Competitive Intelligence

Many CEOs think that CI is bunk and that all the information they need on the competitive environment is already a known factor or can be found through internet searches. These CEOs often can’t see beyond obtaining the sales objectives of the current quarter.

The problem is that these senior executives are like a hamster on a treadmill: running hard and going nowhere. Focusing on short term objectives means you cannot anticipate changes in the market such as the development of new products, demographic and economic changes, and the development of disruptive technologies. Not knowing what is going on in the competitive environment leaves you open to being blindsided.Learning from the “Pentagon Papers”

Two popular beliefs regarding the US involvement in the Vietnam War is that the US aim was to defend South Vietnam from communism; and to prevent the “domino” effect, that is, if South Vietnam falls to communism then all of southeast (including Indonesia, the Philippines and Australia) will fall like dominoes into communist domination, specifically from China.

Both beliefs are false.

The Central Intelligence Agency (CIA) made it quite clear around 1964 that if South Vietnam should fall, there would not be a domino effect, that the US would still exert substantial power to prevent further communist advances into Asia, and that a united Communist Vietnam would revert to its traditional hostility to China. (Pentagon Papers, Chapters 5 & 6) Only the generals and some influential right-wing politicians believed in the “domino” effect and their blind belief held sway. This led to long, bloody war in which millions died unnecessarily.

As for helping South Vietnam, when seeking to apportion the importance of US objectives, only 10% was given to helping the people of South Vietnam, while 70% was given to protecting US prestige as a world power (Pentagon Papers, Chapter 5). So the Vietnam War was not about helping South Vietnam or fighting communism so much as it was about US prestige and self-importance.

And yet the war continued on based on false premises, and this situation has continued to this day.

What happened within the government of a super power often happens within companies, where strategies and tactics are adopted based on delusion and blind belief and not on intelligence/knowledge.

Knowledge Versus Belief

Competitive Intelligence is knowledge based on cold, hard facts that can be applied to developing short-, medium- and long-term objectives regarding all areas of your company’s operation: product and service development, marketing and sales, distribution channels, strategic alliances, mergers and acquisitions, developing and/or adopting new and emerging technologies. It provides a dynamic and ever-changing picture of the competitive environment that can be used as a guide to meeting the changing demands of the market place.

Belief is static and does not adapt easily to changes in the competitive environment. It is not based on facts but may be based on wishful thinking, which can be disastrous.Knowledge Versus Belief

What makes Competitive Intelligence such a powerful, and sometimes frustrating, tool is that it can encompass a wide range of research methods which are then brought together through ANALYSIS to create a detailed and evolving picture of the competitive environment.

Here are some of the elements that come into play:

-  HUMINT: Human intelligence is information derived from simply talking to people. Examples include mystery shopping, exchanging information with people in your own organization, or speaking with industry experts and journalists to get their ideas on industry issues.

-   Market Research: Yes, traditional market research can be part of the CI professional’s arsenal. Whether it is a customer satisfaction study, or focus group study, or a study of general market conditions, or even the results of a business intelligence analysis of your client base – market research can help provide a starting point for an understanding of existing or potential market conditions, as well as developing trends in attitudes and ideas.

-   Public Information/Social Media: There is much publicly available information that can be used for competitive intelligence. This does not mean aimlessly surfing the web. This means looking at such things as:

o  Want ads by competitors (Are they expanding or replacing workers who left?)

o  CEO biographies (What are their backgrounds and how will past experiences influence future decisions?),

o   Strategic Alliances: What subcontractors have been brought in and how do they enhance or hamper a competitor’s ability to compete?

New technologies/New Patents: Can new technologies developed in other industries be used in your industry? What would be the impact? Has a competitor patented a new product? Can it be a “game-changer”?

-   Legislation: Will proposed legislation help or hinder your
company or industry?

-   Financial Information: This can be tricky as financial statements can be dodgy. If your comfortable with such information and know how to analyze it, then it can certainly be a useful tool for the CI professional.

