Fuld’s Competitive Musings

Bain Capital Ventures just invested $53 million in LinkedIn, thereby assigning a billion dollar value for the social network that surprised some analysts in this down market.  No matter, because it was the daughter of Holocaust survivors that told me its true value. If her story has any meaning, it presents testimony to social networking’s power to bond us and our society ever more closely together.

This woman, the daughter of two Holocaust survivors has become her family’s genealogist. She believes it’s her mission to reconstruct her family tree for her children, nieces and nephews before all knowledge of her heritage is lost forever.  

A few years ago, she visited Yad Vashem, the Israeli memorial to Holocaust victims. She accessed its database (now also available on the Web), hoping to find names of long-lost relatives.  In the process, she discovered a cousin still alive and living in Israel.   She then contacted him. He welcomed her, a new-found relative into his home, and thanked her for completing another piece of his missing puzzle. He also told her that after he was released from the displaced persons’ camps in the late 1940s he published notices in local newspapers in order to find missing relatives. No one responded. As evidence of his efforts, he showed her his half-century collection of old, faded, brittle clippings.

The Yad Vashem database is a LinkedIn of sorts (albeit a highly specialized one).  Imagine if this online database had existed in 1947.  Imagine the relatives he might have found.

Ask this survivor the value of that database; he would tell you it’s priceless.

Remember when your father, your mother, or uncle wagged a finger at you years ago telling you it’s not what you know but whom you know.  That’s the power of a LinkedIn. It helps find the “who,” the expert you can’t find on your own.  It helps you connect to a wide world.  Underscoring this same point, Malcolm Gladwell in his best-selling The Tipping Point, underscores how valuable people known as Connectors are to our society. They build people networks in their community, their profession, and around the world.

In competitive intelligence, LinkedIn’s value is its ability to save you time finding the right individual who has the answer. It’s all about helping you corral bits and pieces of valuable data as quickly as possible.  The more complete and timely your data set, the better your analysis will be in the end.  The faster your can assess your prospects or those of your competition, the more certain your decisions makers will feel about the direction they wish to take the company.   LinkedIn and similar social networks have definitely short-circuited the exclusive Old Boy Network of yore and democratized its power at the same time.  For those seeking competitive intelligence, LinkedIn could not have come soon enough.

Again, I ask you, is LinkedIn worth a billion dollars?  I suspect you may now say that Bain’s sizeable investment will prove prescient; a shrewd move in coming years.  I doubt Bain Capital Ventures will suffer Buyer’s Remorse anytime soon.

 Flipping through this past Sunday’s edition of The New York Times, I spotted a large two-part display ad for the CIA on page 8 of the business section. This not too surprising; I have seen ads from the CIA like this before.  Perhaps it was the message that grabbed me.

 “You can make a world of difference: National clandestine service careers,” read one of the ads.

 “Great places to work,” read the subhead for the second ad.

 These declarations made me think and compare the two types of workplaces for intelligence professionals: the government and the corporation.  There are no doubt a lot of very smart people working for the CIA, but the real difference between government and corporate settings is the ability to focus.

 Think about a corporation. Here you have a well-defined (not always well-managed) entity that has a limited number of products or services it must sell to stay in business. If a company’s management does its job well, it knows its customers and what they want to buy and makes its pitch more alluring and more exciting than that of its rivals. It management is really, really smart, it has the foresight to think some years ahead and plan ways to further strengthen its strategic position. The competitive analysts that work for corporations understand the basic objectives and must monitor this relatively focused market. 

Government (any government, not just the U.S.), has far less focus. President Bush declared a “war on terror” some years ago but this is a vaguely worded slogan, not a strategic objective. Where your market is everywhere (practically every country on the planet), it’s hard to know where to focus.  To one degree or another, the CIA must spread its field force to cover the streets, alleyways and halls of government in all these locations.

The press feeds on intelligence failures.  “When it bleeds, it leads,” goes an old newspaper aphorism.  In other words, where you find a problem or a tragedy, you have a headline. The CIA has had its share in recent years.  Not a surprise. This is an agency that has at times been set up for failure. A company can target five discrete objectives and drill down. A corporation has a certain finite number of rivals. In contrast, the CIA has scores of objectives, wide ranging geographies, and seemingly endless enemies in this fractured world of terrorists. 

