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COMPETITIVE INTELLIGENCE
Competitive intelligence can be defined as The intelligence terminology has always been
knowledge and foreknowledge about the somewhat blurred, and new terms emerge as the
external operating environment. The ultimate intelligence discipline matures within the corporate
goal of each intelligence process is to facilitate setting.
decision-making that leads to action.
• Competitive Intelligence,
Successful business strategy requires awareness • Business Intelligence,
about the company’s external environment, • Market Intelligence and
including its customers, competitors, industry • Corporate Intelligence
structure, competitive forces etc. Information
about these issues is the key target of competitive are often used interchangeably or as synonyms,
intelligence. Competitive intelligence can be while
defined as knowledge and foreknowledge about
the external operating environment. The ultimate • Strategic Intelligence,
goal of each intelligence process is to facilitate • Customer Intelligence,
decision-making that leads to action. • Competitor Intelligence and
• Technology Intelligence
The intelligence process enables turning information
into intelligence by processing it via analysis, add a dimension of specificity to the subject.
interpretation and synthesis and utilizing it in the Eventually, all intelligence terms refer to using
future-oriented decision-making. Managing the systematic methods to collect, analyze and
future does not only mean being able to anticipate disseminate information that supports decision-
what will happen outside the company but also making.
being able to shape the happenings through own
actions, i.e. to proactively create one’s future. According to one of the views, Competitive
Intelligence (CI) is regarded as the broadest
Competitive Intelligence is not market research scope of intelligence activities covering the whole
or industrial espionage. While market research external operating environment of the company
often focuses on fulfilling a specific information and targeting all levels of decision-making, i.e.
need or set of needs, intelligence is a completely strategic, tactical and operative. At the same time,
legal ongoing process of developing a holistic it should be emphasized that the key goal of CI is to
picture of the operating environment including facilitate more effective strategic planning and, as
competitors, customers and markets. An effective such, it’s one of the most important strategic tools
intelligence process continuously contributes to that management possesses.
an organization’s knowledge base and leads to
cumulative organizational learning.
The Global Intelligence Alliance (GIA) is a global network of business research and Competitive
Intelligence (CI) consulting companies. The series of GIA White Papers is a means for the GIA and
its clients and partner companies to share knowledge on key topics within the field of Competitive
Intelligence. Please feel free to give us feedback on the White Papers by sending email to
info@globalintelligence.com.
Herring (1992) identifies two categories of (Figure 1). Going up the pyramid we move from
information needed for business strategy quantity (huge amounts of data and information
formulation: available to everyone) to quality (intelligence
leading to specific decisions and actions which
• information about the company’s own can ensure competitive advantage).
resources and capabilities, and
• information about the company’s external This difference is noted also by Kahaner (1996, 20-
environment. 21) who argues that while information is factual,
consisting of numbers, statistics and scattered
The latter (information related to customers, bits of data, intelligence, on the contrary, is a
competitors, industry structure and competitive collection of pieces of information that have been
forces) shapes the industry and is the target of filtered, distilled and analyzed. In other words,
every Competitive Intelligence process. the purpose of the intelligence production is to
put the fragments of information into a coherent
Sawka (1996) defines Competitive Intelligence as puzzle, a picture of the forthcoming future. The
knowledge and foreknowledge about the external essential notion, again, is that information is
operating environment. He considers CI a prelude turned into something that can be acted upon.
to informed decision-making, and further argues
that intelligence can be viewed as actionable
information about a customer, market situation,
regulator, competitor or any other external Intelligence is the lifeblood of
influence. The information is made actionable strategy.
through careful analysis and interpretation, which
turns it into intelligence.
The notion of actionable information is essential This view is supported by Taylor & Farrell (1994,
in the context of Competitive Intelligence. The 95) according to whom transforming information
ultimate goal of each intelligence process should into intelligence calls for intellectual activity
be to facilitate decision-making that leads to such as analysis, interpretation and synthesis
action. Therefore, information not leading to into a form easily digestible for the users. It also
intelligence that can be acted upon is useless involves forecasts and opinions about the future
and should be eliminated over the course of the instead of just observations about historical and
intelligence process before reaching the decision- present situations, i.e. differently from ‘traditional’
maker. analysis, it is not about what happened, but about
what is going to happen.
