Competitive Intelligence

Also by Chris West

Market Research
Competitive
Intelligence

Chris West
# Chris West 2001

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West, Christopher, 1940±
Competitive intelligence / by Chris West.
p. cm.
Includes bibliographical references and index.
ISBN 0±333±78669±6
1. Business intelligence. 2. Strategic planning. 3. Competition. I. Title.
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Contents

Preface xi

1 Competition 1
Virtual Monopolies 3
Definition of Competition 4
Where Do Companies Compete? 5
Marketing and Competitive Strategies 6
The Competitive Environment 9
Mechanisms By Which Companies Compete 10
Scale 10

2 Intelligence 12
The Applications for Intelligence 13
Companies to Watch 14
Narrowing the Field 17
Alternative Applications for Intelligence-Gathering
Techniques 18
Alternative Routes to Intelligence 21

3 The Development of Competitive Intelligence 24

The Development of Competitive Intelligence as a
Formal Activity 25
Factors Influencing the Growth of Competitive Intelligence 28
Factors Inhibiting the Growth of Competitive
Intelligence 31

4 Framework for Competitive Analysis 33

Mapping the Competitive Landscape 34
Drivers of Behaviour and Change 38
Types of Intelligence 42
Key Intelligence Topics 44
Format for Collecting and Presenting Intelligence 45
The Time Dimension 48

vii
viii Contents

5 Overview of the Sources of Intelligence 50

Primary and Secondary Sources 50
Determinants of Methods Used 52

6 Secondary Sources of Intelligence 56

Internal Intelligence Sources 56
External Secondary Sources 59
Locating External Secondary Intelligence 71

7 Intelligence on the Internet 74

Search Engines and Web Crawlers 75
Intelligence Content of the Web 76
Short Cuts 83
Discussion Forums 83
Newsgroups (or Bulletin Boards) 84
Monitoring the Internet 84

8 Primary Intelligence Collection Techniques 86

Internal Primary Sources 86
External Primary Intelligence 92
Obtaining Intelligence Directly from Competitors 99
The Demise of Primary Intelligence? 108

9 Market Research as a Source of Competitive

Intelligence 109
Market Research and Competitive Intelligence 109
Customers as a Source of Intelligence 110
Surveying Markets for Intelligence 111

10 Analysis ± Filling the Gaps and Stretching the

Data 115
Filling the Gaps in an Incomplete Picture 117
Extending the Level of Understanding 118
Environmental Analysis 121

11 Verifying Intelligence 123

Verification of Published Intelligence 123
Verification of Primary Intelligence 127
Sanity Checks 129

12 Competitive Intelligence Resources 130

In-House Resources or External Agencies 130
 Contents ix

The Internal Competitive Intelligence Organisation 132

Competitive Intelligence Staff 134
Identifying Potential External Suppliers 135
Assessing the Suitability of Competitive Intelligence
Agencies 137
Compiling a Shortlist 141
Approved Research Contractors 142
The Proposal 142
Assessing Alternative Offers 143
Presentation of Proposals 145
Negotiations 145

13 The Intelligence Briefing 147

The Briefing Document 147
The Briefing Meeting 153

14 Controlling the Intelligence Collection

Process 155
Project Briefing or `Kick Off' Meeting 156
Review of Discussion Guides 158
Progress Reports 158
Reviews of the Information Yield 158
Final Review of Findings 159

15 Legal Factors and Ethical Guidelines 160

Criminal Law 161
Copyright Law 162
Competition and Antitrust Legislation 162
The Economic Espionage Act 162
Data Protection Legislation 163
Codes of Ethics 164
Non-Disclosure 165
Conflicts of Interest 166
Market Research and Competitive Intelligence Ethics 166
Deliverables 168
Sanctions 168
Regional Variations 169

16 Processing and Distributing Intelligence 170

Written Reports 171
Meetings and Other Forums 171
E-mail 172
x Contents

Corporate Intranets 172

Management Information Systems 173
Knowledge Management Systems 175
Tailored Competitive Intelligence Systems 177
Access to Competitive Intelligence 178

17 Measuring the Effectiveness of Competitive

Intelligence 180
Quality of Intelligence Provided 180
Use Being Made of Competitive Intelligence 181
Development of an Intelligence Culture 182
Event Analysis 182
Market Share 183

18 Counter-Intelligence 184
The Structure of Counter-Intelligence Activity 186
Assigning Responsibility for Counter-Intelligence
Programmes 187
Identifying the Potential Sources of Threat 190
Identifying the Means By Which Intelligence is Being
Sought 192
Identifying and Assessing the Vulnerabilities 194
Categorise Information 200
Reducing the Chances of Intelligence Being Obtained 202
Testing the System 211
Monitoring the Threat 211
Publicise Willingness to take Legal Action 212
Implementation 212

19 Deception and Misinformation 215

Intelligence Held on the Company 216
Channels of Communication 217
Internal Sources of Information 217
Types of Deception 218
Ethical Considerations 220
Propaganda 221

Appendix: The Competitive Intelligence Checklist 222

Further Reading 229
Index 231
Preface

Whenever there is more than a single source of a product or service,

competition is an inevitable and natural consequence. Suppliers take
as many steps as they can to insulate their activities from aggressive
competition but they invariably have to engage in some form of battle
with each other in order to obtain a share of customers' business. The
only question is whether it is a minor skirmish or all-out war.
Although military analogies are common, competition is more
conventionally described as `gentlemanly', `fierce' or `cut-throat',
depending on its intensity and the manner in which it is conducted.
Over time there has been a tendency to gravitate away from the
`gentlemanly' towards the `cut-throat'. This coincides with a progres-
sive transfer of power from suppliers to customers.
The last few decades of the twentieth century have seen a marked
reduction in suppliers' ability to control markets. Monopolies and
near monopolies, common in the nineteenth century, have almost
disappeared. The cosy world of cartels and other supplier agreements
that limit competition and seek to maintain orderly price regimes has
also been severely restricted. This has been achieved by government
competition policies which seek to ensure that customers (that is,
voters) get good service and value for money by virtue of the fact that
a number of suppliers have to compete in order to win their business.
In consumer markets the process has been accelerated by the impact
of consumer and other pressure groups that have encouraged and
facilitated more informed buying as well as stimulating manufacturers
to be more competitive.
A further inducement to compete has arisen from the fact that it
has become increasingly difficult for companies to shield their custo-
mer bases from competitors. Traditionally suppliers have used geo-
graphical, product, service or even emotional barriers to create niches
in which they are sole or dominant suppliers. However, improved
physical communications, reduced product differentiation, better
information flows and more discerning buying have not only given

xi
xii Preface

suppliers the ability to seek out and exploit wider customer bases,
they have also enhanced the ability of customers to break out of the
niches into which they have been classified and broaden the supply
options for themselves. E-commerce represents the ultimate in this
process since it maximises information flows and creates markets that
are unrestricted by distance, nationality or language.
In competitive markets the quality of the competitive strategy is
now as important as customer strategies in determining company
performance. All strategies require information and competitive
strategies are no exception. As a result there is an existing and
growing requirement for competitive intelligence.
Although there has always been an interest in the activities of
competitors, competitive intelligence as it is now practised was
formalised in the USA only in the 1970s and 1980s. A major step
in the formalisation process was the formation of the Society of
Competitive Intelligence Professionals, which created a forum within
which a wholly ethical intelligence-gathering process could be devel-
oped. This was essential if the business was to break away from the
inevitable, but unacceptable, association with industrial espionage.
The transfer of techniques to Europe took place initially in the late
1980s and early 1990s but really gathered momentum between 1995
and 1999 when a series of public conferences promoted competitive
intelligence to wider audiences.
As we stand, competitive intelligence is still in the formative stages
of its evolution. The more obvious techniques have been codified and
described but new developments are constantly being reported in the
professional journals. The Internet has had a profound effect on
competitive intelligence, just as it has in other areas of research, but I
am sure that equally important innovations will be discovered and
introduced in the coming years. The reason for thinking so is that the
innovations work both ways. As intelligence gathering becomes more
widespread so do the techniques for restricting the outflow of
information from companies. Counter-intelligence may be growing
even more rapidly than competitive intelligence, thereby creating a
spiral in which each side of the equation needs to find methods of
circumventing initiatives taken by the other.
The main reason for writing this book is that although interest in
competitive intelligence is growing extremely rapidly in Europe, there
are very few published works which consider the subject from a
European perspective. Books written by American authors are cer-
tainly of generic interest; the principles of competitive strategy and
 Preface xiii

competitive intelligence are the same on both sides of the Atlantic.

