Intelligence lessons from the dugout
The Boston Red Sox, jet tail markings, a Japanese wunderkind, and intelligence lessons to live by.
The Boston Red Sox, as they say in this town, own your heart one minute, and tear it out at the next. In 2004 we won the World Series for the first time in 86 years. Jubilation reigned. By 2006, the season unraveled all at once after the All Star break. This year’s Red Sox pre-season rebuilding efforts bring with them intrigue, big trading dollars, and lots of good competitive intelligence stories. The big CI story is about our new Japanese pitcher, Daisuke Matsuzaka, or Dice K as the media has already dubbed him.
The story begins nearly three years ago when the Red Sox scouts first saw this star pitch hurl his ball in Japan with pinpoint and devastating accuracy. They saw what he could do rather than relying on rumor and hearsay. The scouts were on the ground and gathering intelligence on Dice K – three years before cutting the deal – talk about strategic thinking! These same scouts made sure to let the Japanese team owners know their seriousness by being on the ground, visiting with them continuously, making sure to maintain the dialog throughout.
The true intrigue began a week ago when the Sox, facing a Dec. 14th deadline as one of the rules for negotiating with a Japanese league player-had to make a final push to seal the deal with the pitcher and his agent, Scott Boras. Red Sox owner John Henry did everything he could to slip away to the critical negotiations without being seen. He covered over the Red Sox team logo on his plane’s tail to avoid easy detection, then filed a flight plan for Houston (giving a competing team the notion that perhaps Henry and company was headed to Roger Clemens’ doorstep to resign the ace Texas pitcher), then changing direction to California to clinch the Dice K contract.
There’s more to this tale (Wooing of pitcher was wowing, The Boston Globe, December 17, 2006). It’s a story about furtive, eleventh-hour bidding techniques and about sizing the actual value of the Japanese pitcher. It’s about not suffering buyer’s remorse, possibly outbidding competitors by as much as two-to-one.
Most of all, it’s about a savvy management organization that is willing to live with some risk, one willing to make relatively quick decisions. This was a case of one organization doing everything it could not to signal to the competition. They wanted to hide their tactics that would – if revealed – have undermined their long-term strategy of rebuilding their pitching rotation.
Yes, it’s true, life is not all about baseball (tell that to a loyal Red Sox Nation). Lessons from this international race for talent are clear, and they are directly applicable to professional business, not just professional sports: You cannot delay decisions when markets move quickly; intelligence that gives you competitive advantage is fleeting. Finally, intelligence never eliminates risk, it just reduces risk.
Go Sox!
Never forget, companies have issues!
Workmen were all over the nineteenth century house, rehabbing it. A developer bought it and plans to turn it into condos. As I walked by the house recently, I wished the foreman good luck. “Yup,” he said, “this house has issues, lots of issues.” What he meant was the house, now at least 150 years old, suffered from neglect and disrepair. With every wallboard he pried off, he discovered underlying structural problems – or issues.
Companies have issues, too. One of the goals of a competitive intelligence assignment is to uncover these issues.
Wal-Mart, GE, Johnson & Johnson, Virgin Atlantic, Toyota, all have issues. Any company that has existed for a long time develops issues, otherwise known as inefficiencies, runaway costs, and outmoded marketing techniques.
How do you uncover and realistically determine a company’s underlying problems (in detail, and in advance of the rest of the market)? The more important is the “why,” why is it important? A simple example: Wednesday, this past week (November 29, 2006), Wal-Mart announced it would begin rolling out a video downloading service – the real threat to traditional video stores. A few days later, Wal-Mart announced a drop-off in sales and the market began to worry. What is the truth here?
The headlines will never tell you Wal-Mart’s issues; or if they do, it will be too late for you to do much with this information. Everyone else then has the same information and your competitive advantage has disappeared.
With regard to Wal-Mart’s video downloading service, if you are Blockbuster, you want to understand the infrastructure Wal-Mart or its partners in this venture have built. Do they have the bandwidth, the server farm necessary, the inter-face? Who is developing this interface? How has Wal-Mart fared in the past with regard to Internet commerce? You need to keep these questions focused. Most significant, the research must occur at the street level. You need to find out what Wal-Mart’s suppliers know, understand the cost structure, the potential bumps it will experience.
