A description on how to develop a competitive intelligence structure within an Automotive Company

1. STRUCTURING THE ORGANIZATION TO MAXIMIZE CI
CAPABILITIES IN THE AUTOMOTIVE INDUSTRY
BY:
BENNY T. C. SIU, MBA, P. ENG., CMA
DATE:
JUNE 04, 2004
Updated (2009)

2. EXECUTIVE SUMMARY
This article attempts to address the need of a formal CI organization structure in the automotive
industry. Based on the unique industry characteristics and the external driven nature, CI
activities shall be structured to address business unit requirements, geographical requirements
and functional requirements. This article also provides a brief overview of the industry
dynamics and the different CI technique required to generate relevant information for policy
development.
AUTHOR’S BACKGROUND
The author is an experienced engineer and business planning coordinator for Honda of Canada
Manufacturing. His job responsibilities include the development of internal performance metrics,
policy development, competitor’s benchmarking, and the studies of new product development
and manufacturing technologies. His engineering specialties include the area of industrial
automation and production/operation analysis.
As a licensed engineer of Ontario (P.Eng.), the author holds an undergraduate degree in
Mechanical Engineering and a minor degree in Management Science, from the University of
Waterloo. The author is also holds a Master degree in Business Administration and the
designation of Certified Management Accountant (CMA).
INTRODUCTION
Competitive intelligence (CI) has becoming increasing important in the automotive industry, as
the market becomes more fragmented. Most major automotive players have now offered full
lines of product, ranging from economic sedan, luxury sedan to sport utilities vehicles. The
future order winners in this intensely competitive environment will be the ones who can closely
meet customers’ expectation by successfully execute market oriented competitive intelligence
through a well defined organization structure.
GENERAL INDUSTRY DYNAMICS
The automotive industry can generally be broken into several vehicle classes: economic, family,
luxury, sports, minivan, truck and utility. In addition, the consumer segment in the automotive
industry can generally be divided as value seekers, families, singles, high income and
enterprisers.1 As such, it is essential for automakers to identify the permutation of this market

