh to know. corwe~ly. the vulner..bihty of l-ompo:tltors to our imitation of lheir
tore competences,
• Our ability 10 access new marketS can only be SllIl~factorih' addressed if wc have knowlt'<lge of
compelitors' intentions and Cl1p:JbJlltles in that respect.
Without such knowkxlgc ou r cllpltcit y to "cress C-J;tst,ng and new markets and, abo\'e alL to identify
and maintain the basis of our competitive advaOllll:C will be at best flawed and, more likely.
scverely limited,

J 2. Offu:r- bas('s Jar reqllir;"g txm'/1etirir'e i"t!dlige"ctl

Rcsource·hascd strategy does nOI represcntthe sole justifICation for a competitive intelligence
programme. COn\'cnlional views of the details orlhe market Ilnd Sltuc;tUr:lI struggles of oomplloies
demand knowledge (or at least aSSUlllpuons) of the positions of oompttit()rs III ncgolLatioll
(ThompSOn. 1998) and of their tntcnts and tactics III market developrl\ent C.:lmpaigns IRumclt.
1998), E\'cn with the modern cmphasis on netw(lrk approaches to mdustrial $trategy and thc need
for partnering llpproaches to managing Ihest nelworks of ouycn.. suppliers and poer oompaoJC$. it
can be argued thai knowuIg Lhe capabiliucs and lUlenu of other companies in ess<:nllally noo-
compehtl\t: and trusting re1arioD~hipS 15 an added conuiblltion to the well being of the grouping in
addition to being a safeguard ngaiost UO)' fUlure chaoge In the oature of the relationship.
L.1Stly. it is Important 10 rt:1:un a dynamic unde.rstandll'lg of Ihe technology trlljoctorioi of the
surroonding induslflal environment (Nelson. 1991). Without this pefl;eption of the Changing
technical capabilities or our own industry and Ihal of adjacent industries (from whence unexpected
new fl\'als may emerge) our attempts to generate a viable and approprialc te.::hllOlogy strategy will
be in \'ain. No maller how capable our company is m generatmg techn.:tlogy rhere is always the
pos.slbility that another oompan) in an adjacent prcviously unobserved industry "'ill innovate III
11 di~tion whIch we did not expect and in soch a war a$ to render obs<>lele .:tur own indUsU)'-
centred innovati\e proceu.

I.J. Need 10' efficielll largeti/lg

TheopportunityW>t of ~ueh competitive intclligence g<tthcring rs high, SInce the best inteUigelll..'e
appral$llis lice frequ<:ntJy those earncd our by the very people who are engaged in developing or
cltpl.:titmg our own core CQmpelences. lotelligence derit-eli alwQys from an appraisal of data
informed by some underlying model ofhehaviour, a hypothesis or an assumption again51 which the
C()mpetilors' actionS and ulleralltt$ ClIn be tcsted. It is frequently the most knowledgeable members
ofourcomp<tn) "'00 3re III the best position to de,·elop these hypothe'sesllnd test them against data
gAthered often on an opportunistic ba&is. It is incumbent upon US, therefore 10 targel fhe
competitor intelligence appraisal process efficiently since an efficient CQmpctilOr inrelligence
process will providc the ICllst disruptwn to the mllm-llne activities of market dewlopment. sales or
technology generationtn pursuit of our competitive advantage and its exploitation. If. in addition,
that targeting lli carried out on the basis of a model which contribuu:s to the appraisal proecss itsclf,
by representing our best understandlllg of the dynamics of the compchr\\e sysrem which we ate
Investigating, then II double beoefit will aC("rue, siuce the appraisal process lIself will be rendered
more efficient.

2. Exisling approaches

Kahaner (19%1 supports the view thai a number of benefits d<:nve fr()lll engagemelll in
competlll\c inlcUigcnoe activtt y. In proccsstull terms Kahaner pfO[\'OSCS the usc of a mllitllry 5t yle
inlelligence qcJe to fa,:tlttate the planolll&, collectic)ll. analysis and dissemmation of intelligence
withm Ihe organisation. The cycle rderred to consists of a bi&hly 1IIltr.actire process of dala
gathenng, and conjeclUlc about the COL'1lly'S order of battle. capacit)' and )IIletl1. which In lum
large" fUrlher data gllthcring activities. The juslilkatKlo for this is the usage of this eycle br
governmental agcncic$ such as the United States Ccnlrallntelligencc Agency.
As discussed above. it lS highly dcsirahki to seek e~alllples ofbest praClicem order to impro\'e lhe
competitive advantagt: of the corporation vis-a-vis ilS competitors and this applies n<) k:ss 10 the
process of compet!tin' intelligence acquisitioll as to other business processes. For those COD-
cerned with the methoos and process ofintelJigeoce operations possibly the most obviolli 'tarting
point for oomparison is the IlItelhgence apparutus maintltined by the ltlO<!em nation-state. In the
UK. for e1ample, intdligeooe 1$ estimated \() COSt in the region of$l.5 billion per annum, equivalenl
to apprOJ:imately 5% of tbat devoted to dtfenoe. In pet'§Onnd terms Hennan (1991) identifies the
requirement to be equivalent to 25% 01 that engagoo m Shell (UK)'s operations,

