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What is Competitive Intelligence?

What is competitive intelligence? How does competitive intelligence fit into the strategic planning process? What is the role of knowledge management and how does it relate to competitive intelligence? Is competitor analysis identical to competitive intelligence? How can competitive intelligence become part of a corporate intranet strategy? How do we train our employees to beware of corporate espionage and protect our intellectual property? Do the companies we compete with engage in competitive intelligence on us and what is the effectiveness of their competitive intelligence process? How do we measure the effectiveness of our own CI process?

The question of what Competitive Intelligence (CI) consists of is not as necessary to understanding its importance in business than understanding a bigger and more important question -- why do some firms in an industry win and achieve hegemony where others, often with superior resources, fail

In short, CI is the purposeful and coordinated monitoring of your competitor(s), wherever and whoever they may be, within a specific marketplace... Your "competitors" are those firms which you consider rivals in business, and with whom you compete for market share. CI also has to do with determining what your business rivals WILL DO before they do it. Strategically, to gain foreknowledge of your competitor's plans and to plan your business strategy to countervail their plans. As you might expect, this will involve many methods at the tactical collection level, but it will also require integration into your existing information infrastructure, analysis and distribution of the information, and finally, the calculation of business decisions on the grounds of that information and the analysis of same. This is the "intelligence" part of the formula.

Most of the value-added in manufacturing or product companies is created by knowledge-based service activities such as research and development, marketing research, product design, customer service, advertising, or distribution. Winning firms are organizations that most successfully master the business issues critical to their performance, and develop the most precise understanding of definitions of value and creation of value. Competitive advantage has a lot to do with leveraging the knowledge assets of the firm, while at the same time determining how competitors are likely to leverage theirs.

The goals of this explanation are many:

  • Adopt a strategic approach to the use of competitive intelligence; to see the intelligence function as an integral part of strategy formulation

  • Show how competitive intelligence is used by firms to achieve competitive advantage

  • Examine the process, the tools, and the output of CI

A Fortune 500 company survey showed 55 percent make use of competitive information in composing business strategy. Each firm is a leader in its industry and each firm knows its enemies.

Companies and industries prosper through improvements in competitiveness, leveraging core competencies, and competitive intelligence is at the core of the objective of improving competitive advantage.

Competitive intelligence is the core of competitive strategy

Why do evidently great organizations with great products, wise managers, and other successful strengths, go out of business?

Economies of scale, the foundation on which big companies have based their dominance in the Industrial Era, is no longer an advantage. Changes in information technology, in the financial system, in just-in-time production techniques, and in the rise of companies offering distribution and support systems which previously only the largest companies could afford -- removing the advantages of being big. The diseconomies of scale - overhead, inflexibility -- are becoming increasingly powerful.

Value Of Competitive Intelligence

Here are just a few of the questions firms ask themselves when implementing a CI program:

  • How do we 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 to select strategies which 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?

Whatever strategic framework the firm chooses to embrace for the management of its business, no one element remains more fundamental to competitive strategy than competitive intelligence. Competitive intelligence is more concerned with doing the right thing, than doing the thing right.

The goal of a competitor analysis is to develop a profile of the nature of strategy changes each competitor might make, each competitor's possible response to the range of likely strategic moves other firms could make, and each competitor's likely reaction to industry changes and environmental shifts that might take place. Competitive intelligence should have a single-minded objective -- to develop the strategies and tactics necessary to transfer market share profitably and consistently from specific competitors to the company.

A firm which does not rigorously monitor and analyze key competitors is poorly-equipped to compose and deploy effective competitive strategy and this approach leaves the firm and its markets vulnerable to attack. The basis for CI revolves around decisions made by managers about the positioning of a business to maximize the value of the capabilities that distinguish it from its competitors. Failure to collect, analyze and act upon competitive information in an organized fashion can lead to the failure of the firm itself.

What then is competitive intelligence? How do we define it? In what ways does it differ from market research? How is it used to make companies more competitive? Who needs competitive intelligence? How is it managed? How is it produced? How should competitive intelligence be used? By whom? What are its costs? Where does competitive intelligence fit within the strategic management system of the firm? What are the measurable "bottom line" benefits for managers and their organizations?

The Chinese military strategist, Sun Tzu, emphasized the need for CI: "Now the reason the enlightened prince and the wise general conquer the enemy whenever they move, and their achievements surpass those of ordinary men, is foreknowledge".

The upside of successfully predicting a competitor's future plans are apparent; as are the consequences of making business decisions based on information that is faulty.