I can very much appreciate and believe that the CIA is indeed a wonderful place to work. We need this government organization. Yet, when comparing “intelligence productivity” at the CIA to that of a corporation, I believe maintaining focus may be far more challenging for the intelligence professional than for his corporate counterpart. As one of the sales tag lines in the CIA ad states: “These exciting careers offer fast-paced, high-impact challenges in worldwide intelligence collection efforts on issues of US foreign policy interest and national security concern.”  “Worldwide” is a big agenda. Even for very smart people, you need focus.

Is reality stranger than fiction, or do war games presage reality?

Two months ago, March 4, 2008, we ran a public war game among four leading business schools on the newly emerging wireless Internet (We run these war games privately for clients worldwide when they need to make critical decisions and significant investments.  The results this game achieved mirror the great success we have had with clients who use such games to learn their best strategic options, as well as anticipate a rival’s moves).

Here is a fictional press announcement at the public event that appeared on the future date of May 6, 2008, announcing a future mega joint venture to roll out a wireless Internet. We dubbed the fictional project, Crystal. Here is a portion of the announcement:

“In a surprising turn of events on the part of major telecommunications and media players, a new deal has emerged that is likely to turn the wireless Internet and the mobile phone business on its head and its called Crystal, the 21st century’s first mega communications deal to form a vertically integrated media company with a totally wireless backbone. Crystal’s new executive board consists of a power lunch A-list: John Malone, media baron and Chairman of Liberty Media, Sprint Nextel’s Xohm (WiMax) division president, Barry West, Craig McCaw, founder of Clearwire, a high-speed wireless Internet provider, and Microsoft CEO, Steve Ballmer.   The venture would be funded by Abu Dhabi Investment Authority, most recently noted for its recent $7.5 billion cash infusion into Citigroup.” 

Eerily, today, on May 7, 2008, The New York Times actually announced such a deal. Here is what the article said:

“A who’s who of technology and telecommunications companies plans to announce on Wednesday that intends to build the first of a new generation of nationwide wireless data networks, according to several people briefed on the deal. The consortium includes a disparate group of partners: Sprint Nextel, Google, Intel, Comcast, Time Warner and Clearwire…The partners have put the value of the deal at $12 billion, a figure that includes radio spectrum and equipment provided by Sprint Nextel and Clearwire, and $3.2 billion from he others involved. They expect the network, which will provide the next generation of high-speed Internet access for cellphone users, to be built in as little as two years…”

Did I and my team have a crystal ball to be able to anticipate this announcement so accurately and so clearly over two months ago?  No. What we had was a war game that analyzed all the competitive pieces and allowed some very smart business school students imagine where the industry was going to go next, over the coming one to two years.

What are the headlines you have not yet read about? Well, if the games predictions prove similarly accurate, over the next two years, you will see the following headlines (or some that are very similar):

 Intel will likely enter the landscape through the backdoor by helping PC makers get into the handset business.

 Google will do “a little evil” and partner with AT&T (or possibly one of the other one of the phone carriers)

 Adult content may become the “killer app” for launching the wireless Internet. 

 Google’s roll-out of Android will run into stiff resistance on the part of mobile phone manufacturers because Google and handset producers have opposing views of the wireless future.

There is little magic in predicting industry events in the near term, just a lot of discipline. This discipline is a blend of applying the right intelligence with a strategic framework – not just a lot of important people in a room brainstorming an argument. Anticipating competitor moves means learning how your competitors think. War games do this very effectively, across all industries.

They’re in, they’re out!  Just last month, Sprint and Clearwire attempted another deal to launch a disruptive telecom service based on WiMax. This time the ill-fated deal was with Time Warner and Comcast.  This deal unraveled this week.

Is it over? No not by a long shot.

Fuld & Company ran a war game on March 4 to stress test the strategic positions of the cable companies, the telcos, the investment houses, and even Google, all of whom jumped into the FCC auction that concluded in the same month.

Once we introduced this little disruption, all the teams began to talk to each other, no one wanted to be left at the alter. The deal announced a wireless (based on the new WiMax spectrum made available from the FCC auction) mega-deal.