The use of individuals to gather intelligence for the benefll of II $OCiety ba.' a long history going
back to bibikh.ll times. The modem intelligence organilllllion has il.$ origins ID the early t .....enticth
ctlllury with the establishment in Britain of Ml-6 which had as its mandate rleSponsibility for
intelligence gathering ovef'SCas (Christopher, 1985), The Americllo CIA emerged as a result of the
Second World War in order to collsohdo1le the fragmented intelligence efforts which were blamed
In pan for lapses sll(;h as the infamous Japanese o1Itaek on tbe nanll base at Pearl Hlitbour
(Darling. J99()~
lIaving bocomc: a fonnal part of the machinery of go\"Crnment how does the state-spon50r«!
intelligence business funcli<)n'l The use of the inlelligence efcle as recommended by Kab<l.ner 'S
actually derived from the military. The rationak is uoted by Herman that. 'C,,"trary 10 critics'
/)eli~ft, pe(J~me I"telligen<:e :iel~'CQlI,fiderobie ,ff{)re by bdwcing 'prQperly' *';1), 'propel" ~
HeN:e ,he artrocli<»! qf the mil;tory' melaphtps ofrtqllifl''"ertlJ o"d 1m. CJ'f;/e' (Herman. 1996)
Thi$laSt quotation $uggesaan eJlplanahon fl)r Ihe fu,lures ofinlelhgence to cope ....ilh eJltraord·
inary riluo1tion~ Inlelligcna 5CrVICl$ ""OTld wide ha\Oe been held responsible for failures which have
had consequences for theit governments, The United Stater intelligence oommunity were blamed
for failing 10 predict the end of the $onet UnlOlI 311d more re<:ently ill) enquiry \10'<1$ started as
a fCSult of tlte failure to advise as 10 the likelihood of Indian nuclear tesling.
or
In Israel the reputation itt intelligence machinery was badly damllged by the failure 10 g;\'e
appropriate warning as to the 1913 lIuad. by the AIab Sillies. Black & Morris suggested that Ibis
over-sight "''lIS m large cuuscd by, '0 CQ/lCf!PI 0" 11l4llhe Arobs had ml/me1ltl()l1 Will ",ere i/lcapable .,'
of rem!l'>/ng lhe l<1l1' agains, Isrod (Bla<:k & Moni£, 1991~
Likewise_ in the UK Ibe intelligence Fllllction ",as held accountable for errors in detecting Ihe
IDvasion of Ihe Falkland Islands by Argentina. An enquiry aner the end ofhorlililies considered as
evidence a paptr prtp.'lred far Ihe Jomt lntelligence COITllnittce,a senior oo-ordlnlltiol\ body for the
British intelligence oommunit)'o on lhe possible ris~ from Argentina (Franks, 1983~ A later noalysiS
d¢l;cribcd lite repott :ts. '" 1'('1)' routine Item, C//1IIiJl",'W 1Wthlflg f(1 srart riflgillg a{aml 1><'lIs' (W!:St, 199n

In all these ClIst5 it could be suggesled thai the organilllltion In following ,he cycle has esMblishcd
standard operating and monitoriug procedures which have led to a ccnain myopia III divining from
the inform!Mion available koowledgc about tbe changing environment. Funhcrmore the cyde,
whits, a useful tool for visualising a static situation. appears inappropriate when considering an
eovironment such as a sub~'ers;ve orgaTli..~tiOTl or market COIVfl!:t'tor over time in II. changing
environment.
 Indeed il) tile cases highlighted previously the quality of intelligence regarding the opponent, be
they the Soviet Union, Arab states, or Argentineans was oflen good. The problem $l'JCmed to
revolve around it' silU8tion lOrithio lin environment wbich was i~lf dynllmic. For clllmplc in the
hrach intelligeocc services the victories over the Aral> states III previous ye2f"i helped to form
II mllld"lier whkh degraded intclligencellboutthe Arab armed forces on the basis that they had lost
previou~ engagements with the Israelis and were of poor quality_
Allied to this- is-the problem of maintaining the subjectIvity of the anal)'st. A classic problem for
the gO\'emmem InteUigence agencies hll$ been to select and Il\llintain analysts who can \leW the
world as their opponents or compelltQf"S mIght. This is in contrast 10 the anumption that, 'all
foreign persons are eduCllted at Oxford or Harvard' for example. The-Implication of this statement
is the risk of viewing InformatiOn and assuming that oompetitonstrategieeulturt: is the SMOO as tbe
analyS($. Furthennorc, the intelligence analyst in gO\'ernmenl often joins their organisation and
Stays w,th it for the duration of their career. This means that rile intelligence collectors and analysts
do not get to spend lime ,n posts where their customers operate, and therefore qUlle l.lndeIStaod-
abl)' they lack $Cnsitivlty to the customers lleedS. Allied to tltis situation intra-orgllw5ation:l.l
mobility means that d~ks devoted to particular specialitiC$ hllVC 11 tum Qver of staff every 2.-4
Y<"l~ the imphcfI!lon being that II ~ liard to build up a knowledge bM.k ""ithin the organisation
and too easy to dismantle,
In summary the quest for effectIve competitive intelligence lIequiSltion und analysis ,",'Ithin the
management lllforma!ion structure can dccile benetit from examination of best practice of the
nation.o$tate. However, such cOlls.ideration must be balanced by 1l concern w,th utilising methods
for collcC!lon whICh go beyoud the formal tntelllgence cyele to incorporate an abilily to consi.:kr
dynamiC envtrontuenlS where the organisalJon engages m competition ,,"'itlt Olber actors. The tielt
seetion of this paper illustrates such a te<:hniqu;:.