Competitive intelligence is usually composed of five major areas of endeavor, and is performed under three main approaches in the CI framework:

  • assessment of strategies

  • competitor perceptions

  • effectiveness of current operations

  • competitor capabilities

  • long-term market prospects

Strategic intelligence is concerned mainly with competitor analysis or gaining an understanding of a competitor's future goals, current strategy, assumptions held about itself and the industry, and capabilities -- diagnostic components. Intelligence about the firm's major customers, suppliers and partners (in marketing or research and development alliances) is often also of strategic value.

Tactical intelligence is generally operational and on a smaller-scale, not so centered on being predictive. Tactical issues include competitors' terms of sale, their price policies and the plans they have for changing the way in which they differentiate one or more of their products from yours. Middle-level marketing and sales managers number among some of the main users of tactical intelligence. They want to know how to win the day, today.

Counter intelligence is defending company secrets. Every firm has competitors as interested in knowing your plans as you are in knowing theirs, maybe even more so. Often, this area of endeavor will involve security and information technology, but others are often overlooked, such as hiring and firing strategies, to contain competitor opportunities within the firm.

Competitive intelligence is the determination of solutions to these principle factors and determinants of ongoing competitive advantage:

  • What is the basis of competition

  • Where the firm competes

  • Who does the competitor compete against

  • How does the firm compete

CI is focused on decision making

Seldom do people realize that business, just like life is merely a series of decisions. And global firms have a growing need for the necessary information on which to base decisions concerning the conduct and development of each of their firm's strategic objectives, and the protection of their organizations against threats from their competitors.

Purpose & Role of Intelligence in Business

Intelligence is both a process and a product -- an analytical process that transforms tumultuously gathered competitor and market information into actionable knowledge about competitors' capabilities, intentions, performance, and position; as well as the final product of that process.

The focus of market research tends to be on the problems associated with the profitable marketing of a firm's products and services. The scope of competitive intelligence is far broader. Competitive intelligence is a value-added concept that layers over the top of business development, market research and strategic planning.

The research objectives of a competitive intelligence project will often involve issues such as: the manufacturing capabilities of the competitor; analysis of alliances and/or joint ventures entered into by competitors; the competitor's future plans and strategies for specific markets, or product lines; reasons behind changes in the corporate or business unit strategy, et cetera.

In today's global enterprise, CI happens at two levels -- corporate and business unit. Corporate strategy concerns two different questions: what businesses the corporation should be in and how the corporate office should manage the array of business units. And, competitive strategy is concerned with how to create competitive advantage in each of the businesses in which a company competes based upon core competencies.

The Cycle of Competitive Intelligence

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." There are five steps which constitute this cycle:

  • planning and direction

  • collection and research

  • processing and storage

  • analysis and production

  • dissemination and delivery

There are seven questions to be answered prior to making investment decisions in CI:

  • what do we need to know?

  • what do we already know?

  • why do we need to know it?

  • when do we need to know it?

  • what will we do with the intelligence once we have it?

  • what will it cost to get it?

  • what could it cost not to get it?

CI's Final Product

The product of the intelligence cycle, is evaluated information. It is finished intelligence, packaged in a format appropriate as much to the intelligence itself, as it is to the customer for the intelligence, the decision-maker.

In practice, the intelligence product is unlikely to be created from perfect input. We cannot truly and accurately predict the future until events have already taken place and it's too late. The firm finds itself in a position where it can only react to the competitor's move; it has lost the advantage it might have had if the right intelligence had been available earlier. So, although we can't know for certain the minutiae associated with exact details, we can discover plans and roughly-hewn strategies.

CI's real value is to provide managers with the organizational tool to learn what the competitor will do, not what the competitor has already done.

Ethics and ethical behavior are concerns here and since the area is usually perceived as positive to a company's reputation and competitiveness, it would not be useful for a firm to undertake its intelligence activities without regard to ethical or legal considerations. Everything a firm needs to know about the competition can be obtained by legally available means. The cost of stepping over the line -- into the black -- are far too severe, and unnecessary.

What are the bottom line benefits of CI? Improved market knowledge, improved cross-functional relationships in the organization, greater confidence in making strategic plans, and improvements in product quality versus the competition. In short, better business performance through doing things better.

Arik R. Johnson is Managing Director of the CI consultancy Aurora WDC, where he is a consultant, trainer, writer and speaker on Competitive Intelligence for clients in the Healthcare, Financial Services, Telecommunications, Media, Information Technology, and Manufacturing Industry Sectors. He can be reached via email ( or on the Web (

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