-   Analysis: It is analysis, along with experiential knowledge of your business sector that brings all of the above-mentioned items together to create a complete picture of your company’s competitive environment. This picture is in constant flux. It is your analytical ability, knowledge and foresight that will enable you to anticipate changes in your industry that threaten the existence of, or provide opportunities for growth, your company and industry.

To conclude, it has been briefly demonstrated how difference research forms and sources of information can be brought together through analysis to help key decision-makers make the best possible decisions for their company today and into the future.

The first thing that you need to know is that CI will not be able to help your company unless and until it changes the way it looks at its industry, the world and its position in it.

CI can only help those companies willing to look at their industry and the world strategically, making decisions that are unique and unlikely to be copied by other companies. Using CI to look for industry best practices, for example, will only allow your company to be a copycat of one of your competitors – it does not make you unique or stronger or successful.

The standard areas that CI has been used to develop strategic policies involve such issues as:

-          Innovation and product development
-          Customer service management
-          Operations planning and control
-          Purchasing, supplier and distribution development
-          Quality management
-          Attraction, development and retention of people

But these are unique times in human history and the old paradigms no longer apply.

For example, if your company uses petroleum-based products or is highly dependent on petroleum-based fuels, then the future looks quite bleak. Whether you accept the concept of Peak Oil or believe strongly in the abiotic origin of petroleum, you cannot escape the fact that petroleum is getting harder to find and extract, and is often found in very small deposits. Some sources of petroleum, like the tar sands in western Canada or shale oil, need large amounts of energy and resources (water, natural gas and other chemicals) to create useable oil; and the process is incredibly destructive of the environment. And one day it may become economically unfeasible to drill for oil. Your company may take measures to use less petroleum but the best such a policy can do is delay the day of reckoning.

In this scenario, CI can be used to look for and evaluate technologies or resources that can replace petroleum as a source of fuel and raw materials (like plastic). There are many creative and under-funded companies and research centres in the world that may be developing the technologies and resources to take us into the next stage of human history. Investing in such companies can make your company the leader in the post-petroleum era economy.

With commitment from the senior executives and all other stakeholders, a resourceful company use CI for both profit and the benefit of humanity to develop the cheap, plentiful and clean energy that is already in high demand.

One of the frustrating things end-users of Competitive Intelligence have to deal with is that they often get information that they know already, either instinctively or through experience. The CI department may be very good, providing the information sought by senior management regarding competitor pricing and discount strategies, hiring strategies, product development and distribution strategies, etc. Yet the feeling persists that something more can and should be done with the information they’re getting, especially during the current economic downturn.

This issue is one that has bedevilled many CI professionals for decades: They deliver the information that senior management has asked for and yet there is a great deal of dissatisfaction with the impact of the CI provided and the perceived value of CI is diminished.

I suggest that the fault lies with both CI professionals and the end users. CI professionals should make a greater effort at analyzing data with the goal of providing innovative ideas for senior managers and other relevant end users. The end users on the other hand, should be open to, and encourage the application of, analysis and ideas that may very well change the structure of the company, the products and services it provides, and the markets its serves.

Here are two examples:

A.  Price Wars

If your company is engaged in price wars involving a great deal of discounts, then you may be trapped in a race to the bottom. In price wars, there will always be someone who sells lower than you. If customers are perpetually offered discounts, then the discount price becomes the list price.

In this case, the best strategy might be to target the high-end, high value segment of the market, and leave the competition to fight over the scraps of the low-end, low-value segment. Another possibility might be developing unique products and services demanded by the market which your competitors can not and will not provide, thus creating new markets and new demands.

This may require developing overseas markets and strategic partnerships. CI professionals should think in these terms without fear and end users should be more accepting of innovative thinking.

