How can small businesses in India do competitive intelligence (CI)? I had the opportunity to discuss this with a group of small businesses at the TiE breakfast event in Pune last month.

Small businesses have limited resources at their disposal and need to figure out ways to do CI on small budgets. In developed economies which are well documented, this generally means smart use of free internet tools of various kinds to keep tabs on the industry, regulation, competition, etc.

In India, these tools have limited use, as there is miniscule business information available on the Internet. Small businesses in India need to tap into the “market knowledge” available on the street from their customers, distributors, dealers, suppliers, bankers and so on, in order to keep themselves abreast with the developments around them.

Decision makers in small companies have an advantage over their counterparts in large organisations as they are less removed from these sources of information. Decision makers in large companies are several degrees removed from the market participants. To ensure that the management has enough intelligence for planning strategy, large companies grapple with processes for ensuring smooth flows of reliable information from their on-the-ground staff to the top. Much of it is lost on the way up, which is one of the reasons why larger companies often employ dedicated CI teams or external service providers to gather market intelligence.

In small companies, the key decision-makers themselves interact with other market participants or are at best one level removed from them. They are therefore closer to the key inputs that feed into their strategy plans.

In order to take advantage of this proximity to the environment, decision-makers in small companies need clarity on what intelligence inputs will help them win. What are the key decisions they need to make? What is the information and analysis that will ensure that the decisions are winners? To use CI jargon, they need to know their KITs and KIQs (key intelligence topics and questions). What are the data points that are required for creating actionable intelligence? Which market participants can they tap for each of these data points?

For creating this CI framework, small businesses need to apply the same rigour as large companies do. Once the decision-makers think this through, they can easily leverage their interactions with the external world to gain the required intelligence at relatively little additional cost. The key investment is in developing a clear framework.

However, as long as they don’t have the required clarity on their own CI needs, their interactions with the outside world will remain limited to the immediate transactions at hand – wasted opportunities to get valuable competitive insights!

These words are wisdom, but wisdom is a virtue of few. The rest need to develop it. Tata Docomo recently launched an ad campaign asking people to “Keep It Simple, Silly,” which became an instant hit. Organizations have found that it is easier to sell simple ideas than complicated ones. Every idea is an answer to a problem. So if the answer needs to be simple, why should the solution be complicated? Solving problems is the course of doing business.

Unresolved problems could in time turn complex such that it becomes very difficult to conjure up a cure. The issue does not lie in the complexity of the problem, but with one’s approach towards solving it. Amongst many such approaches used by consultants, is the structure based approach. Solving problems in a structured manner not only helps draw out a simpler framework but also helps reduce the amount of effort put into solving it.

Structured problem solving has benefited consultants to come up with:

1.      An effective initial hypothesis which lays the foundation for data collection, factual synthesis and analysis.

2.     The scope of the problem and a guideline for a researcher which helps him explore in the right direction. Every project is limited by resources and one should avoid expending too many resources in the wrong direction. This helps researchers come up with comprehensive solutions before deadlines and add value to the final product which benefits the client.

3.    Easy to comprehend and simple to implement frameworks which enable them to break complex problems into smaller components that can be solved individually. In today’s competitive scenario, organizations face complex problems, for which untying the Gordian Knot itself is insufficient, one has to unthread the rope into individual threads and solve each thread to the origin of the rope; i.e. the root of problem. A logic tree or a problem tree could be a tool to achieve this.

The advantages can be better understood by looking at a simple case. Indian retail industry which contributes up to 12% of the GDP faces the challenge of increasing competition. The Indian retail sector has witnessed too many players in too short a time, which has made this sector turn vapid. New entrants along with existing players keep asking the same question, “How do we make money in this industry?”

An ad-hoc approach towards this problem could look like the image on the right where there are ‘n’ number of interdependent variables across internal and external factors.

Applying structured based approach towards solving this complex problem could corroborate our assumptions.

Major hurdles faced by a player in the Indian retail industry can be classified into three categories:

1. Threat of rapid price changes and low margins
2. Threat from unorganized sector
3. Legal policies

We can sub categorize by breaking down these categories so that no aspect of the problem is left untouched. One could keep breaking it down till a simple framework of the problem is achieved. I have broken down one arm of the problem tree demonstrating the break-down of a problem down to 5 levels. This can be further broken down into more levels.

We understand that FDI regulation affects New Technology and R&D in retail. This will ultimately help companies deal with low margins. Due to constrain of this blog I will not go deep into these subcategories.

The above approach enables us to cover all the aspects associated with the problem. It also enables consultants to look at different perspectives which would have been hidden or overlooked before.

The golden rule says, no matter how complex the problem, if its solution is not simple then one is on the wrong track. One must always try to simplify the problem as much as possible keeping sure that nothing is left and every possibility is considered. It is only through the most complex situations that the subtle art of simplicity be understood.

The industry (particularly the life insurance segment) has grown very fast in the last 10 years. While initial growth came at a very fast pace, it has now slowed down somewhat and the industry will have to work harder to grow in the next decade.

My antenna picked up a few pain areas the industry is likely to come up against in the years to come, where the players will need good competitive intelligence.