It is characteristic for today’s intelligent
companies to seek, process and use information Differently from rather common misunderstanding,
about their outside environment to manage their Competitive intelligence is not market research,
future (McGonagle & Vella 1996, 9). What turns nor is it industrial espionage. It is a completely
information into intelligence, according to the legal and increasingly essential element in the
above definition, is processing it into forecasts formulation of corporate competitive strategy. It
and utilizing it in future-oriented decision- provides the decision-maker with invaluable insight
making. Hence, managing the future does not into the competitor’s capabilities and intentions.
only mean being able to anticipate what will Furthermore, it serves as an early warning of future
happen outside the company but also being able events, which may have an impact on company
to shape the happenings through own actions, i.e. performance. Bernhardt who calls intelligence “the
to proactively create one’s future. lifeblood of strategy” takes the idea of essential
and vital intelligence even further. He argues that
In other words, although information and a strategy without intelligence is not strategy, it is
intelligence are sometimes used as synonyms, they merely guessing. Meanwhile intelligence is about
are at different levels of the ‘intelligence pyramid’ ‘guessing right’.
Distilled,
Integrated
Intelligence
Information
Knowledge
Information
Random,
Data
Dispersed
Trends and
Themes Business Environment Trends and Critical Themes
CRM:
Customer
Intelligence
Industries
Supplier Customer
Industry
Industry Industry Corporate
Intelligence
Intelligence Intelligence
Scope
Communications:
Media Intelligence
Companies
Supplier Competitor Customer
Intelligence Intelligence Intelligence
on
gi
Re
t
ke
ar
R&D: Technology
Intelligence
Value Chain Dimension
Gelb & Zinkhan (1985) discuss Competitive McGonagle & Vella (1996) have introduced a concept
Intelligence with an emphasis on competitors. called Cyber IntelligenceTM, which encompasses
They separate defensive intelligence from offensive Competitive Intelligence, Strategic Intelligence,
intelligence, both of which refer to rivalry Market Intelligence and Counterintelligence.
between companies. By defensive intelligence, In addition, the authors include such areas as
companies strive to learn about competitors’ crisis management, benchmarking and reverse
plans for new products, product features, price engineering.
changes etc. and prepare for the realization of
these measures. Offensive intelligence, in turn,
focuses on identifying competitors’ weaknesses
and equipping a company with strategies to attack
these weaknesses.
Strategic
Level Strategic Intelligence
Levels
Competitive
Level Competitive Intelligence
Market Market
Level Intelligence
Events
Past Present Future
Figure 3. Strategic Intelligence is seen as the broadest scope of intelligence activities covering the whole
external operating environment of the company and targeting all levels of decision-making, i.e. strategic,
tactical and operative.
As it can be seen from the above review of different of contents (i.e. elements, see Chapter 3) as well
views, the terminology and scope of Competitive as the decision-making level(s) it is primarily
Intelligence efforts in organizations should be intended to serve.
determined on a case-by-case basis both in terms
Trends and
Themes Business Environment Trends and Critical Themes
Industries
Supplier Customer
Industry
Industry Industry
Intelligence
Intelligence Intelligence
Scope
Companies
Supplier Competitor Customer
Intelligence Intelligence Intelligence
on
gi
Re
t
ke
ar
The core of any intelligence system in a company useful to discuss each phase in more detail.
is an intelligence cycle (Kahaner 1996, 43).
In discussing the transformation of data and According to Sawka (1996), defining the
information into actionable intelligence, a process intelligence needs is an absolute prerequisite that
perspective is useful given that a continuous chain ensures management will be fully engaged in the
of action is required. The process, usually called process. Before any data or information is collected,
the Competitive Intelligence cycle, begins with the strategically relevant needs of all intelligence
determining the intelligence needs. users must be articulated (Bernhardt, 1994),
preferably through direct communication between
decision-makers and intelligence professionals.