3. A system inletpretatiOli of inttlligeace prodUCI

In order to make clearer the usc ofsystem models to facilitate intelligence analysis and gathenng.
8 distinctiOIl Ii made between three le\el$ of imelligem:<: product, nllmd)'
• point data.
• process-based information,
• system-bar.ed kMwledge
with iln implk.1\ion of lin Increasing colltextuahsallon within a declared system understanding.
At the IOWdl le\-el of system underst<lllding bu~inC:S$ intelligence 1$ concerned with d"lo pclrllf.
Thtse are essentiaU)' isolated pieces (If data, often vCT}' important to the SUCOCS$ of Ol.lr ende3vour,
but vieWed as being tssenti:tlly lIncollllCCted to the surrounding activitIes of the competitor. For
example, we might \1o'lSh to know the: CQSt of production of a competitor's produc;l, WhIle we arc
fully aW,lrc that the COSt of prOdtlCtioll is a result of a number of underlying factors III our
COtnpetitors' opt'nltion, such 35 \ll'aga levels. prodUCtiOn clticieney, et~tera. it is the elld err<.'CI
lOr tlieb motivates our da.ll! gathenng ratlier tlian tbe underlying factors.
There arc, howe\'er, certain ad\antages ,n vit ....i ng the competitor's cost of production 3$ part of
a linear proceM of oost/nll.le aa.TC1ion_ Firstly, it may not be possible to acquire the COSI of
production directly. Such mformalion IS (ios(ly glllrded and attempts to oblam I! di1'('("lly may be
neithef stl("Ol'SSful nor C1hieal If III-e VIe" the cost u the end of a prooess, hO'Ne\-er. III-e can enq~
IIIhatthe components of that CQ5I m.Igbt be. Our accountants may offer thesugestton thai ttlt end
COSt Isdomuated by only a small numba"O({lloetOI$. WI) wa~ bilk cmt olcapllal upeDdilltR.'and
n". malmals. We can casilyestunate the first ad~ertlRmenlS ia lbe trade preufor YaOOIlS Ievdsof
miff presenl a ready lOuttt of data. Snntlarty. lhe COS! of capital upendllure call be esttmated by
kno\l,'lcdgc oIthc COil of money andestlmauons oftbeCOSt of.set:·up oftbe prodUCIIOO 1}'5ICm. The'
thud component. the cost 01 raw matenals.. is. pteCe 01 data \.,btd! can be acquimt by the SImple
uped!efll of in\lIlng qUOtes from5Uppbns. ThU)" b) CIOB5Kkong~~ "'e ClIO
make csumatcs of dlm:tly 1nacc:es5Jb6e dill... and, mor«J~ CSlabhsh coofidena: IEvds by ~
rderencutg IDtompicte data dira:t.ly acqUII'«I \\Ith other estimates denl'Cd from prClCClRl under-
standi,,!
So far. howe~er. tile hne "till had lbe &1m of estabh..htng smgle data potntj., albeit undef".-mtm
by a ptoc:esl undenlandmg, A furttltr step. leading 10 ~~-bvxd bfot,.ltd~. d to take IDIO
account the complex commercaal syslem of which the data points and proce:iS-baJ,cd lIuormallon
are only part... l1le essential char.u::terrtuc of Ihc:u Iyslern·based knowtedge is lh:llit I~ c.oocerned
With knowledge ",hich denves from an wxierstandmg of lhe commeroal synem as a III'hole. For
ullmple. while II i! appropnale al the operational lC\'cl to be cona:rned about the eMS of
a competJlor In order to estimate, U)', lhe entry pnce of a 'IJle.too' product. at the Slrategic !C'vel
companIes are concerned Wilh wider issues. such. as the product strategy of competitors. ~lere an
undernlanding of lbe relllll~e balance of a compelllo(S cJl:J!Cndlture of resources on innovation (in
order to establish dtlTerentiatcd products) on market process inn(w'4lion (m order to achieve a low
cost ba.>e) on ad'o"erllslng flO achlc~e. for CIIample, brand loyalty or percewed quality) IS ~nll81 to
make an apprlXUtion of the long tenn stratcgiC posture oflhe competitor. If II-t ltfC concerned II-ith
a level of strategic intelligence gathering abo~e the product Mraleg) Ie\-d at the market strategy
or corporale level. for example -the need for a broad-based s)"!Item context i~ e.en slronger. Such
an IIppteC\.iltion can only be &Chic.ed by cstablishmga rich and extetl$l.'e model which spans both
the intem.:11 ~ of lbe p:rat.agonlsU and the essenlial market 1l'IeChanwns

An appropnate struet~ for such a model can be seen m Fig. I, The nalched alaS repreilml
intemallYStems models for OUfS('hes and the competitOB{ool) one competitOr btinS sbo"'lI bert).
The o::ntre secuon fCPIesc;lIts a s)..tem modd or the d}llImtCll of the market mc:cbanasrm.
dll>lmgul,habk from tbe mtemal proo"$S'"S by the common nature oltbe \anablcs. For 6ampR•
• Yan..lble called COMfKII'-\" ..f .. proh, "'·Ollk!. durly fall ""lmID the Internal model ol company A {m
Spilt oflhe mherent kOO'l\oiedge that a profit "'on by A m a fixed market Imphes. Iou of prelll by
~her compallJC5l. Con\ef'j("ly. a \'llnabk calkd to«ll mor*e, Ji:e ",-ould n:lItllllllly fall "";than lhe
central mariet model. sma: It IS spcclfic to Ilellher company alone.
Note that lhere are certain Itnlap bellllQC:I1 the lIItCrnal ~ or the prol;jl.omSIl and lhe
central model. For example. Jf a company C'lpand" us core competellCleS by internal investment m
techniques to reduce 00515 (proo:ss innoVlltK>ll) or 10 enhilJtcc tlte: d,lTerenttauon of iu products
(in~otment m research) the effcct will 00{ "mply be relt In terms or 11M: company's mlernal 'Ute.
 -- -
""-'<' --
""-'<'

