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When Jay Bloom leaves a trade show, his pockets are stuffed withhis competitors' brochures. When he reads trade journals, hescans the pages for new products, promotions and other changes atrival firms. A clipping service sends more articles containingselected key words. If the customers who call his service centermention competitors, he asks for details. Partners and investorsprovide gossip about rivals. Employees patronize competitors toinvestigate others' offers and service from a customer'sangle.
Bloom is no spy, merely a practitioner of competitiveintelligence, or CI. Keeping tabs on the competitive environmenthelps the 32-year-old founder of Pet Assure Inc., a provider ofprepaid pet health plans in Dover, New Jersey, with everything frommarketing to acquisitions, explains Bloom.
"We want to know what our competitors are doing, what theirproducts are like and what their offers are," says Bloom. Thatsounds sensible, but annual surveys by The Futures Group, aHartford, Connecticut, CI consulting firm, find that only about 60percent of respondents have organized CI operations, and those aremostly large companies.
Small companies have a tendency to ignore competitiveintelligence, says John McGonagle, managing partner of the HeliconGroup, a CI consulting firm in Blandon, Pennsylvania. Entrepreneursare often strapped for time, of course, but arrogance also plays arole. "Entrepreneurs tend to think they know all about theircompetitive environment," McGonagle says. "They thinkthey're on top of things, but they aren't."
If you think you're on top of things, you may be--or you maynot be. To help you make the call, Entrepreneur examined PetAssure's CI activities and added McGonagle's expertcommentary for a case study on what it really means to knowwho your competition is. The results reveal what one successfulentrepreneur does right when it comes to competitive intelligence,how he could do better, and what other entrepreneurs can learn fromhis experiences.
Mark Henricks is Entrepreneur's "Cutting Edge"columnist.
Seek And You Shall Find
Bloom had his first exposure to the ways of competitiveintelligence when he worked in risk management at a large New YorkCity bank. There, he gained practice studying big financialinstitutions, primarily through monitoring the information inpublic filings. His motivation for becoming an entrepreneur,however, came from a much more personal encounter with competitiveintelligence.
"When I was at the bank, I had a golden retriever namedLucky who, unfortunately, did not live up to his name," saysBloom. "He had a condition called hip dysplasia and neededsurgery that cost about $3,000."
Bloom had a health-insurance policy on Lucky, but he discoveredit excluded the treatment his pet actually needed, plus many more.When he looked for a better deal, something like the prepaidmembership plans humans use for dental care, he found nothing forpets.
Further investigation revealed most pet-insurance policiescarried limitations similar to those that had left him sodissatisfied. After confirming the niche was underserved, Bloomleft his job at the bank in 1996 and started Pet Assure. One of themost important assets he brought with him was his appreciation ofcompetitive intelligence.
As a result, Pet Assure has unusually comprehensiveintelligence. At 15 to 18 trade shows per year, Bloom and hisemployees drop by rivals' booths to ask questions and gathermarketing material. "You find your competitors there, andit's easy to gather information," he explains. In additionto pet-industry conventions, Bloom attends shows concerningemployee benefits because selling memberships to companies for usein their benefits packages is an important distributionchannel.
Bloom also subscribes to numerous periodicals covering the petand veterinary industries. Although Pet Assure rarely marketsdirectly to consumers, preferring to sell to intermediaries such asinsurance companies, PPO networks and other businesses, Bloom readsthe likes of Cat Fancy and Dog Fancy to see articlesabout, and advertisements for, rivals who do. VeterinaryEconomics 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 serviceto read a wide variety of general and special-interestpublications. When a key word turns up, the service sends him acopy of the article. "Clipping services are great," hesays. "We use generic key words as well as ourcompetitors' names.
"Customer feedback is also important. We get a lot of callscomplaining about competitors' products." Employeesanswering the phone at Pet Assure's call center are instructedto take notes when customers complain, compliment or make anycomment about the competition. The information is forwardeddirectly to Bloom, who distributes it to sales, marketing and otherdepartments.
Some customers of competitive plans come from an unlikelysource: the ranks of Bloom's employees. "A great way tofind out what's going on with competitors is to have staffenroll 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 thecompany was automatically enrolling anyone who called a phonenumber and tacking the fee onto the customer's monthly phonebill. Learning about the objectionable practice alerted Bloom to anopportunity for stressing his own more ethical billing methods toprospects in the competitor's market.
Pet Assure's financial backers are also naturally interestedin competitive trends, and they provide another backstop. Not longago, an investor noticed a rival's ads suddenly increasing innumber and frequency and tipped Bloom off to the potential threat.Bloom found the competitor had formed a strategic partnership toget the cash for its invigorated marketing effort. Bloom used theinformation to form his own partnership with a rival of hiscompetitor's new ally. "We have over 100 investors,"he says, "and they call me every time they see anything on petinsurance."
Perhaps Pet Assure's most valuable CI resource consists ofthe 2,000 veterinarians enlisted to care for members' pets.When rival firms contact a Pet Assure-affiliated vet, the vetusually calls Bloom to discuss the offer. Sometimes Bloom even getsto peek at rivals' contracts. "We get a ton of informationfrom our provider network," Bloom says. "There's noother way to find out about the small, regional players."
Bloom uses his CI findings in a variety of ways. When a customercall alerted him to the fact that a competitor was the target of aconsumer lawsuit in a nearby state, Bloom moved quickly to run downdetails. "That kind of information about a competitor has alot of value, especially when you're bidding againstthem," Bloom says.
A major concern is trying to find out whether a pet insurer ismoving into Bloom's favorite markets: employee benefitprograms, retail pet stores and banks, which offer memberships asinducements to credit-card customers. "We want to know whatour competitors are doing, what their products are like and whattheir offers are," Bloom says.
