➣Warning Analysis: A Risky BusinessKenneth A. SawkaThe Futures Group

Note: This is the first in a series of articles devoted to theunique challenge of early warning analysis. This series is basedon a talk the author presented at the 12th annual SCIP In-ternational Conference and Exhibit, held in San Diego inMay 1997.

One of the most important benefits senior managementexpects from a competitive intelligence system is to keepthe company from being surprised by unforeseen eventsin the marketplace. Delivering this benefit, however, putsnew and unique challenges on the competitive intelli-gence process, and is especially perplexing for the intelli-gence analyst.

Examinations of military warning intelligence fail-ures—Pearl Harbor, the Yom Kippur War, and countlessothers—make clear that a lack of available information israrely, if ever, to blame. Instead, decision makers, whetherin government or business, are usually the victims of sur-prise due to the analyst’s failure to accurately interpretmarketplace signals, and to communicate the likelihoodof threat to those with the authority to take action tominimize the ramifications.

Effective ‘‘warning” requires that analysts report likelycompetitive threats or opportunities to management deci-sion makers in time for them to act. By definition, thisplaces the burden of successful warning on both the ana-lyst and the decision-maker. The analyst’s responsibility isto accurately interpret marketplace signals that indicatesomething new or unforeseen is on the horizon. Conse-quently, it is management’s responsibility to heed thatwarning, and take appropriate measures to either protectthe company against a threat, or seize the notice of anopportunity and act upon it to the company’s benefitahead of the competition.

Let’s look at some of the factors that can obfuscate ananalyst’s ability to misinterpret or miss altogether validwarning signals. We’ll deal with management’s role in alater column.

Pieces of the PuzzlePerhaps one of the greatest challenges analysts face whentrying to deliver valid warning forecasts to management isinterpreting shifts in the status quo and explaining what’snew and unfamiliar. Warning is concerned with what isdifferent, the exception instead of the rule. The difficultyis not necessarily in identifying what is unusual orunique, it is in determining whether the aberration is thebeginning of a whole new trend. This determinationmust be made so the analyst can build a valid case that anew status quo is on the horizon—and deliver the mes-sage in time for management to take effective action.

THE DIFFICULTY IS NOT IDENTIFYING WHAT’SUNUSUAL OR UNIQUE, IT’S DETERMINING

WHETHER THE ABERRATION IS THE BEGINNING

OF A WHOLE NEW TREND.

As if that weren’t bad enough, new patterns typicallytend to emerge in bits and pieces. The analyst, however,is continually compelled to warn early, often before allthe pieces of the puzzle are firmly in place. Managementdemands that warning be delivered as early as possible, togive decision makers as much latitude as possible to takesound actions and execute counter-strategies. However,the validity or certainty of the information is at its lowestdegree at the early stages of the discovery process. Onlywhen a warning circumstance is approaching its culmina-tion—that is, when an anticipated event is imminent orwhen a developing trend is nearly finalized—is the avail-able information at its highest degree of certainty. By thispoint, however, it is usually too late for management todo anything.

Further complicating matters is that the targets ofwarning analysis—customarily chief competitors, butalso regulators, customers, and tomorrow’s competi-tion—are usually trying to achieve surprise in their ac-tion and strategies. For particularly sensitive matters suchas acquisitions, new product introductions, or researchstrategies, competitors will go to great length to keeptheir true intentions hidden, and may even consciouslyemit confusing or misleading signals to keep their com-petitors off base. Analysts faced with trying to interpretthe actions of unpredictable competitors can easily bedrawn off track by a warning target’s efforts to achievesurprise.

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Competitive Intelligence Review, Vol. 8(4) 83–84 (1997)© 1997 John Wiley & Sons, Inc. CCC 1058-0247/97/04083-02

The Analyst’s Corner

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COMPETITORS WILL GO TO GREAT LENGTH TO

KEEP THEIR INTENTIONS HIDDEN AND MAY

EVEN EMIT CONFUSING OR MISLEADING SIGNALS

TO KEEP RIVAL ANALYSTS OFF BASE.

Capabilities and IntentsThe last challenge the analyst faces in trying to deliver ac-curate warning is that doing so requires an assessment of arival’s intentions as well as capabilities. Capabilities arerelatively easy to measure and evaluate. They include ob-servables such as financial resources, manufacturing ca-pacity, management talent, and other measures. Inten-tions, on the other hand, are anything but observable andare open to a far greater degree of variability. Intentionstypically are defined by a company’s willingness to takerisks, to achieve a particular objective, or neutralize a keycompetitor’s strengths. Companies have a variety of op-tions at their disposal to achieve these objectives, and thecourse they decide to pursue, and the pace with whichthey do so, all combine to compose intentions. Warningof capabilities alone is insufficient, as intent essentially de-fines a competitor’s desire to employ its capabilities.

CAPABILITIES ARE RELATIVELY EASY TO

MEASURE AND EVALUATE. INTENTIONS, ON THE

OTHER HAND, ARE OPEN TO A FAR GREATER

DEGREE OF VARIABILITY.

The “Cry Wolf” SyndromeWhat all these challenges have in common is that they arecharacteristics of the marketplace. There are also challengesthat rest with the analyst directly and that can have an equal,if not greater, complicating effect on the ability to warn.The “cry wolf” syndrome is probably the most obvious.Analysts are naturally cautions to deliver what they believeto be a valid warning out of concern that, because you cannever know with absolute confidence that any warning is100% accurate, it is better to be safe than sorry. As a result,many accurate warnings probably go uncommunicated.Going through the painful experience of delivering an in-accurate warning only heightens the “cry wolf” syndrome.

On the opposite end of the spectrum, there is concernamong warning analysts that too frequent warning, no

matter how “correct,” will eventually lead to decision-maker anesthetization, dampening the impact and effectof future warning communications. Decision makers arenaturally hesitant to receive a warning because it presentsexecutives with an unforeseen circumstance on whichthey must take some action, or it suggests that currentstrategies are not working. As a result, they frequently donot want to pay heed to warning alerts, no matter howvalid. A constant, steady stream of warning communica-tions only intensifies the tendency to ignore or dismisswarning reports.

A CONCERN THAT TOO MANY WARNINGS, NO

MATTER HOW “CORRECT,” WILL LEAD TO

DECISION-MAKER ANESTHETIZATION.

The “Shoot the Messenger” SyndromeBeing a warning analyst is risky business. You are com-pelled to provide early and accurate notices of emergingthreats or opportunities to management, yet your reportsfrequently go unheeded because of management’s unwill-ingness to pay attention. You can never know with ab-solute certainty whether your reports are correct, yet fail-ing to warn is perhaps a worse offense than issuing anincorrect warning report. All this combines to form a“shoot the messenger” syndrome among warning analyststhat further complicates the forging of a solid relationshipbetween competitive intelligence units and senior man-agement. In subsequent columns, I will explore the basicprinciples of early warning and offer suggestions on howto overcome these obstacles.

About the AuthorKen Sawka is vice president, business intelligence at TheFutures Group, where he designs and develops client intelligencesystems and conducts competitive analysis. Prior to TFG, Mr.Sawka served as a senior analyst at the CIA specializing inpolitical, military, and economic analysis of China. He receivedhis MS in International Affairs and BS in Political Science cumlaude at the American University. Mr. Sawka has been a SCIPmember since November 1994. He can be reached at TheFutures Group, 80 Glastonbury Blvd., Glastonbury, CT06033 USA; Tel: +1 860-633-3501; e-mail:K.Sawka@tfg.com.

Sawka