Competitive Intelligence A Necessary Tool

Competitive Intelligence: Necessary tool!

Competitive Intelligence has become a necessary tool due to company leaders inability to digest increasing volumes of information let alone turning it into something (knowledge) they can act upon. With the advent of commercial and government databases, information has become cheap and accessible at the same time. Establishing new sources of data has become less important. The question naturally arises: If everyone has the same information, who has the edge over the competitors? What is required to provide a company with a crucial competitive advantage over its competitors is its focus on information priorities and the analysis of and ability to analyse the competitors prices, movements, and other relevant factors. The ability and way in which a company turns raw data and information into intelligence and knowledge is what separates the successful company from the one who fails.

Often the question arises of Competitive Intelligence being the same as industrial espionage. It is important from an ethics and legal point of view and also for the credibility of the profession that the record is set straight. Competitive Intelligence is not comparable to industrial espionage. Competitive Intelligence is not spying on companies and competitors nor is it about stealing information or venturing into illegal practices to obtain sensitive information. It is simply gathering open, available information by means of legal and ethical techniques, analysing it and disseminating the knowledge to the user. More than 90% of all information needed is openly available the remainder is deducible by applying analysis techniques and common business sense.

What is Competitive Intelligence?

Competitive Intelligence is a systematic process that transforms random bits and pieces of data into strategic knowledge about relevant elements in the Competitive environment through a process of collection, analysis, communicating and application of intelligence to provide the clients of competitive Intelligence (management, companies, industries, suppliers etc.) with early warning of impending threats and opportunities. The main objective is attaining, securing and enhancing competitive advantage. Competitive Intelligence makes use of many business, analysis and software tools and programmes and works best when its building blocks are functioning well.

Building blocks of Competitive Intelligence

Competitive Intelligence comprises different types of information and is not a substitute for other operational function in companies. These building blocks could include the following:

  • Market Research
  • Finance
  • Library
  • Product Development
  • Information Technology
  • Research & Development
  • New Market Development

Why Competitive Intelligence?

  • Improve planning and decision-making: Effective decision making lies at the heart of Competitive Intelligence. Ready, aim, aim! is how Mr. T. Boone Pickens, one of worlds greatest oil and gas speculators, describes managers who cannot act upon important information.There are many managers that can never pull the trigger.Those managers who learn the principles of Competitive Intelligence learn quickly how to use the right information to arrive at the best, most expedient (not necessarily the perfect) decision. Competitive Intelligence is about making reasoned, rational decisions while under pressure. 
  • Enhance early warning and forecasting competitive threats: While the Competitive Intelligence profession does not promise to deliver a crystal ball, it has developed numerous, time-tested approaches and techniques to help management prepare rationally for the future. Early warning systems aim at avoiding surprises and taking early advantage of a competitive opportunity.
  • Manage and reduce risk: Competitive Intelligence should provide the mechanisms to reduce or minimise industry risk. Industry risk risk that emanates from industry-wide forces needs to be systematically and proactively managed, just as the more commonly perceived financial risks are managed. Examples of industry risk include disruptive technologies, long-term changes in consumer preferences, performance rise/price decline of substitute industries, an entry of rule changing competitors, formation of a new alliance that changes the companys competitive position, etc. The ability to navigate through industry risk can spell the difference between corporate success and failure.
  • Know ethical and legal limits: Succeeding in business requires companies take an active not a passive approach to nearly every aspect of business, including intelligence gathering. When a business crisis looms or someone upstairs exerts pressure to deliver results, those educated in Competitive Intelligence will understand the boundaries within which they can work without stepping over the legal or ethical line. Potential misrepresentation, conflicts of interest, internal management disputes, overselling of findings, trade secret and intellectual property rights, bribery and use of third parties, are among the many issues a Competitive Intelligence professional must learn. How to apply these guidelines globally, examine alternate strategies to deliver critical information, know how to work within the ethical gray zone are all part of Competitive Intelligence.
  • Make knowledge profitable: Do not mistake competitive intelligence with knowledge management. Competitive Intelligence always has a direct, profit-generating purpose. While knowledge management essentially tries to harness all the information contained with a company, its purpose is not always clear.
  • Avoid information overload: Information overload is not simply the problem of too many websites. It is a real problem that the Competitive Intelligence discipline addresses very directly through critical analysis and intelligence process techniques. Information overload is the result of not knowing how to handle the information you have.
  • Avoid blindspots: A well-trained competitive intelligence professional knows how to keep an objective view of the market realities and therefore, avoid blinders. Companies, especially successful ones, fall prey to pervasive and unchallenged formulas and beliefs about how things work, or should work. The result is that they ignore or deny strategic changes that transform markets, and keep using the same old conventional wisdom. When reality hits, it typically ushers in a severe crisis.
  • Gain strategic perspective: Perspective is the hallmark of a solid Competitive Intelligence education. It teaches how to manage and assess the many types of external challenges facing a companys leaders. The Competitive Intelligence discipline allows the executive to have an outside perspective – an external focus – which is so crucial for management today. It breaks down the fire fighting mentality and the insulation of a disciplinary silo. It is the last bastion of global, general, strategic perspective available in management education today

