COMPETITIVE INTELLIGENCEFOR

STRATEGIC ADVANTAGE

Competitive Intelligence

• The term CI is often viewed as synonymous with competitor analysis, but competitive intelligence is more than analyzing competitors — it is about making the organization more competitive relative to its entire environment and stakeholders: customers, competitors, distributors, technologies, macro-economic data etc.

Competitive Intelligence

• A broad definition of competitive intelligence is the action of defining, gathering, analyzing, and distributing Intelligence about products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization.

Key points of this definition:• Competitive intelligence is an ethical and legal business practice, as

opposed to industrial espionage which is illegal.• The focus is on the external business environment.[1]

• There is a process involved in gathering information, converting it into intelligence and then utilizing this in business decision making. CI professionals emphasize that if the intelligence gathered is not usable (or actionable) then it is not intelligence

Competitive Intelligence

Key points of this definition:• Competitive intelligence is an ethical and legal business

practice, as opposed to industrial espionage which is illegal.

• The focus is on the external business environment.• There is a process involved in gathering information,

converting it into intelligence and then utilizing this in business decision making. CI professionals emphasize that if the intelligence gathered is not usable (or actionable) then it is not intelligence

Knowledge• "Knowledge is of two kinds. We know the subject

ourselves, or we know where we can find information on it" - Samuel Johnson

• Collecting Information on competitors can be likened to prospecting for gold. Nuggets are a rarity. The prospector will need to sift through a lot of soil, to find the few grains of gold which make the task worthwhile. Occasionally, the prospector will even be tricked by iron pyrites - or "Fool's gold"!

Similarly, some of what is collected on competitors will turn out to be useless. Sometimes the information may be completely wrong and lead the unaware on the wrong path. However with experience, this is less likely, as with the skilled gold prospector and "Fool's gold".

What then is competitive intelligence? How do we define it? In what ways does it differ from market research? How is it used to make companies more competitive? Who needs competitive intelligence? How is it managed? How is it produced? How should competitive intelligence be used? By whom? What are its costs? Where does competitive intelligence fit within the strategic management system of the firm?What are the measurable "bottom line" benefits for managers and their organizations?

Directing a company is much like navigating a ship through treacherous waters. Icebergs appear in the form of competitors, but only a small portion of the iceberg can be seen above the waterline.

Waterline

• The most valuable and, often times, most damaging information can be found below the waterline.

• The fact is however, that most firms are not receiving below the waterline intelligence.

• CI provides both above and below the waterline intelligence,

Above The Waterline

• Information that your competitors don't mind you seeing:

• Press Releases

• Website Announcements

• Industry Newsletters  

• Analyst Reports

Below The Waterline • C I that your competitors don't want you to see• Pricing Details • Sales Prospect Lists • Strategic Partners • Marketing Programs • Top Sales People • R&D Plans • Reseller Channels  • Acquisition Targets • Competitive Threats • Patent Submissions • Unhappy Customers • Product Deficiencies • Trademark Infringement • Lawsuit Filings

Who is a competitor in business?

• Other organizations offering the same product or service now.

• Other organizations offering similar products or services now.

• Organizations that could offer the same or similar products or services in the future.

• Organizations that could remove the need for a product or service

Why monitor competitors?• By knowing our Competitors we may be able to

predict their next moves,exploit their weaknessesand undermine their strengths.

• Customer's usually know the differences between companies - their good points and bad points. They know that company A is cheaper than company B and that company C has a better after-sales service. For a business to operate in a market and not know the same, and more, is tantamount to giving up the battle without even starting.

As Frederick the Great said:• It is pardonable to be defeated, but never to be

surprised

Why Competitive Intelligence? • No business is an island. For success, the business will need to deal with

customers, suppliers, employees, and others. In almost all cases there will also be other organizations offering similar products to similar customers. These other organizations are competitors. And their objective is the same - to grow, make money and succeed. Effectively, the businesses are at war - fighting to gain the same resource and territory: the customer. And like in war, it is necessary to understand the enemy:

• how he thinks; • what his strengths are; • what his weaknesses are; • where he is vulnerable; • where he can be attacked; • where the risk of attack is too great.... • and so on. And like in war, the competitor will have secrets that can be the

difference between profit and loss, expansion or bankruptcy for the business. Identifying these secrets is thus crucial for business survival. But all this is not new...

Competitive Intelligence • Competitive intelligence is the practice of examining the external

competitive environment – direct rivals, clients, economic/regulatory matters, and more – to support the development of more resilient, robust strategy and tactics. The intelligence outcome is meaningful, actionable, and provides “an insight about change and future developments and their implications to the company.”

• Effectively, CI improves tactical and strategic decision-making through understanding the competitive environment.

• Competitive intelligence must also be distinguished from competitive information gathering, which is a component of CI, but lacks analysis and meaning – the essence of intelligence. This includes company profiles or news items, which inform about a competitor, but – without analysis or context – provide little meaning and insights to support strategy and decision-making.

Why Intelligence?

