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In today's fast changing business world, no-one likes surprises. The ability to be pro-active and not reactive is one of the greatest techniques for creating value within an organization. This requires a continuous process of transforming information into intelligence so that a company can manage the future. Winning a battle in the business area implies, like in any other face-off, knowing your opponent, in this case, the competition, very well. The manager cannot make a viable strategy, founded solely on information about his company. A competitive strategy means that one is competitive because he differentiates himself from the others. And for this, one has to know what the others are doing.
Nowadays the CEO's need a warning system which can timely deliver the relevant information from the business environment, so that they are able to make decisions with a secure level of certainty that allows the company to maintain its competitive advantage.
The market globalization and the speed of science and technology evolution require the usage of monitoring systems, capable of identifying opportunity niches essential for the growth of the companies. One of the best tools for making this possible is Competitive Intelligence. This instrument supports the strategic planning in every company.
Competitive intelligence in business organizations has benefited greatly from military and government intelligence practices and knowledge. Many of the pioneers in the business intelligence community migrated from a variety of governmental organizations. They brought a set of concepts and insights that have been refined over centuries. Most notably, Sun Tzu's classic work on military intelligence is widely read, and he is credited with being the father of intelligence.
This concept has proven, along the years, its goal (actionable intelligence that will provide a competitive edge) and advantages when applied correctly. Still, most midsize firms lack dedicated competitive intelligence operations, despite the fact that most business leaders recognize that their success depends on looking forward and moving more quickly that the competition.
According to Ben Gilad and Leonard Fuld, competitive intelligence (CI) is the action of ethically and legally gathering, analyzing, and communicating information about third party players in one's competitive arena - from competitors, to suppliers, customers, influencing parties, regulators, distributors, potential new competitors, and so forth, to be used by companies in their planning and decision making. The process of collecting, storing, analyzing and communicating this market intelligence is today an institutionalized process in most large companies.
Done properly, this helps a company avoid surprises by anticipating competitors' moves and decreasing response time. Put simply, competitive intelligence is a method of collecting and analyzing information that lets companies identify possible changes regarding competitors before these become obvious. Data can be gathered from public or private sources, from networking with a competitor's staff or customers or from research in the field. A key rule is that all activity must be legal. CI practitioners must also disclose their identities at all times and not collect information under false pretenses.
- Press releases
- Industry (market) analysis
- Financial Analysts
- Employment Ads
- Trade shows
- Technical conferences
- Meetings and plans
- Customer interviews
- Customer surveys
- Sales forces
- Reps and distributors
- Suppliers and partners
- Former employees
The basis of competitive intelligence is knowing the difference between information and intelligence. This will help managers get on the road to more efficient decision making.
Information is factual. Its numbers, statistics, disseminated bits of data about people and companies and what they've been doing that seems to be of interest. Information often appears to be telling you something but in reality it's not. One can't make good decisions based on information no matter how accurate the information is or no matter how comprehensive it is.
Intelligence, on the other hand, is a collection of information pieces which have been filtered and analyzed. It has been turned into something that can be acted upon.
Intelligence is what managers need to make decisions, not information. Another term for intelligence is knowledge.
Milestones in the evolution of competitive intelligence
Organizations collected commercial intelligence since the first trade took place. Books on organizational intelligence collection appeared as back as the 60's but these early attempts at formal intelligence activities for businesses remained mostly academic and rather ineffective until 1980, when Michael Porter of Harvard Business School published his book, "Competitive-Strategy: Techniques for Analyzing Industries and Competitors" which laid down the theoretical foundation for applied CI.
In the late 70's Fuld & Co and Washington Researchers were the promoters which offered competitive research to corporate clients. In 1986 the Society of Competitive Intelligence Professionals was founded in the U.S. Accepting the importance of competitive intelligence, major multinational corporations, such as ExxonMobil, Procter & Gamble, and Johnson and Johnson, have created formal CI units. Importantly, organizations execute competitive intelligence activities not only as a safeguard to protect against market threats and changes, but also as a method for finding new opportunities and trends. The first professional certification program (CIP) was created in 1996 with the establishment of The Fuld-Gilad-Herring Academy of Competitive Intelligence in Cambridge, MA.