Cetlliinly. the Intcrnal COStS will be reduced or the salary bill increased (internal efTec\5) but
addilionall)' the total market size mIl)' increase as new customers lire attracted mto the market by
the reduced 0051S0r mcreascd fClllurcs urlhe product These hnks arc shown conceptually in Fig. I
Fig. I shows no links directly between the IWO COlllpanies. III the case where tWo companies are
in a direct compeli,i"e stllnce one agllllUllhc other this will be rtpresenllll;ve bUI to the eXttnt thai
the romplmies are in II non.competili\'c relationship (such as technology sharing) there will exist
links between the companies which do not pass through the market mechanisms and which will
therefore bypass tbe market model in lhe S)"Sltm modelling SIrIM:[ure e.l.empli6ed by Fig. 1. It mny
be argued that no relationship between companies is entirely without market oonsequenoes, and 10
the extent tbal this is true, it will be pos5ible 10 eliminale linkages which bypass the marh_l model.

So A system modelling rxampk'

The system models e~e:l1lplilied by Fig. 1 can be inlplemented III II number of ways and it is not
withm Ihescopt of this paper to argue in delail\he res-ptt!l\'e merits ofwhoJl}" quanli\ali\·e (nodels
vis-a_vis Ihose whkh take into attount the Icss clearly defined contrIbutions to be made to S}"Stenl
behaviour by the!)" constitutive human elements. In the context of oompelluve llltelllgtn<:e.
howcn:r, II is obsened Ihat any system modelling approach which fails to rcl!et;t the elfecu of
human bcha~iour UJlOll the bUSIness srstem is unlik.ely to he adequately rich in ils representation
(Checkland. 1984),
A modelling approach. kno..... n as qualitlltrve systems dynamics (QSD) has pro~·«1 successful HI
rH'lKUce (Powell & Brttdford, 1998~ Tile method IS based on the well.k.nowll syslems dynamics
method (Coyle. 19IMl of mfluenct diagrams. The building block of a QSD mfluence diagram is the
linkage of \11'0 descriptive variables by :m Itrrow "llich indicates causality and consequcnt
correlation between the variaN«. causally related varinblcs wilh negative correJtl1ion (for
example. thc \lidl-k.llQ\\'ll effect of !lC<){lumy uJ scale ill rroduclion. where increased volume results
in a reduced (;()lit of uml prodUCtion) are connected by lin arrow with a negllllve sign 3uached
I"os.i\i,·ely related vanables (for exampk CO$I oj proJlJCli()fl aif~ting CQ$1 0/1fO<'ds soMJ have
a posi!i\'c sign attached
It must be ~trtssed lha! the signs atlachcd to the heads of (he arrows indiclHe only the causah!y
and conelalion between Ihe variables; if <:wI <ifpmtlud;01I goes up it pushes COS! ofgoodl sold up
 with 11 (+ Sls.n~ There is no unphcahon thaI I parttcular variable IS mml or falling It an)·
partlCullr lime. Iftherosl of~11on falls. It will cause 1ft/!. amo{g<>otb M>ld to fall (sttlll polilne
correlation, helltt a + sign).
Ijy bUlldmg chains of such causal connectIOns, diagrams which caplure the chaf'dctenslics of
i)'stems CM be built, anti m p;trticular the tffccts of loops of vltJ'iables can be examined. Fig. 2
shows a relevant eumplc.
Here "'e see thai if",e increase Ihe funds /lvailable m II company .....e are mon: Iblc to m~l.'!Il III the
dc\'elopment of new markets. This in turn increases the size of the available market which mcreases
Ihe soles l'(>/"",e, the SQIf'$ income and the profil, ..... lIh the result thaI more funds bocomc aVlUlllble
lhus increasmg the capacily for 1Il[~lIflt'lIf III new mONIS It sboukl be noted Iball~ QSl> melhod
does not dalm thlt tbis investment C)''Cle Iloill lOereue Wllhout constnllnt. Firstly, there ",Ill he
compensallOg1oop6 III the resl of the syS1n11 .....hich "Ill act as limiling me:cbaDl$ll15 10 the i50Ialed
bdJa~lour of Fig. 1. Srootldly. Inc vel'}' Purpo«: cI nprewng system behaviour in !hili fashion 15 10
ldc:nlif)- managcmentlFDdasand aclion rtans'Aluch ..-ill COnlrollhes)"S1em. and to thenltot that
manageuxot is e/5octJve in tbis n:spea !be efl«t oUoopuuch as that or Fll- 2 "''l1I be: protolcd ex-
or
IIICllllated.ldenlificatioo ofpotc:ntially uRSlable Ioopssuctl as thai FiJ- 2 1$ a useful iOOOlm to
managers that. left alone:, ~h mechaniSms can l;!ulld suon&!} ather III our ratour Of llplftSl Ollr
IDterests. and lbat a UlalJagernttu agenda can be: den~ wfnch protnole lhe Itnbges In !be )oop
...iIen sucb Itnb~ ~ In OUT Interests aDd can be allcDilalCd ""Iien tbey act again tow" 1Dtae:stS.
Pov.'dllnd Bradford (1998) report a ca$C Sllldy ill man&F1J1Cnl 01 prodltCt talCty whICh iIlustrales
th~ .p:nda 5IC1tmg.
Other)oops., dC:5cJlbed as p 1 king. beba\'t III a potenl11111yuabk Caslnon. FIg.) show a loop
(rdat~ !O that shown in FIIo 2) where lbe runds made a~.ulable 10 de",::Iop IXW mark.eU lS.secn 10
10ecease theOOS! of8fJO'b wid, which 10 turn cauSc$lhepn'ljif to rail whICh 10 tum causesa fall in the
ja""k (Zl'(Jllabie for mar lei del-clopmenl. ThU5, there IS an lnbermllendency ror sud! a loop to!eek
I slable level The Cltenl 10 which II will S1abdlSC is a function or the slrengtb of the linkages
bet..... een lhe variables. bUl qualitllllvely the loop presoenlS the possibihty thai managclTlC11taClKm
nil! S1rengt"'en tbe lendency of Ihe underlYing I}·slem dynamIC euller 10 ron away or to 11abilise
 +

