Fuld & Company's Competitive Intelligence Blog

 
Dear Colleagues:
 
Fuld & Company has always been about delivering the best in competitive intelligence services to its clients.  Last week’s news about our acquisition and subsequent ability to now serve you with a larger Asia/Pacific presence and 24/7 research capability is something we believe will help you, our clients, very directly.  As the press release reads:
 
“As part of the acquisition, Fuld will be joining forces with Global Business Research Support (GBRS), a provider of competitive intelligence research services for consulting firms, research agencies and companies worldwide since 2002.  From its operations center in the Philippines, dedicated GBRS knowledge teams produce strategic and competitive intelligence reports on key markets, industries and players around the world.
“The addition of Manila-based GBRS will broaden Fuld & Company’s expertise, its service capacity, as well as allow for a true round-the-clock competitive intelligence services to better serve our multinational clients around the world,” said Leonard Fuld, founder of Fuld & Company.
“Fuld & Company’s operations and management teams in Boston and London will remain in place, continuing to deliver customized research and analysis, strategic gaming, and competitive intelligence process consulting services, with additional support and global reach through GBRS. 
 
Just think of the ways we can serve you in the coming years:
-          High quality analysis on a global level
-          Multiple language capability
-          Competitive analysis that takes into account many cultural perspectives
-          24/7 access to the Asia/Pacific region
-          Conduct war games and strategy games on a global scale for our multinational clients
 
This is just the beginning of the list.  We look forward to working with you in the years ahead.  I welcome your calls and comments.
 
Leonard Fuld

Companies must have rules but why do many corporations write information collection rules that are often unrealistic and even potentially harmful to themselves.  For more details on this argument, I recommend you read my recent article, How Competitive Intelligence Rules Encourage Cheating, appearing in the online Harvard Business Review Conversations section.  Feel free to post comments on the article.  I look forward to your opinions.

Here we are in the U.S. with election day upon us. I for one am sick and tired of all the attack ads skewering one candidate or another.  These campaigns have upset me without informing me one iota.   Similar failures – all be the less deliberate – occur inside companies all the time.  Why? Because you didn’t get the message across in a way the executive wanted to read it.
A few weeks ago I spoke to a group of competitive analysts in Brazil about how culture can change the way you deliver intelligence.   To be blunt North Americans typically want intelligence served up differently than Japanese, and differently than Germans.  This is not a criticism, just an observation.  In the thousands of research assignments we have undertaken over the last 30-plus years, we have seen the pattern.  To ignore the pattern is to do all the good work only to have the client say “We don’t get it,” or worse, “Please, do not contact me again.”
Rather than deliver you my recommendations, I prefer to open the conversation by posing three different cases to you.   What you would do in each case:

• We ran a war game with an American firm which has a China subsidiary.  The American executives asked to have the game run in China regarding a new product line being launched in China.   They wanted to make sure their very successful Chinese subsidiary make no mistakes.  We had a difficult time getting everyone to agree on the game’s objectives, let alone uncover competitors’ strategic weaknesses.  By the end of the two days, we did achieve some success but I would have wanted more, more engagement, more “we are one team,” etc.  What was the problem, the challenge and what would you have recommended to the client  – if you could roll back the clock?
• A Japanese company wanted to learn from the best-of-the best in innovation from American firms. This case took place over 15 years ago, by the way.  We chose Intel at the time because in all measures it managed to grow while at the same continually innovating – shedding old products while introducing new, successful ones.   The client understood our selection but rejected our analysis.  Intel by all measures was America’s great innovator.  In the end the client asked us to research another firm, one whose innovative prowess did not match Intel’s.  What about Intel do you think the Japanese client rejected?  A hint: It had something to do with organization structure. 
• Finally, we delivered a monitoring program for a pharmaceutical firm with two internal clients who saw the world very differently.  The marketing executive was satisfied with knowing the rival’s strategic direction, while the R&D chief wanted specifics on clinical trial enrollment and other quantifiable success measures.   At the same time, we had to make this client – both clients – happy with a single and tightly bounded budget.  What would you recommend we do here? Culture was at the heart of this challenge.

Yes, it happened: Allscripts is going to merge with Eclipsys…and we saw it coming over one year ago. 

Last year around this time we had just completed our public war game, The Battle for Healthcare Information.  The objective was to figure out where the emerging business of electronic medical records (EMR) was heading – along with the companies driving this fast-moving market.  One of the predictions was that Allscripts-Misys, among the leading players, would have to merge with another EMR company or a larger conglomerate such as IBM in order to capitalize on the growth opportunities.  Their sales force appeared too small to truly penetrate the more than 90% of the as-of-yet untouched market potential. 