Furthermore, some American works provide extremely useful guides
to European information sources. There are, however, fundamental
differences between competitive intelligence as it is currently practised
in the USA and how it is likely to emerge in Europe. These revolve
around the extent to which information from government sources is
freely available, the rules of disclosure, data protection legislation, the
attitudes of company executives towards intelligence gathering and
the ease with which it is possible to make contact with information
sources. In some instances intelligence gathering is easier in the USA
and in others Europe is a more open source.
Many of the early practitioners of competitive intelligence in the
USA and Europe were former employees of security and military
intelligence services and the police. They brought with them wide
experience in intelligence collection and analysis techniques but also
gave the business a `James Bond' spin which, whilst undeniably
exciting, tended to suggest a relationship between competitive intelli-
gence and espionage. Since then a large number of practitioners in
Europe have entered the business through market research and other
more conventional channels. These entrants have neither had, nor
desired, any military training and have had to develop their craft
without resorting to subterfuge, illegal access, phone tapping, raiding
dustbins or theft. They have to rely on diligence, ingenuity and
deduction, which require a completely different mind-set and signifi-
cantly different set of skills. In 1998 I had the pleasure of listening to a
presentation to competitive intelligence professionals by Philip
Knightly, the respected investigative journalist responsible for some
of the major stories carried by The Sunday Times. He commenced his
presentation by stating that journalists obtain their information in
three ways: they could be given it by those who wish to publicise a
cause, they could buy it or they could steal it. Would that competitive
intelligence was that easy.
Despite the unfortunate associations, many of the current texts
describe competitive strategy and competitive intelligence in military
terms. The military analogy can be helpful in getting the message
across but there are too many activities and techniques that are
entirely appropriate in warfare but are not acceptable in corporate
competition and competitive intelligence. This is particularly true of
the spy for whom the end will always justify the means. Spies steal
intelligence and get medals for doing so; competitive intelligence
professionals who are caught stealing information get locked up.
xiv Preface

This book will take a less dramatic line. Its primary focus is on the
techniques for collecting and analysing competitive intelligence.
Although I have not ignored the applications for the intelligence
my stance is that of an information provider rather than a user. Many
other books with the same title are happier delving into competitive
strategy using descriptions of long-forgotten battles as analogies.
They skim over intelligence gathering itself, which in my experience
is by far the most difficult and mysterious part of the process.
The book has been written for the following readers:
. Competitive intelligence staff active within companies, particularly
those confronted with the prospect of having to obtain competitive
intelligence for the first time
. Competitive intelligence professionals working within CI consultancies
. Market research professionals
. Marketing staff seeking competitive intelligence
. Business strategists using competitor information
For those who are unfamiliar with competitive intelligence I hope that
it will open their eyes to what can be achieved. For those who have
had practical experience I hope it will open up some new methods by
which research can be carried out.
The book is based on experience gained during a career in
industrial market research and, latterly, competitive intelligence.
Unlike our consumer research cousins, industrial market researchers
include detailed examinations of competitors' activities in most of our
projects, though in the early days the means by which we obtained the
data were distinctly amateur. Aubrey Wilson, one of the first prota-
gonists of industrial market research in the United Kingdom, tells
how when conducting a survey on the woollen textile industry in the
early 1960s he attempted to interview the owner of a mill in Scotland.
This dour respondent insisted on taking down a hand-written note of
every question that Aubrey proposed to ask before he would answer
any of them. On reaching the final question he lifted his head, glared
at the hapless interviewer from beneath shaggy eyebrows and shouted
`Get oot! Yer spying on me!' It has never been easy.
I first entered the specialist world of competitive intelligence in
1990 when Ruth Stanat of SIS International introduced me to the
subject. I have always been grateful to her for what might have
seemed at the time a minor piece of enlightenment. Since then I have
worked on a wide range of projects in which it has commonly been
essential to define the methods by which information could be
 Preface xv

obtained or deduced and then presented in an acceptable manner to

clients. In many cases we undoubtedly had the dubious pleasure of
`re-inventing the wheel', a process which I hope readers of this book
will be able to avoid. It was nevertheless enjoyable and I am grateful
to my former and current colleagues in Competitive Intelligence
Services and to our many clients for the contribution they have made
to the learning process.

Chipstead, Surrey Chris West

1 Competition

Competing is as natural as breathing and although the competitive

process is not always enjoyable, winning is one of the most pleasur-
able human sensations. The desire to be a winner, to gain the prize or
to succeed makes the effort or the pain of competing worthwhile.
Competition pervades every aspect of personal, institutional and
corporate activity. As individuals we spend our lives competing for
success in school, in sport, for jobs, for partners and for recognition.
Political parties compete for voters, government departments com-
pete for funds, societies compete for members, charities compete for
donations, tourist attractions compete for visitors and companies
compete for customers. There are those for whom competition is a
major reason for living; they are said to `thrive on competition'. There
are others who, in the interest of a quiet life, would prefer to get what
they want without competing for it but, in the real world, they
invariably find that it is impossible to avoid confrontation and
competition completely. Companies would prefer not to compete,
since doing so absorbs resources and reduces margins, but they
recognise that competition is almost inevitable and, whether explicit
or implicit, methods of dealing with competitors are an integral part
of their business strategies.
The only way that companies can avoid competing completely is to
be a monopoly but the opportunities to achieve this status are (now)
extremely limited. Legislators and the economists that advise them
have an unfortunate, though understandable, belief that monopolies
are bad for customers. This is because historical evidence suggests
that monopolists have a natural tendency to abuse their position by
restricting supply below the level of demand and raising prices. In
contrast, economists have defined `free competition' as highly bene-
ficial for customers, since it maximises supply and reduces prices to

1
2 Competitive Intelligence

the level at which it is just worthwhile for suppliers to remain in the

business. Although Adam Smith was describing a world which was
considerably less complex than that existing at the beginning of the
twenty-first century, his summation of the difference between mono-
poly and competition is timeless:
A monopoly granted either to an individual or to a trading
company has the same effect as a secret in trade or manufactures.
The monopolists, by keeping the market under-stocked, by never
fully supplying the effectual demand, sell their commodities above
the natural price, and raise their emoluments, whether they consist
in wages or profit, greatly above their natural rate.
The price of monopoly is, upon every occasion, the highest that
can be got. The natural price, or the price of free competition, on
the contrary, is the lowest that can be taken, not upon every
occasion indeed, but for any considerable time together. The one
is upon every occasion the highest which can be squeezed out of the
buyers, or which it is supposed, they will consent to give; the other
is the lowest which the sellers can commonly afford to take, and at
the same time continue their business.1
Although once common, it is hard to conceive that a true mono-
poly would be sustainable in today's global economies. Apart from
competition laws aimed at preventing companies gaining a position
from which they can dominate markets, global communications and
fast, low-cost transport has permitted larger numbers of suppliers to
seek access to all markets. Where once local shops supplied vegetables
grown in the neighbouring fields, today's supermarkets display
vegetables from all parts of the globe and, apart from price variations,
the notion of seasonal vegetables has all but disappeared. Various
European state monopolies in telecommunications, postal services,
transport, tobacco, drinks and minerals survived until the 1980s and
1990s but almost all of them died on the altars of privatisation and
deregulation. Apart from the fact that governments no longer saw
owning or running commercial enterprises as part of their mandate
and had alternative uses for the funds that privatisation released, they
had also realised that running businesses was not one of their
strengths. One of the main arguments against monopolies ± particu-
larly state monopolies ± was less to do with the fact that they charged
high prices and more to do with the poor service they provided to
their customers. Bureaucrats have always displayed a surprising
insensitivity to the needs of those they are charged with administering,
which, when transposed into a commercial environment, resulted in
 Competition 3

the antitheses of the customer care strategies that normal businesses

were forced to embrace in the final quarter of the twentieth century.
By way of example, compare the prices for air travel on transat-
lantic routes with those that apply between major European cities.
The cost of budget fares per transatlantic mile is in the order of
7 pence whereas between European destinations it can be fourteen
times higher. There are a number of reasons why this is so but one of
the most significant is the fact there is an abundant supply of seats on
transatlantic routes whereas in Europe agreements between govern-
ments restrict seat supply. In other words, limited monopolistic
practices are permitted in Europe, with a predictable effect on prices.
Of course, the opposite of monopoly is not necessarily competition.
In some markets a failure to control competition may result in a lack
of supply because suppliers are unwilling to make the investments
required to develop products or services which then fail to make an
adequate return. The supply of pharmaceuticals, for which develop-
ment costs are astronomic, is highly controlled for a period of time by
patents and by the system of government approvals. This ensures that
developers of new pharmaceutical products have sufficient time to
recoup their development costs, and more, before they are exposed to
the full force of competition.