If there is an intelligence lesson here, it’s in two parts: (1) Deals happen, to paraphrase a bumper sticker. In any active, high risk markets certain players will always jump into the waters early. The press often follows closely behind, stirring up interest. While we are all reading the press, such as “Comcast Time Warner discuss nationwide WiMax Plan,” on March 25, Associated Press wire service, it seems that more deals will come.  Then, (2) we see the deal falling apart no even one month later.  The second lesson lies with the fact that even good intelligence, as teased out of a war game event, may be true but may also foretell bad decision making on the part of others.

In fact, the war game also foretold other quieter changes: That Google will do a “little evil” and start forming alliances with various telecom carriers to carry its mobile search engine. Nokia and other handset makers may start dealing with Intel – because they will have little choice. The carriers’ so-called walled gardens, where consumers can only buy phones locked into one network or another, are soon to become history – whether or not the phone carriers like it.

These quieter events – not nearly so dramatic – are the ones you need to look for. They are also intelligence products from the same war game. Yes, the dramatic, the mega deals will happen, but they may not be as powerful as the powerfully (but quietly) game changing activities moving around in the background as we speak.

I promised you the findings on our most recent public war game, and here they are:

Four top business schools predicted in the March 4th war game (”The Battle for the Wireless Internet”) that the FCC 700MHz wireless spectrum auction will produce deal-making with lots of cash changing hands but only small near-term tech advances as far as the consumer is concerned.  This first-of-its kind war game championship among the USA’s leading business schools, organized by Fuld & Company and taking place in Cambridge, Massachusetts, featured students from the Chicago Graduate School of Business, Harvard Business School, MIT’s Sloan School of Management, and Northwestern’s Kellogg School of Management.

The business school teams assumed the identify of four companies in the much heralded wireless Internet space, catalyzed by the FCC auction expected to end within a week. AT&T Mobility (Harvard), Google (Chicago), Intel (Kellogg), and Vulcan Capital (MIT), a venture capital fund with cable TV interests run by Microsoft co-founder Paul Allen.

All teams worked to predict the company strategies that may follow the FCC auction. The B-school teams showed much initiative and innovative thinking but proved to themselves that the companies they represented may all have a difficult time rolling out a true wireless Internet offering within the next two years.

Even if all the auction-participating companies represented in the game – that includes AT&T, Google, and Vulcan – won 700MHz licenses at auction, the companies themselves may be hard pressed to build out the infrastructure fully within the next two to three years. 

During the course of the game, each team “stress-tested” opponents’ strategies. By the game’s conclusion both judges and student teams served up a number of predictions for the upcoming year, post-auction:

• Intel, nearly a non-participant in the mobile phone market, will likely enter the mobile phone space through the PC backdoor by helping PC makers – a market Intel dominates – get into the handset business. Rather than try to push an equivalent Intel Inside® theme to the handset companies – an action that will likely be resisted because of the “chip tax” these companies would absorb, Intel will work their way into the WiMax space through the PC world.  This seemed appealing to the Intel team particularly as it began to see the worlds of the PC and handheld mobile devices converging.

• Google will do “a little evil” and partner with AT&T (or possibly one of the other one of the phone carriers not represented in the game; Verizon is a second likely choice) by forming an exclusive but time-limited agreement, similar to the AT&T-iPhone deal.  For the period of that agreement, AT&T will open its network to other handheld devices and applications, at least for the time being breaking down the “walled garden” that the major carriers currently have in place. In exchange, the student team suggested that Google will share 20% of its advertising revenue with the carrier. 

• Adult content may become the “killer app” for launching the wireless Internet.  As suggested by one of the judges in response to team discussions on applications, adult content is already a significant presence on the Internet and will likely have the same effect on the wireless Internet when launched. 

• Google’s roll-out of Android will run into stiff resistance on the part of mobile phone manufacturers because Google and handset producers have opposing views of the wireless future. Traditional handset manufacturers, led by companies such as Nokia and chip companies, such as Intel, will resist Google’s cloud computing march towards open-source and open development based on its Android platform.  Intel and mobile phone manufactures believe that they can only make money by selling a feature rich, memory rich set of phones.  Simple phones are commodities. Google’s Android and its cloud computing concept moves data and operating software away from the devices and into the network (closer, of course, to Google’s ad-serving machine).

