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Gathering competitive intelligence.

Introduction

This checklist provides guidance for individuals or organisations wishing to take a structured and proactive approach to gathering competitive intelligence (CI) as part of a wider management or marketing information system that starts by being quite clear about why the information is being gathered.

Many organisations collect information about the activities of competitors, often on an informal basis through conversations with clients or through information from the press. This method is haphazard and largely reactive. Taking a proactive and structured approach to competitive intelligence means that surprises from competitors are minimised and that opportunities and threats are identified. Plans can be formulated on the basis of 'hard' information and the organisation can learn from its competitors.

National Occupational Standards for Management and Leadership

This checklist has relevance to the following standards: B: Providing direction, unit 2.

Definition

CI provides organisations with actionable information regarding competitors' plans, activities and performance and is a key part of an overall analysis of the operating environment. This information (which can range from new products or pricing to overall strategic direction) is used to make both short- and long-term plans in a number of areas, including strategy, mergers and acquisitions, pricing, marketing, advertising, and research and development.

CI is both a product and a process. The product is actionable information --information used as the basis for a specific action (e.g. acquiring another company). The process is the systematic acquisition, analysis, and evaluation of information about known and potential competitors.

Observe the ethical line

There are ethical and unethical approaches to gathering CI. Information made available in press releases, annual reports or job advertisements, poses few ethical questions. However, sending employees to job interviews at competitor organisations is doubtful behaviour. Spying or business espionage is highly unethical and, in some cases, illegal.

Action checklist

1. Develop a management information system of which CI is a part

In a well-ordered and sophisticated marketing-orientated organisation, CI will be part of an integrated management information system (MIS) encompassing information derived from:

1. The internal accounting system, especially sales analysis.

2. Market intelligence, i.e. the capturing of information from many external sources, including the media, industry reports, etc., regarding matters such as the economic situation and CI.

3. Market research of all kinds which may include understanding any indirect competitors or alternative products that may affect your customers' choices.

These last two points form the backbone of a marketing information system (MkIS).

The intelligence gathered as the basis of marketing research is usually referred to as data and we speak of primary data and secondary data. The former is information collected by means of a specific research programme. The latter is information that already exists, because it was collected as part of a previous research project or for some other purpose. Identifying relevant sources of secondary information, extracting the relevant data and analysing it is usually referred to as desk research. Increasingly this kind of information is built into a MkIS which is constantly up-dated and feeds into the MIS. Some companies set up an office specifically to collect and circulate CI or subcontract the work to specialist companies.

2. Management commitment

Staff time is the major resource in gathering CI and costs of the project will need to be monitored and controlled. Costs will also be incurred in travel to conferences and exhibitions, searching on-line databases, and subscribing to journals. In purely financial terms there will usually be few cases where a direct return on investment is seen from CI, but improvements in softer areas will occur. Commitment is required from senior management to any development of a systematic CI programme so that resources are made available in an area while gains may be intangible in the shorter term.

3. Define the objectives

CI gathering needs to be conducted in a planned manner. Some kind of logical sequence should always be followed. Therefore it is vital at the outset to be quite clear what information is needed and for what purpose. Usually it will be required to provide decision makers, i.e. senior managers and heads of departments, with useful and accurate information. These people must be engaged to find out; what competitive problems they face; what decisions they need to make; how CI can reduce the risk in those decisions; and how they want the CI presented. Without definition research is liable to produce a vast quantity of information but with low utility.

Are you attempting to find weaknesses within another organisation, or to find out what the competition is in a new market that you are hoping to enter, or are you aware of one particular organisation that is seen as posing a threat.

Overall objectives for CI programmes should include the provision of:

* information for strategic decisions

* early warnings of competitor activity.

You must clarify exactly what the CI programme will cover, including:

* individual or groups of competitors

* individual or groups of products or services.

Specific areas can also be detailed, such as:

* competitor pricing

* competitor recruitment drives

* competitor marketing communications activity--such as new advertising campaigns

* competitor strategy.

Clear and specific objectives for the CI programme will provide a focus and help reduce the amount of information that needs to be collected. The objectives should not be set in stone and must be reviewed regularly.

The need to gather CI will be greater at certain times, such as when researching a new product or service. Reach agreement on when the information is needed, how much is worth spending to obtain it, precisely what areas are to be studied and what is their relative importance.

