3 Steps to a Competitive Intelligence Strategy

In my post last week, I kicked off our series on situational awareness with a discussion of the importance of knowing your company when it comes to discussing earnings with investors. This week we continue the conversation breaking down a second component of situational awareness, competitive intelligence.

While knowing yourself is key to putting your earnings in perspective for investors, another piece of this puzzle is knowing where your peers stand. In simple terms, figuring out a viable strategy for competitive intelligence means understanding your competition relative to your company and relative to major industry challenges.

Where do I even start?

Of course, figuring out where to start is far from simple. Clients often ask: How do I keep tabs on my competition in a respectable way? How do I create and implement on-going systems for competitive intelligence? And how do I translate the relevant information I find into the most meaningful format for my team?

Before I start going over details, let’s consider the big picture. I often describe competitive intelligence in terms of your company maintaining a “ready stance.” Like an athlete entering the ring with her opponent, you don’t want to be caught flat-footed by your competition. You want to be ready for anything and able to anticipate the moves your competition makes, so you can adjust accordingly.

So, what steps will help you take the competition by storm?

1. Rethink your competitive intelligence process.

Having a strategy is the best move you can make. Before you approach your board and investors, sit down with your team, develop a clear sense of scope, and think through the different roles members will play.

To guide your strategy, read through your competitors’ earnings transcripts. If their investor presentations are available online, look for clues about their perspective on the market. Are they taking a conservative, moderately conservative, or more aggressive approach? Finally, study their research reports. The more you know about their models and go-to sources, the more you can develop a competitive profile.

Also, make sure you don’t miss the forest for the trees. In other words, don’t just think hard about, say, your closest individual competitor. Looking at the market dynamic between several competitors can yield an innovative strategy, which could offer more guidance than studying any single competitor in isolation.

2. Talk to others in the industry.

When you see others in your industry at networking events or conferences, don’t shy away from talking shop. For example, when a colleague from research and development calls you up to ask about one of the models in your report, strike up a conversation about new federal regulations. While you should never ask about a specific company, it doesn’t hurt to ask for general feedback about your shared industry.

Now, I’m not suggesting that you do anything underhanded or anything that makes you uncomfortable here. Don’t think of this as digging for dirt. If you think of those you talk to as thought partners, your conversation will be cordial and mutually beneficial.

You will be surprised at what people are willing to disclose if you simply ask. Chances are you will come away from your conversation with information that can guide your investment choices and give you a better sense of where your competition is headed in the upcoming months.

3. Put processes in place for developing feedback loops.

Once you have thought about your own processes and gathered information about the competitive landscape, you can make the most of the information by establishing the right processes for getting it up the chain to your executives.

Bringing the information to the executives is really the final step though. You want to come to the table ready with a plan for implementing policy changes and systematically measuring results.

Also, keep in mind that data collection does not equal competitive intelligence. Competitive intelligence is more about creating strategy than it is about gathering loads of information. A little bit of information can go a long way. This means you don’t need to spend millions on a massive database and you shouldn’t simply dump data into the lap of analysts asking them to come up with a strategy.

Developing the right feedback loop requires an “all hands on deck” approach. Have a clear sense of the scope and role for each member of your team. Then take a few simple steps: mandate intelligence reviews at critical decision making stages; have a designated competitive intelligence analyst who sits in on all strategic meetings; and tap into any internal channels that can help implement strategies for competitive intelligence.

Parting thoughts

When it comes to competitive intelligence, the name of the game is to be proactive, predictive, and to revise your strategy according to what your competition might do. If you follow the above tips, you’ll be on your toes when it comes to monitoring your competition and staying on top of industry trends.

Used well, competitive intelligence will lead to increased strategic agility and the ability to adapt to market shifts. Don’t miss next week’s installment of our series all about what to do when markets behave badly. While we all have our fingers tightly crossed that the US election won’t upset the stock market, it doesn’t hurt to be prepared for the worst, right?