Following an initial round, Fuld introduced a disruptive scenario. The future scenario, dated May 6, 2008 post-auction,  involved Sprint Nextel teaming up with DirectTV owner and former cable TV wheeler and dealer, John Malone, WiMax company Clearwire, and the newly minted Microsoft-Yahoo! to form the first truly wireless Internet joint venture. The pressure of imminent competition from this fictional scenario forced all four teams to grapple with both their limitations and the reality of their vision for the future.

Kellogg’s team, representing Intel, won the war game contest based on four criteria:  its strategic insight, accuracy in presenting Intel’s strategy, creative ways it expressed Intel’s vision in the wireless Internet space, and, finally, its ability to project its strategic vision into the future.

As the FCC auction of newly available radio spectrum continues into March, tech and telecom watchers have barely said a word. If you do see an article or two, it is usually burred on page 10 of the business section.  But don’t be fooled.  This is not a non-event.  You can be sure that lightning has already ignited in the distance, but  you just haven’t heard the thunderclap yet. Believe me, it’s coming.  When it does, the telecom and Internet businesses as we know them will rapidly head down a road of change.

 That is why my firm is running the first-ever national championship war game on this subject on March 4 in Cambridge, Massachusetts.  Top-ranked business schools from Harvard, MIT, Northwestern, and the University of Chicago will stress test various corporate strategies and attempt to predict how the wireless Internet will look a year or two after this pivotal auction.

 Google has bid for a piece of the 700Mhz spectrum, which is a prime candidate for promulgating WiMax.  WiMax, unlike its weaker space-bound cousin Wi-Fi, can leap tall buildings with a single antenna – and even pierce those buildings.  Some tech watchers have accused Google of not being serious in building any infrastructure whatsoever. Instead, they contend Google’s sole purpose is to goad all the incumbent telecom wireless carriers to move their wireless systems to open platforms, platforms on which Google wishes to place its Android search screen (a shrunken version of the desktop search box).  Mobile phones are growing at a meteoric rate (according to IDC, the number of mobile phones sold in 2007 was about 1.14 billion – approximately 12.4 percent more than in 2006), and Google wants a piece of the action. The thought of Google entering their turf is no doubt causing great concern to the likes of AT&T, Orange, Sprint, Vodaphone/Verizon, and dozens of other global wireless companies.

 What about Intel intentions to promote WiMax, or Microsoft co-founder Paul Allen’s investment in cable TV?  Both moves are emblematic of a vast array of corporate interests lining up to invade the once walled-garden world of telecommunications. Carriers will no longer control their own destiny. New entrants converging from widely different worlds with hugely diverging objectives want a piece of this new telecom gold rush.

 I will let you know in a couple of weeks how the war game turns out. If this public event, this national championship, plays out the way similar events have in the past, I will have a number of predictions for you that will prove prescient.

 As they say in the communications business, stay tuned!

Choke.  With the sting of the almost-perfect Patriots losing the Superbowl still fresh in my gut, I found it hard to write this note to you.  New England’s dashed hopes are old news by now, but a lesson echoes in my head nevertheless. It’s this lesson I want to share with you.

Yes, last Fall, well before any talk of a record-breaking season, the Patriots garnered a good deal of negative attention for the so-called Spy Gate incident. For those of you who don’t remember, Coach Bill Belichick and his sideline crew were accused of illicitly video taping the Jets’ defensive plays, an action outlawed by the National Football League.  You can either Google the news on the incident or look at an earlier blog of mine (See:                                     )

Yes, yes, I will get to the point that I allude to in the blog title. The Patriots are a superb organization, well-managed, well-run from top to bottom. They were within two minutes of winning the final battle, and even if they had, I still might have written this blog. In fact, I would have felt far more compelled to do so.

Let’s say the Patriots did win. This would have been their fourth Superbowl victory in half a dozen years–a miracle in this salary-capped, rough and tumble sport where a few bad plays nestled among many brilliant ones can cost you a game. Let’s say, therefore, that the Patriots continued to play nearly perfect ball all the way through the season, all the way to the finish line.  What then could I say about Spy Gate?

