Consideration of Strategic Intelligence Organizational Factors on the Basis of Fuzzy Hypothesis Testing Method

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1 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Consideration of Strategic Intelligence Organizational Factors on the Basis of Fuzzy Hypothesis Testing Method Saeed Tahmasbinezhad*, Ahmad Abbaspour** *MA Student of EMBA, Department of Management, Tehran Central branch, Islamic Azad University, Tehran, Iran **PhD Student of Human Resource Management, Department of Management, PhD Faculty, Payam Noor University, Tehran, Iran Abstract The world in which we live has never been such unexpected and variable. Companies have utilized strategic intelligence devices in order to anticipate unexpected events and avoid surprises. Strategic intelligence is a formalized process including research, collection, information processing, and distribution of useful knowledge to strategic management. The main question of this research is that what elements describe strategic intelligence organization in corporation, and what level of these elements bring about effective organizing in an organization. surveillance activities (strategic intelligence) with average formalization, high seniority, centralized organizing, and a few number of departments involved in this activity, and regarding its high position in organizational hierarchy connected to senior managers, are very effective. Besides, it got clear that communicational network structure in strategic intelligence including internal expert groups with average variety and activity maintained through regular meetings, has a good performance. Keywords: Strategic Intelligence, Effectiveness, Organization, Fuzzy Hypothesis Testing Introduction Pinnacle Research Journals 8 The world in which we live is unexpected and variable. Each organization desiring to survive in such a variable world should answer this very important question: how can we predict such unexpected environmental happenings and processes? Environmental scanning has attracted the attention of a large number of corporations in U.S.A since 976. This concept was gradually replaced with competitive intelligence and with the concept of intelligence in 98s. A similar concept named technological watch appeared across from Atlantic Ocean and in the France; besides, it got replaced with strategic and economic intelligence during an evolutionary process in the middle 99s. To put in a nutshell, scanning is the exact observation of the corporation s external environment, like radar in defend systems having the duty of warning and informing. Watching is a more stable function strengthened by more exact informative functions. Although, the prediction of probable events has revealed the effect of processes and events on the organization, it does not have any effect on decision making process. Intelligence goes forward in information processing and suggests some advice to the decision makers; it can suggest or implement a specific action in

2 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 the most advanced mood. In this research, strategic intelligence is a formal process including research, data collection, information processing, and distribution of useful knowledge for strategic managers. Other than informative function, strategic intelligence follows these main objectives:. Prediction of opportunities and environmental threatening (anticipating function) 2. Suggestion or encouragement for doing a particular affair (proactive function) 3. Helping to strategic decision makings 4. Improvement of organization s competitive position. For more effectiveness of strategic intelligence in an organization, different variables are involved. Cohen (29) categorizes these variables into four groups: a) the resources used by organizations for supervision on environment (organizational, technical, human, financial) b) Information and services presented by these systems c) Processes used in this system d) System results and their effect on the organization s performance. Surveillance system is a general term used for description of watch and/or strategic intelligence (WSI) in organizations. The main point is that strategic intelligence needs itself organizing in order to be effective and satisfy the organization s expectations. There is no doubt about the benefits of services rendered by strategic intelligence, but there is a main question about the effectiveness of such systems: how do organizations manage their own surveillance activities? The majority of Iranian corporations and organizations perform some plans under the title of investigating external factors in their strategic planning process; these are generally unsystematic and do not meet organization s expectations. Financial crises at Iranian companies, vulnerability to the gradual omission of subsidies and problems similar to these indicate the weakness in organization s surveillance. The initial and main questions of this research are: what elements describe the organization of surveillance activities (WSI) in corporations? What level of these elements brings about effective organizing of strategic intelligence in an organization? Pinnacle Research Journals 9 Investigation of strategic intelligence organizational elements is important considering both theoretical and applied aspects. In other words, not only is it a fundamental research resulting in more familiarity with this aspect of strategic intelligence, but also an applied research and its results can be used in the effective investigation of external environment and strategic planning, as well as, determining policy for enterprises, of course through more familiarity with effective variables influencing strategic intelligence organizational aspect. This issue catches more attention in a society with unstable and constantly changing economic, social, political, technologic environment. Investigation of strategic intelligence organizational elements - as one of the main sources of strategic intelligence - provides opportunities for state s policy makers and planners at all levels, institutions, and enterprises to explore the environments with unstable condition; furthermore, it enhances accuracy, reliability, appropriateness and relatedness of generated knowledge.

