KANSAS CITY, MO — “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” — Sun Tzu
The words of Sun Tzu are often cited in business circles and while the appropriateness of comparisons between industry and war can sometimes be questioned, the logic of the famed Chinese general is no less informative to executives looking to effectively lead their organizations. In the case of competitive intelligence, Sun Tzu’s perspective can offer several useful lessons:
Lesson 1: Know why you want to know what you want to know. Competitive intelligence efforts are easy for businesses to just ‘do’ … after all, competition is at the heart of business, so they need to stay ‘intelligent’ about what their competitors are up to. As a result, many companies expend significant resources collecting data, but there’s a major difference between collecting information and gaining intelligence. The first step is knowing what this intelligence is meant to do.
How will having a better understanding of the competitive set improve company performance? Which elements of company strategy benefit most from this understanding? What types of information would be most useful, and how can they be obtained?
These are the building blocks of an effective competitive intelligence program.
Lesson 2: Open the aperture. The next question is, “Who is the competition?” Unfortunately, many companies don’t properly define their competition, and their research is flawed from the onset.
The most common mistake made in defining the competitive set is relying strictly on a product category framework. Companies get accustomed to looking through lenses like point of sale (POS) data, which are neatly organized into groupings based on product types and categories.
However, this data only tells part of the story. First, it usually captures only established players with enough volume to make the radar screen. But many times, the long-term threat comes from those earlier on in their journey. These newer companies rethink products and their uses in truly disruptive ways. If companies rely largely on scanner data or standardized reports, they won’t see challengers coming until they’re well into the marketplace.
Second, taking a product type or category approach omits the presence of substitutes. Often, the brands and products that pose the greatest risk don’t make the same things; rather, they address the same consumer job.
If substitutes are doing the job better, focusing solely on players within that product universe could result in an inaccurate perspective on the health of a business’ portfolio and what it truly takes to win.
Lesson 3: You are also the competition. As Sun Tzu’s statement suggests, focusing intelligence gathering solely on other companies excludes the most relevant competitor: your own organization. Any competitive intelligence program that doesn’t provide an objective view as to how your company stacks up along the same prioritized metrics is at best incomplete and, at worst, misleading.
Having a reliable baseline view is critical in deciphering the key “so what’s” that emerge from the information. The best way to achieve this is to have it prepared by an outside entity that will not be influenced by the potential political, career or compensation impacts of delivering difficult news.
Lesson 4: Information is what you gather; intelligence is what you distill. A popular question with competitive intelligence is, “Which information sources are best?”
Honestly, there is no silver bullet source, particularly in today’s landscape where the ability to obtain information grows by the day. Ultimately, the issue isn’t the amount of information available, but rather the quality of it and what is done with it.
First, regarding quality — and this is increasingly important in a world of user-generated content and AI — take proper efforts to ensure what is incorporated is information and not disinformation.
Second, pick the best data sources for the benefits desired. Align sources with actual strategic decisions, and eliminate sources that don’t clearly support this objective.
Finally, information is only the first step. Organizations that get the most out of their competitive intelligence efforts invest as much into organizing, processing and analyzing the information they gather as they do in the gathering itself. This is why having explicit ties between the information sources employed and the benefits sought is so important. It makes it easier to move from information to implication and all the way to intelligence.
Whether this is through AI, other software tools, human-powered efforts or some combination thereof, having the right internal capability to convert information into intelligence, and the appropriate processes to leverage this intelligence in actual decision making, is what ultimately drives the ROI of any competitive intelligence program.
By asking the right questions about why they want competitive intelligence; properly defining their competition; and building strong processes to gather the right information, properly assess it and effectively put the learnings into action, companies can turn competitive intelligence gathering into a sustainable strategic advantage that directly supports the achievement of their key performance objectives.
This story has been adapted from the October | Q4 2024 issue of Commercial Baking. Read the full story in the digital edition here.
