Gathering competitive intelligence. (Checklist 153).

This checklist provides guidance for individuals or organisations wishing to take a structured and proactive approach to gathering competitive intelligence (CI).

Many organisations collect information regarding the activities of competitors on an informal basis--for example through conversations with clients or through press information. This method is often haphazard and reactive, as the organisation only learns about a competitor's activities `after the event'. A structured approach to gaining CI aims to ensure that the organisation finds out and takes appropriate action `before the event'.

Management Standards

This checklist has relevance to the MSC National Occupational Standards for Management: Key Role D--Manage Information.

Definition

CI provides organisations with actionable information regarding competitors' activities and is a key part of an overall analysis of the operating environment. This information (which can range from new products or pricing to overall strategic direction) is used to make both short- and long-term plans in a number of areas, including strategy, mergers and acquisitions, pricing, marketing, advertising, and research and development.

Observe the ethical line

There are both ethical and unethical approaches to gathering competitive intelligence. Information that is made freely available, for example in press releases or job advertisements, poses few ethical questions. However, sending employees to job interviews at a competitor organisation to gather information about their plans is considered doubtful behaviour. Spying or business espionage, for example going through a competitor's dustbins, is highly unethical.

Advantages of gathering competitive intelligence

Taking a proactive approach to competitive intelligence means that:

* surprises from competitors are minimised

* opportunities, as well as threats, are identified

* plans can be formulated on the basis of `hard' information

* the organisation can learn from its competitors

* the impact of an organisation's action on a competitor can be assessed more accurately.

Disadvantages of gathering competitive intelligence

Gaining a sound understanding of competitor activity has no real disadvantages, but it must be remembered that:

* sources of competition are arising increasingly from non-traditional sectors, so an eye must be kept on the competitive environment as a whole

* simply copying competitors or beating them fractionally to market is not the key to organisational success; differentiation from the competition is

* some organisations become so overwhelmed with the amount of data they collect about their operating environment that they are unable to come to a strategic decision. Management guru Igor Ansoff called this `paralysis by analysis'.

Action checklist

1. Make the commitment

The major resource requirement in gathering CI is that of staff time, but costs will also be incurred in other areas, for example travel to conferences and exhibitions, searching on-line databases, and subscribing to journals. In purely financial terms there will usually be very few cases where a direct return on investment is seen from CI, but improvements in softer areas will occur. Commitment must be made by senior management to any development of a systematic CI programme so that resources are made available in an area where gains may be intangible in the shorter term.

2. Identify needs and objectives

The overall aim of a CI programme is to provide decision makers, for example senior managers and heads of departments, with useful and accurate information. These individuals and functions must be surveyed to find out what information they need and how they want it presented. Be clear on what you are attempting to find out through your competitor analysis. Are you attempting to find weak points within another organisation? Do you want to find out what the competition is like in a new market that you are hoping to enter? Or are you aware of one particular organisation that is posing a threat to your department or function?

Overall objectives for CI programmes should include the provision of:

* information for strategic decisions

* early warnings of competitor activity.

At the operational level you must clarify exactly what the CI programme will cover, including:

* individual or groups of competitors

* individual or groups of products or services.

Specific areas can also be detailed, such as:

* competitor pricing

* competitor recruitment drives

* competitor behaviour

* competitor strategy.

Clear and specific objectives for the CI programme will provide a focus and will help to reduce the amount of information that needs to be collected, but remember that they should not be set in stone and must be reviewed regularly. At certain times, such as when researching a new product or service, the need to gather CI will be greater.

3. Bring together a team and assign responsibility

The number of people involved in the CI programme will depend on the objectives that have been set; for example, comprehensive analysis of all of an organisation's competitors will require more staff resources than those needed for keeping up-to-date with one or two competitors' activities. One individual must be assigned responsibility for the CI programme and this must be someone with good communication and information skills and with the ability to work to deadlines.

4. Identify the sources of information

Experts in the field of competitor analysis believe that most organisations already hold or have ready access to 80% of the information required for assessing the competition in the field.