3 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Considering strategic intelligence organizational elements in paper industries is important from multiple perspectives. a) These corporations field is paper production that is made from % recycled fibers. Therefore, their activity s dependency on the external environment is very intensive and their kind of transactions is business to business, i.e. these corporations downstream and upstream industries changes intensively affect their functions, planning, and objectives. b) Paper industry is among energy-consuming industries. This affair revealed its dependence on advanced technologies resulting in energy saving. Regarding these points, an effective strategic intelligence is necessary for this corporation s proper planning and stable development. The total objectives of this research are: investigating the appropriate degree of formalization in surveillance activities, investigating the proper position of surveillance activities in organizational hierarchy, investigating the appropriate degree of centralization in surveillance activities, investigating the proper seniority in surveillance activities and suggesting suitable network structure for communication in surveillance activities. Literature Review. Definitions and Concepts Pinnacle Research Journals Strategic intelligence is a formal process including research, data collection, data processing, and distribution of beneficial knowledge for strategic management. Environmental scanning is a systematic method for scrutiny and scanning of the environment in a way that this scanning results in correct predictions of environmental fluctuations. Environmental surveillance is the exact observation of a corporation s external environment having the duty of notification and informing. A surveillance activity can be qualified as formalized when there are written rules and procedures controlling its operation and the behavior of the elements involved. Seniority is the length of time for which the function has been practiced and the learning phenomenon to which it is connected is brought up. Communication networks are the organizational channels in which information are flowed. The definition of performance and its measure can be quite varied. In its narrowest sense, performance and effectiveness are synonyms. Thy represent the achievement of objectives; measuring them consist of comparing the results obtained with those initially set (Cohen, 29). 2. Viewpoints and Theoretical Basis The understanding of how and why corporations organize surveillance of their environment mostly refers to identifying the objectives assigned to strategic intelligence (why) and the methods implemented to achieve them (how). The objectives assigned to strategic intelligence come directly from its functions (Cohen, 29). Function or duty is the thing that individual should accomplish in his work; besides, it can be an activity, mission, role, service task or a job, but the objective is a goal that should be achieved, a point toward which a strategic or tactical operations is directed (Cohen, 29). Table demonstrates a complete list of objectives assigned to SI that are extracted from overview of literature. Empirical studies have shown that some of the results related to these objectives are not measureable. Therefore, researchers measured those results just qualitatively.

4 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 The approaches to surveillance are mainly descriptive and prescriptive; the literature often recommends the best methods for practicing efficient surveillance. These methods are simultaneously factors and indicators of surveillance effectiveness. Five main elements describe the organization of surveillance: its degree of formalization, seniority, level of centralization (or decentralization), rank in hierarchy and its network structure (Cohen, 29). Table: Objectives assigned to SWI INTELLIGENCE WATCH FUNCTIONS OBJECTIVES (EXPECTED RESULTS) 6. PROACTIVE Decision support Recommendations to users Implemented actions (of influence for example) Fallout examples Bette control on environment 5. COORDINATING Decision support Better coordination in decisions and operations Better operational synergy 4. PROTECTIVE Better protection against misinformation, acts of Securing the corporation abuse 3. PROTECTIVE Better protection against obsolescence of know-how, Protect against threats techniques and technological 2. INFORMATIVE Satisfaction of value information needs for users (in a broad sense) Fallout examples Inform Better knowledge of global environment, markets, Analyze competitors, technologies, rules, and regulations Synthesize Better understanding of competitors' plans and Format intentions Identify information needs Better communication Coordinate & Communicate Decision support Fallout examples: Better strategic choices More appropriate strategic strategies Better strategy (innovation, alliances, fusion etc.) Pinnacle Research Journals Watch and Intelligence (REF: Cohen, 29, p4) 3. Formalization. ANTICIPATING Anticipate environmental threats and opportunities IMPACT OBJECTIVES ON COMPETITIVITY AND PERFORMANCE Anticipation of threats & opportunities Fallout examples: Better reactivity Better crises management Better capacity of adaptation Better competitive position Economy of costs Budgetary economy (avoid wasting resources) Economy (gain) in time Better innovation Better product quality Better sales From the viewpoint of the majority of analysts, surveillance should be organized and formalized, i.e. written rules and procedures should control the involved elements operations and behaviors (Rau&Reichel, 988; Brockhoff, 99). However, other analysts emphasize on the necessity of considering a role for informal surveillance in order that corporation s members have opportunity for collecting information during events or informal meetings.

