Competitive intelligence doesn’t just mean a trip to the local store to see the competition’s finished products—it means gathering business information to gain an advantage in a legal and ethical manner. This book teaches what competitive intelligence is, what a company needs to have a successful intelligence program, where to place an intelligence program, and what sources to use and not use for intelligence. Technology, analysis, and security issues of intelligence are also identified and explored.
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About the Author
Jerry P. Miller has lectured extensively on the topic of competitive intelligence all over the world. He has been a consultant to corporations in the United States and abroad and has published articles in professional journals and magazines worldwide. He lives in Cambridge, Massachusetts.
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Understanding and Conducting Competitive Intelligence in the Digital Age
By Jerry P. Miller
Information Today, Inc.Copyright © 2000 Information Today, Inc.
All rights reserved.
The Intelligence Process — What It Is, Its Benefits, and Current Status
Jerry P. Miller
In this chapter ...
Why Conduct Intelligence?
The Intelligence Process Defined
The Four-Phased Intelligence Cycle
The Various Roles Involved in Conducting Intelligence
The Benefits of the Intelligence Process
The Current Status of the Intelligence Profession
Why Conduct Intelligence?
Conscientious managers can't keep up with changes in the marketplace. Making sound decisions that give their firm a competitive advantage requires careful study of the relevant issues. However, most managers can't devote the time to review and analyze information systematically. Conscientious managers recognize that organizations compete effectively when its managers make sound decisions based upon an accurate understanding of the potential opportunities and threats in the business environment. Organizations cannot operate effectively without intelligence; just as airplanes can't fly without radar. As we know, U.S. government agencies that conduct intelligence focus primarily on threats to national security and spend less time on opportunities. In corporations, the situation is reversed; although managers must be concerned with threats, such as competitor moves and the misappropriation of trade secrets and corporate intellectual assets, they spend considerably more time looking for opportunities to gain and/or maintain their market share.
To compound the issue, businesses are moving at warp speeds, with staffs typically wired across the globe via personal digital assistants (PDAs), and laptop and/or desktop computers. Telecommunication technologies are changing the way firms conduct business functions, including intelligence. Business-to-business applications enable closer relationships between suppliers, vendors, and customers. Information about products, payment terms, and operating instructions are widely available online. Inventory costs have been drastically reduced while sales have increased significantly, as evidenced by Wal-Mart and Baxter Healthcare with their digital logistics and distribution systems.
Cisco Systems, a major supplier of networking products and services on the Internet, also demonstrates the potential of these electronic interfaces: a representative from investor relations at the company recently told me that the firm took in $5.6 billion, or 64 percent of their total 1998 sales, through its Web site (this is an average of $20 million per business day). Forrester Research, a leading research and analysis firm, estimates that business transactions on the Internet will account for up to 6 percent of the U.S. gross domestic product in 2005 (Rigdon, 1999).
Nicholas Negroponte envisioned this digital revolution in his book, Being Digital (Knopf, 1995). According to Negroponte, as the resources of the world become more extensively composed of bits rather than atoms, society will assume a digital state of being. Organizations populated with computers can work together to crunch complex data sets and, thereby, meet customer needs more effectively and more collaboratively.
In his recent article, Slywotzky (1999) applied Negroponte's futuristic perspective to today's digital business environment when he asked readers, "How digital is your company?" That is, what aspects of work involve atoms as represented by paper, pens, and people? What aspects involve bits as evidenced by the use of digital technologies such as groupware, computer-aided-design, and electronic distribution and logistics technologies? What aspects of work, currently in the form of atoms, are key to the business? If digitized, what resulting cost and competitive advantages would you recognize?
You can also examine the digital status of corporate information resources and the intelligence function. At least 70 percent of the information needed to conduct intelligence effectively already resides within most firms. Are the resources in a digital format? Can the entire staff communicate electronically? Do you have access to analytical software that organizes and examines information from key business operations? Can you access external information resources that offer critical insights about your market environment? Can you disseminate intelligence reports electronically across the firm? How can managers try to keep up in an environment whose rate of change grows exponentially?
Managers have some options. They can rely on their past experience, their business associates, and their expertise for making decisions. This cavalier approach may work in some instances, but not in all. Most managers talk to trusted colleagues before making decisions. Yet, these sources of information cannot identify all the critical issues to consider. For example, supermarket managers can talk with supervisors to determine how much chicken noodle soup to re-order. Yet, consumers may favor the low-fat and low-salt brands — a fact that the staff may not know.
A second option is to ignore marketplace fluctuations completely; disregard changes and run the business as usual. Arrogant managers believe that their rank and title demonstrate their understanding of the industry; therefore, no one needs to inform them of marketplace changes before making decisions. This option has led many firms to lose market share or, even worse, file for bankruptcy. The past disruption of the U.S. automobile industry is a good example of the consequences of such ignorance and arrogance.
