Category Archives: Market Intelligence

Dimensions of Market Intelligence

Market Intelligence … is there any term commonly used in business more elusive than this? Generically defined by Wikipedia as the information relevant to a company’s markets, gathered and analyzed specifically for the purpose of accurate and confident decision-making in determining market opportunity, market penetration strategy, and market development metrics, it is often used as a catch-all phrase these days for conducting various types of market research, justifying various half-cocked go-to-market strategies, and ramrodding “best-practices” down the throats of an unsuspecting workforce.

Generating about 2.75M hits from a Google search, we see that it is supposed to lead to “insight”, “strategy”, “competitive domination”, “better business decisions”, and a “trip to Britain“. Some firms (predominantly dominated by stats wonks) seem to define it as metric-driven benchmarking while others (predominantly dominated by industrially-focussed behavioral psychologists) define it as customer-driven case-studies. Some benchmark using production data while others use sales data, some benchmark using forecast data while others follow the whim of the stock market. Which leads me to conclude that no one really has a good handle on what market intelligence is, yet alone how to go about it.

Thus, even though I defined it as the information you need to make the right buy from the right supplier at the right time, which I still maintain to be the best definition you’re going to find anywhere, and even though I gave you some great questions to ask when seeking out a firm to undertake market intelligence research on your behalf (in my X-emplification series), I think we need to step back and try to figure out what the informational components of market intelligence are, so that you will, upon completion of your project, be in position to make the right buy from the right supplier at the right time.

Although it’s hard to come up with a complete list, since the requirements seem to change by the day, the market, and the whim of the economists trying to steer the market (in utter futility, I may add), I really liked Robert Hanfield’s starting checklist, which, amaziningly enough, I found on the ISM Site. Robert Handfield is the Bank of America Distinguished University Professor of Supply Chain Management at NCSU and Director of the Supply Chain Resource Cooperative, which, if you undertake your own “market research”, you will discover to be one of the few academic-driven sites that actually has meaningful materials in its resource center from an industrial perspective.

Rob’s list is the following:

  • Forecasts and Price History
    You can’t negotiate a good deal without good insight into the size of the buy, the price history, and the relationship of the price to market conditions. For insight into good forecasting methodology, check out the posts in the Forecasting category.
  • Supply Base Market Share
    How much of the market does your supply base command. If they are power players, they are in a position to negotiate good prices on their raw materials and their costs may be less than market average. If they are minor players, their costs are probably higher and to get value from the buy you’ll likely have to focus on value-add.
  • Specific Supplier Analyses
    Focus on the suppliers you will be inviting to the bid and suppliers who dominate the market. What are they producing, where are their inputs coming from, where are they going (market-wise), and how are they doing financially?
  • Capacity
    Do they have excess capacity or are they almost at their capacity? Can they grow with you, or will you have to look elsewhere?
  • Buyers
    Who else is buying in your industry, and, more importantly, who’s buying outside of your industry? The appearance of a new market or player can often drain excess capacity rapidly, which could quickly shift the balance of power from the buyer to the supplier.
  • M&A Activity
    What’s happening, why, and will it affect your supply base?
  • Value Chain Analysis
    What are the key cost drivers in the lower tiers of the supply chain, and, just as important, what are the value adds that you can provide to increase the price you can ultimately charge?
  • Cost-Drivers and Should-Cost Driver Identification
    What’s driving your cost – and what should your cost be. Before you source a part, know if the starting point of the negotiation should be $5 or $1. For example, in a recent project for a large customer, Apriori determined that if a different fabrication process were used, the cost for a very simple part could be reduced 80%!
  • Emerging Technologies
    Are any new technologies on the horizon which could reshape the market and your potential place in it?
  • Porter’s Five Forces Analysis
    It’s important to understand the power balance, or inbalance, that exists between your company and its competitors, and this is what Porter’s Five Forces, done properly, will capture. (For my high-level analysis of what the forces were going to mean, in general, for Supply Chains in 2008, see this post.
  • Ultra-In-Depth Risk Analysis
    What could stop you dead in your tracks? If you don’t know, you haven’t even begun a thorough market intelligence research project. Identifying risks, and then the precautions you can take to prevent them, or at least minimize their impact, is a fundamental key to success.
  • Currency Projections
    What happens if the US Dollar sinks again? Or the Yen goes on the rise? Don’t know? Then you shouldn’t be negotiating that contract yet!
  • Government, Regulatory, & Socioeconomic forecasts
    Is the country you are thinking of doing business in run by a Hugh Chavez in training? If so, better think twice before investing hundreds of millions into setting up a new operation there (unless, of course, you like having your assets seized by the state).

