WINNING AT THE MARGINS
Competitive intelligence isn't a buzz word that will slip in and out of the cultural fabric of business jargon, says Michael Belkine, managing director of Splendour Ltd., a competitive intelligence consultancy in Ramat Hasharon, Israel. “Competitive intelligence has existed since wise people began using intelligence wisely to improve their competitive advantage,” he says. “What's changed is awareness. Competition today is more aggressive, and technology has made access to data faster and more global than it has ever been.”
And that has created new rivals in every corner of the world.
“Twenty years ago, a company in Europe wouldn't pay any attention to what similar companies were doing in China, India or Brazil,” Mr. Belkine explains. “Now those companies can put them out of business.”
With hundreds of challengers at your virtual front door, tracking the competition and using that information to guide project decision-making is more critical than ever before.
CUSTOMIZED COMMUNICATION
Not everyone processes information the same way—and that should be taken into account when communicating intelligence, says Marty Palka, Cisco Systems.
“Our CEO prefers voice mail,” he says. “So when I need to deliver insights on market intelligence, I leave it for him in a message.”
But Mr. Palka relies on more formal written communication for other types of data, including daily market updates, summaries of competitors' and partners' quarterly fiscal reports, and customer survey data.
“You have to have a broad breadth of communication that allows decision-makers to get information in a way that is most convenient,” he says. “And you have to follow up the data to make sure it's received and understood.”
The data can come in a variety of manners: soliciting feedback from the sales team, tracking political or environmental issues that can impact projects, and asking discrete questions at conferences and seminars to get a sense of what rivals are up to.
Compiling and analyzing this information helps the portfolio management team identify early on what the opposition and the market are doing and decide whether they can come out with something better, faster or more innovative, Mr. Belkine says.
It also gives companies the chance to cut their losses if they can't compete. Mr. Belkine says pharmaceutical firms, in particular, have proven especially adept at monitoring their rivals' progress on breakthrough drug development against their own work to decide when and if to back down. He estimates it typically takes companies 10 years and $1 billion to bring new drugs to market. And after all that, there's usually only one winner.
“When four companies compete to develop the same drug, the one that comes out first claims the prize,” he says. “If competitive intelligence allows the other pharmaceutical companies to know when the competition is ahead of them, they can save millions of dollars for every week earlier that they stop their own projects.”
That might seem a drastic choice, but it shows the value of tracking what your adversaries have in the pipeline, says Tony Nagle, managing director at competitive intelligence consultancy Fuld & Co.'s European operations in London, England. “If you have good insight into what competitors are doing, you can decide whether you want to follow the same path or go a completely different direction. Either way, it's an educated choice.”
For most businesses, success is about “winning at the margins” and competitive intelligence can deliver that edge. “It's about using industry information to gain competitive advantage,” Mr. Nagle says.
Getting the low-down on the competition shouldn't mean bending the rules.
“Competitive intelligence is about collecting information legally and ethically. You might find it at trade shows, through suppliers or dealers, or from people in your own company or Rolodex. You just have to know who has the answers.”
—Leonard Fuld, Fuld & Co., Cambridge, Massachusetts, USA
Where that intelligence comes from—and how reliable it is—often varies by region, says Jan Smith, managing director of market intelligence for Kroll InfoAmericas, São Paulo, Brazil. “In North America or Europe, intelligence can more easily be gathered from printed, published research, but in areas like Latin America, where reporting requirements are not as strict, there's more reliance on human intelligence.”
He urges clients in Latin America to scrutinize industry data, particularly from government sources, because it can follow other agendas or have gaps due to the informal infrastructure and lack of reporting mechanisms.
“For the most reliable information, you have to turn to on-the-ground efforts,” Mr. Smith says. “Go directly to the experts in the public and private sectors and interview them face to face.”
That means portfolio managers need to build a longer lead time into the decision-making process, and staff their teams with regional experts who understand the economic and business environment. “The learning curve here is steep,” he says, “and regional experts can be as valuable as industry experts when making decisions.”
STRAIGHT TO THE SOURCE
Competitive intelligence isn't just about watching the opposition, says Marty Palka, chief intelligence analyst of investor relations for Cisco Systems, the San Jose, California, USA-based global network solutions provider. Companies need to take a worldwide view of all of the factors that could indicate a major market transition. Along with tracking industry trends, the stock market and competitors, he focuses much of his time and information-gathering around what end-users have to say.
“A lot of Cisco's competitive intelligence is built around customer feedback,” he says. “If you don't stay in constant contact with customers, you can be too late to meet their needs.”
