The Need for a Competitor Intelligence System

Answering these questions about competitors creates enormous needs for data. Intelligence data on competitors can come from many sources: reports filed publicly, speeches by a competitor’s management to security analysts, the business press, the sales force, a firm‘s customers or suppliers that are common to competitors, in-spection of a competitor’s products, estimates by the firm‘s engi-neering staff, knowledge gleaned from managers or other personnel who have left the competitor’s employment, and so on. Souces of data are described in more detail in Appendix B. It is unlikely that data to support a full competitor analysis could be compiled in one massive effort. The data to make the subtle judgments implied by these questions usually come in trickles rather than rivers and must be put together over a period of time to yield a comprehensive pic-ture of the competitor’s situation.

Compiling the data for a sophisticated competitor analysis probably requires more than just hard work. To be effective, there is the need for an organized mechanism—some sort of competitor in-telligence systemto insure that the process is efficient. The ele-ments of a competitor intelligence system can vary according to the particular firm‘s needs, based on its industry, its staff capability, and its managements’ interests and talents. Figure 3-4 diagrams the functions that must be performed in developing the data for sophis-ticated competitor analysis and gives some options for how each function might be performed. In some companies all these functions can be performed effectively by one person, but this seems to be the exception rather than the rule. There are numerous sources for field data and published data, and many individuals in a company can usually contribute. Furthermore, compiling, cataloging, digesting, and communicating these data in an effective fashion are usually be-yond the capabilities of one person.

One observes a variety of alternative ways firms organize to per-form these functions in practice. They range from a competitor anal-ysis group that is part of the planning department and performs all the functions (perhaps drawing on others in the organization for collecting field data); to a competitor intelligence coordinator who per-forms the compiling, cataloging, and communication functions; to a system in which the strategist does it all informally. All too often, however, no one is made responsible for the competitor analysis at all. There seems to be no single correct way to collect competitor data, but it is clear that someone must take an active interest or much useful information will be lost. Top management can do a lot to stimulate the effort by requiring sophisticated profiles of competi-tors as part of the planning process. As a minimum, some manager with the responsibility to serve as the focal point for competitor in-telligence gathering seems to be necessary.

Each of the functions can also be performed in a number of dif-ferent ways, as noted in Figure 3-4. The options shown cover a range of degrees of sophistication and completeness. A small firm may not have the resources or staff to attempt some of the more sophisticated approaches, whereas a company with a large stake in successfully reading some key competitors should probably be doing all of them. Whatever the level of sophistication, the importance of the commu-nication function cannot be stressed enough. Gathering data is a waste of time unless they are used in formulating strategy, and cre-ative ways must be devised to put these data in concise and usable form to top management.

FIGURE 3-4   Functions of a Competitor Intelligence System

Whatever the mechanism chosen for competitor intelligence gathering, there are benefits to be gained from one that is formal and involves some documentation. It is all too easy for bits and pieces of data to be lost, and the benefits that come only from com-bining these bits and pieces thereby foregone. Analyzing competitors is too important to handle haphazardly.

Source: Porter Michael E. (1998), Competitive Strategy_ Techniques for Analyzing Industries and Competitors, Free Press; Illustrated edition.

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