Companies are encouraged to adopt Direct contact is important because intelligence
the classical four-step intelligence users may have difficulty in expressing their needs
and prior knowledge due to its tacit nature. The
cycle used by the U.S. Central
role of need determination has become extremely
Intelligence Agency (CIA) and other important especially in the era of an expanding
national security organizations information overload. Asking the right questions
throughout the world. (‘what do we need to know’) at the beginning
of the cycle helps to ensure that the produced
intelligence is used by decision-makers.
The cycle includes setting goals, obtaining data, Effective intelligence processes set the intelligence
comparing information from different sources and customers, i.e. the users, as the starting point for
estimating possible future developments. Finally, the entire function. The users are given intelligence
the results have to be utilized in a timely fashion. they require, analyzed to a level that serves them
best, and delivered in a form they desire (ibid.).
Bernhardt (1994) introduces a Competitive
Intelligence cycle with five phases: planning and Numerous sources need to be continuously
direction, collection, processing, analysis and monitored in order to find the appropriate material.
production and, finally, dissemination. In his Monitoring can be seen as continuous surveillance
model, adapted from the CIA, the author includes of formal and informal sources, whereas the actual
need determination in planning and direction. collection calls for a more specified need. On the
The collection phase is followed by processing, other hand, active monitoring is also likely to
which in Berhardt’s model refers to computerized create new needs.
activity.
In practice, monitoring and collection are
Kahaner (1996, 44) describes only four phases: overlapping phases in the intelligence cycle. The
planning and direction, collection, analysis and needed information calls for active gathering
dissemination. In this context, too, all the start- measures often implemented by a corporate library
up activities, including need determination, belong function, especially in the case of using external
under the planning and direction phase. sources. The role of human intelligence, i.e.
intelligence that is not documented but possessed
McGonagle & Vella (1996) also discuss a four-stage by individual employees, is also significant.
cycle starting with establishing the intelligence
needs. The required information then has to be It is argued that human intelligence,
collected and analyzed. The authors incorporate also referred to as “tacit knowledge”,
preparing, presenting and utilizing the intelligence
seems to set organizations apart
into the final stage in the cycle.
Obviously, there are separate, yet interrelated stages regarding their intelligence
in the intelligence process. Some of the phases can capabilities and, eventually,
be further divided into more specific phases. From competitiveness.
both theoretical and practical perspectives, it is
The value adding role of analysis in the intelligence The final stage of the intelligence cycle is the
process is highlighted by Bernhardt (1994) who utilization of the processed information, which in
stresses that it is the options and recommendations turn will lead to determination of new needs. Gilad
emerging from the analysis that facilitate senior (1989) identifies five basic targets for utilization:
managers’ strategic decision-making. identifying new business opportunities, sharing
ideas, improving the organization’s ability to
When the relevant information has been thoroughly anticipate surprises, improving managers’ analytical
analyzed, it needs to be disseminated to users. skills and integrating diverse ideas.
The role of the dissemination phase is to ensure
that the right people receive the right intelligence Referring to a study involving 20 U.S. top-managers,
at the right time. Dissemination is an extremely Gelb et al. (1995?) argue that intelligence is mainly
significant part of the intelligence cycle as the used for improving corporate processes, decision
basis of the entire function may be eroded if the making and overall performance of managers.
intelligence product is delivered too late. The Secondly, problems and opportunities are better
decisions have to be made and actions taken before anticipated through adequate intelligence activity.
an anticipated situation will occur. Moreover, intelligence processes help companies
understand how they are performing relative to
immediate competition and to plan accordingly.