Local Suppliers, Your Opportunity is Now!

The media is full of stories about the failings and weaknesses of global supply chains. It seems we have suddenly discovered that China is far away (and not in fact a remote US state); that ’emerging’ markets do not share Western value systems; that business rules and practices are driven by culture and cannot simply be overridden or suppressed; and that historic economic muscle does not automatically translate to limitless power and control.

So now the body of experience is growing. The war stories are proliferating. And as costs rise, supply constraints kick in, quality failures become visible and threatening, [and] we find [ourselves in] an environment in which fundamental questions are being asked over supply strategies. Perhaps local sourcing makes sense. Maybe those old suppliers were not so bad after all.

So states Tim Cummins in the beginning of his blog post on how Buyer Misery Equals Supplier Opportunity where he essentially states that the current market should offer the perfect storm for local suppliers to make their case that, when everything is factored in, local suppliers are often the best choice for your business.

As Tim notes, in tough times, local suppliers can offer the following advantages:

  • lead time reduction
    You can get products next week, not next quarter. This reduces your costs and increases your profits in multiple ways:

    • reduced transportation costs
      It costs less to truck across a few states then to truck across a few provinces in China, ocean freight across the entire ocean, and then truck across multiple states through multiple regional distribution centers.
    • reduced inventory costs
      You only have to store a few weeks worth of inventory, not a few months. Considering 10% to 20% of total product cost at most companies is inventory cost, this is very significant.
    • fewer lost sales from stock-outs
      If your inventory depletes faster than you expect, you can often get more in days with expedited shipping (which is worth it if the product is a high profit margin).
  • quality improvement
    In addition to sharing the same values, a supplier in your local market is bound by the same laws, regulations, and liabilities that you are. Thus, the chances of them producing an inferior quality product are much lower. Note that this also reduces your costs as higher quality means fewer returns, and, most importantly, fewer lawsuits!
  • compliance
    Again, a local supplier is bound by the same laws and regulations that you are. Thus, they will be compliant from the start. This also reduces your cost as compliance monitoring can get very costly.
  • innovation
    Even though some foreign suppliers, desperate for business, may seem over eager to work with you, you have to remember that, in some cultures, you don’t say ‘no’ to the customer and that the supplier may not be as open to open collaboration as a local counterpart who speaks your native language natively as well. Plus, a supplier in a local market is more likely to be going through ups and downs at the same time you go through ups and downs and is, thus, more likely to be on the same wavelength.

So follow Tim’s advice and get out there and promote your services as a more reliable, ethical, environmentally-conscious, compliant, quality, innovative supplier who is ready and willing to work with your customers to find new and innovative ways to reduce costs and increase value across the board in a manner that will allow a consistent and predictable supply.

And for all of you suppliers who are saying “How do we do this?, my answer is to use the tools and services that are already available to you. Create a great web-site and have a search engine optimization firm optimize it for Google searches. Every day, more and more people turn to the web, and Google, to help them discover new sources of supply. Then, identify a marketplace (not a supply network that is limited to buyers who use a certain vendor’s software) where people are going to go to look for suppliers like you. If you’re in manufacturing, I recommend taking a good look at MFG.com. Yes, it is a pay-to-play marketplace (but then again, they’re all pay-to-play marketplaces), but at least they have an in-house team dedicated to helping manufacturers make the most of their opportunity, which includes assistance in getting set-up, finding new opportunities, and responding to RFPs. (This is because they make most of their revenue off of transactions, which don’t happen unless their manufacturers get business.)

Maximum Value From Your Consultants

There was a great article recently in Supply Chain Brain that described a litany of failure. In measuring the value of supply chain consultants, the authors review five horror stories that resulted from consulting engagements. This article was very enlightening as it did a great job of what can go wrong when you fail to work with your consultants and heed their advice. Even though consultants are cheap, and often the best resource you have to identify savings, this is only true if you work with them. Otherwise, they become just as expensive as all the other boneheaded initiatives an average organization will introduce on a daily basis.

