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Survive and Thrive Through Competitive Intelligence

Published
  • February 22 2002, 1:00am EST

Competitive intelligence has been the focus of attention from media and businesses worldwide. A survey of Fortune 500 companies recently demonstrated that 55 percent of the respondents utilize competitive intelligence information when formulating business strategy. This enhanced interest is in part fueled by the increasing availability of information and the proliferation of commercial databases worldwide.

Competitive intelligence provides many bottom-line advantages to those who incorporate the tool into their business strategy and decision-making processes. The strategic and financial advantages have made the process invaluable for savvy businesses. The rewards of competitive intelligence includes allowing companies to:

  • Foresee marketplace trends and fluctuations
  • Anticipate competitor strategies
  • Discover new or potential customers
  • Learn from successes and failures of others
  • Increase the number and quality of mergers and acquisitions
  • Enter new lines of business
  • Develop improvements in product quality.

Information gathering is the first, and probably most discussed, step in the competitive intelligence process. For most professionals, this includes gathering information from a database and supplementing these findings with annual reports, Web site postings, industry publications, job bank searches and even contacting the competition themselves.
Competitive intelligence isn’t limited to investigating your competitions’ actions but also taking it a step further to define how your company measures up to the competition. To complete this process, the final two action steps of competitive intelligence need to take place: effectively compare your competitors’ data with that of your own company and develop an action plan based on this analysis. There are a number of techniques, tools and practices that can be utilized to complete these steps effectively.

SWOT Analysis

A SWOT exercise is designed to analyze a company’s strengths, weaknesses, opportunities and threats. According to the Society of Competitive Intelligence Professionals, 55.2 percent of its members use SWOT analysis as a tool for analyzing information, and 63.1 percent rate the tool extremely or very effective. The SWOT exercise can be especially useful when you not only complete an analysis for your competitors, but also for your own company.

The goal of a SWOT analysis is to pinpoint the strengths and opportunities as well as identify areas for growth and improvement for a company. The SWOT analysis should be extensive, including internal and external audiences, along with local, national and international considerations. Some sample areas to look into include marketing, human resources, finance, corporate culture, corporate structure, research and development, operations, information technology, innovation, strategies and location. To evaluate a company’s strengths, weaknesses, opportunities and threats for these areas, consider some of the following questions:

  • Marketing: How strong is the market position? What is the marketing mix (breadth and depth of product lines, etc.)? How strong are the brands? How large is the marketing staff?
  • Human Resources: Is the staff diverse in background, perspectives, experience and knowledge? What are the employees’ education and experience levels? What are the hiring practices? Are there strong performance review systems in place? What is the quality of work life? What is the turnover/retention rate?
  • Finance: Is there an ability to raise capital? What is the analysis of financial ratios? What is the stockholder value?
  • Corporate Culture: What is the level of creativity/flexibility/leadership/productivity? Are the company policies strict or lenient? What key issues can be found within the policies? Does the company promote social responsibility?
  • Corporate Structure: What are the objectives and strategies for the company? What is the decision-making process like? Are there structures and processes in place to handle crisis?
  • Operations: Is there a customer focus? What are the distribution channels? What are labor cost levels? How up-to-date are the manufacturing systems?
  • Information Technology: How effective is the use of technology (automation, database management, e-commerce, etc.)?
  • Innovation: What is the level of research & development spending? What are the current "hot" R&D projects?
  • Strategies: What are the growth strategies (mergers and acquisitions, strategic alliances, etc.)? Are there strategies in place for refocusing (divesting and restructuring, etc.)? What are the strategies within each function, including human resources, marketing, etc.?

The findings of this questioning can be translated into a comprehensive, yet simple list by segmenting the various findings into one of four areas or headings: strength, weakness, opportunity or threat. Once the SWOT analysis process is complete for both your company and its competitors, a pattern will emerge. One company’s strengths and opportunities are a competitor’s weaknesses and threats. This technique also quickly identifies needed action steps.
Other than SWOT analysis, there are several other techniques and tools that can be used for competitive information evaluation. The possibilities include win/loss analysis, scenario development, simulation or modeling, and intelligence mapping. However, for professionals just branching into competitive intelligence, the benchmarking process is certainly a valuable starting point for analysis.

Benchmarking and Evaluation

Simply put, the objective of the benchmarking tool is to figure out how the leader became the best and then determine what your company has to do to get there. The benchmarking process should not be viewed as a one- time measurement but rather a tool for continuous improvement.

Historically, benchmarking was used to evaluate manufacturing processes; however, the tool is now used in many areas of businesses management. Benchmarking has become a powerful tool for corporate improvement since it not only helps organizations identify performance gaps, but it also forces companies to understand why the gap occurred in the first place.

While SWOT analysis can be used as an overall evaluation tool, benchmarking is designed to focus on one particular aspect of the company. Whether it’s marketing, customer service or innovation, the list of what you can benchmark and compare in competitive intelligence is endless.

The first step of the process is determining what you want to benchmark and then identify who of your competitors is the "best" in this area. For example, if your company is interested in evaluating its marketing efforts, you must decide which of your competitors has the most recognizable and championed brand. Who has the largest marketing voice in the marketplace? Who has the most aggressive advertising campaign, what about the strongest public relations efforts? Whose sales force is most aggressive and knowledgeable? Certainly, using the strengths findings from the SWOT analysis would be helpful.

Once you have identified the "best" competitor in your field of a particular area, you should then compare that company’s standings to that of the overall industry. What implications do these standings have on your company? For example, when benchmarking financials, consider your competitor’s financial condition versus the current industry standard. Are they in strong standing? This could be an indication that they’ll fight any other companies looking to enter the market and aggressively compete against them. Are their profit margins thin? Perhaps this is an opportunity for you to undercut the company in price to run them out of the market.

Next, compare your company’s standings to that of the industry and the competitor that you’re benchmarking against. Where do you exceed the standard? Where do you fall behind? Then consider what your competition might assume from your standings. Are you an easy target for market takeover? Is your business a likely consideration for acquisition? This line of questioning will lead you to the next step: taking action.

Taking Action

The real value of competitive intelligence is providing managers with a tool to learn what a competitor will do, also known as foreknowledge, not what the competitor has done. Part of this strategy is taking historical information about a company and applying to a trend or forecast. A common example of this practice is the technique sports teams throughout different sports use of watching tapes of their competition. Through analyzing tape after tape of their competitors performing in previous games, coaches and players are able to make an educated determination of not only who the key competitive players are, but also what plays are used when. Perhaps more importantly, however, is how the coaches are able to use this information to determine what defensive and offensive plays and strategies they should use during their upcoming game against the competition.

Applying historical information in forecasting can be taken a step further by developing a psychological profile of the competitors’ decision-makers. This will help determine how the executive, and thus the company, might respond to a given situation.

From new product development to investment prioritization, the findings from a thorough analysis of competitive intelligence information can have a number of implications within a company. Internal departments that often benefit from competitive intelligence findings include marketing planning and research, business development, research and development, product planning, strategic planning and financial planning.

With this in mind, the next step is to pull together a comprehensive and informative report for top decision-makers. Because raw information download has limited usefulness, this document must be able to quickly and effectively point to opportunities, warn of potential threats and outline some preliminary next steps. Goals should be established and a plan of attack developed, including a realistic time line and designation of responsibility for the various next steps.

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