Virtual Monopolies
The advantages of being a monopolist and the disadvantages of
having to compete are sufficiently powerful to induce those that
can to seek to create a quasi monopolistic situation for themselves.
The main mechanism by which suppliers can avoid head-on conflict
with competitors is a process well-known to marketers as product or
service differentiation. This concept is closely related to the `Unique
Selling Proposition', first expounded by Rosser Reeves of Ted Bates
as a key ingredient for successful advertising campaigns.2
Most suppliers accept that competition is inevitable but would
prefer a situation in which it was unnecessary. Considerable research,
design, development and creative resources are therefore devoted to
efforts which will result in products or services which are clearly
differentiated from those of competitors and may be perceived by
customers to be unique ± in other words, to create a form of
monopoly. Unique products and services can result from or be
complemented by a unique operational environment that clearly
distinguishes the supplier from other companies active in the business.
4 Competitive Intelligence

Uniqueness can be real, in that a product has features or attributes

not provided by competitive products, or it can be perceptual. The
need to create perceived differences between products arises most
strongly when real differences are difficult, if not impossible to
develop and demonstrate. McDonald's does not have a monopoly
of the hamburger market but it is widely perceived as a unique player
within that market. This has happened because of its history as the
first to develop a global burger business, its culture, its value
proposition and its intensive promotional activity.
Differentiation can be sought in any aspect of a company's opera-
tions. Traditionally in the marketing process companies have sought
to differentiate themselves from their competitors by:
. Production technologies
. Product features
. The raw materials used
. Price levels
. Discounts and rebates
. Distribution channels
. Delivery methods
. Delivery speed and reliability
. Promotional methods
. The perceptions they create for their brand
. Service offers
. Their location
. The company culture
. The staff they employ
Many of these are visible and therefore obvious to the competition;
others are the invisible drivers of an end result, which is itself visible.
For example, unique production technology or a unique source of
raw materials can result in production cost advantages that translate
into competitive prices.
However achieved, uniqueness is usually transitory in competitive
markets. Unique product and service features can eventually be
copied and even intangible advantages can be eroded over time by
consistent promotion and publicity. The only long-term defence of
unique positions is to innovate and create new forms of uniqueness.

Definition of Competition
A company's competitors are those organisations that can have an
adverse effect on sales through their own success in winning business.
 Competition 5

The most common definition of competitors is the narrow one of

direct competition, which includes only those companies offering
comparable products and services into the same target markets. In
these situations the competition is head on and customers make a
choice between suppliers that are all perceived as being capable of
meeting their requirements in broadly similar ways.
However, competition also exists indirectly between suppliers that
offer alternative and sometimes very different solutions to the same
problem. In the traditional telecommunications market (often re-
ferred to as POTS ± Plain Old Telephone Service) BT, AT&T, France
Telecom, Deutsche Telecom and their other national equivalents were
once monopoly suppliers. After privatisation, deregulation and the
break-up of the monopolies competitors from very different back-
grounds (cable TV and the utilities) emerged as direct competitors, as
well as a host of new specialist telecommunications companies.
Names such as Sprint, MCI, NTL, Telewest and Energis and a host
of smaller companies offering low cost calls via calling cards or access
numbers carved niches for themselves in the market, but the service
was essentially the same.
However, the analysis of the competitive situation would be
seriously flawed if it considered only the fixed line operators. The
mobile communications market now accounts for a significant pro-
portion of the total communications business and is competed for by
a different set of suppliers in addition to the traditional carriers. The
analysis would be further flawed if it excluded e-mail and text
messaging, both of which are displacing voice communications,
and, looking forward, effective voice communications over the Inter-
net could cause a significant reduction in long-distance connections.
The broadband technology that services the voice and data commu-
nications market also enables the transmission of pictures. This
permits telephone companies to compete with terrestrial television
transmissions and even the airline business, if video conference calling
ever succeeded in reducing the amount of business travel.

Where Do Companies Compete?

There is a widespread and wholly understandable impression that the

primary form of competition is that which takes place between
companies for customers, in other words, that the main competitive
battlefield is the marketplace. However, in the context of competitive
intelligence it is important to recognise that this is very far from the
6 Competitive Intelligence

case. Companies compete across the full spectrum of their activities

and whilst the marketplace is extremely important, it is by no means
the only competitive arena. Some of the key areas in which competitive
action can have a profound effect on a company's performance are:
. Strategic ± competition for acquisitions
. Technology ± competition for patentable products and processes or
for licences
. People ± competition for the best staff
. Finance ± competition for investors and funds
. Locations ± competition for manufacturing, warehousing and
office sites
. Suppliers ± competition for raw materials or components
. Distribution ± competition for shelf space
. Markets ± competition for customers
In all these areas competition is significant only when there is an
actual or impending shortage of whatever resource companies are
seeking. In the battle for acquisitions the shortage is acute because at
any one time there is normally only a few companies available to be
acquired and a number of potential suitors. Competition for financial
resources is rarely significant since the supply of funds that are
available for good investments is not constrained to the point that
companies need to fight for a share. In times of full employment
competition for people can be acute, but at the bottom of the
economic cycle supply can far outstrip demand. Similarly the supply
of raw materials can oscillate from abundance to shortages.
Even in markets shortages of customers are not necessarily the
case. There is rarely a shortage of demand for a real bargain. In such
situations customers will soak up whatever supply is available, if only
to stockpile. Demand is driven by a host of factors that include price
and performance but also customers' anticipation of the future supply
situation. Threatened shortages of essential products, such as food or
petrol, will result in buying sprees that quickly deplete stocks. In such
situations competition is irrelevant; customers will buy from whom-
ever at whatever price they care to charge.

Marketing and Competitive Strategies

The principles of marketing were developed and codified in the

postwar period when demand was growing rapidly and competitive
pressure was relatively low. In many markets manufacturers could sell
 Competition 7

all they could produce and although they risked being left behind as
superior products were developed, competition was not at the top of
their list of worries. Marketing focused entirely on customers and was
defined as a process for winning by offering products that met
customer needs at prices they were prepared to pay. In his seminal
work, Innovation in Marketing, written in 1962, Theodore Levitt
barely mentions competition.3 He concentrated on what was then
deemed to be important, namely, customer retention, the evolution of
markets and product development. Although outfoxing the competi-
tion was an inevitable part of this process, the emphasis was on the
product and service stratagems that would be deployed, rather than
direct competitive action. In a key chapter entitled `Management
Myopia',4 Levitt attributes low growth to a management failure to
spot developments that would make current markets obsolete. Tar-
geted competitive action was relevant only for suppliers that were
seeking exceptional growth and therefore needed to make gains in
market share. The sequential recessions of the early 1970s, 1980s and
1990s resulted in an slowdown in overall economic growth and an
overall trading climate in which even modest rates of growth required
an increase in market share, unless companies were operating in
specific high-growth niches.
At the same time the pressure on companies to compete more
strongly has intensified.
This is a result of a number of clearly defined forces, which include:

. Higher financial performance demands placed on suppliers. Increas-

ing financial demands of owners and shareholders have resulted in
an injection of the killer instinct. The management of companies
are required to meet ever more ambitious targets and certainly
cannot afford to fail. They therefore defend their existing positions
in their markets vigorously and are also driven to seek expansion
. Diversification. The need to protect and enhance the future growth
of the business will often be interpreted as a need to diversify into
new markets. If the markets they target are themselves new,
competition may not intensify, as may also happen if the diversi-
fication is made by the acquisition of an existing participant.
However, if a company enters an existing business as a new player
then competition is automatically intensified
. Globalisation or geographical diversification. By reaching out into
new countries global players intensify the competitive environment
. Technology. Developments in technology, and particularly the
convergence of technologies, are enabling companies to challenge
8 Competitive Intelligence

incumbents in new markets and radically alter the competitive

environment
. Outsourcing. The trend towards outsourcing of key processes to
those organised to carry them out more effectively and at lower
cost can improve competitiveness by permitting companies to focus
on the operations that they do best. The growth of `virtual
companies', which outsource all functions other than product
design and overall management, is the ultimate expression of the
outsourcing process. Providing the supplier of outsourced services
performs well, outsourcing reduces the number of functions that
companies need to control and manage and therefore the scope to
create problems for themselves. By eliminating the need for
investment in fully serviced companies, outsourcing reduces the
cost of entry into markets and therefore encourages the formation
of new competitors
. Improved information flow. The economist's definition of perfect
competition includes the requirement for customers to have perfect
knowledge of the products that are available and the prices for
which they can be acquired. In the real world perfect knowledge
rarely exists or is confined to small geographical areas (such as a
street market). Suppliers have therefore been able to operate in
markets that have been partially protected by ignorance. Long-
term improvements in communications have gradually eroded such
protection but the advent of the Internet has created a forum in
which perfect information on product availability on a global scale
is a real prospect
As a result of these changes, defending an existing market position
from attack or growing market share became serious marketing
objectives and share gains are difficult to achieve without engaging
in an outright battle with competitors.
Marketing has therefore evolved to embrace two separate streams
of strategy:
. The customer facing strategy, which is concerned with satisfying
the needs of customers
. The competitor strategy, which is designed to win customers but by
ensuring that the company and its products and services beat,
outmanoeuvre or outflank the opposition
For maximum effect, customer and competitive strategies work
hand in hand, complementing each other in the common objective of
winning business. However excellent, a competitive strategy will not
compensate for serious deficiencies in a customer strategy for any
 Competition 9

length of time, though it may provide breathing space whilst defects

in the product or service offer are rectified. Similarly, however superb,
customer strategies will eventually be unravelled and undermined by
competitors.

