Making Intelligence Smarter: Analysis of Competing Hypotheses

A portion of competitive intelligence work is simply gathering source information. However that information’s value depends in part on how well analysts can develop defensible conclusions from hypotheses that are often at odds with each other. Borrowing from public sector intelligence practice, the analysis of competing hypotheses (ACH) framework tests different interpretations by plotting hypotheses against evidence using a two-dimensional matrix.

Populating the Horizontal Axis: Hypotheses

The first step of the ACH approach is to gather hypotheses about a potential future event, business situation, or competitor move, and create a column in the matrix for each hypothesis. Potential entries for this horizontal axis could come from sources such as brainstorming sessions, blog-based commentary, social media, interviews with subject matter experts, and many other common intelligence sources.

There is often a hierarchical structure to the hypotheses. “Windows 8 will rapidly achieve large market share” could be a top-level hypothesis, with sub-hypotheses such as “small businesses will be slow to adopt Windows 8” and “Windows 8 will accelerate upgrades from Windows XP.”.

Populating the Vertical Axis: Evidence

Companies weighing their responses to events must consider multiple hypotheses. Following the example above, a software company deciding what resources to apply to supporting Windows 8 will want to have an understanding of the likely adoption of the new OS within its customer base. To support that understanding, pieces of evidence are populated along the horizontal axis of the matrix, so that the impact of each can be considered against the hypotheses.

Pieces of evidence to be used for ACH can come from any source used in competitive intelligence research, including open source intelligence (such as job postings or resumes from LinkedIn), first-party interviews, and industry events. General marketing materials such as feature lists or price points are also valuable.

Gleaning Insight from Intersection Points within the Matrix

Once the matrix is populated, analysis should proceed in a structured manner.. Each intersection in the matrix is first identified as “consistent,” inconsistent,” or “not applicable,” based on the support (or lack of support) by a specific piece of evidence for a given hypothesis. The next step is to tally a score for each hypothesis, based on the number of pieces of evidence that support it, minus the number that contradict it. Potential conclusions can then be ranked on that basis; note that, in some cases, a single piece of inconsistent evidence can disqualify a hypothesis from further consideration.

Using ACH can provide the ability to empirically establish the validity of multiple hypotheses, where there would otherwise be a tangled, contradictory mass of opinions.

By Sean Campbell
By Scott Swigart

Questions of ethics are always a point of interest in competitive intelligence (CI), and workshops on this topic are a staple of industry conferences. Guidelines such as the Strategic and Competitive Intelligence Professionals (SCIP) Code of Ethics are a great start, as are legal or ethical guidelines established by your company or customers. Our discussion here adds to that type of formal policy with discussion that can help CI professionals establish their own ethical foundations.

Scenario: Avoiding the Temptation of Identity Games

Most of us have at least considered whether we would get an advantage by hiding our true intent when we are gathering competitive intelligence. Whether as simple as turning a conference badge backward or as complex as inventing an elaborate cover story, not disclosing who you are violates a core ethical requirement. It’s worth mentioning that the same is true online, and creating fake social networking profiles for the purpose of collecting CI is out of bounds.

Note that these ethical considerations are binding even if you know for certain that competitors are being unethical toward you. The tendency to do otherwise follows from the “business is war” mentality, but we should all recognize that even in war, participants are subject to rules of engagement such as the Geneva Convention.

Scenario: Overhearing Sensitive Information

Imagine that the person next to you on an airplane is talking on their cell phone about sensitive information that could benefit you or your client. They may be talking about flaws in their product, for example, or challenges they are having in selling. What do you do? In this case, we would not feel ethically bound to stop them from disclosing the information.

That person has an obligation to protect the sensitive information, and this situation represents a failure on their part to fulfill their responsibility, rather than an ethical breach on your part. This sort of failure to keep information private is no different, from an ethical point of view, than inadvertently disclosing information in job postings or LinkedIn profiles, which are typically considered “in bounds” for CI research.

Scenario: Identifying Limits on Full Disclosure

Consider being on a call conducting research for a client, when your research subject asks you who the research is for. While you clearly must identify yourself, it is a different question altogether whether you are ethically bound to disclose the identity of your client (which could also be a violation of the client’s privacy).

The way to handle this conundrum is to avoid it altogether by being forthright up front about the fact that you are not a potential customer, for example, when you are talking to a sales professional. If you identify yourself as a CI professional but say, “I can’t tell you whom I am calling for,” you have done your ethical duty. That practice can also play a key role in avoiding the appearance of impropriety, which is vital to protecting your reputation, which benefits you in the long run.

By Sean Campbell
By Scott Swigart