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Articles: Business intelligence

Practical Ways for Competitive Intelligence Professionals to Measure their Success
By Fiona Kerr
Source: www.competia.com

While there have been studies indicating the value of Competitive Intelligence to an organization as a whole, it can be challenging for the Competitive Intelligence professional to measure precisely the value of her individual work or its impact on her organization. There are, however, simple and practical ways to evaluate the importance of Competitive Intelligence projects. This article will discuss several distinct possibilities:

  • Empirical evidence linking financial and market performance to Competitive Intelligence

  • Measuring the value of Competitive Intelligence based on its direct financial impact on the business

  • Measuring the value of Competitive Intelligence based on its indirect financial impact on the business

  • Measuring the value of Competitive Intelligence based on traffic and utilization

This article outlines each of these methods providing a variety of examples for further clarification.

Empirical evidence linking financial and market performance to Competitive Intelligence

In 1995, the Competitive Intelligence Review published an article entitled "A Look at the Link between Competitive Intelligence and Performance." In this article, James Cappel and Jeffrey Boone note empirical evidence linking the financial and market performance of publicly traded companies to the existence of an internal Competitive Intelligence function. The study compares the performance of Competitive Intelligence companies versus non-Competitive Intelligence companies in terms of sales, market share and EPS. The results show that in all three cases, the companies employing Competitive Intelligence, on average, outperform those companies with no apparent Competitive Intelligence activities.

Such research is useful for measuring the importance of Competitive Intelligence activities, in general, on the success of an organization. Yet, the success of a company is the result of the efforts of many people and it is difficult, impractical and even a bit arrogant for a Competitive Intelligence department or an individual Competitive Intelligence professional to directly correlate positive overall financial and market results to its/his personal efforts. Indeed, it can be awkward to measure the value of individual Competitive Intelligence contributions at all. However, there are some practical ways to attribute a metric to the value of your Competitive Intelligence accomplishments. Sometimes, you may have to be a bit creative, but it is possible nonetheless.

Measuring the value of Competitive Intelligence based on its direct financial impact on the business

The most easily valued Competitive Intelligence is that to which revenues or savings can be directly tied. For instance, if you were able to correctly estimate the cost structure and margin of a competitors' product, you would have a significant advantage in a highly competitive pricing situation. If the sales department used this information in a successful campaign, a portion of the value of the deal could be attributed to the Competitive Intelligence.

There are many examples where such a direct link to Competitive Intelligence can be made.

Example 1

David Lithwick, a Senior Partner at Market Alert notes the pharmaceutical industry frequently uses Competitive Intelligence to help manage large marketing expenses reserved to counter competitor threats. For example, knowing the launch date of a generic drug's arrival on the market allows the brand company to initiate a more timely and effective marketing campaign in response. If Competitive Intelligence indicates a delay in the launch date for the generic drug, the brand company can postpone the retaliatory marketing expense. In these instances, the value of the Competitive Intelligence is the estimated cost of capital saved during the deferral period.

Example 2

Citigate Markowitz & McNaughton is a management consulting firm specializing in intelligence. Chris Campbell, a Managing Director at Citigate Markowitz & McNaughton, observes that Competitive Intelligence is an indispensable tool when conducting due diligence. He gives the example of a private equity company considering purchasing a computer components manufacturer. Citigate Markowitz & McNaughton conducted extensive Competitive Intelligence assessing both the market and the target's customers. The results highlighted the following:

  • Market growth for the target's key products was slowing to a rate below the target's assertions

  • Concerns over the target's limited diversification to counter a declining market

  • Suspicions about the target's supposed "cutting edge" technology

Citigate Markowitz & McNaughton's research determined the initial offer was inappropriate and the negotiated deal price dropped from $48 million to $25 million. The value of this intelligence was $23 million.

It is not always that Competitive Intelligence and generated revenues and/or savings are so clearly linked. However, it is important to follow up with Competitive Intelligence customers to find out to what end they used the analysis. If the results are monetary, and the link is as clear as the examples above, it is not inappropriate for the Competitive Intelligence professional to claim some responsibility.

