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Intelligence Generation and Superior Customer Value


Stanley F. Slater and John C. Narver
Journal of the Academy of Marketing Science 2000; 28; 120
DOI: 10.1177/0092070300281011
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JOURNAL OF THE ACADEMY


Slater, Narver
OF MARKETING
/ INTELLIGENCE
SCIENCE
GENERATION

WINTER 2000

Intelligence Generation
and Superior Customer Value
Stanley F. Slater
University of Washington, Bothell

John C. Narver
University of Washington, Seattle

It has become conventional wisdom that an organizations


ability to continuously generate intelligence about customers expressed and latent needs, and about how to satisfy those needs, is essential for it to continuously create
superior customer value. However, intelligence generation typically has been treated as a generic firm activity.
The authors propose that there are four distinct modes of
intelligence generation, each of which is part of a welldeveloped intelligence-generation capability. The article
reports the results of an exploratory study that supports
this proposition.

The importance of a superior organizational learning


capability as a source of competitive advantage is a common refrain among both managers and scholars (e.g.,
Kohli and Jaworski 1990; Nonaka 1991; Quinn 1992;
Slater and Narver 1995; Stata 1989; Stewart 1997).
Organizational learning occurs as (1) individuals acquire
intelligence, (2) individuals share the intelligence
throughout the organization, (3) organizational members
achieve a shared interpretation of the intelligence, and (4)
the organization considers changes in the range of its
potential behaviors based on the shared interpretation
(e.g., Garvin 1993; Huber 1991; Sinkula 1994; Slater and
Narver 1995). The objectives of this article are to describe
four different intelligence-generation strategies and to
demonstrate how each contributes to the creation of superior customer value. In the following sections, we discuss
the relationship between customer value and competitive
Journal of the Academy of Marketing Science.
Volume 28, No. 1, pages 120-127.
Copyright 2000 by Academy of Marketing Science.

advantage, describe four specific intelligence-generation


strategies, and report the results of an exploratory study
that demonstrates the linkage between intelligencegeneration strategy and superior customer value. We conclude by suggesting an agenda for developing a superior
organizational learning capability.
CUSTOMER VALUE AND
COMPETITIVE ADVANTAGE
Customer value is created when the benefits to the customer associated with a product or a service exceed the
offerings life-cycle costs to the customer. Benefits are
made tangible for the commercial customer through
increased unit sales or increased margins. Life-cycle costs
include search costs, operating costs, and disposal costs, as
well as purchase price.
A position of superior customer value is achieved when
the seller creates more value for the customer than does a
competitor. This is most easily illustrated when a customer
conducts a net present value (NPV) analysis for the purchase of a new piece of equipment. Economic value for the
customer is created when the present value of the cash
inflows from increased revenues exceeds the present value
of the cash outflows from the investment in the equipment
and the associated operating costs. A seller creates superior value when the customers NPV from purchasing the
sellers offering is greater than the NPV from purchasing
any competitors offering.
A seller has a competitive advantage when he or she
creates superior customer value and when he or she also
has a positive NPV from the transaction or from the entire
product line. It is unlikely that the second condition will be
achieved if the first condition is not.

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Slater, Narver / INTELLIGENCE GENERATION

