Excerpts

Chapter One What Is Competitive Intelligence, Anyway? It's Not What You Call It, It's How You Use It That Counts Competitive intelligence. Competitor intelligence. Business intelligence. These terms describe one of the hottest areas in business-related information research. The concepts may be related, but each of these terms has a different connotation: the use of publicly available information on competition and competitors to help your company gain an advantage, through strategic decision-making, in a line of business in which it competes. information about another specific company, or group of companies, including such critical factors as financial performance, productivity, market position and strategies. this is broader than Competitive Intelligenceand encompasses information that is not necessarily "competitive" in nature. No matter what you choose to call it, the important thing to remember is that the use of such information has become a strategic necessity in today's competitive business environment. Some authorities have stated that ninety percent of the information needed in a company's CI program is available from publicly available sources, and that the other ten percent can be deduced. Gathering and applying competitive intelligence not only results in a more successful and profitable company, but it may be crucial to its survival. Why CI? The rationale for gathering and using competitive intelligence might be "What's in it for me or my company?" Use CI to Predict a Competitor's Next Moves Knowing what a competitor is up to allows you to respond more quickly to that competitor's plans. The right response could mean greater market share, which translates into greater revenue. The Difference Between Two Millionaires To illustrate the benefit of predicting a competitor's moves, here is the story of two millionaires. And, it is true. Both of our millionaires are self made. They're about the same age. In truth, they grew up very near to each other in Phoenix, Arizona. One made his fortune in a single industry. Starting with a one-room workshop, over a span of 13 years, he turned it into a 40,000 square foot furniture factory -- all his own. The other, whose high school interest was in cameras and electronics, progressed his way up the ladder of success by going from company to company in Silicon Valley, in sales then development and marketing, and finally drawing his big hand in computer microprocessors. In fact, both our millionaires drew big hands -- well beyond $50 million each. Both own large acreage in Colorado and multiple homes in Arizona. By the time both men reached 47 years of age, they were virtually retired. Both rode the wave crest to success in their respective industries. There is one major difference between our two men. The millionaire with the furniture factory had his success in one industry -- manufacturing waterbed frames and alternative furniture. In part, he succeeded due to his perseverance and weak competition. He didn't have to do much competitive intelligence -- what's to be concerned about when your competitors are found hanging out at rock concerts and neglect to follow good common work-sense? Our computer industry millionaire, however, did have to use competitive intelligence. In his fast-paced competitive industry, when it came decision making time, he had to have inside information about the competition -- what Apple was planning, and who the companies in Singapore were selling to, and who had factories in what country, and how many salespeople the competition had out there -- and all sorts of precious tidbits of information that helped him make informed -- and correct -- decisions. Winning decisions. Let's turn the clock ahead quickly. How are our two multi-millionaires doing? After selling off his factory, the furniture millionaire decided to help his son launch a racing bicycle manufacturing business. But, they neglected to investigate what they were getting into -- and promptly ran amuck. Costs far out-stripped returns. The people they chose to assist them in the venture -- largely friends from the former venture - couldn't and didn't perform. Next, he tried a return to furniture manufacturing, but the products didn't catch on. Meanwhile, millionaire number two resigned from his seven figure job with the microprocessor mega-manufacturer (Did his own in-house competitive intelligence warn him to "get out now?"). Because so much of his experience involved competitive intelligence, he now consults mutual fund companies, advising them on the plusses and minuses of the electronics and computer firms the fund managers might invest in. His wealth continues to accumulate. One rode the wave of the waterbed craze and thought he would be successful in any business. He failed twice. The other was in a competitive field where he had to use competitive intelligence. He continues to succeed at whatever business venture he chooses to engage in today. Whether you are riding the wave of success or not, business intelligence and its application are something you need to know, now and forever. Use CI to Turn a Weakness Into an Advantage One mark of the successful competitor in the business world is the ability to triumph over adversity. Ail companies are faced with difficult decisions, from time to time. It's how they are handled that makes the difference! Here's an example: From Fire Sale to Cyber-Sale Because of tight money and a mild winter, Acme Manufacturing was stuck with a warehouse containing a million dollars worth of expensive ski wear that had not sold. Acme hired a consultant to devise a way to sell the merchandise without holding a "fire sale." The consultant, Jane, began to research the problem. As part of her online research, she found several useful pieces of information: * Omega Inc., a much larger competitor, was planning a major advertising campaign for next season. They would introduce a new line of mid-range priced ski wear aimed at the teenage market, and planned to spend "big money" on a major advertising campaign. * Several e-commerce sites on the Web focused on selling sporting goods. For a reasonable fee, it would be possible to establish a web page to tout the high quality and good looks of Acme's ski clothes, complete with graphics showing the product line. The e-commerce site owners would process orders. By eliminating the "middleman" (i.e. retailer), it would be possible to sell the goods at a reduced price using the Internet, and avoid taking a loss on the