When Jay Bloom leaves a trade show, his pockets are stuffed with his competitors' brochures. When he reads trade journals, he scans the pages for new products, promotions and other changes at rival firms. A clipping service sends more articles containing selected key words. If the customers who call his service center mention competitors, he asks for details. Partners and investors provide gossip about rivals. Employees patronize competitors to investigate others' offers and service from a customer's angle.
Bloom is no spy, merely a practitioner of competitive intelligence, or CI. Keeping tabs on the competitive environment helps the 32-year-old founder of Pet Assure Inc., a provider of prepaid pet health plans in Dover, New Jersey, with everything from marketing to acquisitions, explains Bloom.
"We want to know what our competitors are doing, what their products are like and what their offers are," says Bloom. That sounds sensible, but annual surveys by The Futures Group, a Hartford, Connecticut, CI consulting firm, find that only about 60 percent of respondents have organized CI operations, and those are mostly large companies.
Small companies have a tendency to ignore competitive intelligence, says John McGonagle, managing partner of the Helicon Group, a CI consulting firm in Blandon, Pennsylvania. Entrepreneurs are often strapped for time, of course, but arrogance also plays a role. "Entrepreneurs tend to think they know all about their competitive environment," McGonagle says. "They think they're on top of things, but they aren't."
If you think you're on top of things, you may be--or you may not be. To help you make the call, Entrepreneur examined Pet Assure's CI activities and added McGonagle's expert commentary for a case study on what it really means to know who your competition is. The results reveal what one successful entrepreneur does right when it comes to competitive intelligence, how he could do better, and what other entrepreneurs can learn from his experiences.
Mark Henricks is Entrepreneur's "Cutting Edge" columnist.
Seek And You Shall Find
Bloom had his first exposure to the ways of competitive intelligence when he worked in risk management at a large New York City bank. There, he gained practice studying big financial institutions, primarily through monitoring the information in public filings. His motivation for becoming an entrepreneur, however, came from a much more personal encounter with competitive intelligence.
"When I was at the bank, I had a golden retriever named Lucky who, unfortunately, did not live up to his name," says Bloom. "He had a condition called hip dysplasia and needed surgery that cost about $3,000."
Bloom had a health-insurance policy on Lucky, but he discovered it excluded the treatment his pet actually needed, plus many more. When he looked for a better deal, something like the prepaid membership plans humans use for dental care, he found nothing for pets.
Further investigation revealed most pet-insurance policies carried limitations similar to those that had left him so dissatisfied. After confirming the niche was underserved, Bloom left his job at the bank in 1996 and started Pet Assure. One of the most important assets he brought with him was his appreciation of competitive intelligence.
As a result, Pet Assure has unusually comprehensive intelligence. At 15 to 18 trade shows per year, Bloom and his employees drop by rivals' booths to ask questions and gather marketing material. "You find your competitors there, and it's easy to gather information," he explains. In addition to pet-industry conventions, Bloom attends shows concerning employee benefits because selling memberships to companies for use in their benefits packages is an important distribution channel.
Bloom also subscribes to numerous periodicals covering the pet and veterinary industries. Although Pet Assure rarely markets directly to consumers, preferring to sell to intermediaries such as insurance companies, PPO networks and other businesses, Bloom reads the likes of Cat Fancy and Dog Fancy to see articles about, and advertisements for, rivals who do. Veterinary Economics and similar publications illuminate opponents' approaches to the vets who care for Pet Assure's members' animals.
And it doesn't stop there. Bloom employs a clipping service to read a wide variety of general and special-interest publications. When a key word turns up, the service sends him a copy of the article. "Clipping services are great," he says. "We use generic key words as well as our competitors' names.
"Customer feedback is also important. We get a lot of calls complaining about competitors' products." Employees answering the phone at Pet Assure's call center are instructed to take notes when customers complain, compliment or make any comment about the competition. The information is forwarded directly to Bloom, who distributes it to sales, marketing and other departments.
Some customers of competitive plans come from an unlikely source: the ranks of Bloom's employees. "A great way to find out what's going on with competitors is to have staff enroll in their programs," he explains. Competitive shopping, as the practice is known, offers deep insight about rivals' offerings, marketing, pricing and service.
One Pet Assure employee who signed with a competitor found the company was automatically enrolling anyone who called a phone number and tacking the fee onto the customer's monthly phone bill. Learning about the objectionable practice alerted Bloom to an opportunity for stressing his own more ethical billing methods to prospects in the competitor's market.
Pet Assure's financial backers are also naturally interested in competitive trends, and they provide another backstop. Not long ago, an investor noticed a rival's ads suddenly increasing in number and frequency and tipped Bloom off to the potential threat. Bloom found the competitor had formed a strategic partnership to get the cash for its invigorated marketing effort. Bloom used the information to form his own partnership with a rival of his competitor's new ally. "We have over 100 investors," he says, "and they call me every time they see anything on pet insurance."
Perhaps Pet Assure's most valuable CI resource consists of the 2,000 veterinarians enlisted to care for members' pets. When rival firms contact a Pet Assure-affiliated vet, the vet usually calls Bloom to discuss the offer. Sometimes Bloom even gets to peek at rivals' contracts. "We get a ton of information from our provider network," Bloom says. "There's no other way to find out about the small, regional players."