At Audacia Strategies, we’ve been practicing our “ready stance” for a long time. We don’t just provide flashy presentations and strategic advice from the sidelines. We roll up our sleeves and stand with you shoulder to shoulder until we achieve the measurable results you are after. Are you ready to schedule a free consultation and find out what a difference Audacia Strategies could make for your company?

Photo credit: ljupco / 123RF Stock Photo

investor relations

Investor Relations Starts At Home: 3 Tips for Disclosing Q3 Earnings

This week it seems like everyone in the financial world has been obsessing over companies like Apple and Google releasing their Q3 earnings reports. For analysts, preparing to disclose earnings is one of the biggest challenges of investor relations. Wall Street has been in a holding pattern during the past 30 days. But the perceived wisdom is that if any of these big companies reveals an earnings surprise, it could be just the jolt investors need to bring them out of their malaise. I’d say the jury is still out though.

There is no doubt that quarterly earnings are a crucial measure to watch. Still, as you develop a strategy for communicating your company’s Q3 earnings to investors, consider that finding the right message is as important as the actual data you are communicating. It’s always a good idea to keep things in perspective. Since companies aren’t valued in a vacuum, having situational awareness is essential to communicating the right message to your investors.

In fact, situational awareness is so essential to investor relations that we think it deserves a three-part series of its own. So we’ll start off in this post with tips for helping you view your company from the outside in. We will follow up with posts about knowing your peers and knowing the market.

What is situational awareness and why is it key for your quarterly earnings strategy?

As you might have guessed, there are three main components to situational awareness: knowing yourself, knowing your peers, and knowing the market. Each of these components plays a role in preparing you to discuss your company’s valuation with investors. Investors want you to give them the numbers, but they also want you to help them interpret the numbers. Remember that they are looking to you as an expert on their investment.

This is especially true when it comes to disclosing earnings. Building a successful investor relations strategy is about getting into the minds of your investors. From an investor’s perspective having more information is always preferable to having less, so anything you can do to put those numbers in context will be well received.

Think of it this way. Which is more helpful for investors to know:

  • Your earnings rose 10%?
  • Or your earnings rose 10% while your closest competitor’s earnings rose 8%?

That the second one jumps out as more helpful demonstrates the power of situational awareness. Now, we’re not saying you call out your competitors’ results specifically but you definitely want to note the “industry-leading” results during your earnings call. An investor relations strategy that integrates situational awareness doesn’t simply focus on telling the story of your quarter. It also positions your company relative to how your peers performed and to how the market itself performed, giving your investors a more complete picture of your company’s performance.

So let’s talk strategy.

What does it mean to know yourself?

1. Know your company better than anyone else.

This should go without saying, but no one external to your company should understand your company better than you do. So develop your own models, craft earnings polls, and get into the minds of analysts to understand how they are really evaluating you.

Additionally, rather than making assumptions about what analysts are thinking about your company based on their research, reverse engineer the research whenever possible. Get your sell side analysts’ models and compare and contrast. If it becomes obvious to you that analysts are operating under incorrect assumptions, build some commentary into your earnings call discussion to explain any discrepancies and to give more context for their revised models.

2. Know what the analysts ask.

Examine the questions analysts asked about your company and your peers during the last quarter (or even during the last few quarters). Compare those questions to what they are asking during the current earnings season. For example, if analysts asked about the risks associated with a particular raw material three quarters ago, but haven’t asked since, this might explain discrepancies between your internal reports and the external reports you’re seeing.

Don’t simply assume the questions analysts ask are consistent from quarter to quarter. While it can be tempting to dismiss a lower than expected valuation from analysts on grounds that they don’t have the complete picture, investors will rightly hold you accountable for failing to anticipate and adjust internal models.

3. Know yourself relative to your peers.

This bleeds over into what we’ll talk about in more depth next week, but part of knowing yourself includes knowing how you will handle the release of peer earnings reports. Because many data points are more meaningful in the context of understanding industry trends, keeping tabs on your competition is key to understanding how to position yourself with investors.