• Managers need to increase the quality of:1) products or services2) strategic planning and3) market knowledge

• That results in higher business performance

Cycle of Competitive Intelligence • The process by which raw information is acquired,

gathered, transmitted, evaluated, analyzed and made available as finished intelligence for policymakers to use in decision-making and action."

Five steps cycle• planning and direction • collection and research • processing and storage • analysis and production • dissemination and delivery

competitive intelligence is a business process

CI process provides • Direction & Planning - Identifying and defining

key intelligence requirements; managing assets to meet requirements; and prioritizing work.

• Collection - Identifying sources; gaining access to sources and information; matching requirements against sources to answer intelligence requirements

• Analysis - Drawing meaning from collected information to answer intelligence requirements

• Production & Dissemination - Reporting results on time in an appropriate format

Strategic intelligence

• Strategic intelligence is concerned mainly with competitor analysis or gaining an understanding of a competitor's future goals, current strategy, assumptions held about itself and the industry, and capabilities -- diagnostic components. Intelligence about the firm's major customers, suppliers and partners (in marketing or research and development alliances) is often also of strategic value.

Tactical intelligence

• Tactical intelligence is generally operational and on a smaller-scale, not so centered on being predictive. Tactical issues include competitors' terms of sale, their price policies and the plans they have for changing the way in which. they differentiate one or more of their products from yours. Middle-level marketing and sales managers number among some of the main users of tactical intelligence. They want to know how to win the day, today

Counter intelligence

• Counter intelligence is defending company secrets. Every firm has competitors as interested in knowing your plans as you are in knowing theirs, maybe even more so. Often, this area of endeavor will involve security and information technology, but others are often overlooked, such as hiring and firing strategies, to contain competitor opportunities within the firm.

Business Intelligence

• Business processes and transactions generate massive amounts of information. This information when stored in multiple dimensions and analyzed enables an organization to improve business performance, customer loyalty and profitability.

• Business Intelligence comprises applications and technologies used for accumulating, analyzing, and providing access to data that facilitates quick and accurate decision-making.

Uses of Business Intelligence Solutions

1. Financial and profitability analysis

2. Analysis of marketing and sales effectiveness

3. Customer and vendor analysis

4. Market and competitive intelligence

5. Corporate strategy and business planning

What is the purpose of CI?

• Intelligence is both a process and a product; an analytical product that transforms tumultuously gathered competitor and market information into actionable knowledge about competitor’s capabilities, intentions, performance and position as well as the final product of that process.

Collecting competitor information• Information will come from a variety of sources, both within the

organization and external to it.• Sales representatives deal on a daily basis with customers - and

will hear what the competitors have been doing. They are the business foot soldiers - with the ear to the ground who can forewarn management about impending enemy campaigns.

• Research & Development may come across new patents. • Purchasing may find out that a supplier is now also supplying a

competitor. • Market research can give feedback on the customer's perspective • ...but these are just examples of where information can come

from.• Information can also be found on the Internet itself - most

companies are now advertising their services and some specialise in offering information that can be used for competitor research.

Countering Competitor actions• Having identified what competitors are doing, battle

can be entered. Sometimes the battle will be vicious - especially when two competitors have been slogging it out for years. (Pepsi vs. Coca Cola; Procter & Gamble vs. Unilever).

• Various military strategies have been used to describe different approaches to beating competitors - flanking strategies, encirclement and siege strategies, frontal attacks and even guerrilla marketing tactics. However it should always be conducted within the law.

• Although it is tempting to use underhand ways of gaining an advantage, certain activities may result in a prison sentence as well as extremely damaging publicity, loss of goodwill and loss of revenue.

CI Tools

• Radar Screening

• Benchmarking

• Channels/Market Segmentation Analysis

• Blind spots Analysis

• Financial Forensics

• Scenario Planning

• War Gaming

War Games

To begin with, a war game is neither a game nor about war.

Rather, a war game is a role-playing workshop, built around the need to predict competitors’ future moves, customers’ changing preferences, M&A activity and other industry changes.  The war game ends with charting best course options for the company.

Does your company need a war game? 

Sun Tzu and the Art of War• Around the year 500 BC, the great Chinese military strategist,

Sun Tzu wrote a treatise on the Art of War. From a 21st century perspective, many of Sun Tzu's approaches would be viewed as barbaric today. Nevertheless, his views on strategy are still relevant today - for both military commanders and business leaders looking at how to win against competitors.

• Now the reason the enlightened prince and the wise general conquer the enemy whenever they move, and their achievements surpass those of ordinary men, is foreknowledge".

• If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

The Net Changes Everything

• The Internet has dramatically accelerated the speed with which anyone can track down useful material, or find other people who might have useful information.

• Before the Net, locating someone who used to work at a company - always a good source of information - was a huge chore.

• Today people post their resumes on the Web; they participate in discussion groups and say where they work. It's a no-brainer.

Case Study

• Recently we were asked to determine the size, strength, and technical capabilities of a privately held company. It was hard to get detailed information. Then one of our analysts used , a search engine that tracks online discussion groups. The company we were researching had posted 14 job openings to one newsgroup.

• That posting was like a road map to its development strategy. You couldn't find that sort of thing five years ago.

