Competitive Intelligence

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 it is 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 United States. An indication of the importance of competitive intelligence is the growth, since 1986, of the Society of Competitive 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.” A 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 competitors' 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. In the late 2000s, this situation is being replayed in a fashion, as high gas prices again have people turning away from large American-made SUVs and trucks and toward smaller, more fuel-efficient Asian (Japanese and Korean) cars.

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 competitors' 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

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 on industries is available 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' 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). Two of the most popular

web-search tools for businesses are ComScore and Hitwise. ComScore uses a panel of people who are trained in web searches; they constantly monitor the Internet for relevant information. Hitwise uses a data-collection program to automatically search and download certain Web pages.

Regardless of what tool is used, 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 Professionals (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 Magazine. A bimonthly publication with articles by peers in the competitive intelligence profession.
• Journal of Competitive Intelligence and Management. A quarterly, international, blind-refereed journal covering all aspects of competitive intelligence and related management fields. This journal seeks to further the development of competitive intelligence and to encourage greater understanding of the management of competition.
• Competitive Intelligence Review. A journal archive for peer-reviewed research and case studies focused on the practice of competitive intelligence. The archive includes contents listings, summaries, and articles from past journal issues.
• SCIP Online. SCIP's e-mail newsletter, sent free to all members twice a month.

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' 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. Held in Seattle, the CI division's 2008 conference entertained such speakers as Vinton Cerf, VP of Google, and Seth Godin, business author.

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.

Strategic Insights. Strategic Insights is a company that conducts competitive intelligence research on a global level, offering companies a thorough and legal way to gain their information.

SIS International Research. SIS is a competitive intelligence firm that does extensive research and conducts interviews with relevant people, including customers, government officials, executives, and suppliers.

The Mind Company. Based in Argentina, the Mind Company utilizes teams of trained experts in competitive intelligence to help organizations across the world. They pride themselves on being internationally capable.

Competitive Intelligence Services, Inc. CIS is an American competitive intelligence company that works to establish connections with organizations, learn their goals and markets, and then aid them in gaining competitive advantage through their intelligence services. To avoid any conflict of interest, CIS only takes one business per particular industry or immediate market.

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