Introduction

A few years ago a close friend asked me to meet with his company's senior leadership. He described how a competitor was taking market share away from them as easily as a child serving himself an ever-larger piece of pie. The competitor was so aware of what their firm would do the competitor's 'reaction' often slightly pre-empted their initial action.

I attended a meeting of the C-Level leaders of this medium sized manufacturing firm. I listened to their corporate strategy, a broad outline of their plans for the coming year, and how this one competitor had already yanked the rug out from under them. It was obvious the competitor had a top-notch intelligence program. I offered what I thought was a compelling evaluation:

"They can win with a wooden sword."

The boardroom fell silent as a funeral; corporate pallbearers bowing their heads around a boardroom table coffin. I allowed them a moment of reflection, certain someone would speak up. Finally, the COO broke into a wry smile.

"Sun Tzu," he nodded gravely.

I shook my head, only now accepting the gravity of the situation.

"Never mind," I squeaked, wordlessly willing my friend to seek employment elsewhere. In the intelligence field I tend to hear a lot of military comparisons to competition. Smart companies use intelligence as the armed forces do; planning where and how to attack. Unfortunately, that comparison is lost on many U. S. business leaders. They quote Sun Tzu's Art of War from cover to cover; yet characterize intelligence as 'too military' for business purposes.

Most senior leaders haven't served a day in uniform since high school band camp, yet they bark orders to their 'troops' without the benefit of in depth intelligence. The result can be seen in the Wall Street Journal's daily business obituaries: Thousands of shuttered firms, millions of laid off employees, and billions in lost market capitalization. All because leaders don't consider a formal intelligence program to be "good business."

But every now and again a leader comes along who recognizes intelligence is imperative to creating and maintaining a distinct advantage. He or she takes on the competition and soundly defeats them because they understand victory is not about money, or equipment, or employees, but rather on how well they manage uncertainty. Even if they don't believe 'business is war,' they acknowledge beating a worthy opponent takes preparation. They can win with a wooden sword.

The wooden sword is a reference to the great Japanese swordsman and strategist Miyamoto Musashi. Born in 1584, he was one of the last great samurai. At the age of thirty he was undefeated in over sixty individual contests, most ending with his opponent's macabre death. Around 1612 Musashi stopped using steel altogether in favor of wooden swords; individually crafting one for each and every engagement.

After accepting a challenge Musashi would spend weeks searching for just the right local tree. Upon finding it he would measure and consider each branch until he intuitively knew the right one to excise. Finally, he would reverently carve, shape, and finish a perfect new sword. He would then 'learn' the new sword; practicing feverishly – hours stretching to days - before he was, at last, ready to receive his challenger.

He carried on like this for thirty more years – undefeated, killing the majority of his opponents.

Miyamoto Musashi retired in 1643, his victories chronicled in villages throughout Japan. In the weeks before his death in 1645 he wrote a manuscript entitled A Book of Five Rings, one of the greatest scripts on strategy ever put into print. It is required reading in Japanese business schools and as timely for commerce today as it was to combat in the 16th century.

Far from being a tome on swordplay, Musashi told his readers to spend their time and energy learning about their competition. If you know how and where the competitor will strike, you will soundly defeat him every time, regardless of any technical advantage he might have. That was the power in a wooden sword. It didn't take weeks to find the right tree, the right branch, or the right carving techniques. A farmer's rake handle would have been more than sufficient.

Musashi spent those weeks learning everything he could about his opponent. Whom have they defeated? How did they go about doing so? What strategies did they follow based on clan, school, region, and experience? Through careful study and experimentation he answered all of these questions and identified his opponent's weaknesses.

In the private 'familiarity' sessions with his new sword he would insert openings in his defense precisely designed to elicit his opponent's weakest techniques - the ones Musashi wanted to be assailed by. In the actual duel he waited patiently until he recognized the aperture of his opponent's ill-chosen technique. Then, with the benefit of weeks of practiced muscle memory, Musashi unleashed his explosive countermove with lethal precision.

Most opponents never knew they'd been manipulated.

Clearly, my friend's competitor knew how to do this as well. They picked their battles carefully. They knew which products to promote and which to let slip quietly into obsolescence. Can your firm do that? Can you learn to take advantage of your competition's weakest points? Would you know their weak points if you saw them? Most companies don't. As Musashi proved 400 years ago, with information like that a wooden sword is a lethal weapon.

***

In a fragile and uncertain business environment, shareholders are increasingly demanding management keep up with the competitive Joneses. But it's not just the Joneses anymore. Now it's also Nagawa, and Jacquay. Madarov and Bolivas. Once a firm goes global every one of their competitors has no choice but to do the same. With financial and communication technology world wide over the Internet, everything is global.