On the surface, the Patriots organization remains well run, with few outbursts and little outrageous behavior on the part of its players.  That’s fine, commendable even.  The New York Times published articles dogging the Patriots and Spy Gate up to (and on) Superbowl Sunday itself.  I’m not sure what the Times was attempting to accomplish, aside from selling more newspapers (I hope I don’t sound too cynical or biased). The Patriots may have deserved a greater punishment than the slap-on-the-wrist they received.

Sports commentators around the country continue to downplay the severity of the crime. After all, they said in various ways, video taping to catch play signals was common practice for many years, and likely continues still. The only difference here is that Belichick got caught with his video camera in the cookie jar.

Is that all we are worried about, getting caught?  Is that the only lesson the Patriots have taught us as we enter the remaining month of winter?  Is that all companies should worry about – getting caught? I hope not.

The worry about getting caught is just the symptom of a much larger problem. Football is an aggressive sport both physically and mentally. Players must be hyper focused in a somewhat chaotic environment.  Chaos – whether it’s the chaos of the trading floor, the hectic pace of a salesperson on the road, or the pressures and unexpected hiccups prior to a product launch – does not excuse stepping over the line.

Management teams that only worry about getting caught are the ones who actually will get caught because one day their actions will surface in the wrong places.  Executives need to think through the cascading results of turning their heads on unethical behavior.  They cannot condone (or pretend not to know about) desperate pleas to beat the competition at all costs.  These executives need to take responsibility to ensure that such desperate pleas are answered with rational, ethical, and legal methods.  Just ask Hewlett Packard (HP) about the damage incurred from its pretexting scandal a year and a half ago. Simple suspicion that a leak existed among the companies board of directors cascaded into a complex series of highly questionable intelligence-gathering activities.  Even though the gathering occurred through arms-length transactions, it resulted in law suits and a stain on HP’s reputation.

I have counseled many companies on their competitive intelligence and information-gathering compliance guidelines. Too often, I find these companies worry a lot, but give little thought as to consequences of their ill-defined guidelines. This is a dangerous game to play, when companies just worry but don’t ask “what if”?

At the same time, management cannot rely upon standard guidelines, such as those published by The Society of Competitive Intelligence Professionals. That list of general statements is just a start. Companies need to examine how they behave in their specific marketplace. Different industries have different norms; that’s a fact. 

So, I’m sorry the Patriots lost. What a depressing night it was at 11:30 pm that Sunday night.  The Patriots fought hard until the very end.  Still, it does not excuse the fact that the team broke the rules.  It does not excuse the fact that the NFL let the Patriots off with a slap on the wrist.  While I know this so-called Spy Gate scandal will become a sports footnote over time, in my mind it remains a core lesson of why companies should compete aggressively but fairly. 

Sometimes bad things do happen to good companies, deservedly so.

 Let’s start the new year by wiping some bad habits off the grease board.  I want to tear into my pet peeve of “competitor profiles,” an apparent CI staple.

 For nearly 30 years, I have visited, counseled and critiqued intelligence departments or their equivalents. Invariably, the manager or director shows me the array of competitor profiles lining the shelves, proof-positive the competitive intelligence department is doing its job. Doing what job, I ask?

 Back in the mid-eighties before the widespread use of email and nearly a decade before the World Wide Web, compiling a competitor profile made a lot of sense. It didn’t provide the final answer, but was a sensible activity nevertheless. Executives clamored for such documents because they assembled in one place recent news announcements about rivals, industry changes, government regulatory activity, and so on. Typically, these were weekly, sometimes monthly distributions.

 Fast forward to 2008; it appears not much has changed. Too many executives still receive these newsfeed profiles.  In sharp contrast, I have also witnessed a new crop of analysts who present pinpoint, high-value insights in competitor assessments designed to directly address their executives’ critical concerns. These in-house analysts are my intelligence heroes.

For the rest of you that still think a neat compilation of news articles will do the trick in today’s news-rich, easy-information-access world, you are just fooling yourselves.  If your profiles are simply mash ups of existing news articles, you are wasting your time, as well at that of your customers.  

