"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 still sounds forbidding. But what less do we face today in the modern business enterprise than no-holds-barred war? The fight between firms, for marketshare, mindshare or all-out hegemony, competition and the quest for competitive leverage has never been fiercer, never more bloodthirsty. Competition in business is the fight for the future.

When I was invited to become contributing editor on competitive intelligence topics, also known as "CI", for KMWorld Magazine I made it my goal to add another voice to this discussion, a forum that is already being well-served by dozens of other authors around the world. In coming months, my contributions in the context of our discussion here will focus on how get the most and, more importantly, the best, from our competitive intelligence efforts, deploy and measure the results made by the CI function and show how some of the world's fiercest competitors strive towards market hegemony. This first brief essay represents a starting place for my future thoughts on the subject for KMWorld, in order to establish a point of reference from which to proceed and for the benefit of newcomers to the field.

Enough administrivia, let's cut to the chase and begin by asking the big questions, such as why evidently great firms, often with superior resources, fail and go broke, are broken-up, dissolved, reorganized or acquired (and, yes, reorganization and acquisition are considered kinds of failure), where others succeed? Did you know that there is only one firm (General Electric) that remains listed in today's Dow Jones Industrial Average that was part of the original DOW Dozen first published in 1896? All of the others have fallen aside, been absorbed by other companies with superior competitive strategy and understanding of their business or declined in parallel with changes in the marketplace, unable to adapt to changing economic conditions.

Competitive Intelligence as the Focal Point of Competitive Strategy

We all should have learned by now 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 upon which everything else is built. Prahalad and Hamel, in their seminal work in the field, "The Core Competency of the Corporation", found that there are three characteristics which guide the identification of core competencies: first, they must be competitively unique; second, they must make a disproportionate contribution to customer-perceived value; and, finally, they must form the basis for entry into new product or service markets. General Electric understands its core competencies, and is able to achieve either first or second place in any of the diverse businesses it enters; if GE cannot be a leader in an industrial sector, it will divest itself of the business! Intel understands its core competency - "to make the guts of the information revolution".

The reasons why firms fail ultimately comes down to a question of how they manage the knowledge they have within and about themselves and their competitors and turn that knowledge into responsiveness and action in terms of their strategic plan and its tactical execution. Yet, a 1995 study of Fortune 500 corporations found that only 55 percent make use of competitive intelligence in formulating and executing competitive strategy! That's not to say that they all don't have concentrated CI functions, merely that the purpose behind CI is often misunderstood.

Never before have we had the same access to today's quantity or quality of raw information, both within and without the company, to bring to bear on the battlefield of the marketplace. The question we all face is not "how and where do 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 as much as 80 percent of the knowledge about its competitors that a firm requires to compete successfully is already present somewhere within the company. Although this is perhaps little more than a folk myth, as I can't find any scientific reference on that number, it is still an important observation about the need to apply what we already know. We should take note of the word "somewhere" -- implying an urgent need to map it and channel it before the competition does. In essence, CI is about "outsmarting the competition" by understanding the forces at work behind success more completely and acting on that understanding.

Why then do firms place so much emphasis on external research, when they have already committed enormous capital towards building the knowledge assets already in place and apparently underutilized? 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 or bundling of services based on an analysis of customer needs. The real value of CI is predictive rather than historical in nature and ultimately only makes a difference when a gap exists in the knowledge between a company and her competitors. Second, business leaders today have neither the time nor the inclination to consume information they already know, and they'd be fools if they did. At least, that's what the shareholders tell me.

Why then do so many CI efforts fall short of producing "actionable" results that are quantifiable and contribute a bottom-line impact to the continued success of the firm? Many are the hosts of CI cells that have been organized into multi-disciplinary groups with an explicit mission of gathering information about competitors, direct, latent, parallel or otherwise, for the benefit of competitive strategy. Likewise, I've had the honor to know many of their CI managers and have been amazed at the sophistication of some, as well as the naivete of a few, of the systems put in place for CI. The CI function is as diverse as business itself. I see a need to create a continuum of best practices that can be applied universally across the incredibly varied scope and scale of business operations today, while planning for what those operations will become in the future.

So where to begin? Define the mission? The CI mission comes down to asking ever more focused questions. How do we most usefully define the much broader mission of the company, its strategic intentions, its objectives and its range of available choices? What do we need to know to develop and to select strategies that are not only successful, but also sustainable? What new products should we build and which markets should we enter and how? How do we implement our competitive strategy?

The Competitive Intelligence Cycle

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, originally developed by the government "spooks" themselves. The Central Intelligence Agency 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

• dissemination and delivery

The purpose of the Intelligence Cycle is also a five-fold mission, including:

• assessment of strategies

• competitor perceptions

• effectiveness of current operations

• competitor capabilities

• long-term market prospects

In my upcoming essays we'll examine this intelligence cycle, the varied goals behind it and the tools and techniques used to achieve those goals. The scope of our discussion will range from identification of sources to analysis techniques to intranet tools and ethical responsibilities, and we'll look at how the world's leading businesses use CI to create sustainable competitive advantage. Until next time, remember, "Commercium bellum est; noscete hostem."

Arik R. Johnson is Managing Director of the CI consultancy Aurora WDC. Contact him via email at arik@aurorawdc.com or, for more information, visit www.AuroraWDC.com.