As a third alternative, managers can attempt to conduct some type of intelligence work. This option is a logical choice today, especially for managers of small firms with fewer than 500 employees. Since many such firms cannot afford to hire an intelligence professional, their managers need to learn the basics of the intelligence process as well as what local, print, oral, or digital sources are available to them.
The digital sources are increasingly seen as a great leveler. On the Web, for instance, for a small monthly charge at Scoop (http://www.scoop.com/services/services.html), you can obtain personal intelligence services that deliver search results from over 1,600 sources to your e-mail account. There are many other Web-based news filtering services available to managers at reasonable cost.
There is still the problem of analysis: if a small firm participates in a highly competitive market and plans to execute a major business venture, its managers probably won't have the time to systematically analyze all the relevant information they are able to retrieve. Instead, as is the case with many small research and development firms, they may need to rely on the expertise of an intelligence consultant. This alternative is risky for medium or large firms in highly volatile industries, however, because the number and significance of marketplace changes call for frequent and careful tracking.
The final choice: hire intelligence professionals to coordinate the function, and assign aspects of the process to key managers across the firm. These directors of divisions and departments will need extensive training if they are to collect specific types of information effectively. Meantime, to ensure the incorporation of the process into the mind-set of the firm, the entire staff will need to learn about the benefits of intelligence.
The Intelligence Process Defined
According to Kahaner (1996), intelligence is an absolute imperative due to the rapid pace of business, information overload, increased global competition from new competitors, more aggressive competition, rapid technological changes, and forceful global changes such as the European Union (EU) and the North American Free Trade Agreement (NAFTA).
Most managers gather information about their business. They read The Wall Street Journal, Business Week, or the business section of their local newspaper. Yet, when a story hits the press, it's already old news. Most managers talk with customers and business colleagues from whom they gather important insights. Yet, today's business climate requires a more consistent and formal method for gathering information and creating intelligence. Many firms have begun to conduct some type of structured intelligence work — but perhaps not enough to survive in today's fast-changing, global business environment.
A product-line manager within a U.S.-based pharmaceuticals firm learns from a field representative that a Japan firm is developing a similar product. How will she acquire the relevant and accurate information? Conduct intelligence or lose competitive advantage.
The premier manufacturer of alkaline batteries wants to understand the status of research, worldwide, regarding non-alkaline batteries. How will the company acquire the relevant and accurate information? Conduct intelligence or face the threat of product replacements.
The intelligence process is based on the assumption that managers seek to become better informed about critical issues on a formal and systematic basis. Intelligence is distilled information. As defined by the Society of Competitive Intelligence Professionals (SCIP), intelligence is "... the process of ethically collecting, analyzing, and disseminating accurate, relevant, specific, timely, foresighted and actionable intelligence regarding the implications of the business environment, competitors, and the organization itself." Intelligence is more than reading newspaper articles; it is about developing unique insights regarding issues within a firm's business environment. Note that the intelligence process generates insightful recommendations regarding future events for decision makers rather than generating reports to justify past decisions. The process offers critical choices regarding future decisions that provide a desired competitive advantage.
Data, when organized, become information; information, when analyzed, becomes intelligence. Based on this model, intelligence professionals usually execute a four-phased process, or cycle: 1) they identify the intelligence needs of key decision makers across the firm; 2) they collect information about events in a firm's external business environment from print, electronic, and oral sources; 3) they analyze and synthesize the information; and 4) they disseminate the resulting intelligence to decision makers.
The focus of decision making often determines the aim of the intelligence process. Strategic intelligence emphasizes its relationship to strategic decision making and business and/or product development. Business intelligence incorporates the monitoring of a wide range of developments across an organization's external business environment or marketplace. Competitive intelligence focuses on the present and potential strengths, weaknesses and activities of organizations with similar products or services within a single industry. Competitor intelligence involves profiling a specific organization. Regardless of its focus, the intelligence process usually includes each of the four phases. Note that intelligence is more extensive than market research, which usually focuses on consumers' preferences for products and/or services.
In addition to understanding these various definitions of the intelligence function, decision makers, if not everyone in the firm, should come to a consensus as to what constitutes data, information, intelligence, and knowledge. If managers and intelligence professionals fail to address these fundamental issues, staff will misinterpret these distinctions, which in turn can lead to an ineffective intelligence process. Furthermore, managers must differentiate between facts, organizational mission, and vision as well as corporate-wide presumptions regarding the business environment and the marketplace. Assuming that decision makers have a common understanding on these issues, when in reality such an understanding doesn't exist, will lead to a diffused intelligence function.
Intelligence can assist areas of the firm where management desires a sustained or increased competitive advantage. For example, a vehicular parts manufacturer that distributes items nationwide may conduct intelligence on distribution systems. A software engineering firm that must attract and retain creative and skilled employees may conduct intelligence on work force diversity using a benchmarking framework.
