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About Cookies OKWhat is Competitive Intelligence
This is an extract from a lecture we gave to MBAs, business school students & graduates at the University of Westminster in London. Watch for a taste or click here for the full lecture.
Contact us if you would also like us to talk to your employees or students on any aspect of competitive or marketing intelligence.
Over the years we’ve answered many questions covering various aspects of competitive intelligence. If you don’t find an answer to your CI problem in the following list ask us a question and we will try to answer it for you.
This seems a straightforward question, but people use the terms in different ways. Our definition follows:
For some people, competitor and competitive intelligence are effectively synonymous. Terms such as marketing intelligence and business intelligence are also used to cover the wider environmental aspects (although business intelligence is also often used as a term for mining corporate internal data for information and has no connection to markets).
Other terms encountered include – marketing intelligence, market intelligence, sales intelligence, technology intelligence, financial intelligence and economic intelligence. Essentially these are further subdivisions, limiting information to decision processes relating to marketing, sales, technology, financial or economic business functions, etc. although there can also be overlap – for example, marketing intelligence refers to the intelligence required to gain a competitive advantage within the marketplace overall – and as such, includes sales aspects and a knowledge of the competitor situation.
Note: This FAQ was originally published in the Strategic & Competitive Intelligence Professional‘s membership magazine (Competitive Intelligence Magazine – Mar-Apr 2003).
We've recently started using a much simpler definition for Competitive Intelligence i.e. CI is the intelligence needed to enable companies to profitably gain customers, winning out against alternatives". The reason we like this new definition, apart from it being simpler, is that it focuses on customers. The aim of the business is to gain and keep customers who have a choice on who they do business with - i.e. they can choose alternatives which may be competitors but can also make a choice not to purchase at all (i.e. to be non-customers). Customer choice can depend on many factors - the overall business / competitive environment (as in the first definition) as well as other aspects such as the company reputation, the technologies used, the economy and much more.
We include the word "profitably" as not all customers are financially profitable. Profitable may also mean providing referrals. With non-profits and the public sector customers may not even be a source of revenue at all and "profitably" satisfying customers may involve completely different metrics to those required for a for-profit business.
Prior to making an acquisition of, or merging with, another company, due diligence research should be undertaken to confirm all the facts about the prospective company. Generally this includes a full review of the other company's finances and looks at the fit between the two companies.
Due diligence research should also look at the business environment, management capabilities, historical profitability and the company's market potential. Often however this full process is skipped or rushed - as there is a wish to make the deal. Too often, acquisitions fail to fulfil their promise and expectations and this is generally because softer, qualitative factors have been ignored. Competitive intelligence can help in due diligence research by filling in these gaps. It can look at other companies in the market to understand the real competitive situation and evaluate the technologies, customers, suppliers and help identify potential problems that would often be missed by the more traditional approaches focusing on finances and product fit.
Essentially, due diligence research SHOULD also include competitive intelligence type research and not be limited to financial / product aspects.
Knowledge management is the process through which corporate knowledge is used to improve organisational performance. Essentially it looks at managing internal knowledge processes, developing the efficient usage of all information required for corporate decisions.
Competitive intelligence (CI) is a process for gathering usable knowledge about the external business environment. CI focuses on turning external information into the intelligence required for tactical or strategic decisions relating to the business environment. Without an effective knowledge management process, gathered CI is likely to collect dust — there is no proper process to turn the information into something usable. Even if immediate actions are taken based on collected CI, it must be integrated into the internal knowledge systems to develop any long-term learning. This learning is a crucial element to enable companies to become skilled at spotting trends and adapting to business change.
In this context, I think that it does no harm to think about Charles Darwin. Darwin’s focus was on the survival of the fittest and not the survival of the biggest or the cleverest or the fastest. Survival of the fittest refers to a species’ ability to adapt to its external environment as this changes.
Exactly the same principles apply in business. Businesses with effective processes for collecting intelligence on their external environment, integrating it with internal information and then using both external and internal knowledge to take advantage of opportunities while guarding against threats will be those that survive in the long-term. The dinosaurs could not adapt to sudden climatic change – and the same will apply to corporate dinosaurs that think that being biggest or richest is all that is needed.