The Cisco team tracks consumer demands through yearly satisfaction surveys, face-to-face interviews, and feedback from the sales teams about customer requests and comments. “For every project, the focus is on customer requirements,” Mr. Palka says. “You have to have good customer input to achieve that.”
He points to the March launch of the company's ASR 1000 Series Router, which was billed as a breakthrough in aggregating many network services on a single platform.
The project was designed in response to market trends, industry reports and customer demand that indicated the business community wanted a more flexible, compact and powerful network system, Mr. Palka says.
The market intelligence supporting the project included:
■ Double-digit growth of remote branch offices, and a steady increase in mobile workers and telecommuters who need access to corporate headquarters from anywhere at any time
■ The rise of web 2.0 collaborative tools, shared cooperative applications and video conferencing—which all requires a prioritization of these applications over other network traffic
■ Increased services delivered over wide-area networks, which results in increased complexity and demand.
SOURCE: From Stick Fetchers to World Class, Fuld & Co., Cambridge, Massachusetts, USA. Results based on a global online survey of 141 corporations released in April 2007.
That data was also supported by similar requests coming from Cisco's own customers, Mr. Palka says. All of that combined was enough to give the company the confidence that its intelligence was valid.
Tracking market intelligence as well as customer needs helped Cisco spot the trend—and come up with a project that addressed it. “No company can have sustainable competitive advantage forever,” he says, “but we stay attuned to trends and we listen to the challenges our customers face.”
FROM TAPAS TO IZAKAYA
No matter how information is collected, it's only the first step in the competitive-intelligence process. Companies need a system to analyze and respond to information if they want to benefit from it, says Suzy Badaracco, owner of Culinary Tides, a food industry consultancy in Portland, Oregon, USA. “There is a difference between tracking trends and predicting them,” she says. “To just watch is to be a follower. It's like starting a marathon three hours late.”
To stay ahead of the pack and avoid investing in projects built around short-lived fads, companies should gather—and then evaluate—information from multiple sources. “Pre-trend events aren't always clear and it's easy to misinterpret them,” Ms. Badaracco says.
Companies that jump onto the latest fad without understanding the driving force behind it can end up in trouble, she warns. When consumers embraced the low-carbohydrate diet craze, for example, global food giant Kraft quickly released a flood of products in the category.
“Other food companies saw that and followed suit with their own low-carbohydrate offerings, but they didn't necessarily understand the strategy,” Ms. Badaracco says.
When the consumer interest started to fizzle, “Kraft saw the red flags and got out, while other companies lost millions because they weren't paying attention to all the market factors,” Ms. Badaracco says. “When you follow the competition without having a larger vision of where the trend was going, you can get burned.”
There are always trends and fads popping up, morphing and disappearing, she says. Izakaya, a Japanese-style bar that serves small dishes of food, has currently piqued her interest. Ms. Badaracco sees the trend growing in response to multiple factors, including:
■ The proliferation of Spanish tapas restaurants offering small servings of food
■ Social trends of “clanning,” in which people come together in small groups during times of crisis
■ An increasing interest in wines and wine/food pairings.
“Izakaya has personality,” Ms. Badaracco says. “It is appealing for multiple reasons, which makes it more likely to stick around.” The combination of factors might indicate a potential project to create a frozen or packaged product in the category.
Finding multiple sources that point to the same need gives companies more solid evidence to support a new project. Ms. Badaracco encourages companies to look at research, government approvals and customer-satisfaction data to support ideas before investing heavily in them. “It's not enough to enter a trend. You have to watch it,” she says. “Good intelligence gives you breathing space to launch projects with confidence.”
Part of tracking the competition is understanding different risk profiles. Companies like Kraft, for example, have a history of entering trends quickly but staying agile enough to exit when interest slows. In contrast, U.K. food titan Unilever is slower to invest in trendy product categories, Ms. Badaracco says.
“When you see the birth of a trend and you know your competitor's personality, you can guess who will be first and who might get it wrong,” she says.
This holistic approach to intelligence is valuable, but companies can't afford to get bogged down in the details, warns Leonard Fuld, president of Fuld & Co., headquartered in Cambridge, Massachusetts, USA. “If you try to get every piece of information that you want to make the perfect project decision, you'll get overwhelmed and it will take too long. The goal is to piece together what you do know to make the best choice.”
And then, get the data out there, adds Mr. Nagle. “Market-leading companies often have formal internal processes in place to make sure competitive intelligence is part of strategic decision-making,” he says.
That means information has to be gathered on a regular basis, analyzed, and then shared quickly and clearly with key stakeholders. “The shelf-life of intelligence is often measured in weeks,” he explains.
The secret's out: Competitive intelligence that arrives too late won't do much to help project decisions. PM