Following Day and Wensley (1988), we differentiate


between sources of customer value and performance outcomes that are the result of delivering superior value.
Although there are numerous sources of customer value,
for brevitys sake we focus on product quality and on skill
at developing new products. We also focus on two performance outcomes that result from delivering superior
valuecustomer satisfaction and superior sales growth.
These performance outcomes are incomplete indicators of
competitive advantage because they do not explicitly consider economic value for the seller.
In the 1980s, U.S. businesses awoke to the threat posed
by the superior quality of many foreign-made goods.
Numerous studies based on the Profit Impact of Marketing
Strategies (PIMS) database supported the existence of a
relationship between product quality and performance
(e.g., Buzzell and Gale 1987). As Day (1990) put it,
Boosting quality is now seen as the surest route to creating superior customer value (p. 173).
If the 1980s was the quality decade, perhaps the
1990s is the product development decade. In many
industries, product life cycles are measured in months, not
years. This is largely due to the ability of fast-followers to
reverse-engineer a product and to develop an equivalent
and less expensive version in less than a year. The continued success of companies such as Hewlett-Packard and
3M is based on the fact that they are able to generate the
majority of their revenues and profits from products introduced in the preceding 3 years (e.g., Bylinsky 1998).
Customer satisfaction leads to customer retention.
According to some consultants estimates, it costs up to 5
times as much to make a sale to a new customer as it does to
make an additional sale to an existing customer. Thus, customer defections are among the worst economic events
that can happen to a business (e.g., Heskett, Sasser, and
Hart 1990). Consequently, more and more businesses are
making customer satisfaction and retention part of the balanced scorecard they use to assess performance and manage their businesses (Kaplan and Norton 1996).
The second performance indicator we consider is sales
growth relative to key competitors. Relative sales growth
is probably the best indicator of whether superior customer
value is being created. A firms sales will not increase
faster than its competitors unless it is creating more value
for customers than the competition. Thus, while relative
sales growth is an incomplete measure of a sellers competitive advantage and economic performance, it is perhaps the most complete measure of customer value
creation.
INTELLIGENCE GENERATION
Intelligence is generated when data are collected and
given meaning with respect to changing the potential range

121

of organizational behavior (Glazer 1991; Huber 1991;


Moorman 1995). In this article, we use the terms intelligence and knowledge interchangeably. Intelligence may
influence organizational behavior in at least three ways
(Menon and Varadarajan 1992). The first is actionoriented use, which is the direct application of intelligence
to solve a problem or to exploit an opportunity. The second
is knowledge-enhancing use, which may provide the foundation for future behavior change. Third, intelligence may
be developed for affective use, that is, to increase satisfaction or to decrease dissonance with a change that already
has been made.
On the basis of an extensive literature review and
numerous in-depth interviews and consulting projects in
low- and high-tech, and consumer and industrial products
firms, we suggest that intelligence is generated through
one of at least four generic strategies (see also Garvin
1993; Leonard-Barton 1995; Nevis, DiBella, and Gould
1995). These are market-focused intelligence generation
(e.g., Day 1994b), collaborative intelligence generation
with others such as suppliers or alliance partners (e.g.,
Leonard-Barton 1995), intelligence generation from
experimentation (e.g., Hamel and Prahalad 1991;
Leonard-Barton 1995), and intelligence generation from
repetitive experience (e.g., Alberts 1989; Reichheld
1996).
Market-Focused
Intelligence Generation
A market-focused intelligence generation strategy
focuses on acquiring information about customers
expressed and latent needs, and competitors capabilities
and strategies (e.g., Day 1994b; Kohli and Jaworski 1990;
Narver and Slater 1990). This intelligence provides a
focus for the businesss product development and sales
growth efforts by enabling the business to develop strong
relationships with key customers and insights into opportunities for market development. Market-driven organizations develop new intelligence about market requirements
and how best to meet or exceed them through superior
capabilities at market sensing, customer linking, and channel bonding (Day 1994a).
Thus, while market-focused businesses use the traditional tools of market scanning such as focus groups, market surveys, and market databases, they also employ
high-touch techniques such as working closely with lead
customers and with channel members (Von Hippel 1986),
visiting customers to thoroughly understand a customers
environment and needs (McQuarrie and McIntyre 1992),
and self-critical benchmarking of customer value creation
processes of best-in-class organizations (Day 1994a).
These skills enable market-oriented businesses to stand
out in their ability to continuously sense and act on events
and trends in their markets (Day 1994b:9; see also Hurley

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122

JOURNAL OF THE ACADEMY OF MARKETING SCIENCE

WINTER 2000

and Hult 1998; Slater and Narver 1998). The empirical


evidence suggests that market-focused learning is strongly
related to new product success (e.g., Lynn 1998) and to superior sales growth (e.g., Atuahene-Gima 1995; Slater and
Narver 1994).

Hypothesis 2a: Collaboration-based intelligencegeneration practices are associated with product


quality.
Hypothesis 2b: Collaboration-based intelligencegeneration practices are associated with new product success.