B.  Improving Ease of Use

If you have a number of highly-valued clients providing the majority of your sales, it makes no sense to annoy them by charging them for minor products and services which do not add much to your bottom line or customer satisfaction. It is better to take the high road and provide those services free of charge. Why should you lose major clients because you annoy them by charging for trivial services?

Clients, whether consumers or commercial enterprises, should find it easy to do business with you. If pricing or organizational changes are required to make your company easier to work with, then that is what the CI professional should advocate and end users should be open to accept.

CONCLUSION

Senior managers, as end users, should encourage “outside the box” analyses from their CI professionals in order to get full value from their CI departments. Competitive Intelligence is most useful when it is seen as a proactive force within a company in partnership with key decision-makers.

Competitive Intelligence can be a source of idea generation for product innovation, not just for dry analysis of current market conditions

The issues that will likely confront your senior management likely centre around the following areas:

A.  Clients and Competitors

Senior management will be concerned about keeping key clients. Keeping in mind Pareto’s Law (the 80/20 rule), it is likely that 20% of your clients represent 80%of the revenues. In some cases the ratio is more extreme. Therefore, it is essential to know how changes to the economy (including globalization), technology, demographics, are effecting your clients. Is your company keeping up with the changes your key clients are facing? What are your competitors doing to challenge your standing in the eyes of your key clients?

Another thing to keep in mind: Are some of your key clients losing the battle against foreign competitors or the changing economy, and are thus facing extinction? Are you missing opportunities to develop relationships with growing companies that could potentially be key clients of the future?
B.  Products and Services

What are the key specifications to your products, services, price points that attract and keep your best clients? What are your main competitors doing to challenge your company? Are there any developing technologies or new competitors that could disrupt your industry? Are your products and services competitive enough to enter new markets?

Also, there may be alternatives to your products and services that you may not be aware of but have been successful in other parts of the world. Do you have the capability of understanding what is happening elsewhere without having to wait for the English or French translation?

C.  Growing and Dying  Markets and Market SegmentsMarkets,

whether domestic or foreign, are in a constant state of flux. Increased prosperity in one segment or sudden immiseration elsewhere can disrupt your company’s revenues if your company makes the wrong decisions.

In extreme cases, companies may need to change their business model beyond recognition in order to grow and prosper. Nokia (which started as rubber and heavy cable manufacturer before transforming into a wireless telecommunications giant) and 3M (which started off as a mining company and manufacturer of sandpaper) are two well-known examples.

As a CI Manager, you should be aware of growing markets overseas and developing market segments in your home country. This will enable you to be an advocate for product and service innovation to profitably serve those markets. You should also be aware of declines in markets as well, so that you can be an advocate for extricating your company from developing products and services (and markets) that will not bring in sales revenues.

CONCLUSION

As a CI Manager, you should be ready to take an active role in developing a deep understanding of existing and potential clients and competitors; current and emerging markets; and the current and developing products and services that can attract important clients. Competitive Intelligence is based on hard facts, common sense and an awareness of opportunities and dangers.

A.  No Relationship with Senior Management

Not all CI professionals are extroverts and nobody expects them to be. On the other hand, they must not pretend that all their research and analytical skills will be noticed or be of value if they sit in their office all day.

CI professionals must devote their time developing and nurturing relationships with senior management. A strong relationship with any senior manager will get the attention of that manager’s staff, who can also develop into valuable allies for your CI efforts.

Think about it. Would anyone, especially a senior manager, share information, concerns or needs with someone they did not know? Not likely and as a result the CI function is likely to suffer.

B.  Not Keeping Up with Education and New Techniques

Education is a responsibility that is often neglected, and CI professionals are no exception. There are some organizations that use only one method of reporting (e.g., an Excel matrix of competitive pricing) and one analytical methodology (e.g., SWOT analysis). Whether as an employee or consultant, you may be afraid of rocking the boat with new tools and approaches. Maybe you should.

New analytical techniques add valuable texture and context to available data that would otherwise not seen before.

