Competitor Analysis – A Brief Guide

What is involved

There are four stages in monitoring competitors – the four “C“s:

• Conversation – speaking to decision-makers, strategists and those who need competitive intelligence to define precisely what is wanted. (This first step is sometimes called “Direction” or “Definition” as the decision-maker defines the research question). The next steps aim to satisfy these needs.
• Collecting the information – from the Internet, Social Media, published sources and also interviews with individuals with knowledge about the topic.
• 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.

There is also a fifth step which is the responsibility of the end-user / decision-maker – who should use the gathered intelligence. Intelligence that is not used or that sits on a shelf, or in a computer file, is wasted. Thus a fifth C is

• Countering any adverse competitor actions – i.e. using the intelligence (and also providing feedback, specifying new intelligence requirements, thus going back to the first stage again).

The first “Conversation” stage of the process is crucial. One mistake a lot of people make is to start collecting information without thinking how information will be used. If it cannot be used to inform the business’s strategic or tactical decisions then the time, money, and effort spent collecting it is wasted.

The intelligence requirements are likely to differ, depending on the business need – and the decisions that will have to be taken. For example:

• The business may be planning a new product – so information on what competitors are doing in the same area will help in the decision process and plans for this new product.
• The business may be looking at how the industry will develop over the next 5 or 10 years – information needs will be broader, and will have to include technology developments, cultural, social and economic changes, etc.
• The board is looking at a potential merger, acquisition or business partnership – the requirements will be similar to the first example, although the emphases will be different.

Thus before starting a search for information the competitor analyst needs to sit back and define what they are looking for and why.

They need to identify the key areas of concern for the business decision makers requesting the information, and aim to satisfy these. This is done through a conversation with the decision maker or end-user to define the intelligence requirements.

Rather than collecting information in a random or haphazard manner, the search needs to be focused and planned, and aimed at answering the business’s intelligence requirements, often termed the Key Intelligence Topics, or KITs. Other information may be interesting, but unless it helps the decision process it should be viewed as superfluous, and stored for use at another time or even ignored if it is unlikely to ever have value.

Information will come from a variety of sources, both within the organisation 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 – almost all companies now have websites, Facebook pages, twitter feeds, and more. Some specialise in offering information that can be used for competitor research. Some are free (Linkedin.com is an excellent free resource) while some, such as the company financial information provider D&B (Dun & Bradstreet), charge for their information. If you need to know about both private and quoted companies D&B is one of the best sources. Few other companies offer the same global scope – although some local companies will give D&B a run for its money for single country information. For public companies, there is also the D&B subsidiary, Hoovers, which holds considerable information – much of it free. Patent information can be obtained from companies such as Thomson Reuters patent service (formerly known as Derwent Information) or from local patent offices. Global press information is available from databases such as Dialog (now owned by Proquest), Lexis-Nexis and Factiva.

There are numerous other web-sources: discussion forums, blogs, podcasts, protest groups, customer and governmental sites and so on. (Our training workshops cover top sources and how to find them).

You can also find information using primary research approaches at trade shows and conferences, and by interviewing industry experts, your competitors’ customers and suppliers, ex-competitor employees – or even the competitor. There are, however, ethical issues involved when obtaining information from some of these sources and for this reason, companies often choose to outsource primary research to competitive intelligence consultants (such as AWARE).

From information to intelligence – competitor analysis

Having scanned the press, searched online, spoken to the sales force, customers, suppliers, Uncle Tom Cobley and all, there should now be a large pile of data on your competitors.
Unfortunately much of this data will be repetitious, out of date, wrong or inaccurate, misleading, or incomplete. However like a jigsaw, each piece can help build up the compete picture. And even if some pieces are missing, you can often get a good idea of what the real picture actually is – even if other pieces are damaged and not all remaining pieces fit perfectly. For example,

• the company report can give an idea of a company’s health – which will be enhanced by information from trade suppliers, trade press articles, and credit information agencies such as D&B;
• patents give an idea of R&D activity;
• trade press gives an idea of marketing activity;
• market research can give feedback on the customer’s perspective.

And of course there are specialist organisations such as AWARE that have the techniques to dig deeper and get information that can lead to an idea of competitor strategy and future trends.

All this information needs to be collated – with any links and commonalities highlighted. The information needs to be verified or checked to ensure that it is valid and not misinformation or disinformation that may be put out to confuse researchers. It then needs to be indexed and catalogued – so that when new information comes along, it can be quickly linked to similar information that had previously been found. It may be stored in a custom-built or dedicated competitor database accessible via the company Intranet – although it can also be stored in much less sophisticated forms.

Finally, the relevance and importance of each piece of information needs to be interpreted, analysed and understood – on its own and in conjunction with other information, the other pieces in the jigsaw. This is where information starts to become intelligence.

Many companies are overly secretive, protecting information that all their customers and competitors already know. Secrecy is important. It can be extremely dangerous to let a competitor know about the new product being developed. However, letting the sales force attempt to sell products without a full awareness of their products’ strengths and weaknesses relative to the competition is like sending them out with one arm tied behind their back. They will be unable to answer objections and comparisons convincingly, and thus are less likely to make the sale. And if the competitor product is that much better then shouldn’t marketing, or product development be looking at ways of improving one’s own product – rather than hiding the damaging news like the metaphorical ostrich?

Competitor intelligence needs to be evaluated and selectively communicated to all who need to make decisions based on what customers, suppliers, or other companies in the market are doing or are likely to do. And in today’s world, that usually means everybody. The worker in the factory needs to know why production processes have changed from what was always done if he is to believe in management. The Mushroom theory of management (keep ’em in the dark and feed them junk!) has always had its adherents but has not usually succeeded in the long term.

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. A business war game can help identify strategies that can win out and other techniques can also be used when planning competitive strategies. However it all must 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.