Almost without a doubt, companies large and small nowadays can use technology, much of it free, to push news items of interest to management. Do not waste your precious time and political capital underwhelming management trying to duplicate the news-delivery capability of Google News, Factiva, or LexisNexis. 

 Okay, now that I have that rant off my chest, let’s focus on the intelligence heroes.  I am referring to Craig McHenry of Wyeth (See Intelligence Diaries, Pharmaceutical Executive, November 2007). I am referring to Daniel Vasella, CEO of Novartis who actively promotes open competitive discussion, or Gary Roush of Corning who always pushed his colleagues at Corning to ask the tough questions that go far beyond front page news (See, The Secret Language of Competitive Intelligence, Crown Publishing 2006).

 My intelligence heroes are always asking important questions as they create this new breed of competitor analysis: Why is the competitor doing what it is doing?  What does it intend to do next? If we react by expressing strategy A vs. strategy B, what might happen?  What other options do we have? These are all important questions, the answers to which rarely find their way onto stale competitor profiles.  Competitive intelligence folks must answer these and other similar substantial questions for executives. Profiles filled with rehashed news reports are not “actionable,” an overused but important CI phrase; only analysis combined with recommendations and probably some face-to-face arguments (excuse me, discussions) make intelligence actionable.

 Mash-up profiles, a time waster.  Analysis and recommendations, priceless.

Just before we all stepped away from our desks at the end of 2007, I challenged you to answer five questions. These questions related to five intelligence events I felt had the greatest impact on my thinking in 2007.  Here are the answers. Let’s see if you agree:
Question 1:
How has Google upset the phone business – without even having entered that business? Which phone carrier has already reacted? What early warning signal was this carrier watching before making its announcement?

Answer:  Google’s threat to buy its way into the mobile phone business was one of the loudest competitive signals I have heard in the last decade.  If you are not in the cell phone business, you may have allowed this announcement to slip under your radar. Let me explain.

Google’s disruptive moves may also allow handset companies, such as Motorola and Nokia, to innovate, selling products to anyone who wants them. Likewise, Intel will see opportunity in a potential Wi-Max explosion, possibly selling an entirely new family of specialized microchips and establishing a new mobile phone standard. Microsoft will see a similar opportunity to extend its influence far beyond software and operating systems for the desktop or laptop

Here is why the world of mobile phones and wireless technology that so dominates our modern lives is about to dramatically change along with the old rules and entrenched corporate giants that govern this world.  In the United States in January 2008, the Federal Communications Commission will conduct an auction for a piece of the radio spectrum (700 MHz) that will become vacant when the broadcast industry completely switches over to high-definition TV. This end of the spectrum has the ability to carry signals much farther and at lower cost than the cell networks now in place. According to experts, unleashing the 700 MHz band will make Wi-Max nearly universally available – not limited like its weaker cousin, Wi-fi, by a 150-foot perimeter around a transmitter. More significant, Wi-Max may replace traditional cell networks altogether. Wi-Max antennas are much cheaper than cell towers and have a smaller footprint (meaning that city zoning boards can approve their installation since they will essentially be out of sight).  The FCC auction will give rise to a competitive stampede. Italy and Norway will have a similar auction at the end of 2007, with the UK, Austria, and Sweden set to follow at the beginning of 2008.

Historically, the FCC has allowed certain carriers to control portions of the radio spectrum (Verizon, AT&T, and other traditional phone companies). These companies control the hardware and technology permitted on their systems, and no one else can gain access.  Shortly after the FCC announced its intentions to auction this additional piece of the spectrum and allow consumers more choices, a new set of companies entered lobbying for new rules. Dell, Phillips, Microsoft, and Google, among others, formed the White Space Coalition, a group petitioning the FCC to open these new channels to unlicensed users and devices.

Traditional phone carriers–such as Verizon (or its partner, Vodaphone, in Europe), AT&T, Orange, and Sprint–are justifiably nervous about Google’s threatened entry into the mobile telephone market. Google’s now-famous business approach is to make all services free or nearly free, funding everything through targeted online advertising. If the carriers lose the initial argument to block Google’s make-the-airwaves-free petition with the FCC, it would mean that their subscription model may no longer work. Why should customers pay for access, when they can suffer a few ads and pay nothing for the actual phone service?
Question 2:
Which famous investor concluded a very large and a very public acquisition inside of two weeks? Which company did he buy and what types of intelligence helped him identify the acquisition? How did his action prove that competitive intelligence is a combination of experience and information – where investor experience diminishes the need for heavy doses of information, in turn speeding the decision to buy? 