merchandise. When Acme was presented with this news, they quickly decided to jump into e-commerce. Instead of losing money, they were able to turn the situation around. This near disaster taught them several things: * Given her valuable advice, paying Jane $2000 to be their consultant was clearly worth it. * They could be successful in a new marketplace -- the Internet. * They could learn what competitors were planning, and get into the new marketplace well ahead of Omega Inc and others in the industry. After expenses for their consultant and paying costs incurred using the e-commerce service on the Web, Acme still realized a profit. At the same time, they learned a valuable lesson! Use CI to Become Aware of Change as it Happens, Before It's Too Late to Act Librarians call it Current Awareness, others may call it an alert service. Whatever you call it, the ongoing monitoring of events in an industry, of preferences in the marketplace or of staffing changes that could take a company in new directions is crucial if your company is to be a leader rather than an a "also ran." What follows is the story of one company that successfully used CI to stay on top of change. Managing Potential Problems Proactively MegaCorp, a large multinational corporation, was planning some major changes which would impact employees across the world. Several departments in the company were interested in how these changes would be covered and presented by the media, as well as how the changes would be perceived by the employees and stockholders. Early in the game, special monitoring was undertaken to detect and measure the reactions of these groups, as the various announcements were made over a period of a few months. Bob was assigned to coordinate this activity. MegaCorp needed to monitor the media in a dozen different countries in addition to the US, so Bob arranged for automatic alerting services with LEXIS-NEXIS and set up Custom Clips on Dow Jones Interactive. As a precaution, MegaCorp also decided to monitor broadcast news in case enterprising radio and TV personnel got the story and decided to interview employees. To that end, they signed contracts with the Video Monitoring Service and Financial Times for coverage within and outside of the US (see Chapter 6 for more detail on these services). To put an ear to what employees and stockholders were saying, they used a free Internet service, Company Sleuth (www.companysleuth.com). This service monitored the major Internet message boards on a daily basis, providing a running commentary on what was being talked about in cyberspace by employees, stockholders and other interested parties. Each day, Bob received an e-mail that told him which message boards contained new discussions regarding MegaCorp. He read the messages and identified areas that seemed to be causing concern. As a result of the intelligence turned up during the monitoring, several beneficial results were achieved: * The Human Resources Department learned what employees were thinking. Several detailed articles were published in employee newsletters, expounding upon the data that had been included in "official" announcements, and defusing what could have been a negative situation regarding employee morale. * The Public Relations Department developed a series of press releases stating that the facts of the situation. These were designed to anticipate queries by the media, and to avoid misinterpretation or publication of only "half of the story." * Investor Relations used the input from the message boards as a "heads up." They added explanatory documents to the company web site. In addition, they were able to better prepare their officers to respond to shareholder questions from the floor at the next annual meeting. Use CI to Gain Competitive Advantage Uncovering what the competition is planning provides an opportunity for action -- either defensively or offensively, such as actions designed to gain or retain competitive advantage or market share. The story that follows illustrates the concept of CI being used to gain competitive advantage. Beating the Competition to Market Alpha Company discovered that Beta, Inc, a small start-up company, had apparently begun clinical trials of a new drug. Alpha company had invested significant money and personnel in the development of a similar drug, believing that they had a unique product in mind. Alpha Company also discovered that Beta, Inc's CEO was Mr. X, who was formerly employed by a large international pharmaceutical company. They were very concerned about possible ramifications of this connection, as well as some other "coincidental" facts that had turned up regarding connections between Beta, Inc and large drug companies. Alpha Company's researchers undertook a RUSH online research project to determine (1) where Beta, Inc's clinical trials were underway, (2) what stage the clinical trials had reached, and (3) whether any connection could be established between the small start-up company and one of the large international companies. They were also interested in collecting more information about some of the other people whose names began to appear as the research progressed. The searchers combed the Internet and several specialized commercial databases, and quickly learned where the clinical trials were taking place as well as the stage that had been reached. Scholarly articles from the commercial sources provided solid scientific information. On the Internet, they identified several web sites that track clinical trials, as well as homepages for many pharmaceutical companies, both large and small. Data found here was useful to telephone researchers who conducted interviews with key personnel at several companies. Additional information regarding Beta, Inc's activities was located at the web site of the Food & Drug Administration, where calendars provided information regarding the subject matter of meetings, attendees' names, etc. Alpha also established a connection between Beta, Inc and a former FDA employee who apparently was a Beta lobbyist. By putting together the information retrieved online, and then combining it with the results of telephone interviews and other research, Alpha Company was able to determine what Beta, Inc was "up to." Alpha Company speeded up its own efforts to complete trials, obtain the necessary FDA approvals and bring the product to market long before Beta, Inc was able to do so, thus gaining a crucial competitive advantage. Because of the nearly instant availability of