Competitive Intelligence

Tactical, Operational & Strategic Analysis of Markets, Competitors & Industries

One of my colleagues was on an introduction call recently with a potential new client (a major health insurer), and the responses from them were surprising - shockingly so. Their message was this, "We don't look at our competitors. We look at market trends, and react to those."

My first thought was that we were speaking to the wrong group, but they self identified as the CI function, included a person titled "Director of CI and Market Research", and claimed to be responsible for all research related requests... but that no one at the company ever asked them to look at Competitors.

Now granted, I work in a CI consulting role, so my perspective is skewed by the fact that people who come to me interested in looking at their competitors, but am I missing something here?

Why would a company NOT be interested in having a better understanding of their competition?
For those of you working in an internal CI function, do you see this lack of interest in competitors from your senior leadership also?

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There are several good reasons to not pursue CI activities:

1. You're not feeling any pain imposed by competitors or their activities. Yes, there is some risk of being surprised, but having CI doesn't eliminate that.

2. You have a very strong product development capability, and move very quickly.

3. You're very customer focused. This is especially true in combination with #2.

4. You don't have the capacity to act on, or even ponder, the data. Or maybe your approach simply doesn't need it - as with #3.

It's very tempting to make the assumption that it's always better to have more intelligence, especially for those who provide it. But if you step back you will see that additional intelligence sometimes just muddies the waters, creates delays & distractions, and can actually disable decision making in some cases.

The enemy of better is best, and much intelligence is provided with the aim of enabling the best. Being able to act effectively with speed is often better than acting with perfect effectiveness more slowly.

Another factor is politics. Companies are groups of individuals, and they perform when these individuals work together. Sometimes facts to not help this cause, and sometimes they actually cause huge problems. Hence the wisdom of only fools telling truth to power. This is really the same thing as the last point: 5 executives working together with a flawed but workable plan is better than 5 executives arguing for months about intelligence that's moved their cheese, and what to do about it.
Steve has really covered a lot of the major reasons not to do CI here. If these reasons are the real reasons for ignoring competitors, they aren't half bad. Apple, it is said, ignores other firms in the market because they are too busy revolutionizing industries like music and telecommunications.

That said, your company should probably be as good as Apple in order to get away with this kind of behavior. Competitors shouldn't cause obsession in the leadership, but it's generally foolish to ignore their impact on the market as a whole.

What's really dangerous here is that you might miss potential disruptive competitors, those clever little players (or trends) that are ignorable now, but which are conspiring to overturn the whole game. After all, you might have Apple doing something like launching the iPod, which will eventually overturn the music retail business. But since they don't look like Sam Goody, you'll not be looking.

To sum up, it's good not to be totally focused on competitors, but I can't imagine CI without at least a few of them in your sights.
Eric - you've brought up a few really interesting points.

How many times have you sat with more than 1 other CI person and not had the conversation (vent?) where the CEO/President is upset because they've heard something new and didn't hear it from the CI people first?

My count is zero. This comes up as reliably as the weather. The problem isn't that CI departments are deficient, the problem is that they don't really do early warning very well, and never will. The first reason is that the folks in the top are in the best position to hear rumors. The second is that early warning requires the recipient to believe the message, which is unbelievable in direct proportion to the necessity of believing it. So even if the lower-down folks brought the exact same rumor to the table, it wouldn't have the same credibility, and probably wouldn't get as far.

A smart CEO, upon hearing the rumor, instead of bashing CI for not finding it first will task them with putting meat on it's bones. Verify it, learn more, move it from interesting to actionable. That is what good CI people can do really well. Unfortunately CI is often sold on the ridiculous promise of early warning instead of the more boring but infinitely more valuable analysis & deeper research.

CI would never have saved the music industry. It could only give them a better indication of how deep the knife would cut, maybe. Again, the problem is that the message had to be believed to be useful, but it was fundamentally unbelievable. Consider the proposition: You want me to buy a $300 device, which requires a $3000 computer so that I can buy music online at the same price as in a store, all just to listen to music like I do now on a portable CD player that's not much bigger than the ipod and has better battery life? Wait, there's more? I get to spend hours and hours 'ripping' my music into my computer, which doesn't have enough storage for it anyway, just so I can make my CD's marginally more portable? Oh, and the music I rip isn't compatible with other devices?

Remember the mindset when the iPod came out, and the state of computing in general back then. If you were any of the victims of the iPod's success, would you want to be the one to convince your company what was coming? Me neither.

What would have saved companies is acceptance that their world had changed, and that they'd better find a new opportunity. CI folks would be well positioned to help in that process, but, well, we know how often they get invited to that kind of party.

I think I agree that CI can aid in detecting disruption, but it takes open-minded leadership to enable them.
Steve if the company is worth its salt in business, the very basic thing they would do is 5 Force Analysis.

5 Force Analysis is a Industry Analysis tool.

1. Competitors
2. Customers
3. New Entrants
4. Subsitutes
5. Competitive Rivalry in the Market / Markets


Maybe they are not using this simple yet very complex tool correctly.