A number of published and unpublished sources of information on competitor activity exist, including:

* exhibitions and conferences

* on-line databases and World Wide Web sites

* journals and newspapers

* product catalogues

* personal contacts in other organisations.

Do not overlook the importance of front-line staff as sources of CI. They are more than likely to pick up competitor information through their dealings with customers. Make them aware of the need to keep a lookout for information and implement a procedure for the information to be reported to the right person.

5. Use technology

Use databases to keep an archive of the information you collect. This will allow searches to be undertaken more easily on a subject or a competitor. Be aware of copyright legislation--it is illegal to scan many documents, for example press clippings, into an electronic format for storage and retrieval, but you will be able to keep references or the newspaper in hard copy. Remember that training must be provided for staff in using information storage and retrieval software.

6. Compile a report

Brevity is important when reporting the information gained from the CI programme. The most important points must be highlighted and references to further information should be provided. A decision must be made on how often a report is produced; weekly may suffice in some environments whereas other industries may require daily reports.

Ensure that all those managers who need to know the information are provided with a report. Remember that technology, particularly intranets and e-mail, can be used to disseminate CI within the organisation more quickly than paper.

7. Take action on the results

Competitive intelligence only gives strategic advantage when it is analysed and acted upon. Keep records of occasions when information was used successfully to gain advantage over competitors and also when it was too late to take action.

Don't jump to counteract a competitor's movements without considering your own organisation's objectives. Only the right action for you, at the right time, will bring advantage.

8. Evaluate against objectives

Ensure that you evaluate the success of the CI programme against the objectives that were set. Identify problem areas, for example, a weakness in obtaining information in one particular area or on one particular competitor, or a slowness in disseminating the information gained. Draw up recommendations for improving the CI programme and present them to management, along with details of CI successes.

9. Make changes

Take action on the recommendations for improvement and continue to evaluate the CI programme regularly. Keep communicating CI successes.

Dos and don'ts for gathering competitive intelligence

Do

* Remember that competitors today may not be competitors in the future--always keep an eye open for new competitors, especially from unlikely areas.

* Inform and involve front-line staff--they are the employees who come into contact with customers and are at the cutting edge.

* Keep CI reports brief and regular, and ensure that more detailed information is easily available to the reader.

Don't

* Forget that your competitors will also be trying to gain intelligence on your organisation.

* Spend money on researching organisations that are no longer your competitors--move with the market.

* Overstep the ethical line--check your organisation's own code of conduct.

* Ignore the importance of communicating the success of the CI programme.

Useful reading

Books Developing comprehensive competitive intelligence Hamilton, Ontario: Society of Management Accountants of Canada, 1996 The new competitor intelligence: the complete resource for finding, analysing and using information about your competitors, Leonard M Fuld New York: John Wiley, 1995 Beat the competition: how to use competitive intelligence to develop winning business strategies, Ian Gordon Oxford: Basil Blackwell, 1989

Journal articles Demystifying business intelligence, Kenneth A Sawka Management Review, Vol 85 no 10, October 1996, pp47-51 Managing competitive intelligence, Barbara Ettorre Management Review, Vol 84 no 10, October 1995, pp15-19 Competitor analysis, Richard Wilson Management Accounting, Vol 72 no 4, April 1994, pp24, 26

Related checklists

* Performing a SWOT analysis

* Report writing

Thought starters

* Have you ever been taken by surprise by a competitor's activities?

* How much do you really know about your main competitors?

* What are the strengths and weaknesses of your competitors?

* Where do you perceive your major threats to come from and opportunities to be in the future?

* How quickly can your organisation react to an opportunity in the marketplace or overcome a threat from a competitor?

Further information

Checklists are available in the following formats:

* Individual checklists.

* A complete set of 195 on CD-ROM or in hard copy.

* Checklists with permission to photocopy.

Full details of the range of checklists available can be obtained from:

Lavis Marketing, 73 Lime Walk, Headington, Oxford, OX3 7AD Tel: 0845 702 3736 (local rate call) Fax: +44 1865 750079 or from Checkpoint on the Chartered Management Institute's website at www.managers.org.uk