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Articles: business intelligence

Competitive intelligence programs: An overview
Author: Yogesh Malhotra, Ph.D
Source: http://km.brint.com

What is a competitive intelligence program?

"A formalized, yet continuously evolving process by 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" (Prescott and Gibbons 1993). CIP tries to ensure that the organization has accurate, current information about its competitors and a plan for using that information to its advantage (McGonagle & Vella, 1990).

How is competitive intelligence different than business espionage?

CI uses public sources to find and develop information on competition, competitors, and the market environment (Vella & McGonagle, 1987). Unlike business espionage, which develops information by illegal means like "hacking," CIP uses public information - all information that can be legally and ethically identified and accessed.

How to determine competitive intelligence information needs?

Effective implementation of its CIP requires not only information about the competitors, but also information on other environmental trends such as industry trends, legal and regulatory trends, international trends, technology developments, political developments and economic conditions. The relative strength of the competitor can be judged accurately only by assessing it with respect to the factors listed above. In the increasingly complex and uncertain business environment, the external [environmental] factors are assuming greater importance in effecting organizational change. Therefore, the determination of CI information needs is based upon the firm's relative competitive advantage over the competitor assessed within the 'network' of 'environmental' factors.

What are the general uses of competitive intelligence information?

The competitive intelligence information obtained using CIP can be used in programs that supplement planning, mergers and acquisitions, restructuring, marketing, pricing, advertising, and R&D activities.

What is the role of the organisation's internal competitive intelligence unit?

Despite the increasing sophistication of CI tools and techniques, the most important role in a CIP remains that of the organization or its internal Competitive Intelligence Unit. Once the CI needs have been defined, the CI-unit is responsible for collection, evaluation and analysis of raw data, and preparation, presentation, and dissemination of CI. The CI-unit may handle all the activities itself, or it may assign some tasks to an outside contractor. Often, decisions have to be made on assignments of data collection, and data analysis and evaluation.

The CI-unit has to decide upon the choice of sources of raw data. Should it use government sources or online databases, interviews or surveys, drive-bys or on-site observations? It has also to decide if and when to deploy 'shadowing' and defensive-CI. Other decisions may involve choice of specialized interest groups (such as academics, trade associations, consumer groups), private sector sources (such as competitors, suppliers, distributors, customers) or media (such as journals, wire services, newspapers, financial reports) as the sources of information. Very frequently, such issues involve balancing various constraints, such as those of time, finances, staffing, etc. and therefore are based upon individual judgement.

Are there any methods or methodology for a competitive intelligence program?

The purpose of CIP is to gather accurate and reliable information. The groundwork for the CIP is done through an internal Competitive Intelligence Audit which is primarily a review of the organization's operations to determine what is actually known about the competitors and their operations. As a starting point for obtaining CI data, the organization generally has some knowledge of its competitors, and its own CI needs. In absence of a definition of its information needs, the organization may not be able to deploy its resources effectively. To avoid such a scenario an organization may conduct a CI audit which is effectively a review of its current operations to determine what is actually known about the competitors and their operations. The CI audit helps in pinpointing the organization's CI needs.

When the organization has some knowledge about its competitors and its own CI needs, it proceeds to the stage of gathering CI data. Based upon the CI needs, relevant data can be gathered from the organization's own sales force, customers, industry periodicals, competitor's promotional materials, own marketing research staff, analysis of competitor's products, competitor's annual reports, trade shows and distributors. Specific CIP techniques include querying government resources and online databases, selective surveys of consumers and distributors about competitor's products, on-site observations of competitor's plant or headquarters, "shadowing" the markets, conducting defensive CI, competitive benchmarking, and reverse engineering of competitor's products and services.

Raw data is evaluated and analysed for accuracy and reliability. Every attempt is made to eliminate false confirmations and disinformation, and to check for omissions and anomalies. Omission, which is the seeming lack of cause for a business decision, raises a question to be answered by a plausible response. Anomalies (data that do not fit) ask for a reassessment of the working assumptions (McGonagle & Vella, 1990). While the conclusions one draws from the data must be based on that data, one should never be reluctant to test, modify, and even reject one's basic working hypotheses. The failure to test and reject what others regard as an established truth can be a major source of error (Vella & McGonagle, 1987).

Evaluation and analysis of raw data are critical steps of the CIP. Data that lacks accuracy and reliability may be marginally correct data, concoction of very good data, bad data, or even disinformation. All data is produced or released for some certain purpose. In CIP, reliability of data implies the reliability of the ultimate source of the data, based upon its past performance. In CIP, accuracy of data implies the [relative] degree of 'correctness' of data based upon factors such as whether it is confirmed by data from a reliable source as well as the reliability of the original source of data. Evaluation of CI data is done as the facts are collected and unreliable or irrelevant data is eliminated. Analysis of remaining facts includes 'sifting' out disinformation, studying patterns of competitor's strategies, and checking for competitor's moves that mask its 'real' intentions (McGonagle & Vella, 1990). The resulting CI information is integrated into the company's internal planning and operations for developing alternative competitive scenarios, structuring attack plans and evaluating potential competitive moves.