Bloom uses his CI findings in a variety of ways. When a customer call alerted him to the fact that a competitor was the target of a consumer lawsuit in a nearby state, Bloom moved quickly to run down details. "That kind of information about a competitor has a lot of value, especially when you're bidding against them," Bloom says.
A major concern is trying to find out whether a pet insurer is moving into Bloom's favorite markets: employee benefit programs, retail pet stores and banks, which offer memberships as inducements to credit-card customers. "We want to know what our competitors are doing, what their products are like and what their offers are," Bloom says.
Lately, Pet Assure has looked into acquiring some smaller competitors, and CI plays a key role by letting Bloom evaluate acquisition candidates without tipping his hand. "The monitoring lets us form opinions on who's worth pursuing a relationship with and who's not going anywhere," he says.
The Expert's Analysis
Pet Assure goes further than most small companies in competitive intelligence, says McGonagle. That probably comes as no surprise to hard-working entrepreneurs out there who can barely find time to run their own businesses, let alone monitor others. But Bloom's personal exposure to competitive intelligence in a corporate environment led him to put CI high on his entrepreneurial to-do list. "The entrepreneur's involvement is the biggest obstacle in small businesses," says McGonagle. "But, obviously, [Bloom] didn't just buy into this; he was the driver."
McGonagle lauds the way Bloom personally oversees collection and dissemination of intelligence throughout the organization. "That's the model for small business," says McGonagle. "He's using it the same as information about profits or regulatory issues."
Another key is managing CI to get the most return for your investment. "One thing that discourages small business from getting involved in CI is that they have so few people, and they're all busy," McGonagle says. Bloom's experience shows you can mount a part-time CI effort that's effective and efficient.
While large companies may have entire departments devoted to competitive monitoring, entrepreneurs need not assign even one full-time person to the job. Simply informing customer-service representatives about your interest in competitive feedback can produce loads of valuable information, McGonagle says. "If no one asks them about it, they don't tell you about it," he adds.
Using trade shows, industry periodicals and clipping services is basic CI, McGonagle says. Likewise, many firms find that partners, such as the veterinarians in Pet Assure's case, can be useful sources. Bloom gets extra credit, however, for employing investors to collect information. "We tend to think about suppliers, customers, sales forces and employees," says McGonagle. "But there, he's tapped into something I've rarely heard about with entrepreneurs."
Using CI to scope out potential acquisitions, as Pet Assure is doing, provides an unusually high return on investment, McGonagle adds. Quietly monitoring buyout candidates is far preferable to making direct information requests. Even preliminary formal negotiations require hiring expensive lawyers and accountants to audit the financials. Worse, before revealing anything, firms may ask you to promise not to enter their market for months or years. "That's a big price to pay if you decide you don't want to dance," notes McGonagle. "If you do it yourself with CI, you may not get all the information you need, but you don't have the restrictions."
Room For Improvement
Even Bloom can improve in some areas, McGonagle contends. The expert likes to see as much attention paid to protecting your own information as to learning about others. Requiring customers to keep materials confidential helps, he says, but you should take it for granted that if you can get your competitors' materials, they can get yours. "Never assume the competition isn't as smart as you are," he warns.
Verifying information is another area Bloom may need to emphasize. For instance, a customer could be telling you about a competitor's offer in hopes you'll try to beat it. "They give you information for a reason, and you have to understand that," McGonagle says. "Especially if you don't have documents, make sure you check on it."
Along those lines, Bloom needs to verify papers such as provider contracts aren't being obtained improperly. "Make sure the documents are not marked confidential and for the use of the recipient only," advises McGonagle.
McGonagle is somewhat concerned that it took a customer to alert Bloom to a lawsuit against one of his competitors. Careful monitoring of regulatory actions and reports, especially in a highly regulated area like insurance, might well have revealed the issue sooner, he says. Timely awareness of a lawsuit is crucial, McGonagle explains. There may be limited opportunity to see court documents, many of which are full of valuable information, before a competitor arranges to have records sealed from public view.
Entrepreneurs in most industries can get surprising amounts of information from the government, adds McGonagle. Tax assessments might reveal the quantity and type of machinery behind a rival's factory walls. Bids on government contracts and applications for environmental permits might do the same.
One last key to operating an effective CI program is to involve employees as much as possible. McGonagle likes to see active incentives for workers to take part. This can be as simple as letters of praise in their personnel files. "People die for that kind of stuff," he says, "because it can mean a promotion."
For entrepreneurs themselves, competitive intelligence can mean the difference between teaming up with the right partner and getting trampled by an unseen opponent. Bloom, whose company has gone from start-up to a 22-employee firm in three years, is a believer. "You're not in a position to compete without competitive intelligence," he says. "It's like running a race without looking at the other runners."
- The Internet Age of Competitive Intelligence(Quorum Books) by John J. McGonagle and Carolyn M. Vella discusses the impact of the Internet on the acquisition and use of information about business opponents.
- The Society of Competitive Intelligence Professionals is an international group that sets standards, provides education, hosts events and publishes information about competitive intelligence. Contact SCIP, 1700 Diagonal Rd., #600, Alexandria, VA 22314, (703) 739-0696, Fax: (703) 739-2524, email@example.com, http://www.scip.org
- Competia.com is an online publication containing news, analysis, tips and techniques from the world of competitive intelligence. It's available at http://www.competia.com
Helicon Group, (610) 916-2081
Pet Assure Inc., (888) 789-7387, http://www.petassure.com