Intelligence in the private sector:
Ethics and efficiency in uncertain times
Robert David STEELE Vivas
ABSTRACT
Intelligence is a process: requirements definition, collection management, source discovery and validation, multi-source fusion, machine and human translation and analysis, visualization of complex ideas, and timely appropriate delivery of decision-support. Intelligence is decision-support. Secret sources and methods are not and should not define intelligence. Indeed, secret sources and methods in the private sector, apart from being illegal, are generally fraudulent, over-rated, over-priced, and rarely equal to what can be obtained for a fraction of the cost and none of the risk from open sources of information including eleven types of human intelligence that are legally and ethically available to the astute manager. The renaissance of a nation today demands a renaissance of national and commercial intelligence.
Ethics is the codification of human memory of what works to enhance the prosperity and security of communities that practice ethics among themselves and in relation to other communities. A Nobel Prize has been awarded to a person who demonstrated that trust lowers the cost of doing business. In today’s world of ubiquitous surveillance, ethics begins with transparency, is rooted in the truth, and ultimately becomes an intangible value. In India, US companies that initially complained about US anti-corruption laws found that Indian officials preferred them precisely because it protected those officials from being suspected of corruption in any award to a US company. Recently a national hero in India finally broke his fast in support of the nation-wide anti-corruption campaign. Corruption is a form of lie – a hidden cost -- a cost externalized to the public -- a cancer that introduces waste and abuse. Restoring integrity to business is essential.
In these uncertain times it is not possible for any Industrial-Era or hierarchical system to survive with the old concepts of top-down “command and control.” There are only two ways to create a Smart Nation and/or a Smart Corporation that is agile, alert, and effective in the face of constant change: first, management must learn new priorities and new values including placing more priority on the education and independence of employees from the bottom up, and on demanding the truth at any cost; and second, management must realize that the employees in the aggregate and as individuals are the only thing standing between the business and ignorance. They are your “intelligence minutemen,” if they are not educated, empowered, and listened to, the business will inevitably lose money and market share while also failing to see new opportunities only discernible from very tight feedback loops among customers, suppliers, regulators, and “the company.” The other half of performance and profit in the 21st Century is integrity – both personal integrity and organizational integrity of purpose, process, and outcomes. Integrity must be inherent at all levels.
The seven strategic concepts I will discuss are these:
1) CEOs are more out of touch with reality and the truth than they realize—commercial intelligence is important, but CEOs must understand the difference between decision-support and snake oil.
2) The future of capitalism lays in the five billion poor with their four trillion a year annual income, four times that of the one billion rich. This requires a fundamental change in business design.
3) The future of profit lies in holistic sustainable businesses that do not externalize costs to the public today or tomorrow. Integrity is central to performance, profit, and the public good.
4) Software is eating all industries one at a time—beware of Google, embrace the open—open source software, open data access, open spectrum, and of course open source intelligence.
5) The time for Spain to restore its greatness as a partner to all countries in the Southern Hemisphere, but especially in Latin America, is now.
6) Governments cannot cope with complexity—and the information explosion—without help from the business community both large and small. Hybrid information-sharing networks are essential to all.
7) Strategic analytics demand an appreciation for holistic attention, the “new craft of intelligence.”
Introduction and Context
This article, and my briefing, have been created for this event and are completely new. However, in the course of thinking about how best to help the participants, all leaders in government and industry concerned with the business world, I had occasion to examine my earliest published work, and found five articles that are still relevant, still useful. For this group I have posted them in full text online where they are easily translated into Spanish or other languages with Google Translate. Here are links to the five articles with full-text:
1992 E3i: Ethics, Ecology, Evolution, and Intelligence
1993 Corporate Role in National Competitiveness: Smart People + Good Tools + Information = Profit
1995 Private Enterprise Intelligence: Its Potential Contribution to National Security
2002 New Rules for the New Craft of Intelligence
2008 Creating a Smart Nation: Strategy, Policy, Intelligence, and Information
By way of introduction, I would respectfully emphasize that corruption is treason. Corruption is not just about honor and keeping one’s word. It is about falsifying information, ignoring standards, failing to focus on the minutia of sources, process, products, and services such that the consumer is not well served; the public is deprived of resources or costs are externalized to the public, and the legitimacy of the government is undermined, whether from a loss of tax revenue or a loss of public well-being. When corruption becomes a pervasive characteristic of a culture, it is a stake in the heart of the country and a stake in the heart of any business. If there is one thing that government and industry should agree on, in my view it is that corruption is the enemy, and integrity is the shared value.
Integrity is priceless. Integrity properly understood is about much more than honor. It is about completeness—the quality or condition of being whole or undivided. In the world of intelligence, both the secret world and the commercial world, this means that a holistic process, a respect for the fullest possible diversity of sources and methods, is essential.[1]
If both the government and the private sector commit themselves to integrity, there is no conflict between the goals of intelligence—to find the “best truth” for all parties—and the goals of politics—to find the “best compromise” for all parties.[2]
Today, I am heartened by what I perceive to be a new appreciation for integrity. We can see this among the protesters from Athens to New York, and we can see this in new investment practices that recognize the role that integrity plays in achieving efficiencies that enhance profit. Below I quote from Steven Howard Johnson, author of the free online book Integrity at Scale:
It turns out that companies who rank in the Top 100 for corporate responsibility outperform the S&P 500 by a considerable margin. But that comes not from the profit-maximization ethos that lies behind agency theory. It comes from a qualitative belief in the value of service as part of the way one does business. The good companies set a higher bar, ask people to live by higher standards, elicit greater competence, and achieve better results. It isn’t about dollars, alone; it’s also about doing business in ways that give life more meaning.[3]
It is my honor to speak to you about intelligence and integrity. They go together very well.
