THE MAGAZINE

Is Intelligence in the Wrong Hands?

By Sam Elrom

In business, as in warfare, a basic tenet is: Know your enemy. That knowledge is gained through the gathering and analysis of intelligence. Today, many companies make software that purports to achieve this objective. I would argue that while these business intelligence (BI) programs can be extremely useful, they cannot replace human analysis.

BI systems involve such processes as "data mining," "fuzzy logic," and "real-time data warehousing." These terms suggest that conclusive findings are being acquired through ultra-fast search, location, capture, and filtering of certain data.

The danger is that the decision making is left to computers. Relying on computers is tempting, because it seems a much easier, and less labor-intensive, alternative to human thinking and brainstorming. But no software can yet rival the human brain.

Consider, for example, the case of one European company that my company worked with. This company had a full-time person responsible for reading newspapers, magazines, press releases, and other open sources. From this material, the person prepared a weekly report for the executive vice president of operations.

The company, looking for ways to cut costs during a reorganization, eliminated this function and began using two business intelligence systems. The systems were in place and running for about 9 months, and the users thought that they were doing what needed to be done with less work and at a lower cost. The CEO said that it provided peace of mind and presented information in an easy-to-understand format.

At about this time, the company planned to release its most advanced product, in which it had invested 18 months and considerable money on intensive R&D and marketing efforts. Then suddenly, its main competitor launched a similar but more advanced system. The company was taken totally by surprise. It was clear that the automated BI system had not really been providing useful intelligence.

The competitor had delayed the launching of its product twice, saying that the delay was due to the need "to synchronize activities." Our client had interpreted this as a setback in the development or manufacturing of the competitor's product.

As a result, the board of directors, per the CEO's request, approved an additional three months to continue the development of the company's product so as to add cosmetic elements that were canceled earlier because of lack of time. That had proved to be a critical miscalculation, and it led to the competitor beating the client to the market. The BI system had raised no alarms.

Our consulting firm was hired in an effort to understand what went wrong. We found that using the BI systems had led the company to lower its level of effort in trying to figure what "the enemy" was doing.

The most significant factor was that the company no longer had a person dedicated to analyzing raw information. Our analysis indicated that if the company had not eliminated this single source of human intelligence, it might not have been beaten to market by the competition.

Our investigation suggested that this employee would have brought to the attention of his boss more than 35 important pieces of information regarding the competition, which we found buried in the pile of papers that kept being sent to that desk, although the function no longer existed.

We recommended that the company reinstall the "intelligence desk" function. We also suggested that all corporate employees, from top management to assistants and secretaries, undergo intensive training on the pros and cons of the computerized BI systems as well as on how to integrate use of the software into the overall analysis of intelligence. We further recommended that the company teach designated personnel the meaning of certain types of intelligence and how to extrapolate that type of potentially valuable information from the everyday news they might read or otherwise run across.

As this case illustrates, business intelligence software is no substitute for a complete competitive intelligence program, where humans look at dynamic factors and continually update assessments based on new information. That's not to say that computerized BI systems have no value, only that decision makers must understand their limitations.

Basically, BI systems cull information from multiple sources, then reorganize and reformat it. This is not true business intelligence.

Consider this BI system definition of what such a system does: allow businesses to capture, transform, analyze, and flow information from disparate systems and sources into a pool of knowledge that is then shaped into an easy-to-digest format, thus providing batches of filtered information to be used by the decision makers.

This filtered information may be useful to a purchasing manager, floor production manager, or accounting manager, but this information is far from sufficient for the executive suite to use as a basis for strategic and policy decisions.

A BI system may have the ability to collect information on a competitor's advertising, for example, but can it analyze the effectiveness of a competitor's marketing tactics or the significance of an acquisition?

Let's compare the business intelligence software approach with how military and national security intelligence has traditionally been handled. Historically, victory was in many cases achieved when pieces of intelligence were gathered by human intelligence. And though computers can aid in the collection process, human intelligence is paramount to analysis.

It is a paradox, because we naturally tend to believe that computers don't make mistakes, but if the human factor is missing, the chance of making severe mistakes increases. For example, if we had had more human intelligence in the form of agents on the ground in Iraq, we might have had better real-time information about weapons of mass destruction or the plans of insurgents.

The same principles can be applied to the business intelligence approach. It is obvious that there is a critical need for field intelligence. When executives build their decisions on information from automated BI programs alone, they are not drawing as much from the "real world."

When the human factor is involved, a more complete and dynamic intelligence picture is generated based on the analysis of primary sources, such as news and other open-source material, coupled with information gathered live from industry experts, competitors, customers, suppliers, and manufacturers at market events and elsewhere. The compiled analysis will result in an overall view that is far more meaningful than a compilation of data by a BI system.

Real intelligence lets you know what the information means, why it is important, how it relates to existing vulnerabilities and risks, and what actions might be warranted in response. This business function is too complicated, too dynamic, too delicate, and too sophisticated to be left in the "hands" of a machine.


Sam Elrom is president of Elrom Security Consulting, in Baltimore, Maryland.

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