The Competitive Environment

Writing in the 1980s,5 Bruce Henderson described two extremes of

competitive activity, natural competition and strategic competition. He
described natural competition as an evolutionary process in which
competitive activity progressed incrementally by trial and error. In a
natural competitive state competitors adapt slowly to each other and
to changes in the market environments in which they are operating. In
contrast, strategic competition is revolutionary and `seeks to make a
very large change in competitive relationships'. Strategic competition
can be initiated by suppliers who, for whatever reason, feel they can
gain market share by engaging in an extreme bout of competitive
activity. It increases the normal level of business risk and tends to be
short-lived. However, a successful period of strategic competition will
tend to encourage the perpetrator to repeat the exercise. If a compe-
titor initiates a programme of strategic competition, retaliation is
essential for survival. Those that are attacked will be required to
defend their market positions or lose share. A successful defence may
severely disadvantage the attacker and discourage further incursions.
Bouts of strategic competition are evident in many industries but
particularly in retailing. In 1999 the major British supermarket
chains, which had coexisted more or less peacefully for some years,
were struck by a series of events that initiated a burst of strategic
competition. Asda, the up-and-coming contender in the market, was
acquired by Walmart, a major discount retailer in the USA. This
more or less coincided with a period in which:
. Tesco, the market leader, had been gently flexing its muscles
. The British media were making increasingly loud protests about the
differences between British and foreign prices for food and other
consumer goods
. Three other rivals, Sainsbury's, Safeway and Marks & Spencer, had
all been experiencing problems stemming from a failure to keep
pace with developments in the marketplace
Asda and Tesco immediately embarked on a price war, which
was heavily promoted as being in the consumers' interest. The
10 Competitive Intelligence

weakened competitors were forced to follow suit or lose part of their

constituency, the last thing they needed when trying to regroup and
reorganise.

Mechanisms By Which Companies Compete

Competitive strategy is often likened to warfare. Marketing warfare
has been written about extensively and most of the analogies are
perfectly valid at a strategic level. However, there is one major
difference between armed struggle and competing for customers,
which means that the nature of the battle is radically different. In
warfare the opposing forces fight over terrain. The primary measure
of success is territorial gain and the subsequent domination or
subjugation of those who live on it. In business competition is for
customers and resources; they are, in effect, the terrain that is fought
over. Unlike the landscape, customers and resources are active
participants in the competitive process. It is their choices that
determine the outcome of the battle. The landscape cannot reject its
conquerors but customers can certainly refuse to be won, distributors
can refuse to allocate enough shelf space and staff can refuse to be
recruited. Force is not an option to overcome such resistance and
must be replaced by persuasion which is effective only when it
maximises the attractiveness of the offer, uses appropriate commu-
nication channels and maximises the financial benefit to the target. In
a market environment this would be called marketing ± persuading
the target to do what you want them to do (that is, buy from you) by
meeting their requirements more effectively than anyone else.

Scale
The perception of competition tends to vary according to the
seniority and role of the staff member considering it. The perception
stretches from a highly strategic view to short-term tactical issues. To
the chief executive competition is defined as organisations and
processes that can threaten the future viability of the company. At
the level of the sales representative the competition that matters is any
company or action that threatens a sale. At the intermediate level of
departmental heads, interest in competition spans the short and
medium term. Although concerned with losses of sales due to
competitive action they are also concerned with performance in the
budget period for which they are responsible.
 Competition 11

Strategic competitive objectives

Clearly a competitive strategy is an integral part of any marketing

strategy which needs to be shaped to take account of what compe-
titors are doing. Where competitors exist the key role of the compe-
titive strategy is to:
. Undermine competitors' offers so that the attractiveness of the
suppliers' own offer is maximised
. Position the company so that any head-on conflict with competi-
tors likely to drive down prices and margins is avoided
. Avoid activities in which the most likely outcome is a blood bath
. Anticipate competitors' actions so that their effectiveness can be
neutralised

Tactical competition

Competitive intelligence has just as big a role to play in tactical

situations as it does in the formulation of strategy. Indeed, many
companies will recognise the tactical advantages that can be gained
from intelligence more readily than any strategic benefits. Tactical
activities are short-term responses to day-to-day situations that arise.
They are `cut and thrust' rather than broad sweeping developments.
Tactical competition revolves around the need to respond:
. When competitors implement unanticipated changes in their activ-
ities ± this can include product launches, withdrawal from the
business, changes in selling activity, new promotional programmes,
changes in personnel
. When a change incurs within the customer base or in the supply
chain
. When economic conditions change

Notes

1. Adam Smith, The Wealth of Nations (1776) Chapter VII.

2. Rosser Reeves, Reality in Advertising (New York, Alfred A. Knopf,
1961).
3. Theodore Levitt, Innovation in Marketing (New York, McGraw-Hill,
1962).
4. Originally published, and better known, as `Marketing Myopia', Harvard
Business Review, July±August 1960.
5. The Boston Consulting Group, Perspectives on Strategy (New York,
John Wiley, 1998).
2 Intelligence

Competitive intelligence is the process by which companies inform

themselves about every aspect of their rivals' activities and perfor-
mance. It is an essential ingredient when planning not only marketing
campaigns but also production programmes, human resources, fi-
nance and all other corporate activities that competitors can influence
directly or indirectly. No battle can be fought without intelligence on
the opposing forces. Just as card games are easier to win when players
have either seen or deduced their opponents' hands and exams are
easier to pass when the questions are known or guessed in advance,
competition is easier to engage in when the current and future
activities of the competitors are known or anticipated. In all compe-
titive situations the accuracy and timeliness of the intelligence that is
held may have a determining influence on the outcome of the
engagement.
In battle where lives are at stake it is essential to know the terrain
over which the battle will be fought, who the enemy are, their
mentality and the resources at their disposition. It is preferable to
know their intentions and it is extremely useful to know how they
intend to achieve them and when and where they are likely to launch
an attack. In fact the more information military commanders have at
their disposal the greater their chance of winning. No student of
military history can be in any doubt about the value of military
intelligence and the major efforts that have been made to obtain it.
The same level of criticality cannot be applied to a game of cards or
even success in examinations, but in business, where the financial
penalties for losing can be severe, the case for acquiring competitive
intelligence can be indisputable.

12
 Intelligence 13

The Applications for Intelligence

Intelligence on the marketplace within which competitive battles are

fought, commonly called market or business intelligence, provides the
essential background to all strategic and tactical decisions. It indicates
the likely severity of the battle and the length of time over which it is
likely to take place. It also indicates the marketing and promotional
tools that competitors can use successfully to fight their battles and
the messages to customers that are likely to produce the most positive
outcome. But, more important than any of these, it provides a
forward view of technology, customers and customer requirements
that forewarns of significant change, thereby providing a basis for a
strategy that differentiates companies from their competitors and
permits some radical outflanking manoeuvres. The relationship be-
tween business or market intelligence and market research is extre-
mely close. Only those who define market research narrowly as being
concerned exclusively with customer surveys and focus groups will
fail to see the connection.
Intelligence on competitors is used in three situations:

. Curiosity
. Emulation
. Anticipation

The most common, and least useful, is to satisfy an inevitable

curiosity about other companies active in the same business. The level
of curiosity may be tempered by an arrogant belief that competitors
are irrelevant and is rarely deemed to be worth satisfying at a price.
Curiosity is usually satisfied by information that is gathered through
trade gossip, from staff that have previously worked in competitive
companies, from published media and from informal contacts. No
attempts are made to verify the information collected and such
companies often live in a false competitive environment fed by
inaccurate impressions and rumours in which it is impossible to
defend themselves from surprise attack or even launch credible
offensives.
Emulation is a more worthy application for competitive intelli-
gence. It recognises that all companies have something to learn from
their competitors ± even if it is only that they have nothing to learn.
The learning process can cover the full gamut of competitors' opera-
tions and its usefulness is recognised most readily:
14 Competitive Intelligence

. When a company has encountered a problem that it is having

difficulty resolving with its own resources (so how do the compe-
titors do it?)
. When existing or new competitors have launched an initiative that
appears to be successful
. When competitors appear to be using superior technologies, achie-
ving higher levels of productivity or performing better financially
Companies that use competitive intelligence only as a source of
inspiration tend to be followers rather than leaders, content with the
fact that they will be second to market with innovations and lagging
in the performance race, but they are nevertheless benefiting from the
knowledge gained by their competitors and leveraging their own skills
and resources.
The most advanced application for competitive intelligence is that
which enables companies to recognise current and future competitive
threats and to devise stratagems that will neutralise their effectiveness
and gain some form of competitive advantage. Advanced users of
competitive intelligence tend to be:
. Companies that are active in businesses in which the competitive
landscape is evolving rapidly and subject to major change
. Companies active in businesses that require heavy investments and
long-term development programmes in order to remain credible
players
. Aggressive players seeking rapid gains in market share
. Dominant players with major positions to defend
. Players that have recognised that they are seriously vulnerable to
attack

Not surprisingly, the major users of competitive intelligence tend to

be in information technology, healthcare (especially pharmaceuti-
cals), financial services and e-commerce.

