What is Competitive Intelligence?
What Is Competitive Intelligence?
When you hear the term "competitive intelligence," what might come to mind? Studying a competitor to compile intel on their new product? One might think of shady tactics, such as spying. To those unfamiliar with the practice, it is understandable to feel this way. Yet it misses the mark. Let us explore further.
Seena Sharp, in her book Competitive Intelligence Advantage, defines competitive intelligence as "knowledge and foreknowledge about the entire business environment that results in action" (Sharp, 2009, p. 15). This goes far beyond merely tracking rivals. It encompasses a broader scope. Sharp breaks this definition into four components.
Knowledge refers to the past. It is the foundation that builds understanding of context.
Foreknowledge is about the future. It focuses on near-future events such as forecasts, predictions, and anticipated market changes.
Entire encompasses the total business environment. This ranges from suppliers to government regulations and even demographics. We will go into more detail below.
Action indicates the decisions that are made from new information provided by intelligence.
Competitive intelligence (CI) is a strategic practice that leads to making smarter decisions and minimizing risk (Sharp, 2009). As the old saying goes, "surprises are rarely good in business," and competitive intelligence can help business leaders analyze their risk to these surprises. It serves as both a product and a process. It can be packaged in a quarterly report. It can be monitored by an entire team that tracks the business environment daily. Sharp puts it nicely. "It’s having a 360-degree view" (Sharp, 2009, p. 17).
To expand this concept, let us consider how competitive intelligence integrates with business planning. It provides a framework for anticipating shifts in consumer behavior or technological advancements. This proactive approach allows leaders to stay ahead of challenges rather than reacting to them. Such foresight is invaluable for small and large businesses alike.
Beyond Competitors: CI’s Wider Scope
Contrary to some beliefs, competitive intelligence is not just about competitors. Sharp argues that focusing solely on rivals is misguided. Understanding competitor information is part of the bigger picture of comprehending the entire competitive landscape. It should not be the sole focus of your competitive intelligence apparatus. As mentioned above, the 12 main factors make up the competitive landscape according to Sharp:
Customers
Distributors
Suppliers
Competitors
Demographics
Economy
Other Industries
Technology
Prospects
Government/Industry Regulation
Culture
Substitutes
Consider Sharp’s example of a client manufacturing metal frames for plastic bag handles. Initial analysis covered market size, competitors, and distribution. Deeper exploration revealed broader trends. The shift to reusable bags. Volatile petroleum prices are affecting plastic. Consumer demand for "green" options. This robust competitive intelligence boosted their confidence to expand. It led to an increase in sales at a much faster pace than originally expected (Sharp, 2009, p. 39). Is that not more than just rival analysis? I would say so.
To further illustrate, let us think about how these factors interplay. A change in government regulation might affect suppliers. This, in turn, impacts production costs. Understanding these connections requires a comprehensive view. Competitive intelligence provides that view by synthesizing data from multiple sources.
Why CI Starts with the Customer
Sharp emphasizes that competitive intelligence begins with the customer. Their needs define the market (Sharp, 2009, p. 42). This approach helps tailor strategies. She identifies 11 key times for CI.
Line extension
Uncovering opportunities for growth
Market entry
Economic or societal changes
Crafting a strategy or a new marketing plan
Making a substantial purchase
Uncovering unknown customers
Changes in your industry
Changes in your customer base
Validate assumptions.
Leveraging your current capabilities
A notable example is Plano, a Texas fishing tackle box maker in the 1980s. Management discovered non-fishers buying their boxes. After investigation, they found women who sew and teenage girls using them for sewing kits or makeup. Leadership tested the market with repackaged boxes called Caboodles. Sales increased significantly (Sharp, 2009, p. 122). This shows how customer insights drive innovation.
Expanding on this, let us consider how customer feedback loops enhance CI. Regular surveys or casual conversations can reveal shifting preferences. These insights allow businesses to adapt products or services. This customer-first mindset is a cornerstone of effective intelligence gathering.
Getting Started with Competitive Intelligence
CI is not just about competition. It is about the entire competitive landscape. The information that becomes intelligence helps business leaders minimize risks and make better decisions. It provides new information. It validates assumptions. It forces a rethinking of certain beliefs. Competitive intelligence is not optional for businesses that want to succeed. It is necessary.
How vulnerable are you to market changes? Is your business strategy driven by intelligence or mere information? These are questions every business leader must address to thrive. Start by assessing your current practices. Share your insights in the comments.
References
Sharp, S. (2009). Competitive Intelligence Advantage: How to Minimize Risk, Avoid Surprises, and Grow Your Business in a Changing World. John Wiley & Sons.