Only two months after the game ended, Allscripts already began to reach out by forming an alliance with Cardinal Healthcare for assitance in sales and distribution.  Apparently that first “dance” did not develop into a something more permanent but it clearly began a process for Allscripts that lead to its just announced merger with Eclipsys.

Let’s see where this year’s game leads….The Battle for China’s Smart Grid.  I have already posted the conclusions from the US version of the game.  I intend to post our findings from the European-run version.  The conclusions and predictions differed somewhat.  More about this next week.

Today’s Wall Street Journal article headline said it all: Foreigners Vie to Upgrade China Grid.  Written from China’s viewpoint, it sees Western firms eyeing an infrastructure gold rush.  The reality is that the state-sponsored smart grid initiative is one of the largest infrastructure projects ever conceived with China spending up to $100 billion dollars over the next 10 years.

The article also underscores the conclusions from our war game and cited one of its primary assessments: “To ease Chinese concerns,” the article states, “Western companies that want to win big jobs may have to sell a stake in themselves to a Chinese state-owned company, according to a study by Fuld & Company, a Boston-based consultancy.”

In a recent trip to China I informally polled business executives and others who work in the energy industry there about the game’s conclusions.  While I raised a few eyebrows concerning the game’s predictions, no one told me “Impossible!” or said we were way out of touch with reality.  No, in fact those I spoke with stated that the game was an important platform upon which to stress test this market.

What will happen next with the smart grid in China?  What lessons will both Chinese and Western companies learn from this great energy petri dish China has set in place? What can the West learn from this experiment on how it can grow a market in China?  More important, what can both China and Western companies take away from the experiment they can then apply to the rest of the world in the decade to come?

Stay tuned in this space for more updates as we watch the war game’s predictions unfold.

On April 28, Fuld & Company ran its annual public war game in Cambridge.  This year’s topic was The Battle for China’s Smart Grid.  On May 2, I flew to China and reviewed the game’s findings with multinational businesses and academics in Beijing and elsewhere who are interested in the smart grid initiative. The sense from those that studied the game’s outcome was that it rings true.  Among the predictions: A Chinese company will become a part owner of one of the multinational players – not just a partner – in building out China’s grid.  The following is an excerpt from the press release we issued following the war game. What do you think? – Leonard Fuld

* * *

When it comes to building China’s smart grid, Western companies need to deal with multiple elephants in the room.

With 30-plus executives from energy and technology giants GE, IBM, Siemens, Hewlett-Packard and others looking on, four leading business schools yesterday participated in a war game to stress test the global strategies of these firms in competing for China’s $100 billion Smart Grid — only to encounter obstacles that had nothing to do with their companies’ technological prowess and everything to do with how they work with and within China. 
Through rapid-fire arguments, interrogation by an expert panel of judges, as well as questions from the corporate observers, “The Battle for China’s Smart Grid” War Game revealed many obstacles that many observers admitted that their companies must acknowledge and overcome if they are to win a piece of the $10 billion-per-year funding China has offered.   These predictions included:

• To fully take advantage of the emerging opportunities regarding the “smart grid” in China, Western companies, such as GE Energy, Siemens and Cisco, may have to sell a stake in their business.   Alliances and so-called loose partnerships are becoming less and less viable as tenable business positions in China.   The Chinese government is likely to want a piece of the intellectual property action for Chinese firms, and giving them a stake in publicly held Western companies would provide that stake.   At the same time, Western companies generally are uneasy about selling a piece of their business (or will have some difficulty pitching the sale to their domestic stockholders).  This poses some important strategic dilemmas and may necessitate a fundamental re-thinking of how foreign firms approach the Chinese market.
• Western companies need China to take on the world:  Western companies such as Siemens and GE have long believed that they can dictate the terms of expansion by their Chinese partners outside of China.  But a Chinese partner will likely become a necessary ingredient in any Western company’s global expansion plans by absorbing some of the financial and political risk among the diverse array of emerging opportunities across the globe.   The market in China is only the beginning for the Chinese government-run State Grid-approved corporations.  
• Standards setting and the capability to manage the buildout process represented by companies such as IBM may trump China-legacy firms such as GE and Siemens, selling technology and hardware into the Smart Grid.  As the IBM team (represented by the winning business school team, Kellogg) demonstrated, while IBM may have fewer years clocked in China than do GE or Siemens, it is offering an entirely different and high value sales proposition.  China wants and needs what IBM has to sell: skills in systems integration.  Aside from representing a true standards setter, IBM or companies like it can serve as the Smart Grid’s maestro, coordinating and vetting the other players in the Grid’s construction.  Cisco will need to participate in the standards setting process in order to preserve a place for itself against strong competition from Huawei, Cisco’s chief China rival.