Hypothesis 1a: Market-focused intelligence-generation


practices are positively associated with product
quality.
Hypothesis 1b: Market-focused intelligence-generation
practices are positively associated with new product
success.
Hypothesis 1c: Market-focused intelligence-generation
practices are positively associated with customer
satisfaction.
Hypothesis 1d: Market-focused intelligence- generation
practices are positively associated with relative sales
growth.
Intelligence Generated
Through Collaboration
Collaboration enables the organization to generate
intelligence with and from other organizations about new
opportunities or means for creating superior customer
value. Powell, Koput, and Smith-Doerr (1996) argue that
when the knowledge base of an industry is both complex
and expanding and the sources of expertise are widely dispersed, the locus of innovation will be found in networks
of learning, rather than in individual firms (p. 116).
We believe that collaboration will have the greatest
impact on sources of value such as product quality and new
product development. Alexander MacLachlan (1995), the
recently retired senior vice president and chief technical
officer for E. I. DuPont de Nemours & Co., commented,
Management believes that external leveraging is critical
for companies like DuPont today (p. 53). This sentiment
is echoed by Robert Gussin, the former vice president for
science and technology at Johnson & Johnson, Technology has become so sophisticated, broad, and expensive
that even the largest companies cant afford to do it all
themselves (Leonard-Barton 1995:135).
There are numerous reasons to develop these partnerships. First, it is virtually impossible for any company to
have all of the talents and intelligence that are necessary to
be competitive in a dynamic environment. Second, it often
is much less expensive to ally with a partner who has specialized skills than it is for the business to develop skills
and resources itself. Finally, risk may be reduced by using
contractors to develop early prototypes or do pilot manufacturing runs before a commitment to a production facility is made (MacLachlan 1995). These partnerships
facilitate intelligence generation within the network and
dissemination of the intelligence throughout the network
(Hamel 1991; Powell et al. 1996).

Intelligence Generated
Through Experimentation
Experimentation means trying ideas about means for
creating superior customer value that are outside of the
organizations normal routines, evaluating the intelligence
generated from those experiments, and striving for consensus on the meaning of the results. Experimentation is
essential to the development of successful new products,
particularly in dynamic environments where customers
have difficulty articulating fundamental needs or understanding the benefits of a new technology or new product
(Hamel and Prahalad 1994; Lynn, Morone, and Paulson
1996). In this type of situation, traditional market research
may be of little benefit (Slater and Narver 1998).
A willingness to experiment is a manifestation of entrepreneurial values that include innovativeness, risk taking,
and competitive aggressiveness (Lumpkin and Dess
1996). Experimentation is a high-risk activity, though,
particularly when product innovations are rapidly copied
by competitors (Ghemawat 1986; Williams 1992). To
minimize the risk and maximize learning, successful innovators frequently work intensively with lead customers to
understand their latent needs (Von Hippel 1986), undertake low-cost market experiments (Garvin 1993; Hamel
and Prahalad 1991), and share knowledge through crossfunctional teaming (Lynn 1998) to leverage development
capabilities across the corporation (Stalk, Evans, and
Shulman 1992).
Hypothesis 3: Experimentation-based intelligencegeneration practices are associated with new product success.
Intelligence Generated
From Repetitive Experience
Intelligence generation from experience has been discussed for more than 50 years, ever since it was observed
that manufacturing costs declined at a relatively stable rate
with every doubling of production volume in the aircraft
industry. This phenomenon was termed the experience
curve or the learning curve. It has since been observed in
many other industry environments (Alberts 1989). However, the benefits of experience are not the result of some
natural law. These benefits are realized only when there is
a conscious and sustained effort to understand the nature
of the process and to identify opportunities for improvement. The benefits may be the result of improved

