Weighted Ranking Analysis for Competitive Intelligence
A substantial portion of competitive intelligence practice is applying structured methodologies to decision making, both to improve the quality of decisions and to build consensus around those decisions. As introduced in The Thinker’s Toolkit, by Morgan D. Jones, weighted ranking is a powerful set of critical thinking tools that can be applied in this manner. This approach is highly applicable when hard choices need to be made.
Setting the Foundations for a Structured Decision
Deciding among a group of industries that your company could potentially enter is a classic competitive intelligence decision that can be helped by weighted ranking. People generally have little trouble deciding between two options, such as when the eye doctor asks you which of two lenses you see more clearly through; when the list of options to choose among (in whatever context) gets five or ten items long, people tend to get overwhelmed.
In our industry-choosing example, the team should start by establishing a list of the industries to be considered, before identifying which ones are healthy or viable (this latter effort can be handled using frameworks such as Porter’s Five Forces). Next, the conversation can turn to specific reasons the company should or should not enter each industry.
Identifying the Critical Criteria for the Decision
Just as important as identifying a clear list of industries to be considered, it is also vital to methodically identify the criteria for examining each industry as a potential choice. The presence of opportunity is not the same thing as being a good fit, because no company can compete effectively in every industry.
Factors involved in this list of criteria include such considerations as how fractured the industry is, in terms of how many companies presently dominate it, as well as the growth potential of the industry in various markets around the world, in terms of both revenue and employment. Equally important, you must consider whether it is a good match for your company, in terms of your existing expertise, the products involved, sales channels used, capital required, etc.
Applying the Weighted Ranking for a Objective Result
In our example, once the industries to be considered and the assessment criteria have been established, the elements of the decision process are in place. Next, it is necessary to rank the criteria on terms of importance to the decision and place them in an ordered list on that basis. Doing this is fairly simply. For example, you ask, what’s more important, the projected growth rate of the industry, or the current size. Whichever criteria wins gets a point. You do this for every possible combination of criteria. And then you divide the points a criteria got by the total possible. This results in a weighted rank. And every time we do this, our clients realize that what’s really important – when forced to choose – is not exactly what they would have predicted.
By Sean Campbell
By Scott Swigart