Basics of Competitive Intelligence and Information Advantage - dummies

Basics of Competitive Intelligence and Information Advantage

By James D. Underwood

Every field of study has its own terminology. The two key terms you need to know in this field are competitive intelligence and information advantage.

What is competitive intelligence?

Competitive intelligence is the process of legally and ethically gathering, analyzing, and acting on information about an organization’s market environment, competition, and other forces that may impact its future success. Done well, CI reveals future opportunities and serves as an early-warning system to help companies steer clear of organizational disasters.

Here are some key points to keep in mind about competitive intelligence:

  • CI isn’t spying. Professionals don’t participate in or condone the use of illegal or unethical means of gathering intelligence about competitors.

  • The CI process involves four essential steps: planning, gathering, analyzing, and executing. If any step is missing or performed poorly, the value of the CI is compromised.

  • CI is service oriented. Think of CI as a product and your organization’s leaders as clients. To be useful, CI needs to be tailored to the type of intelligence the organization’s decision makers need in order to gain a competitive edge.

  • Successful CI requires the right combination of process and people. The process ensures that all four steps — planning, gathering, analyzing, and executing — are completed efficiently. CI must team up with the decision makers during the planning stage to identify the types of information needed and what it will ultimately be used for.

    Planning ensures that CI is able to gather high-value information that’s targeted to answer a question, solve a problem, avoid a costly mistake, or identify opportunities or threats. Analysts must convert that raw information into meaningful intelligence. Executives and managers then need to put that intelligence into action. Failure at any stage is failure overall.

By understanding decision makers and other influential individuals and groups within the organization, their intelligence needs, and the involvement of executives, the CI team can markedly improve the ability of an organization to execute on important information.

Here are a few CI activities that may be similar to what you’re already doing:

  • Sales people hear comments from customers about a competitor’s next big product.

  • Your CEO hears a speech by a competitor CEO that talks about a change in strategy.

  • One of your company’s drivers reports seeing a new type of distribution equipment on the back of a competitor’s truck.

  • Your sales manager hears a story about your largest competitor’s pending merger with an industry supplier.

  • You just noticed that your top competitor has changed its mission statement on its website to appeal to a new segment of the market.

  • A trade journal features an article about a new technology that can reduce manufacturing costs by 50 percent.

If your organization is like most, it’s probably not analyzing the info or executing responses, which are two of the essential steps of the CI process. Leadership needs to put that intelligence into action.

What is information advantage?

Simply put, information advantage is what an organization achieves when it uses competitive intelligence (which deals with external factors) to gain strategic insight into internal analytics (an understanding of what the numbers mean). You can look at it as a formula:

Internal analytics + External competitive intelligence = Information advantage

Information advantage can help you answer key competitive questions, such as: “Why did sales of product X decline last quarter?” and “Why did sales of our product mix change in the United Kingdom last month?”

CI constantly monitors where you are and provides feedback so you can correct your course and remain on track as your competitors lose their way. With information advantage, you use people and technology, internally and externally, to continuously create preemptive business strategies to boost profits and win market share.

If you don’t gain information advantage, you’re at information disadvantage in relation to any competitor who’s engaging in competitive intelligence and using it to shed light on its internal analytics.

Note that in the context of the term information advantage, information is the product of CI and internal analytics, such as sales trends; it’s the insight gained through the careful analysis of facts. Outside the context of information advantage, the term information refers to raw, unprocessed information. In general discussions, you need to understand the distinction between data, information, and intelligence:

  • Data: Unprocessed facts or figures outside of a context that would make them meaningful. If your company sold 50,000 bouncy balls last year, that’s data. But without anything to compare that number to, it’s not meaningful.

  • Information: Facts or figures in a meaningful context. If your company sold 50,000 bouncy balls last year and 100,000 the previous year, that’s information. You know that sales of bouncy balls declined by 50 percent.

  • Intelligence: Insight that can lead to better decision making. Your sales of bouncy balls declined by 50 percent last year because the market was saturated with bouncy balls. You now know the reason and can plan accordingly.

Distinguishing competitive intelligence from competitor intelligence

Another key distinction to make is between competitor and competitive intelligence:

  • Competitor intelligence: Competitor intelligence focuses solely on what competing firms are up to. If you’re focused solely on the competition, you’ll always be at least one step behind, and you’ll never be able to take the initiative to seize opportunities. You’ll also be more prone to engaging in industrial espionage.

  • Competitive intelligence: Competitive intelligence analyzes everything that could possibly affect your market, including emerging technologies, legislation, industry regulations, customer sentiment, changes in the industry and the economy, and other factors, as well as what competitors are up to. Competitive intelligence provides the insight you need to gain a first-mover advantage.

Don’t get hung up on the competition. Opportunities are more likely to arise from what the competition isn’t doing to serve customers than from what it is doing.