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Getting Smart and Not Predicting the Future
In this article: Our author outlines the importance of not expecting intelligence to predict the future, but rather to help us understand how competitors and the market might respond to potential actions.
American humorist Will Rogers (1889-1935) said, “The trouble with people is not that they don’t know but that they know so much that ain’t so.” In this article I will make three "ain’t-so" cases.
But first, this true story
It took quick thinking and an old TV show to save me from certain disgrace when I appeared on the cover of a business magazine. It might save you, too. That’s why I’ll share the story.
Some years ago, Oregon Business discovered that my company conducted business war games around the world from its base in un-warlike Oregon. I agreed to an interview. We talked about CI, competitive strategy, war-gaming, Fortune 500 companies, and mega-million-dollar surprises. I smiled brightly as a photographer snapped away. On my way to the door, I asked about the title of the article. They responded with the name of a secret-agent TV series well-known at the time: “I Spy.” Gulp. A dramatic title, to be sure, but not exactly the professional image I wanted to project. I asked, “Would you consider a different title?” “Sure,” they said, “like what?” Another secret-agent series came to mind. “How about ‘Get Smart’?” And so it came to be. Whew.
On the cover of a business magazine, “I Spy” suggests corporate espionage, of which we do not approve. But what, exactly, does “Get Smart” suggest? How do we get smart?
To me, getting smart starts with accepting a hard truth: There is no such thing as the future. I conducted a business war game for a Fortune 100 company. We had teams for their business, key competitors, distributors, regulators, and customers. I asked each team to come up with as many plausible moves as possible in ten minutes. Nothing trivial (“we can cut our prices by 1.0%, 1.1%, 1.2%...”), nothing impossible (“we will beam our competitors to Neptune”).
The number of possible scenarios they identified — all combinations of moves for every team — came out to be just over 39 million. Not bad for ten minutes.
Sure, some of the 39 million were highly improbable. Which ones, exactly? And even if we could instantly and perfectly cull the 99.9% least probable, we’d still have 39 thousand. Can we spot the most likely one? As one of 39 thousand, how likely is it? Does it deserve to be crowned the future?
Many strategy-development processes pay little heed to competitors. Spreadsheets treat budgets as simple engines — supply more fuel, demand more thrust — and hold people accountable for making the plan come true in the future. There’s no room in that model for the action/reaction reality of competitive dynamics.
Business war games (and other forms of brainstorming and simulation) enlighten and excite because they expose those competitive futures. They’re not perfect; nothing is. Qualitative war games rely on humble human brains to sift through futures, and quantitative war games take time to set up. But they let us make better decisions than we could without them. That’s smart.
Keeping up with the competitors
Competitive intelligence is good, relative to competitive ignorance and foolishness. But consider the Midas touch, which caused everything King Midas touched — everything — to turn to gold. It is possible to have too much of a good thing.
I’ve run compressed-time business war games in which teams are alerted as soon as other teams make a move. “Strategies” typically and quickly degenerate into tit-for-tat retaliation.
We worry, and rightly so, when we have too little CI. Too little CI makes us blind and vulnerable. But too much CI can make us obsess about competitors. In effect, our desire not to be outdone turns us into a reflection or shadow of them.
“Too little CI makes us blind and vulnerable. But too much CI can make us obsess about competitors.”
I am not saying quick, forceful reaction is automatically bad. I am saying obsessive focus on competitors is not automatically good.
If a competitor does X, it doesn’t mean we must do X too. Their action is not necessarily a SWOT threat that we must parry. Likewise, if a competitor does not do X, it doesn’t mean that we should do X. Their inaction is not necessarily a SWOT opportunity that we should grab. Getting smart means using intelligence to improve decisions, while remembering intelligence is not a decision in itself.
There’s more to CI than prediction for the same reason there’s more to strategy than imitation. We need to know more than what our competitors might do. We need to know how they will respond to what we might do. Knowing that helps us make smarter strategy decisions.