5 Vol. 3 Issue 9 September 24, ISSN , pp Seniority Some authors suggest a certain amount of experience in surveillance activity associated with organizational learning processes influencing the effectiveness of surveillance (Jain, 984). 5. Centralization, Decentralization and the Number of SWI points Fahey et al. (98) believe that there should be an autonomous entity responsible for surveillance in the center of the company in order to an ideal continuous surveillance, while Stubbart (982) defends decentralized in functional departments. Some authors have supported a central direction unit and functional entities (Terry, 977). The number of surveillance points depends on the surveillance decentralization degree. Corporations can have a surveillance unit if they choose centralization for their surveillance activities, or distribute a large number of surveillance units across different functional departments in corporation s operational structure (Ghoshal & Westney, 99). 6. The Hierarchy Connection Fahey et al. (98) are interested in linking the surveillance unit to senior management. In Klein and Linneman research (984) 7% companies have connected this unit s to the planning department. Most companies assign such a duty to marketing department (Bournois & Romani, 2). A majority of researchers assign responsibility of this unit to managers, since the importance and benefit of surveillance are more strengthened there; besides, management s support and commitment are the key factors for success (Cohen, 29). 7. Network Organization Pinnacle Research Journals 2 Each surveillance approach-whether formal or informal, centralized or decentralized- should perform on the basis of information exchange. According to this, researchers and professionals emphasize on the necessity of network organization in surveillance activities. There are four main elements that influence the effectiveness of surveillance network; these are network variety, network activity, network maintenance method, and the existence of internal expertise groups for data analysis and reliability measurement (Cohen, 29). Theoretical Framework of the Research Figure indicates the relationship between variables. As you see in this figure, formalization rate of strategic intelligence activities, these activities' centralization or decentralization rate, communicational network structure, the position of these activities in organizational hierarchy, organization s seniority, are independent variables. Strategic intelligence effectiveness is known as dependent variable.

6 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Methodology of the Research. Steps of Research Figure : Conceptual Model of the Research Pinnacle Research Journals 3 This research is applied from the viewpoint of objective; besides, this is cross-sectional survey considering research method and data collection time. As strategic intelligence definition, its objective is facilitation of decision-making and support of the decisions made by organization s key decision-makers; therefore the present research s statistical population characteristics are organization s strategic and key decision-makers. Considering research scope the statistical population of this research contains 8 senior executive managers of small and medium size paper enterprises in Mazandaran Province in north of Iran. Calculation of sample size in fuzzy method does not depend on the population distribution and the hypothesis that should be tested (Azar and Faraji, 28). Satisfaction Degree Function used for calculation of the extent of sample s being well in Fuzzy Hypothesis Test indicates the extent of belief in sample s being well. In this research_ due to low population size_ sample is referred to the population that brings about the highest satisfaction degree.

7 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Considering this fact that research s independent and dependent variables are type of linguistic and conceptual variables, fuzzy hypothesis testing is use to analyze this research s data. Fuzzy hypothesis testing is a generalization of classical statistical hypothesis testing; furthermore, it is used to determine accuracy (inaccuracy) degree of a hypothesis. 2. Research Questions and Hypotheses a. What formalization rate is necessary for strategic intelligence activities? b. How many years of experience in implementation of this process indicate organizational seniority and learning? c. What kind of organizing (centralized or decentralized or mixed) is favorable for strategic intelligence activities? d. What position in organizational hierarchies should surveillance activities have for favorable performance? e. What level of factors influencing communication network organization causes effectiveness of strategic intelligence activities? Following hypotheses are introduced as the researchers initial assumptions: Hypothesis: strategic intelligence activities with an average formalization have a good effectiveness. Hypothesis2: Strategic intelligence activities with a high seniority have a good effectiveness. Hypothesis3: Centralized organizing of strategic intelligence activities has a good effectiveness. Pinnacle Research Journals 4 Hypothesis4: high position in organizational hierarchy have a good effectiveness. Hypothesis5: communicational network organizing in surveillance activities have a good effectiveness when maintained by meetings, involved internal expert groups and had an average variety and activity. 3. Fuzzy Hypothesis Testing Population X, sample and hypotheses are assumed, a fuzzy hypothesis can be shown like this: If condition (fuzzy), condition2 (definitive) and... and condition K (fuzzy) is established, then X with membership degree will be a member of F.

