Competitor Analysis - A Brief Guide
The Basic Principles of Competitive Intelligence
This guide to competitor analysis is by its nature, elementary and is a summary and precursor to a more detailed article published in Business Information Review in June 2002. (This can be accessed from our CI Articles request form). There are also many books on the subject - covering everything from finding information on competitors, to analysing the information and finally using it in business strategy. We list a number of titles on our recommended books pages - (for example the classic texts on strategy by Michael Porter - Competitive Strategy and Competitive Advantage). We can also help you in most aspects of CI offering research and analysis services, as well as training and CI workshops so that you can learn how to do CI effectively yourself. However, enough of the preamble....
No business is an island. For success, the business will need to deal with customers, suppliers, employees, and others. In almost all cases there will also be other organizations offering similar products to similar customers. These other organizations are competitors. And their objective is the same - to grow, make money and succeed. Effectively, the businesses are at war - fighting to gain the same resource and territory: the customer. And like in war, it is necessary to understand the enemy:
- how he thinks;
- what his strengths are;
- what his weaknesses are;
- where he is vulnerable;
- where he can be attacked;
- where the risk of attack is too great....
and so on. And like in war, the competitor will have secrets that can be the difference between profit and loss, expansion or bankruptcy for the business. Identifying these secrets is thus crucial for business survival. But all this is not new...
Sun Tzu and the Art of War
Around the year 500 BC, the great Chinese military strategist, Sun Tzu wrote a treatise on the Art of War. From a 21st century perspective, many of Sun Tzu's approaches would be viewed as barbaric today. Nevertheless, his views on strategy are still relevant today - for both military commanders and business leaders looking at how to win against competitors. For instance:
If you are ignorant of both your enemy and yourself,
then you are a fool and certain to be defeated in every battle.
If you know yourself, but not your enemy,
for every battle won, you will suffer a loss.
If you know your enemy and yourself, you will win every battle.
Who is a competitor in business?
Business competitors are:
- Other organizations offering the same product or service now.
- Other organizations offering similar products or services now.
- Organizations that could offer the same or similar products or services in the future.
- Organizations that could remove the need for a product or service.
Why monitor competitors?
By knowing our Competitors we may be able to
predict their next moves,
exploit their weaknesses
and undermine their strengths.
Customer's usually know the differences between companies - their good points and bad points. They know that company A is cheaper than company B and that company C has a better after-sales service. For a business to operate in a market and not know the same, and more, is tantamount to giving up the battle without even starting. As Frederick the Great said:
It is pardonable to be defeated, but never to be surprised
So what is involved?
There are four stages in monitoring competitors - the four "C"s:
- Collecting the information (with a first stage - deciding what to collect)
- Converting information into intelligence
(with three steps: CIA -Collate and catalogue it, Integrate it with other pieces of information and Analyse and interpret it)
- Communicating the intelligence.
- Countering any adverse competitor actions - i.e. using the intelligence.
One mistake a lot of people make is to start by collecting information without thinking how the information will be used. There is no value in information that will just sit on a shelf. If it cannot be used to inform the business's strategic or tactical decisions then the time, money, and effort spent collecting it is wasted.
- The business may be planning a new product - so information on what competitors are doing in the same area will help in the decision processes and plans for this new product.
- Alternatively, the business may be looking at how the industry will develop over the next 5 or 10 years.
- Or perhaps the board is looking at a potential merger, acquisition or business partnership.
The information requirements for each of these business decisions will be completely different and so the information that should be sought will also be different.
Thus before starting to search for information the competitor analyst needs to sit back and define what they are looking for and why. They need to identify the key areas of concern for the business decision makers requesting the information, and aim to satisfy these.
Other information may be interesting, but unless it helps the decision process it should be viewed as superfluous, and stored for use at another time or even ignored if it is unlikely to ever have value. (As an example, it is generally not necessary to know the name of the CEO's children to understand how the CEO makes decisions.) Thus, rather than collecting information in a random or haphazard manner, the search needs to be focused and planned, and aimed at answering the various intelligence requirements of the business (often termed key intelligence topics, or KITs).
Collecting competitor information
Information will come from a variety of sources, both within the organization and external to it.
- Sales representatives deal on a daily basis with customers - and will hear what the competitors have been doing. They are the business foot soldiers - with the ear to the ground who can forewarn management about impending enemy campaigns.
- Research & Development may come across new patents.
- Purchasing may find out that a supplier is now also supplying a competitor.
- Market research can give feedback on the customer's perspective
...but these are just examples of where information can come from.
Information can also be found on the Internet itself - most companies are now advertising their services and some specialise in offering information that can be used for competitor research. Among the best are D&B (Dun & Bradstreet) with a database of over 30 million companies world wide. If you need to know about both private and quoted companies this is one of the best sources. Few other companies offer the same global scope - although some local companies will give D&B a run for its money for single country information. For public companies, there is also the D&B subsidiary, Hoovers, which holds considerable information - much of it free. Patent information can be obtained from companies such as Thomson Scientific's patent service (formerly known as Derwent Information) or from local patent offices. And global press information is available from databases made available by companies such as Dialog (also from the Thomson group), Lexis-Nexis and Factiva. There are numerous other web-sources - discussion forums, web-logs (blogs), podcasts, protest groups, customer and governmental sites and so on. We include some of the web-sources we use to search for competitor information on our CI Sources links pages. You can also find information at trade shows and conferences, and by interviewing industry experts, your competitors' customers and suppliers, ex-competitor employees - or even the competitor although there are ethical issues involved when obtaining information from some of these sources.