Note: This FAQ was originally published in the Strategic & Competitive Intelligence Professional's membership magazine (Competitive Intelligence Magazine – Mar-Apr 2003)
OSINT, HUMINT and SIGINT are terms adopted from military intelligence and describe different ways of obtaining intelligence - whether for military uses or also for commercial purposes - as in competitive intelligence.
The key is that it is essentially research that involves a search of "open sources" such as the web. As such sources have increased, its importance has grown and some would say it is now more important than both HUMINT and SIGINT.
OSINT also includes an emerging sub-division, sometimes called SOCMINT which stands for social media intelligence. This involves looking at social media (Facebook, Instagram, LinkedIn, etc.) to gather intelligence on companies, other organisations and individuals based on what they post on the various social media channels.
The skills for uncovering such material are important for CI professionals and go well beyond an ability to use basic Google. Examples of material that AWARE has found include complete supplier lists, customer lists and even minutes of executive board meetings for target organisations. All such material was gathered because they were made publicly available - although generally the organisation making the material available thought that it would not be findable. As one example, we found a list of customers along with their spend and forecast spend that had been embedded in a PowerPoint presentation that was made available on this listed company's investor page for all to read (although to find the list you had to download the PowerPoint to access an embedded Excel worksheet). Finding such intelligence takes an ability in not only knowing how to look, where to look but most importantly being aware of what can be found and knowing how to spot such intelligence when it is available.
As a general rule, OSINT research is needed first - to identify people to speak to and often also to understand the full background of the research question, looking for what has already been openly published.
It is not the external CI expert who loses out if an organisation’s strategy goes awry. It is the organisation’s management who have this responsibility. So outsourcing functions should only occur where there are clear benefits to the organisation.
In the case of competitive intelligence a considerable amount of key intelligence will be held within the firm itself. This comes from the experience of employees and the contacts they make. Competitive information should be picked up during the sales processes, for example. There is a real risk this kind of information can be lost when outsourcing competitive intelligence to an external consultant, unless this consultant is seconded onto the staff and works in the company on a daily basis.
However a CI consultant can offer an objective perspective that can be hard to obtain using internal staff.
Consultants should also be considered where there are either insufficient staff members, or not enough staff with the skills for a particular intelligence requirement. In such cases, failing to outsource competitive intelligence to a CI agency or consultant can be damaging as it will mean that decisions will have to be made without the intelligence needed to reduce risk and support decision-makers.
How & why to outsource competitive intelligence – detailed answer, including the roles & benefits of a CI consultant.
Showing the value of competitive intelligence (CI) to sceptical management is one of those questions that keep getting asked. Unfortunately, the question is one that is not always easy to answer: it can be quite hard to demonstrate the value that effective competitive intelligence gives to organizations. Companies may even only find the value years after cutting their competitive intelligence expenditure when a competitor springs a surprise and the company is caught with their pants down. Of course, by then it is too late!
Competitive intelligence can be looked at in the same way as a fire insurance policy – it provides a form of risk insurance, providing the organization with the information required to protect against direct threats posed by competitors and the environment.
Effective competitive intelligence helps organizations identify opportunities and threats, providing the information required to make decisions that can take advantage of the opportunities and steer clear of the dangers of time and at the lowest cost. Viewed like this, it becomes easier to see the value that competitive intelligence can give. The question becomes not “what does competitive intelligence cost” but “what is the cost of not having the information provided?”
How to show the value of competitive intelligence – detailed answer, including links to research studies, and how to convince sceptical management of CI’s value.
The best ways of learning about CI will be through
Where can I learn more about competitive intelligence – detailed answer, including more information on course providers, etc
In order to identify your competitors it is useful to think like a customer and how a customer would go about finding a supplier – what steps did your customers take to find you? What are their needs? What other companies are meeting, or can meet, the same or similar needs – and how. These are your potential or actual competitors.