Variations of competitive intelligence
Over time, businesses recognized a form of intelligence that was called in various ways (competitive intelligence, business intelligence, corporate intelligence, competitive information or commercial intelligence), but most of the experts have settled to call it competitive intelligence.
Regardless of the term that we use, CI is the use of public sources to develop data about competitors and the market environment and its transformation in usable information, thorough analysis. When thinking about CI, public information refers to the information that one can access legally and ethically. Publicly does not mean necessarily published information.
The most commonly recognized variations of CI are:
competitor intelligence (McGonagle and Vella)
1. Strategic intelligence
Strategic intelligence represents competitive intelligence provided in support of strategic decision making. This means providing the highest levels of management information on the competitive, economic and political environment in which companies operate now and in which they will operate in the future (See David b. Francis "Your competitors: who will they be?" Competitive Intelligence Review 8, no.1 1997: 16-23).
This type of intelligence generally supports the senior management for the overall strategy. The most common applications are in the development of strategic plans, capital investments, political risk assessment, mergers, acquisitions, joint ventures, corporate plans, R&D planning (See Edwin Ruhil and Sybille Sachs "Challenges for strategic competitive intelligence and the corporate level", Competitive Intelligence Review 8, no 4 1997: 54-64).
Strategic intelligence involves the assessment of a firm's direct competitors, the competition environment and its indirect competitors, but an equally important part is the development of intelligence on the long-run changes caused by all of the forces driving the industry competition (Larry Kennedy "Competitive intelligence in business process engineering: a study at digital equipment corporation" Competitive Intelligence Review 8, no 2 1997: 8-13).
The focus has to be on factors as technology trends, political risks and regulatory developments. It is designed to warn the company of impending problems and alert it to upcoming opportunities, always in time to take needed action (Mark Sullivan, "Using competitive intelligence to develop a strategic management action- oriented measurement system", Competitive Intelligence Review 8, no 2 1997: 34-43.).
2. Competitor intelligence
Competitor intelligence is the use of public sources to locate and develop data that are then transformed into information about competitors, their capabilities, current activities, plans and intentions.
The role of this type of intelligence is to help the operating managers within strategic business units or product managers and other people involved in the process of product or business development.
3. Market intelligence
Market intelligence is intelligence developed on the very current activities in the marketplace (See Kenneth A. Sawka, "Warning Analysis: a risky business", Competitive Intelligence Review 8, no. 4, 1997:83-84).
Market intelligence depends on highly developed software tools and analytical skills highly trained people to provide market knowledge, professional expertise and marketing insight.
The data should be received fast and detailed so that they enable a firm to find out information regarding the success of failure of its product promotion, the next moves of the competitors regarding their promotions and possibilities of cross-promoting the product.
Frequently users of market intelligence are marketing departments and market planning department because they use the feedback on the success or failure of previous sales efforts.
4. Technical intelligence
Technical intelligence activities enable a firm to respond fast to threats and to identify the opportunities which result from technical and scientific development.
It is believed that TI is a function which if it is executed properly, could result in a saving of 10 to 100 times the investment in the function (See Davis C. Pring, "Competitive Intelligence and Market Research: Filling the Gaps" in Global perspectives on CI, ed. John E. Prescott and Patrick T. Gibbons, 1993, 223-239).
Technical intelligence can provide information about the methods and processes used by the competitors, their dependence on outside technology, patents or new technology acquired, the capabilities of the competitors' R&D staff, estimations about expenditures for this department.
TI primarily focuses on technological trend rather than on the market ones. A part of the experts considers that it should be more concerned about the opportunities of the firm, than on the threats to the firm.
Active and defensive CI
When CI started to become popular, there was no discussion of anything besides the actions designed to collect information about the competitors, called active competitor intelligence. During its evolution, analysts started to realize that what they were doing, it could be happening to them also. This led to a new interest towards activities that were destined to protect companies against CI activities from other companies, called defensive competitor intelligence.
Active CI processes are those aimed at collecting raw data as well as analyzing those data to provide finished intelligence. The goal of a defensive program is to make life much more difficult for your competitor's intelligence analysts, so they will give your firm more operating flexibility.
Counterintelligence is the process of countering, preventing the intelligence gathering effort of other parties, your competitors. It has to be understood as a part of an ongoing process. This program's effectiveness is measured through minimization of losses due to the competitive intelligence effort of the competitors.