C.  Avoiding the Truth

As a CI professional, sooner or later you will come across “sensitive” information (e.g. conflicts with your company’s current assessment of the market) that has to be brought to the attention of senior management. This is the information that senior management will not be happy to hear – or so you may think. If you avoid making people aware of these findings, you will not only be making a disservice to yourself, but also to the people who depend on the information.

If you do, you will gain the respect of your senior management. It will allow them to make more effective decisions, because they will have to first address the conflicting information, and in doing so get at the real truth.

D.  Not  Making the Information Intelligible

CI professionals are trained in the art of obtaining and analyzing information. Too often, however, they stop there versus providing senior management with a presentation to make all the information intelligible so that decisions can be made and changes brought about.

Speak to the audience in their terms. If your focus is on product, the presentation should be on product analysis, such as how a competitor’s actions could threaten a particular product and what should be done about it.

E. Not Celebrating Victories

CI professionals don’t always like to draw attention to themselves, but they should do so because it is in their best interest to do so.

Victories don’t always come in the form of your company doing something spectacular as a result of your efforts, but rather in your company not doing something that would have, otherwise, resulted in loss of time and revenue (e.g. a decision not to compete against a regional competitor or go after a market sector and so avoid losses in expenditures and human resources.)

That’s still a win. Celebrate it.

Here we look at some reasons or excuses companies use to not develop a Competitive Intelligence capability or to improve upon what they have in place.A. We do have a competitive intelligence capability
in place = It doesn’t seem to be of much benefit to us:

This situation may be caused when CI is conducted by a number of people within the company. Thus data and the interpretation of data is effectively summarized, co-ordinated and shared among key decision-makers within the company.

Another problem may be the person or persons conducting CI. If CI, or what passes for CI, is conducted by a low-level person or by someone for whom CI is a secondary responsibility. In these situations, CI is not given the time and budget necessary to be effective or to influence the decisions of senior management.

Finally, a major problem is what passes for CI. For some companies, collecting the ads, brochures or websites of competitors is the extent of their CI work. Many others focus exclusively on the prices charged by their competitors. They never go beyond that and, as a result, they don’t understand how their competitors think, which segment of the market they’re targeting, their cost of doing business, the service bundles that come with (or don’t come with) the prices charged,  their profit margin, or whether they are successful or not.

B.  CI is too expensive =  We know all about the competition

All too often, companies, or rather their senior management, who are confident they know all about their competition and the overall competitive environment are the ones who are blindsided by unexpected events. “We didn’t see it coming” is the plaintive cry from the senior management of companies who are run out of business or are forced to severely downsize because they did not see changes in the competitive environment like new technologies or non-traditional competitors.

A well-financed group of CI professionals play a key role in the success of companies in highly competitive environments. They take into consideration not only how the competition is reacting to changes technologies, demographics and legislation but can also determine their level of success and the challenges they pose to their competitors. They also analyze the impact of non-traditional competitors and new business models are challenging their industry and measures to counteract or exploit such changes.

This is where the value of Competitive Intelligence is derived.

C. We are looking for 100% certainty = We would rather
have no information

It is true that CI research does not always provide 100% of the data demanded by senior management. Not research of any kind can do that. But it is also true that CI research does provide very important pieces to the competitive environment puzzle. Analysis, knowledge of the industry, and being open-minded about developing technologies and new business models – or how existing technologies can be used in innovative ways – is what a CI professional uses to bring together different pieces of information, to synthesize them and to create a complete picture of the competitive environment, or even a number of possible future scenarios.

There is always uncertainty in business. Competitive Intelligence can provide senior managers with an understanding on how different decisions can impact their company and industry, and in so doing provides them with guidance in their decision-making.

After presenting the report for a major CI project to senior management, I found myself being questioned about the results of the study. It seems that a number of senior managers had made certain assumptions about the competition, and when they found that the report contradicted their assumptions they immediately called into question the results of the study and the methodology used.

