An organisation thrives when it discovers, develops, and delivers what its stakeholders want - not just customers - in the form of winning business strategies.

Developing winning business strategies relies on making informed choices, which requires the availability of reliable, relevant and timely information.

The purpose of competitive intelligence is to make sense of the vast amounts of data available about the environment, about competitors, and about markets. It is a key component of the organisational intelligence framework for an agile corporation (see the 'The Agile Corporation' White Paper).

What is Competitive Intelligence (CI)?

"Competitive Intelligence (CI) is a process - using legal and ethical means - for discovering, developing, and delivering timely, relevant intelligence needed by decision makers wanting to make their organisation more competitive - in the eyes of the customer. It is used for assisting in strategic decisions, such as product development, mergers, acquisitions and alliances, as well as tactical initiatives, such as anticipating and preempting likely moves by customers, competitors, or regulators."

The Society of Competitive Intelligence Professionals (SCIP) describes CI as "Competitive intelligence (CI) is the process of monitoring the competitive environment. CI enables senior managers in companies of all sizes to make informed decisions about everything from marketing, R&D, and investing tactics to long-term business strategies. Effective CI is a continuous process involving the legal and ethical collection of information, analysis that doesn't avoid unwelcome conclusions, and controlled dissemination of actionable intelligence to decision makers."

Military Intelligence - The Genesis for CI

Western intelligence came about with the opening up of trade routes from Europe to Africa and India and later to the New World. Political and commercial intelligence became important to European nations with governments, large trading houses and banks developing extensive intelligence networks. In 1815, Rothchilds Bank used its own network to learn about Wellington's victory at Waterloo before others and exploited this information to their great advantage.

Military intelligence developed greatly in sophistication during the Second World War with emphasis on analysis techniques, including the use of the first computers. Prior to this war, there had been a large dependence on spies for intelligence gathering which was largely ineffective.

The CIA is probably the best known government intelligence agency in the world. They describe the intelligence process as the Intelligence Cycle.

It was only in the 1980s that large corporations started using CI techniques to help in providing more accurate information for use in strategic planning.

Today, true CI professionals operate by a code of conduct that involves only legal methods of obtaining information. By using creative ways to obtain information, it is possible to build up accurate pictures without the need for espionage or spying. However, there have been instances where unscrupulous individuals have been caught spying. One notable case was that of Hitachi executives being indicted in 1982 for conspiring to steal trade secrets from IBM. After some months Hitachi pleaded guilty and the corporation and two employees received heavy fines.

Signals and Data

In many cases organisations want to give off signals and strive for these signals to be received by the target audience. For example, a business looking to hire new employees may place an advertisement in the press. In looking for new buyers of their products, companies will usually publicise their products widely. These are examples of publicly available data that can become valuable pieces of intelligence about a competitor.

CI Allows You to Gain Competitive Advantage

Imagine you're the boss of the new Titanic Casino - supposedly the grandest casino in the world. Opening night was just spectacular with big names in the entertainment industry attending from all over the world. The event was simply stunning. However, not long after the casino first opened the Asian currency crisis hit and it didn't take long before the 'high rollers', the source of major revenues, were gone. Income from other sources was not meeting expectations. The share price tumbled and your job is now on the line. What happened? Why didn't you see this coming? Why isn't there a radar available for business like there is for ships to show what is happening in the environment and to avoid hitting an iceberg, for example?

Well, there is such a 'radar' and it's called Competitive Intelligence. Like a ship which uses a number of navigational aids such as radar, depth sounders, and satellite navigation equipment, CI analyses not just the environment, but competitors, and markets as well. Abraham Lincoln once described how to govern a nation with how one would steer a riverboat. "You don't just set your compass and head south - or you will quickly run aground. Instead you steer from point to point, according to how the river is running and the obstacles that appear in your path."

CI provides senior management with the up-to-date and relevant information needed to formulate winning business strategies in marked contrast to relying on out-dated assumptions about what's happening in the marketplace.

The CI Process - Designed for Efficiency

The Competitive Intelligence process is composed of six phases:
1. Destination Phase is the preparedness and the capability to perform the task
2. Demand Phase identifies the information needs and determines the approach to be taken
3. Discovery Phase involves seeking out and collecting the information sources by legal means
4. Development Phase produces a meaningful picture from the pieces of data that have been discovered and analysed
5. Delivery Phase communicates the resulting intelligence to the right people at the right time
6. Disengagement Phase involves debriefing clients and reflecting to improve the process.

See CI-Action - Implementing a Competitive Intelligence Capability

2. Demand phase
This is where an assignment starts. Because there is so much data, it is vital that some boundaries or frameworks are put on the CI activity so as to focus on the most important areas of interest. There needs to be a statement about what it is you really need to find out and why. For example, "What is the answer to this problem . . . " or "What can we do to take advantage of this opportunity . . . ?". From this we need to identify the Key Intelligence Topics (KITs) and Key Intelligence Questions (KIQs) that need to be addressed by the CI unit.

Note that CI is much more than competitor analysis. CI examines areas that are fundamental inputs to the strategic planning process: the environment, competitors and markets. This data complements micro-environmental information available from internal sources about existing customer behaviour and trends. Usually called business intelligence, it often involves data warehousing and data mining to provide this information from internal databases.

