Thursday, January 31, 2008

Competitive intelligence

Competitive intelligence is the term given to the gathering of information on business rivals through legitimate means such as via published data and interviews. The practice has its own representative body, the Society of Competitive Intelligence Professionals (SCIP), and is now taught on some courses as a key business skill. Proponents claim that competitive intelligence focuses on understanding competitive dynamics and helps in planning future change. The Internet, of course, provides a comprehensive and easily accessible source of data about competitors. So the challenge these days is less about collecting information than it is about analysis and focus. Useful information might include news about an imminent product launch or the appointment of a new chief executive. The best competitive intelligence relates to what a competitor is going to do, rather than what it actually is doing at that time. The knowledge gained then has to be disseminated throughout the organization (a process known as organizational learning) so that it is available for possible use by other people in the company at a later date.

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According to Curtis (2001), there are three principal factors driving increased investment in competitive intelligence:

  • the Internet;
  • globalization;
  • higher customer expectations.

From an ethical perspective, the concern is the boundary across which competitive intelligence becomes industrial espionage, or spying. In 2000, software giant Oracle admitted hiring detectives to rifle through rubbish for information on rival Microsoft in a case that became known as Garbagegate'

SCIP's ethical code means that its representatives cannot lie about who they are, but they can be as vague as possible, and usually claim to be conducting market research when contacting staff in the target company for information. Trying to obtain trade secrets (the most famous is the recipe for Coke) is against the ethical code. Competitive intelligence professionals claim that 'most' information a competitor could need is either already in the public domain or can be obtained without actually breaking the law. Whether the practice is ethical, of course, is another question entirely.

According to research by The Futures Group (, 60 per cent of companies have an organized system for collecting competitive intelligence, while 82 per cent of those with revenues of over £7 billion make comprehensive use of such a system. The researchers ranked the eight leading users as:

1 Microsoft;

2 Motorola;

3 IBM;

4 Procter and Gamble;

5 General Electric;

6 Hewlett-Packard;

7 Coca-Cola;

8 Intel.

The Futures Group recommends the following strategies for effective intelligence-gathering:

  • Debrief the sales force.
  • Attend conferences and trade shows.
  • Examine the background and private interests of newly appointed executives.
  • Keep track of patents.
  • Look for hidden messages in marketing material.
  • Ask what you would do if you were equipped with the same tools as your competitor.

There are a number of disparate information sources that can be drawn upon; for example:

Companies such as those listed above that take competitive intelligence seriously tend to give the function a strategic rather than an operational role within their organizations. This means that the person in charge of competitive intelligence will be a senior employee and report directly to the board of directors. The intelligence gathered is then used to support executive decision-making. If competitive intelligence is treated merely as a subdivision of the marketing department, then there is little to distinguish it from 'everyday' market research.

To summarize, competitive intelligence is about not making mistakes, and reducing unnecessary risks. Consider the following examples of companies that missed out:

  • Sears did not spot the potential competition from discount retailers such as Walmart
  • Levi Straus' did not appreciate the growing threat from other specialist brands such as Timberland.
  • Compaq did not anticipate that Dell would undercut prices by selling computers direct to consumers.

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