For instance, in the defense industry where there has been a mostly flat business landscape for much of the past year, it makes sense for defense contractors to pull back and take a more austere approach to allocating resources. But if you know your competition is taking this approach, while your company is increasing its investment in research and development, for example, you may have a powerful discriminator that sets you apart from your peers. Well communicated and in context, a carefully considered, seemingly contrarian investment strategy could really pay off in potential valuation.

Long story short, if you aren’t keeping tabs on your competition and how they handle macro-issues facing your industry, then you are operating at a serious disadvantage. It’s a little bit like showing up to a tennis match with a ping-pong paddle. Of course, it’s important to work on your backhand, but if you haven’t studied your competition carefully, you risk underestimating them.

Stay tuned for next week’s continuation of this series on situational awareness and investor relations when we’ll discuss knowing your peers on a deeper level. In the meantime, if you would like help communicating a consistent and compelling investment story, we’re always ready to talk disclosure strategy (with as much geeky detail as you can handle, of course). No matter how well you know your company, we understand that it can be challenging to know how to frame your message and to develop the right outreach plan. Contact us today. We’ve got your back!

Photo credit: Wavebreak Media Ltd

weekend reading

Weekend Reading

We survived another political convention season, my friends. High fives all around.

You may be shocked to hear that there has been plenty of news cycle beyond the U.S. presidential race with Q2 earnings, economic reports (hello July nonfarm payrolls!), and a new all-time high for the S&P500. So much for that old saying about “sell in May.”

As we head into the weekend, here’s a quick round-up of some of the news that caught our attention. Consider it our gift to you to keep you entertained and informed during your evening commute (for my train/subway riders), Friday afternoon wind-down (wine-down?) or over your weekend morning coffee. Cheers.

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Companies Routinely Steer Analysts to Deliver Earnings Surprises (Wall Street Journal)

We received a LOT of calls and emails over this article.

Audacia takeaway: Investor Relations is about making sure that there is transparency in company communications with investors and analysts. Ensuring that investors and analysts are well aware of public information is a legitimate and very appropriate activity. Analysts, like all of us, are awash in news and data. Many sell-side analysts cover upwards of 20 companies; buy side analysts may cover hundreds of companies. It is critical that companies ensure that their public messages are heard and comprehended so that they can be fairly valued.

That said, investor relations professionals (IROs) operate within SEC regulations called Regulation Fair Disclosure. There are legal ramifications for those companies who do not operate within those regulations (see: Office Depot). Additionally, investor relations professionals should encourage their employers to have a well-documented quiet period policy and stick to it.

We are always happy to discuss disclosure strategy. If you or your organization has questions, drop us a line, a tweet, or give a call. We’ve got your back.

Daily Report: Venture Capital’s Endangered Middle Class (New York Times)

Two weeks ago, we highlighted Entrepreneur.com’s report that venture capital placements are up 20.5% over Q1’16. This week, we are looking at venture capital fundraising. Per the New York Times, “In the first half of the year…just five venture firms raised $7.4 billion, or about one-third of the $22.9 billion raised over all by V.C.s.”

What could this mean? Well, it could mean that with a significant concentration of funds in a few firms we could see more concentrated placements, potentially leaving mid-sized funds and companies at a disadvantage.

Audacia Takeaway: Lots of game left to play here but it’s worth keeping an eye on… and it may open a unique business opportunity for those willing to step into the void.

Regulators Ask Big Banks to Give More Details About Trading Activity (Wall Street Journal)

In this era of high-frequency trading and dark pools, it is interesting to see that the SEC may request that big banks report trading revenue by product line (e.g., bonds, stocks, commodities, etc.). Today, trading revenues are reported en masse with little transparency into what might be driving a bank’s trading results.

Audacia Takeaway: This could be an interesting turn of events for investors by shedding light not just on what is trading but how it trades.

weekend reading

Weekend Reading

Ah summer, the season of sipping lemonade (or your libation of choice) by the side of the pool, long lazy days in hammocks and chasing the ice cream truck down the street.

