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Competitive Intelligence

The Basic Principles of Competitive Intelligence

This guide to competitive intelligence and competitor analysis is by its nature, quite basic and is a summary and precursor to a more detailed article published in Business Information Review in June 2002. (You can download this from here). There are also many books on the subject – covering everything from finding information on competitors, to analysing the information and finally using it in business strategy. We list a number of titles on our recommended books pages – (for example the classic texts on strategy by Michael Porter – Competitive Strategy and Competitive Advantage).

Sun Tzu and the Art of War

Around the year 500 BC, the great Chinese military strategist, Sun Tzu wrote a treatise: the Art of War. From a 21st century perspective, many of Sun Tzu’s approaches would be viewed as barbaric. Nevertheless, his views on strategy are still relevant today – for both military commanders and business leaders looking at how to win against competitors.

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Frequently asked questions

What's the difference between competitor & competitive intelligence?

This seems a straightforward question, but people use the terms in different ways. Our definition follows:

  • Competitive Intelligence is the process whereby information on the competitive environment is gathered and used to guide and inform company / organisational decisions. Competitive Intelligence looks at the overall external competitive environment (which includes suppliers, customers and other company stakeholders, as well as the economic, sociocultural, political, legal and technological environment facing the company).
  • Competitor intelligence is a subset of this – looking purely at competitors (as well as potential competitors), rather than the overall competitive environment (which include customers, suppliers, regulators, etc.).

What's the difference between due diligence research & competitive intelligence?

Prior to making an acquisition of, or merging with, another company, due diligence research should be undertaken to confirm all the facts about the prospective company. Generally this includes a full review of the other company’s finances and looks at the fit between the two companies.

Due diligence research should also look at the business environment, management capabilities, historical profitability and the company’s market potential. Often however this full process is skipped or rushed – as there is a wish to make the deal. Too often, acquisitions fail to fulfil their promise and expectations and this is generally because softer, qualitative factors have been ignored. Competitive intelligence can help in due diligence research by filling in these gaps. It can look at other companies in the market to understand the real competitive situation and evaluate the technologies, customers, suppliers and help identify potential problems that would often be missed by the more traditional approaches focusing on finances and product fit.

Essentially, due diligence research SHOULD also include competitive intelligence type research and not be limited to financial / product aspects.

What's the difference between knowledge management & CI?

Knowledge management is the process through which corporate knowledge is used to improve organisational performance. Essentially it looks at managing internal knowledge processes, developing the efficient usage of all information required for corporate decisions.

Competitive intelligence (CI) is a process for gathering usable knowledge about the external business environment. CI focuses on turning external information into the intelligence required for tactical or strategic decisions relating to the business environment. Without an effective knowledge management process, gathered CI is likely to collect dust — there is no proper process to turn the information into something usable. Even if immediate actions are taken based on collected CI, it must be integrated into the internal knowledge systems to develop any long-term learning. This learning is a crucial element to enable companies to become skilled at spotting trends and adapting to business change.

In this context, I think that it does no harm to think about Charles Darwin. Darwin’s focus was on the survival of the fittest and not the survival of the biggest or the cleverest or the fastest. Survival of the fittest refers to a species’ ability to adapt to its external environment as this changes.