How to Develop Competitive Intelligence

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Collecting competitive intelligence is like a scavenger hunt; nuggets of information are hidden everywhere. Your challenge is to go out and find them. But you cannot conduct the hunt as random bursts of effort if you want to develop truly effective competitive intelligence.

In a world where the competitive environment constantly evolves, ad hoc approaches will never develop and maintain a comprehensive competition profile. To keep up, you’ll need a methodical, disciplined approach to ensure that you always have a handle on what your competitors are doing.

First Define Your Comptition

You might think that your competitors are simply the other folks selling equipment like yours. Yes, they are your competitors. But that’s not the complete picture. Your competitors come in three forms:

  1. Direct competition
  2. Alternative approaches
  3. Decisions to not buy

Direct competition is the obvious head-to-head, equipment-to-equipment competitor. With direct competitors, it is easy to determine relative value. It’s as simple as lining up your performance on the critical value drivers with that of your competitor. Then apply a little math, and you’ve got your equipment’s value.

Alternate approaches refers to indirect competition. These are the alternative ways that your target customer can solve their problem.

For example, hard disk drives solve the problem of non-volatile storage for a large volume of data for personal computer users. To the hard-disk drive manufacture, its direct competitors are the other hard-disk drive manufacturers. But alternatives exist where the computer user can avoid purchasing a large hard drive. They can subscribe to a cloud-based storage service and get away with very little local storage. The cloud-based storage service is an alternative solution for the personal computer owner and an indirect competitor to the hard disk drive maker targeting this market.

The last type of competition, one often overlooked, is the “Decision not to buy.” In the equipment world, the decision not to buy can take many forms, including these:

A decision

  • Not to expand production capacity
  • To repair instead of buy new
  • To operate at a lower yield level
  • To operate at a lower productivity
  • To operate at a higher cost

For example, let’s say you have an equipment solution that will improve the yield for a prospect in your target market. That prospect decides to pass on your offer, not buy anything, and continue to operate at current yields.

Your prospect arrived at that decision by making relative value determination between:

  1. Don’t buy: Avoid new capital investment and live with current yields
  2. Buy: Make a capital investment and achieve higher yields

By choosing “1,” the prospect chose your decide-not-to-buy competitor.

Where to Find Your Competitive Intelligence

Places where you can find competitive intelligence include:

  • Presentations by executive management that provide information about future strategies of the company
  • Annual reports and regulatory filings
  • Articles, news stories, and other features created by someone inside or outside the company
  • Product-specification sheets and other company literature distributed at conferences, trade shows, and other events
  • Physical observation of competitor activities at your customer sites, trade shows, or investor events
  • Special studies, research papers, and analyst reports about an industry and/or company
  • Interactions with customers, suppliers, and other industry participants
  • Industry-specific social network sites

Bits of competitive intelligence are all around. You have to be looking for it. It’s a little like walking through the woods where wildlife is all around you. If you’re not paying attention, you’ll never know it’s there.

Who Does What

An effective competitive-intelligence system requires these four primary activities:

  1.  Lead
  2. Collect
  3. Analyze
  4. Disseminate

Responsibility for each of these activities is summarized in the table below.

Competitive-Intelligence Activity

Responsibility

Lead

Product Management

Collect

All organizations that have regular contact with the market

Analyze

Product Management

Disseminate

Product Management

Leadership for ensuring robust competitive intelligence falls squarely on product managers. They need to ensure that a system is in place, that everybody understands their role, and that the intelligence is used to inform product and marketing strategy.

The best place for collecting detailed competitive intelligence is in proximity to where your competitors and customers conduct their business. Competitive data collection needs to be a formal part of the job description for organizations with regular contact with the market. In addition to product management, this includes

  • Sales,
  • Service,
  • Applications, and
  • Management.

The analysis process to turn raw competitor data into true competitive intelligence belongs to the product management function. It’s their job to figure out what the data means to the business, reconcile conflicting data, and determine how to respond.

Finally, for competitive intelligence to be useful, it has to get into the hands of the people in your organization who need it. All the collected intelligence and analysis needs to be packaged into a useful form and then disseminated to the key stakeholders. This responsibility for disseminating competitive intelligence falls squarely on product management.

Establish a Closed-Loop System

Developing competitive intelligence is a perpetual process. You are never finished. The data is always changing, incomplete, or requiring further validation. You need a closed-loop management-and-control mechanism that ensures a rigorous, dependable process.

The system shown in the figure below establishes a routine to regularly identify gaps against the target intelligence, collect data to fill those gaps, and then update your analysis and disseminate it. This process also inserts a regular inspection point to ensure that the system is working.

Graphic showing process for maintaining competitive intelligence
Graphic showing process for maintaining competitive intelligence

Before embarking on any competitive intelligence update mission, you’ll need a framework to identify the specific information needed. To get your system started:

  • Create fill-in-the-blank templates that identify all the competitive-intelligence items that you need collected and analyzed. It’s helpful to structure these in presentation format. That way, when it comes time to disseminate and communicate, your materials are ready to go without additional work.
  • Fill in all the blanks in your new templates with the data that you already have.