Many companies are very careful to protect their physical assess, but it is far more important to protect the intangible assets of the company. Cloaked competitors are those that protect themselves from the intelligence gathering efforts of their competitors.
For doing this, the most important aspect is to understand how competitors work, which channels they use, and the techniques they use.
One has to deprive competitors of a few key pieces of data that are vital for the big picture of the analysis (Deborah C. Sawyer, "Defining your competition: Trojan Horses, Fifth Columns, and other threats", competitive intelligence magazine 3, April -June: 45-46).
Implementing competitive intelligence - the CI process
Although the main job of competitive intelligence is to support management decision making, having a methodical competitive intelligence system in place can help the company address many different issues.
A methodical competitive intelligence program can:
Anticipate changes in the marketplace.
Anticipate actions of competitors.
Discover new or potential competitors.
Learn from the successes and failures of others.
Increase the range and quality of profitable targets.
Learn about new technologies, products and processes that affect the company's business.
Learn about political, legislative or administrative changes that can affect the company's business.
Enter new businesses.
Look at the company's own business practices with an open mind.
Help implement the latest management tools.
The CI process is most commonly divided into four basic stages, which make up what is known as the CI cycle :
Planning: this means establishing the needs of the company. On one hand, the managers of the company recognize the need for CI and, on the other hand, they define what kind of CI the company needs. It also means what questions the managers want to answer with the CI, who else may be using CI, and how, by whom, and when the CI will finally be used.This is also the part of the cycle in which the competitive intelligence practitioner decides which course he should take in fulfilling his task.
This stage can also be thought of as the other end of the intelligence cycle because once specific intelligence is delivered to the decision maker his successive actions - based on that intelligence - will stimulate further intelligence needs. The company's situation will certainly change based on those actions.
Gathering: this phase involves the actual gathering of raw information from which intelligence will be produced. The vast majority of collection materials are public domain meaning they are available to anyone who knows where to look. Sources include periodicals, annual reports, books, broadcasts, speeches, databases and so on.
Creative collectors can usually find anything they need legally and ethically. Collection also involves processing information so that it can be transmitted and stored electronically if desired. Once in electronic form it can be manipulated into a form which allows it to be analyzed.
Analysis: this is generally considered the most difficult part of the intelligence cycle. Analysis requires great skills and boldness because it requires the analyst to weigh information, look for patterns and come up with different scenarios based on what he has learned. Even though analysis is based on logic and hard information, analysts must sometimes 'fill in the blanks' and make intelligent guesses about possible outcomes.
Dissemination: this step involves distributing the intelligence product to those who requested it. It's the time when the analysts will suggest possible courses of action based on his work. He must be able to emphasize his recommendations and defend them with logical arguments. The resulting intelligence will also be distributed to others in the company who can use it. The final form of the CI, as well as its timeliness/opportuneness and security are important considerations.
Studies have shown that the distribution of the effort the CI professionals spend among these four stages of the CI cycle is approximately as follows:
Needs - 20%
Gathering - 30%
Analysis - 40%
Dissemination - 10%
The element that runs through and directly links all the phases of the CI cycle is the need to monitor, on a continuous basis, what the company has done and how well. The goal is to provide feedback from each phase to the other three of the CI cycle. By doing this, the company can improve both the product of an individual assignment and the entire CI process even as the organization is using it.
Feedback to and from each phase of CI to all others is essential. That feedback generates a constant review that seeks to raise and then answer question like: Are the CI targets still correct? Should the CI unit add or delete targets, areas of interest and so on?
"Know the enemy and know yourself; in a hundred battles you will never be in peril"
Sun Tsu: The Art of the War
There are several points that we need to consider throughout the competitive intelligence process.
Tasks to be performed by CI Professionals (See CI Education Harvard Style by Ben Gilad, Competitive Intelligence Magazine, Volume 6, Number 4):
Go beyond internet searches: collect from human resources.
Go beyond public databases: collect hard-to-get information from less obvious sources.
Go beyond competitors: analyze whole markets and industries.
Go beyond static analysis and current market statistics: predict change.
Go beyond marketing intelligence: understand finance and cost accounting.
Go beyond marketing, finance, and cost: understand strategy.
Go beyond strategy: understand risk.
