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Battling for marketshare, CI helps build stake in future

This article appears in the issue July 1999 [Volume 8, Issue 7]

"Commercium bellum est, noscete hostem." Business is war, know your enemy. Whether it’s written on a Roman merchant’s doorway or in the pages of a techno-business magazine, it sounds forbidding. But what less do we face in the modern business enterprise today than all-out war? The battle between firms for marketshare, mindshare or no-holds-barred dominance has never been fiercer, and it’s a fight for the future.

Why do evidently great firms-often with superior resources-fail, go broke, get dissolved, reorganized or acquired (and, yes, reorganization and acquisition are considered kinds of failure), while others succeed? Only one firm (General Electric) that was part of the original DOW Dozen first published in 1896 remains listed in today’s Dow Jones Industrial Average. All of the others have fallen aside, been absorbed by other companies with superior competitive strategy and an understanding of themselves, or declined with changes in the marketplace, failing to adapt to changing economic conditions.

Using competitive intelligence to compete

We all should know that fortunes are not cast by successful products, but by a rational understanding and application of core competencies-the real value behind each firm-often a single area of excellence on which everything else is built.

Prahalad and Hamel, in their seminal work in the field, "The Core Competency of the Corporation," found that three characteristics guide the identification of core competencies. First, they must be competitively unique. Second, they must make a disproportionate contribution to customer-perceived value, and, third, they must form the basis for entry into new product or service markets.

General Electric (www.ge.com) understands its core competencies and is able to remain in either first or second place in any of the diverse businesses it enters. If GE cannot achieve first or second place, it will divest itself of the business. Intel (www.intel.com) understands its core competency-"to make the guts of the information revolution."

Firms fail or succeed based on how they manage the knowledge they possess about themselves and their competitors, and on how they turn that knowledge into responsiveness and action in terms of a strategic plan and its tactical execution. Yet, a 1995 study of Fortune 500 corporations found that only 55% use competitive intelligence to formulate and calibrate competitive strategy. That’s not to say that they don’t all have concentrated CI functions, merely that the purpose behind CI is often misunderstood.

Never before have we had the access to raw information, both within and without the company, to bring to bear on the battlefield of the marketplace. The question is not about how and where we find the information we need to succeed. Rather, managers must ask themselves, "How do we manage the tremendous volume of information available and apply it effectively to execute our business strategy?"

It has been said in the CI community that companies already somewhere possess 80% of the knowledge they need regarding their rivals to compete successfully. Although that figure might be a myth, it’s an important observation about the need to apply what we already know. The word "somewhere" implies the need to map and channel the knowledge.

Why then do firms place so much emphasis on external research when they have already committed enormous capital toward building the knowledge assets that are already in place? There are two answers. First, the shelf-life of CI is relatively short when compared with other types of information in the enterprise, such as data mined from customer records that might be applied for a one-to-one marketing campaign. The value of CI is predictive rather than historical in nature and only makes a difference when a gap exists in the knowledge between a company and its competitors. Second, business leaders today have neither the time nor the inclination to consume information they already know.

Why do so many CI efforts fall short of producing bottom-line impact toward the continued success of the firm? Many are the hosts of CI cells that have been organized into multidisciplinary groups with an explicit mission of gathering information about competitors, direct, latent, parallel or otherwise, for the benefit of competitive strategy. Some CI managers are sophisticated; some are naive. The CI function is as diverse as business itself. We see a need to create a continuum of best practices that can be applied universally to the incredibly varied scope and scale of operations today, while planning for what those operations will become in the future.

The CI mission comes down to asking ever more focused questions, beginning with how to most usefully define the company’s mission, its strategic intentions, its objectives and its strategic choices. What do we need to know to develop and select strategies that are not only successful, but sustainable? What new products should we build and which markets should we enter, and how? How do we implement our competitive strategy?

Cycling through business problems

Predicting the future-or rather "probable futures"-of businesses and their environments is indeed a well-refined science, often referred to as the intelligence cycle. The CIA describes the intelligence cycle as "the process by which raw information is acquired, gathered, transmitted, evaluated, analyzed and made available as finished intelligence for policymakers to use in decision making and action." It consists of five cyclical steps, repeated over time and applied to specific business problems or objectives: planning and direction, collection and research, processing and storage, analysis and production, and dissemination and delivery.

The purpose of the intelligence cycle is also a five-fold mission: assessment of strategies, competitor perceptions, effectiveness of current operations, competitor capabilities and long-term market prospects.

Future articles will examine the intelligence cycle, the varied goals behind it and the tools and techniques used to achieve those goals.


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