4. Develop the research plan

Factors to be decided upon at this stage include the following:

* Define competitors; this is the 'universe', the total number of organisations from which information will be gathered.

* Decide on the survey methods to be used.

* Planning the approach will also include working out a detailed timetable and allocating manpower other resources such as computer time.

* Assemble the team and assign responsibilities. The number of people involved in the CI programme will depend on the objectives that have been set. One individual must be assigned overall responsibility for the CI programme and they must be a good communicator with strong information skills, good project management aptitude including the ability to work to deadlines.

5. Identify information sources

Experts in the field of CI believe that most organisations already hold, or have access to, 80% of the information required for assessing their competitors.

Significant secondary data can be found inside a company through its people and their current knowledge. Alternatively, many external sources of secondary data are available, in government departments, trade associations, professional bodies, the press, specialist research agencies and other sources.

Some research agencies operate syndicated research programmes. These are research programmes set up on a co-operative basis paid for by contributions from each of the companies taking part. It is possible to 'buy into' such programmes. Alternatively, agencies sometimes mount programmes of research and offer the results for sale. Trade associations often make information freely available to their members but sell it to 'outsiders'.

The techniques used to collect CI fall into four main groups:

--from published materials and public documents:

* annual reports

* press releases

* on-line databases and internet sites

* the media

* advertisements--especially recruitment advertising from competitors defining new types of people they are looking for

* product catalogues, other promotional brochures

* patents and trademarks.

--from observing competitors or analysing products:

* attending exhibitions and conferences

* buying their products and dismantling them as part of a benchmarking exercise.

--from people who do business with competitors

* personal contacts in other trade organisations

* existing customers.

--from recruits and competitors' employees

* job interviews with candidates working with competitors

* conversations with competitors' staff at industry functions and networking events

* making direct contact with competitor organisations and making specific enquiries.

Do not overlook the importance of front-line staff as sources of CI. They are likely to pick up competitor information through dealing with customers. Make them aware of the need to keep a lookout for information and implement a procedure for the information to be reported to the right person.

Remember, all this information should be built into a total 'Marketing Information System' which is constantly being up-dated.

6. An international perspective

Remember, language and cultural differences may limit cross border intelligence gathering. Approaching competitors' employees is more difficult today--people are more wary if approached by someone from a different country. Moreover, activities that are 'ethical' on one territory might put you in jail in another!

The cardinal rule of international corporate intelligence is:

The best international competitor intelligence resource is still your own organisation.

Most CI is probably already available from within your own company. Even if your firm does not have offices outside your home country, you may still have contacts worldwide through trade representatives, affiliates and suppliers. You must consider these in three-dimensional, not two-dimensional terms. For example, a sales person may know a great deal about a particular competitor or a specific technology. But that same sales person also knows about that competitor by region or by country. You need to appreciate that your organisation--particularly if it is a globally based company - has all three informational dimensions: competitor-specific; product- or technology-specific; and specific by region or by country.

7. Use technology

Electronic databases are useful intelligence tools but they have limitations. Getting instant results informs you that database has something to offer but this information can be months or years old. Databases can save you time and give you a breadth of knowledge about an issue or a competitor. They give you information, not intelligence this requires analysis and the gathering of primary, first hand information.

The Internet has value in enabling you to obtain information from individual experts all over the world. As the de facto global network standard, the Internet allows users on one proprietary e-mail system to send and receive messages with those on another. Furthermore, Internet functions such as FTP (file transfer protocol), gopher (a system of navigating the Internet via text menus), and the World Wide Web (a navigation system based on hypertext links) provide the CI researcher with access to the products and services of university and government librarians, journalists, college professors, and consultants.

Use databases to keep an archive of the CI you collect allowing searches on a subject or a competitor to be done more easily. Be aware of copyright legislation--It is illegal to scan many documents, e.g. press clippings, into an electronic format, but you may keep references or the newspaper in hard copy. Training for staff in using information storage and retrieval software must be provided.

8. Consider primary data sources

If information required for a particular CI research project does not already exist as secondary data, you have to determine the best way of collecting primary data. There are three fundamental approaches to doing this--observation, experiment, and survey. The third approach is normally associated with competitor market research. The first two have a strong role to play in CI gathering.