8 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 In the above equation, function hypotheses is defined like this: which indicates sample element s degree of conformity to (equation : hypotheses accuracy degree) Function presents a map of elements D for each hypothesis in [, ]. For determining the degree of data s conformity to hypothesis, each one of D elements is compared with related condition in prior conditions of hypothesis. Considering determinative conditions, each condition that is wrong will lead to x i exit from focus, because this data does not support Null or Alternative hypothesis. The following hypothesis is assumed: " (equation 2) In which are linguistic variables and and B are linguistic values (fuzzy sets) with membership function that are defined on references sets. We can define Equation through Combination Rule Inference (CRI) as an equation with k+ dimension on. Some solutions are suggested for determining equation R (U, V) on the basis of and, the most common of those are the utilization of Cartesian product A and B, i.e.. In the present research, Larson s implication (fuzzy conditional statement) is used: R (U, V) = (V) (equation 3: Larson s implication relation) According to this implication we have: (equation 4) Pinnacle Research Journals 5 Using this equation, the following equation is always inserted between null hypothesis and alternative hypotheses,. Furthermore, you can use other forms to combine prior values and following values. When the total result of combining prior and following values for each elements of sample are attained, those values should be assimilated in order to determine how much the values existing in D support H. arithmetic average (or paying attention to pessimistic or optimistic attitude among other operations) can be used for assimilating the values of D sample elements related to L hypothesis. M L(D) i L (x i ) L =,, 2,..., r (equation 5: arithmetic average for D value) In which indicates some elements of D which are related to the studied hypothesis. M L(D) Shows how many elements in D support hypothesis L (Azar and Faraji, 28). The results of fuzzy hypothesis testing are presented in the form of. These values indicate the accuracy degree of null hypothesis and alternative ones. If H hypothesis accuracy

9 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 degree is completely larger (smaller) than alternative hypotheses then we can conclude that the possibility of occurrence H is completely larger (smaller) than alternative hypotheses (Azar and Faraji, 28). Analyzing the Data of the Research Figure (research model) has determined five independent descriptive variables affecting dependent variable (strategic intelligence performance). At the first step of this research, fuzzy partitioning of the studied variables and their ways of definition should be determined. Here, the only detailed analysis is hypothesis; besides, analysis results for other hypotheses are stated in conclusion section. Figure 2 shows fuzzy partitioning of formalization and Effectiveness/Performance variables. Performance/Effe ctiveness Formalization Low Low Medium Then Mediu m High High Figure 2: Fuzzy partitioning of Formalization and Effectiveness/Performance variables Fuzzy sets low formalization, medium formalization, high formalization at linguistic variable surveillance activities formalization and each partition's membership function are presented in figure 3. Pinnacle Research Journals 6 Figure 3: Exhibition of Formalization Fuzzy Sets and Their Membership Function

10 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Strategic intelligence effectiveness/performance is assessed according to these criteria: effect on company s performance, achieve to strategic intelligence s initial objectives, and strategic intelligence results and benefits. In this way, linguistic variables low, medium, and high in relation with linguistic variable effectiveness/performance of strategic intelligence are considered as the following. (Figure 4) Figure 4: Exhibition of Performance/Effectiveness Fuzzy Sets and Their Membership Function Collected data for variables surveillance activities formalization and strategic intelligence effectiveness/performance are shown in table 2. Table 2: Formalization and effectiveness/performance linguistic variables data Pinnacle Research Journals 7 respondent Membership Degree In Formalization Fuzzy Linguistic Sets Membership Degree In Performance/Effectiveness Fuzzy Linguistic Sets Score Low Medium High Score Low Medium High