As a CI Manager, I know that the methodology was valid, that we double-checked the data and the sources of the data, and that the conclusions we made are based on verified information. It’s just that these senior managers made the wrong assumptions.

How should one deal with the crossfire of internal politics?

This situation is one which most CI professionals (and Market Research professionals as well)  will face sooner or later in their career: a client has a strong belief regarding the anticipated results of a study and, when that belief has been proven to be inaccurate, the client questions the results and those involved in the research.

In a recent study on wind turbines, a client questioned the results for a specific North American manufacturer, which indicated a high level of quality, high customer satisfaction and praise from industry experts. Further research and data were required to finally convince the client that the information was accurate and that, indeed, the manufacturer produced a high-quality product that was making strong inroads in the North American and global markets.

Knowing Your Client’s Biases

When interviewing or networking among internal (and external) clients, not only is it important to understand their information needs but also what their information biases are as well. Every client has a skewed view of the world based on their responsibilities within the company, their professional background and their experiences. As a CI professional, you should note clues these biases so that you will be able to address them during your research.

Being Prepared

When collecting and analyzing data, be prepared to respond to potential questions, especially if the information contradicts any set beliefs held by your clients.

If it is likely that the results of the study will likely engender criticism from clients:

1. Gather information from as many verifiable and reliable sources as possible;
2. Get more data than you usually need so that you can call upon a mass of data to support your findings;
3. Think about some of the questions that may be asked and answer those questions in your report;

Know your data and your sources thoroughly, because you may be asked a question you did not anticipate.

Conclusion

Understanding your clients’ biases can provide you with a forewarning of potential questions of study results. This will allow you an opportunity to gather sufficient, verifiable and cross-referenced data to be forearmed with the ability to answer those questions or criticisms.

You will never completely eliminate the possibility of criticism of study results but you can minimize their impact.

My company’s focus in using Competitive Intelligence has been concentrated on competitors (for example, their product and service bundles, pricing, size of sales force, new hires, etc.). How can Competitive Intelligence be used to anticipate changes in the industry or competitive environment so that my company will be in a position to profit from such changes?

ANSWER:

That’s a very good question. You have pointed out a key objective of Competitive Intelligence, one that is all too often ignored in the business community: the Identification and Understanding of Signals Indicating Changes in Consumer Demand.

The ability to identify such signals requires a CI professional to take a wide view of the industry he/she is operating within. Understanding the marketing strategies, products and corporate cultures of competitors is very important but it does not permit the CI professional to identify changes in the market.

Below are few examples.

Changes in Government Legislation or Tax Laws

Very often external forces bring about significant changes in an industry. Government legislation, including tax incentives, may impact an industry by lowering the barriers to entry of new competitors. For example, the players in a specific industry may feel safe because the cost of entering the market (the cost of new manufacturing facilities, hiring of skilled staff, etc.) is prohibitive.

Changes in tax laws and other incentives may very well entice new competitors into the industry, and disrupting the way business is conducted.

Also, advocacy or lobby groups for industry and consumer issues can provide some clues about upcoming changes in your industry. If there is advocacy group that looking for legislation that could impact your industry, try to understand their motives and demands. It can help your company devise changes in processes and technology that can obtain a significant advantage in the market place.

Low Price Competitors

In any particular market, whether it is consumer or B2B, there may be a significant part of the market that feels that it is paying too much money for products and services it doesn’t necessarily need. They may be looking for a provider who, while not necessarily providing the best products or services, can provide something that is of acceptable value at a low price, a provider who is deemed “good enough”.

Quite often, low cost competitors have found a way to be more efficient somewhere along the value chain (for example, they may have removed the “middle man” somewhere along the process between manufacturing and distribution processes). Their example can provide you with ideas to cut costs, improve profitability and enter new markets.

