Competitive Intelligence - Principles

Principles

Organizations use competitive intelligence to compare themselves to other organizations ("competitive benchmarking"), to identify risks and opportunities in their markets, and to pressure-test their plans against market response (war gaming), which enable them to make informed decisions. Most firms today realize the importance of knowing what their competitors are doing and how the industry is changing, and the information gathered allows organizations to understand their strengths and weaknesses.

The actual importance of these categories of information to an organization depends on the contestability of its markets, the organizational culture, and personality and biases of its top decision makers, and the reporting structure of competitive intelligence within the company.

Strategic Intelligence (SI) focus is on the longer term, looking at issues affecting a company’s competitiveness over the course of a couple of years. The actual time horizon for SI ultimately depends on the industry and how quickly it’s changing. The general questions that SI answers are, ‘Where should we as a company be in X years?’ and 'What are the strategic risks and opportunities facing us?' This type of intelligence work involves among others the identification of weak signals and application of methodology and process called Strategic Early Warning (SEW), first introduced by Gilad, followed by Steven Shaker and Victor Richardson, Alessandro Comai and Joaquin Tena, and others. According to Gilad, 20% of the work of competitive intelligence practitioners should be dedicated to strategic early identification of weak signals within a SEW framework.

Tactical Intelligence: the focus is on providing information designed to improve shorter-term decisions, most often related with the intent of growing market share or revenues. Generally, the type of information that you would need to support the sales process in an organization. Investigates various aspects of a product/product line marketing:

• Product - what are people selling?
• Price - what price are they charging?
• Promotion - what activities are they conducting for promoting this product?
• Place - where are they selling this product?
• Other - sales force structure, clinical trial design, technical issues, etc.

With the right amount of information, organizations can avoid unpleasant surprises by anticipating competitors’ moves and decreasing response time. Examples of competitive intelligence research is evident in daily newspapers, such as the Wall Street Journal, Business Week and Fortune. Major airlines change hundreds of fares daily in response to competitors’ tactics. They use information to plan their own marketing, pricing, and production strategies.

Resources, such as the Internet, have made gathering information on competitors easy. With a click of a button, analysts can discover future trends and market requirements. However competitive intelligence is much more than this, as the ultimate aim is to lead to competitive advantage. As the Internet is mostly public domain material, information gathered is less likely to result in insights that will be unique to the company. In fact there is a risk that information gathered from the Internet will be misinformation and mislead users, so competitive intelligence researchers are often wary of using such information.

As a result, although the Internet is viewed as a key source, most CI professionals should spend their time and budget gathering intelligence using primary research — networking with industry experts, from trade shows and conferences, from their own customers and suppliers, and so on. Where the Internet is used, it is to gather sources for primary research as well as information on what the company says about itself and its online presence (in the form of links to other companies, its strategy regarding search engines and online advertising, mentions in discussion forums and on blogs, etc.). Also, important are online subscription databases and news aggregation sources which have simplified the secondary source collection process. Social media sources are also becoming important - providing potential interviewee names, as well as opinions and attitudes, and sometimes breaking news (e.g. via Twitter).

Organizations must be careful not to spend too much time and effort on old competitors without realizing the existence of any new competitors. Knowing more about your competitors will allow your business to grow and succeed. The practice of competitive intelligence is growing every year, and most companies and business students now realize the importance of knowing their competitors.

According to Arjan Singh and Andrew Beurschgens in their 2006 article in the Competitive Intelligence Review, there are 4 stages of development of a competitive intelligence capability with a firm. It starts with "stick fetching", where a CI department is very reactive, up to "world class", where it is completely integrated in the decision-making process.