Lately, Pet Assure has looked into acquiring some smallercompetitors, and CI plays a key role by letting Bloom evaluateacquisition candidates without tipping his hand. "Themonitoring lets us form opinions on who's worth pursuing arelationship with and who's not going anywhere," hesays.
The Expert's Analysis
Pet Assure goes further than most small companies in competitiveintelligence, says McGonagle. That probably comes as no surprise tohard-working entrepreneurs out there who can barely find time torun their own businesses, let alone monitor others. But Bloom'spersonal exposure to competitive intelligence in a corporateenvironment led him to put CI high on his entrepreneurial to-dolist. "The entrepreneur's involvement is the biggestobstacle in small businesses," says McGonagle. "But,obviously, [Bloom] didn't just buy into this; he was thedriver."
McGonagle lauds the way Bloom personally oversees collection anddissemination of intelligence throughout the organization."That's the model for small business," saysMcGonagle. "He's using it the same as information aboutprofits or regulatory issues."
Another key is managing CI to get the most return for yourinvestment. "One thing that discourages small business fromgetting involved in CI is that they have so few people, andthey're all busy," McGonagle says. Bloom's experienceshows you can mount a part-time CI effort that's effective andefficient.
While large companies may have entire departments devoted tocompetitive monitoring, entrepreneurs need not assign even onefull-time person to the job. Simply informing customer-servicerepresentatives about your interest in competitive feedback canproduce loads of valuable information, McGonagle says. "If noone asks them about it, they don't tell you about it," headds.
Bloom's competitive shopping gets high marks from theexpert. "It's something that surprisingly few people do:become a customer of the competitor," McGonagle says."People don't realize how important it is to get on[competitors'] mailing lists and get catalogs." You canlearn all kind of things, including, if you pay attention to whatelse you start getting in the mail, whether competitors are sellingthe names on their customer lists to other marketers. You can thengain an advantage by crafting a customer-privacy policy thatpromises not to sell names to list brokers.
Using trade shows, industry periodicals and clipping services isbasic CI, McGonagle says. Likewise, many firms find that partners,such as the veterinarians in Pet Assure's case, can be usefulsources. Bloom gets extra credit, however, for employing investorsto collect information. "We tend to think about suppliers,customers, sales forces and employees," says McGonagle."But there, he's tapped into something I've rarelyheard about with entrepreneurs."
Using CI to scope out potential acquisitions, as Pet Assure isdoing, provides an unusually high return on investment, McGonagleadds. Quietly monitoring buyout candidates is far preferable tomaking direct information requests. Even preliminary formalnegotiations require hiring expensive lawyers and accountants toaudit the financials. Worse, before revealing anything, firms mayask you to promise not to enter their market for months or years."That's a big price to pay if you decide you don'twant to dance," notes McGonagle. "If you do it yourselfwith CI, you may not get all the information you need, but youdon't have the restrictions."
Room For Improvement
Even Bloom can improve in some areas, McGonagle contends. Theexpert likes to see as much attention paid to protecting your owninformation as to learning about others. Requiring customers tokeep materials confidential helps, he says, but you should take itfor granted that if you can get your competitors' materials,they can get yours. "Never assume the competition isn't assmart as you are," he warns.
Verifying information is another area Bloom may need toemphasize. For instance, a customer could be telling you about acompetitor's offer in hopes you'll try to beat it."They give you information for a reason, and you have tounderstand that," McGonagle says. "Especially if youdon't have documents, make sure you check on it."
Along those lines, Bloom needs to verify papers such as providercontracts aren't being obtained improperly. "Make sure thedocuments are not marked confidential and for the use of therecipient only," advises McGonagle.
McGonagle is somewhat concerned that it took a customer to alertBloom to a lawsuit against one of his competitors. Carefulmonitoring of regulatory actions and reports, especially in ahighly regulated area like insurance, might well have revealed theissue sooner, he says. Timely awareness of a lawsuit is crucial,McGonagle explains. There may be limited opportunity to see courtdocuments, many of which are full of valuable information, before acompetitor arranges to have records sealed from public view.
Entrepreneurs in most industries can get surprising amounts ofinformation from the government, adds McGonagle. Tax assessmentsmight reveal the quantity and type of machinery behind arival's factory walls. Bids on government contracts andapplications for environmental permits might do the same.
One last key to operating an effective CI program is to involveemployees as much as possible. McGonagle likes to see activeincentives for workers to take part. This can be as simple asletters of praise in their personnel files. "People die forthat kind of stuff," he says, "because it can mean apromotion."
For entrepreneurs themselves, competitive intelligence can meanthe difference between teaming up with the right partner andgetting trampled by an unseen opponent. Bloom, whose company hasgone from start-up to a 22-employee firm in three years, is abeliever. "You're not in a position to compete withoutcompetitive intelligence," he says. "It's likerunning a race without looking at the other runners."
Next Step
- The Internet Age of Competitive Intelligence(QuorumBooks) by John J. McGonagle and Carolyn M. Vella discusses theimpact of the Internet on the acquisition and use of informationabout business opponents.
- The Society of Competitive Intelligence Professionals is aninternational group that sets standards, provides education, hostsevents and publishes information about competitive intelligence.Contact SCIP, 1700 Diagonal Rd., #600, Alexandria, VA 22314,(703) 739-0696, Fax: (703) 739-2524, info@scip.org, http://www.scip.org
- Competia.com is an online publication containing news,analysis, tips and techniques from the world of competitiveintelligence. It's available at http://www.competia.com
Contact Sources
Helicon Group, (610) 916-2081
Pet Assure Inc., (888) 789-7387, http://www.petassure.com
