Competitive Intelligence: Strategically Critical yet Underutilized

Competitive_intelligence.jpgIn a world where knowledge is power, what you don't know can hurt you. The good news: It's not so hard to find out what your rivals are up to. Competitive intelligence can drive your strategy, calm your fears about the future, and give your company a competitive edge. Competitive intelligence uses many of the same techniques as market research but deploys them to answer highly targeted and specific questions, rather than to gain insight into broad market trends.

Any successful approach to achieving top-line growth must take into account what your competitors are, and are not, doing, and balance those insights with a detailed understanding of promising market opportunities. Ignoring either of these activities puts top-line growth at risk. 

Companies must therefore invest not only to keep pace with competitors, but also to render them irrelevant whenever possible, while simultaneously anticipating and preparing for the next threat or opportunity. Wal-Mart is an example of this. 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' customers.

Strategic and competitive planning has traditionally been a slow process, which puts it fundamentally at odds with the rapidly moving and shifting needs of most companies today. This is true especially with those operating in crowded, highly contested markets. For this reason alone, many companies admit to including only superficial analysis of competitive strategy in strategic planning.

A recent survey found that two-thirds of strategic planners believe that companies should consider expected competitor reactions when making decisions, and yet fewer than one in 10 recalled having done so, and fewer than one in five expected to do so in the future. In another survey, 71 percent of U.S.-based companies claimed to use competitive intelligence to guide their decision making, but most admitted using it for operational or tactical reasons (e.g., pricing, marketing) rather than strategic ones (e.g., sales purposes, new product launch planning, strategic alliance formation). Consequences of misguided competitive decisions include lost profit margin and revenue, relinquished market share, and acquisition by a competitor.

Competitive intelligence can help managers discover new markets or businesses, beat the competition to market, foresee competitor's actions and reactions, 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.

So what information is needed to develop a meaningful ongoing competitive intelligence process, and how can a company get this information? The market dynamics and competitive set will play a large role in dictating the information needed to conduct meaningful competitive intelligence research. For example, the intelligence research for a mature, price-sensitive market may focus more on competitive cost structures; while research in a dynamic, tech-driven market may focus more on competitive technology and innovation. However, there are common elements in most well-designed competitive intelligence efforts, including the following:

Technology and Innovation – Technology and Innovation, whether acquired or internally developed, provides a very strong indication of strategic direction. An understanding of the type of machinery being purchased, raw materials being used, and manufacturing jobs postings may provide an indication of competitive manufacturing strategies or how plants are staffed and their cost structure. Reviewing patents filed by competitors is also a great resource for developing a better understanding of strategic direction. Staying informed of potential partnerships, mergers, and acquisitions provides excellent insight into overall strategic direction in both current and new markets. 

Financial Profiles – Financial information is not only very fertile ground for competitive intelligence, but also easily accessible for publicly held companies. In addition to annual reports and SEC filings, analysts’ calls are a very good source of information. Financial information for privately held companies is more challenging to obtain. The best option for collecting data on private companies is a third-party data service such as LexisNexis, Hoovers, or Avention. 

Cost Structure and Pricing – Cost and pricing information can be extremely valuable, but is usually the most difficult piece of competitive intelligence to collect. This type of information is typically very guarded by both competitors and customers. Market research firms can provide company specific cost and pricing information through the use of methodologies such as conjoint analysis and/or Van Westendorp’s Price Sensitivity Meter.   

Overall Strategic Direction – In addition to many of the methods reviewed above, one of the best ways to better understand the strategic direction of competition is to visit their displays at local and national tradeshows. First, tradeshows in which competitors decide to participate can provide a clear picture of the markets they are pursuing. Secondly, the theme, messaging, and the products highlighted usually support the overall strategic picture. If you incorporate tradeshow visits into your competitive intelligence activity, it may be beneficial to hire a research firm to visit competitive booths, as many booth attendees are trained to look out for competitors seeking information.

Strengths & Weaknesses – Understanding relative strengths and weaknesses is an important aspect of competitive intelligence. Developing a solid understanding of which critical product and service attributes drive satisfaction and value in the market is the first step. This, coupled with the knowledge of your company’s performance as well as competitors’ performance on these critical attributes provides a clear picture of how well you compete on the key drivers of customer satisfaction and value. Developing this depth of competitive intelligence through “Voice of Customer” research can create an invaluable competitive advantage, providing unparalleled insight when making strategic decisions.

The information and search capabilities of today’s internet can provide a wealth of competitive information, especially financial and technical data. However, to develop a more robust and unbiased understanding of the competitive landscape, including costs, pricing, and “Voice of Customer,” the best results are accomplished using a professional market research company.

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Editor's Note

This post was written by Priority Metrics Group (PMG), a partner in custom research.

About PMG

Priority Metrics Group (PMG) is a professional marketing consulting firm based in Spartanburg, South Carolina. PMG provides customized research, analysis, and consultation services designed to generate profitable growth for clients. They work with leading organizations in a variety of manufacturing and service industries. They are experts at gathering and processing market information, analyzing data, and translating information into actionable growth initiatives.          

Topics: Market Research Strategy Custom Market Research