McKinsey Article

[Melanie Wing]

Has anyone had an opportunity to read the lastest McKinsey Quarterly Article, How companies can understand competitors’ moves: McKinsey Global Survey Results? Unfortunately, I don't have a premium membership. But the lead looks pretty interesting. Would love to know what anyone may have learned from it.

Here is link: http://www.mckinseyquarterly.com/How_companies_can_understand_compe...

[Babette Bensoussan]

Melanie and Ken

Ever since the economic downturn, McKinsey appears to have produced more articles supporting the principles of CI than ever before.

Have a look at this one: http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Leadin...

This article is free and easy to download. Look at third paragraph on page 11 - if that isn't CI??? Interestingly they call it business intelligence.

I believe this economic downturn gives CI professionals a really good chance to show value - this time with a focus on protecting existing markets!

Cheers
Babette

[Melanie Wing]

Here is another one, basically on personality profiling....

http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Gettin...

[Nimalan]

This is a premium article. Would be nice if key points could be discussed here. (Assuming it does not violate any copyrights).

McKinsey seems to be definitely on the CI path!!

[August Jackson]

Melanie, thanks for bringing this article to the forum's attention. When I looked at the article I was pleased to note that Hugh Courtney was one of the co-authors. Courtney was my Corporate Strategy professor this past Spring in the Smith School of Business. His book "20/20 Foresight" includes some interesting frameworks for anticipating and planning for scenarios, and I think strategic analysis like this is one of the vectors for CI professionals to deliver some of the most value to our customers and decision-makers.

The McKinsey Quarterly article highlights the importance of stakeholder (owners, executives, managers and front-line employees) objectives and biases as important determinants of corporate strategy. It's a strong case for the fact that a company that can accurately profile competitive stakeholders can reverse-engineer competitor moves. The authors advocate for the analysis of competitors both at the organizational and individual level.

One of the critical elements in anticipating competitors' moves is how closely their resources, capabilities and market position matches one's own. The great example here is the comparison of McDonalds to Burger King, which is more nuanced than my recent blog entry Your Competitor Doesn't Always Look Like You. In recent years McDonald's has been on the receiving end of a lot of consumer group and other criticism for the unhealthy content of their food. This locked them in to a fixed set of marketing and promotion options. Burger King, by comparison, was able to to engage in campaigns that targeted a lucrative niche of fast food consumers less concerned with the nutritional content of their food with quirky adds. Burger King was able to compete asymmetrically and pursue lucrative market segments in a way McDonalds could not lest it be criticized further for contributing to the trend of obesity.

Stakeholder objectives rarely align with corporate objectives, and this leads to moves and behaviors that are perceived as being inconsistent or random. Owners' objectives often plays a critical role in formulating corporate strategy, and this is evident in family-owned or controlled firms or private partnerships. In the case of senior managers we're all no doubt familiar with the agency issues that arise that often lead firms to moves that maximize short-term gain at the expense of long-term strategy and other consequences of the agency challenge. In decentralized companies business unit or regional decision-makers' objectives and beliefs can often play a critical role in the execution of strategy.

The article concludes with a recommendation that strategy and intelligence functions take time to perform past performance reviews following surprise competitor moves to evaluate how and why they didn't anticipate those moves. The authors also recommend that firms should include in strategic analysis in an on-going and real-time manner as opposed to schedule one off exercises.

The article includes recommendations and considerations with which most CI practitioners would agree. Overall the authors and editors clearly understand that the article's audience is executives as opposed to CI practitioners. Some CI practitioners might find the coverage of specific analytical frameworks rudimentary compared to the level of detail contained in articles that are usually geared towards an audience of practitioners. That issue aside articles such as this appearing in publications such as McKinsey Quarterly will contribute to education of executive customers of competitive intelligence to communicate the value of CI and establish clear expectations of what is required to have an effective CI input into executive decision-making.

[Nimalan]

Great summary! Thank you!

[Adrian Alvarez]

Hi August,

Great summary August!