11 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 The number of studied hypotheses will be 3 3=9 considering fuzzy linguistic variable's partitions surveillance activities formalization and strategic intelligence effectiveness/performance. These hypotheses and the effect of table 2 data in supporting of them are illustrated in table 3. As you see in table 3, for example, data related to 8th respondent are.9 in supporting of hypothesis 5,.4 in supporting of hypothesis 6,.9 in supporting of hypothesis 8, and.4 in supporting of hypothesis 9. In the similar way, in table 2, 8th respondent s formalization variable is medium to the extent of.5 and high to the extent of.5; and his opinion of strategic intelligence s effectiveness/performance is.8 medium and.82 high. Thus, about 5th hypothesis values of, medium formalization and medium performance variables are multiplied and make.5.8 =.9. Other digits shown in table 3 are attained in a similar way. Hypothesis confirmation degree column of table 3 is attained through each line s arithmetic average. As it is shown in table 3, 6th hypothesis surveillance activity (strategic intelligence) with average formalization has a good effectiveness is more acceptable than other hypotheses. Table 3: hypotheses and their confirmation degrees about linguistic variables formalization and effectiveness/performance Hypo. num. hypotheses Respondent Number Hypothesis confirmation degree Pinnacle Research Journals low formalization have low effectiveness low formalization have medium effectiveness low formalization have high effectiveness medium formalization have low effectiveness medium formalization have medium effectiveness medium formalization have high effectiveness high formalization have low effectiveness high formalization have medium effectiveness high formalization have high effectiveness In fuzzy hypothesis testing, verifying or rejecting a hypothesis (null hypothesis) is not important, its accuracy is the important matter. The results attained in table 3 are in conformity with

12 Vol. 3 Issue 9 September 24, ISSN , pp. 8-2 Pinnacle Research Journals 9 overview of literature, where expertise and pioneers of establishing strategic intelligence process determined some extent of formalization suitable for strategic intelligence activity. Conclusion and Suggestions Results attained from research are: a) Hypothesis average formalization have a good level of effectiveness with accuracy of.3756 is confirmed more than other hypotheses. b) Hypothesis strategic intelligence activities with a high seniority degree have a good level of effectiveness with accuracy of.2925 is confirmed more than other hypotheses. c) In the third hypothesis, definitive variable centralization is partitioned into centralized, decentralized mixed and auxiliary condition the number of strategic intelligence points is partitioned into three fuzzy sections of low, average, and high. Effectiveness/performance linguistic variable is partitioned according to (3-2) and the 3 3 3=27 hypotheses are investigated; according to them the hypothesis surveillance activities (strategic intelligence) with centralized organizing and low SI points (involved entities) have a good level of effectiveness with accuracy of /2656 is confirmed more than other hypotheses. d) Hypothesis strategic intelligence activities with a high rank in organizational hierarchy and under the supervision of senior manager have a good level of effectiveness with accuracy of.22 is confirmed. e) In fifth hypothesis, definitive variable of internal expertise groups is partitioned into these two terms, Yes and No. Definitive variable internal members' network s maintenance procedure is partitioned into three terms of meeting, data presentation, data distribution. Definitive variable external members' network s maintenance procedure is divided into three terms of meeting, attendance in conferences, and attendance in fairs. Linguistic variable network activity is partitioned into three fuzzy sections low, average, and high; linguistic variable network variety is partitioned into three fuzzy sections low, average, and high. Linguistic variable strategic intelligence effectiveness/performance is partitioned in a way similar to (3-2). Therefore, =324 hypotheses are investigated and the hypothesis strategic intelligence activities with a network organization including the presence of internal expertise groups, and the maintenance procedure of linkage with internal and external members through meeting, average variety, and average activity has a good level of effectiveness with accuracy of.253 is confirmed more than other hypotheses. Suggestions Considering the research results, the proper organizing of surveillance activities for small and medium size organizations, experiencing a variable environment, should be centralized and have a relative formalization in order to have enough flexibility and to be reduced the assigned time necessary for reaction. According to this approach, the position of these activities in organizational hierarchy should be at the level of senior management and take advantage from an efficient communication network. It seems that the research results conform to small and medium size companies type of organizational structure that seeking efficiency and cost saving in their own main activities; nevertheless, coordination among these activities is not very important issue for them. Like elements related to organizing, processing resources and elements, technical resources, financial resources, and human resources influence the strategic intelligence effectiveness/performance; studying these elements can be a good suggestion for future researches. Present researchers suggest studying the relation between strategic intelligence and

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