The other elephants in this Smart Grid room identified by the judges and the teams playing out their roles included China’s concern about its own security in preventing others hacking the country’s system, as it hires Western firms who have the technological prowess to build out the Smart Grid.  Another elephant that Western companies have underestimated is capacity.  The grid needs to add enormous   transmission capacity at the breakneck pace China will demand.  China’s acceptance or nonparticipation in carbon pricing will also speed or slow down the expansion of the power grid.
“With a potential annual value of approximately US$20 billion over the next five years, the onset of the Smart Grid initiative in the PRC represents one of the largest, most strategically important global business opportunities for the coming decades,” commented Denis Simon, professor of International Affairs at the School of International Affairs, Penn State University and senior China advisor to Fuld & Company.  “Not only will the Smart Grid project define a potentially new, transformational economic trajectory for China in the energy field, but it also may serve as a catalyst for changing the rules of the road in terms of the way firms compete and cooperate across the global commercial landscape.”
All four teams worked hard to identify how the firms they represented in the War Game could add enough value to the Smart Grid initiative in China to earn profits for their companies.  They recognized the need to enter into strong partnerships with Chinese and potentially other Western firms in order to bring a successful package of products and/or services to the table. 
The Annual Strategy War Game National Championship, “The Battle for China’s Smart Grid,” was organized by Fuld & Company (http://www.fuld.com/).  IBM, Siemens, GE Energy and Cisco were represented by business students from Northwestern’s Kellogg Graduate School of Management, MIT Sloan School of Management, University of Pennsylvania’s Wharton School, and Yale School of Management.  Most of the students have worked in energy, technology and/or in China.  Last year, the War Game was on “The Battle for Healthcare Information”.  By the way, each of our public war games have made successful marketplace predictions each year.

This coming month we are running a public war game on The Battle for China’s Smart Grid.  We have very quickly seen that this is more than a strategic fight of Western companies for a share of a China mega-infrastructure project.  It will likely demonstrate how Western companies can succeed in a very fluid China market – where the opportunity is great the the stakes are high.

Just this past week the New York Times (Academic Paper in China Sets Off Alarms in U.S., March 20) reported on an academic paper written by two researchers from China on the vulnerability of America’s power grid to computer attack.  This article resulted in misinterpreted accusations regarding China’s intentions to “take down” the US grid. When interviewed the researchers pointed out that this paper was theoretical and lacked the necessary depth to accomplish what their accusers claim.  Besides, they wanted to make it very clear that they used the US case because they were able find enough data in America and not enough on China’s grid to allow them to analyze their own system. 
The more substantial question is how extensively will US and European energy and technology companies invest in plant, infrastructure, and product development in China – seemingly a necessity if they are to build out China’s smart grid?  Recent concerns expressed by US firms about new PRC government policies that place heavy emphasis on only procuring products and equipment that contains “indigenous Chinese innovation” raise questions about how much of the market actually will be available to foreign companies.

If one just reads the ongoing press about Google’s exit and arguments with the Chinese government, then it is clear that concerns about the PRC business environment are growing.    At the same time, with far less noise other companies, such as Applied Materials, a prominent Silicon Valley technology firm is moving some of its technology R&D over to Xian, China (Austin-American Statesman, March 22, 2010). What exactly is the center of gravity regarding foreign business thinking about China?
Finally in response to US trade pressure on China, the China’s commerce minister, Chen Deming, warned against the U.S. beginning a trade war with China (Washington Post, March 22).  
So, as you can see the Battle for China’s Smart Grid is far more than just about the technology itself. It is about nations trying to gain competitive advantage.  It’s about where the R&D will be taking place. It’s about trust and about how to establish a growing business in a new market with lots of promise.

 We just released a white paper on The Art of Anticipating Disruptions (click through to the white paper section of our website).  What is remarkable is how such a wide variety of headline-catching companies have managed to learn about and successfully plan for these disruptions. 
 We based this white paper on an examination of over 100 companies. Sixteen companies made the “cut.”  That is, 16 companies seemed to have built an intelligence mechanism that allowed them to see just far enough around their strategic corner.   Among the leaders cited in the paper are Wyeth (Pfizer), Intel, Cisco, Shell and Corning.
From those interviews, we identified five key success indicators that describe how the best-in-class companies anticipate disruptions. They are:
• Credibility – Intelligence activities have the explicit support of senior management.
• Investment – Most intelligence programs have full-time staffs and dedicated budgets.
• Communication – Early warnings are effectively communicated to key stakeholders.
• Training – Business managers can factor early warnings into their strategic planning.
• Action – Senior executives are prepared to respond to disruptive events.

I invite you download “The Art of Anticipating Disruptions” white paper; then I would ask each and every one of you to let me know if you feel your company or another not mentioned in the white paper are models we should also consider – and why!

Enjoy the read!