Fig. 4 shows the full diagrnm from which Figs. 2 and 3 nre extracts It derives from an
/Ktual ooosulrancy coOOC'rned with estllblishing the nature of the oompclilive environment
for a majOr 1l1lcmational defen5C company. While it is It simplification of the aclu.,1 overall
model prodUttd il caplurcs; many of tbe important illustrative poinls for competitive
intclllgelll.'e. Comparing ,t with Fig. I we see that the central section has a market model
showing, for CJ:ampJe. that Increased switching COStS will tcml to mise the height of eIIlry
0arrJer.r To 8 new entrant (prcdMiO'l). If new cnlnUllS cross lnat enlry barrier (pretlafi(Jll up) Ihe
market share of C()Ulpauies A and B (the Incumbents) will fall (A's markel share ;!nd Us mQ,*~t
share).
The Internal rnodeb 0( this iJ!uslrath"c inlluellOt: diagram show the elfeet~ of increased int't'$Imerl'
." rNeQrch on designed quality and/f!(ltllrQ, both of which in turn affect the fl('rceired quality. This
then Increases Ihee.uclltto which a compan)'cao claim 11 relative prem'um in the market which then
mc:rea$l"$ the price.
While the simpliflCd Fig. 4 doe<; not purport to be an adequate representation or a business
sy$tem, it shows many of the char.:u,;teristics oftbc- more complicated influence diagrams appropri-
ate for actual consultancy work. Its usc forcompttitive intelligence targeting and analysis wm now
be illustrated and certain conclusions dfil\.m regarding the nature of the system origins of
competitive intelligence of various types.

6. Ulle of the QSO diagnm to targt:f and aDaly" eompetitil'e iDtelligence

WIthin the l'Onteu of mlluerw::e diagrums such as Fig. 4 the tripartIte distinction between
point data. ptooess information and system-based knowled&e can now be seen as relatin/!.
1110 J " ~l J P Br+'t/ I~'*-*'l",JIIjontuw<M~_10()OQOIIJlI-I~J

•
-- =.

=- J
\J_.'.J
.--
respecll\ely. to
• the indIvidual variables within the diallJ'llrn.
• chains of causality represented by sequenCC5 of arrOllS hnking ,'anables and.
• loop" and conllCl,:lcd loops..

6 J. Po"" data

ludi'ldu;l.1 variables 1IIlthin the dd.JI"I.m TqwelCnt Itam or lfildhgenoe *bicb 1IIl'r migtll ~I.: 10
measure eurnti.aIl) III 'Wlalion from lhe surrOWldlll& system connc:cuoll$. An important JlICOE' of
potnt data .... h~h misht aUov.- us to _ _ the ablhty 0(1 compclrtor tocompeteapnsllD III lerms
olspeed oflllllOvalicn migblllll"cll be the rate of ru-rdJ UrI'oD"!JIIeJU. The pomt data approach .... auk!
then Jead us to Ittemplthe aequwtion of thai data directly. Such an mquir) ~ utremel) dil6cuJt..
companies I!~ the details of thc:tr Tcsean:b expendIture carduIlJ'. and as It d<oe> nol fomt part of
all)' statutorily requared public decJaratJOl1. it l! unl1l..dy that Ill) c.ornpany for lIIl'hll;h raean:;h
apernhture 111'1.5 Important 1IIouid wtlhngly release such data. Rcson might then ba~e 10 be made to
less direct method!/.. Staff ~tcd from the competitor might bring mformatlon .... llb them;
elu.-ting )talfof tile competitor might be indlllCl"«t; benchinarJung standard'll may gJve IlUlght of the
expenditure to be expected. Even S() the amount of lIIteJI1~ooe a\;ulable if the oompetitors
l"e5Carch e.\penduure IS tn:;ated merely as lin dlSSOClatw point ~aO:Jble IS hnuted Smce the
 measurement of soch a ~ariable is dissociated from the surroundmg system dynamics tlK: point
data is eMClltially an item of lIltelligence assessed in a static fashion.