Now you are ready to enter the closed-loop portion of the process. First, identify the gaps. The gaps are the holes or outdated data in your templates. Assign the responsible stakeholders to collect the data needed to fill those gaps.

When the data comes in, it’s time to aggregate and analyze it. You’ll have to reconcile conflicting data points, perhaps validate certain inputs, and then update your templates. Once that’s complete, disseminate the fresh competitive intelligence. Send the composite analysis to stakeholders, and thank the team for their help.

Next is the regular inspection. This step is necessary because competitive-intelligence acquisition has no natural deadlines in the course of conducting day-to-day business. If you don’t do it, you’ll still make the quarter’s numbers, shipments go out on time, and employees still get paid. But, as you know, nothing ensures that a project will get done better than a published deadline. Therefore, you have to manufacture a deadline for competitive-intelligence acquisition within your company’s management systems. Try including a competitive-intelligence review as a regular, standing agenda item in one or more of these forums:

  • Product-line reviews
  • Strategy reviews
  • Sales meetings
  • Product management staff meetings

Provided that the forum occurs regularly, it will serve as a constant reminder to maintain your competitive intelligence.

How to Plug the Tough Holes

Even with a robust competitive-intelligence system in place, you’re still going to have some tough holes to fill. Those holes are often the specific details you need to fully build out your value proposition or ensure that your positioning is effective. One way to close those gaps is to go to the market with your best assumptions about your competition and then let the market help you make corrections along the way.

Take the set of sales presentations that you already use to articulate your advantages and value proposition. This will be your starting point. Make sure that these presentations are precise about how you are different from the competition. In places where you do not have sufficient data, resist the urge to go “vague.” Instead, use your best guess to describe your competitor’s capability in precise terms.

For example, if you were trying to draw a distinction between you and your competitor on the cost of consumable parts, don’t fall back to qualitative comparisons like:

“Lowest consumables cost.”

Instead, use your actual costs and your best guess for your competitor:

“Less than $150K/year in consumables versus $225K/year for our competitor.”

Next, gather up those sales materials and get on the road. Present them to your customers, suppliers, prospects, and other industry participants.

When you present “Less than $150K/year in consumables versus $225K/year for our competitor,” at some point on your road trip, someone is going to correct you and say, “The competitor’s consumables cost only $175K/year.”

Bingo! You have your data.

Obviously, you need to handle this process very carefully. Your approach will vary depending on the norms and culture of your industry. Be thorough enough to achieve your objective, but don’t compromise important industry relationships or anyone’s integrity.

Why Sales Fails to Get You Competitor Data

“No matter how many times we ask, the sales team never seems to come up with the competitive information that we need. Yet, they’re not shy about banging on us for wimpy marketing materials that fail to address the competitive issues. Why can’t they just help us out?”

If you’re a product manager experiencing this frustration, you’re not alone. You need detailed competitive information to position your products effectively. No one has better access to that information than your sales and service teams. So why is it so hard to get it from them?

If you are still reading this and thinking that you’re about to learn how to expose bad behavior by the sales force, you can stop now. To fix this, product managers need to consider that you might be the problem.

If you are open to this possibility, keep reading for your three-step improvement program.

1. Know Specifically What You Need

That’s right. You must know the specific gaps in your competitive intelligence that keep you from effectively positioning your products.

For example, if you’re positioning your product on “fastest setup time,” you need to know your competitors’ setup times. If you don’t know, there’s your gap.

2. Be Specific with Your Requests

Do you want to know the biggest mistake you can make when asking the sales force for help with competitive intelligence? It’s this:

Send an e-mail to the whole sales team, asking them to send you anything they have on the competition.

Two bad things happen. First, everyone on the “To” list will assume that someone else on the list will respond to your request. Usually, this results in no response.

Second, “send anything you have about the competition” is so ambiguous that the sales team won’t know where to start. So, they don’t.

Instead of shotgunning your request, take a more specific approach. Ask individual salespeople to help you find specific morsels of competitive intelligence. This will convey a sense of accountability to the salesperson and give him task clarity. It is OK to ask more than one salesperson for the same information because your competitors’ position and performance may differ for each customer.

3. Reward Their Effort

Sales teams often complain, “We send in all kinds of competitive information. But it’s like feeding a black hole. Nothing ever comes back.”

You cannot expect the sales force to provide a steady stream of competitive info unless they see a return on their efforts. A salesperson is no different from the rest of the human race in this regard.

As the product manager, you need to turn the data from the sales force into updated competitive analysis, sharper product positioning, and better selling tools. Get these new materials into the salespeople’s hands and acknowledge the individuals who provided you with the data that made the new materials possible.