Competitive intelligence, or CI, is a widely misunderstood discipline among small businesses. It's not corporate espionage (which is illegal), and it's not market research (which isn't actionable).
"Competitive intelligence is designed to help companies make decisions," says Bob Fox, head of a government-sponsored CI training program for Alberta entrepreneurs. That means you must first figure out what you need to know, and how soon you need to know it in order to do something about it. Will my competitor set up a distribution centre in my market? With whom should I partner in Africa? What will be the hot new colour for scooters?
"All these are real questions I've had companies bring forward," says Fox.
Collecting competitive intelligence is closer to what a journalist does than a spy, in that there are laws and ethics of conduct. CI practitioners use a rule of thumb: If having your actions reported on the front page of a newspaper would embarrass your company, don't do it. That still leaves grey areas, and some businesses opt to hire CI consultants to investigate more sensitive issues.
That said, CI for entrepreneurs is fundamentally about effective internal communication. "You're small," says Jonathan Calof, a professor of business at the University of Ottawa who is one of Canada's top CI consultants, "so you get your people together and say, 'If we were doing this, what signs would we give out?'"
Here are five common questions businesses ask - often too late - and some ideas on how to use CI techniques to ferret out the answers.
Is my rival developing a new product?
Even top-secret plans tend to leak out through gaps in communication strategies. Inconsistent public statements by company staffers can point to new initiatives, so it's critical to monitor your competitors' comments in the media, on industry blogs, at conferences and on social networks like Twitter and Facebook. When CEOs make speeches to chambers of commerce, they will often hint at future plans as they plug their companies' achievements, says David Blenkhorn, a marketing professor at Wilfrid Laurier University who specializes in CI. Help-wanted ads can be another clue: Is the company seeking new types of hires? Is it looking for R&D staff? Your local city hall can be a fount of valuable data. Has your rival filed any zoning requests or planning applications - information the public can access - that suggest a facility expansion?
Economic trade and development officers can likewise tell you about new plans by companies in the area. Public libraries in major cities, as well as university business schools, have research groups and sector specialists on staff who can help you to search patent databases around the world for any filings by your rival. Trade shows are great opportunities to verify rumours, allowing you to talk informally with your (and your competitors') customers and suppliers about new products hitting the market. Manufacturing companies often offer public facility tours; other businesses host open houses and social activities.
Which of my competitors' top people are ripe for plucking?
When applying CI to recruitment - known as sourcing intelligence - start with your employees' professional networks, says Jonathan Calof. Tell your staff to feel out colleagues at rival outfits to see if someone's looking to jump ship. Waiting for signs of problems at competing companies before head-hunting their employees can be counterproductive, he says. "The really good people will have already left."
Once you've homed in on a particular individual, Calof suggests identifying all the people with whom he comes into contact and talking to as many of them as possible about his plans and career prospects. It's called "boxing the target," and it allows you to craft a recruiting strategy before you make the approach.
Is my competitor having financial problems?
To get the scoop on private companies' fortunes so you can capitalize on their troubles before they become public, look for changes in patterns, says Calof. It can be as simple as monitoring the parking lot of a rival's plant to see if it's full for two shifts or just one. But there are more subtle signs. David Blenkhorn suggests checking whether your competitor has sought any financial assistance from government programs, such as subsidies, grants or loans. The applications, along with the applicants' financial filings, are often made public on government websites.
Why did I lose that bid?
The more instructive way to frame this question is, why did my competitor win it? Step one: Call the client and ask, says Alli Marshall, who runs Strix Insights, a Calgary-based strategy firm catering to small businesses. "Don't assume you lost this business because of price," she says. "You'll normally find it's a complex value system in gauging bids." What was the client looking for that you failed to provide? Beyond that, you want to find out as much as you can about your rival's bid, focusing especially on its cost structure, says Blenkhorn. Many bids for government contracts are made public, so you can discover a competitor's costs for labour, materials and other key items on public projects, and assume the ratios will likely be similar on private ones. Another way such information comes out is during lawsuits, says Blenkhorn. When Research In Motion battled patent infringement claims, court proceedings revealed data on all participants' R&D and manufacturing spending.
It can be useful to map out your competitors' network of contacts within your own client base. "Customers will tell you a lot of things about who they deal with [at other companies]and why," says Blenkhorn. The value lies not only in gauging who holds the power in green-lighting contracts, but in realizing when you don't have a shot at winning. "Sometimes, the winner is predetermined," notes Blenkhorn. "You don't want to spend too much time and money on a bid you can't get."
How is my competitor able to outsell me on this product?
Retailers can usually glean much of the answer by shopping at the rival's locations. "Mystery shop" your competitor, paying attention to details, from colours and decorating materials to the music, the smells, aisle width and traffic flows, advises Mark Healy, a partner in Toronto's Torque Customer Strategy. If the target company doesn't deal directly with the public, tap their channel partners for answers. Store managers or service providers may reveal, for example, that a rival's higher sales have nothing to do with the product or promotion, but the fact it offers better margins to the channel partners. And whenever possible, talk to the front-line staff, Healy advises. "This is where you're going to find out that even though product X has the lowest price, no one buys it because the reps won't recommend it."
KNOW YOUR COUNTERINTELLIGENCE
You congratulate yourself for your shrewd intelligence-gathering - but what if the competition is doing the same? "Small businesses often can't withstand a loss of a secret," says CI consultant Jonathan Calof. "They're more vulnerable [than large companies]"
Going after CI is not enough: You also need a defensive strategy.
First, decide what is secret, and don't worry about everything else. The more you try to protect, the more chance of disclosure, says Calof, so figure out what is truly core to your competitive advantage. With blogs and wikis and various social networks, the concept of keeping secrets goes against the grain for many young people accustomed to professional collaboration online. "Don't try to protect everything," says Calof. "Science and technology grows because people share information."
You'll have a good shot at blocking your rivals' CI inroads if you recruit the help of your employees. Tell them that if they ever get questions regarding the areas you identify, they should report them to you or another executive. "That way, you create a buffer," says Calof, while staff stay alert to prying eyes and big ears.
Speaking of which, assume that everything you say in a public or semi-public forum may as well have been whispered in your competitor's ear. Even the questions you ask at conferences can reveal aspects of your strategy and direction.
Some companies go so far as to put out false signals, including running elaborate disinformation campaigns to mislead competitors. One U.S. pharmaceutical firm set up a fake project in a dedicated building to divert a rival's attention from what it was really developing.
Most importantly, says Calof, don't underestimate your competitors. "Assume the other side is smarter than you give them credit for."