Competitive Intelligence

Competitive Intelligence Versus Business Intelligence

As a Competitive Intelligence professional for the past 14 years, I think that it is important that research professionals be able to distinguish between Competitive Intelligence and Business Intelligence.

These two terms are used interchangeably by many in the MRIA to describe a wide variety of information gathering and analysis techniques. I think that this is unfortunate because it creates confusion where there should be clarity.

What is Business Intelligence?

Traditionally, Business Intelligence is the research of a company’s book of business or clientele. Using a company’s IT resources, a researcher would create a detailed profile of existing clients with purpose of:

• Analyzing the clients (Who are they? Where are they located? What are their demographics/psychographics? Etc.)
• Analyzing buying habits (Who buys what, when and how often?)
• Developing sales strategies (Cross-selling, Up-selling)
• Developing new products and services
• Developing new ways to reach clients and deliver products and services
• Understanding shopping habits, etc.

In Business Intelligence, the emphasis is on using internal or other readily available information to develop insights on current clients. It is using past behavior to predict future tendencies. It is the use of computer software to present secondary or pre-existing data in a graphic format, with the objective developing tactics and strategies to influence future actions based on past activities.

In short, Business Intelligence is akin to what used to be called Knowledge Management, Customer Relationship Management or data warehousing.

With this definition, Business Intelligence has a clearly defined meaning and role. It can serve a vital function in any corporation if it is used wisely.

While Business Intelligence can be used as a resource for Competitive Intelligence (as described below) it is not, however, an equivalent to or substitute for Competitive Intelligence.

What is Competitive Intelligence?

My definition for Competitive Intelligence in its most all-encompassing form is as follows:

Competitive Intelligence is the gathering and analysis of primary and secondary data (but especially primary data) from a wide range of sources, and its dissemination to key decision-makers in a clear, succinct and actionable format.

Examples of data sources of (both from within and without the company) include:

• Competitors
• Suppliers
• Front line personnel (sales and customer service)
• Financial and legal departments
• Lobby groups and legislation
• Industry experts magazines
• Patents
• Ads
• CEO biographies
• Market research reports
• Financial statements
• Business Intelligence (as defined above)

All these sources of information can and must be used and synthesized to develop a profound understanding of the entire competitive landscape.Competitive Intelligence involves innovative analytical methods to interpret developing patterns in the activities of all players in the market (competitors, customers, suppliers, governments, etc.) The discussion of innovative analytical techniques and interpretations of developing patterns in the competitive environment is beyond the scope of this discussion. Suffice it to say that Competitive Intelligence, properly applied, brings together data from a very wide range of sources and synthesizes this data into a coherent and actionable analysis for key decision-makers.

The Role of Competitive Intelligence

A Competitive Intelligence professional must provide company executives not only with an analysis of competitor activities, but also develop scenarios based on impending or proposed legislation, the impact of developing technologies, major shifts in demographics and public opinion, the development of new markets overseas and how they impact scarce resources.

In predicting competitor activities, the Competitive Intelligence professional must consider not only established competitors, but also up and coming competitors who may be developing a new technology that could have a major impact on the entire industry.

When Research In Motion first introduced the Blackberry, the major telecommunications companies did not consider RIM to be a threat. The original Blackberries had limited capabilities and RIM itself seemed to be on the edge of financial ruin.

RIM’s technology improved dramatically as well as the appearance and capabilities of the Blackberry. Now, all the telecommunications companies are playing a hopeless game of catch-up. They missed their opportunities.

Competitive Intelligence is Dynamic

Competitive Intelligence is a dynamic and entrepreneurial activity. It cannot function as a bureaucracy, with the emphasis on predictable procedures and routines. Bureaucracies are inflexible, suited for stable or predictable situations.

Competitive Intelligence thrives highly competitive or innovative industries, in environments where each threat or problem is unique, where creative analysis and thinking is essential for survival and success.

Competitive Intelligence is Insight

The essence of Competitive Intelligence is Insight. This means looking at competitive situations from new perspectives, not by traditional standards.