Whew! This year is about to end and what a relief for many of us. Busy, hectic, fractured are just some of the adjectives I will consider when looking back over my shoulder at 2009.  Next year promises to evoke a different set of adjectives, such as confounded and ill-prepared. I say this because we are about to complete a number of surveys that indicate 2010 will bring with it a number of specific short-term and long-term competitive warning flags:

Warning flag #1 – China continues to confound Western companies:  We just completed a survey on competitive challenges Western companies encounter when working in China. We conducted this survey in conjunction Dr. Denis Simon, Professor of International Affairs at Penn State University and the China Institute. Fifty-four companies participated, many with over 16 years of experience in the China market.  Among their competitive concerns are:
- The business environment remains uneven and extremely vexing
- Our chief competition in China today may be other multi-nationals but tomorrow are likely to be domestic Chinese companies about which we know terribly little
- Government policy so dominates competitive conditions, we feel we just do not have a handle on which way the “wind is going to blow” with respect to new regulations or changing competitive rulings
- There is a lack of informational transparency with much market data either not available or at times not accurate
Warning flag #2 – We are inadequately prepared for the next healthcare marketplace: Under the guidance of Wayne Rosenkrans, Fuld Vice President and Chairman of the Personalized Medicine Coalition in Washington as well as a Fellow at MIT’s Center for Biomedical Innovation, we are polling senior healthcare executives in the United States about their preparedness for the 2015 healthcare market.  From their responses to date, they appear to say that their organizations have not prepared for the futures that await them.   

For the moment all attention in the United States is focused on the White House’s healthcare initiative and pending legislation. That is today but what about the market only five years away?  It is unclear whether or not large drug companies have planned that far ahead. What we see are lots of Big Pharma mergers mostly to rebuild or shore up the pipeline. This controls for short-term stock market reaction and may shield these firms in the long-term.  If preparation is the key, I am not sure that mergers alone will future proof your competitive portfolio. Take the survey and see how your peers view these futures.
Warning flag #3 – Too many companies are riding on guidelines that offer only legal lip service.  For the last two years we have been running a new survey on corporate ethical-legal guidelines for information gathering. We are about to close this survey. What I have seen until this point is that most large companies issue legal and ethical policy statements for competitive information collection. That is fine but not adequate. Many respondents who work for these companies also declare that they have not seen or know in any depth policy details or how to apply their information-gathering guidelines. Company management always has lots to do; these types of legal policies seem to fall to the bottom of the pile once issued – that is until someone steps over the ethical/legal line and calls negative attention to the corporation.  Stay tuned for a summary of this survey and implications it teaches us all.  If you are interested in trying out this anonymous survey for yourself, just click here.  You will have automatic report card sent you upon completion.

China, healthcare, and ethics, are all competitive issues that will remain with us for a very long time.  During the quiet weeks ahead, think about how your competitive landscape is changing and the challenges that you and your company will face in 2010 and beyond.

I wish you a quiet next couple of weeks and a successful year ahead.

As we approach the holidays and trade show season winds down, I thought it a good time to reflect on the immense value of attending a scientific congress or trade show for vital intelligence.  I would argue that attending such a show over three days (or about 45 hours of “on” time, is worth 1,000 hours of phone calling from your desk.  Just imagine, more than a 20 times return on your intelligence time.

Too many firms attend these congresses ad hoc, with little preparation. Add to this the fact that the competitive intelligence effort is often divorced from the scientists, marketers and others also attending from the same company. What a shame! 

Some of our consultants are on the road for weeks at a time, attending just such congresses and we often do so in concert with our clients.  We take a team approach at covering football field-sized events as economically yet as thoroughly as possible.   Just consider the competitive value of such an intense meeting, where the critical thinkers, market makers, producers, customers are present – in a sense all of Porter’s five forces are there. 

 Anyone that has responsibility for developing competitive insights knows how useful these meetings can be but too frequently cannot marshal their own colleagues to work the conference floor as a single coordinated unit, fanning out with particular goals in mind, visiting certain booths, knowing what questions are critical, and so on.

Speaking with one of our senior project managers about this topic, she presented some very convincing arguments for attending these shows.  She strongly believes that conferences provide you terrific opportunity to

 Do a reality check on what messages your rivals send out to their target market. Messaging strategy is a particularly important when pharmaceutical and biotech firms try to position their drugs in the marketplace.
 Catch the scientific subtleties by listening directly to the scientists and engineers who directly design the studies, or create the technology.
 Understand the importance of a rival’s future investment in promoting a particular drug or new product – often way in advance of any formal announcement.
 Glimpse the future by hearing market gurus, managers from trend-setting companies discuss their view of market trends and rumors of competitive activity.

Next time you know a trade show or scientific congress is about to take place prepare for it, and build a team to fan out at the show.  Just when your feet begin to ache on the third day of the event console yourself by remembering those nearly 1,000 hours of phone time you saved because you assessed your competition on the ground, in real time.