24 Jun. 2016 | Comments (0) Share Follow @Conferenceboard
In July 2015, Novartis launched its new heart failure drug, Entresto, which Forbes in 2014 predicted would be a blockbuster — with expected sales of $10 billion annually — as the potential market in the US exceeds 5 million people with a heart failure condition. Yet, in the first quarter of 2016 the company sold only $17 million of Entresto in the U.S. market.
The failure stemmed from resistance in the U.S. by both insurance companies and cardiologists to a new and expensive drug (which costs more than $4,000 a year, compared to pennies a day for existing drugs). Pharmaceutical companies spend millions upon millions preparing meticulous plans for new drug launches – and yet their route-to-market strategies haven’t changed in decades, even though the reality of the market has.
The really frustrating thing is that so few companies learn from such mistakes; the usual response is “hindsight is 20-20” and the failure is chalked up to bad timing. Maybe a brand manager is moved to a different department, but little else changes – the same consultants are hired, the same “best practices” are pursued – and organization itself rarely actually learns. The failures continue.
In May of 2015, a food-safety commissioner of Uttar Pradesh, India’s most populous state with 205 million people, was claiming that a package of Nestlé’s popular Maggi noodles had been found to contain seven times the permissible level of lead and had recalled the batch.
Maggi’s sales accounted for quarter of Nestlé’s $1.6 billion sales in India. It has been one of the most powerful and trusted brands in that market and held a commanding 63% market share. The event that started in Uttar Pradesh rolled like an earthquake over Nestle and resulted in five-month ban on Maggi. Nestle lost $277 million in sales and paid $70 million in a recall. The damage to the brand name has been even larger —half a billion dollars. Paul Bulcke, Nestle’s CEO, was quoted by Fortune as saying, “This is a case where you can be so right and yet so wrong… We live in an ambiguous world. We have to be able to cope with that.”
Nestlé was not able to cope with that – but a competitor was. Baba Ramdev, the yoga guru owner of the fastest-growing local consumer goods company in India, launched a competing product, advertised as “healthier” than Nestlé’s and at a lower price point than Maggi.
We must start to think differently about how business, management, and strategic intelligence works. What companies today need isn’t meticulous plans, but to constantly reassess the business and its markets and competitors. In other words, the goal for strategic intelligence is not to collect market information to make plans, but to use that information to generate insights that in turn support ever-changingperspectives. Eventually, these perspectives may result in action. Or not. The test of a capability is not in management action but in management learning. Avoiding a $500 million mistake is surely just as valuable as launching a $500 million product.
What builds management perspectives? What insights will cause an executive — in R&D or Marketing or Finance — to not only change his or her perspective, but to be able to juggle different perspectives? In his best-selling book, Superforecasting, Philip Tetlock states “The job of intelligence is to speak truth to power, not tell [the powers] temporarily in charge what they want to hear.” But what is truth in an ambiguous world? Is there just one?
Intelligence analysts live in a different knowledge context from managers. Management may have to play an internal political game with issues that intelligence analysts don’t even know about! Moreover, insight is in itself an ambiguous concept: how can management and intelligence work together on creating insights that have real competitive implications? Strategic intelligence leaders in large corporations (as in government) have no idea, since they mostly work in a different sphere. This disconnect between the institutional production of (more and faster) intelligence and the personal use of intelligence by corporate decision makers seems the most vexing issue for corporate leaders. The solution is probably not easy, but it comes down to four radical changes:
- Manage talent differently. Executives must actively recruit and promote on tolerance of ambiguity mindsets where the unexpected builds perspectives.
- Use competitive intelligence differently. Companies must utilize the intelligence team specifically for insight management, not as an information search-and-distribute function. At the minimum, institutional intelligence’s crucial role shouldbe supporting a change in perspective. Optimally, it will foster an organizational culture thriving on ambiguity outsmarting stability-seeking competitors.
- Work together. Easier said than done, but the parallel from the military is that the intelligence analyst should be side-by-side with the decision maker at all times, not down the hall or in a different building.
- Study personal use of intelligence. Corporations spend a fortune studying aspects of employees’ behavior, developing organizational learning, assessing performance, and providing feedbacks. They spend almost nothing trying to understand, chart and overcome obstacles for using intelligence inside the organization. This is not another “HR job.” It is at the heart of avoiding half-billion dollar loss like Nestle’s or nasty disappointments like that of Novartis.
This blog first appeared on Harvard Business Review on 06/16/2016.
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