COMPETITIVE INTELLIGENCE



Competitive Intelligence 460
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Intelligence is information that has been analyzed for decision making. It is important to understand the difference between information and intelligence. Information is the starting point; it is readily available numbers, statistics, bits of data about people, companies, products, and strategies. As a matter of fact, information overload is one of the leading problems of today's executive and the top reason for needing a competitive intelligence expert. Information becomes intelligence when is it distilled and analyzed. Combining this idea with those of competition or competitors leads to the concept of gathering and analyzing information about competitors for use in making management decisions. Competitive intelligence provides a link between information and business strategies and decisions. It is the process of turning vast quantities of information into action.

The field of competitive intelligence, as a profession, is relatively new in the U.S. An indication of the importance of competitive intelligence is the growth, since 1986, of the Society of Competitor Intelligence Professionals (SCIP), an organization committed to developing, improving, and promulgating the methods, techniques, and ethical standards of the group. SCIP defines competitive intelligence as "the legal and ethical collection and analysis of information regarding the capabilities, vulnerabilities, and intentions of business competitors conducted by using information databases and other 'open sources' and through ethical inquiry." The major research firm in the field, Fuld & Company, Inc., defines it as "information that has been analyzed to the point where you can make a decision and a tool to alert management to early warning of both threats and opportunities. Competitive intelligence offers approximations and best views of the market and the competition. It is not a peek at the rival's financial books." Competitive intelligence can help managers discover new markets or businesses, beat the competition to market, foresee competitor's actions, determine which companies to acquire, learn about new products and technologies that will affect the industry, and forecast political or legislative changes that will affect the company.

EXAMPLES

Examples of competitive intelligence include stock traders who analyze the data on prices and price movements to determine the best investments. These stock traders have the same data as other traders, but analysis of the data separates them from others. Another example is the Japanese automobile industry's analysis of the U.S.-automobile market in the 1970s. High gasoline prices and smaller families created a demand in the United States for smaller, more fuel-efficient cars. Japanese automakers employed competitive intelligence methods to determine this trend and then made manufacturing decisions based on it, beating the U.S. Big Three to market with high quality, fuel-efficient cars. Another example of successful use of competitive intelligence is AT&T's database of in-company experts. Part of this service is the monitoring of companies with which their own employees are most interested. This led to some early insights of emerging competitors. A final example is how Wal-Mart stores studied problems Sears had with distribution, and built a state-of-the art distribution system so that Wal-Mart customers were not frustrated by out-of-stock items, as were Sears's customers.

ETHICAL METHODS

Competitive intelligence is not spying on the competition. It has been associated in the past with the political and military intelligence used during the Cold War era. Because of this association, many people think that competitive intelligence uses illegal, shady, or unethical means to gather information about competitors. Visions of wiretapping, bribing competitor's employees, or stealing information come to mind. This is not true today. Such techniques can damage the reputation and image of corporations and are not worth the risk. SCIP takes a strong position on the importance of ethics and developed a code of ethics for members. Note the words, "legal and ethical," and the emphasis on retrieving data from "open sources." Competitive intelligence experts use openly-available information. They do dig into public records and government databases and use the latest technology (such as satellite photoreconnaissance and software tools such as spiders) to help gather and analyze large datasets. However, the professionals and companies for which they work do not use illegal methods.

THE PROCESS

Today, competitive intelligence is an important activity within corporations, serving all areas of business functioning: research and development, human resources, sales, etc. A recent survey by The Futures Group found that 80 percent of large, U.S.-based organizations have a formal, in-house, competitive intelligence department. In the future, competitive intelligence activities will become standard. The wide availability of information on the Web makes competitive intelligence more accessible to medium-size and small firms. Software tools to analyze and disseminate intelligence also make it easier to implement competitive intelligence tools. The process of competitive intelligence is outlined in the following steps:

  1. Setting intelligence objectives (i.e., designing the requirements)
  2. Collecting and organizing data about the industry and competitors
  3. Analyzing and interpreting the data
  4. Disseminating the intelligence

SETTING THE OBJECTIVES.