The Competitive Intelligence professional can help executives through the recognition of new patterns of behavior among customers, competitors and suppliers. The Competitive Intelligence professional’s tasks “require immersing oneself in the competitor’s persona”.

Creating databases is a useless activity for a Competitive Intelligence professional, because such data has a short shelf life. What was valid a year ago, a month ago or week ago is now just useless information because situations change very quickly in our world.

Emphasis on Primary Data

Gathering secondary information is not the job of the Competitive Intelligence professional.

The emphasis should be on primary research, what is often referred as human intelligence. The use of primary research or human intelligence is what gives Competitive Intelligence its edge over other forms of research.

Unlike secondary research, primary research is alive and current. It provides insights on the internal dynamics of competitors. It provides harbingers of significant changes or developments within a competitor, whether it be the development of new products or technologies, mergers and acquisitions, expansion of sales forces, etc.

In general, people accept primary research in Competitive Intelligence (or mystery shopping as it is often referred to) in a consumer products and services setting. After all, observing signage, the professionalism of frontline personnel, the availability and presentation of products and brands – it’s all rather harmless, they say.

When it comes to a business to business scenario, the view of Competitive Intelligence becomes more jaundiced. It is seen as a form of spying or espionage – especially when it comes to primary research.

Code of Ethics

I believe that Competitive Intelligence in a business to business scenario is legitimate and acceptable.

I follow a Code of Ethics. I believe in do’s and don’ts, and that if you adhere to the don’ts you will have a good understanding of what you can do.

The code I follow is as follows:

1. Never steal (this includes “dumpster diving” or other forms of digging through someone else’s trash for documents, etc.);
2. Never bribe, extort or coerce anyone into providing competitor information;
3. Never accept competitor information or documents (especially trade secrets) from an informant with possible hostile intent (like a disgruntled ex-employee);
4. Never threaten or jeopardize anyone’s career or reputation, either intentionally or otherwise.

Conclusions

The purpose of this article is to clearly differentiate Competitive Intelligence from Business Intelligence.

Business Intelligence is the analysis of client information to develop insights and conclusions regarding how best to increase sales and profits from an existing set of customers and to develop ways and means to access more customers.

Competitive Intelligence is the synthesis of data from a wide range of sources to develop an analysis of current and developing scenarios in the entire competitive arena. This includes competitors, technologies, markets, legislation, etc.

Business Intelligence is based primarily on existing data.

Competitive Intelligence puts a special emphasis on primary data or human intelligence. This is what gives Competitive Intelligence its dynamism, because it allows the Competitive Intelligence professional to keep current with evolving market forces and to help executives to make strategic and tactical decisions to anticipate and exploit changes in the market.

Competitive Intelligence is a creative and dynamic tool best used by organizations in highly competitive and/or highly innovative markets.

Finally, Competitive Intelligence can be conducted ethically and effectively whether it is used in B2C or B2B environment.

QUESTION:

Many feel that the Internet and analytical software tools to organize Competitive Intelligence data are the key to having a successful Competitive Intelligence program.

The Internet is fast, cheap, accessible, convenient and is global in scope. Analytical software tools can consolidate and summarize the data and provide a visual structure to the data.

So why would anyone want to use primary or human intelligence for their Competitive Intelligence activities?

ANSWER:

With regard to the Internet, free data is all too often worth every penny you pay for it: nothing. The Internet provides a lot of data for which the source is unknown. The data cannot be validated. Often, in particular on company websites, the data may be out of date or deliberately false.

Even fee-based data has limited value, because it provides information on past, not current, conditions. Also, the provider of the data may have an agenda or bias and may not provide all of the data on a particular subject.

With regard to analytical software, their value is only as good as the data inputted. If the data is outdated or false, the software will provide only beautifully organized and illustrated falsehoods.

Analytical software packages are seen as magic bullets, but there are no magic bullets in Competitive Intelligence.

Human intelligence, that is, human intelligence that is checked and corroborated is the only truly valuable source of information in the Competitive Intelligence arena. Human intelligence is current and forward looking and can provide details that only people in the know can provide.