One area of focus is to understand the customer and educate him on insurance in order to increase insurance penetration. Despite very high growth in the last 10 years, life insurance penetration stands at only around 4%. A not-so-high growth in the non-life segment has kept the penetration there to a measly 0.6%.  This is significantly lower than many other countries. The key issue (to different extents in life and non life segments) here are that the customers don’t understand the products well and the companies don’t understand the customer well.

The other much talked-about pain point is channel productivity. Both life and non-life segments have armies of agents that deliver, on average very low sales. Companies want to and need to monitor channel productivity and benchmark their own against those of their competitors and the industry as a whole. While everyone needs to have this information, no-one wants to share their own data with the others. A little like compensation data, I guess, where everyone wants to know the others’ while keeping their own confidential.

Related to channel productivity is the need for research on distribution channels. The individual agent is the primary distribution channel for both life and non-life segments, though newer companies like Canara HSBC are experimenting with greater reliance on banc assurance. The disconnect between the perceptions of the industry players on the one hand and those of the agents and customers on the other stood out during the conference.  While insurance companies grumbled about the high incidence of false claims, one of the agents complained about the difficulties he faced in getting legitimate claims of his clients processed. Going by the murmurs at the venue, this seemed to be a shared opinion of many agents present there. Going forward, industry players will really need to understand the issues of their agents to make them more productive.

Finally, most speakers discussed the need to reach out to the “bottom of the pyramid”. In fact, the conference had a whole session dedicated to discussing micro-insurance. Indeed, as with many other industries, once the urban and SEC A& B markets get saturated, the attention inevitably turns to the bottom of the pyramid, which as one speaker pointed out is not the same as the rural market but resides primarily in rural areas. Insurance companies don’t necessarily need to create new products, as one speaker pointed out. Most of them have almost too many policies in their stables, one or more of which will be suitable for the small ticket insurer. The first difficulty is in reaching the customers and educating them. A bigger challenge is in servicing those policies. Insurance companies need to develop processes and delivery mechanisms that are cost efficient even for small ticket transactions in remote areas. Many of them are looking to find solutions through mobile and internet technologies. Regulations will also play a very important part in the evolution of distribution and delivery models.

Bottom line is that I expect that individual insurance companies the industry as a whole will need to allot significant bandwidth on competitive intelligence in the coming years.

In many industries (FMCG, telecom, consumer durables, etc), companies have seen higher growth in rural markets than in urban areas in recent years. Their strategy so far has been to sell the same products to the rural customers that they sell in urban markets but in smaller-size packs – sachets, to get the rural folk hooked on. And reports suggest that the rural consumers do seem to have shifted from local non-branded products to branded soaps, detergents, biscuits and so on.

But no one really understands what is driving this growth – most of what they know is conjecture. Good monsoons (hence agricultural performance) from 2004-2008 was considered to be the key driver of rural growth – till 2009.  Rural markets have grown in the first two quarters of 2009 despite poor performance of agriculture. We now attribute this to non-agricultural income – various rural employment and rural income generation schemes. The fact is, no one has any hard data on the rural markets.

According to Rama Bijapurkar, an authority on consumer trends in India, “The truth is that we don’t yet have an answer to this through direct field surveys that actually ask people who their customers or their employers are. Sadly, Indian companies’ willingness to pay for hard data is low and in the absence of this, India is now at a pace where conjecture, no matter how widely believed, can be a dangerous basis for business planning.” (Rural consumption myths I)

This is also the reason why there have really been no attempts to design new products for the rural markets. And there are some very good reasons why rural markets should really be studied is distinct from urban ones. Rama Bijapurkar has described some of them in another article on the same theme – Rural consumption myths II

As a research company, we see many research requests that focus on understanding the bottom of the pyramid in India – but always focussed on the “urban conglomerations”. I guess understanding urban markets is hard enough given the (poor) availability of data – you need the very brave to take on the rural markets. But unless someone does this, sellers to the rural markets will continue to flounder in the dark.

The seemingly poor performance notwithstanding, the legislation is a valuable (but under-utilised) tool for business researchers to gain valuable data in an environment of information drought. Data on the % of the RTI appeals filed for business research purposes is not available, but I feel it is likely to be a very negligible proportion.

The Indian Government collects far less data than governments in more developed countries. Businesses in India thirst for a valid basis on which to base decisions, particularly those relating to unorganised segments of the economy and household incomes. Given that the unorganised sector constitutes over 85% of the economy in terms of employment, and over 60% in terms of GDP, the information gap is huge.

The little data that the government does collect is not easily available to researchers. Much of it is not posted on websites. Phone calls and trips to the concerned offices don’t always yield results – it’s really depends on whims and moods of officer in charge. The data that is posted on websites is not always easy to find – many government websites are poorly designed and hence really hard to navigate. Links don’t always work. On contacting the authority, a curt instruction to “take it from the website” is all that is forthcoming.

In such cases, an RTI works very well. The timeline is long – it takes at least a month to get a response, some times a little more. Where the information is politically sensitive, the information may take much longer to get – or I have been told, not at all. Our experience with applications for data of interest to businesses has been positive.

Researchers in developed countries, where a lot more information is available, have taken the right to information legislation to an entirely different level. The legislation, for instance, can be used to figure out details such as specific changes in the production line of a competitor’s factory. While India is a very long way from that kind of reporting and transparency, a start has been made.