6.2 PrQu:n-bused injQrlMfiOIJ

A more successful analysis approach which contributes to the targeting task is to consider the
lirll~ar proces.'iI::S of which research investment forms one element. See fig. 5 below.
Such a perspocltve puts the research investment in the financial context of the company.
JU\'e$tment in rtSCarch i$ seen as competing with im'e$tmell/ ill process (e\'enwally to reduce
production costs) and with hlVe$rme"r in mONI dc~elopmenL The anal)'st is nOw in 11 better
position to estimate the research in~estment of the competitor. Bounds ,an be placed on tbe
in\'estment by rn.1ldng estimates of the other two competmg ,ariablcs. For example, our accountants
may mform us that the investment in proct:$ is dominated by thecost of capital investment. Sino.: we
can obscn'e the building of capital equipment am,! because "'e can determine the likely COStS of
spedlk purchases of large plant tby malting legitimate enquiries of suppliers) \\e can estimate the
• likely financial expenditure on prOC¢SS. More refined estimates would result from a more deuuled
pr\~s modeL aud might iuvolve the visible effect of recruitment and the expcndllure on
production slaff by o[lS(:r\;ation of the recruilment activity {lhrough public advertisements for
staff) and the gOLllg rates for salaries al various le\·eb. The essentild chnr.loeristics of the
prOf.'eSS-blucd information view is tbat pieces of intelligern::c can be built up by considering
oonlributory aJSOCIlIted factors upon wh,ch more data m;ty be available, Such a processual
ll.pprooch alre:ldy fall~ withm the readily aHlilable techniques of competelll inldHgellc(" anal}sl$.

There is more to be gained from taking a wbole ~yslem view, hQwc~cr. Fig. 6 shows a dilTerent
edr.tet from rig. 4.
II will be seen that i/lI7i'rfmcm In research fotms patt of a closed loop which p;asses through cOSt vi
goods soId,/ma.', Sllles in(Qffl.., profil, umiillbfefimds and back. 10 JrIV£sttlltl'fl it! research, There are
three other loops in the dIagram, two passing through I"leslmet!r in procts:> and another passing
through In/Wfment 1/1 IIlurkelS,

.....
......
.../+ ~
..... .-
I
~=~--~~
.......
.. ....uta
....-
..
ptOCItH

FIe. oS. /l. f"octSS ,it\>.. of ~lClI in_men, (e',I_'cd fmm Fii- 4~
192 J H ~.J P ~ ~.lt1wMI(J/'~,t ....... 1f)11OfI(J/11I1-19J

-,-,._-..,.. :::..
...

I
0-~ -:--1:~=.
-. -- ---
." '.... 10-

_./
-.(;2'."
=:.. +
FlI- 6. L<qo....". ol"*"fd> 111_-'

An undcmandmg or lhc: plaor ollbc competItor's mvestmeot ID research ID • dyuanll<; loop

Ilolucb r:nrotDpiliSCS pnce and pJ<lfit aIlo~ U'l1O ma.ked}namK'e5UmaIC oflhc n:scarch im-estment
0\"C1" lime. By targeting our compcllll\-c mtelligence tc50Urccs upon the kcy \'anablcs of lhc model
COMtttuted by Fig. 6. _-c can mobihse a Ilo"hole scnes of pieces 01 Inl0rm&tlOn sud!. as tbe
year-on-)ur pront of tbe COIJIl)in}. thc ycar-on-)ur Prices. the re:laU\e IO\CSlmc:nl> on praces,
and in I\CW marl::ets. The analyst Ihus hasthc basis fur bypaWDg lhe protectIOn measures "'bkh thc
l'O!Tl~1I10r can pUI m plate to protect agall"l data-point IIcquisltion lind cerlam pr0CC$5-bascd
mrerences on our part It IS significantly more: dlfYicullto protect against thc d)namlc clJeclS of
~Ilriablcs which ofne<:esslty arc publicly avallable, clther because of regulatory requirements or by
virtlle of their publication bemg part of I he otfering process by "'hieh trade is earriN out (prices. 10
ta~e an obvious example),

7. S4ralflic inteflignltt alld lhe martet JMdcl

Intclligence produa such i$ the research ml'l:$lmenl rate discw.l;ed above operate .1.1 c:s,o;eoli.ally
al the tactICal or opcrauonal1cvel. At tbc strategil; le>cl cornpames require IIwghllDlo the poIK:icl
.. hteh are hem! pursued by their competitors.. We might CnqlllTC.. lOr t'Umple, '" bcl:ber the o\'Cfa1l
poltcy of the competitor is chanJlO! on baJlIlICIe bct_een COSt compeliUOD .Uld dllli:re:ntiation. We
mlJht WIsh to k1lO\\ .. hclber Ihecompetitorl1tn1lelY has dtangcd from eIpIon&UOO ofan tuSunl
martel 10 lhe devdOpmenl of IlCW IDMket.L Tbc QSD 1D8ucocr diagl1un~ lP~c IDsighu mto lhe
appropflllte targctmg of InteUip:o;:!'IClt' ~l.Irca at IhlS ll.talCPC Ie\'cl.
lei Wllakc the cascofa competitor Ilobo may be changing policy from elUSling market Cllp!<>itallon
to new market development Fit. Jlan extract from Fig. 4) sho"'"liOfI'\e of the key effects..
 "'_ 6.-
-

•
--"
--
....• -
.-I-
~_C/
---
Markel
Model
--
Internal M<>del of CamplIny D
~ .. 7. MoGel <If market e:nuy po/.i<:J of romplUI)' B aoo ,rs olJccI OD romplUly A.

