Business Knowledge

© 2000 millennium strategies

Overview

Business knowledge is one of the critical factors that separates one organization from another. In this paper I will discuss business knowledge, how it is more than business intelligence and why is it important to every decision maker and business leader. The reasons to engage a process to acquire business knowledge are these:

• • Help to clearly define the products, services, region, competitors and customers that are your market
• • Ascertain the dynamics, drivers, trends and segmentation in your market
• • Keep tabs on major players and competitors and their products or services
• • Create a clear path into the future for the organization
• • Keep track of regulatory, economic and societal changes that may change your business
• • Anticipate the actions of competitors and the changing needs of customers
• • Define the best practice as a measure of success for your organization.

Business Knowledge

A wise old person once said to me "It is not what you don't know that will hurt you. It is what you know that ain't so." Well, it is both, actually, that may hurt you. Both not knowing or knowing wrongly can be disastrous. Knowing wrongly however is usually worse. Whereas not knowing usually causes no action or response, knowing wrongly can generate tremendous action and response toward the wrong end. That is why I like to put a fine edge on the idea of business knowledge.

Business decision makers have two types of decisions to deal with: tactical and strategic. Tactical decisions are reactive and directed toward the near term. Strategic decisions are pro-active and directed toward the long term. Effective communication within the company is the most critical element for effective tactical decisions, but adequate business knowledge is what yields effective strategic decisions. Since communication is the issue behind tactical decision, I will leave them and the issue of communication for another time and focus on strategic decisions and the concept of business knowledge.

Few companies implement an active process to gather and ascertain the information they need to make effective strategic decisions. They rely on the knowledge of a few key individuals. This method works great for small companies where key individuals have the methodology, informal as it may be, to gather and evaluate information all in their head. As a business grows, or as processes or products become more complex, key individuals may no longer be able to maintain the required knowledge base. This leads to an ever-expanding gap between what is known and what needs to be known. What makes this condition so insidious is that the gap may not be realized until there is some critical development that is no longer recognized for what it is: the end of business as one knows it.

Elements of business knowledge

There are two dimensions to business knowledge: scope and cycle. Scope refers to the breadth of the information, for example, product price has a small scope, market volume has a large scope. Cycle refers to how quickly the information ages into obsolescence. Product price ages quarterly, market volume ages annually. It must be understood that scope and cycle vary by all the dimensions that a company can use to align itself with its market, so what I present here are generalities, at best.

The primary elements of business knowledge are:

• • Regulatory and governmental issues
• • Economic and political issues
• • Industry and technology trends
• • Market and product trends
• • Competitor information
• • Customer information
• • Product information
• • Internal operations assessment

I have arranged each of these elements in the figure to give you an idea of how much of an effect each one has in the scheme of things from you, through your customers and competitors, your market and on to everyone. In addition, the cycle times extend from days through weeks and months, and on to one and two years. The critical factor that will change your specific condition from that shown in the figure is how sensitive your business is to each of these elements. That depends on numerous factors, but the most important usually include revenue per customer or number of customers, geopolitical range of customers, rate of product change and competitive dynamics. Another factor that could have inordinate impact is shifts in governmental regulations.

A final point about these elements is this: Once you have established a baseline, your objective is to catch the changes. The best approach to catching changes is to use the cycle time to be proactive about measuring your environment and also be receptive to what comes at you as news and updates.

Building a base of business knowledge

Most companies rely on reports from the sales department, much of it anecdotal, and on generalities of the business press to build a knowledge base for strategic decision support. While both of these sources are very important, overall, by themselves they can lead to critical blind spots. Information from the sales department is nearly always historical and based on the needs of current customers only. The trade press will seldom provide the focus or depth required and there is the issue of sorting what is fact from what is speculation.

So, how does a company acquire and maintain the business knowledge that they need and then use it? Like this:

• • Develop a clear understanding of the intelligence that is required to build the base of knowledge and put someone in charge of the process to manage the bits and pieces that go into the big picture. Both are critically important.
• • Talk to everyone in the company to find out what they can contribute. I have seen estimates that say 90% of what you need to build the knowledge base is already known by company personnel, but it includes everyone, not just key individuals. Keep up with the trade press, in particular, journals that are focused most closely on your products, services or primary market segments.
• • Determine if there are gaps in your knowledge base and seek sources for additional information. These gaps may include specific details about competitors, market trends, competitive position or emerging forces. Sources may include direct field observation and specialized research reports.
• • Make the maintenance of business knowledge a continuous process. Determine what information needs to be updated on a daily cycle, what is weekly, monthly, quarterly and annually, and set about doing it.
• • Renovate your decision process, if needed, to include and rely on your business knowledge base.  

Sources for business knowledge

Sources for business knowledge may not be at all obvious. If you need to keep track your competitors with special care, direct observation of the number of cars in their parking lot or how late the lights are on may provide valuable insight to their current success. Also, help wanted ads and construction permits can tell volumes about their plans for the future. Product or service segments that can be measured in billions of dollars have trade publications and information resources to measure trends and major players. In fact, entire industries have sprung up to provide information of a specific nature to specific industries. For example, governmental regulations in the health care industry are so critical to operations and they change so often that multiple companies earn tens of millions of dollars compiling and disseminating information to health care providers to keep them informed, usually on a daily cycle.

If you have only a few customers, you may want to keep special track of each of them to determine how well they are doing, independent of what their purchasing agent may say. Again, want ads, lights at night and construction are good signs, but you may want to order a D & B or track their patent estate to validate other information. When you have specific names to work with, you can use Web search engines or information resources to find news and articles of importance. In addition, many trade publications have search capabilities on their Web sites that will ferret out particular information.

One of the best sources for certain kinds of information is personal interviews. The key to success with interviews is finding the right person. From my experience, most folks are pleasant and if you do not take too much of their time they will freely give you their opinion. Personal interviews are best for very specific kinds of information and for surveys. Few persons have a sufficiently broad picture to assess trends or track economic or regulatory issues, but some of my best interviews have been trend assessments with college professors who were authors of papers that I found using Web search engines.

One of the best sources for business knowledge is syndicated research. Numerous organizations provide industry-specific reports that track trends and major players. These reports run from one to five thousand dollars and are usually updated on a one to two year cycle. For answers to your specific questions or assessment of your specific segment there is custom research. These reports run from a few to tens of thousands of dollars and can be configured to detail customers, competitors, products and segment in addition to industry drivers and trends. The downside of reports, however, is that they are a snapshot in time and cannot be expected to provide all of the information a robust business knowledge base requires.

Conclusion

How well do you feel you know each of the elements in the business knowledge spectrum? How well is this knowledge passed throughout the organization? How well is it used for strategic decisions? The answers to these questions are as unique as your organization, but if any are less than what you want, now is a good time to make the "knowledgeable" decision.