Launching a business intelligence function at Lubrizol Corporation
Lubrizol Corporation (NYSE: LZ) is an innovative specialty chemical company that produces and supplies technologies to customers in the global transportation, industrial and consumer markets. The Additives Division (LZA) focuses on lubricant additives.
Prior to economic recession, changes affecting LZA’s markets generally were gradual and incremental. Consequently, business planning responsibilities generally were kept within the individual business segments. However, the abrupt disruptions brought about by the recession prompted senior management to commission the development of a pan-segment function to provide broader and deeper intelligence support to business segment planning activities.
The challenges included:
- Developing an intelligence program to serve a broad array of additive business segments (passenger car, heavy duty vehicle (on-road and off-road), driveline, fuels, marine engines, small engines, hydraulics, greases, metalworking fluids).
- Overcoming internal cultural barriers to pan-segment cooperation.
- Delivering a work product of material value to business segment planning activities.
- Doing all of the preceding with extremely limited resources.
LZA took a phased approach to developing the intelligence function: The 1.0 Deliverable was due first, to be followed by “2.0”; incremental improvement in 2011, and “3.0”; future perfect.
The market intelligence function was called upon to respond to the need of improving the quality of strategic planning in the company’s Additives Division.
Business strategy should be the primary driver for setting up and developing intelligence activities: High quality MI will help the company not only to implement strategies, but also to formulate new ones.
Considering the above scenario from a more technical perspective, the questions to be addressed at the stage of setting up and scoping an intelligence program include:
- User groups: What are the corporate activities and target user groups that the intelligence program should serve?
- Breadth of scope: What are the topics on which the above target groups will need information, and how will they be prioritized?
- Depth of scope: What requirements will the above needs set to the intelligence team’s analytical and consultative capabilities?
- Time horizon: What will be the time horizon and, in particular, the future orientation of the intelligence program?
Defining the scope of the intelligence program translates into conducting a needs analysis for the entire intelligence program: Identifying the corporate functions that will be using the intelligence deliverables, and topics and themes that will be most relevant for each of them. Additionally, the degree of future orientation needs to be addressed; looking into the rearview mirror is a good starting point, however in a mature MI program, a great deal of time is spent on outlining possible future scenarios about the anticipated developments in the operating environment.
The exhibit below highlights some of the most common user groups to intelligence, and the intelligence topics of interest. In a typical scenario, the first target group to the intelligence activity is the corporate function (and the adjacent ones) under which the intelligence program has been placed. Since the Strategic Planning, Business Development, or Marketing functions quite often initiate the intelligence program, the primary target groups of the activity are typically made up of people working in client-facing positions, or in those that involve strategic planning or corporate development.
The scope of the Market Intelligence program covers the target groups of the activity, and their primary information requirements. Topics of importance will vary between target groups, as will the ideal deliverables.
Establishing and operating an intelligence program is an investment in internal “process infrastructure”; it would be a waste of resources not to at least consider expanding its reach beyond the initial target groups that have intelligence needs.
Innovation and product management, supply chain management, M&A or investor relations are examples of activities that are highly dependent on accurate business information and may benefit from the existing intelligence activity, if only its scope will be extended to cover their specific needs. What is typical of rather immature intelligence programs is that information to cater to the needs of different user groups is being collected and processed in silos, which easily results in cost redundancies and missed synergies.