Answer: Surprise (not really!), the answer is Warren Buffett. His proposed acquisition of Marmon Holdings for $4.5 billion hit the year-end with a wallop. From all newspaper accounts, he spent a couple of weeks considering the deal then pounced.  He apparently had known the Pritzker family for decades, and likes their way of managing and growing companies. He also liked the very fundamental industry that Marmon Holdings represents, box cars and shipping equipment. 

The question I posed focused less on the decision and more on how Buffett came to that decision. In a broad sense, Buffett knows his KITs (Key Intelligence Topics): A company with strong and stead (1) cash flow and (2) companies that operate with high barriers to new competitor entry. 

You may laugh and consider that these are two very simple criteria. Yes, they are but Buffett will drill much further into each category, likely generating scores of questions each focused and reflecting on one or the other KIT.  His knowledge of manufacturing industries (Marmon, an industrial conglomerate itself, is known for its capital intensive products in transportation and construction equipment)  also allows him to make certain assumptions or to gather insights based solely on observation or asking pointed questions.

Buffett eschews the formality and bureaucratic smell of PowerPoints. It is speed and details that concern him. Buffett has taught me once again that vise-like focus on the important questions, combined with experience to speed decisions, separates the dawdlers from the winners.
Question 3:
Which agri-business company believed in the opportunity for genetically modified seed nearly ten years ago - despite all the negative press?  Why did it persist? What intelligence did it find promising enough to further invest many hundreds of millions of dollars? What is the key intelligence lesson in this case?

Answer: Monsanto is that company.  Its management stuck it out through all the bad, mostly Western press, to become a dominant player in genetically modified seeds.

A December 6, 2007 BusinessWeek article described Monsanto’s remarkable accomplishments: “While a vocal band of opponents is still protesting biotech crops, a growing multitude of farmers around the world is planting them. The reason is no mystery: Monsanto seeds contain genes that kill bugs and tolerate weed-killing pesticides. So they are much easier and cheaper to grow than traditional seeds. More than half the crops grown in the U.S., including nearly all the soybeans and 70% of the corn, are genetically modified. Just five years ago, China, India, and Brazil planted virtually no genetically engineered crops. Now Brazil can barely build roads fast enough to get all of its biotech soybeans from the fertile interior Mato Grosso state out to ports. Farmers in China and India, meanwhile, planted more than 17 million acres of biotech crops last year. These three countries are now three of the six largest GMO-planting nations in the world, as measured by area planted.”

Back in 1999, a hoard of news articles appeared about one of Monsanto’s earlier GMO products, notoriously nicknamed the Terminator seed.  Even, the St. Louis Post-Dispatch, Monsanto’s home town newspaper declared in an editorial, “Monsanto Should Renounce the ‘Terminator.”  

Then, again, a number of news sources in the non-Western press thought much better of Monsanto’s genetically modified products. The Economic Times of India declared “Farmers gain from genetically improved crops.”  Japan Chemical Week analytically decided that Monsanto had an interesting and possibly very useful product: “Monsanto Japan Developing Herbicide-tolerant Rice Varieties.”  Both these articles appeared within a month of that editorial in the St. Louis paper.

Monsanto adopted the long view here. It is unclear exactly if Monsanto’s management truly appreciated the political firestorm that would erupt over GMO products back in the late 90s.  Nevertheless, it trained its sites toward the strategic horizon, marketing its products where they were needed, biding their time and likely working with lobbyists and regulators to both demonstrate the economic viability and even necessity for its biotech offering.

The world eventually came around – mostly, anyway.  “Intelligence is not always tactical” is an important lesson to remember in this day and age of blogging, quick-Google hits, and the urgency of companies to meet quarterly stock analyst expectations.

Question 4:
Which two 2007 business scandals underscored the need for ethical guidelines in information collection – both involve sports organizations, one in the US and the other in Europe?

