All throughout the month of February 2010 Aurora WDC will be celebrating its 15^th anniversary and we’d like to share some thoughts on the role of intelligence in business organizations and how it’s changed over the years.

On February 3^rd, 1995 (by coincidence also my 25^th birthday) I completed the Articles of Incorporation for Aurora Worldwide Development Corporation and started building a wall to section off a 12-by-25-foot office on the eastern side of my mother’s beauty salon in tiny Chetek, Wisconsin – my hometown, where I’d returned to pursue the next phase of my career. Though I wasn’t sure at the time, precisely, that Aurora would be a competitive intelligence consultancy, we’ve since established a respected position in the field and I knew there was a desperate need among businesses of all kinds to close the gap between what they THINK they know and what they ACTUALLY know.

Closing this gap is the nature of intelligence in all industries – it demands both skepticism as well as courage to convey to powerful decision makers the things they didn’t know they didn’t know and deliberately discount the value of “known knowns” that no longer prove valid.

In the years since, I’ve come to call this gap the “stochasm” because the self-deceit it produces can make the events that unfold around an organization seem almost… well, random in their punishment of managerial decisions that seemed like such good ideas at the time.

This impression of randomness however is mistaken. Indeed, substantially all of the mistakes that will ever happen in organizations derive from this decision stochasm phenomenon (aside from “Acts of God” which are truly random) which have also been called "blindspots" or "sway" - indicating we fall under their intoxicating influence.

Overconfidence based on assumed knowledge is a far more immediate enemy than any mere competitor could ever be. As a result of my sincere belief that stochasm itself is the enemy, a few years ago I set about finding a tasking doctrine that could better explain and predict industry change than traditional competitive strategy theory. In my search, I discovered Harvard Professor Clayton Christensen’s Disruptive Innovation Theory and the core theories of innovation that accompany his explanation of how change happens in industries of all kinds and how that change can be understood and anticipated.

However, as Clay would often lament, the methodology, though thorough, was less accessible than it could be to the rank and file workforce in commercial firms. Likewise, in my adjacent field of competitive intelligence, it has often been said that most of what we need to know about the external environment in order to understand it is already known inside the firm; the remainder is more often than not “nice-to-know” or granular detail which would prove diminishing in its returns in understanding what’s coming next. The real problem is in surfacing that knowledge in time to make a difference.

Beginning around 2005, I set about trying to distill Christensen’s theories into a series of intelligence tasking questions that could be presented to a knowledge workforce to answer and test the design of a more “social” methodology. At the same time, Web 2.0 made it possible to be social in enterprises of all kinds, once IT was sufficiently consumerized. The result of this work within Aurora's intelligence frame of reference we call RECON – which describes five domains of anticipating change – Risk, Efficiency, Customers, Outlook and Novelty; these five domains apply themselves to commercial firms in four organizational contexts – Markets, Operations, Products and Strategy.

The theory goes, if a company could present the resulting five-by-four matrix of question types – 20 in total – to the knowledge workforce for scoring and weighting according to probabilities, then a large portion of the risk of mistakes arising from managerial stochasm could be avoided. Indeed, new forecasting methods such as prediction markets could augment the mathematical probability determination of seemingly “quantum” events using social media technologies to aggregate information about the same questions.

Market Risk

So I begin with the first of these intersections between external domains and internal contexts – Market Risk – or the questions driving loss of status quo in the markets the company currently serves.

More often than not, this is because the company has defined its markets incorrectly – rather than interpreting markets based on “jobs to be done” or problems to be solved, most companies mistakenly think of their current markets as stationary targets based on age, sex, income or geography and then try to create a strategy that can fit each one.