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Slater, Narver / INTELLIGENCE GENERATION

productivity from more efficient use of people or equipment, of lower scrap or rework rates from improved
processes, or of lower investments in working capital from
improved inventory control.
From a customer value perspective, a commitment to
generating intelligence from experience may uncover opportunities for improving the quality of customer relationships. For example, the most painful but potentially most
enlightening experience is that of losing a customer or
even losing a portion of a customers business. Long-time
customers tend to produce more revenue for the business
and are more profitable because of lower selling expenses.
The value of a loyal customer base is well accepted, so it is
very important that customer defections are recognized
and the reasons for them understood. Root-cause analysis
is a technique for identifying fundamental problems instead of their symptoms (Reichheld 1996). This experiential process enables the organization to take appropriate
corrective action to prevent additional customer defections. In this way, a continuous improvement philosophy
can pay off in building strong customer relationships as
well as in improving production processes. In a turbulent
environment with short product life cycles, experience is
likely to have a greater influence on customer relationships
than on product cost (Moore 1995).
Hypothesis 4a: Experience-based intelligencegeneration practices are associated with product
quality.
Hypothesis 4b: Experience-based intelligencegeneration practices are associated with customer
satisfaction.
THE STUDY
We selected the electronics industry as the setting for
this exploratory study. The electronics industry is characterized by short product life cycles, rapid technological
change, and intense rivalry (Williams 1992). A list of the
largest 1,000 electronics firms by number of employees
was purchased, and a questionnaire was mailed either to
the president or general manager of each firm. This list
included firms such as IBM, Texas Instruments, Intel, and
Hewlett-Packard. After eliminating duplicates and
accounting for undeliverable addresses, the sampling
frame consisted of 955 firms. Sixty-six usable questionnaires were returned for a response rate of 7 percent. A
follow-up with a small number of nonrespondents showed
reasons for noncompliance, including lack of time, corporate policy against participating in studies, and distrust of
the research objectives.
While this response rate might raise concerns about
nonresponse bias, the diversity of the sample as described
in Table 1 and the fact that there are no significant

123

TABLE 1
Sample Characteristics
Characteristic

Percentage

Revenues
Minimum
Maximum
Median
Strategy
Prospectors
Analyzers
Defenders
Reactors
Reported return on investment
Minimum
Maximum
Mean

$U.S.
3 million
10 billion
30 million

32
24
33
11
5
50
16.3

differences between early and late respondents indicate


that the sample is not biased with respect to size, strategy,
or performance, and that it is adequate for assessing the
suggested relationships.
To develop measures of the four intelligencegeneration strategies, an extensive literature review was
completed, and fifteen 30- to 60-minute, in-depth interviews were conducted with managers, marketers, and
engineers in a major electronics firm. On the basis of this
preliminary work, a set of 6 to 10 items was developed for
each intelligence-generation strategy and incorporated
into the questionnaire. The questionnaire was then pretested on 55 executive MBA students, each with at least 10
years of business experience, and on 10 managers, marketers, and engineers from the firm where the in-depth interviews were conducted. All respondents were asked to
complete the questionnaire and to comment on the clarity
and meaning of the items. On the basis of this input, some
items were revised, some were eliminated, and a few were
added. These items constituted the final questionnaire that
was mailed.
After the questionnaires were returned, a factor analysis of the items for each of the four intelligence-generation
strategies was conducted to assess the unidimensionality
of each style measure. Items that loaded most highly on the
first factor were retained and combined into scales to
measure each intelligence-generation strategy. Cronbachs alphas were computed for each scale and item-tototal correlations were inspected to determine if any of the
items negatively affected scale reliability. We believe the
final scales have face validity, are unidimensional and reliable, and measure distinct constructs. The items for each
scale are contained in the appendix.
We include market dynamism and competitive hostility
as control variables because of their potential to influence
performance (e.g., Jaworski and Kohli 1993; Porter 1980).
We measure the product development effectiveness and
customer satisfaction with two-item scales, and product

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JOURNAL OF THE ACADEMY OF MARKETING SCIENCE

TABLE 2
Ordinary Least Squares Regression
ResultsStandardized Regression
Coefficient / (SE ) (N = 66)
Sources of
Customer Value

Performance
Indicators

Product New Product Customer


Sales
Quality
Success
Satisfaction Growth
Market focused
Collaborative
Repetitive experience
Experimentation
Market dynamism
Competitive hostility
Adjusted R