3. Discovery Phase
Discovering information about what's happening in a market is not new. All businesses do this to some degree. However, particularly in small-to-medium sized businesses, this is usually an ad hoc and disorganised activity. It might occur after a company has lost a bid to a rival company. Or it might occur when there is a prospect of buying out another business and due diligence on information from external sources is required. So a key word in this definition of CI is process, meaning a structured way of gaining competitive intelligence. We need to ask ourselves, "What do we already know?", "What do we still need to find out?", "What information sources can we use?", and "How can the information be stored?"

CI practitioners rely on publications, suppliers and customers as the most popular sources of information, followed by company employees, industry experts, the Internet, industry conferences, and commercial databases. In fact an enormous amount of information already exists within a firm but it is usually ignored, unorganised and untapped.

4. Development Phase
Analysis is the means of making sense of the myriad of data available. It involves evaluating the data for usability by taking into account the relevance, truth value, understandability, sufficiency, significance and timeliness of the data. Information is then collated and synthesised according to the target and priorities set by users. The relevant questions we should ask ourselves are, "Do we have enough information to meet the needs of the set task?", "Is there superfluous information that can be left out?", and "How can we best combine the information from different sources?".

5. Delivery Phase
The filtered information is stored and disseminated to the relevant interested parties via written reports, or e-mails, or verbally. On-line facilities are often provided for users to access stored intelligence reports. The questions we should ask ourselves at this point are, "What will we do with this information?", and "With whom can we share this information?"

Two very different situations may be involved with the delivery phase. The first is where the intelligence function is separate from the decision making function, an example being where a CI unit may be asked to provide input to the board of directors who need to approve a take-over strategy. On the other hand, operational decisions are frequently handled by members of cross-functional teams who may also be involved in assessing and developing the intelligence. In this case, the intelligence function needs to be integrated with the decision making. An example is where a company may be come aware of an imminent new product announcement by a competitor, and as a result may decide to bring their own new product launch forward.

6. Disengagement Phase
This is an important element missing from the CIA intelligence cycle. Single-loop learning takes place through reflection on what occurred and by identifying ways to improve the process next time. We need to ask ourselves, "Did the results match the expectations of the initiator?", "Did we achieve our purpose?", "In what ways could the results be presented to improve communications?". This step ensures quality in the process. This step applies both in the case of on-going monitoring or in the case of a once-off assignment.

Although computers take a major role in CI systems, there is a large, necessary component of human involvement in all phases of the CI process.

CI Enables Effective Business Strategies

Every time a customer decides to buy something, a competitive assessment takes place. This doesn't necessarily mean they will only take the lowest priced product or service. They will look to what they perceive gives them the best value or look to what product or service they perceive best meets their needs. Every sale that is made, therefore, is up against some competitive force.

In the twentieth century we have gone from a situation of scarcity of product to today having an abundance of choice. With many choices available to buyers, having a competitive advantage is vital to the company that wants to thrive. Knowing the competition is one part of understanding competitive advantage and this relies on information.

Information is key for both tactical and strategic business decisions. For example, analysts in stockbroking firms continually assess companies for their investment potential and investment decisions are made daily. For many years now the strategic business plan has been looked upon as the main vehicle for setting the long-term company direction. In The Renewal Factor by Robert Waterman, he says to "treat information as the main strategic advantage". He also adds that it is not just information, but being alert to opportunities and having intuition play a large part in developing flexible and effective strategies.

In a survey conducted by The Futures Group in October 1997, respondents were asked to identify where intelligence is needed to make decisions. These areas were ranked in order of importance:

1. Competitive Activities
2. Changing Market or Industry Structure
3. Customer or Supplier Activities
4. Emerging Technology Initiatives
5. Global Economic Conditions
6. Regulatory Climate
7. Political Climate

In the book, Business Blindspots by Benjamin Gilad, he says, "Competitiveness is based on learning, which is based on the ability to listen: to customers, to consumers, to partners such as suppliers, or to competitors, to industry experts, and, most important, to one's own employees. The essence of this philosophy is so simple it is embarrassing. The competitive environment sends messages all the time: signals about change, trends, prospects, threats and weaknesses. Early on, these signals are weak, ambiguous and hidden. Tapping them and then learning from them is an art that requires open eyes, ears and minds."

Using computers enhances productivity

Companies are finding the availability of information on the Internet especially beneficial for carrying out secondary research, for monitoring government information, and for internal dissemination of intelligence via intranets. In a survey conducted by the Montague Institute, the top three reasons cited by respondents for their company's use of the Internet and intranets were to:

• Improve the quality of competitive or business intelligence (70 percent)
• Increase the cost effectiveness of acquiring, disseminating, and using internal information (58 percent)
• Add value to existing products and services (55 percent)

In the Development and Delivery aspects of CI, Lotus Notes is probably the most widely used software for storing and disseminating competitive intelligence in the large corporations. There are several software developers who have written packages for CI requirements and this is now extending into the area of knowledge management.

CI is Used by Top Companies

According to The Futures Group survey, eighty-two percent of USA companies with revenues over $10 billion have an organised CI system. Companies perceived to make the best use of business or competitive intelligence are, in order of ranking, Microsoft, Motorola, IBM, Proctor & Gamble, General Electric, Hewlett-Packard, Coca-Cola, and Intel.

References

CIA Intelligence Cycle.

Competitive Intelligence Booklist..

Competitive Intelligence -- Get Smart!, Fast Company, April 1998

Kahaner, Larry. Competitive Intelligence : How to gather, analyse, and use information to move your business to the top.

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