From information to intelligence
Having scanned the press, searched the Internet, spoken to the sales force, customers, suppliers, Uncle Tom Cobbley and all, there should now be a large pile of data on your competitors.
Unfortunately much of this data will be repetitious, out of date, wrong or inaccurate, misleading, or incomplete. However like a jigsaw, each piece can help build up the compete picture. And even if some pieces are missing, you can often get a good idea of what the real picture actually is - even if other pieces are damaged and not all remaining pieces fit perfectly. For example,
- the company report can give an idea of a company's health - which will be enhanced by information from trade suppliers, trade press articles, and credit information agencies such as D&B;
- Patents give an idea of R&D activity;
- Trade press gives an idea of marketing activity.
And of course there are specialist organizations such as AWARE that have the techniques to dig deeper and get information that can lead to an idea of competitor strategy and future trends.
All this information needs to be collated - with any links and commonalities highlighted. The information will need to be indexed and catalogued - so that when new information comes along, it can be quickly linked to similar information that had previously been found. It may be stored in a custom-built or dedicated competitor database accessible via the company Intranet - although it can also be stored in much less sophisticated forms.
Finally, the relevance and importance of each piece of information needs to be interpreted and analysed - on its own and in conjunction with other information, the other pieces in the jigsaw. This is where information starts to become intelligence.
Communicating the intelligence
Many companies are overly secretive, protecting information that all their customers and competitors already know. Secrecy is important. It can be extremely dangerous to let a competitor know about the new product being developed. However, letting the sales force attempt to sell products without a full awareness of their products' strengths and weaknesses relative to the competition is like sending them out with one arm tied behind their back. They will be unable to answer objections and comparisons convincingly, and thus are less likely to make the sale. And if the competitor product is that much better then shouldn't marketing, or product development be looking at ways of improving one's own product - rather than hiding the damaging news ostrich like?
Competitor intelligence needs to be evaluated and selectively communicated to all who need to make decisions based on what customers, suppliers, or other companies in the market are doing or are likely to do. And in today's world, that usually means everybody. The worker in the factory needs to know why production processes have changed from what was always done if he is to believe in management. The Mushroom theory of management (keep 'em in the dark!) has always had its adherents but has not usually succeeded in the long term.
Countering Competitor actions
Having identified what competitors are doing, battle can be entered. Sometimes the battle will be vicious - especially when two competitors have been slogging it out for years. (Pepsi vs. Coca Cola; Procter & Gamble vs. Unilever). Various military strategies have been used to describe different approaches to beating competitors - flanking strategies, encirclement and siege strategies, frontal attacks and even guerrilla marketing tactics. However it should always be conducted within the law. Although it is tempting to use underhand ways of gaining an advantage, certain activities may result in a prison sentence as well as extremely damaging publicity, loss of goodwill and loss of revenue.
Collecting Information on competitors can be likened to prospecting for gold. Nuggets are a rarity. The prospector will need to sift through a lot of soil, to find the few grains of gold which make the task worthwhile. Occasionally, the prospector will even be tricked by iron pyrites - or "Fool's gold"!
Similarly, some of what is collected on competitors will turn out to be useless. Sometimes the information may be completely wrong and lead the unaware on the wrong path. However with experience, this is less likely, as with the skilled gold prospector and "Fool's gold".
Competitive Intelligence Training
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Finding Competitive Intelligence using Online Sources
AWARE consultants are experts at discovering competitor information online and have developed a market-leading course on Finding Competitive Intelligence using Online Sources. This course has been given as an in-house course to numerous companies across industries (IT, publishing, telecoms, chemicals....) and countries, as well as publicly at SCIP annual and European conferences, the London International Online Information Conferences and other similar events.
The workshop has received high praise for its unique approach to finding competitive intelligence on the Internet. The workshop - available as a half-day summary, full day or 2-day in-depth training course with extensive practical online sessions - teaches attendees how to find actionable competitive intelligence rather than just present a list of sources that quickly date. Like all AWARE's in-house training, the course can be customised to focus on industry or competitive area.
For more information on this workshop and how it can help you become a more effective Internet researcher check out our Competitive Intelligence Training and ask us about our courses on finding CI information.
Quick Tip: Questions
A key competitive intelligence skill is the ability to distinguish what you do know from what you don't know. The effort is then to find out sources for the unknown information - as the great English writer, Dr Samuel Johnson said:
Knowledge is of two kinds. We know a subject ourselves, or we know where we can find information upon it.
Unfortunately even with the knowledge there can be problems. Lewis Branscomb - the US physicist and Harvard management professor once said:
People rarely distinguish among data, information, knowledge, and wisdom. But they are as different from each other and as interlocking as starch molecules, flour, bread, and the flavorful memory of a superb morning croissant.
The aim of competitive & marketing intelligence is to turn data into something that can lead to competitive advantage in the same way that your morning croissant or loaf of bread depends on flour and water interacting to make something that is more than just a mixture of the raw ingredients.