Companies to Watch

When determining the competitors that need to be studied it is wise

to adopt the broadest possible definition of competition. Although
the current threats may be obvious it is essential to consider potential
future threats, and these can arise from well outside the current
boundaries that delimit the business. As already described, competi-
tion is conventionally defined as comprising direct and indirect
 Intelligence 15

competitors. It can also be defined as current competition and

potential future competition. The most worrying group in any market
are the potential future competitors: those companies that have no
current connection with the business, have not declared their hand
but can have a devastating effect if ever they decide to enter.1 Figure 1
illustrates the competitive structure that can exist in any market.
Most competitive intelligence is aimed at direct competitors ±
companies that sell identical products or services at similar prices to
an identical customer base. These are the companies that are faced
head to head in the marketplace on a daily basis and constitute the
most immediate threat. Direct competitors are usually well-known.
Only in new, rapidly evolving or highly fragmented businesses is it
likely that companies are competing against suppliers of whose
existence they are unaware and even then the competitive process
usually ensures that their presence becomes known relatively quickly.
Indirect competitors are those that sell products or services that are
not identical but compete for the same category of customers'
expenditure. In the personal transport market cars in the same price
and performance categories are in direct competition whereas man-
ufacturers of motorcycles and providers of public transport services
are indirect competitors. Indirect competitors need to be watched not

UNRELATED COMPETITORS FROM UNRELATED

POTENTIAL RELATED FIELDS POTENTIAL
COMPETITION COMPETITION

INDIRECT

DIRECT

UNRELATED UNRELATED
POTENTIAL POTENTIAL
COMPETITION COMPETITION

Figure 1 Competitors to watch

16 Competitive Intelligence

only because of the effect they can have on a market but also because
they may broaden their product range and compete directly.
Outside the ring of direct and indirect competitors lies a further
group of companies that are active in related businesses and have the
skills and resources to diversify if conditions suggest that it would be
profitable for them to do so. When diversifying such companies seek
to maximise the use of the assets they have developed in their core or
original businesses and in doing so may alter competitive conditions
in the new markets. The emergence of garage forecourts as 24/7
grocery retailers is due to the fact that they attract a continuous
mobile customer base, have parking space available and are already
bearing the cost of long opening hours for their primary business. The
entry of the supermarkets into financial services markets creates
additional income earning opportunities from their customer base,
uses the equity they have built in their brands and places them one
step closer to being one-stop shops.
Further out still lie companies that have no current connection with
a market but could at some stage decide to enter it. Radical
diversifications are extremely difficult to predict since they are
normally founded on interpretations of a skill base that are invisible
to the outside world. When Virgin was launched as a record retailer
only a brave observer would have predicted that at some future date
the company would enter the airline and then the railway businesses.
Now, having observed the power of the Virgin brand and its ability to
carry the company into diverse markets it would be very easy (though
not necessarily accurate) to suggest that ferry companies and cruise
lines should consider them potential competitors.
Although new entrants from radically different businesses are
difficult to anticipate they are also becoming more common. This
in itself provides more evidence on which to base predictions. The
realignment of IBM from a company supplying hardware to one
offering a mix of hardware and consultancy services means that it is
less surprising that a company like Hewlett Packard should make a
bid for the consulting arm of PricewaterhouseCoopers.
One group that is often overlooked as a potential competitor is the
customers. Despite the trend to outsourcing there is always a risk that
customers will decide to make components for themselves or establish
service departments that cut out external suppliers. The risk is great-
est when customers' satisfaction with external sources deteriorates to
low levels because quality is inadequate, supply is inconsistent, service
levels are poor or prices are too high. Items that are deemed to be
strategically important are more at risk than others.2
 Intelligence 17

Narrowing the Field

Adopting a broad definition of competition has one major disadvan-
tage ± it can throw up large numbers of companies to watch. Studying
hundreds of companies is clearly impractical, at least on any regular
basis, and there therefore needs to be some mechanism by which
competitors are placed in priority order. Obviously the companies
that it is imperative to observe are those that can do the most damage
to sales and profits in the short term. Within the ranks of direct and
indirect competitors this can usually be determined by reference to:
. Size ± large competitors generally have the resources and the power
to do more damage than small competitors
. Management ± superior management teams with proven records of
success require closer watching than those with a reputation for
mediocrity
. Aggression ± competitors that have a record of being aggressive in
the marketplace are likely to be more dangerous regardless of
whether they are successful or not. Periods of aggression initiated
by one supplier can cause turmoil in the market, to which
participants have to respond
. Technology ± competitors that are using significantly better tech-
nology have the capability to disturb the competitive balance,
particularly if it can be converted into a product, performance or
price advantage
. Product ± competitors with identical or similar products require
closer monitoring since they can be used as substitutes more easily
and their actions can have an immediate impact on performance
. Customer base ± competitors that service the same accounts or
similar types of customers are inherently more dangerous than
those that operate in more remote segments of the market
. Geographical proximity ± this can arise when raw materials are
shared, when the market is concentrated in a particular region or
when one company is a breakaway from another. Competitors
operating out of nearby locations are often close in many other
senses; a high proportion of staff may have worked (or are being
tempted to work) for the competitors and other resources may be
shared, thus blurring distinctiveness in the minds of the customers
. Success ± companies experiencing a run of success in the market
need to be watched closely
. Profits ± companies that are earning above-average profits may be
establishing a resource base from which to broaden their compe-
titive challenge
18 Competitive Intelligence

. Profile ± high-profile suppliers, particularly those appearing fre-

quently in the media, may be preparing the way for a major assault
on the market
. Recruits ± the recruitment of new management may also herald a
change in pace in competitive activity
In the longer term it is necessary to consider the potential new
entrants as well as those already active on the competitive scene. Since
new competitors can emerge from many alternative sources and give
few clues as to their intent, the problem of deciding which companies
to watch is magnified many times. It can only be done effectively by
carrying out a constant scan that seeks clues that suggest a possible
interest in the market. The clues can be reasonably definitive or
simply straws in the wind. The former will suggest that a company
should be placed under close scrutiny; the latter that it should be
examined from time to time to see whether more positive evidence is
available. The clues that may be picked up in a scan are likely to
include:
. Management statements that suggest that a diversification into a
new market is being considered either for growth or as a replace-
ment for poor earnings in current businesses
. The recruitment of new management known to have an interest in
the market
. The development of a new technology that would facilitate entry
into the market
. The establishment of partnerships that suggest a growing interest in
new businesses and a mechanism for making an effective entry
. The purchase of a licence that could be used to enter the business
. Patented product developments

Alternative Applications for Intelligence-Gathering

Techniques
The term `competitive intelligence' implies that the techniques are
valid exclusively for examining competitors and the competitive
environment. Although the competitive intelligence community has
indeed built its business around the analysis of competitors, the
techniques are equally valid for other purposes. These include the
analysis of companies that are being considered or targeted as:
. Acquisition candidates (which may also be competitors)
. Investment prospects
 Intelligence 19

. Joint venture partners

. Suppliers
. Distributors
. Customers

Acquisition candidates

The acquisition process includes volumes of due diligence which

normally concentrates heavily on the financial performance and
prospects of the target company. The market and competitive envir-
onment are not usually ignored but it is rare for them to get more
than a cursory examination by the teams of bankers, accountants and
lawyers that comprise the typical acquisition team. Competitive
intelligence techniques, which study the company covertly, can inject
valuable insight into acquisition decisions on those aspects of the
company that are unlikely to be revealed either by the figures or often
the target company itself.
The main inputs are analyses of:
. The identity of current and potential competitors to the acquisition
target
. The competitive positioning of the company within the markets it
services
. Its strengths and weaknesses relative to significant competitors
. The types and levels of competitive pressures it is facing
. The sustainability of its market share and its ability to grow sales
A more refined use of competitive intelligence in an acquisition
situation is to obtain insight into the internal structures, resources and
cultures with a view to determining the degree of fit with the acquiring
company. Cisco Systems, a voracious acquirer that made 70 acquisi-
tions between 1994 and 2000, uses its competitive intelligence re-
sources as an integral part of its acquisition team. A high proportion
of Cisco's acquisitions are young companies just out of the early
rounds of financing. With such companies it is essential to hold on to
the key staff and for this to happen the company has to fit with the
Cisco culture. Advance study of acquisition candidates considers their
cultures and their leadership style and practices. This is used to
identify those that stand a reasonable chance of being integrated
without heavy staff losses. The success of this process can be
measured by the fact that Cisco retains 70 per cent of the CEOs that
it acquires.3
20 Competitive Intelligence

Investment prospects

Investments in companies by venture capitalists or trade investors are

invariably preceded by a programme of due diligence to test the
assumptions being put forward by the prospect. Data supplied by the
company itself should rightly be treated with caution and verified
independently. Whilst this is commonly accepted for the assumptions
supplied about the market environment in which the company is
operating it is rare to test the statements that the company makes
about its organisation, internal workings and strengths. Competitive
intelligence can be used to bridge this gap.