.373*
(.187)
.496***
(.187)
.166
(.150)
.027
(.160)
.115
(.071)
.003
(.109)
.137**

.097
(.209)
.084
(.204)
.147
(.166)
.426**
(.170)
.095
(.076)
.029
(.121)
.085*

.156
.411**
(.170)
(.205)
.109
.122
(.170)
(.205)
.245*
.117
(.136)
(.164)
.005
.038
(.145)
(.175)
.370*** .363***
(.065)
(.078)
.002
.182
(.100)
(.120)
.160**
.300***

*p .10. **p .05. ***p .01.

quality and relative sales growth with single items that


assess the firms performance relative to competitors in its
primary served market.
RESULTS AND DISCUSSION
Table 2 contains results from the ordinary least squares
(OLS) regression analysis. Although the independent variables are correlated, the variance inflation factors indicate
that multicollinearity is not a problem.
This study suggests that a well-developed intelligencegeneration capability is positively associated with superior customer value. Practices associated with the marketfocused generation of intelligence are positively related to
superior sales growth (Hypothesis 1d supported), our primary measure of superior customer value. Market intelligence should reveal underserved and emerging market
segments where growth opportunities will be the greatest.
Practices associated with the generation of intelligence
from repetitive experience are positively related to our
other measure of customer value performance, superior
customer satisfaction (Hypothesis 4b supported at p .10).
Customer satisfaction is the product of positive buyerseller interactions. As these interactions occur and are
evaluated, and processes are refined, satisfaction should
improve.
Collaboratively generated intelligence is most strongly
related to superior quality (Hypothesis 2a supported), an
antecedent of superior customer value. This is because
many companies, particularly noncompetitors, are willing
to share information on best practices that lead to service,

WINTER 2000

quality, or productivity gains (Tucker, Zivan, and Camp


1987). Finally, experimentation-focused intelligencegeneration practices are positively related to new product
development success (Hypothesis 3 supported). Success
in this venue is more the result of carefully planned market
probes than of in-depth market research (Hamel and Prahalad 1991). An unanticipated result, and one for which
we have no explanation, is the weakly negative relationship between practices associated with the market-focused
generation of intelligence and product quality. Overall
though, it seems that achieving a position of superior customer value requires competence in multiple intelligencegeneration strategies. The relatively strong interrelationships among the four intelligence-generation strategies
indicate that a general predisposition to learning underlies
them all.
An Agenda for Developing
a Learning Capability
We offer the following suggestions for improving an
organizations intelligence-generating capability based on
our research in this area.
Develop a thorough understanding of your business
system. Systems thinking is a critical component of the
learning organization (Senge 1990). Systems thinking is a
process for understanding structures that underlie complex situations. It focuses on interrelationships among key
variables and on processes of change. The results from the
present study suggest a set of systematic relationships between intelligence-generation strategies and indicators of
superior customer value. However, these relationships
may not describe the situation for any particular business.
Thus, it is important for every business to develop its own
system model (Slater, Olson, and Reddy 1997).
To do this, the firm should clearly articulate its market
strategy. This may be the strategy that the business already
is pursuing. Or, it may reflect a new consensus by the top
management team regarding the most appropriate route to
create superior customer value in the future. Such a discussion among the members of the businesss top management team provides a forum for examining customers
needs, the competitive environment, and the firms strategic capabilities, with the objective of articulating a clearly
defined strategy.
Next, the firm should develop a relatively broad set of
performance indicators, including the ones used in this
study, that offer the promise for guiding strategic change.
Then, if firm strategy has remained relatively constant,
trend lines illustrating how the selected performance indicators have changed during the past 3 to 5 years should be
constructed. The data should be quarterly where possible
so as not to obscure seasonal relationships. Then, either
through the use of statistical techniques such as regression