What are the tools and techniques for competitive intelligence activities?

Different types of CI tools and techniques are available for different requirements of the CIP.

  • Contacting Government Agencies can yield valuable data for the CIP, but may often require excessive lead time.
  • Searching Online Databases is a faster method of finding competitive information, although it is more expensive. With increasing sophistication and affordability of information technology, this technique is expected to become less expensive. Database search does not provide information that has not been released to the public or that has not yet been collected.
  • From Companies and Investment Community Resources Some types of data that are not widely available from databases can be procured by contacting the corporation itself or from investment community sources.
  • Surveys and Interviews Surveys can yield plenty of data about competitors and products, while Interviews can provide more in-depth perspectives from a limited sample.
  • Drive-by and On-site Observations of the competitor's [full or empty] parking spaces, new construction-in-progress, customer service at retail outlets, volume and pattern of [suppliers' or customers'] trucks, etc. can yield useful CI information about the state of the competitor's business.
  • Competitive Benchmarking is used for comparing the organization's operations against those of the competitor's.
  • Defensive Competitive Intelligence involves monitoring and analyzing one's own business activities as the competitors and outsiders see them.
  • Reverse Engineering of competitor's products and services may yield important CI information about their quality and costs.

Any 'standard' tools and techniques for all competitive intelligence Activities?

Not all CIP tools and techniques are suitable for all CI objectives; the CI-unit has to use judgement in determining the relevant CI needs and the most appropriate tools and techniques. Specific tools and techniques are chosen depending upon various factors such as CI needs, time constraints, financial constraints, staffing limitations, likelihood of obtaining the data, relative priorities of data, sequencing of raw data, etc. (McGonagle & Vella, 1990). While government sources have the advantage of low cost, online databases are preferable for faster turnaround time. Whereas surveys may provide enormous data about products and competitors, interviews would be preferred for getting a more in-depth perspective from a limited sample. Therefore, human judgement is an essential element of the decision regarding which CI techniques to deploy in a specific situation.

How can the competitors foil your competitive intelligence program?

Very likely the target competitor would be aware of the organization's CI moves and could make all possible efforts to thwart or jeopardize the organization's CIP. The competitor may have its own CI activities targeted at the organization. Or it might intentionally generate disinformation to mislead the organization's efforts. In fact, the organization's CI activities may find data which the competitor has 'planted' to keep the organization "preoccupied" and "off-balance" (McGonagle & Vella, 1990).

The competitor could also create the problem of false confirmation by releasing similar, but misleading (or incomplete), facts to different media sources. The competitor may also use common ploys to pump information from the organization's employees. Such ploys include "the phantom interview", "the false flag job seeker", "the seduction," and "the nonsales sale."

  • Phantom Interview The competitor, posing as a potential employer, inquires from the organization's employees about their duties and responsibilities.
  • False Flag Job Seeker A competitor's trusted employee , in the guise of a potential job seeker, tries to learn about the organization in the course of the employment process.
  • Seduction Involves flattery of organization's employees to encourage disclosure of important facts. In the nonsales sale technique, the competitor pursues the organization's non-employee associates such as distributors and suppliers to elicit information about the organization's pricing structure, customer service, etc.

What are the information hazards of competitive intelligence information?

The objective of the Competitive Intelligence Program is to gather relevant information that is valid and accurate. Incomplete or inaccurate information may jeopardize the organization's CI efforts.

  • False Confirmation. There might be instances of false confirmation in which one source of data appears to confirm the data obtained from another source. In reality, there is no confirmation because one source may have obtained its data from the second source, or both sources may have received their data from a third common source.
  • Disinformation The data generated may be flawed because of disinformation, which is incomplete or inaccurate information designed to mislead the organization's CI efforts.
  • Blowback Blowback may occur when the company's disinformation or misinformation that is directed at the competitor contaminates its own intelligence channels or information. In all such cases, the information gathered may be inaccurate or incomplete.

 

Copyright, 1996, Yogesh Malhotra, Ph.D. MBA, BE, CDP, C. Eng,
Chairman & CKO, @BRINT Institute,
Professor of e-business & Knowledge Management
All Rights Reserved. Reproduced with permission.
Malhotra, Yogesh. (1996). Competitive Intelligence Programs: An Overview [WWW document], @BRINT Research Institute (www.brint.com). URL http://www.brint.com/papers/ciover.htm