3. fragmentation and produce vehicle models that meet customer expectation. Typical market
research would be conducted on specific customer group and identify their needs in various
functional areas and assign a rating based on targeted customers’ preference (Figure 1):
Figure 1. Sample Product Mapping Sheet
This mapping sheet will form a reference point in the market, demonstrating the target
preference of the specific customer group. Automakers will then assess its current product line
that are marketed to this customer group and benchmark itself against this reference, as well as
other rivals. (Figure 2.)
Figure 2. Product Gap Mapping
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4. As seen from figure 2, it is implied that the order winner will be the one who can close the gap
between its current product and the customer preference. Some may argue that as long as the
product is below the mid line, customer will always prefer those products as they tend to provide
more value than the actual monetary tradeoff. This theory may hold true but automakers should
stay away from such strategy because it only provides value to the customer while automakers
loss on its adequate share of the profit.
This product mapping will then be used as a threshold in generating target manufacturing and
designing budgets.2 This budget is set to generate a target cost base to design, manufacture and
produce the particular vehicle with the target set of attributes. This will provide automakers to
understand the projected profit margin of such vehicle and understand whether such a customer
group is worthwhile to pursue.
This section is to demonstrate the importance of information gathering in the early stage,
specifically for the automotive industry. Automakers have to have a clear understanding of the
market condition prior to committing into a substantial capital investment. Early warnings,
market and economic trends are important for automakers, as they need to understand which
customer group would yield the maximum profitability and growth opportunity. It is therefore
essential for automakers to align its organization in order to create the proper linkage from
sales/marketing to product design and vehicle manufacturing.
ESSENTIAL SKILL SETS OF CI PROFESSIONALS IN THE
AUTO INDUSRY
Globalization in the auto industry has significantly increased the intensity of competition. While
the major automakers are facing decrease market shares and stagnant profitability within the US
markets, other new battlefield such as the growing China market has diverted the attentions of
senior executives. Given that the auto industry is heavily driven by external conditions, CI
professionals not only have to have the skill sets to analyze the market condition, but also the
ability to assess internal conditions and capabilities in the area of product development and
manufacturing technology. It is critical that CI professionals in the auto industry to develop
good linkages among sales and marketing, product development and manufacturing. These
linkages shall then be proposed to senior executives and in turn be incorporated into policy
development. Companies with sales and establishments around the world need to clearly
identify the unique characteristics (political factors, economical factors, social factors and
technological factors) of each region.
The aggregate of all these studies create a unique challenge to CI professionals in the auto
industry. CI professionals would have to acquire the necessary skill sets in order to perform
thorough studies on the industry dynamics so that these efforts could be incorporated into overall
strategic and tactical planning. Suitable CI studies for the auto industry should be oriented
towards long-term business strategies, product development, environment and industry
assessment, customer preferences, financial characteristics, technological advancement and
human capital and their behaviour.3
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5. In order to perform these comprehensive studies, CI professionals shall have the necessary skills
including (but not limited to) the following areas: sales, marketing, engineering, operations,
statistics, accounting, and finance. More importantly, CI professionals shall have the capabilities
to persuade senior executives to incorporate these studies into future policy development.
TYPICAL ORGANIZATIONAL STRUCTURE FOR MANAGING
CI
Most of the auto companies have various business units around the globe and the effectiveness of
CI highly depends on an adequate organizational structure and knowledge management database.
At a high level scale, CI practices of the auto companies are very similar to Eastman Kodak.4
Auto companies practice business intelligence to address market and economic changes;
technical intelligence to address latest automotive design and development (i.e. low emission
engines, alternative material, etc); manufacturing intelligence to address efficiency and flexibility
(i.e. value chain analysis, flexible manufacturing and multi-platform technology). CI activities
are usually incorporated into daily business practice and function.
The organizational structure begins with different business units (sales, design, manufacturing)
and each unit is responsible for its respective CI studies (business intelligence, technical
intelligence, manufacturing intelligence). Within each business unit, it is then sub-divided into a
matrix organization with grids form by geographical and functional segments. (Figure 3.)
Figure 3. Organizational Structure for Automotive CI
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6. As automakers operate in multi-region with multi-business units, it is essential that the CI
information gathered to be shared among those that demand such materials. The information
sharing process can be conveyed through periodic forums, specific discussion groups and with
champion teams. A detailed example can be seen from the manufacturing intelligence gathering.
Each region has a champion team that coordinates each functional study group. The champion
team is also responsible to assess both internal and external CI and incorporate the relevant
information into regional policy development. (Figure 4.)
Figure 4. CI MATRIX WITHIN A MANUFACTURING UNIT
HIERACHY OF VARIOUS CI STUDIES
Each business unit is responsible of conducting relevant CI studies to assess current business
conditions and determine future improvement opportunities. Two different types of CI can be
identified as external CI and internal CI. External CI comprises of studies focuses on general
industry trends, market conditions, customer behaviour, supplier power, regulatory issues, and
competitor benchmarking. Although sometimes there may be redundancy in performing these
studies, it is recommended that each of these studies are as thorough as possible so no potential
risks will be underminded. Internal CI deals with collecting and reporting key performance
metrics so that current business status can be properly reflected. A balanced scorecard5 would be
a good tool to utilize, in order to capture financial and non-financial indicators.
In addition, the integration between the external and internal CI is generated through proper
market and competitor benchmarking. This will provide auto companies to improve through
learning from industry leaders and industry’s best practice. The integration can be monitored
through the use of a FIICH model6 and CI champions can monitor CI results against the
matching of these elements:
• Focus: Develop a clear set of goals and objectives for CI-knowledge activities
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7. • Implement: Create an organizational culture conductive to implementing actionable CI
knowledge
• Institutionalize: Incorporate CI knowledge-management practices into the daily activities
of managers
• Change: Modify thought processes, behaviours, and performance in ways that help
achieve organizational goals and objectives
• Hone: Make the CI knowledge-management process a dynamic, evolving activity with a
bias toward continuous improvement.
INCORPORATING CI INTO STRATEGIC PLANNING
Automotive companies shall be aware of the importance of incorporating CI functions into
strategy and policy development. CI is essentially studies of the business, from both an external
and internal perspective. As the FIICH model has suggested, CI functions shall be incorporated
into daily activities and therefore become the requirement and validation of the company’s
mission and vision. As business condition changes, especially in such an industry with intense
competition, CI will be able to assist policy maker to understand the validity of the current vision
and whether the existing value propositions of the company yields a long-term comparative
advantage.
1
J. Paul Peter, M. Deighan, S. C. Certo, S. W. James, “StratSim: The Business Strategy Simulation”, Interpretive
Software Inc., Charlottesville, Virginia, 2001
2
Management Accounting Standard 3400, “Target Costing”, The Society of Management Accountants of Canada,
2002.
3
C. F. Feisher, “Analysis in CI: Process, Progress, and Pitfalls”, Managing Frontier in Competitive Intelligence,
2001.
4
R. Williams, “Knowledge-enabled Competitive Intelligence: CI Across Business Functions”, APQC, 2002.
5
Strategic Management Series, “Applying the Balanced Scorecard”, Management Accounting Guideline, The
Society of Management Accountants of Canada, 1999.
6
J. Madden, “Overview of Best Practices in Competitive Intelligence”, Managing Frontier in Competitive
Intelligence, 2001.
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