A clear statement of the intelligence needs of the organization should be outlined by management. If this step is ignored, the competitive intelligence department will be bogged down with too much information and possibly distracted by ad-hoc requests for data. This step is necessary regardless of where in the organization the competitive intelligence department is located. Some corporations have competitive intelligence report directly to the CEO; in others, it is located in marketing or in research and development. The role of any competitive intelligence program should be driven by the needs of the corporation, especially areas that have key performance consequences.

COLLECTING AND ORGANIZING THE DATA.

The online revolution has enhanced ease in collecting and obtaining information, but the competitive intelligence expert must constantly be alert to new sources and places for finding information. The most obvious data collection sources include trade magazine and newspaper articles, company Web sites, newswires, chat forums, and Web search engines. Free information is available on industries via census data on government Web pages. Similarly, free public company information from U.S. Securities and Exchange Commission (SEC) filings, such as the 10-K and 10-Q report, can be easily obtained on the Web. These corporate reports yield detailed financial and product information and also identify mergers, acquisitions, and legal proceedings against the company. Other channels for fee-based data are information aggregators such as Factiva, Lexis Nexis, Hoover's Online, MergentOnline and Standard and Poors's databases. Analyst reports and market research reports from companies such as Jupiter, Forrester Research, and Frost and Sullivan, although usually quite expensive to acquire, provide detailed analyses on companies and industries.

ANALYZING AND INTERPRETING THE DATA.

Analysis and interpretation is the real core of competitive intelligence. Collected data must be transformed into "qualitative" information (i.e., intelligence). One way to analyze data obtained from the Web is to use a Spider. There are competitive intelligence Spiders available that index and categorize documents found though Web searchers. Whether a Spider is used or not, the next step is to interpret the information. Lehmann and Winer outline four important aspects competitive intelligence professionals need to interpret about competitors: their current and future objectives, their current strategies, their resources, and their future strategies. Once this assessment is complete, competitive intelligence professionals measure their companies in comparison to competitors; this is known as benchmarking. From the benchmarking process, trend identification and prediction can be made.

DISSEMINATING THE INFORMATION.

Dissemination is the delivery of current, real-time intelligence to the decision makers in the firm at the time they need it. Timely dissemination is essential if the intelligence is to be perceived as trustworthy. The current philosophy is that delivering to people at all levels in the organization enhances competitive advantages.

HISTORY AND LITERATURE

Competitive intelligence is, in part, an outgrowth of the military intelligence field. Within corporations, it is a direct outgrowth, or evolution, of market research, which uses investigation (especially understanding the strategies, capabilities, and options of competitors or rivals) to examine the marketplace. Examining marketing research books at the time competitive intelligence emerged helps identify the shift. Market research differs from competitive intelligence in that it is usually conducted when a new product is in the planning or development stage and often utilizes surveys, focus groups, and other research tools to study the market. Competitive intelligence requires a more continuous and structured scanning of competitors and the environment. William T. Kelly's work introduced the field of intelligence in his 1965 text. Michael E. Porter's books, aimed at practitioners, identify competitive intelligence as a needed business function. Porter's books outline the tools for analyzing competitors and evaluating their strengths and weaknesses, which can then lead to opportunities. Leonard Fuld's work helped revolutionize and define the field. Fuld is a key writer and the founder of a major consulting firm that trains people in competitive intelligence methods and techniques.

THE COMPETITIVE INTELLIGENCE EXPERT

The competitive intelligence expert or analyst usually has a strong business background, combined with experience in the company. Likely candidates for the assignment are generally research-oriented people in sales, marketing, or research and development. Combining research skills with communication and writing skills is essential. Because of the research orientation of the job, people with library or information science backgrounds in the company are logical choices.

ORGANIZATIONS

THE SOCIETY OF COMPETITIVE INTELLIGENCE PRO-FESSIONALS (SCIP).

The Society of Competitive Intelligence Professionals (SCIP), established in 1986, is a global, nonprofit, membership organization for everyone involved in creating and managing business knowledge. The mission of SCIP is to enhance the skills of knowledge professionals to help their companies achieve and maintain a competitive advantage. SCIP publishes the following influential periodicals:

COMPETITIVE INTELLIGENCE DIVISION OF THE SPECIAL LIBRARIES ASSOCIATION (SLA).