Fortunately for us, the article also does a great job of describing the proper approach to maximizing the benefits your consultants can offer you through the advice it offers in each of its tales of horror. The proper attitude, approach, and attention is paramount to your success, and makes the difference between a project that is classified as a dismal failure and a project that generates 10X ROI. As the article notes, in many cases, the best a consultant can do is to give you a good roadmap. When all is said and done, you still have to drive the car to the destination.

So what do you need to do? At a high level, you need to:

  • Listen to the consultant, even if it’s not what you want to hear.
    A good consultant is one who comes in, tells you what’s wrong, and what you need to do to fix it. There’s no value in a consultant that pays you lip-service for a big paycheck.
  • Be prepared for “scope creep”.
    A good consultant will likely uncover problems that neither of you were aware of at the outset. Although you will be able to push off some of these problems to a future project, others will need to be addressed. For example, if the goal of the project is to design or identify a software-based solution to automatically generate import and export documentation for customs and the consultant identifies that your organization is not capturing certain types of critical, required, data, then you will need to extend the project scope to the creation of a process and implementation of a system to capture the necessary raw data.
  • Be ready to take action and implement at least some of the recommendations.
    There’s no benefit in paying a consultant thousands upon thousands upon thousands of dollars simply to identify problems and respective solutions. The benefit comes in implementing the solutions identified by the consultant.
  • Put your own ego in check.
    Maybe you built your company from nothing to a 25-person 5-Million a year operation on nothing but sweat, resolve, and pennies you found on the street while your heavily-funded venture-backed competitors went-belly up faster than lemmings can get to their favorite cliff. That’s great, and you definitely deserve a pat on the back, but that doesn’t mean you know what it takes to grow your company from a small 5-Million nickel-ante player to a mid-size 50-Million market force to be reckoned with.
    Or maybe you were the one who last sourced that 100-M category three years ago and saved 10-M. That doesn’t mean you’re the right person to source that category again today when the balance of power has shifted to suppliers, when raw material costs according to the market indexes have risen 50%, and when your key suppliers are already maxed. You did well, but you likely don’t have the expertise and experience of the consultant being brought in who has sourced this category half a dozen times in the last year in similar market conditions and who knows what you need to do to get results.
    The consultant’s goal is to bring you value, which you will only get if you’re willing to admit that “Ok, I’m good, and I certainly know more about this consultant than X, but right now, I really need to do a good job with Y, and this is the right person for that job.” And you have to remember what happens at the end of a successful engagement — the consultant moves on to the next project and you’re the only one left to get the pat-on-the-back, and the big bonus, from the boss-man.
  • Recognize that sometimes technology is the answer.
    A smart person recognizes that technology, by nature, is not intelligent and that she should not blindly follow any “advice” it has to offer, but she also recognizes that, on the right equipment, it can do more computations per minute than she can do in a lifetime and mine through more data in a few minutes than she’ll ever be able to. If you’re lacking good visibility or data upon which to base decisions, you need technology that can get you that visibility and data.
  • Work with the consultant (and leave the politics to the politicians).
    Regardless of the rumors you might hear, the consultant is not there to take your job. Trust me when I say she doesn’t want it.
  • Get the consultant the data she needs promptly …
    Every day a consultant waits for data is another day the project is delayed and another day you will have to wait to get the advice you need to improve your operations and cash-flow.
  • … and make sure that data is good data.
    A consultant’s recommendations are only as good as the information you provide.
  • Don’t limit the consultant to focussing on just process or just technology.
    The two go hand in hand. There’s no value in automating an inefficient, incorrect, or just plain poor process and there’s no value in adapting your processes to fit the wrong technology. Give the consultant the freedom to address the full scope of your problem.
  • Be serious about problem solving and process improvement.
    If you’re doing a project merely to “check a box” on standardized RFXs, then you’re just wasting everyone’s time. For example, if you undertake a SAS-70 initiative just because your competitor did it without a solid goal of improving your service offerings and production processes, the effort will simply result in a large collection of “manuals on the shelf” gathering dust that cost you hundreds of thousands of dollars.
  • Be prepared to go back to school.
    Sometimes the consultant will find that you’re significantly behind the curve and the only way to catch you up is through radical updates to your processes or technology, which are well beyond where you are today. If you’re not prepared to learn and innovate, you will not be able to act on the recommendations, which might literally mean the difference between staying viable and going bankrupt.