It means uncertainty has increased by several orders of magnitude. Leaders who only a few years ago thought they could get everything they need to know over the Internet are learning the reality of economist and Nobel Prize laureate Herbert Simon's words when he said "a wealth of information creates a poverty of attention." There's simply too much information out there.

Basic Google queries yield millions of hits. Rather than accepting the information is not available we instead feel betrayed that the answer is right in front of us - lost in the vast electronic forest of pages stacking useless returns on our screen. Leaders feel misled. Stupid. Trapped.

I hope this modest little book helps change that. It is written for leaders like those at my friend's company. Though they may not like or subscribe to some of the concepts and methods I'll outline here, they will at least understand how their competitors are exploiting and manipulating them. Maybe they can explain it all to the executives who will be called in to replace them once shareholders have had enough.

There's something in here for practitioners as well. There's a few new techniques, some templates on my website you can download, but mostly there are ideas about how to serve leaders better. Don't wait on them to tell you want they want – in most cases, they have no idea. Not that they're not intelligent and motivated people – they just don't know what they don't know. This can help you coax them into new areas, getting better clarity on your rivals, and causing those rivals all manner of fits in trying to figure you out. It will bring the practitioner and the leader closer together, each coming to rely more on the other than they have in the past.

I've been in the intelligence business for longer than I care to admit, moving from Research to corporate Director to consultant to government officer to military contractor. I've had the honor of working alongside the best and brightest, as well as the inept and incompetent. Like any profession, there's always room for improvement.

When intelligence works, when it makes a measurable impact on the daily activities and long-term success of an organization, it is intimately tied in to leadership's overall strategy. That's what this book is about - tying intelligence and strategy together in a particularly unique way. Little here is fundamentally new. Strategic thinkers like Miyamoto Musashi of feudal Japan, the late Colonel John Boyd of the U.S. Air Force, and the masterful Peter Drucker have done much of this many times before. But I hope my unique proposition of linking strategy to a functional intelligence discipline, where each feeds the other, causes leaders to think about competition and conflict in a whole new light.

Strategic Planning was a popular corporate endeavor up until a few years ago. When the business market was good, with stock prices rising quickly, competitive strategy was no longer considered necessary. The global economy was carrying every reasonably well run business with it – the "rising tide lifts all boats" approach we read so much about back in the day. But as my father is fond of saying, time and tide wait for no man. Just as the global tide picked up these many firms, it also sent them crashing back down on the rocks. Welcome to 2008.

Corporate leaders, Board members, institutional shareholders, Executive Directors, and a host of other decision makers find themselves in the un-envious position of having nobody left to blame. Now they have to make tough decisions on their own. Now their performance, or rather a lack of it, will be on display for everyone to see and judge. If they fail, they too will join the statistical ranks of the global business meltdown of 2009. So, what's a leader to do?

First, they should understand they have options. Second, they should know they can make a difference in the lives of their employees, customers, and shareholders. Third, they should learn they cannot just survive the current market ebb, they can emerge from it stronger and better prepared to take on any competitor foolish enough to challenge them. It's not easy and can at times be hard on the ego. But done right, the results are spectacular.

Not-for-profit groups including religious, educational, cultural, and public service organizations have many of the same competitive pressures in addition to several unique ones of their own. I've been involved with several large non-profit groups over the years and the conflict for resources, the strain to serve clients, and the pressures from stakeholders have never been higher. While profit is not their goal, neither is failure – and leaders' fiduciary responsibilities carry no less liability than any SEC regulated firm.

I've placed the tools outlined in the book on a webpage for readers to download. Small firms will find a few utensils they wouldn't otherwise have time and resources to develop. I hope they help you grow and expand; feeding the job-creating economic beast that is the United States. Major corporations will find these tools are easily shared across a large organization by email because they're all Microsoft Excel templates. There's no 'iffy' software to download on corporate networks - I'm trying to make this as painless as possible.

All organizations are increasingly facing analytic rather than time based competition. Companies who correctly analyze competitor, market, and customer information, then act on it in a timely fashion, will gain a competitive advantage. Time itself offers no distinctive advantage. How companies deal with time, how they analyze information, adjust strategy, and maneuver their resources creates competitive advantage. Fusing intelligence and strategy in order to make faster and more robust decisions with less information is the only means for long-term survival. That's the purpose of competitive intelligence.

Over a decade ago futurists Alvin and Heidi Toffler characterized how companies were increasingly engaged in time-based competition, citing the growing "hyper-connectivity" of global business. Leaders who want to survive must embrace this new reality and accept it is now the norm. It requires a new and unheard of level of performance.

Hyperformance.