One way you can approach this is as follows:
Using this kind of approach you can generally identify your competitors and some basic information on each. It is likely that the customer base for some of these companies will be different to yours. (Some may target higher-value customers, some smaller niche customers. Although such companies are offering similar products they aren’t really competing for your customers). You should focus on those actively competing with you or who have the capabilities to (e.g. financial strength, and expressed interest). This does not mean that you should ignore the remaining companies. They may not currently be competing with you yet as they are producing similar products or services they may have the capabilities to compete with you. It is a question of emphasis and prioritisation.
The sort of information you should look for depends on the competitor, the market and the overall business environment. If the competitor is winning out against you, then you need to understand how and why. Is it a problem in what you are doing – leading to customer dissatisfaction, or are they doing something better? If the competitor is winning out in the overall market, the same sort of questions are raised – although if you are holding your own against them, the priority may be different. If the competitor is new to the market, do they offer anything new that is more attractive to customers? Do they use any new technologies in their business operations that could give them an advantage?
These are typical considerations to look at. Essentially, when looking at competitors you need to understand their capabilities – finances, products & services offered, management skills, etc. You should also find out what their goals are and assumptions about the market. Finally, an understanding of their strategies is key – and combining all these aspects can allow you to anticipate what they are likely to do next.
What sort of information should I look for on competitors? – a detailed answer, including links for selected research sources.
There is no “formula” for collecting information on competitors – but there is a process. First, you need to differentiate between passive collection and active collection.
Passive collection involves collecting and storing information that comes your way through the daily operations of the company. With a passive collection, there is no targeted collection plan as such – and what comes in is essentially random.
Active collection is different and requires planning along with a formal search strategy. Typically, the aim is to answer a specific question regarding a competitor and to monitor for changes e.g. with the competitor’s website or news about the competitor.
How do I monitor my competitors’ activities? – examining both passive and active competitor monitoring approaches.
The availability of financial information depends on which country you are looking at and what types of companies. For many industrialised countries it is relatively easy and low-cost or free to obtain financials on companies of interest. If the company is publicly quoted, then you should be able to find full financial information as this will be made available to shareholders. However it can be harder to find financial information on private companies.
In some markets there are statutory requirements to make private company financials publicly available. These include most European Union countries as well as Australia, India and a number of others. Unfortunately there are many countries where private companies do not have to file publicly, making it difficult to obtain good quality financial information although some financial information providers do collect some data.
Where can I find financial information on my competitors? – detailed answer outlining methods and some key sources for Europe, the USA and elsewhere.
One of the problems for competitive intelligence is that sources can often be unreliable or inaccurate. Sources may not know the full story or may give false, out-of-date or inaccurate information. Sometimes this is deliberate – where companies leak information about forthcoming products with the aim of forestalling competitor products.
One approach to solving this is to use a ranking system, where you allocate points for each item depending on factors such as:
Sources are then ranked and only those passing a threshold are trusted. Scoring sources using a ranking system shows how this can be done with a 5-point scale with a case example showing how even reliable sources can sometimes give out inaccurate and false information.
There are two ways of doing a competitor evaluation.
The second approach makes much more efficient usage of time and will be more useful for management as it gives them what they need without the requirement to sift through that ton of data. Of course, the ton of data is important as it gives background information, and can help in spotting new trends and anomalies that may signify a change in strategy for the competitor or confirm other information. However, when asked to do an evaluation the first question should be what is the purpose? (If an acquisition then the information will be different to looking at new product ideas or new market moves).
However if you already have lots of data, you should not just throw it away as what may seem irrelevant now may be important later. One approach is to construct a detailed profile of the competitor. A form I use as a guideline breaks down the major types of information that you are likely to collect or need on your competitors as follows:
I use this as an aide memoir for everything on a particular competitor. It is essentially a brief summary of all the essentials – so that you have everything in one place. Its purpose is to save you from having to look up the key points and search through several documents – whether held in a hard-copy format or computerized.
A key intelligence topic (or KIT) defines a particular set of needs for a particular user of competitive intelligence. The process is a derivation of the CIA’s national intelligence topics, which facilitate the US Government’s task of organizing, prioritizing and focusing intelligence resources on the primary needs of the national security community and its policy makers.
