Competitive intelligence

Introduction and definition
"Competitive Intelligence (CI) is both a process and a product. The process of Competitive Intelligence is the action of gathering, analyzing, and applying information about products, domain constituents, customers, and competitors for the short term and long term planning needs of an organization. The product of Competitive Intelligence is the actionable output ascertained by the needs prescribed by an organization."

Key points of these definitions:
 * 1) Competitive Intelligence is an ethical and legal business practice. (This is important as CI professionals emphasize that the discipline is not the same as industrial espionage which is both unethical and usually illegal).
 * 2) The focus is on the external business environment.
 * 3) There is a process involved in gathering information, converting it into intelligence and then utilizing this in business decision making. CI professionals emphasize that if the intelligence gathered is not usable (or actionable) then it is not intelligence.

The term is often viewed as synonymous with Competitor analysis but Competitive Intelligence is more than analyzing competitors — it is about making the organization more competitive relative to its existing set of competitors and potential competitors. Customers and key external stakeholders define the set of competitors for the organization and, in so doing, describe what could be a substitute for the business, votes, donations or other activities of the organization. The term is often abbreviated as CI, and most large businesses now have some Competitive Intelligences functions with staff involved often being members of professional associations such as the Society of Competitive Intelligence Professionals.

The Society of Competitive Intelligence Professionals (SCIP) is an organization for those who are interested in learning more about Competitive Intelligence. Established in 1986, they provide education and networking opportunities for business professionals, and provide up to date market research and analysis. “Members of the SCIP have backgrounds in market research, strategic analysis, science and technology.”³

Historic development
Although elements of organizational intelligence collection have been a part of business for many years, the history of Competitive Intelligence began in the U.S. in the 1970s. In 1980 Michael Porter published the study Competitive-Strategy: Techniques for Analyzing Industries and Competitors which is widely viewed as the foundation of modern Competitive Intelligence.

After the Cold War ended, many U.S. (ex-) intelligence officers aimed at a career in the private industry. In 1986 the Society of Competitive Intelligence Professionals was founded in the U.S. and grew to 6.000 worldwide, mainly in the U.S. but growing numbers especially in UK and Germany. In 1997 the Ecole de Guerre Economique (School of economic warfare) was founded in Paris, France. It is the first European institution, which teaches the tactics of economic warfare within a globalizing world. In Germany, Competitive Intelligence was unattended until the early 1990s. The term Competitive Intelligence first appeared in German literature in 1997. In 1995 a German SCIP chapter was founded, which is now second in terms of members in Europe. In summer 2004 the Institute for Competitive Intelligence was founded, which provides a post-graduate certification program for Competitive Intelligence Professionals. Japan is currently the only country, that officially maintains an economic intelligence agency (JETRO). It was founded by the Ministry of International Trade and Industry (MITI) in 1958.

Principles
Organizations use competitive intelligence to compare themselves to other organizations, which enables them to make informed decisions. Most firms today realize the importance of knowing what their competitors are doing, and the information gathered allows organizations to realize their strengths and weaknesses. With the right amount of information, organizations can avoid unpleasant surprises by anticipating competitors’ moves and decreasing response time. Examples of Competitive Intelligence research is evident in Daily Newspapers, such as the Wall Street Journal, Business Week and Fortune. Major airlines change hundreds of fares daily in response to competitors’ tactics. They use information to plan their own marketing, pricing, and production strategies.

Resources, such as the Internet, have made gathering information on competitors easy. With a click of a button, analysts can discover future trends and market requirements. However competitive intelligence is much more than this, as the ultimate aim is to lead to competitive advantage. As the Internet is mostly public domain material, information gathered is less likely to result in insights that will be unique to the company. In fact there is a considerable risk that information gathered from the Internet will be misinformation and mislead users.

As a result, although the Internet is viewed as a key source, most CI professionals will spend their time and budget gathering intelligence using primary research — networking with industry experts, from trade shows and conferences, from their own customers and suppliers, and so on. Where the Internet is used, it is to gather sources for primary research as well as information on what the company says about itself and its online presence (in the form of links to other companies, its strategy regarding search engines and online advertising, mentions in discussion forums and on blogs, etc.). Also, important are online subscription databases and news aggregation sources which have simplified the secondary source collection process.

Organizations must be careful not to spend too much time and effort on old competitors without realizing the existence of any new competitors. Knowing more about your competitors will allow your business to grow and succeed. The practice of Competitive Intelligence is growing every year, and most companies and business students now realize the importance of knowing their competitors.

Ethics
Competitive information may be obtained from public or subscription sources, from networking with competitor staff or customers, or from field research interviews. Competitive Intelligence research is distinguishable from industrial espionage, as CI practitioners generally abide by local legal guidelines and ethical business norms. There is a strict code of ethics followed by reputable CI practitioners, laid down by the Society of Competitive Intelligence Professionals (SCIP). This includes the stipulations that CI professionals:


 * must abide by all applicable laws - whether domestic or international. Thus bugging, bribery, and other such illegal practices would be a serious breach of the ethical code.


 * must accurately disclose all relevant information, including one's identity and organisation, prior to all interviews. This ensures that primary research is conducted ethically without misrepresentation. As such it also limits what can be done - and attempts to gain information through lies about one's identity would be viewed as industrial espionage. At the same time, the code of ethics recognises that it may not be in the interests of the research to declare the ultimate purpose for which the information is being gathered - hence it is only required to disclose relevant information to sources such as one's identity, organisation, etc. It is not a requirement to say who the ultimate client is, and so many organisations employ consultants who can be totally honest about who they are while keeping their client's name confidential. Such consultants will say that the information is being collected as part of a benchmarking or industry study, for example. What is not said is that the benchmarking study is being done only on competitors to the client!


 * must provide honest and realistic recommendations and conclusions in the execution of one's duties. Competitive Intelligence can sometimes uncover unpleasant truths that companies would prefer not knowing. At the same time, not knowing could lead the organisation to failure. CI Professionals need to communicate both the good, and the bad - strengths and weaknesses - even in cases when management would rather stay in ignorance. Further, along with the message, the CI professional should use their understandings to provide suggestions and recommendations for action. If the intelligence gathered is not used but ignored it has no value. As a result, competitive intelligence is a key discipline in enabling companies preserve and gain competitive advantage in their business environment.

Many companies are concerned about keeping their practices above board. One of the ways to ensure this is through internal training and providing employees with clear-cut, written policies (such as in the employee manual) as to what is acceptable practice.