1. Need
8. Utilization Analysis
& Feedback
2. Observing
& Monitoring
7. Storing
3. Collection
from external
and internal
sources
6. Dissemination
4. Structing
& Elimination
5. Analysis
Competitive intelligence is not market research, making and strategy development. It is carried
nor is it industrial espionage. It is a completely out through industry analysis, which means
legal and increasingly essential element in the understanding the players in an industry;
formulation of corporate competitive strategy competitive analysis, which means understanding
which provides the decision-maker with invaluable the strengths and weaknesses of competitors;
insight into the competitor’s capabilities and and benchmarking, i.e. the analysis of individual
intentions. It serves as an early warning of future business processes of competitors”.
events, which may have an impact on company
performance. In discussing the transformation of data and
information into actionable intelligence, a
While market research often focuses on fulfilling process perspective is useful given that a
a specific information need or set of needs, continuous chain of action is required. It can be
intelligence is an ongoing process of developing argued that the core of any intelligence system in
a holistic picture of the operating environment a company is an intelligence process or cycle. The
including competitors, customers and markets. key stages of this
An effective intelligence process continuously cycle are:
contributes to an organization’s knowledge base
and leads to cumulative organizational learning. • definition of the intelligence needs;
• collection of information and continuous
Although the terminology and scope of monitoring of various sources;
Competitive Intelligence efforts in organizations • processing the collected information;
should be determined on a case-by-case basis • analysis;
both in terms of contents and the decision- • dissemination and storage;
making level(s) it is primarily intended to serve, • utilization.
a useful definition of CI was offered by SCIP.
According to this organization, Competitive The managerial input, i.e. adequate planning and
Intelligence is a “timely and fact-based data direction, is essential in order to initialize the
on which management may rely in decision- cycle and then keep it functional.
Bernhardt, Douglas C. (1994), ‘I want it fast, factual and Langabeer, James (1999), Exploring the CI Value Equation.
actionable’ – Tailoring Competitive Intelligence to Executives’ Competitive Intelligence Review, Vol. 10(3), pp. 27-32.
Needs. Long Range Planning, Vol. 27, Feb. 1994, pp. 12-24.
McGonagle, John J. Jr., Vella M. Carolyn (1996), A New
Calof, Jonathan L. (1997), For King And Country... And Company. Arhcetype for Competitive Intelligence. United States of
Business Quarterly, Spring, 1997, Vol. 61 Issue 1, pp. 32-39. America, Westport: Greenwood Publishing Group Inc.
Dahl, Patrick; Luecal, Scott (1995). Gathering Competitive Meyer, Herbert E. (1991), Real World Intelligence. Friday
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Piirto Heath, Rebecca (1996), What you don’t know will hurt
Etorre, Barbara (1995), Managing Competitive Intelligence. you. Marketing Tools, Jul/Aug 1996, pp. 52-59.
Management Review, Oct 1995, Vol. 84 Issue 10, pp. 15-19.
Prescott, John E. (1995), The Evolution of Competitive
Gilad, Benjamin (1989), The Role of Organized Competitive Intelligence in: Rethinking Strategic Management pp. 71-90,
Intelligence in Corporate Strategy, The Columbia Journal of ed. by D.E. Hussey, Jonh Wiley&Sons Ltd., U.S.
World Business, Winter 1989, pp. 29-35.
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Intelligence Practices of Industrial Marketers. Industrial 47-51.
Marketing Management, 14. pp. 269-275.
Stanat, Ruth (1990), The Intelligent Corporation: Creating a
Ghoshal, Sumantra; Kim, Seok Ki; (1986), Building Effective Shared Network for Information and Profit. AMACOM, American
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Management Review, Fall 1986, Vol. 28., No.1., pp. 49-58.
Taylor, Allan, Farrell, Stephen (1994), Information Management
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75.
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11.
The Global Intelligence Alliance (GIA) is a global network of business research and
Competitive Intelligence (CI) consulting companies. Leveraging its worldwide reach,
the Global Intelligence Alliance provides multinational organizations with a single
source for all CI requirements including: process consulting, intelligence services,
education, and leading technology solutions.