Time is critical
Slowness is the enemy of competitive intelligence. Having knowledge about something three weeks after you need to act is of little value. One needs to ask himself, from where will he get the information and how long will it take. This requires a very deliberate and strong competitive intelligence effort. Without a serious commitment to competitive intelligence, time will erase whatever hope one has for effective decision-making.
The objective should be to close the gap between when the event occurred and when one has the knowledge to act.
Although it's not easy, it is critical that competitive intelligence remains free of bias, providing neutral type results. Competitive intelligence is not intended to support an existing management decision. Good competitive intelligence should speak the truth and let management decide how it wants to proceed.
One way to ensure that competitive intelligence is neutral, is to make it independent, similar to other independent functions such as internal auditing. Also, where one places competitive intelligence within the organization can influence the "freedom" that competitive intelligence has. Instead of making it a sub-section of marketing, make competitive intelligence accessible to all functions. The CI Function tends to fit well with functions like Strategic Planning and Knowledge Management.
Big Egos kills CI - One reason competitive intelligence is not widely used is simple - it can be very unpopular. Competitive intelligence can contradict what management has been advocating. And if management is not willing to listen to competitive intelligence, then it will have little value.
Go where the information is
Sometimes competitive intelligence can be highly effective through casual and obvious sources of information (See Guy Kawasaki - How to drive your competition crazy). There are some simple steps for understanding the competition: Shop the competition, become a customer of the competition, query the competitor's customers, ask the government about the competition and become friends with a research librarian.
One of the more time consuming activities within competitive intelligence can be collecting and categorizing information. So knowing where to look can be half the battle. One needs to spend time talking to people who are in the know.
Challenge conventional thinking
Great competitive intelligence will challenge management to think in new ways. There are too many changes taking place in the world today. There is no way management should be comfortable with the status quo. Therefore, competitive intelligence should deliberately test and validate critical management decisions.
Likewise, management should welcome and encourage competitive intelligence to challenge both tactical and strategic decision-making. Competitive intelligence should be a reality check.
The Learning Organization - Competitive Intelligence becomes invaluable when it changes the behavior of an organization. This is best accomplished when the organization becomes a learning organization.
Competitive intelligence should not engage in illegal acts. Additionally, competitive intelligence should not jeopardize the reputation of a company. Fuld & Company recommends the following ten commandments of competitive intelligence:
1. Do not lie when representing yourself.
2. Observe your company's legal guidelines.
3. Do not secretly record an interview if it is against the law.
4. Do not issue a bribe.
5. Do not use eavesdropping devices.
6. Do not mislead anyone in an interview.
7. Do not swap price information or capacity with a competing company.
8. Do not distribute or exchange misinformation.
9. Do not steal a trade secret.
10. Do not knowingly pump someone for information that could sacrifice that person's job or reputation.
CI is not spying - Some people equate competitive intelligence with spying. Competitive Intelligence is not about spying, it's about knowledge.
Partner with Risk Management
Over the last several years, there has been increased emphasis on Risk Management - protecting the company from unexpected losses. However, Risk Management is very internally focused; things like control procedures within the company, security safeguards, authorizations and approvals, transparency in reporting, and so forth. Since risk management is internal, we need to compliment risk management with competitive intelligence. The reason is simple - CI is externally focused and these external forces have major risk implications. Therefore, it is extremely important to combine RM and CI for a comprehensive approach to risk management.
Intelligence collected and analyzed by and from human sources is often the determining factor behind your intelligence capabilities. Those organizations with extensive human sources as opposed to over-reliance on published sources will have superior competitive intelligence capabilities. This will lead to increased effectiveness in strategic decision-making, giving the company a fundamental competitive advantage.
Infrastructure before software
No doubt that many professionals will seek out a software solution to competitive intelligence. Although technology can help (and it continues to evolve), the manager should focus most of his efforts on building the infrastructure (staffing, training, processes, etc.) associated with competitive intelligence. One shouldn't work in reverse, forcing the processes to fit some software solution - design the processes first and then supplement the competitive intelligence with investments in basic technologies. Additionally, one may want to leverage existing technologies, such as internal databases, intranets and other applications for building your CI infrastructure.
World Class CI takes time - The usual time required to build a world-class competitive intelligence program is between 5 and 7 years.