Oh. Wait. It is also the season of earnings, political conventions, strategic planning, mid-year reviews and flights delayed by thunderstorms (ORD. Always.).

For those of you, like me, who are not in your hammock with a libation but are coming into the weekend at full speed, here’s your short round-up of some of the more thought-provoking news of the week. Feel free to peruse these links over your Saturday morning coffee or, you know, that hammock libation. Cheers.

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C.E.O.s Meet in Secret Over the Sorry State of Public Companies (NYTimes)

When Warren Buffett speaks the world listens. And when Warren Buffett, Mary Barra, Larry Fink and ten additional leading public company CEOs, investors, and fund managers sign their name to a set of “Commonsense Corporate Governance Principles” it’s time to sit down and think seriously about the current state of public companies. The group came together to advocate that public companies take a “long-term approach to management and governance of their business.”

Read the open letter and full set of governance principles here

Audacia Takeaway: There is hope for those of us who really do appreciate -and yearn- for more common sense in the world of governance. It’s time to stop being too “fancy” with our governance and our messaging. Real talk works.

There is a lot to like in this manifesto. Here’s one of my favorite comments in the Commonsense Principles of Corporate Governance

A company should not feel obligated to provide earnings guidance – and should determine whether providing earnings guidance for the company’s shareholders does more harm than good. If a company does provide earnings guidance, the company should be realistic and avoid inflated projections. Making short-term decisions to beat guidance (or any performance benchmark) is likely to be value destructive in the long run

Venture Capital Investments Rebound for Tech Startups (Entrepreneur.com)

As the public markets go, so goes venture capital apparently. Entrepreneur.com is reporting that venture capital placements are up 20.5% over Q116. But it’s not all fun and buzz, valuations are down 30-50% from last year and VCs are getting more selective.

Audacia Takeaway: Differentiation and relevance still matter.

My favorite comment from the article

“We are being more selective,” said Erik Gordon, professor at the University of Michigan Ross School of Business and faculty adviser to the university’s venture capital fund. “We’re not going to invest in everything that says ‘We are the Uber of X’ or ‘the Facebook of Y.'”

How Market Strategists Got 2016 Right and Wrong at the Same Time (Bloomberg.com)

Once again proving that the investment crystal ball more often acts like a Magic 8 Ball, “Reply hazy try again.”

In a year that has brought us Brexit, lone-wolf terror attacks, attempted military coups and a U.S. presidential election, economic forecasting is even more difficult than usual.

Audacia Takeaway: Refer back to our first set of news stories today. Run the business for the long term.

My favorite comment from the article

“We are in a world where you’re going to fixed income to get your capital appreciation, and you’re going to equities to get your yield,” said Bhanu Baweja, the London-based head of emerging-market cross-asset strategy at UBS. “It’s an upside-down world.”

Welcome to Audacia Strategies

And so it begins…

Hi there, I’m Katy. Welcome to the Audacia Strategies blog. I think you’re going to like it here.

A quick note about us, Audacia Strategies delivers investor relations and corporate communications to businesses that are in transformation. Transformation isn’t for the faint of heart – you want to do it right the first time. We help you get the most bang for your transformation buck by communicating effectively and completely across your stakeholders. You can learn more about what we do over on our Services page.

But this blog isn’t about Audacia Strategies. We have a whole website for that! Over in this corner of the world I’ll be talking about some of the latest “ripped from the headlines” examples of companies in transformation, providing some Investor Relations/Corporate Communications 101, and interviewing folks who have been in the trenches through big transformations and lived to tell the tale.

Most importantly, this blog is about you. I’m looking forward to hearing your perspectives, challenges and successes. I hope you’ll comment on the posts, ask questions, make suggestions, and drop me line at katy@audaciastrategies.com or tweet at me @KatyHerr. Conversations are much more fun than monologues, right?

I’m looking forward to getting to know you. Let’s talk.

 

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