Squeeze the Most Out of Your Supply Chain

Supply chain investment is on the rise, but many companies are finding that effectiveness still declines over time after the introduction of a new solution. Why is your average supply chain, powered by best-of-breed technologies, still not operating at peak efficiency? I’d argue that there are a number of reasons, including lack of proper visibility, lack of proper monitoring processes, and lack of proper training, but a recent article in Supply and Demand Chain Executive took a different twist. In “Squeezing the Most Out of Your Supply Chain”, the author, who notes that it is likely that your average supply chain is not operating at peak efficiency, indicates that a supply chain opportunity assessment can help you you determine if, and where, this is happening. This implies that one of the reasons your supply chain is not efficient is that your average company probably doesn’t know where it should be focussing and that the systems it is employing might not be the right systems or the systems the company needs the most.

A supply chain opportunity assessment gives your company a complete look at the overall state of one of its most critical functions and provides your company with a comprehensive list of opportunities for improvement. With this knowledge, your company can define a set of actions to improve its operating efficiency and ensure that its supply chain is properly designed to support growth and flexibility to prevent supply disruption.

A supply chain assessment is a straightforward process, which, as per the article, can be boiled down to a succinct series of steps.

  1. Define the scope.
    Business Unit or Entire Operation? Subset of processes or full spectrum? Although you should assess your entire supply chain, it’s often best to start small, focussed on key areas, to generate some initial improvements and wins that will fund future assessments.
  2. Examine the ongoing challenges in your business model.
    Document how information, materials, and financials flow through the organization and review the metrics that are being used to evaluate effectiveness. This will help to reveal the challenges.
  3. Identify key issues impacting performance and perform a root-cause analysis.
    Also be sure to compare the company’s existing processes to industry best practices. This will help you zero in on the real improvement opportunities.
  4. Identify and prioritize opportunities.
    Determine the potential business impact of each opportunity and the relative ease with which they can be realized. Then select the most valuable ones and start with those.
  5. Develop a solutions roadmap.
    Once you’ve identified the appropriate improvements, develop a roadmap that outlines the project plan, estimated timelines, and expected costs. And follow through!

Avoid Corporate Death by Beating the Odds

No company is created to fail. Yet the odds are stacked against corporations surviving more than a few decades. Many once-greats are dying a slow death, losing much of what made them superior. Others have expired quickly. And new research shows that many more are starting to atrophy astheir leaders turn their focus to managing complexity — and away from leading for the future. A new, nine-element framework can help you diagnose your organization’s health, and address the factors that increase corporate life expectancy.

Robert Rudzki, President of GreyBeard Advisors, author of Straight to the Bottom Line and Beat the Odds, and blogmaster of Transformation Leadership just published his manifesto on ChangeThis (now Porchlight) — “Avoid Corporate Death: Nine Essential Elements Will Keep the Reaper From Your Company’s Door”. In this paper he notes that companies that do not lead firmly for the future have a much greater chance of corporate death than those that do, and that, more importantly, resilient organizations appear to have nine fundamental traits in common – which he has defined as the Beat the Odds (BTO) Guidance Framework.

As “proof” of its success, he offers a recent study by the Iacocca Institute of Lehigh University and BetterManagement.com that asked 700 executives to rank their companies against the framework. The result — companies with higher BTO scores also had a return on invested capital (ROIC) or a return on equity (ROE) that exceeded their corporate cost of capital. Correlation may not be causation, but it sure is impressive nonetheless. And considering that there have been more than 600,000 outright business failures in the US alone in the past 10 years, any little bit helps.So what’s the basis of the framework? The following nine rules that define how a resilient enterprise should operate.

  1. Establish a Purpose
  2. Live and Defend Your Core Values
  3. Acquire a World View / Create the Future
  4. Articulate an Inspiring Vision / Lead at All Levels
  5. Develop Strategies / Business Models / Competencies Consistent with the Foregoing, and Linked to Each Other
  6. Assure the Organization is Aligned and Energized
  7. Measure What You Want to Achieve and Nothing Else
  8. Decide! Act! Get On With It!
  9. When in Doubt, Use Common Sense

For more information on the framework, see the manifesto.