I believe, however, that the article was a sort of re-discovery by McKinsey of 4 corner's analysis, which, interestingly, they do not cite among the books to read.

I say 4 corners because they talk about resources, capabilities and market position and also about the decision maker's objetives and interests. So, the same dog with a different name..

I also have to say that four corners is not original neither, since the military has talked about capabilities and intentions for decades before 4 corners ever existed..

In any event, this is good publicity for CI, which they even mention as CI in the article, so it is good news!

Best regards,

Adrian

[Donna Ann Pusey]

This is a premium article, which unfortunately is not my level of access. If possible, please forward a copy to my inbox.. as I would be happy to review the article -- although McKinsey is known for 'stating the obvious'...

[Douglas BERNHARDT]

Hi Donna

I've only just seen your note from February, but in the unlikely event you still need the McKinsey article, please find it attached.

Best regards
Douglas Bernhardt

[Vivek Raghuvanshi]

Dear Melanie / and Thanks Douglas,

I just went through the McKinsey article, kind courtsey Douglas.

My Observations are as follows:

McKinsey wrote
------------------------
" Companies can gain an advantage from anticipating their competitors’ strategic moves. Yet companies change their strategies for a host of reasons, some external, such as broad economic changes or competitors’ moves, and some internal, such as the results of a
strategic planning process." -- McKinsey wrote

My Interpretation:
---------------------------

1. Answer... My Interpretation is that companies do not change their strategies because of broad economic changes or competitor moves or a result of strategic planning process. Companies change strategies depending on what Strategic Option they want to use to Target the Market which can be classified as:

A. Mass Market
B. Affinity Conscious Market
C. Quality Conscious Market.

The Market for a company is segmented. Mckinsey needs to understand that strategies change because the Market is Segmented into 3 major areas. So the strategy the company was using in a "Mass Market" ie Low Cost Option, may not be feasible if the company so decides to enter "Affinity Conscious Market" because a company may go in for Broad Differentiation strategy or Best Cost Strategy. And if the company so decides to enter "Quality Conscious Market" then it may opt for Best Cost strategy or Focussed Differentiation strategy.

2. McKinsey wrote:
----------------------------

Looking ahead

A• The very small number of companies that completely replace their strategies or
reverse direction suggests that few competitors are likely to generate real surprises.
Companies should not spend the majority of their strategic-planning time trying
to anticipate all of their competitors’ possible strategic moves.

B• The timing of many competitors’ moves can be predicted, because these moves either
result from an annual planning process or are prompted by external events visible
to all companies. Companies should be sure they understand the external landscape
of their industry at least as well as their competitors do (and investigate when
their competitors conduct their annual planning process).

C• The competitors likeliest to succeed with new strategic initiatives are those that are
already outperforming financially. These competitors are also the likeliest to
search for a new initiative, making them the ones to focus on when watching for
surprise strategic moves.



My Interpretation:
---------------------------

A. Companies need to understand possible strategic moves because the Market ie Consumers are divided into 3 major areas which have 3 different Strategic Options. So a Company with a single product could be competiting in 3 different consumer segments. McKinsey forgets that THREAT is not only from Existing Competitors but from Parallel Competitors and Latent Competitors which do not exist on the radar.

B. I beg to differ, though through OSINT a layman can identify the probability of a competitor move, but unless we are able to identify " Strategic Inflection Points " we cannot predict competitor moves. To identify Strategic Inflection Point, we have to see beyond the scope of Radar. For example if a company goes in for Value Chain Analysis and is Discreet about it, it may go in for a Best Cost Strategic Option whereas we may misinterpret as Low Cost Option. Thereby a wrong interpretation of the Competitor's Strategic Option could result in a wrong maneuver.

C. The competitors likely to suceed with new strategic initiatives does not necessarily have to be the ones who are financially sound, everybody can interpret a "Star or a Cash Cow" but What - If, a competitor is a " Under Dog ", it may through Value Chain Analysis or through Backward and Forward Integration or through Related Diversification become a Threat.