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Measuring the Value of Competitive Intelligence: The Inadequacies of Return-On-Investment Calculations. A Fuld & Company Special Report. F ULD & C OMPANY I NC. http://www.fuld.com ♦ http://www.fuldltd.co.uk

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A Fuld & Company Special Report

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A fuld company special report

Measuring the Value of Competitive Intelligence: The Inadequacies of Return-On-Investment Calculations

A Fuld & Company Special Report

FULD & COMPANY INC.

http://www.fuld.com ♦ http://www.fuldltd.co.uk

126 Charles St 20 Conduit St. World Trade Center 1

Cambridge, MA 02141 London W1S 2BQ CH-1215 Geneva 15

USA United Kingdom Switzerland

+1 617.492-5900 +44 (0) 207 659-6999 +41 (0) 22 929-1900


A fuld company special report

For Veteran CI Companies, Justifying Their CI Program With a Calculated Return-On-Investment Is Unnecessary

  • Eight CI departments that we benchmarked in 2001 often receive adequate CI resources without having to justify their value with an ROI measurement

  • This, despite a widespread perception in the CI community that calculating CI’s ROI is essential to the survival of a CI department

All eight companies we benchmarked could be considered “measurement-intense” organizations

Yes

No

Sometimes

What is “return-on-investment?”

Return-on-investment, or ROI, is the percentage yield on dollars invested. In other words, it is a realized outcome (gains and/or savings expressed in dollars) divided by the cost incurred to obtain the realized outcome.

ROI can only be measured when inputs (expressed in dollars) and outputs (expressed In dollars) are clearly defined. Moreover, the causality between the investment and the outcome must be equally clear.


A fuld company special report

Even If World-Class CI Groups Had To Calculate ROI, Doing So Would Result in an Almost Completely Meaningless Figure

  • Many companies do not know their total CI budget; as such, ROI inputs are difficult to quantify.

  • Likewise, ascertaining the causality of the output – i.e. that the beneficial result can be directly or solely attributed to CI – further distorts ROI.

  • As a result, any CI ROI figure can be easily manipulated to “prove” the effectiveness of a fledgling CI operation, or to justify the expenditure for vendors or consultants offering stale, re-packaged products and services.

CI staffing and budgets at world-class CI companies vary widely, and have little or no revenue correlation

--Source: Fuld & Company

“After one highly successful CI project, management gave us another $250,000. We didn’t ask for it; they were just pleased with our work.”


A fuld company special report

Only three companies we surveyed regularly provide recom-mendations to their CI users. The lack of recommendations makes it difficult to link CI to a specific outcome

Furthermore, CI practitioners in the companies we surveyed do not systematically track or record how the intelligence they provide is used, nor do they seek user feedback

A Major Obstacle to ROI, and a Serious Departure From CI Best Practices, Is the Failure to Provide and Track Recommendations

Yes

No

Sometimes

“We don’t want to tell the pilot how to fly the plane.”


So if roi has little meaning how can ci groups measure their effectiveness

For CI practitioners to demonstrate their effectiveness and value, they must regularly engage their internal CI users and track how their products and services are being applied

Many CI departments do not have the resources, organizational standing, or credibility required to track and record outcomes

These measures can be – and are more meaningful if they are – qualitative, tied to specific company actions, decisions, and outcomes

To be effective, these measures must be tracked and communicated to management regularly

What does management expect from CI?

Objective, synthesized, clear and concise reports about competitive developments

An explanation of the forces responsible for competitive conditions

An analysis of the implications of competitive situations

In most cases, recommended courses of action

How does management know when CI is valuable?

Fewer surprises

Able to put competitor actions in context

Less frustration trying to interpret overwhelming or contradictory information

So, If ROI Has Little Meaning, How Can CI Groups Measure Their Effectiveness?


A fuld company special report

We advocate including in every CI process an effectiveness tracking and user feedback mechanism

We believe CI organizations can measure their efficacy in three ways:

CI utilization tracking

Customer satisfaction

Decision-specific results

Introducing the Fuld Intelligence Effectiveness Index

The abilityof CI practitioners to, over time, demonstrate the efficacy of their CI program leads to sustained or increased CI resources, and a broader acceptance of CI as a necessary business practice

We proposeworking with an elite set of organizations to routinely help them track, analyze, and report on the contribution and benefit of their CI programs. We will aggregate the results across this set of companies and issue an annual CI effectiveness index to fuel the growth of the CI discipline

Fuld & Company Helps Companies Regularly Measure The Effectiveness of Their CI Efforts And Stay True To Best Practices

Planning &Direction

DECISION-MAKER NEEDS

Published Information

The NEW CI Cycle

Dissemination & Evaluation

Primary Source Collection

Analysis &

Production

OTHERUSERS


Appendix study methodology and participants

Appendix: Study Methodology and Participants

  • Fuld & Company identified CI best practices via:

    • Secondary research

    • Review of Fuld & Company projects

  • Questionnaire-based interviews

    • 12 telephone and/or in-person interviews

    • 8 in-depth formal interviews from sample pool

      For more information, contact:

      Karen E. Rothwell

      Consulting Director Fuld & Company

      +1 (617) 492-5900

      [email protected]


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