Competitive Intelligence: How to Evaluate a CEO’s Product-Development Philosophy and Approach - dummies

Competitive Intelligence: How to Evaluate a CEO’s Product-Development Philosophy and Approach

By James D. Underwood

Some of the competitor CEOs you encounter in your competitive intelligence work will seem to have a product-development philosophy that can be summed up as, “If we build it, consumers will buy it.” They invent a new product, load it with bells and whistles, and hand it over to marketing and sales to sell. When it flops, they blame marketing and sales or, even worse, consumers.

Some companies that fit this mold are successful: Twenty percent or more of the products they roll out are big hits, and that’s enough to keep them afloat.

Companies achieve greater success, however, by taking aim at true opportunities and gaps in the market before pulling the trigger. Organizations that aim first usually have a customer-focused approach to product development. They work closely with consumers throughout the product-development cycle to determine what prospective customers really want and need. This approach takes longer, but it leads to greater innovation and consistency in success rates for new products.

How do you find out whether your competitors are product focused or customer focused? First, consult your salespeople; they have firsthand knowledge of which competitors are beating them and how. Second, conduct a basic investigation of a competitor’s history of introducing new products to the marketplace. Look into how successful the organization’s new products are.

An organization that consistently hits doubles and triples and occasional home runs is usually customer focused. Organizations that strike out a lot and only occasionally hit home runs tend to take a product-focused approach.

Seeing how your competitors have historically innovated (incremental product improvement; a frequent next-little-thing approach; or a next-little-thing combined with an occasional next-big-thing approach) helps you understand exactly what you’re dealing with and enables you to predict their future innovation approach.

How to differentiate between public relations and the CEO’s real opinion

Every organization on the planet likes to think of itself and promote itself as innovative and cutting edge, but few of them walk the walk. Take everything an organization says about its innovative nature with a grain of salt and dive deep in your research to determine whether the organization’s actions back up its claims. As you perform your research, use it to answer the following questions:

  • Does the organization invest in intellectual capital (research directors, brand managers, and other thought leaders)? Do these investments or lack thereof align with the CEO’s statements?

  • Do the firm’s financial statements align with the CEO’s statements?

  • Historically, has the CEO tended to make statements that were designed to mislead, or have they been highly predictive of what the firm actually did?

How to size up a CEO’s ability to think outside the box

Trying to figure out a CEO’s ability to think (and act) outside the box can be difficult. Here are a few ways to assess a CEO’s ability to think creatively and implement creative ideas:

  • Look at the CEO’s seven-factor assessment score. A score of 30 out of a possible 35 points indicates that the CEO is very capable of thinking outside the box. A score of 25 indicates a moderate capacity for creative thinking and behavior.

  • Interview the CEO’s former co-workers, who can usually tell you about the CEO’s ability or tendency to think outside the box and receptiveness to creative ideas.

  • Study historical data to see how creative this CEO’s past decisions and actions have been.

A CEO doesn’t necessarily need to be creative. By surrounding herself with creative people and letting them influence her decisions, she can foster a corporate culture of creativity that’s just as good if not better than what a highly creative CEO can accomplish.

How to assess a CEO’s willingness to move assets to new areas

Some CEOs get stuck in the rut of tradition, focusing on the organization’s history of success in a particular sector, its core competencies, and where it tends to excel in relation to its competitors. That type of thinking and leadership often dooms an organization to being left behind by more innovative competitors.

The most radical CEOs take a portfolio approach to internal resources, including cash, liquidity, talent, and skills. In other words, they act as though they’re managing an investment portfolio. As they spot opportunities or threats, they’re more willing than your average CEO to shift resources in response and extend beyond their historical comfort zone to pursue opportunities.

These individuals can be dangerous competitors if you happen to be operating in a sector in which they have identified a major growth opportunity.

As you research the competition, look for evidence of each competitor reaching out beyond its traditional areas of success to expand its reach, and you’ll usually discover CEOs who are willing to shift assets to pursue momentary advantages. For example, General Electric has an excellent track record for getting rid of lower-performing products in order to invest in higher-opportunity areas.

How to gauge a CEO’s risk tolerance

A CEO’s risk tolerance is usually fairly indicative of an organization’s propensity toward risk and its drive to innovate. To gauge a CEO’s risk tolerance, consider the following:

  • The CEO’s seven-factor assessment score: The higher the score, the more willing he is to take risks.

  • The CEO’s historic risk-related behavior: High rollers are usually high rollers in all aspects of their lives.

  • Information you’ve found in industry and other publications: A story about a CEO making a bold move to seize a momentary advantage reveals a great deal about his attitude toward risk.