Joint venture partners, suppliers and distributors

The performance track record of all companies with which a potential

relationship is being considered should be tested, particularly if the
relationship is critical to future performance. It is essential to know
whether a business partner is capable of living up to the promises they
make, and researching their true capabilities and their reputation with
other partners is more accurate than taking trade references and less
expensive than finding out by trial and error.
Many of the so-called joint ventures between companies in the
former east European countries and western partners were predicated
on the assumption that the western partners would supply the
financial resources that the eastern companies could use to expand
their businesses. In a high proportion of cases the eastern companies
lacked the management skills to use the finance with which they were
provided and it soon became clear that without a major injection of
management skills as well as finance, the joint ventures would fail.
What was thought at its inception to be a joint venture soon became a
full acquisition, which was not what the negotiators of the deals
expected.

Customers

When pitching to business customers an in-depth and independent

assessment of their activities, needs and satisfaction with current
sources of supply can provide a basis for a winning bid. Suppliers
that show an awareness of their customers' requirements are generally
viewed more favourably than those that are ignorant and a bid that
 Intelligence 21

touches on real problems encountered by the customer in the past will

add spice to the offer. It is even more helpful to know that specific
accounts are dissatisfied with their current sources of supply and are
open to competitive offers.

Alternative Routes to Intelligence

Any company seeking competitive intelligence has a number of

alternative sources to turn to. In addition to those professionals that
specialise in competitive intelligence using the techniques described in
this book, they can consider:

. Companies that offer intelligence databases

. Market research companies
. Private detectives
. Companies that specialise in the investigation of corporate fraud
. Companies and individuals that carry out industrial espionage

Intelligence databases

Companies that have built databases of news and information on

companies and markets have been quick to spot their usefulness for
competitive intelligence and have repackaged their services accord-
ingly. There is no doubt that a good database and clever search
facilities are a major asset to analysts since they can save considerable
time, speed up the search process and probably increase the amount
of intelligence that is obtained.

Market research

The market research route to competitive intelligence has been in

existence for many years. It has been part of the standard offer of
research agencies that study industrial markets since the 1960s and
the agencies that study consumer markets also have a long track
record in providing basic sales and market share data for competitors.
The use of market research for competitive intelligence is discussed
further in Chapter 9 but it has to be appreciated that research
agencies work on the fringes of competitive intelligence and not
within its mainstream.
22 Competitive Intelligence

Private detectives

Private detectives are also on stronger ground for certain types of

information. Their origins are usually in the police or military
intelligence and their culture is one in which the end justifies the
means. Whilst they will not engage in activities that are illegal they
will have a different interpretation of where the ethical boundary
line lies.

Corporate fraud

Companies that investigate corporate fraud are close in approach to

private detective agencies, largely because they employ the same types
of investigators. The clients they act for are under threat from
activities that are illegal and it is judged fair to fight fire with fire.
Although such companies study competitors, they are not a part of
the competitive intelligence community as defined for this book.

Industrial espionage

Even though no real link exists between the methods by which

competitive intelligence is gathered and those used in industrial
espionage, there is a perceived link between the two activities. This
is despite the fact that competitive intelligence is a natural and legal
component of the competitive process whereas most of the techniques
used for industrial espionage are completely illegal. Much is in the eye
of the beholder. There are those that regard any attempt to collect
information on their activities as a gross invasion of their privacy and
will go to extreme lengths to stop it. In this they are aided by a press
that much prefers stories about spies to anything as mundane and
conventional as competitive intelligence. Press stories all too fre-
quently elevate the most innocuous intelligence-gathering exercise to
the equivalent of a spy ring organised by the former Stasi. Unfortu-
nately the broader community that often aligns itself with the provi-
sion of competitive intelligence sometimes gives them cause to do so.
The temptation to initiate a programme of industrial espionage is
strong amongst those with low ethical standards or whose need is so
great that they are prepared to ignore their usual scruples. Compe-
titive intelligence stands a reasonable chance of obtaining the data
that are required but in many cases those that practise industrial
 Intelligence 23

espionage can almost guarantee that they will be able to obtain what
is required. Where competitive intelligence will yield reasonable
deductions on competitors' plans, the industrial spy will offer copies
of documents and recordings of company meetings.

Notes

1. See D. Frances, K. Sawka and J. Herring, `Competitors ± Who to Watch,

What to Watch, Who to Ignore and How to Tell the Difference',
Competitive Intelligence Review, vol. 7, Supplement 1, 1996, pp. 95±100.
2. Deborah Sawyer, `Defining Your Competition: Competition from With-
in: When the DIY Bug Bites Your Customers', Competitive Intelligence
Review, vol. 7, no. 4, 1996, pp. 79±80.
3. Ammar Hanafi, `CI at Cisco Systems: An Acquisitions Success Story',
Competitive Intelligence Magazine, vol. 4, no. 1, Jan.±Feb. 2001.
3
The Development of
Competitive
Intelligence1

Market research has traditionally focused on the analysis of custo-

mers. This has never been to the exclusion of all other participants in
markets, but `customer focus' has been the distinguishing character-
istic of an organisation that has embraced the marketing concept. The
customer is the ultimate target of all marketing activity and under-
standing the customers' activities, requirements and expectations is,
and will remain, an essential ingredient for the development of
marketing strategies. However, customer analysis has never been able
to provide answers to all marketing questions and other participants
in markets have been studied and analysed regularly. These include
distributors, specifiers, advisers and competitors. Each of them is a
valuable source of intelligence for those attempting to define a
winning strategy, though, to date, customer analysis has taken the
lion's share of research budgets.
In many markets an unexpected consequence of widespread and
total dedication to satisfying the needs of customers has been an
intensification of the competitive environment. Products and services
succeed best when they are genuinely unique. Market research can
increase the chances of being unique, but only if competitive suppliers
abstain from examining customers' requirements. What has happened
in practice is that most if not all suppliers have researched the
customer base extensively and, surprise, surprise, they have all arrived
at exactly the same conclusions ± or at least solutions which are so
similar that the customers can barely differentiate one product or
service offer from the others. Suppliers of products that are identical
in specification and performance to those offered by competitors
(such as most commodities, cement, steel, petrol and base chemicals)

24
 The Development of Competitive Intelligence 25

have had to find methods other than product features by which to

differentiate their offers. Typically they have relied on image-build-
ing, superior service strategies, deals with distributors, competitive
pricing and discounting to create a differentiated offer. However,
image, service, distribution and pricing requirements can be studied
just as easily as product needs or even copied, therefore neutralising
any market advantage that has been gained. In the absence of any
further information, reducing prices or raising discounts may seem to
be the only workable methods of winning customers, but it is a road
to financial ruin. The consequence of these developments has been
that companies have been forced to consider methods of attacking
the competition whilst at the same time perfecting their offer to
customers.
The prominence of customer analysis is not exactly under threat
but as soon as trends in the research business, in the broadest sense,
are examined, it is clear that an increasing proportion of resources is
being allocated to the study of competitors. In Europe the sums spent
on competitor analysis are still relatively small but dependence on
customer analysis is being diluted as an increasing number of
companies appreciate that overdependence on customer-driven stra-
tegies is increasingly likely to give rise to problems.
Competitive intelligence is far from new. Information on competi-
tors has always been a component of tactical and strategic marketing
planning. For centuries before marketing was a gleam in a Harvard
professor's eye, companies have at least watched their competition, if
for no better reason that to learn and pick up useful ideas. What we
are considering is the development of competitive intelligence as a
formal activity. In this sense it is following the path previously taken
by marketing, customer analysis, strategic planning and a host of
other business disciplines that have been converted from intuitive
processes carried out by general management into specialist functions
carried out by staff with formal training.