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Slater, Narver / INTELLIGENCE GENERATION

analysis or through qualitative analysis, relationships


among these performance indicators should be evaluated.
It is important to identify leading indicators of changes in
measures such as revenue growth and profitability, as these
are indicators of shareholder value creation. This analysis
is the foundation for the development of a model of the
businesss system.
Focus learning activities through business strategy.
The purpose of the preceding exercise is to develop an understanding of where to concentrate intelligencegeneration efforts. Intelligence generation can be timeconsuming and expensive. And, as suggested earlier, not
all intelligence-generation strategies may be appropriate
for all businesses. As Thomas Wajnert (1993), the CEO of
ATT Capital, explains, Effective learning is purposeful
and should be related explicitly to an organizations mission. Unless learning efforts are guided by clear purposes,
the organization risks (becoming) skilled at many things,
but expert at none (p. 196).
While it is widely believed that market-focused intelligence generation is important regardless of a businesss
strategy, other intelligence-generation practices may not
be as universally valuable. For example, the innovative
product leader may benefit more from experimentation
than from repetitive experience. Conversely, the business
that focuses on operational excellence may derive more
benefit from experience than from experimentation. Identification of the highest-leverage intelligence-generating
activities should be a result of the business system
analysis.
View learning as an investment, not as an expense.
Firms must be patient as they create new intellectual capital. Allocating resources to learning is not like spending
money on coupon advertising, which can produce an immediate payoff. Instead, it is like investing in a new technology whose payoff is uncertain and will occur in the long
run (e.g., Sinkula, Baker, and Noordewier 1997).
For example, the results of other studies (e.g., Lynn et al.
1996) suggest that experimentation may depress profits in
the short term. However, this activity drives new product
success and growth. The new products that follow from
this experimentation become the foundation for future
profitability.
It also is true that the value of intellectual capital depreciates just as the value of any other asset does. Depreciation, in this case, is the result of intelligence being out of
date or from its leakage to competitors. When this occurs,
intelligence ceases to be a source of competitive advantage
as it is not current or is not unique to the firm. Thus, the
intellectual capital of the firm must be replenished through
continuous investment.
Manage collaborative relationships carefully. Collaborative relationships are difficult to manage. To maximize

125

the likelihood of a successful cooperative relationship,


several issues require careful consideration. First, the firm
must objectively assess its position. Cases in which a
weaker company tries to improve its skills by partnering
with a stronger company frequently fail. There is little incentive for the stronger company to share critical intelligence. The collaborators must also be comfortable that
their goals are consistent. If one partner is interested in immediate profitability when the other is more focused on a
long-term learning and development opportunity, conflict
will arise. Finally, conflict resolution processes must be
developed before the first conflict arises. This will often
set the stage for compromise earlier in the decisionmaking process. Nonetheless, these issues represent only
the tip of the iceberg when it comes to managing major relationships (e.g., Bleeke and Ernst 1995).
Instill a sense of personal responsibility for learning,
and for unlearning. Organizational learning begins with
learning by individuals. Leaders in learning organizations
are able to raise the awareness of peers, subordinates, and
others about issues of importance. They create a climate in
which inquiry and commitment to the truth are the norm,
and where challenging the status quo is expected (Senge
1990:172). They motivate their people to do more than
was expected of them. The leader acts as a coach, encouraging intelligence-generation activities and helping
to surface assumptions and understand patterns and relationships among people, organizations, and events. By understanding the nature of these systematic relationships,
subordinates take responsibility for learning and make
better decisions with less direction from top management
(Senge 1990).
Thus, a key leadership task is to develop intellectual
maturity throughout the organization. The most basic level
of intellectual maturity is cognitive knowledge, the mastery of subject matter through an individuals education or
continued training. Knowledge is transformed into skill as
the employee applies it to complex, real-world problems.
This application will result in some successes and some
failures. The value of this experience is realized when the
individual searches for the reasons for success and failure,
and develops an understanding of the cause-and-effect
relationships underlying a phenomenon or a discipline.
The highest level of maturity is self-motivated creativity.
At this stage, the individual takes full responsibility for his
or her continued development and takes the initiative in
exploring and understanding the value of new ideas and
skills. Self-motivated creativity enables the individual to
adapt proactively to a dynamic environment (Quinn,
Anderson, and Finkelstein 1996).
Leaders also must set an example in unlearning detrimental practices. By surfacing and challenging their own
assumptions and mental models, they encourage employees to do the same. As John Seely Brown (1991), the chief

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JOURNAL OF THE ACADEMY OF MARKETING SCIENCE

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scientist of the Xerox Palo Alto Research Center, explains,


Unlearning is critical in these chaotic times because so
many of our hard-earned nuggets of knowledge, intuitions,
and just plain opinions depend on assumptions about the
world that are simply no longer true (p. 192).