A successful Competitive Intelligence cycle (and its Counter-Intelligence counterpart) requires:

• Consistent Application;
• Commitment (from senior management and the Competitive Department down to lowliest clerk); and
• Control (that is, control of data and analysis quality to ensure that decision-makers are not given false information which could result in costly mistakes)

Situation: You are in the process of establishing a CI department at your company. Aside from individual projects in response to specific requests from my internal clients, what other CI activities you should be preparing for?

As head of the CI department, you should prepare to engage in a wide range of information gathering and analysis activities.

To begin with, the head of the CI department should establish a network of internal sources of information. For example, salespeople often come across information on competitor activities, and much of this information is never shared with other departments. It will be your responsibility to establish a relationship with the salespeople and their managers so that any competitive information gathered by them is sent to you or your department for analysis and follow-up. The same applies to customer service representatives, who sometimes get competitor information from the clients they contact.

As head of the CI department, it is your responsibility to develop a profound understanding of the competition and the competitive market. What market segments are they targeting? How are they bundling their products and services? Competitor brochures and ads can provide some clues as to what your competitors are doing and how their actions will impact your company and the industry. Will they likely be successful? Market research conducted by your company or purchased from a third party can provide information on market trends. Coupling market research and information gathered from competitor brochure and ads can provide insight on the market segments the competitors are targeting and how it would likely impact market share and profitability.

If your industry is regulated by government legislation, it is important to keep abreast on any proposed legislation.

The personalities of the CEOs of competing companies can have a major impact on the strategies they are likely to employ. Does the CEO of a major competitor have a background in accounting or sales? Has the CEO worked in another industry or company or has he/she been promoted from within? Does the CEO have an aggressive or passive personality? What strategies has the CEO used in the past that is likely to be used again?

Another source of information are job ads. Is a competitor hiring more salespeople. If so, what is the reason for this hiring? Is the competitor hiring more R & D specialists? If so, is the competitor developing a new technology that can give them an edge in the industry?

To conclude, if you are planning to establish a CI department, you should map out all of the internal and external sources of competitive information and establish a network of contacts to facilitate information gathering and analysis.

Situation: You are in the process of establishing a CI department at your company. Aside from individual projects in response to specific requests from my internal clients, what other CI activities you should be preparing for?

As head of the CI department, you should prepare to engage in a wide range of information gathering and analysis activities.

To begin with, the head of the CI department should establish a network of internal sources of information. For example, salespeople often come across information on competitor activities, and much of this information is never shared with other departments. It will be your responsibility to establish a relationship with the salespeople and their managers so that any competitive information gathered by them is sent to you or your department for analysis and follow-up. The same applies to customer service representatives, who sometimes get competitor information from the clients they contact.

As head of the CI department, it is your responsibility to develop a profound understanding of the competition and the competitive market. What market segments are they targeting? How are they bundling their products and services? Competitor brochures and ads can provide some clues as to what your competitors are doing and how their actions will impact your company and the industry. Will they likely be successful? Market research conducted by your company or purchased from a third party can provide information on market trends. Coupling market research and information gathered from competitor brochure and ads can provide insight on the market segments the competitors are targeting and how it would likely impact market share and profitability.

If your industry is regulated by government legislation, it is important to keep abreast on any proposed legislation.

The personalities of the CEOs of competing companies can have a major impact on the strategies they are likely to employ. Does the CEO of a major competitor have a background in accounting or sales? Has the CEO worked in another industry or company or has he/she been promoted from within? Does the CEO have an aggressive or passive personality? What strategies has the CEO used in the past that is likely to be used again?

Another source of information are job ads. Is a competitor hiring more salespeople. If so, what is the reason for this hiring? Is the competitor hiring more R & D specialists? If so, is the competitor developing a new technology that can give them an edge in the industry?

To conclude, if you are planning to establish a CI department, you should map out all of the internal and external sources of competitive information and establish a network of contacts to facilitate information gathering and analysis.

Dear CIC: What competitive information can be gathered by visiting a competitor’s retail outlet, aside from pricing? Outsourcer