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Leadership & Business Wisdom

Gathering and Using Intelligence

Information has to be organized to test a company’s assumptions about its theory of its business.

Information has to be organized to challenge a company’s strategy. It has to test the company’s assumptions about its theory of its business. This in cludes testing the company’s assumptions about its environment—society and its structure, the market, the customer, and technology. And information on the environment, where the major threats and opportunities are likely to arise, has become increasingly urgent. Then there are assumptions about the specific mission of the company. Third, there are assumptions about an organization’s core competencies needed to accomplish its mission. Software may be designed to provide this information tailored to a specific group such as hospitals, universities, or casualty insurance companies. Companies can produce some of the information they need themselves, such as information about customers and noncustomers. But even big companies will have to hire outside experts to help them acquire and organize the information they need. The sources are simply too diverse. Most of what the enterprise needs to know about the environment is available only from outside sources —from all kinds of data banks and data services, from journals in many languages, from trade associations, from government publications, from World Bank reports, from scientific papers, or from specialized studies.

The Test of Intelligence Information

The ultimate test of an information system is that there are no surprises.

The ultimate test of an information system is that there are no surprises. Before events become significant, executives have already adjusted to them, analyzed them, understood them, and taken appropriate action. One example is the very few American financial institutions that, in the late 1990s, were not surprised by the collapse of mainland Asia. They had thought through what “information” means in respect to Asian economies and Asian currencies. They had gradually eliminated all the information they got from within their own subsidiaries and affiliates in these countries—these, they had begun to realize, were just “data.” Instead, they had begun to organize their information about such things as the ratio between short-term borrowing and the country’s balance of payments and information about funds available to service foreign short-term debt. Long before these ratios turned so unfavorable as to make a panic in mainland Asia inevitable, these executives had realized that it was coming. They realized that they had to decide whether to pull out of these countries, or to stay for the very long term. They had, in other words, realized what economic data are meaningful in respect to emerging countries, had organized them, had analyzed them, and had interpreted them. They had turned the data into information —and had decided what action to take long before that action became necessary.

The Future Budget

The budget for the future remains stable throughout good times and bad.

In most enterprises—and again not just in business —there is only one budget, and it is adjusted to the business cycle. In good times expenditures are increased across the board. In bad times expenditures are cut across the board. This, however, practically guarantees missing out on the future. The change leader’s first budget is an operating budget that shows operating and capital outlays to maintain the present business. That budget should always be approached with the question: “What is the minimum we need to spend to keep operations going?” And in poor times it should, indeed, be adjusted downward.

And then the change leader has a second, separate budget for the future. The future budget should be approached with the question: “What is the maximum funding these new activities require to produce optimal results.” That amount should be maintained in good times or bad — unless times are so catastrophic that maintaining expenditures threatens the survival of the enterprise.

Winning Strategies

“One prays for miracles but works for results,” Saint Augustine said.

There is an old saying that good intentions don’t move mountains, bulldozers do. In nonprofit management, the mission and the plan—if that is all there is —are the good intentions. Strategies are the bulldozers. They convert what you want to do into accomplishment. They are particularly important in nonprofit organizations. Strategies lead you to work for results. They convert what you want to do into accomplishment. They also tell you what you need to have by way of resources and people to get the results.

I was once opposed to the term “strategy.” I thought it smacked too much of the military. But I have slowly become a convert. That is because in many businesses and nonprofit organizations, planning is an intellectual exercise. You put it in a nicely bound volume on your shelf and leave it there. Everybody feels virtuous; we have done the planning. But until it becomes actual work, you have done nothing. Strategies, on the other hand, are action-focused. So I have reluctantly accepted the word because it’s clear that strategies are not something you hope for; strategies are something you work for.

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