information, and the broad range of resources available in electronic format, Alpha Company was a winner in this battle in the "drug wars." Alpha Company's cost to conduct the competitive intelligence project was $10,000. The estimated profit returned from their new product was in excess of $1,000,000. Who Gathers Competitive Intelligence? Now that we've discussed the uses for CI and reviewed some examples of these uses in action, it's important to discuss who gathers competitive intelligence information. Some searchers for competitive intelligence may not think of the information in those terms. The company may not have given the name CI to what these people do, even though they spend a great deal of time doing it. In-House Specialists & End Users Gathering information may be assumed to be "part of the job." Some people identify a question or need, and set about gathering the information to find answers. Others may be asked by someone else to research a question or problem that involves information about competitor companies or about an industry. The "real jobs" held by these people may include these: * Key player in a small company or in a start-up company who is charged with certain responsibilities for helping the company to grow. * Professional librarian, responsible for supporting the information research needs of various people or departments in the company. (Librarians call this the Reference function, when describing their work.) * Executive engaged in sales, marketing, research and development, human resources, planning or other areas, who needs certain information to fulfill responsibilities that are part of the job description. * Sales person competing with dozens or hundreds of others, sometimes working for the same organization, to compile lists of potential buyers for their products or services. * Entrepreneur starting a new business, trying to create business and marketing plans. * Independent information professional, sometimes known as an information broker, who is hired by-the-project or on a contract basis to gather information required for use in-house by the client. CI Practitioners -- A New Breed More and more these days, we see job descriptions or meet people who describe their position at work as involved chiefly in the area of competitive intelligence. CI practitioners help businesses gather and analyze data to create information, which is combined with what is already known, to create the knowledge base . Words like "interpret," "deduce," or "intuition," are sometimes mentioned in the context of their work, since the knowledge base involves human interaction, and taking advantage of what is already known by those within the organization. The knowledge base is used when studying companies or industries or making various decisions that are crucial to a company's growth or survival. CI professionals come from varied backgrounds, most frequently building upon experience in some area of the business arena, or from working in information research. In general, they fit one of these profiles: * Their background and education is in business or a business-related field. Experience in one or more areas of a company's activity such as sales and marketing, research and development, planning, or other areas, has led to an assignment working in CI. * They have a degree in library or information science and have worked in the company's library or information center, fielding research questions from others in the company. They are now part of the company's CI team, or they receive research requests from that group. * They are a manager, with an understanding of the "big picture" of the company's information needs and challenges, who is expected to have, or to gather, the knowledge required for making decisions that are in the company's best interests. Additionally, some CI practitioners have experience working for the government, often in some intelligence-related capacity. CI Teams Come in All Sizes In the past ten years, more and more large companies have staffed teams or groups that support other departments in the organization, providing the research and analysis needed by the decision-makers. But just as often, smaller businesses have recognized that they, too, cannot thrive and grow unless they use information to their advantage. Business magazines are full of articles about small companies that grew into large ones, because they figured out how to do something better or faster than their competition. This "figuring out" took an awareness of what was happening, of what was needed, and of how other companies were handling the issue. CI activity in your company may be the responsibility of a CI group, or the task may be in the hands of a nucleus of research-oriented people within your department. Likewise, the CI "department" may be a "one person band," (translate that to mean YOU ). What is important is that within your company, the right information must reach the right people at the right time. In the case of factual information, you probably have a deadline. In the case of trends or consumer behavior, or new competitors, however, this means as early as possible. Why CI is Important as We Enter the 21st Century While the development of computers revolutionized life on Earth, events occur just as they have for hundreds of years: wars are won and lost, treaties are made and broken, styles in clothing come and go, new modes of transportation take us further, faster. Yet each of these things has been influenced by new technology. The forward movement that we've made in the Twentieth Century is indicative of the speed with which we are likely to move in the Twenty-First. For a business to prosper, it will be necessary to be able to look ahead and to anticipate change. Competition for Foreign Markets -- The Global Challenge In spite of the daily ups and downs of the financial markets, ethnic wars, sanctions, taxes and politics, new markets have opened and are expanding in many parts of the world. The company that gets there first or best meets the demands of the market, stands to profit. The Changing Face of Business Changes in the business environment make competitive intelligence more important than ever. Treaties like the North American Free Trade Agreement (NAFTA), the emergence of the European Union and similar bilateral treaties have lowered or eliminated trade barriers between countries. Your competition is no longer down the street -- it may be halfway around the world. You can identify competitors by