1. Commercial Intelligence
CEOs are more out of touch with reality and the truth than they realize—commercial intelligence is important, but CEOs must understand the difference between decision-support and snake oil.
I approach this at four levels—strategic, operational, tactical, and technical. Of all the individuals in an organization, the CEO is both the only one that must think in terms of all four levels at all times, and also the one individual most dependent upon others for accurate information.
Ben Gilad, co-founder of the Academy of Competitive Intelligence, says this in his book, Business Blindspots: Replacing Your Company's Entrenched and Outdated Myths, Beliefs and Assumptions With the Realities of Today's Markets (Probus Professional Publications, 1993)
Top managers’ information is invariably either biased, subjective, filtered or late. . . . Using intelligence correctly requires a fundamental change in the way top executives make decisions.
At the strategic level, if the CEO does not have a professional, completely independent decision-support or intelligence function in place, the CEO will not be able to avoid costly surprises and also react quickly to new opportunities.
I have learned three things over the past forty years as an intelligence professional:
First, the government does not do economic or industrial intelligence nor does it do economic or industrial counter-intelligence. This is one reason why Goldman Sachs and other U.S. based banks were able to maliciously “explode” the economies of Greece and other countries. This is an area where the private sector could take the lead, with full government participation, creating a regional and national commercial intelligence centre.
Second, CEOs that rely on their executives or special assistants for information essential to making decisions are going to be working with, at best 20% of what they could and should know, and as Ben Gilad observes, this information is generally going to be biased, subjective, filtered, or late.
Third, there is a very specific combination of four levels of commercial intelligence that have been proven to yield dividends. Known as the Herring Triangle, I illustrate them here, together with their need and cost percentages.
Most commercial intelligence endeavors in my experience stop at the lowest level and are nothing more than in-house newspapers with a little research on demand.
These capabilities can and should be developed as shared capabilities, both within and among industries, and in partnership with the government.
I will end this point with a short story from the French steel industry in 1993. They spent millions investigating foreign steel industries. However, because they were not working closely with other industries, they completely overlooked the emergence of the plastics industry as the new provider of automotive parts. Whatever you do, cast a wide net and be ready to think, share, and collaborate outside your company, outside your industry, outside your country.
2. Five Billion Poor Have Four Trillion Dollars A Year
The future of capitalism lays in the five billion poor with their four trillion a year annual income, four times that of the one billion rich. This requires a fundamental change in business design.
When considering the future, it is helpful to begin with an appreciation of threats to that future. There is only one global study that has both identified the high-level threats to the future, and also put them in priority order. I refer to the United Nations High-Level Panel on Threats, Challenge, and Change, which published its report in 2004, A More Secure World: Our Shared Responsibility, which is also available free online.
Every one of these threats is a threat to the future of industry, government, and society around the world.
I am often told by those I speak with that they prefer to focus on their local business. I understand that point of view, but must respectfully point out that the Earth is shrinking; that changes that used to take 10,000 years now take less than three years; and that reality kicks the last ball.
You may not be interested in reality, but reality is interested in you. Poverty, to take one example, creates more infectious disease and destroys more of the environment than all corporations combined.
Addressing all of these threats is not just a job for government, and in fact governments need the help of industry such that traditional ministries can benefit from a new form of hybrid information-driven governance in which industry and government are full partners in eradicating threats and in orchestrating behavior and spending across all relevant policy areas. To that end, here are twelve policy domains where industrial and government intelligence and policy must be closely integrated; investments both inside and outside one’s home country must be fully informed -- in China now, everyone is discovering that they are severely deficient in energy, health, and water, three vital areas of concern for any manager.
My point is that sustainable profit for the future is going to require a focus on the emerging marketplace of the five billion poor, and that in turn is going to reward those governments and those industries that learn to create, maintain, and exploit a global information-sharing and sense-making network.
The good news is that the five billion poor have the one thing that is priceless and essential to our future: human brains. There is an entire literature on the theme “wealth of networks,” In my view, those offerings that empower the poor with information and communications tools at a very low cost, and those offerings that leverage advanced knowledge to provide very low-cost offerings to the poor, with prosper.
This will require a dramatic change in how we understand business design, market design, sales design, and how we approach not just the governments, but the other groups that are important in gaining access to the marketplace of poverty. A much more holistic approach is required.
In the world of the rich, a refrigerator is a very expensive item that requires electrical power. In the world of the poor, a simple refrigerator consists of two clay pots with long necks, one inside the other with an air gap, and requiring now power. Buried in the ground, they keep meat fresh for five days. Clean water and nutritious low-cost food are two other areas of great promise.
In the world of the rich, there is generally stable government and a well-defined process for entering the market. In the world of the poor, most governments have failed and gaining access to the poor is complicated.
3. Integrity and Profit
The future of profit lies in holistic sustainable businesses that do not externalize costs to the public today or tomorrow. Integrity is central to performance, profit, and the public good.
Before I discuss software, the Latin American marketplace, panarchy, and holistic analytics, I must address the matter of integrity, and closely related to integrity, the matter of true cost economics.