This is a Strategy tool. Maybe somebody in the organisation is using this tool and they do not want to talk about it.
In my industry, if you don't at least monitor your competitors, you can't get an idea of what they might do to win the next contract and how you can beat them at their game. With an industry that is so hard to differentiate between companies, government contractors rely on competitive intelligence. For most areas of government contracting, barriers to entry are relatively low as are the differentiation of products and services. Knowing the competitors as well as the customers is the only way to succeed in a this environment because most of the time it comes down to price.

I suppose in a niche market, if they already know the barriers to entry are high and the competitive landscape is minimal, I can see why they might assume they can forgo evaluating the competition. That said however, as Steve mentioned, there are always innovators out there. I'd like to think that even a company that doesn't regularly pursue CI, is at least monitoring the marketplace for potential substitutes and new entrants that might attract their customers wandering eye.
Jeremy,
Great post with some insightful responses. Having worked in the insurance industry (always understaffed), CI teams become so involved in CI projects that they forget the other CI functions and some of monitoring and digging for warnings and indication basics -- simple as that.
Thank you all for the very interesting replies. I tend to think any company not doing CI is playing to lose, but some of the feedback offered suggests scenarios whereby doing CI might be pretty low on the list of priorities - especially if budgets are tight.

William Edmiston - I'm in the Bay Area too (SF) and would love to take you up on a more direct conversation. That said, any insights you have to offer, might also be appreciated by the thread responders if you have the time to type out your thoughts.

Thanks again everyone for sharing your thoughts. Much appreciated.
I'm going to play devils advocate here.

It's possible that this company has its feet firmly on the ground - and is actually thinking more than many of us do.

As CI professionals we focus on competitors - perhaps to too great an extent if we ignore market trends. Companies may lose market share to competitors but it's very rare that they will lose out totally to a competitor.

If you focus on market trends, you watch what customers are purchasing and what their current needs are and how these are changing. This makes perfect sense, as it's NOT competitors that make you money but your customers. Failing to match their needs both now and in the future will mean that your customers will switch to a competitor. Keeping your customers 100% happy will mean that they are unlikely to want to switch to a competitor. Furthermore, customers may know about emerging trends that both you and your competitors haven't yet spotted - perhaps from another sector. (Consider Polaroid and digital cameras. Yes - i know it's cliched as a case and also more complex, but essentially Polaroid missed the digital camera revolution as their business model at the time wasn't capable of handling the changes digital photography brought to the market. They new their traditional competitors in film - but not the emerging ones).

So looking at market trends means that you are identifying what makes customers happy - now - so essentially what STOPS the competitor gaining your customers. It also looks at trends that could threaten you in the future - and your traditional competitors too.

In contrast, focusing too much on competitors can mean ignoring customer needs, wants and desires. When that happens it doesn't matter how much you know about your competitor - as you've just lost the customer who paid for all that (now useless) competitor research.
I have found that there are two general attitudes behind all the reasons why a company would not look at its competitors -- arrogance and ignorance. Arrogance: we're the market leader, and as long as we keep serving our customers well, there's no reason to look at competitors. To which I reply - yes, until the competitor figures out a better way to serve customers. Ignorance - in many cases, companies WANT to assess their competitors, they just don't know how to do it effectively. This is where CI becomes a label for what is really market research, library research, trends analysis, etc. The suggestions here so far to employ techniques like Five Forces are great for getting companies started at a more disciplined look at their competitors and competitive forces. But, in both situations (arrogance and ignorance) it will take a devastating competitive surprise to give firms like these religion on the importance of competitive intelligence.
Hi Jeremy,
Last week at SCIP Amsterdam, the CI Manager of CISCO said that they were also not that much looking at the competition, but rather focusing on understanding customers. This seems to be the behaviour of market leaders who prefer creating markets and innovating, rather than following others.
As far as I know all companies always use 5 Force Analysis.

Now it depends on how effective is the OODA loop
I'm delighted to finally hear the conversation moving away from competitors. The marketplace and customers are FAR more important than competitors in identifying opportunities, market changes, as well as customer's concerns, complaints and new ideas. Competitors should not be ignored, but keeping up to date with business and industry changes will be far more useful to the company than devoting a lot of time to monitoring competitors. This assumes the competitor knows something your company doesn't - and it's accurate.

Emerging competitors are more useful as they cannot gain sales or customers unless they offer something that the existing companies don't. And the reason if rarely price. Existing competitors need to be on the radar to determine if they are successful in doing something different that your company isn't doing or hasn't even considered. This might include adding a feature that customers want, targeting a different market, developing alternative uses, etc.

Far too many conversations focus on competitors rather than the entire competitive environment, as is evidenced by topics at SCIP's conference and articles in CI magazine.

I have had very strong opinions about the relative value of competitors for many, many years, and therefore devoted an entire chapter to this topic in my book, Competitive Intelligence Advantage (Wiley). Perhaps cheeky, I titled it "Why Fixating on Competitors is Misguided."

Competitors today include substitutes and companies from totally different industries. As above, the only way they get customers is because the established companies have a misguided focus on direct competitors rather than the marketplace. This is valuable for the company as it points out what they may have missed.

The more in touch companies are with their customers, the less likely another company (emerging or from another industry) will become a competitor (or serious competitor), as there is less opportunity. Note Amazon, eBay, Swiffer who maintain their dominance because they focus on staying current and continually satisfying customers.

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