Measuring the value of Competitive Intelligence based on its indirect financial impact on the business

More often the correlation is less precise. Sometimes intelligence achieves no immediate gains, but enables future benefits. For instance, Competitive Intelligence is one of the many inputs used to create a market share forecast. This forecast in turn is one of the inputs used to decide production rates. It would be presumptuous for the Competitive Intelligence professional to assume responsibility for appropriate production rates, but it is not unreasonable to point out there is a relationship. In the cases where intelligence has an indirect impact on the business, it is again important to follow the trail to determine how the information was used and the resulting impact.

Example 1

At Bombardier Aerospace, the network of Competitive Intelligence focals regularly benchmarks the company against competitors with the intention of process improvement. While we are often pleased to find ourselves to be the owners of a "best practice", there have been cases where we have uncovered evidence indicating a negative disparity between our own performance and that of a competitor. In these instances, the functions affected by these findings have responded by re-evaluating the processes under study and determining a course of action to close the gap. The resulting savings from these changes can be quite substantial. Attributing these savings solely to the team, collecting and analyzing the competitor information, would be erroneous. Did the Competitive Intelligence team create the savings? No. Did the Competitive Intelligence team expose an opportunity for savings? Absolutely. Thus, it is fair to include the Competitive Intelligence team as a significant contributor to those savings.

It takes time for the business to feel the impact of some Competitive Intelligence projects. The studies themselves may be only one of many factors that collectively cause a positive economic result. In these instances, when the connection between the outcome and the Competitive Intelligence is indirect, it is even more important for the Competitive Intelligence analyst to follow the path of his project, especially since the route to the end result may be a bit convoluted. Take the time to follow up. What other research or analyses did the Competitive Intelligence feed? What was the ultimate conclusion? If there was a positive financial effect, you can attribute it in part to the Competitive Intelligence.

Measuring the value of Competitive Intelligence based on traffic and utilization

Finally, there are times when Competitive Intelligence is prepared, but no financial value can be attributed to it either directly or indirectly. This does not mean there is no inherent merit to the work.

Take the common practice of sending Competitive Intelligence professionals to major trade shows. While at the show, they follow and evaluate the actions of competitors. One of the many reasons for this is to keep PR informed in a timely manner to enable their immediate and adequate response if questioned about the impact on their business of competitor events and announcements. For this kind of service, a PR department will always be grateful. It helps them do their job more effectively. However, the precise value of this type of Competitive Intelligence is elusive. No revenues are generated. No savings are realized. In this case, the Competitive Intelligence department must be creative.

You can measure the importance of this type of Competitive Intelligence by the extent of its usage. To do this, it is important to keep detailed records:

1. Log all calls requesting Competitive Intelligence:

  • Log both calls requiring full studies and those that can be answered quickly

  • Track from where the calls come. How many times does the CEO/her secretary/the management committee make a request?

  • How many of the calls are from repeat callers?

  • Are you the first line of defense for any department (CEO's office, investor relations, PR, etc.)?

2. Keep folders of not only major studies, but also those ad hoc Competitive Intelligence requests to which it takes only a few hours to respond. If you prepare regular reports:

  • Track the questions, comments and compliments the reports receive. Questions and comments indicate a report is being read and used

  • If you do not receive comments, survey senior management. Their opinion is a gauge as to whether or not the business finds a report useful. Ask for opinions and suggestions for improvement. Act on suggestions and file all responses.

  • Track the requests to be added to a report's distribution list. Requests are as good as compliments. They indicate another reader has said the report is valuable.

3. Know where your work is quoted:

  • Track which and how many presentations contain references to your Competitive Intelligence studies.

If a Competitive Intelligence department meticulously monitors all of the above, it will know precisely where, when and how often the company uses its analyses. It may not be possible to convert this information into a financial measure, but if the utilization is high and with the right people, it will certainly indicate the work is of consequence.