analyzing the growing amount of company information online. One "quick and dirty" way to do this is to search for companies which have the same Standard Industrial Classification (SIC) code as your company. Narrowing your search further might limit results to companies with sales over a certain dollar figure or to those that have more than a certain number of employees. Many free web sites provide SIC code searching, but to limit further, a commercial file like Dun's Market Identifiers would be a good choice. This database can be found on the DIALOG service in File 516, among other places. HOT TIP Hoover's at www.hoovers.com provides a list of competitors in its company records. Hoover's is a good start, but you should also look further. Identifying a company's competitors is a much more complex undertaking than merely generating a list by classification code. The challenge comes in finding more and more details about companies so that you can identify your company's true competitors. That is one of the reasons for this book -- to assist in that identification! Finding Leads Outside of the US But how could a company in middle-America, for example, find leads in places like Eastern Europe? The Traditional Approach A few years ago, you might have contacted a local or regional "incubator" or similar organization. Organizations like the US Department of Commerce offer various programs designed to assist businesses interested in importing or exporting goods and services. Another option was to join a trade mission to a particular country or region. This approach, however, costs time and money, and you might have found yourself competing with other members of the trade mission for contacts in the target country. In the past, you might have hired a consultant. This also costs money, and finding a consultant with good contacts and knowledge of your company's industry presented a challenge. Perhaps you searched the Journal of Commerce or a comparable publication. To get timely leads, you needed a subscription to the publication or access to an online service like DIALOG, which again costs money and required specific searching skills. The Y2K Approach These strategies still are useful, but today, as we approach the new millenium, you have a powerful new tool in cyberspace, which provides additional, less costly possibilities. You can meet, greet and learn using the Internet. The World Wide Web is rife with trade-related sites, and listservs, which are electronic mailing lists or discussion groups that usually require a subscription or registration. Those who wish may participate actively. However, many subscribers prefer to "lurk," which means reading selectively and ignoring items of no interest, rather than frequently contributing to the discussion. This provides an excellent way to keep up with what's being said by others, without becoming entangled in lengthy discussions. For more information on this topic, see "Usenets/Listservs" in the Bookmarks & Favorites section of Part IV. HOT TIP You can search your industry's trade publications using electronic sources. The full text of thousands of newspapers and magazines can be searched in seconds using some of the major commercial database services, see Comparing the "Big Three" Online Services Section in Chapter 3 - Is Everything Really on the Internet? The Purpose of this Book Increased awareness of the need for actionable business intelligence has been fed by a continuous flow of books and articles on the subject. There are books of success stories detailing the results achieved by CI task forces formed at major US corporations, as well as "how to" books which address all aspects of competitive intelligence work, including telephoning, interviews, manual research techniques, or online searching. In addition, specialized works can be found on individual topics like market research or benchmarking. This book is intended as a specialized resource for CI practitioners and others who search for business intelligence. You, the reader, may use it in one of these ways: * To learn about the information tools that are available, if you don't keep up with this topic regularly or if you are new to electronic information research. * To add to your existing list of sources for intelligence gathering. Nobody knows every good online vendor or Internet site regarding a topic. New products or sources come along every week. * To learn how to use familiar tools differently or better, or from another vendor, or for a lower price. Learning More About CI -- Join the Pros One of the most significant events in the evolution of business intelligence gathering was the founding of The Society of Competitor Intelligence Professionals (SCIP) , in 1986. Since that time the organization has grown to more than 6000 members in 44 countries, with an annual membership increase of forty percent. As described on the SCIP web site, www.scip.org, this organization provides its members with networking, educational opportunities, and a Code of Ethics that is taken very seriously by the membership. Annual conferences in the US and in Europe provide additional opportunities for members to expand their knowledge and understanding of the field. Many SCIP members have backgrounds in market research, government intelligence, or science and technology. The FAQ (Frequently Asked Questions) page at the SCIP site makes clear the fact that CI is not industrial espionage, digging through trash bins, or warfare. It is an ethical business practice carried out by those who are smart enough to learn what information to go after, and how to do so. Greater Awareness of CI's Importance If something is a "hot topic" it generates a volume of written material. By that measure, CI is definitely hot. A recent search of magazine and journals in a single business-oriented database located dozens of recent mainstream and scholarly articles about CI. The authors of these articles are not just CI practitioners "preaching to the choir." Publications such as American Salesman, Employment Relations Today and Management Services have published articles on CI, making it clear that interest in CI is corporate-wide. HOT TIP A representative list of books and articles may be found in Part IV of this book in Appendix E. These will provide further information on the practice of competitive intelligence for those new to the field. Competitive Intelligence: Competitor Intelligence: Business Intelligence: Copyright (c) 1999 Facts on Demand Press. All rights reserved.