Everyone from marketing pros, to lawyers and accountants are hanging out a shingle announcing their expertise in competitive intelligence. The well-known players in the industry, including firms such as Gartner, Forrester, and Fuld & Company, are complemented by a myriad of niche firms that target specific industries. There are firms geared to the healthcare industry, the tech sector and the automotive world. Even Microsoft and a number of other software firms understand the demand for competitive intelligence, and market analytical applications for a variety of industries. And most medium-to-large companies employ specialists in intelligence units and strategy divisions who devote their time to staying ahead of market trends, and sifting through the patent applications and news releases of their competitors.

But just what is competitive intelligence? Simply put, it can be any sort of information that helps a business create competitive advantage.  The increasing pace of change in the business environment demands that companies invest in competitive intelligence. In fact, according to Marion Debruyne, professor of marketing at Emory University’s Goizueta Business School, the biggest trend in competitive intelligence in the last couple of years is the acceleration and growth of information availability.

It seems like the availability of this data would be a good thing. But, with the Internet making so much information available, it can be difficult to delineate what is useful information and what is not necessarily beneficial to a company’s bottom line, says Debruyne. “At the same time, it’s necessary to keep the spectrum broad, so that you can pick up on future issues and not lag on new developments.” Breaking the process down can be a helpful way to filter through the sea of data. Says Debruyne, “There are essentially two processes needed to make the wealth of information out there useful in any way: (1) selecting which information is valuable to look at, and (2) converting that raw information into knowledge.” But, she warns, there is a common danger that companies face. “The selection and interpretation of information will be flavored by the firm’s current situation and the beliefs of the people looking at information. For example, information about current competitors might receive prevalence over information about potential new competitors.” If the new competitor happens to have a runaway hit with a fledgling product or service, that success could be the death knell for a company that “never saw it coming.”

Debruyne goes on to explain that preconceptions can cloud how information is selected and utilized. “A manager’s beliefs often operate as a “filter.” For example, if you believe that voice-over-IP will be successful, you’ll see signs of that in the information you receive. You’ll be more struck by the information that confirms that notion, and you’ll be more likely to dismiss contrary information.  Because of that filtering, an outsider can sometime be more objective. However, an outsider lacks the insight to link information to the specifics of the company and really convert it into knowledge.”  The biggest challenge, she believes, is the ability of the company to act on the information they’ve obtained. “There is a tension that exists between [just getting information and] turning information into actionable knowledge.”

Stacey Anderson, assistant vice president of corporate strategy at Equifax in Atlanta, admits that it is a challenge to effectively utilize all of the available information.  In 2002, Anderson headed the company’s first competitive intelligence unit and developed its first corporate-wide intranet. Today, as is commonly the case, Equifax uses internal and external sources for competitive intelligence. The company turns to established research firms such as Gartner and Forrester for general industry information, but it relies on niche firms for specialized data. Notes Anderson, “There is so much information out there, that it’s important to determine what is valuable for your particular company. Sales and marketing people need competitive data. Executives in the organization need current information to make strategic decisions. The key is getting the right information to the right people in the organization who can act on it.”

Winston Ledet, director of strategic business development for The Home Depot in Atlanta, agrees that the “challenge is to cull through that information to make it as actionable as it can be.” He adds, “You also have to think about how to make it as current and forward looking as possible. You can't merely be looking in the rear view mirror. You have to strategize where the market is going and where things will open up. At The Home Depot, we place a big emphasis on the strategic planning process with a market-backed perspective. We look at the consumer and the competition. We always look at consumer trends and trends in the industry, and pay attention to a broad spectrum of competitors across our various businesses. Then our department partners with other groups such as merchandising and operations. We make sure to distill information down throughout the organization, and then we look at competitors and see where they are looking for growth and see what risk they present to us.”

Competitive intelligence is used in every area of a company, but it is perhaps most important when a company is entering a new market or launching a new product.  Says Equifax’s Anderson, “Good competitive intelligence and analysis must be at the crux of any decision to enter new market, especially when there is a significant capital outlay.” Anderson centers on looking at an industry and determining the major players in the field. “We may look at their core competencies, customer bases, financial performance, strengths and weaknesses, and long-term growth prospects. The question then becomes “Do we buy, build, or partner [with a company] to become the dominant player in a new industry?”

The Home Depot’s Ledet adds that it is essential to take a critical look at one’s self, in addition to the competition. “We also do a lot of consumer research to see how they perceive us versus the competition—to see our advantage, our vulnerabilities, and how to differentiate ourselves from the competition. Most of our competitive intelligence comes from internal sources. We also rely on external companies for customer research, and we look at the more obvious things such as analyst reports and annual reports on the competition. The Internet has made it easy to get that [information]. Then it’s a
process of consolidating information and driving to implications and actions.  Our biggest challenge is leveraging our large organization to provide meaningful information, consolidating the information, and translating it into concrete actions. There’s still a tremendous amount of human screening to go through it all. The biggest question is how to separate the wheat from the chafe.”

And while one company looks for competitive intelligence on the competitor, there is also the competing firm on the other side working to protect information on its latest invention, new product or revolutionary drug. In March 2005, Apple Computers won the legal right to press bloggers for sources of leaked trade secrets, and in 1999, Ford Motors unsuccessfully sued for access to the source of leaked information on a website devoted to cars. Russell Coff, professor of organization and management at Goizueta, says that for many businesses, keeping things under wraps is critical.

But competitive intelligence doesn’t mean that you need a spy on your team. Just studying the information that is readily available can sometimes be very useful, depending on how it is approached. Says Coff, “In the tech field, for instance, people often filter through all of the patents that firms apply for. IBM has hundreds. That information has been online since 2001. Of course, you have to recognize that the majority of the filings are red herrings, as they may serve no real informational value. Then you might look further to see developments for some of the larger competitors or in specific categories of technology.”  It’s not uncommon for a company’s own employees to leak a breakthrough. For instance, a company may need to create a buzz for a lagging development, in order to garner additional funding.