In a silllilllr way to the analySiS of research investment above, the justifying logic of the
compe{jlor can be traced in the right hand side of Fig. 7 In\'CSlmenl in 11<'''' lIlarket prn<fratio'l w,n
dri\'c up the overall $i:e oflhe 'IIllriC( which in tum will drive up the sales roll/me of our competitor,
company B. This .....ilI dri\e down 8's OOS/ O/prod"cliQn (because of economies oflearning,scale and
volume~ This will drive down thc wst of goods ,WId which pushes up B's available pro61,

8. S)'stem grounding of intelligellCt' proou<:tllnd il~ rele\'lloc'" to lhe busilWSli task

It win be clcar from tbc above that system undel'$tanding is "ital for the targeting of imelligence
rc$Oun;:es and for the analysis of the raw prodU(t, To the cxtcm that we can conlC<\:tualise lower
level intdhgen~'t product within II hIgher s)'stem level of undef1;tandmg (point wla WlthlO
II process-based undel'$tandlllg or prOCCS$-based mtormallon wilhlO a system-based understand·
ing) then .....c can contribute to intelligence proouct at tbat higher k"eL The advantages of this
conle~tualisation are not limited 10 lhe analysis process alone, however, since a sensitivity 10 lbe
indic:ltors and ""'llrnings which cue our al''llreness 01 a compet'tor's change of policy alj() allow U5
to target our limned 3oqUISItion resot.trte more effectIvely. Even the simplified system model aoove
shows the e:l.tcntlo which the oo,hfiC<ltion 01 It system underslanding 3110w$ gretlter awareness of
these indications Ihan does any attempt 10 acquire isolated point data.
Intelligence producl Illforms slrategic undcl'5tanding and decision making as much as it does
optrntional docis.ion makmg, particularly when the core competence or resource-b.ued strateg.IC
frnllleworks are taken into ll(;CQUnl. These approac~ rely on mellSUres ofour competence relative
to the competitors, and this comparison iii in essence an issue 01 intelligence. We can be as a«urate
I1nd ..elf-ob$ervant of our competences as ""ie wish; without an equally accurate view of til<:
l-ompelilOI"$' OOmpetencei our developmental strategy will be iU-founded. Naturolly, the more
Slrategic the use to which OUf inlelligence prooutt is 10 be pUI. the higher the level oIlhe system
model which underwrites it.
Whatever the purpose of the intelligence product. hoW'tver, the trlpartile distinction obscned
above between point-dala, proceS-';-based infoml:uion and systcnl-based knowledge mforms the
targettn8 and analysis process. The conllCClion bet .... een the syste:m modelling and thiS tn·panit".
distinction can be summed up in Table I. Here we sec Ihat there is a direcl concordance belween
the !eye! of inte.lligence prodllCl desired, tbe applicability of thaI product lind the leY'el of system
conteuuali;;ation which is necessary to produce that intelligence product.
The practical implications of the syslem·based approach are wide ranging. Firstly. the QSD
Influence diagrams providc a convenient f",gu(lfrtmCtl bctw<:cn the intelligence acquisition plOfes-
sionals and the policy I<:vds of the finn. Sa.-ondly, the generation of a system diagram produces
ooo\'ergcn<:e between the perspectives of the poJiC)',makers and the intelligence acquirers. and this
of Itself is much to be desir~'d. Thirdly. the conle"lualis:ltioo pr(l(:C&~ addressed :lbove prov'idcs
a langible i...:rease '" elfici<:ncy in 11IW intelligence acqulsilion tn that marketcrs and otbersengaged
prevu,usly in data-point acquisitiOn become scnsittied 10 thc Intelligence implications of data
encountered by chanc:e. By nlak108 them aware ofthe process implications Ihe: reJcvanceofthedatl1
can oflen be s<-""Cn more dearly. Fourthly. and most significantly. 1he dirtel effect on the slrategic
decision making processes call be tangible. The contribution of tntelligence product 8t1he policy
proxess le\eJ can OftCII be lI)(hre.;t and under valued, but with a system·based approach the direct
l1pplidbihty or the mtdHg<:nce producl 10 Ihe delet;lion of policy changes on the pall of the
compelitors. for e"ample, is cI~rly ~n by the senior execulives. The eff<:d of this is nOl only to

Table 1
Cone<mbl!<'<' or i"'dl~ produtl """'I "jlh 'y<l_ clemenl. &nd DlC:ClIaaiJrnII of Q(;qlliJi.i<:ln
N3lllRl or LAl<:l1illOllOO
prOOIlC'

Variabto l>ttcct obset'Vlltill~

("b:li,"iI~d tl'f!el 1I11ildina lip ;lIrormalKm
r,om ,.."a.le<! dalil
......
or alw.a1 Jinh
Obicrr.tU\ll:l of ,i,(ne.

Policy
...,
' .•I)""i dal~
IIldUCfioo of ul'<krt';"ll
 J It "-IL J p IJn>tJf-J ~-'~rJ(~ M~ 1O(1()()1)j /8/-19' 19~

enhance the .5talUS Or tbe oomJX(lII~e Intelligence fUIl/;\lOn or the firm, but also 10 Improve Ihe
polic) gent:rallon pr(](X5S.. This.s dearl) or Si&mfieanoe to the elfecti'i(:nc:ss and sunwabdlly or the
company In today's complex and d)'nanuc buslDe$l en'-uonmcnL

8a1'Dl')". J 1I\I97l. Sirtirp.; fao:ww _rhu: f.ss!uu_lold aDd bo IUMcJ:) in: "J F..... R......... 6... MIl
Ilnlcp:t.. PI' 1*-160, (hbd; OLiP
Bllod-L. Ii: M.xns. 8.11991~ t..Os.-m-. n.--*l ........ rfl..J>_U, 1"l"Cka H"'l~
Chedlalld.. P lI~l S~ tlooIIk..... =,',
al r. ~ uf 100ft ~ _~ - ' Lbo!
.-ploa.l..:wb..-l ~ In I). Pr1>bf.Sdf_p -.I ,4_1II/_ _ ~1pp. W-106~ ikrb'"
r •

~\.<rlaJ.