KITs are characteristically categorized as one of three basic categories:
What are KITs and how to define them? – detailed answer, giving further information on each type of KIT, etc.
It is a normal competitive practice to benchmark competitor prices in most markets. If you are not monitoring competitor prices then you are missing a crucial and readily available source of competitor information that can give clues to a vast quantity of additional data. (Link price changes to company financials, to get trends in profitability; price changes also gives indications on how the company sees its products over time and thus overall marketing strategy.) This applies irrespective of whether you are a retailer, manufacturer or in a service industry. The only real difference is the accessibility of the price information.
In the retail sector obtaining price information is usually straightforward. You can go to a shop and ask or usually just see the price tag. As a consumer, there should be no problem shopping at a competitor’s outlets. However, it is not ethical to nose around in “staff only” areas or store rooms, for example, or to damage stock, etc. Also, although the information is usually public, store staff may object and ask why you are making long lists of prices and stock holdings. If they do, you would need to say what you are doing – otherwise, you would be misrepresenting yourself – so walking around with a note pad, or recording device could cause raise suspicions and cause you problems. Of course, this problem only arises when checking prices at a physical location. Checking prices on their e-commerce / Internet stores is much simpler.
In business-to-business environments collecting price, information can be much more difficult. Many companies are secretive. Even worse, they may not even have a formal price list that will be made available outside the company. Prices offered will vary depending on a number of factors, including the quantity purchased (and so any resulting discounts) or other services offered. Unless you actually intend to purchase competitor products, do not claim to be a potential customer if contacting a competitor directly – as that could be viewed as misrepresentation and so unethical.
Nevertheless, in the majority of cases, pricing information IS in the public domain. It is in the customer’s interest to get the best deal. So, it is in the customer’s interest to know what prices the various suppliers in the industry are offering. As a result, the first point of contact can be your customers and your competitors’ customers.
Speak to your customers (or get your sales people to do this). Ask what the competitor has quoted. Contact lost customers and prospects and ask what they actually paid for the product. You can generally be quite open – saying your company name. To non-customers you can also say that you need the information so as to ensure that your products are competitive. It will usually be in their interest to give some information – as perhaps next order they will get a better deal. All this is ethical – as you are not misrepresenting yourself or asking for confidential information. (When asking for prices, do not attempt to gather information if it is covered by a confidentiality agreement signed between the competitor and your contact! Obtaining information from such contacts will mean they have breached their agreement and so puts both you and the contact at risk of getting sued!)
In some cases, especially for large scale projects, products are put out to tender. In such situations, it may be possible to find the value of bids put out by competitors from a variety of public sources. In Europe, there is a database called Tenders Electronic Daily (often called TED) at http://www.ted.europa.eu/ that records the bids for all major governmental supply, service and public works contracts within the European Union. Information recorded includes pre-information notices, invitations to tender and contract awards. TED is particularly easy to use and now covers almost all Western European and most Eastern European countries – members of the European Union. Other databases tend to be more specialist – but do exist. A useful site for sources for USA government bid and the tender information is held at http://www.fedmarket.com/. Finally, you should not ignore your own industry journals, which frequently record contracts won by companies and their value.
Trade shows are one of the best sources for information on competitors. At trade shows, there are the obvious opportunities to collect competitor brochures, as well as free pens and enough chocolate to keep your dentist busy for another year. However, if that is all you collect then you’ve missed a major opportunity to learn more about your competitors. Rather, you should view trade shows as an easy way to update your knowledge about the overall competitive landscape – for example:
And so on.
Trade show & conference intelligence – detailed answer highlighting steps to take before, during and after the event.
First, it is important to stress that neither Europe or the US are monolithic blocks and it would be wrong to consider them in this way. There are cultural differences in different parts of the US: compare California to New York, for example. The cultural attitudes in New England are very different to those in parts of the deep South or Mid-West. (An easy way of seeing this visually is to look at voting patterns in the US presidential elections – with some states tending to the Democrat party and others tending to vote for the Republicans.)
