INTRODUCTION TOCOMPETITIVE INTELLIGENCE
GIA WHITE PAPER 1/2004
GIA White Paper 1/2004Introduction to Competitive Intelligence
Competitive intelligence can be defined asknowledge and foreknowledge about theexternal operating environment. The ultimategoal of each intelligence process is to facilitatedecision-making that leads to action.
Successful business strategy requires awarenessabout the company’s external environment,including its customers, competitors, industrystructure, competitive forces etc. Informationabout these issues is the key target of competitiveintelligence. Competitive intelligence can bedefined as knowledge and foreknowledge aboutthe external operating environment. The ultimategoal of each intelligence process is to facilitatedecision-making that leads to action.The intelligence process enables turning informationinto intelligence by processing it via analysis,interpretation and synthesis and utilizing it in thefuture-oriented decision-making. Managing thefuture does not only mean being able to anticipatewhat will happen outside the company but alsobeing able to shape the happenings through ownactions, i.e. to proactively create one’s future.Competitive Intelligence is not market researchor industrial espionage. While market researchoften focuses on fulfilling a specific informationneed or set of needs, intelligence is a completelylegal ongoing process of developing a holisticpicture of the operating environment includingcompetitors, customers and markets. An effectiveintelligence process continuously contributes toan organization’s knowledge base and leads tocumulative organizational learning.
Executive Summary
The intelligence terminology has always beensomewhat blurred, and new terms emerge as theintelligence discipline matures within the corporatesetting.Competitive Intelligence,Business Intelligence,Market Intelligence andCorporate Intelligenceare often used interchangeably or as synonyms,whileStrategic Intelligence,Customer Intelligence,Competitor Intelligence andTechnology Intelligenceadd a dimension of specificity to the subject.Eventually, all intelligence terms refer to usingsystematic methods to collect, analyze anddisseminate information that supports decision-making.According to one of the views, CompetitiveIntelligence (CI) is regarded as the broadestscope of intelligence activities covering the wholeexternal operating environment of the companyand targeting all levels of decision-making, i.e.strategic, tactical and operative. At the same time,it should be emphasized that the key goal of CI is tofacilitate more effective strategic planning and, assuch, it’s one of the most important strategic toolsthat management possesses.••••••••The Global Intelligence Alliance (GIA) is a global network of business research and CompetitiveIntelligence (CI) consulting companies. The series of GIA White Papers is a means for the GIA andits clients and partner companies to share knowledge on key topics within the field of CompetitiveIntelligence. Please feel free to give us feedback on the White Papers by sending email toinfo@globalintelligence.com.
GIA White Paper 1/2004Introduction to Competitive IntelligenceHerring (1992) identifies two categories of information needed for business strategyformulation:information about the company’s ownresources and capabilities, andinformation about the company’s external environment.The latter (information related to customers,competitors, industry structure and competitiveforces) shapes the industry and is the target of every Competitive Intelligence process.Sawka (1996) defines Competitive Intelligence asknowledge and foreknowledge about the external operating environment. He considers CI a preludeto informed decision-making, and further arguesthat intelligence can be viewed as actionableinformation about a customer, market situation,regulator, competitor or any other external influence. The information is made actionablethrough careful analysis and interpretation, whichturns it into intelligence.The notion of actionable information is essential in the context of Competitive Intelligence. Theultimate goal of each intelligence process shouldbe to facilitate decision-making that leads toaction. Therefore, information not leading tointelligence that can be acted upon is uselessand should be eliminated over the course of theintelligence process before reaching the decision-maker.It is characteristic for today’s intelligentcompanies to seek, process and use informationabout their outside environment to manage theirfuture (McGonagle & Vella 1996, 9). What turnsinformation into intelligence, according to theabove definition, is processing it into forecastsand utilizing it in future-oriented decision-making. Hence, managing the future does notonly mean being able to anticipate what will happen outside the company but also being ableto shape the happenings through own actions, i.e.to proactively create one’s future.In other words, although information andintelligence are sometimes used as synonyms, theyare at different levels of the ‘intelligence pyramid’
1. Definition of Competitive Intelligence
(Figure 1). Going up the pyramid we move fromquantity (huge amounts of data and informationavailable to everyone) to quality (intelligenceleading to specific decisions and actions whichcan ensure competitive advantage).This difference is noted also by Kahaner (1996, 20-21) who argues that while information is factual,consisting of numbers, statistics and scatteredbits of data, intelligence, on the contrary, is acollection of pieces of information that have beenfiltered, distilled and analyzed. In other words,the purpose of the intelligence production is toput the fragments of information into a coherentpuzzle, a picture of the forthcoming future. Theessential notion, again, is that information isturned into something that can be acted upon.This view is supported by Taylor & Farrell (1994,95) according to whom transforming informationinto intelligence calls for intellectual activitysuch as analysis, interpretation and synthesisinto a form easily digestible for the users. It alsoinvolves forecasts and opinions about the futureinstead of just observations about historical andpresent situations, i.e. differently from ‘traditional’analysis, it is not about what happened, but aboutwhat is going to happen.Differently from rather common misunderstanding,Competitive intelligence is not market research,nor is it industrial espionage. It is a completelylegal and increasingly essential element in theformulation of corporate competitive strategy. Itprovides the decision-maker with invaluable insightinto the competitor’s capabilities and intentions.Furthermore, it serves as an early warning of futureevents, which may have an impact on companyperformance. Bernhardt who calls intelligence “thelifeblood of strategy” takes the idea of essential and vital intelligence even further. He argues thata strategy without intelligence is not strategy, it ismerely guessing. Meanwhile intelligence is about‘guessing right’.
Intelligence is the lifeblood of strategy.
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