By the way, purely reactive strategies never win, because they never take the lead. Reactive strategies play not to lose. That is not a bad thing, but if ego (yours or someone else’s) demands dominance, you must do something proactive.
What we know that ain’t so
We don’t know as much as we think we do. The sad proof is all around us. Think, for example, about the big-name companies that have slipped, slumped, and sunk.
Here’s one thing they have in common: None of them wanted to slip, slump, or sink. Here’s another: All of them were led by smart, motivated, data-rich people who wanted to soar. Like business people around the world, they were well aware of the usual dangers — short-term focus, excessive cost-cutting, inattention to customers, and the dreaded “D” word — and they thought they knew what to do. And yet.
I was involved in a crisis-simulations business for a while. In one program, we had one hundred government and first-responder leaders watch a terrorist-bomb scenario play out, with human decision-makers, in real time. We halted the simulation at several points and asked the leaders to choose what action to take.
The leaders were far from unanimous. On one decision, with four options, no option even got a majority. That means:
Over 1,900 people have entered pricing strategies into my Top Pricer Tournament. All receive the same information about its fictitious industries and identical competitors. All pick strategies they think will work; after all, no one says “I’ve got a good strategy and a bad strategy, I think I’ll take the bad strategy.” And yet, they select wildly different strategies.
It is hard to say something ain’t so when we’ve been taught it is so. But when we question what we know, we can experiment. We can debate, brainstorm, and pre-mortem. We can figure out why smart people went wrong as they tried to succeed. We can learn.
What we learn is not a specific move (e.g., “prepare three letters”) but rather a more profitable way to think. That’s exactly what happened to me when I didn’t do so well in my own tournament. When I saw how other people’s strategies beat mine, I understood how they’d been smart and I’d been wrong. It changed my deepest views on competitive strategy.
So there is no the future, knee-jerk use of intelligence can hurt us, and we don’t know as much as we think we do. That begs two questions. First: With all those flaws, how do we ever make money? And second: Where’s the part about getting smart?
About the first begged question. We are imperfect... and so are our competitors.
Don’t be dazzled or seduced by companies — Amazon, Apple, Facebook, Google, Tesla — we place on pedestals. Those five companies had $713 billion in 2018 total revenue, according to the 2019 Fortune 500 list. That’s huge, but boring old Walmart and ExxonMobil had $805 billion. Also, most companies are not Amazon, Apple, Facebook, Google, and Tesla.
Consider airlines. For all their jockeying, American Airlines, Delta Air Lines, and United Continental Holdings are practically triplets. They’re as close on the Fortune list as three broad-shouldered passengers cramped in coach.
For the most part, you win some, your competitors win some. That might sound defeatist. It isn’t, unless you think it’s possible always to beat them… and that just ain’t so.
“For the most part, you win some, your competitors win some ”
About the second begged question. Here’s the part about getting smart.
The remarkable Daniel Quinn, author of Ishmael, wrote, “Once you learn to discern the voice of Mother Culture humming in the background, telling her story over and over again to the people of your culture, you’ll never stop being conscious of it.”
Become conscious of how business cultures hum: the future, keeping up with the competitors, and knowing what ain’t so.
Short, sweet, and smart: Don’t be too sure. Pay attention. Ask questions. Think.
One more thing
Did you think the “I Spy” story was over? (Don’t be too sure.)
I knew I didn’t know the title of the Oregon Business article, so I asked. That led to a smart move and the new, improved “Get Smart” title. (Pay attention. Ask questions.)
Did you think about the picture they’d put on the magazine cover? Neither did I. I assumed that it would be a warm picture of a cool guy. It turned out to be a suitably cropped photo of me peeking through a keyhole. Oh well. Another opportunity to get smart.
“Competitive intelligence (CI) cannot mean forecasting the future. It ain’t so for the simple reason that there is no such thing as the future.”
Advanced Competitive Strategies, Inc.