Proactivity or “risk management”

 Why does commercial intelligence always do the first and never the second?

Before we begin, per usual, I apologize wildly for my English again. It's not perfect, but it's not my native language either.

Now let's get started...

The key purpose of this whole story is a cautionary tale!

If you want to have a highly effective intelligence capability in your company that allows you to maintain a high level of competitiveness, do NOT overburden intelligence with functions that are not assigned to it. Especially those that can be handled by other parts of the company.

First, let's look at “risk management” and the reasons why commercial intelligence does not engage in this area of activity. Let's start with opportunities!

Problems and opportunities of “risk management”

Does the commercial intelligence system have real market “risk management” capabilities? Definitely not! Real external market risks are not manageable.

At the same time, if we take, for example, the military sphere of activity, military intelligence not only has “risk management” capabilities, but they have been actively used since time immemorial. Who or what in military intelligence is the key object of research and study? The enemy! Can we control the enemy's forces by literally forcing them to act in our interests? Of course, we cannot directly order enemy troops to do one thing or not to do another, but we can nevertheless force them to act in our interests.

Admittedly, with certain reservations:

1.    In a limited area of the front or theater of operation;

2.    Against relatively limited enemy forces;

3.    With very high material, physical and informational costs;

4.    All of our actions to control the enemy do not give us a 100% guarantee of success.

To understand the overall process, we will have to dive into the very basics of management as a function. Let's imagine that we have two objects in front of us:

·         one of which is the object of management (who or what we intend to manage);

·         second - the subject of management (the one who will or intends to manage the object).

What conditions are necessary for the subject to be able to manage the control object successfully and in parameters more or less satisfactory to him? It seems that such conditions are:

·         availability of real levers and mechanisms for managing the facility;

·         availability of opportunities to exert real managerial (controlling) influence on the object;

·         availability of methods and methodology for managing a specific facility;

·         control communication (management communication to direct, control, and make adjustments to correct and correct management errors) or a “feedback” mechanism to the facility

The distinction between some conditions is not so obvious and can be barely distinguishable, for example, “methods and methodology of management” (instructions for controlling a cavalry horse) and “real possibilities of influencing the object”, which can be provided by the methodology itself. If all four conditions are present, you can control any real object and even a process, because the object of control can also be a process.

In other words, whether in front of you: a motorcycle; a horse; an automobile; a spaceship; a person or a work team; a cavalry (tank, artillery, infantry) brigade; including units of enemy troops - if all four conditions are present, you are able to control it up to certain limits.

Now we can, for clarity, break down to the end of “risk management” in military affairs, where the risk itself is the enemy troops.

Attention! As when exposing a trick or charlatan - watch your hands carefully!

The basics of controlling enemy troops were described as early as Sun Tzu,

around the 4th century BC.

“War is the way of deception. Therefore, if you can do anything, show the enemy as if you could not; if you use anything, show him as if you did not use it; though you are near, show him as if you were far away; though you are far away, show him as if you were near; lure him with advantage...”

In the actual management of enemy units:

·         as the object of management, we will influence and affect the command of enemy forces;

Indeed, the enemy's troops are commanded and controlled by his command. Without instructions from the command, enemy troops will not make a move or maneuver. That is why the enemy command is the most suitable object for our management.

·         as a condition of real managerial influence on the object;

We will use the real benefit to the enemy of winning the battle or avoiding defeat in the battle.

·         as a condition for the availability of methods and methodology;

We use the method of changing (correcting) the real information field. We correct the “world picture” for the enemy commanders in the direction we want.

·         as a condition of real  levers of object's control;

We will show enemy commanders what we don't really have and conversely, carefully conceal what we do have in reality.

·         as a condition of “feedback” to the object (“management links” for management error correction and remediation).

We, using all the capabilities of our intelligence, will confirm and, where necessary, confirm with concrete actions the general picture of disinformation that we are promoting. Since the enemy, having his own intelligence forces, will certainly check whether everything is really so! And we must confirm to him the full conformity of his vision of the world picture.

Many of you have probably read the book “The Man Who Never Was” by Ewen Montagu or watched the movie “Operation Mincemeat”. It was an operation to disinform the enemy in order to ensure the landing of troops in Sicily.

However, if you take any known operation on disinformation, read enemy management or, in modern manners, “risk management”, the methodology and execution are about the same. (I recommend you search and read about Bodyguarg and Fortitude operations).

If you have all the four listed conditions for controlling an external object, then you are able, up to certain limits, to manage it. If you lack at least one condition, the possibilities of real management become very elusive. Absence of any two control conditions makes management of an independent external object impossible.

That is, we control a real enemy, showing some real activity and using all four conditions of control. If there is no real activity to influence the object, and if we do not have the four conditions of control at our disposal and arsenal - then there is no real control and will not be, because it is impossible.

Why does commercial intelligence, unlike military intelligence, not have such capabilities? Because competitors in commercial intelligence are not key or prospective intelligence targets! You should have already read about this HERE. There is simply no such intelligence task. Do I need to explain the reasons why? If yes, post in the comments and I will elaborate on this issue.

What about the other risks? Why not try to “manage” them?

As a reminder, commercial intelligence examines real external market risks that could have a significant impact on a company's business activities to achieve its intended goals and/or to generate profits.

Or rather, the risks themselves are real, but they are future risks! They have not yet been realized and have not yet occurred. The intelligence system studies them in advance, proactively. It studies the probability of realization and development of these risks. Is it possible to manage what has not yet happened and has not occurred?