Changes occur outside an organization that are significant for decision making. Change is rapid, though, and no one manager or intelligence professional has the time or ability to absorb an increasing amount of information across a firm's entire business environment. Therefore, they cluster these issues into those distinct sectors that are important for the firm. A common set of such sectors are: competitors, suppliers, and customers, as well as economic, technical, and governmental/regulatory issues. Sectoring enables intelligence personnel to gather specific information more effectively and efficiently. Usually, staff with specific industry knowledge and experience will track certain sectors. For example, an intelligence professional with a financial background may follow economic issues. These sectors can vary in type and importance depending upon the industry in which a firm participates. For example, the securities industry closely monitors economic changes; therefore, they may sub-divide an economic sector into bonds, stocks, and mutual funds. Research institutes rely heavily on recent scientific studies; therefore, they may sub-divide the research sector into cancer, cardiac, AIDS/HIV, etc.
The Four-Phased Intelligence Cycle
The four phases of the intelligence cycle include:
Identification of key decision makers and their intelligence needs
Collection of information
Analysis of information and upgrading it to intelligence
Dissemination of intelligence to decision makers
The following overview highlights the major characteristics of these four phases.
During the first phase, the intelligence staff identifies the intelligence needs of key decision makers. However, the actual decision making often takes place below the executive level. An example of this issue occurred recently within a prominent domestic firm in the computer technology industry. The intelligence staff created a computerized alerting service containing daily news about various critical issues. They marketed the product to key managers at the second and third levels below the top executives. After using the product, these managers arrived at some insightful recommendations. The executives were pleased with the results, but wondered how they reached such conclusions. Learning about the alerting product, the executives asked the intelligence staff to place them on the distribution list.
After identifying users and their needs, professionals start collecting information — phase two. During the collection phase, staff acquire relevant information from primary and secondary sources. They also determine the appropriate collection procedures and analytical frameworks. Without a road map, the process rambles. Primary sources are oftentimes industry experts (e.g., analysts, consultants, columnists), as well as customers, suppliers, and staff members within, for example, corporate communications and/or investor relations. Managers regard primary sources quite highly due to their uniqueness and the likely competitive advantage that the information may provide — unlike secondary print and electronic sources that are non-proprietary and readily available. Secondary sources provide the background information to support the insights that are gained from the primary sources. Secondary sources include commercial databases and print publications, such as analysts' reports, government publications, industry newsletters, executives' speeches, technical reports, and patent reports. The Internet provides access to many secondary sources; however, many specialized sources are fee-based and require accounts (see Chapter 6).
Having gathered the necessary information, intelligence professionals identify significant patterns and trends. They seek unique insights and unforeseen relationships in data. For example, a nationwide grocery chain wanted to know what additional types of items deli-counter customers usually purchased. After analyzing cash register receipts, the intelligence staff found that they also bought wine. Based on this finding, headquarters ordered the branch managers to relocate the wine section adjacent to the deli counter. Their wine sales soared.
The analysis phase can require a scientific research approach: formulating a proposition, and determining the validity of assumptions as well as the probability of the upcoming impacts. The analyst may use statistical software and/or various modeling techniques. Throughout this process, the practitioner may realize the need to acquire additional data. Therefore, collection and analysis are not necessarily sequential phases. This phase demands persistence and creativity on the part of the intelligence staff as well as the recognition of knowing when to stop analyzing (see Chapter 5).
Excerpted from Millennium Intelligence by Jerry P. Miller. Copyright © 2000 Information Today, Inc.. Excerpted by permission of Information Today, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Foreword Leonard M. Fuld,
Introduction: Competitive Intelligence — No Witchcraft Here, Just Business Savvy Jerry P. Miller,
Chapter 1: The Intelligence Process — What It Is, Its Benefits, and Current Status Jerry P. Miller,
Chapter 2: The Birth and Growth of Your Intelligence Process — Behavioral, Cultural, and Structural Factors Jerry P. Miller,
Chapter 3: Deciding Where to Locate the Intelligence Unit Kenneth A. Sawka,
Chapter 4: Skills and Training for Intelligence Jerry P. Miller,
Chapter 5: Analytical Models and Techniques Michael A. Sandman,
Chapter 6: Information Resources for Intelligence Helene Kassler, with Michael A. Sandman on "Primary Research",
Chapter 7: The Information Technology Marketplace Bonnie Hohhof,
Chapter 8: Knowledge Management and Intelligence Functions — A Symbiotic Relationship Rebecca O. Barclay and Steven E. Kaye,
Chapter 9: Intelligence and the Law James Pooley and R. Mark Halligan,
Chapter 10: Conducting Intelligence Ethically Clifford C. Kalb,
Chapter 11: Intelligence and Security John A. Nolan and John F. Quinn,
Chapter 12: Small Business Intelligence — People Make It Happen Jerry P. Miller,
Chapter 13: Millennium Intelligence — The Future Guy Kolb, Jerry P. Miller, and the Business Intelligence Braintrust,
Biographies: The Business Intelligence Braintrust,