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INTRODUCTION TOSTRATEGIC INTELLIGENCEGIA WHITE PAPER 2/2004

Executive SummaryStrategic intelligence (SI) is an important tool ininforming and supporting strategic managementactivities in different stages of the strategydevelopment. In short, Strategic Intelligence canbe defined as “a systematic and continuous processof producing needed intelligence of strategic value inan actionable form to facilitate long-term decisionmaking”. Customers of SI include individualsinvolved in strategic decision-making.From the process perspective, Strategic Intelligencecan be seen as a part of Competitive Intelligence,as it is also a systematic and continuous processwith a purpose to facilitate decision-making withneeded and timely intelligence input delivered inactionable form. The major difference between SIand CI is that SI actions focus strictly on supportingstrategic decision-making by monitoring aspectswith strategic significance. Additionally, a SI timehorizon is broad and the focus is on all significantevents: past, present and future events.In order to practice effective Strategic Intelligencecapable of meeting the needs of strategicmanagement and introducing intelligence ofstrategic value into the decision-making process,certain critical aspects should be considered. Theyinclude: Appointing a strategic level process owner,preferably the VP for Corporate Strategy, and aseasoned SI Manager. It enables integrating thebest available internal senior expertise into theSI process. Knowing and understanding the internal SIcustomers - individuals involved in strategicplanning. Defining the SI priorities and properlycommunicating them (critical strategic themes,key players to be analyzed, early warningthemes). Designing and producing SI products that servecustomers’ content needs and communicationneeds. Building a network of Strategic Intelligencecontributors, both internal and external.GIA White Paper 2/2004 Introduction to Strategic Intelligence

1. IntroductionThis paper focuses on the relationship betweenStrategic Intelligence and strategy. The aim isto provide readers with a definition of StrategicIntelligence (SI) and explain the role of intelligencein formulating and implementing strategy.monitor, interpret, and respond to environmentalchanges. This is where SI, a systematic processof collecting, analyzing and communicatingactionable strategy-oriented business information,can serve as input in strategic decision-making.The role of Intelligence in strategy formulation isa critical one, especially now, given the quicklychanging business environment. As the paceaccelerates, it becomes more difficult for seniormanagers and decision-makers to adequatelyThe paper begins with a discussion on strategyand attempts to define for readers the concept ofStrategic Intelligence (SI). Strategic Intelligenceas a part of Strategy Development will then bediscussed followed by some concluding remarks.2. StrategyThe concept of strategy has been around for aslong as there have been organizations and wars.Inevitably, there has been a huge amount ofstudies and writings on the subject. Today, thereare different ways of defining strategy and theconcept of strategy can be viewed from manyangles. The aim of this chapter is not to providea clear-cut definition of strategy but to givereaders an overview of strategy which can serve asa framework for studying the relationship betweenStrategic Intelligence, strategy formulation andimplementation.As mentioned earlier the concept of strategy canbe viewed from different angles. Here are some,but by no means all, dimensions that should beincluded in any unified definition of the conceptof strategy. These dimensions can provide aninsight on how thinking strategically can benefitour business.Some traditional views: Strategy as a coherent, unifying and integrativepattern for decision- making, a blueprint forthe whole organization that indicates theorganization’s future destination. Strategy as a means of establishing anorganization’s purpose in terms of its longterm objectives, action plans and priorities forresource allocation; aligning short term actionand resource deployment to be congruent withlonger term objectives. Strategy as a definition of a firm’s competitivedomain including defining the businesses a firmis in or intends to be in, segmentation, strategicpositioning and how and where it is going tocompete. Strategy as a response to external opportunitiesand threats and to internal strengths andweaknesses; a means of achieving a longrange competitive advantage, and a favorablecompetitive position and adapting to meet thedemands of a changing environment. Strategy as a logical system for differentiatingmanagerial tasks at the corporate, businessand functional levels; defining an overallmission and allocating resources with a senseof strategic priorities. Strategy as a definition of the economic andnon-economic contribution the firm intends tomake to its stakeholders.GIA White Paper 2/2004 Introduction to Strategic Intelligence