Some definitions of Competitive Intelligence

  • Wikipedia defines Competitive Intelligence as”the action of defining, gathering, analysing, and distributingintelligenceabout products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organisation.”
  • Business intelligence mainly refers tocomputer-based techniques used in identifying,extracting, analysing business data, such assales revenueby products and/or departments, or by associated costs and incomes. Business Intelligence technologies provide historical, current and predictive views of business operations. Common functions of business intelligence technologies are reporting,online analytical processing,analytics, data mining,process-mining,complex event processing, business performance management,benchmarking,text miningandpredictive analytics. Business intelligence aims to support better business decision-making. Thus a Business Intelligence system can be called adecision support system(DSS).Though the term business intelligence is sometimes used as a synonym for Competitive Intelligence because they both support decision making, Business Intelligence uses technologies, processes, and applications to analyse mostly internal, structured data and business processes while competitive intelligence gathers, analyses and disseminates information with a topical focus on company competitors.
  • Arik Johnson of Aurora defines Competitive Intelligence as”…the purposeful and coordinatedmonitoringof your competitor(s), wherever and whoever they may be, within a specificmarketplace. Your “competitors” are those firms which you considerrivalsin business, and with whom you compete formarket share.”
  • In a 1993 paperJ.E. Prescott, & P.T. Gibbondefine Competitive Intelligence as”…aformalised, yet continuously evolving processby which the management team assesses the evolution of its industry and the capabilities and behaviour of its current and potential competitors to assist in maintaining or developing a competitive advantage.”
  • defines Competitive Intelligence as a systematic and ethical program for gathering, analysing, and managing external information that can affect your company’s plans, decisions, and operations.

What is the difference between competitive intelligence and market research?

There is frequent confusion regarding the differentiation between market research and Competitive Intelligence, especially since many of the techniques used such as questionnaires and primary source interviewing are used in both disciplines. The basic difference is less a matter of tools and techniques and more one of focus. Depending upon how they are defined and differentiated within an organisation, at times the terms are used and meant interchangeably. Market research is often focused on understanding various aspects of customer demand, and preferences for features, functions, and solutions. It is often conducted in the form of discreet studies, whereas, Competitive Intelligence is a systematic and on-going process, more likely to be focused on questions of strategic direction and the determination of future intent. It is systematic nature of the underlying process of identifying, collecting, and analysing information from potentially numerous sources, both primary and secondary, toward a specific decision in order to develop a clear understanding of competitor plans, market trends, and future opportunities or threats and – importantly – to assess what one’s company should do in order to reduce decision risk, achieve or sustain advantage, that is at the heart of CI. No matter how you define each activity, it is clear that both are in the least complimentary and synergistic. Competitive Intelligence is more than market research. It is an actionable and truly probing analysis of your competitor’s business and operations amongst others. The research calls for thoroughness and an ability to connect seemingly disparate pieces of information.

The question of what Competitive Intelligence consists of, is not as necessary to understanding its importance in business as understanding a bigger and more important question; why do some firms in an industry win and achieve hegemony where others, often with superior resources, fail.

In short, Competitive Intelligence is the purposeful and coordinated monitoring of 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. Competitive Intelligence also has to do with determining what your 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. As you might expect, this will involve many methods at the 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. Competitive Intelligence is not only about competitors, it is about every factor in a company’s business or competitive environment that might impact on competitiveness.


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