C'hmf0flbn'. A.ll"'~'l""".-..tt n.- "''''''' ........ ~ "f. u-don. Ha 1°"

C...·k. R 119%~ S-"'~...." ~ " " - - 4 ' ...,. L<VWbr~.t.HaU.
l""h~""'XlO1.7Ior, __ ' r~.-:" A~j__ <Sf.,.. ,.. J9~ ~Jh'. __ PulMy"a..... SUo..
Unnn'alL)" .......
Fun.... L II L l19l3~ CmtId. 8m FlItk...... 1.... D<b '"""" Repon (lia CQfIlfllinec uf Pm)' C ~ Jill)" 198t
JI(" A' -cnL I..oodooL; Her Majoslfl SIlIlOee<y 0tIi<>:
Granl. R (1M).. T1x: n:wun:e-blIsed Ihtoi}' uf C'Oalpcllll'e a.hantaat: ImplK:auoos roo stnllety .........ulauo... In S.
Sept-Bom. n.. JIrOtfr)' --"tT (pp. 179-199~ Udont: Iita.k"ell
lIu. Au 4< M.Jl..! /II {l9%~ 1M _i'D ~ {J,../ pro«ff. ,( ~ ~ ~.....ndon P.. nl~HaU.
Herman, M. (19%).. 1"w1/~ P""~ In pHU ultd W<I~, Caml."d••, Cambrid~ UnivnlOlI)" I"...,
Herman, M (lWn BnrWr ,,,,,,,I,sc-« t......rdf lite ",dIM/"'" W_ UM opfK1fflUIi'ia,.oI 38. lon,lon; 8ralloey'l.
K.hu..... L (l'ASl 10 C--"..nli.... '1Url1igtn«' FI"IJIn bJad Of!'" ,,, ~ ........ 1to<J'lIUW raw.,.. DlIW..... UM .....
;,if<,..,....,_
/4) ,W<NII! In 'lui g/ohIlJ """*'.JpI;oN> 11'1" :!O- 3~~ 1"_ Y....£ S>moo ~nd SdluJIl~r

Ma,lJdet, C. &: W,lh.. nuon, P 11994\, Kel;oted d,,~f\r:at()ft, Con: "","pe'eD(lOS and ""fJ"I"'Ile perttmnarooo. ~
M~~I.IJ. 149.1~7
Ndsoa. R. (199'1 \l,by <kI fi....... ddfer atodloow doo It mall ..' 10 NJ t _ R~-sJo"'''''''~IPl'14(,..1l,()1.
Oll'ord QUI'
~ J~ &: 8radbd. J 11991>1 Tbr ....,.."t,/,tIJ'Ilqy ,nlCffJoc:e:: t:~ qllahlal''''' pr.- rnorldl'O /date Lbo _ ..... t)
run.:tKNl 10 bo-_ d)"UllllCS- Sonorw..bral. 10. I" . 160
l'Jahalad.C 4< H.... G.119'l(ll. The~~aftbeaorpon1>Oll.~ . .·· = IfftVll.Ma)-J.."". 79--91.
RDIIIdI, R (i99l<~ £-aluaq booIiDnI OIraloen III H MUIlLbef&. J 0-... Ii: S. GIiooIIlllol. 1k~' J"WDS (pp.
91-1001. HMd H....psrcad; Pml_lbll
"""'P"" L II~l1k"'''' ' - ' f'(rlw '_I Lppeo.s.d* Ilivoof, NJ PrallJo.:>o.lbll
\!rea..' (1991\ r..- _ _,.... F: P' ' rJiw,tU; 1JJf . . . . _ ~-'r"* lHdoe UUk. Bron
abd C.-pMI)

Ilofore ut.,ap It-. pn:oca. plIIl. t -I ,Sln.lqy II Buto l'.......ry SdoooI 01 MIG al,JollD Po-~l1.,....-.1
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'''TO attod) p~ \,. . uf_.-hdtn.aJ ' _ if . . .~ - . . . . . ~~n) ...... po ......JOf
~ pr<lJlIl;U. "..., m.pcIlb'''' I.D _ If uf cnueal ~ He ......t.. ~ oa tho lIIIerfxoo
bct"ua w:alq;:J IIld lOOC<lril)" ... tho ina Hos poblluUOM ro- 1D\c:r-<:<JDrPUlY «IfIlloct. l«1l1ll) _.....-..' uri
sru- ~ , and ... i. . fiiMn uf H\ltbo Quetu". Go6d Medal b A""""" Elt:dlmtt and tile OR Soac:lfs
P'raodonl', Modal
J....y 8,lIdrord II D... na; III ~_ filth Anilar 0 Uitk H• .-011)" elIfDpIcwd .... doet<:JnIO. Srn""'l<"
Orolatooa M~~' ... "'Ib C",nfi<1d U"'''''''''')", Roynl M~,"'t)' Collqpo uf Samot Slln~. JelJre) u. pIIb1 ,he<! ""
I ran. 01 ... t,oa. illdudt"llhe impKt: 01 <>peral.oruot mcan:b..llIteltl;encc. In<Iwkdfc and ....... nl)' roDOHllI al lhe
WD'. poIq- 1fIlI.'II,Ie><d Ind comnbuted t""
UK Stral".;c [)ri>noe R......... III 1997