From the unifying point of view, strategy becomesa fundamental framework through which anorganization can assert its vital continuity whileat the same time purposefully managing itsadaptation to the changing environment to gaincompetitive advantage.Having a “strategic thinking” mindset does not, initself, always generate a fully functional strategyfor an organization. On the other hand,Strategic planning does notguarantee strategic thinking.Most strategic planning systemsrely on historical data andnumbers generated internally.These systems often require long and exhaustiveanalysis. The result is an extrapolation of historyinto the future. Strategic thinking, on the otherhand, incorporates an assessment of both theinternal and external environment. The processinvolves a qualitative evaluation of the businessand its environment and is both introspective andextraspective.When discussing strategic planning, strategicdesign or strategic thinking, it is important to giveconsideration as well to strategic management.Michael Porter’s statement “The essence ing competitive strategy is relating acompany to its environment” highlights severalkey dimensions of strategic management.1. The first part of the statement, “the essenceof formulating”, indicates that there mustbe a process at play. Whether structured orunstructured, formal or informal, rational orirrational, the organization must proceedthrough a number of steps before it can arriveat a strategy. This dimension of strategicmanagement, which looks at the how ofstrategy, is referred to as the strategy process.2. The next part of the statement, “competitivestrategy”, indicates that the strategy processmust result in a strategic outcome. This outputof the strategy process is a course of action tobe followed by the company that will allow forthe fulfillment of the company’s objectives inthe face of competitive pressure. This dimensionof strategic management, which looks at thewhat of strategy, is referred to as strategycontent.3. The final part of the statement, “is relatinga company to its environment”, indicatesthat strategies are developed to suit varyingorganizational and environmental contexts. Thisdimension of strategic management is referredto as strategy context and looks at where, when,who, and why.StrategyImplementationEvaluationand ControlFigure 1. Four basic elements of strategic managementLet’s now have a look at the basic elements ofstrategic management – elements which attemptto provide insight into the strategy process (how),strategy content (what) and strategy context(where, when, who and why):Environmental scanning includes both externaland internal scanning. The external environmentconsists of the task environment and the societalenvironment. The task environment (also referredto as industry) includes competitors, customers,suppliers, interest groups etc. The societalenvironment includes more general forces suchas technological and political-legal forces. Theinternal environment includes the corporation’sstructure, culture and resources.Strategy formulation includes the corporatemission/vision, objectives, strategies andpolicies.Strategy implementation is a process by whichstrategies and policies are put into action (e.g.programs, budgets and procedures).Evaluation and control: corporate activitiesand performance results are monitored so thatactual performance can be compared with desiredperformance.GIA White Paper 2/2004 Introduction to Strategic Intelligence

3. Definition and Tasks of Strategic IntelligenceCompetitive Intelligence (CI) is often defined asknowledge and foreknowledge about the externaloperating environment of the organization. Thepurpose of CI is to facilitate proactive decisionmaking by producing the needed businessinformation into actionable form and making itavailable at the right time. The orientation andutilization of CI is tactical and to some extentstrategic. The CI time horizon focuses on presentevents and, to some extent, on past and futureevents as well. Some CI processes are designedto serve the strategic level, while some focus onoperative monitoring or both.needed and timely intelligence input delivered inactionable form.The major difference betweenSI and CI is that SI actionsfocus strictly on supportingstrategic decision-making bymonitoring aspects with strategicsignificance.Strategic Intelligence is a type of CompetitiveIntelligence produced for strategic purposes.Customers of SI include individuals involved instrategic decision-making.Users of SI are primarily individuals involvedin strategy development. Additionally, a SItime horizon is broad and the focus is on allsignificant events: past, present and future events(Figure 2). In short, Strategic Intelligence canbe defined as:From the process perspective, Strategic Intelligencecan be seen as a part of Competitive Intelligenceas it is also a systematic and continuous processwith a purpose to facilitate decision-making with“A systematic and continuous process of producingneeded intelligence of strategic value in anactionable form to facilitate long-term evelStrategic IntelligenceCompetitive tPresentFutureFigure 2. The Scope of Strategic Intelligence. Source: McGonagle & Vella, 1996GIA White Paper 2/2004 Introduction to Strategic Intelligence

Strategic Intelligence has to be highly needbased. Here, need refers to content needs as wellas communication needs of the content (format,timeliness etc.). Typically, the higher the strategicanalysis level, the more interactive the intelligencecommunication and the less information quantityare required. Some typical, content relatedstrategic intelligence needs include: Impact-analysis/so-what analysis: how doesa certain phenomenon affect the company’sbusiness Business driver analysis: what are the main drivingforces affecting the business environment Scenarios with probable outcomes/long rangeviews of battlefield developments In-depth competitor and key-customer analysesinstead of company profiles Bird’s eye view of the business environment:overall battlefield illustrations Relevant macro issue and trend analysis andtheir impact Analysis of critical strategic themes3.1. Strategic Intelligence as a part of Strategy DevelopmentWhat are the roles of SI activity in strategic decisionmaking? Six basic roles can be identified:1. Describing the competitive environment:Intelligence analysis must define the currentcompetitive arena in which the company operates.BusinessEnvironmentAn intelligence assessment must be made of theforces and factors that make up the company’scompetitive environment. The figure 3 belowshows a generic model of a strategic businessenvironment/competitive environment.General paniesInterest GroupsMarketRegionSuppliersValue Chain DimensionFigure 3. Strategic Business EnvironmentGIA White Paper 2/2004 Introduction to Strategic Intelligence