The Development of Competitive Intelligence as a

Formal Activity

Having access to information on competitors is not the same as a

structured competitive intelligence programme. In order to predict the
development of competitive intelligence in Europe it is therefore
necessary to understand the forces that make companies take the
analysis of their competitors so seriously that they engage in intelli-
26 Competitive Intelligence

gence programmes initiated and run by staff members with formal

responsibility for the collection, dissemination and use of competitive
intelligence. Normally, this process is not one which occurs in a single
step but takes place over a period of time during which there is a
growing awareness of the need to have a competitive strategy that is
every bit as important as the customer strategies that are already
commonplace.
In terms of their use of competitive intelligence, companies seem to
move through a series of stages as illustrated in Figure 2. The first is
competitor awareness. This stage is entered soon after a company is
formed or even before, when the start-up is being planned. Being
competitor-aware means that the key competitors are known and that
there is some knowledge ± usually incomplete and certainly unverified
± about their products, their prices, the clients they have succeeded in
winning business from, the market sectors they service and the staff
they employ.
The organisation that is competitor-aware rarely uses the data that
it holds other than for occasional ad hoc tactical exercises, such as
competitive pricing decisions, or as an input to a business plan that
has to be submitted to an external organisation, such as a bank.
As companies grow they tend to become competitor-sensitive ± both
in terms of their awareness of the damage competitors can inflict on
their business and the need to win orders by competing more
effectively. Unfortunately, being competitor-sensitive does not
always increase the demand for information on competitors. An
alarming proportion of competitor-sensitive companies continue to
rely exclusively on informal information flows through their sales
forces, business contacts and scans of the trade press, rather than a
structured intelligence programme. When they do step outside the
informal information channels the prime motive is usually emulation.

COMPETITOR-AWARE

COMPETITOR-SENSITIVE

COMPETITOR-
INTELLIGENT

Figure 2 The path to competitive intelligence

 The Development of Competitive Intelligence 27

They seek to copy what they perceive to be the best of their

competitors' practices. There is nothing wrong with emulation as a
business process, providing it is factually driven using techniques such
as reverse engineering and competitor benchmarking, but it repre-
sents a very limited application for data that can be derived about
competitors' activities.
The organisation which is competitor-intelligent is one that devotes
serious resources to studying their competitors and anticipating their
actions. This includes identifying competitors' physical and intangible
resources, studying their organisations and their methods in as much
detail as is practical and developing knowledge of their strategies and
potential game plans. The competitor-intelligent organisation is set
up to anticipate competitors' activities. It is continuously aware of the
threats posed by competitors, the nature and seriousness of those
threats and what needs to be done to counteract them. It recognises
the need to look forward and predict the likely responses to actions it
is proposing to take itself. It is also aware that the most serious
threats may arise from companies that are not yet active in its
business sector and may come from new entrants.
A summary of the conditions which apply in the three stages of
competitive development is shown in Table 1.
There is a close parallel between the growth in competitor analysis,
as described above, and the development of customer analysis. There
was a time when organisations were only customer-aware. They knew

Table 1 The three stages of competitive development

Competitor Data Applications Organisation Systems for

collection managing CI

Aware Informal Curiosity None None

Sensitive Informal/ Emulation Marketing Marketing
formal management information
information system
officer
Intelligent Formal Anticipation Competitive Manual or
intelligence computer-
manager based CI
systems
28 Competitive Intelligence

they had customers but took little account of customer requirements

in their product and service planning processes. Companies were
managed by staff with a technical or a commercial background, such
as engineers, chemists or accountants, and sold what they felt they
could produce best or most profitably. The sales representatives' task
was to dispose of the company's output at the best possible prices.
Progress was by a form of natural selection. The companies that grew
and survived were those that were lucky enough to develop products
for which there was a healthy demand. The rest fell by the wayside.
Those that survived were not guaranteed to continue surviving since
their products could always be superseded. Unless they kept pace with
developments in the market ± often initiated by competitors ± they
went under. Customer analysis was adopted when companies realised
that luck and natural selection were extremely poor ways of securing
the future of the business, especially when the tools were available to
make reliable predictions of customers' requirements from suppliers.

Factors Influencing the Growth of Competitive

Intelligence

The progress from being competitor-aware to competitor-intelligent

is illustrated in Figure 3. It is driven by:

. The need to have a competitive strategy

. The ability to use the intelligence once it is gathered to contribute
to the bottom line
. The ability to study competitors

Many organisations perceive a need but have no idea how to fulfil it.
Others may be aware that information can be collected but have no
idea how to develop a competitor strategy.

The need for a competitive strategy

The perceived need for a competitive strategy is determined by the

level or intensity of competition in the market serviced by the
company. If there are no competitors or if the competition is weak,
benign or inactive, there may be no point in wasting resources on a
competitive strategy. The industries that have been the quickest to
embrace competitive intelligence are those which experience the most
intense competition or where the competitive environment is changing
 The Development of Competitive Intelligence 29

NEED FOR COMPETITIVE ABILITY TO STUDY

INTELLIGENCE COMPETITORS

Probability
High
ABILITY TO USE THE Medium
INTELLIGENCE
Low

Figure 3 Probability of competitive intelligence being used

rapidly. In Europe, telecommunications, pharmaceuticals and finan-

cial services all fall into this category.
Around the world there have been a series of developments or
events that have resulted in a major intensification of competition
between suppliers. In summary these are:

. Privatisation
. Deregulation
. Liberalisation
. Global marketing
. Periods of economic recession

There are many industries that have led, and in some cases still
lead, a life which has been heavily sheltered from the full blast of
competition. The state monopolies and nationalised industries are the
leading exponents of this happy condition. Telecommunications,
electricity, gas, water, steel, the airlines, broadcasting and some of
the automobile manufacturers have all been protected at some stage
in many countries. Privatisation signalled the end of protection and
has resulted in an intensification of competition, sometimes to an
alarming extent.
Deregulation has similarly intensified competition. The accoun-
tancy and legal professions and the airline business have all become
far more competitive when the regulation of those businesses ceased.
30 Competitive Intelligence

Once the gloves were taken off, even the most traditional organisa-
tions have become addicted to the bare-knuckle fighting required to
defend their business or increase their market share.
Global marketing programmes have resulted in more companies
seeking to supply national markets. These have often imported
innovative products and marketing techniques from their home
countries or regions which have disturbed the status quo in the new
territories they have entered.
Periodic economic slowdowns and full recessions can also intensify
competition. When markets grow quickly suppliers can achieve their
growth ambitions without impinging on their competitors' territories,
as long as they are not overambitious. When markets slow down or
decline, growth can be achieved only at the expense of competitors by
increasing market share. This requires a clear competitive strategy.

The ability to use competitive intelligence

There is generally a high awareness of the tactical applications of

competitive intelligence. It requires neither training nor experience to
work out that knowledge of competitors' prices, sales techniques,
staffing policies, training programmes and terms and conditions of
business would facilitate a winning sales pitch. What is less well
developed is the strategic use of intelligence to position a company so
that future competitive threats can be anticipated and countered. The
skills to do this are still a rare commodity.
Interest in competitive strategy was kindled and nurtured by the
publication of books such as Michael Porter's Competitive Advantage
and Competitive Strategy in the 1980s.2 This was accompanied by a
short flirtation with marketing warfare which focused on beating the
competition by adopting military tactics. Although marketing war-
fare was great fun it was rarely practical. Many of the analogies were
stretched far too much to be really useful. Nevertheless, business
school courses and external training programmes have led to greater
awareness of the elements of competitive strategies and have heigh-
tened the need for intelligence on which they can be based. They are
also increasing the supply of analysts that can use the data.

The ability to study competitors

The final driver of development is the ability to obtain a regular

supply of accurate intelligence. As already stated, most companies
have access to internal sources in the form of published reports,
 The Development of Competitive Intelligence 31

industry newsletters, company websites, the trade press and their own
sales forces. Whilst these sources are capable of providing a founda-
tion level of intelligence, they are rarely harnessed fully and, even
then, are rarely adequate. A surprisingly high proportion of compa-
nies are unaware of the fact that primary data collection and
analytical techniques exist to provide a full analysis of individual
competitors and provide a tool for predicting competitor actions.
This situation is changing gradually as more professionals are
allocated to the task of competitor analysis and budgets for the
acquisition of intelligence are being established. In this respect
European business lags behind the United States by several years
where the competitive intelligence profession has already matured
and has become an established part of the armoury of management
techniques.