Just like my walking by the outside of a rehabilitated house, seeing only the gloss, so too, you need to go beyond the headlines if you are to see the issues that lie hidden in wait.
Apple to license its iTunes platform to outside online music stores.
Whoa! Is it possible that Apple would open up its entertainment ecosphere to other companies, possibly competitors? If the war game we ran among University of California (Irvine) business school students is any indicator – and such war games have been in the past – market pressures will possibly force Apple to license its iTunes platform to a variety of online music stores.
This event took place last week but will likely presage the market by a year.
Mark my words. Two years ago during a war game that we facilitated between MIT and Harvard business schools, the students predicted, 6 months in advance, that Microsoft and Google would fight fiercely over an investment in AOL. For although AOL’s subscriber base has continuously eroded since the explosion of cable modems and digital subscriber lines (DSL) via the phone companies, there were still approximately 20 million subscribers with 40 million eyeballs to see all that advertising. This was a prize that both business school student teams began to see clearly as the war game stress-tested each team’s strategy.Earlier this year, a rematch between the two schools examining the digital entertainment space forecasted the Apple announcement of iTV, the exact label students at the March 2006 game gave the Apple initiative – after they too were pressed to reassess their Apple-designed strategy. So here we are in Apple land, once again. In this game we suggested a plausible scenario where Wal-Mart and Dell would form a partnership to sell both music and Dell MP3 players. This initiative caused the Microsoft, Apple, Verizon, and News Corp teams to examine their stated strategies very closely. Apple realized it could not stay put.
When confronted by the game’s judges – the equivalent of a board of directors – the Apple team knew it needed a course correction. It would open its DRM (digital rights management) system, in effect licensing its iTunes platform to others in order to extend its market penetration. The partnerships proposed included one with News Corp. and competitors Disney-ABC and Time Warner, as well as with Verizon to create a content distribution management system for digital home entertainment.
Rub your eyes and open them. Yes, today Apple remains as tightly shut as ever, its iTunes firmly in its grasp, the Do-Not-Enter sign posted on the door. Tomorrow, though, who knows? If these business school students are right, and we have discovered that out of the mouths of babes come some prescient thoughts, expect the unexpected in Apple land.
Of Blogs and Wikis and Intelligence Failures: Lessons from a backwards science experiment
This past Sunday, The New York Times presented a cover story (Rewiring the Spy, The New York Times Magazine, December 3, 2006) about the vast open-source technology that has emerged, and how it severely challenges the government intelligence community. I read it and commiserated, for governments all over the world now face terrorist threats that are potentially as lethal or disruptive as any state military force.
What are the real, underlying questions, and how can business learn from the intelligence crisis government now faces?
The author’s conclusion appeared to be twofold: Number one, it is inevitable that government intelligence bureaus will become more Internet-savvy, latching onto open source information using the latest blog and wiki monitoring tools; two, government must become more fleet-footed altogether. Without increasing speed and improving decision making, all the best technology in the world will be for naught.
In my estimation, we must never forget that the U.S. may have jumped a bit too quickly into Iraq because of poorly gathered and conveyed information on Saddam Hussein and his so-called Weapons of Mass Destruction. It was groupthink, that very human inclination to go along with the pack, that tripped up analysts. Little on-the-ground information was available and it proved to be specious in the first place.
“In July 2004,” I wrote in The Secret Language of Competitive Intelligence (Crown Publishing, 2006), “the Report on the U.S. Intelligence Community’s Prewar Intelligence Assessments on Iraq detailed a story of intelligence breakdowns that in may ways mirror the psychological stumbling blocks I have seen in companies over the lasts twenty-five years.”
In effect, the invasion of Iraq was a backwards science experiment. Analysts drew their conclusions, then made the facts fit – even if the data was less than credible.
Yes, government needs the best technology, but first it needs to know what is really happening on the ground. Once it does, it needs to act, quickly and decisively based on intelligence gleaned from sources and activities it can verify.
The same lesson applies to corporations. Too many are conducting backwards science experiments, and paying a heavy price to competitors.