Answer: The short answer: In the U.S., the Patriots football team steals the opponent’s (The Jets) defensive signals during an early season game. The coach is fined and the team penalized.  In Europe, McLaren is accused of stealing Ferrari’s technical specs for its race cars, thereby giving McLaren unfair competitive advantage. McLaren was forced to pay a £50 million fine, as well as having to forgo a critical race this past season.

The longer answer is that sports is a business, plain and simple. Competitive knowledge and its importance to achieving a win are truly out there, exposed to public view.  I win; you lose. Sports is far more of a zero-sum game than most businesses. In business you can collect information then develop intelligence that wins you some market share but you don’t typically expect that intelligence to truly vanquish a rival. In sports, a piece of intelligence can help you accomplish a complete victory.

Perhaps that is why we typically hold sports up to a high standard, a noble standard.  Therefore, when a team or its management fails to meet that lofty standard we are shocked – even if for a moment.  Companies may be able to claim a more complicated set of reasons; all is not as black and white as a game of football. That’s not clear. I believe that sports and business have a lot in common: Loss of reputation, loss of money.  Just as the Patriots and McLaren.
Question 5:
Which Internet social phenomenon explosively grew in 2007, first beginning a few years ago as a popular Net-based community activity now finding ‘business legs”?  Why is it likely to become a powerful corporate intelligence concept in the years ahead? 

Answer: Social networking…I think I actually gave this one away by the way I phrased the above question.  Friendster preceded Facebook and Linked-In by some years but for some reason social networking sites exploded in size and prominence in 2007, growing to 50 million members (up from just 20 a year earlier).   Two major events sparked the growth and acceptance of social networking, both of which legitimized the concept and in effect made them true communications platforms – across and between companies, as well as communities.  First Google’s purchase of YouTube expanded its search and advertising model into the sharing-video realm. It’s not clear that Google has truly figured out how to monetize this platform but it has fed its growth.  In another quieter announcement, Facebook opened its programming platform to developers in May 2007.  According to an Information Week article appearing in October 2007, Facebook’s gambit has paid off: At that time over 100,000 developers already signed on with Facebook.  Facebook’s not-to-modest goal is to rival or supplant Microsoft as the platform of choice for everyone. This is indeed an ambitious plan but one that has born some fruit.

My experience in 2007 is that business managers who never before knew what social networking on the Net was joined either Facebook or Linked-In, or both.  My LinkedIn network grows from some scores to millions of contacts – only three steps removed from me. This is a powerful tool we can all leverage for information collection or simply to make the world far smaller each and every day.  These sites foreshorten our ability to reach someone who can answer our questions even though we may never before have met.  Wow! What an amazing tool, what a powerful intelligence opportunity.

I don’t know when or where social networking became a legitimate intelligence tool but somewhere, sometime in 2007 it happened.

Rather than reflect on good and bad personal habits we seem to acquire each year, I instead want to focus on the intelligence lessons I learned these past twelve months. I won’t spoon feed you the lessons; I prefer you guess which ones caught my attention.  Read the five challenging questions below. See if you can beat me to the answers before year’s end.  Next week, the beginning of 2008, I will offer my answers (If you can guess them in advance, please file your comments below):
1. How has Google upset the phone business – without even having entered that business? Which phone carrier has already reacted? What early warning signal was this carrier watching before making its announcement?

2. Which famous investor concluded a very large and a very public acquisition inside of two weeks? Which company did he buy and which types of intelligence helped him identify the acquisition? How did his action prove that competitive intelligence is a combination of experience and information – where investor experience diminishes the need for heavy doses of information, in turn speeding the decision to buy? 

3. Which agri-business company saw an opportunity for genetically modified seed nearly ten years ago - despite all the negative press?  Why did it persist? What intelligence did it find promising enough to further invest many hundreds of millions of dollars? What is the key intelligence lesson in this case?

4. Name two 2007 business scandals that underscored the need for ethical guidelines in information collection – both involve sports organizations, one in the US and the other in Europe.

5. Which Internet social phenomenon explosively grew in 2007, first beginning a few years ago as a popular Net-based community activity now finding ‘business legs”?  Why is it likely to become a powerful corporate intelligence concept in the years ahead? 
I look forward to giving you my answers when we all cross over to 2008.