Benchmarks key operating processes.


Arranges seminars and classes to educate employees about
important concepts and processes.
Enters into joint ventures and alliances.
Develops information-sharing relationships.

Create opportunities for dialogue. Organizational


learning occurs only when intelligence is widely shared in
the organization. It is essential to create opportunities and
forums for this sharing to occur. To encourage individual
learning and sharing of experiences, organizations such as
Motorola, General Electric, and Banc One have established their own in-house universities to promote a
learning environment (Kanter 1992). They also make extensive use of information technology such as electronic
mail, intranets, and shared databases, which facilitate
rapid information sharing. Leaders in learning organizations encourage lateral, cross-functional transfers that
force employees to learn and develop new skills, and to
share their existing skills and perspectives with new colleagues (Nonaka 1991). The result is more rapid and extensive information sharing, and increased potential for
unlearning to occur by spreading different points of view
across an organization.

Intelligence generated through experimentation: = .71


Conducts small, internally focused experiments.
Conducts small, market-focused experiments.
Varies competitive methods to assess their relative
effectiveness.
Uses cross-functional teams or task forces.
Intelligence generated from experience: = .69
Emphasizes the need for standardized operating processes
that can be refined based on employee input.
Measures the performance of key business processes.
Refines procedures after careful study.
Seeks opportunities with potential for cost reduction or productivity improvement from repetitive experience.

ACKNOWLEDGMENTS
We gratefully acknowledge the support of the Marketing Science Institute and the helpful comments of
G. Tomas M. Hult, Gary S. Lynn, and James M. Sinkula.

CONCLUSION
It is clear that intelligence is one of a businesss most
valuable assets. It is also true that, like other assets, the
value of a given stock of intelligence depreciates over
time. This is the result of market dynamics and/or the intelligence disseminating throughout an industry so that it no
longer provides a competitive advantage. The challenge is
to continuously generate new intelligence about customer
needs and how best to satisfy them. The present study suggests that different intelligence-generation capabilities
contribute to customer value creation in different ways.
Managers must commit themselves and their organizations to the creation and maintenance of these capabilities.
APPENDIX
Intelligence-Generation Style Measures
Market-focused intelligence generation: = .81
Benchmarks key processes for improving customer satisfaction.
Tracks and analyzes competitor actions.
Allocates resources to identifying and understanding new
market opportunities.
Attempts to develop new ways of looking at customers and
their needs.
Systematically collects information about customer needs.
Intelligence generated through collaboration: = .76
Sends employees to seminars or short courses to bring back
new ideas to the organization.

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ABOUT THE AUTHORS


Stanley F. Slater is the vice chancellor for academic affairs and a
professor of business administration at the University of Washington, Bothell. His research interests lie primarily in the areas of
market-based organizational learning and market strategy implementation. He has published more than 30 articles in the Journal
of Marketing, the Journal of the Academy of Marketing Science,
the Strategic Management Journal, and the Journal of Management, among others. He has won Best Paper awards from the
International Marketing Review and from the Marketing Science
Institute. He currently serves on five editorial review boards including those of the Journal of Marketing and the Journal of the
Academy of Marketing Science.
John C. Narver is a professor of marketing in the Graduate
School of Business Administration at the University of Washington, Seattle. His general research interests lie in the area of strategic marketing. His current research is primarily concerned with
the creation and effects of a market orientation in an organization. His work has been published in the Journal of Marketing,
the Strategic Management Journal, the Academy of Management
Journal, and the Journal of Market-Focused Management,
among other scholarly journals. He has won the Best Paper
award from the Marketing Science Institute.

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