This organization was formed in 2004 as an association for corporate librarians and information professionals who have evolved beyond collecting and managing information, to provide examination of data that can help their organizations succeed. The Competitive Intelligence Division encompasses all aspects of competitive intelligence including: (1) planning, (2) identifying decision makers's intelligence needs, (3) collecting and analyzing information, (4) disseminating intelligence products and services, (5) evaluating intelligence activities, (6) promoting intelligence services among a client base, and (7) additional industry-specific issues. Competitive Intelligence Division members concentrate on developing their competitive intelligence skills to assist them in functioning more effectively as intelligence professionals within their respective organizations.

FULD & COMPANY, INC.

Fuld & Company, Inc., is a research and consulting firm in the field of business and competitive intelligence. This company, founded by Leonard Fuld in 1979, is a full-service business intelligence firm providing: (1) research and analysis, (2) strategic consulting, (3) business intelligence process consulting, and (4) training to help clients understand the external competitive environment.

THE INSTITUTE FOR STRATEGY AND COMPETITIVENESS AT HARVARD SCHOOL OF BUSINESS.

This Institute, led by Michael E. Porter, studies competition and its implications for company strategy; the competitiveness of nations, regions and cities; and solutions to social problems. Based at Harvard Business School, the Institute is dedicated to extending the research pioneered by Professor Porter and disseminating it to scholars and practitioners on a global basis.

Judith M. Nixon

FURTHER READING:

Boncella, Robert J. "Competitive Intelligence on the Web." Communications of AIS 12 (2003): 327–340.

Burwell, Helen P. Online Competitive Intelligence: Increase Your Profits Using Cyber-Intelligence. Tempe, AZ: Facts on Demand Press, 1999.

Chen, Hsinchun. "CI Spider." Decision Support Systems 34, no. 1 (2002): 1–17.

"Corporate CI 'Eagles.'" Competitive Intelligence Magazine, January 1998. Available from < http://www.scip.org >.

Fuld, Leonard M. Competitive Intelligence: How To Get It; How To Use It. New York: Wiley, 1985.

——. Monitoring The Competition: Find Out What's Really Going on Over There. New York: Wiley, 1988.

——. The New Competitor Intelligence: The Complete Resource for Finding, Analyzing, and Using Information about Your Competitors. New York: Wiley, 1995.

Gilad, Benjamin, and Tamar Gilad. The Business Intelligence System: A New Tool for Competitive Advantage. New York: American Management Association, 1988.

Kahaner, Larry. Competitive Intelligence: How To Gather, Analyze, and Use Information to Move Your Business to the Top. New York: Simon & Schuster, 1997.

Kelley, William Thomas. Marketing Intelligence: The Management of Marketing Information. London: Staples P., 1968.

Lehmann, Donald R., and Russell S. Winer. Analysis for Marketing Planning. 4th ed. Boston: Irwin, 1997.

Miller, Jerry, et al. Millennium Intelligence: Understanding and Conducting Competitive Intelligence in the Digital Age. Medford, NJ: CyberAge Books, 2000.

Porter, Michael E. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press, 1985.

——. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 1980.

Snow, C.C. ed. Strategy, Organization Design and Human Resources Management. Greenwich, CT: JAI Press, 1989.

Tyson, Kirk W.M. The Complete Guide to Competitive Intelligence. 2nd ed. Chicago: Leading Edge Pub., 2002.

Vibert, Conor, ed. Introduction to Online Competitive Intelligence Research: Search Strategies, Research Case Study, Research Problems, and Data Source Evaluations and Reviews. Mason, Ohio: Thomson/Texere, 2004.

Walle, Alf H. "From Marketing Research to Competitive Intelligence: Useful Generalization or Loss of Focus?" Management Decision 37, no. 5/6 (1999): 519–525.

West, Chris. Competitive Intelligence. New York: Palgrave, 2001.



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