Within Europe, the situation is even more diverse. Not only are there language differences (not everybody speaks English), but across Europe, you will find big differences in legal systems, democratic processes, work expectations, religion and much more. In many European countries there are also regional differences that play a part – with different languages spoken in different parts of the country. For example, Welsh is widely spoken in Wales which is part of the United Kingdom made up of England, Wales, Scotland and Northern Ireland. In the North Eastern parts of Spain, Catalan is a major language and on parts of the French-Spanish border Euskara (Basque) is the main language.
All this is important when looking at organizations across borders. In the UK there is an expectation that even small private companies should file company accounts – and they do. In Switzerland very few companies file accounts as the legal requirements only expect quoted companies, banks, and similar financial institutions to file accounts.
Understanding cultural differences is also important when interviewing contacts for CI. Different cultures show varying degrees of openness and have distinct expectations. Ethics differ between cultures – what is acceptable in one country would be viewed with suspicion in another. Some cultures are happy to converse over the telephone, while there are some that still prefer business meetings to be face-to-face.
An awareness of these differences is important when planning an interview. Further, if you don’t speak the same language, or if your accent would put off a potential interviewee then it is better to consider using somebody local even if it costs more: the results will be worth the expense.
Note: This FAQ was originally published in the Strategic & Competitive Intelligence Professional‘s membership magazine (Competitive Intelligence Magazine – Jul-Aug 2002)
A PEST analysis (also sometimes called STEP, STEEP or PESTLE analysis) looks at the external business environment.
In fact, it would be better to call this kind of analysis a business environmental analysis but the acronym PEST is easy to remember and so has stuck. PEST stands for Political, Economic, Sociocultural and Technological. (Technological factors, in this case, include ecological and environmental aspects – the second E in STEEP and PESTLE, while the L in PESTLE stands for legal or legislative which are included among Political factors when using the PEST acronym). The analysis examines the impact of each of these factors (and their interplay with each other) on the business. The results can then be used to identify and take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans.
PEST Analysis – detailed answer highlighting steps to take to carry out a PEST analysis
A SWOT analysis builds on the results of the PEST analysis, which looks at the company’s external environment. Its purpose is to identify company strengths and weaknesses so that strengths can be maintained or increased and weaknesses corrected. A further purpose is to identify opportunities and threats resulting from external factors – especially those that have an impact on the company’s strengths and weaknesses. Company strengths and weaknesses need to be identified in all aspects of the business, relative to the market and expected or previous performance.
It is also important to realize that opportunities arise out of weaknesses. Correcting a weakness presents a marketing opportunity. Similarly, failing to maintain a strength is a threat to the company.
A preliminary approach for carrying out a SWOT analysis is to list perceived company strengths, weaknesses, opportunities and threats under each of these headings. Ensure that no weaknesses cancel out company strengths; identify potential threats to company strengths; and look for opportunities that could arise out of correcting weaknesses. In addition, from the above list, highlight key areas of concern or areas that require action. These become the focus for future planning.
SWOT Analysis – detailed answer highlighting steps to take to carry out a quantifiable and objective SWOT analysis
Value chain analysis is a particularly useful tool for looking at competitors and identifying sources of competitive advantage. It was first described formally by Michael Porter in his book Competitive Advantage back in 1985. Porter described five primary activities which added value to the final output of a company, as well as a number of support activities. These primary activities were termed
Value chain analysis looks at the efficiency, effectiveness, and costs of each of these processes required to deliver the product to the customer.
What is value chain analysis? – detailed answer with an example of how value chain analysis can give clues to strategy.
A Business War Game allows organizations to test their beliefs and assumptions about their business environment. The process allows organizations to build a better understanding of industry issues and helps them identify emerging opportunities and threats. It is a tool that is of particular use when the competitive environment is undergoing a process of change, as it allows decision makers to consider how different organizations can react to the change and each other.
The objective of a War Game should be to improve corporate planning processes, using the lessons learned from the War Game in business strategy.