From a commercial intelligence perspective, external market risks are not and should not be managed. When and if they occur, it is the intelligence function's job to give its company the best chance of responding to the risk as quickly and effectively as possible. Using the company's own resources and capabilities for this response.

In other words, the company's task is to effectively manage its own resources and business activity under risk conditions. The tasks of managing external risks themselves do not arise in front of the company due to the lack of real opportunities for such management.

Finally, methods and techniques for practical risk management!

If you go to any forum or discussion of “risk management” specialists, you will find a lot of presentations and discussions of the importance of quantitative research methods and risk assessment methods. Tie-butterfly analysis; Bayesian networks; Monte Carlo modeling, etc., for a total of more than 30 risk assessment methods in the “risk management” arsenal.

Ever wondered about the practical content of quantitative research methods and risk assessment? Quantitative research methods are statistical research methods. Quantitative data are data in numerical form.

What does this mean in practice? It means that risks, if we are talking about risks, for example, have already happened many times and repeatedly. Repeatedly enough that you have been able to compile some kind of statistical database, for example, of how often such a risk has occurred over: a week/month/year/decade. From an intelligence perspective, it's not even a risk, but some condition of the external environment periodically recurring. Most likely, all of the preceding intelligence indicators preceding the risk are already well known. This makes its identification an extremely simple task.

Where does the study of risk in commercial intelligence begin? With the hypothesis that some risk is probable and possible. Do we have any statistical information on the problem? We don't! There is only a hypothesis, to confirm or refute which is the task of intelligence. For lack of quantitative data, we turn to qualitative, creative methods, and it is they, as a rule, allow us to solve the problem. No! Not “risk management”, but risk identification and assessment of the likelihood of the actual occurrence of risk and its realization.

However, we've gotten sidetracked. All right! You have researched and assessed the risk using quantitative methods, modeled it using the Monte Carlo method - And? Where is the management? That is, specific control actions (impact) on the risk, forcing it to change the parameters of external activity in the desired direction!

In military intelligence, in order to control, we exert some kind of controlling influence on the risk (in our case, the enemy command)! Our goal is to get the target to change some parameters of its actual activity in the direction we want. It's not easy. But if it succeeds, we actually manage the risk.

Meanwhile, specialists in “risk management” manage hundreds and even thousands of risks of their companies, I am not even talking about dozens of risks, it is a trifle. It is absolutely impossible to even imagine such a thing in commercial intelligence. The amount of work involved in managing and controlling the management of each specific risk, if such a task were set, would be physically impossible.

In commercial intelligence, we consider specific external market risks to be unmanageable. Among other things, because of the minimum time to actually react. The one who is able to detect the risk and react to its negative impact earlier than others will be able to pass the risky situation with the lowest costs, losses and business losses for his company.

If you try to “manage” risk in the face of already identified risk, you risk plunging your company's activity into crisis conditions with unpredictable results.

However, perhaps we simply put different meanings and content into the concept of “risk management”.

So we're back to being proactive again.

Proactivity as the main task

Informational support of business competitiveness is the main task of intelligence in business. To detect a threat (risk) as quickly as possible and give your company a chance to respond to the risk as quickly as possible.

Imagine a ship at sea and a duty watch tasked with detecting an attacking enemy torpedo. The sooner the torpedo is detected, the more time the crew and ship's captain have to respond with an appropriate maneuver to the approaching threat. If the crew is cohesive and trained, and the captain is experienced, the chances of surviving and avoiding the threat increase significantly.

By the way? What would happen if the captain tried to control not his own ship and crew, but the directly approaching torpedo? Which situation leaves a better chance of success?

To address the challenge of proactive response, commercial intelligence works on the principle of “shooting at a preemptive target”. Anyone who has been involved in hunting or skeet shooting knows that in order to shoot and hit a target, one must aim and shoot not at the moving target itself, but preemptively, at the point where the target will be when the bullet arrives. The same principle applies to reconnaissance studies.

In commercial intelligence, we start researching the object, not when the pre-identified and identified risk has already occurred (realized) and develops its negative impact on the company's business. But we begin to monitor the probability of risk at the stage when the external environment begins to form conditions, phenomena and circumstances that contribute to the occurrence of the predicted risk. Before its actual maturation and realization.

Of course, this is possible only when the hypothesis of the probability of occurrence of a particular risk is formulated in advance. At the same time, together with the hypothesis of probable risk, the probable and possible (available) methods, techniques and opportunities to respond to the risk are formulated. This is how the chain of effective proactive response of the company to risk is formed and laid down, including:

·         proactive detection (detection of risk at the stage of its formation) BEFORE its actual realization;

·         immediate informing (of management and/or those responsible for responding to a particular risk);

·         responding directly to risk with a set of pre-designed methods, techniques and response mechanisms.

 If you have developed and created such a chain of proactivity, you will be able to respond to risk as quickly and as effectively as possible. Any reconnaissance is actually a set of fairly simple actions that are done “forward-looking”, in advance and well in advance of expected events.

I hope I have been able to show why, of the two tasks: proactivity and “risk management,” commercial intelligence always does the first, and never the second.

You already know how to practically build a commercial intelligence system in your company from the “hunting” guide, and if you don't already, download it HERE.

If you have any questions, we'll talk about it. Yes! And I'm not saying goodbye.

In the next post, we will just consider the essence and content of the“strategy session in commercial intelligence”, where future objects of research for intelligence are formulated, as well as methods and techniques for responding to their activity.