Developing Technologies

There may be an upstart company or two on the periphery of your industry that has a new technology that has not reached its potential. It is possible that the technology is not very good (at this point in its development) and the services may be substandard. It would be a good idea to understand the product this company is providing and to understand the concept behind the product: What is the idea behind the product and why would it be important to a potential client?

Very often, technology lags behind the concept or idea behind the product. It is only when the technology is fully developed, along with the added services that ride on this technology, that the product becomes a disruptive force in the market – either displacing established players or creating markets where none existed heretofore.

A good example is the wireless handheld device like the Blackberry. When wireless handhelds first came the technology was not fully developed and the service was not very good. Established players in the telecommunications industry did not think much of this upstart product. By the time the technology was fully developed, it was too late. Many companies are trying to emulate the original handheld manufacturers, but now they are so far ahead in that market that new entrants (who try to copy the leaders) find it almost impossible to compete.

1. Competitive Intelligence requires a comprehensive understanding of the entire competitive environment, not just established competitors

2. Be aware of potential disruptive forces that could impact your industry. This will help your company to anticipate major changes in your industry and profit from changes in market demands and new technologies.

3. Pay attention to potential changes in legislation and also advocacy groups promoting such changes. Understand the motivations behind the demand for such changes, even opening up a dialogue with lobbyists and advocacy groups. Again, this can lead to changes in the way your company does business and so keep it ahead of the competition.

4. Try to learn from the competition. This involves not just performance benchmarking against key competitors. It also involves studying competitors on the periphery of your industry, who may have products or technologies that are still in the development stage. What is the concept behind the technology? What market is being targeted? What capability is being offered and why would it be important to the target market?

5. Focusing exclusively on established competitors can create a major competitive blind spot from which your company can be blindsided by unforeseen developments.

The issues that will likely confront your senior
management likely centre around the following areas:

A. Clients and Competitors

Senior management will be concerned about keeping key clients. Keeping in mind Pareto’s Law (the 80/20 rule), it is likely that 20% of your clients represent 80%of the revenues. In some cases the ratio is more extreme. Therefore, it is essential to know how changes to the economy (including globalization), technology, demographics, are effecting your clients. Is your company keeping up with the changes your key clients are facing? What are your competitors doing to challenge your standing in the eyes of your key clients?

Another thing to keep in mind: Are some of your key clients losing the battle against foreign competitors or the changing economy, and are thus facing extinction? Are you missing opportunities to develop relationships with growing companies that could potentially be key clients of the future?

B. Products and Services

What are the key specifications to your products, services, price points that attract and keep your best clients? What are your main competitors doing to challenge your company? Are there any developing technologies or new competitors that could disrupt your industry? Are your products and services competitive enough to enter new markets?

Also, there may be alternatives to your products and services that you may not be aware of but have been successful in other parts of the world. Do you have the capability of understanding what is happening elsewhere without having to wait for the English or French translation?

C. Growing and Dying  Markets and Market Segments

Markets, whether domestic or foreign, are in a constant state of flux. Increased prosperity in one segment or sudden immiseration elsewhere can disrupt your company’s revenues if your company makes the wrong decisions.

In extreme cases, companies may need to change their business model beyond recognition in order to grow and prosper. Nokia (which started as rubber and heavy cable manufacturer before transforming into a wireless telecommunications giant) and 3M (which started off as a mining company and manufacturer of sandpaper) are two well-known examples.

As a CI Manager, you should be aware of growing markets overseas and developing market segments in your home country. This will enable you to be an advocate for product and service innovation to profitably serve those markets. You should also be aware of declines in markets as well, so that you can be an advocate for extricating your company from developing products and services (and markets) that will not bring in sales revenues.

CONCLUSION

As a CI Manager, you should be ready to take an active role in developing a deep understanding of existing and potential clients and competitors; current and emerging markets; and the current and developing products and services that can attract important clients. Competitive Intelligence is based on hard facts, common sense and an awareness of opportunities and dangers.