War Games typically involve a number of teams with each representing different “players” operating in the industry environment. Generally, but depending on the actual purpose and scope of the game, these teams represent different competitors. However, they can also include key customers or other organizations such as regulatory bodies.
War Gaming – detailed answer summarizing how to carry out a war game and war game benefits, etc.
On first glance, CI could not possibly conform to six sigma principles, as by definition, CI analysis involves interpreting information that is variable and uncertain. On this basis, there is no way that CI could ever achieve the 3.4 defects per million six-sigma standard.
However, some aspects of the CI process can also follow six sigma principles. Six Sigma aims at exceeding customer expectations, by reducing errors wherever possible at each stage of the value chain. This should also be the aim for all CI functions?
The cost of poor quality is now recognized as being a significant overhead – and the same applies to CI. Failing to adopt best practices means that businesses risk making bad decisions based on poor intelligence. The impact on corporate bottom lines of such decisions will be considerable, so CI and a six-sigma approach can work although with some limitations on the traditional approach.
How to apply Six Sigma processes to competitive intelligence – detailed answer summarizing how and where to apply six sigma approaches to a CI function.
A key part of the competitive intelligence process is communicating gathered data in a usable format. Raw data without any analysis is not intelligence. There needs to be some effort analyzing and then presenting the results in a format that makes clear what has been found. How does the information relate to other pieces of information you have on the competitor? Are there any obvious trends? What are the key points?
The format of the final report and how it is communicated must be considered and this is the final stage of the standard CI process.
How to report competitive intelligence – detailed answer outlining areas to consider when reporting CI.
It depends on what the vacancy is. Different characteristics are needed for different CI roles and you would be lucky to find one person with everything. You need to be clear on what you want the new recruit to do i.e. what is the job specification? The skills required for secondary or desk research are quite different from those needed for primary research. Often great researchers are not competent analysts or communicators and not everybody can manage or run a department. At the same time, you may need somebody who can fulfill a number of these functions and so require a compromise candidate who has a spread of skills but is not outstanding in any particular skill.
There are a number of psychometric tests that have been used to evaluate candidate qualities – Belbin team-types and Myers Briggs Type Indicators (MBTI®) are two of the best known.
In a large competitive intelligence department, you may have the luxury of searching for candidates who can specialize in one or two areas: secondary research, primary research, project management, financial analysis, etc. However, in most cases a compromise is needed – and the objective should be to prioritize the key attributes based on what is currently done and what you would like to be done.
How to recruit competitive intelligence personnel? – detailed answer summarizing CI job roles and what to look for when recruiting CI personnel.
Competitive counter-intelligence is the flip-side of CI.
In the same way that a CI specialist will try to gather information on competitors, the counter-intelligence specialist will try and stop you.
This can be
As an example, some companies have rules about who can speak to outsiders. If you do not have the name of an individual within the company then you will be passed to an external relations spokesperson who will assess your inquiry before passing you on to the relevant person. So, if your purpose is to interview a staff member to gather CI then you may find access denied. (This is assuming that you are honest and do not lie about who you are and who you represent – in other words, follow ethical approaches to competitive intelligence information gathering.) Other companies monitor e-mails coming in and going out of the firm, looking for keywords including competitor names and similar information that could indicate leaks. And of course many do both and more: monitoring telephone traffic, briefing staff before they meet contacts on what not to say and so on.
Counter intelligence recognizes the techniques used by ethical CI practitioners and also those who cross the line into industrial espionage and sets up procedures to block access. Essentially, firms with a well-oiled counter intelligence process take the same attitude to their information assets as to their physical assets. Both are too valuable to be left unguarded and both require appropriate security measures to keep them protected.
Note: This FAQ was originally published in the Strategic & Competitive Intelligence Professional‘s membership magazine (Competitive Intelligence Magazine – Jul-Aug 2002)
Note: Some of these questions were published in a question & answer column we wrote for Competitive Intelligence, the magazine produced by the Strategic and Competitive Intelligence Professionals (SCIP) professional association. Where relevant we’ve updated answers taking account of changes since publication.
