Competitive Intelligence

Competitive intelligence (CI) aims to assess and predict competitive developments which can affect an organization's performance. The goal of CI is to guard a company's long term profitability. Companies that understand CI create, run and use CI as an early warning system. Companies that don't, waste resources of monitoring competitors' every move with no clear effect on their own performance.

Competitive intelligence (CI) is the analysis of risk and opportunities in the environment of organizations facing competition for their services or products, based on predicting the moves of high impact players (HIP) in the market.  The scope of competitive intelligence coverage includes the moves of existing competitors, new competitors, customers, suppliers, competing industries (substitution effects), as well as influence players such as government agencies, politicians, technolocy diffusers, etc. An alternative name for competitive intelligence practitioners in commercial enterprises is industry risk analysts.  Most Fortune 500 companies today employ one or more CI managers in their various business units.

Competitive intelligence has been institutionalized in most large companies (97% of Fortune 500 as of 2008) by the late 90s. Many companies created a whole CI department comprised of several analysts and collectors. Collectors of intelligence bring in the data from the competitive environment and the analysts then interpret developments for their potential effect on the firm’s botom line. The mission of CI is to alert management at various levels (from product all the way to corporate) to upcoming changes in the market with potential for risk or opportunity before these become obvious. 

 

Even companies that can’t afford a whole CI department employ CI analysts. Those “Lone Rangers” as they are known in the CI community rely on collection network, tapping employees coming into contact with outside players (customers, competitors, suppliers, etc) to provide the input for the analysis resulting in intelligence. The intelligence is then fed to decision makers at the account, product, brand, business unit or corporate level depending on its strtegic or tactical relevance. 

 
While CI in its present form was developed first in the US, it has spread across the globe. European, Central and South American, and some Asian firms follow the basic CI model developed by Ben and Tamar Gilad in their book, The Business Intelligence System which was first published by the American Management Association in 1988. However, the US is still leading in CI practices, acceptance of the function inside corporate cultures, and relationship with top management. The professional association in this field, The Society of Competitive Intelligence Professionals (SCIP) was founded in the US in 1986 by a group of US based information vendors. Today SCIP boasts chapters around the globe but its US membership is its core strength. Some countries, such as France and Germany, created independent CI associations, though it is unclear how acceptable CI is among German firms, or how much of the “CI” in France is an analytical business practice or “industrial espionage” influenced by the government secret services. 

 

History

Organizations collected intelligence about their environment since the beginning of time. The academic precedent of modern CI can be traced to the works of Francis Aguilar of Harvard (Environmental Scanning, 1967) and Harold Wilensky of UC Berkeley (Organizational Intelligence, 1967). Environmental scanning was in vogue for a while among very large companies, but the practice proved too academic to yield real bottom line results. In 1980, Michael E. Porter of Harvard published his Competitive Strategy work (Free Press,) which set the stage for analyzing competition in a systematic way.

 
In 1985, Leonard Fuld published his best seller, Competitor Intelligence - How to get it, how to use it and with the creation of SCIP and the publication of Gilad’s book, CI was born as a practical, result-oriented commercial function and process.  Several influential works followed, among them Herbert Meyer’s Real world Intelligence (1991) and Ben Gilad’s Business Blindspots (1994), and competitive intelligence was on its way to become the newest corporate practice since marketing was born in the 50s and strategic planning in the 60s. From the first such function at Motorola, created and led by Jan Herring in 1982, the function spread to every major corporation in the US and with a delay of 10 years, to Europe. 

CI has known ups and down among various industries in accordance with their fortunes and competitive pressures. Early adopters such as chemical companies and utilities were going through globalization of competition and regulatory changes, respectively. Others, like Pharmaceutical companies, were flushed with cash and wanted the latest in corporate best practices. Late comers such as insurance companies were cautiously proceeding with what seemed a reasonable practice to protect against strategic risks. However, ups and downs have been the norm even within an industry, where some companies have developed world class intelligence capabilities and others are struggling with basic information desks activities. This has been the result of varying levels of understanding of how to deply professional intelligence skills, misconception about what CI is, and generally lack of experience in managing this new activity.

The creation of the first professional institute of CI, The Fuld-Gilad-Herring Academy of Competitive Intelligence in 1996, brought discipline and higher quality to the field. The Academy, a cooperative venture of three leading figures in the field, evolved into the main certifying agency in the field, granting CIP certificate to CI managers completing its 12-course rigorous program (including a workshop in ethics), and sitting for a certification exam. To date, 270 CIPs graduates of the Academy serve as leaders of CI functions among the Global Fortune 500s. The Academy also trained thousands of marketing, sales, business development and strategic planning managers in basic skills of competitive intelligence. In an attempt to further raise the standards and reputation of the field, the Academy sought and achieved first of its kind accreditation by the International Association for Continuing Education and Training (IACET) for its training.

 

Principles of effective CI process

The field of CI has sprouted enormous literature in a short time, two periodicals (CI Magazine and CI Review published by SCIP) and hundreds of articles. Naturally, the “formulae” cookbooks and articles about the best practices of CI flourished as well. Surveys by the Academy of CI suggest that there is no one “best practice” recipe to create and run a CI function in a company. Instead, the function's effectiveness probably depends on the firm's culture, its decision makers' (inate or acquired) inclination to use intelligence, the synthesis skills of the CI analyst (as contrasted with analytial skills alone), and the competitive pressures on the company.
 
It is clear, though, that CI has various levels of effect on a company’s profitability and therefore companies who miss out of one or more of these effects are benefiting less from CI.

 

The highest level of CI is strategic, what Ben Gilad calls Strategic Early Warning system in his book, Early Warning, 2003. Most companies who focus their CI efforts on short term, tactical competitors’ activities miss out on using CI to affect long term strategic positioning. CI supporting sales and marketing tactical moves can yield a satisfying win in local battles, but waking up management to strategic risks (and opportunities) is several times more important for the future prosperity of the enterprise.

 
Many companies make the mistake of using CI as a monitoring process for competitors’ current activities. While it is important to keep an eye on what is happening in one’s market, the second principle of effective CI moves the discipline from a descriptive (information reporting) mode to a predictive (analytical intelligence) mode.

Another mistake is to assume that competitor and competitive intelligence are synonymous. They are not. Competitive intelligence covers all high impact players, not just competitors. In many industries, strategic changes to buyers, new potential competitors, and the rise of substitute technologies are more risky than the activities of existing incumbents. The third principle of effective CI means the scope of CI is always the industry, and that the CI function must serve as a convergence point to all external information with competitive implications. Silos of information and political haggling typically reduce the effectivenes of the CI analyst.

 
Within these three principles, CI activities can be performed in many ways, and organizational structures are less important than relationships. Whether the CI function is independently reporting to the chief decision maker (President of Business Unit), or to VP of Marketing, is less significant than the relationship between the CI manager and the executives. If the CI manager is not accorded a seat at the executive table, and does not enjoy credibility there, executives are shortchanging their own performance. If CI is filtered through several layers before it reaches senior management, senior management is deprived of true insights. Size, resources, and products of the CI function or the CI manager are much less important than the trust he or she enjoys from the decision makers who need to outsmart competitors in the fight to capitalize on industry structural changes.

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