Observation. It is sometimes better to watch what people do rather than to ask them what they do. The advantage is that it eliminates any interviewer-bias and avoids the difficulty that people do not always remember their actions, especially trivial ones clearly.

Experiment. Simulating a real situation is often a better way of assessing likely future behaviour than asking people hypothetical questions. For example, suppose we want to know which of two possible packages shoppers would prefer; we can put them side by side in a real or dummy shop, and see which pack is chosen. Test marketing is an example of experiment as a means of obtaining CI data although it has the drawback of possibly signalling to your competitors what you are doing.

9. Analyse the information

Analysis can conjure up an intimidating array of equations, regression analyses and other statistical complexities. However, analysis is simply the application of common sense and experience to raw information.

To Peter Drucker "Information is the manager's main capital" and the manager must decide what information is needed and how to use it. For this capital to produce healthy returns it must be converted into intelligence, and analysis is the means to do so. The analysis need not be complicated, only complete and accurate. Intelligence is a process of focus. In order to make solid business decisions, managers need to:

* focus in on their market and identify who or what is a competitor;

* identify which of the many market forces is most important so they can concentrate their time and efforts; and

* understand which strategy their target company is pursuing and bring all their information-gathering and analysis efforts to bear on that strategy.

Spend your time wisely; do not waste it by exploring the wrong market, the wrong competitor or the wrong strategy.

10 Compile a report

Brevity is important when reporting the information gained from the CI programme. Decide who the audience for the report is, highlight the most important points and provide references to further information. Decide how often a report should be produced; monthly or weekly may suffice in some environments whereas other industries may require daily reports. Frequency is based on the speed of change in the market in which one is operating.

11 Determine competitor response

How will the competition respond to your actions; there are four options:

* Non-response--are they weak or a sleeping giant. What if they wake up?

* Fast response--some competitors may respond quickly and with such impact as to nullify your action. What will you do if they do this?

* Focused response--perhaps the competition will only change one variable (usually price). What will you do then?

* Unpredictable response--this is by far the most difficult to deal with, so what are your contingencies?

12 Take action on the results

Competitive intelligence only gives strategic advantage when it is analysed and acted upon. Keep records of occasions when information was used successfully to gain advantage over competitors and also when it was too late to take action--in that way the MIS and data collection process may improve.

Don't jump to counteract a competitor's movements without considering your own organisation's objectives. Only the right action for you, at the right time, will bring competitive advantage.

13 Evaluate against objectives

Ensure that you evaluate the success of the CI programme against the objectives that were set. Identify problem areas such as a weakness in obtaining information in a particular area, a particular competitor, or a slowness in disseminating the information gained. Draw up recommendations for improving the CI programme and present them to management, along with details of CI successes.

14 Make changes

Take action on the recommendations for improvement and continue to evaluate the CI programme regularly. Keep communicating CI successes.

Managers should avoid

* forgetting that competitors may also be trying to gain intelligence on your organisation

* spending money on researching organisations that are no longer your competitors--move with the market

* overstepping the ethical line--check your organisation's code of conduct

* failing to communicate the success of the CI programme

* imagining that copying competitors or beating them fractionally to market is the key to organisational success; seeking greater differentiation from the competition is the route to a market advantage.

Additional resources

Books

Competitor targeting: winning the battle for market and customer share Ian H Gordon

Etobicoke, Canada: John Wiley, 2002

Proven strategies in competitive intelligence: lessons from the trenches John E Prescott and Stephen H Miller eds

New York NY: John Wiley, 2001

Competitive intelligence: create an intelligent organization Michelle Cook and Curtis Cook

London: Kogan Page, 2000

Competitors: outwitting outmanoeuvring and outperforming Liam Fahey

New York NY: John Wiley, 1999

This is a selection of books available for loan to members from the Management Information Centre. More information at: www.managers.org.uk/mic

Internet Resources

These wikipedia entries are useful guides. Both have useful links for further information and for exploring the topic deeper.

Competitor analysis http://en.wikipedia.org/wiki/Competitor_analysis

Environmental scanning http://en.wikipedia.org/wiki/Environmental_scanning
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Title Annotation:Checklist 153
Publication:Chartered Management Institute: Checklists: Managing Information and Finance
Geographic Code:4EUUK
Date:Mar 1, 2006
Words:2673
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