QUESTIONS“You can tell a man is clever by his answers.

You can tell a man is wise by his questions."

Asking questions is one of the best ways I know to get information. But not all questions are created equal. Insightful and profound questions invite equally insightful and profound answers. In sales great questions bring out lots of valuable information about the customer’s needs, desires and concerns. So, how do you ask great questions that uncover the real facts, opinions and feelings?

Questions to be answered prior to making investment decisions in CI

• what do we need to know? • what do we already know? • why do we need to know it? • when do we need to know it? • what will we do with the intelligence once

we have it? • what will it cost to get it? • what could it cost not to get it?

How To Ask

• 1) Get in the flow of Open -> Closed Questions: The first thing to keep in mind when asking questions is to start with open questions and then progressively move to more closed questions as you seek more specific information. Only when you have reached a clear and quantified response to a specific question should you move on to the next question area.2) Ask White, Green, Black and Red Questions: This is a simple and easy way to remember a powerful sequence of questions that go directly to the real issue(s) that will directly uncover a maximum of information, rich in facts, opinions and feelings.

So what is involved?• There are four stages in monitoring competitors - the four "C"s:• Collecting the information (with a first stage - deciding what to collect) • Converting information into intelligence

(with three steps: CIA -Collate and catalogue it, Integrate it with other pieces of information and Analyse and interpret it)

• Communicating the intelligence. • Countering any adverse competitor actions - i.e. using the intelligence. • The business may be planning a new product - so information on what

competitors are doing in the same area will help in the decision processes and plans for this new product.

• Alternatively, the business may be looking at how the industry will develop over the next 5 or 10 years.

• Or perhaps the board is looking at a potential merger, acquisition or business partnership.

• The information requirements for each of these business decisions will be completely different and so the information that should be sought will also be different.

• Thus before starting to search for information the competitor analyst needs to sit back and define what they are collecting

• CI is the purposeful and coordinated monitoring of our competitor(s), wherever and whoever they may be, within a specific marketplace...

• Your "competitors" are those firms which you consider rivals in business, and with whom you compete for market share.

• CI also determines what business rivals WILL DO before they do it.

• Strategically, to gain foreknowledge of your competitor's plans and to plan your business strategy to countervail their plans.

• Tactical collection level, but it will also require integration into your existing information infrastructure, analysis and distribution of the information, and finally, the calculation of business decisions on the grounds of that information and the analysis of same.

• This is the "intelligence" part of the formula.

C I Management• The management of competitive intelligence in large and

medium-size companies can be done in very different ways depending on its culture and sector.

• To be able to reap the maximum benefits and obtain the participation of all the organization in the program of the CI, it must be assumed that the company that proposes the development of the CI activities follows the program. The development of the program will be made through an augmented growth and divided into different phases which will give origin to a CI unit.

• In this sense, most of the Indian companies, like most of the Western companies, have concentrated programs of CI in activities specialized and pertinent to a single functional area like commercial, technological or economic/financial.

CI Benefits

• 1. To reduce the risk of the possible failure of a project, for example: the development of a new product, an acquisition, an alliance or a fusion, or the penetration into a new country.

• 2, To improve the competitive position of the company against its competition.

• Also, a CI program can offer additional benefits like the Protection of information.

Impact of CI for India

• In India CI existed as a function within the market research department, though now it has matured to a vital role of significance that it has gained prominence. Thanks to the outsourcing wave, it’s a rush hour growth for Indian Knowledge Process Outsourcing (KPO) industry.

• With financial research, market research, patent research being the key spike areas for outsourcing, CI is also actively outsourced by various consulting firms, thereby supporting their main operations.

Competitive intelligence is the core of competitive strategy

• Why do evidently great organizations with great products, wise managers, and other successful strengths, go out of business?

• Economies of scale, the foundation on which big companies have based their dominance in the Industrial Era, is no longer an advantage.

• Changes in information technology, in the financial system, in just-in-time production techniques, and in the rise of companies offering distribution and support systems which previously only the largest companies could afford -- removing the advantages of being big.

Value Of Competitive Intelligence Few questions firms have to ask themselves. • How do we most usefully define the company's

mission, its strategic intentions, its objectives and its strategic choices?

• What do we need to know to develop and to select strategies which are not only successful, but sustainable?

• What new products should we build and which markets should we enter and how?

• How do we implement our competitive strategy?

STRATEGIC PERSPECTIVE

• To determine the competitions, strategies and objectives of the present and potential competitors and to study possible future actions.- To investigate and to define the opportunities and threats of a sector or specified area of business. - To watch and to alert of any relevant changes in the related markets, clients, technologies (Technology Watch), legislation and all elements.

• CI can be applied to small businesses with creative and simple formulas

Bottomline

• We cannot truly and accurately predict the future, but we can evaluate the past and extrapolate trends to forecast the future. CI’s real value is to provide managers with the organizational tool to learn what the competitor will do, not what the competitor has already done.

• Companies with CI programs have better knowledge of their markets, better cross- functional relationship between their business units and a greater ability to develop proactive competitive strategies.