Keeping a close eye on the competition is often thought to be a big boys' game. Many Fortune 500 companies have entire departments devoted to competitive intelligence, or CI, and there's a whole subindustry of CI-focused management consultants to serve those departments. Small companies, on the other hand, are thought to be too busy minding their own businesses to mind others'.
In fact, competitive intelligence may be more important to small companies than to large ones, because small businesses feel the impact of competition more immediately and more deeply. "All small-business owners do CI in some way or another," says Craig Fleisher, a management professor at the College of Coastal Georgia in Brunswick and a former president of the Society of Competitive Intelligence Professionals.
Not all of them do it well, though, and Fleisher says research increasingly demonstrates that the lapse is holding these companies back. At successful companies, he says, "competitive intelligence is part of the day-to-day operation -- part of the fabric of the enterprise."
The pages that follow are an introduction to keeping track of your rivals. It will require some dedication, but it need not cost a lot of money or take too much time. And you won't have to resort to employing spies or subterfuge.
1. Getting Started
Before you can begin to understand the competition, consultants say, you have to be able to articulate your own business's goals and strategy -- knowing both where you stand in the marketplace and where you would like to be. "You've got to find ways to clearly put yourself side by side with your competitor," says Anne House, an Arlington, Virginia-based competitive-intelligence consultant. "Because it's in the difference between the two of you where opportunities lie."
Determine who matters. Keeping tabs on your rivals, formally or informally, usually occurs one of two ways. Either you are monitoring them regularly, updating your store of information as circumstances warrant, or you are suddenly faced with a surprise -- in the form of a new challenger, say -- that requires a prompt response.
The latter case often reflects a failure to think broadly about who your competitors really are. Though most business owners can identify their current top direct competitors, they "assume what exists today is going to be true tomorrow," says Fleisher. Leonard Fuld, principal in the Cambridge, Massachusetts, CI consulting firm Fuld & Company, recommends "war games" -- in other words, anticipating moves by existing competitors or new entrants that could rearrange the market.
Still, don't watch more than five companies at any one time, or you may find yourself overwhelmed. "Spending too much time on competitive analysis is spending too little time on truly being competitive," says Rick Galbreath, president of Performance Growth Partners, a small-business consultancy in Bloomington, Illinois. "How do you become a dominant factor in your marketplace if you're looking over your shoulder 24 hours a day?"
Focus on what matters. According to popular CI theory, a thorough investigation into a competitor will analyze four aspects of its behavior (or "four corners," in the jargon): 1. its goals (or "drivers," often expressed in terms of revenue or profits); 2. management's assumptions about the market; 3. its strategies and tactics to achieve those goals; and 4. its capabilities for meeting the goals.
In practice, most companies are mainly interested in the third and fourth elements, tracking strategies and tactics and capabilities. For the most part, that boils down to collecting information on your competitors' products, marketing, and operations. (See "Gathering Intelligence," below.)
Formalize the process. "Part of making competitive intelligence a discipline is discipline," says Fuld. Start by designating someone to oversee the effort. (It need not be you, but your employees must know that you back the effort.) Establish a repository of competitive information -- folders on the server or mail server, for example -- that is accessible to anyone on staff who could contribute to or benefit from it. Finally, executives should review and analyze the data that are collected periodically, say, once a quarter. "Competitive intelligence in and of itself has no intrinsic value," says House. "The value accrues when you use it to make better decisions."
2. Gathering Intelligence
Businesses have always watched their rivals closely, but the advent of the Internet -- and especially search -- has changed the game. Not only are vast sources of data instantly available, but the process of collecting data can be largely automated.
In the news. First, sign up for e-mail alerts about the search terms of your choice from Google News (news.google.com), which tracks hundreds of news sources -- when one of those terms appears in a news article, you will know about it. (Choose search terms carefully to avoid a flood of needless messages.) CI investigators say the best sources are very often small-town newspapers or local business papers that avidly cover hometown companies, particularly when they are big fish in a little pond. Google News does not always reach those outlets, but you can often sign up directly with those news sources for e-mail alerts or daily digests of stories.
Online. A competitor's website is an obvious place to begin. After you study it, deconstruct it using Fagan Finder, a bare-bones but very useful research site. Plug the address into the search box at faganfinder.com/urlinfo. You will be able to quickly learn, for example, the other sites that link to it, which can reveal alliances, networks, suppliers, and customers. "Sometimes you'll see directories they're listed in -- perhaps you should be in that directory, too," says Robin Lasher, director of the Navarro College Small Business Development Center in Corsicana, Texas. Fagan Finder also links to trackers, like the free site WatchThatPage.com, that monitor specific pages and alert you by e-mail when they are changed. "When a company changes its website, it certainly speaks to how their messaging is changing and how they prioritize what they're communicating," says Toni Wilson of MarketSmart Research Services in suburban Dayton, Ohio. For example, the online bio of a new manager might hold clues about a competitor's new direction.
Business data aggregators such as Dun & Bradstreet (dnb.com) and InfoUSA (infousa.com) provide detailed company information, including financials, although the services are not cheap. Often, however, local academic and public libraries have subscriptions (in libraries, InfoUSA is branded ReferenceUSA) and a willingness to share them -- and other resources -- with local small businesses. Ditto Small Business Development Centers and other economic development organizations.
From the bureaucracy. Government agencies hold a store of public but often unpublished information, available simply through a Freedom of Information Act request (or its local equivalent). Wilson, for example, once requested Occupational Safety and Health Administration accident records from landscaping companies competing with her client. "It just provided a wealth of information about where these companies did business and what their safety records were like," she recalls. "And ultimately, it helped our client position itself as more conscientious about safety."
Consultants are perennially devising new analytic models for evaluating a business and its competitive landscape, often with catchy names or abbreviations. But Craig Fleisher, the management professor, argues that these tools are not interchangeable -- they work best, he says, when put to specific uses.
For strategic planning: Particularly popular is SWOT, which stands for "strengths, weaknesses, opportunities, and threats." SWOT divides these into quadrants on a grid. The challenge of using this tool, says House, is that "it requires you to be somewhat dispassionate about strengths and weaknesses, and most people aren't with their own organizations."
To analyze new market opportunities: A simple, if crude, way is to draw up what's known as a strategic group map. You plot your company and your competitors on a grid, against two variables that most define success in your field, such as pricing and product quality. The grid, which is divided into quadrants, illuminates the strategic space that remains open.
To anticipate how competitors might react to your next move: Fleisher suggests returning to the four-corners analysis. As discussed on the second page, you match up your company against the competition in terms of goals, assumptions, strategies, and capabilities.
Ask Your Staff
"A lot of times, your sales folks know a lot about the competition, but nobody ever asks them," says MarketSmart's Toni Wilson. These employees don't always see collecting intelligence as part of their job description, so company leaders have to institutionalize it, in part by fully embracing it as well as recognizing employees who contribute. Consultants recommend encouragement such as regular contests that are perhaps more fun than profitable -- say, a "scoop of the month" party that rewards good tips with certificates for free ice cream.
"As long as you keep the feedback loop coming, it builds on itself without adding costs, because they're doing their jobs anyway," says consultant Leonard Fuld. "In fact, it makes their jobs more interesting." Make it easy for employees to participate, with simple forms (that are perhaps part of the standard reporting process) in addition to a central repository.
The Society of Competitive Intelligence Professionals (scip.org) offers articles, resources, and a list of leading practitioners to members (membership is $295 a year); individual articles cost $25.
The market research firm Polson Enterprises offers a detailed procedure for researching an industry or company and extensive links, at virtualpet.com/industry/howto/search.htm.