Factors Inhibiting the Growth of Competitive

Intelligence

There are also some serious constraints on the growth of competitive

intelligence. The most important of these are:
. Data protection legislation that has been enacted at national and
European Community levels
. Fears that competitive intelligence is unethical
. Counter-intelligence
. Failure to deliver on promises
Very broadly, data protection legislation places severe restrictions
on the amount of information that can be reported on individuals.3
The collection and analysis of information on companies is not
constrained, except to the extent that it involves an analysis of
owners, directors or individual staff members. In many situations
this is not a serious problem but the legislation has a much wider
effect on competitive intelligence than the legal stipulations.
In addition to the actual constraints data protection legislation can
reduce respondent willingness to cooperate because of the fear that
they might be infringing the law. It can be used as a convenient excuse
for those that do not wish to cooperate.
Fear of engaging in unethical activity is also a powerful constraint.
Discussions on competitive intelligence very quickly turn to the
subject of industrial espionage, which in the view of many people is
the same thing. It can take a lot of explaining to convince marketing
32 Competitive Intelligence

staff that it is possible to collect useful intelligence by wholly ethical

techniques and that because it is useful it does not have to have been
stolen. To the cynical, the code of conduct under which competitive
intelligence is carried out suggests that it will rarely come up with
anything useful. This is far from true but the case needs to be
demonstrated convincingly.
Counter-intelligence measures, which seek to control the outflow of
potentially sensitive information, are already installed in many com-
panies. Their effect is to frustrate not only competitive intelligence
exercises but also legitimate market research activities. Not surpris-
ingly, as the profile of competitive intelligence rises so does interest in
counter-intelligence. This may result in the cart arriving before the
horse with counter-intelligence techniques in place before competitive
intelligence becomes established as a substantial business.
The final threat to the development of competitive intelligence
would be a failure to deliver on its promises. This could happen if
competitive strategies do not result in the gains that are expected or if
the data that are specified could not be obtained. There is a real
danger of both, especially the latter. Much of the data that are being
specified for competitive intelligence exercises is highly sensitive and
there is always a significant chance that they cannot be obtained at a
cost which is regarded as acceptable or even at all. There are, for
example, cases of companies wishing to know who is bidding for
particular contracts and what prices they have included in their bids.
This is an unreasonable expectation but pointing this out can cause
dissatisfaction with the process.

Notes

1. This chapter is based on a paper given by the author at an ESOMAR

Conference Marketing and Competitive Intelligence: Understanding the
Impact, Geneva, 1999.
2. M. Porter, Competitive Advantage, Macmillan, New York, 1985; M.
Porter, Competitive Strategy, The Free Press, New York, 1980.
3. See Chapter 15.
4 Framework for
Competitive Analysis

The intelligence needs of any organisation must be driven by the

applications for which the intelligence is to be used. This applies
across the board regardless of whether it is marketing intelligence,
business intelligence or competitive intelligence that is being consid-
ered. The need for competitive intelligence derives directly from an
organisation's competitive strategy and from a wide variety of tactical
situations in which the organisation squares up to competition on a
daily basis.
At a strategic level intelligence is used to define:
. How an organisation can be positioned (or repositioned) in order
to win business from competitors
. The likely responses that competitors will make when challenged by
a new market initiative
. Future changes in the shape and structure of the competitive
environment that may enhance or detract from the organisation's
ability to sell
Positioning against the competition requires a clear understanding
of each competitor's own stance in the marketplace and their appar-
ent objectives. All markets are made up of a mixture of:
. Competitors that seek to lead, in terms of technology, innovation,
service and price, and others that are content to follow
. Competitors that seek to dominate in the market-share rankings
and others that exploit favoured niches
. Competitors that are aggressive attackers and competitors who
defend the territory they have already won
. Competitors that rely on their size and those that exploit the
nimbleness that is a common consequence of being small

33
34 Competitive Intelligence

Within this environment the organisation must select a competitive

strategy that it feels will enable it to meet its own corporate objectives.
Depending on the characteristics of the competition it may also feel
that the objectives themselves should be reshaped to ensure that they
are realisable. An important ingredient in both activities is an
assessment of the competitors' ability to sustain the positions they
have chosen and their vulnerabilities to competitive attack.
Competitors' responses when under attack can be observed over
time and are a function of their objectives and their resources. They
also reflect the personality of the leadership and their interpretation
of how best to wage competitive war. With a few notable exceptions
business leaders tend not to have profiles which are as high as those of
generals in battle but this does not mean that they are any less
important in determining how a competitive action will be fought,
only that by being less well-known they are less predictable.
No competitive environment is static. It changes its shape accord-
ing to the activities of companies that are in the business, the
emergence of new entrants and changes in the various marketplaces
that the competitors service. The actions of companies in a market
may be influenced strongly by what is happening in other markets in
which they are operating. It is quite possible for a competitor to
reduce its activity level purely because it is experiencing problems in
another market.

Mapping the Competitive Landscape

Companies coming to competitive analysis for the first time generally

require a map of the competitive landscape within which they are
operating. Although the major direct competitors may be well-
known, competitors that are active in specialist niches and on the
peripheries of the business may be less clearly visible. Companies in
start-up situations or entering new markets obviously have a greater
need for maps of the competitive landscape than those that have been
active in a business for many years. However, experience is sometimes
a poor guide to competition, particularly if the business is evolving
rapidly, and can be completely inadequate when looking forward to
the structure of future competition. In all markets, new entrants from
adjacent markets or from converging technologies represent a con-
stant threat and create a requirement for regular updating of the
competitive map.
 Framework for Competitive Analysis 35

When considering the competitive landscape, participants in a

business are often poorly placed to recognise the full spectrum of
competition they may be facing. Their view tends to be blinkered by
the parameters of their own activities, which restricts their ability to
recognise suppliers as competitors unless they are in a broadly
comparable position to themselves. Those that are carrying out the
mapping process must have a free hand to include not only direct
competitors but also those that are indirectly competing for the same
segment of the customers' budget. This may involve looking at
competition through the eyes of the customers by asking questions
that determine which suppliers customers consider as being capable of
solving their problem. Even outside technology markets, where it is
broadly accepted that there are many different ways of providing a
solution, this process can yield surprises.
Most competitive situations are sufficiently complex to defy sim-
plification and a map of the competitive landscape is the key to
understanding the nature of the competitive battle to be fought. The
map shows the number of organisations competing for customers and
classifies them according to their size and the share of the market that
they hold. It provides a basic profile from which a number of
assumptions can be drawn about the competitive battle. Clearly a
map that is this simple does not provide all of the answers but it
represents a starting point, which can be elaborated as more intelli-
gence becomes available.
The map, based on company size and market share, can be
presented as a grid, which at its simplest would have four segments.
In Figure 4 these have been described in terms that characterise the
likely strategic posture of the companies that occupy each box.

Occupants of the competitive landscape

As defined above there are six typical occupants of the competitive

landscape each with a different perspective and each representing a
different type of threat to the other occupants.

Defenders
In slow- or low-growth markets, large companies with large market
shares will often be in a defensive position. They have a lot to lose but
also have the resources required to prevent loss by erecting barriers
around their business and engaging in fierce defensive actions, if
required. Obviously, the need to defend depends on whether they are
36 Competitive Intelligence

High

VULNERABLE DEFENDERS

Market Share

TERRORISTS AGRRESSORS
OR OR
POND LIFE TRANSIENTS

Low

Small Large
Company Size

Figure 4 The competitive landscape

being attacked but they may engage in preemptive action in order to

deter potential aggressors as well as brutal and punishing campaigns
against those that threaten their positions.

Aggressors
The main aggressors in the competitive landscape sit in the large-
company, low-market-share box. If the market is attractive enough
they are likely to be considering how to expand their market share.
The two options for them are organic development and acquisition.
The juiciest targets for them to attack in any organic driven pro-
grammes are those companies in the defender box. They will also
consider companies in the other two boxes as acquisition targets.
Although each company holds only a small market share and will
yield only a small volume of sales, their attraction is likely to lie in the
staff, technology or expertise that has enabled them to penetrate the
market.

Transients
Some of the companies in the large-size/small-share box will have a
passing interest in the market and are likely to seek an orderly exit.
If their small share is the result of an attempted market penetration
that has failed to yield significant results or is a legacy business that
 Framework for Competitive Analysis 37

is no longer regarded as core to the company's development, they

will consider a disposal either to an existing participant or to the
management.

Terrorists
The terrorists in the bottom left-hand box are small both in size and
market share but have some unique or attractive component in their
offer. It is this that has enabled them to gain access to the market and
has provided them with a basis on which to shake up the status quo.
Typically they are underpinned by some unique technology, a method
of doing business or exceptional staff that they are exploiting as
aggressively as their resources will permit. They cannot be written off
as their activities may be underwritten by a venture capitalist or some
other external source of capital. Their seriousness as competitors
depends on the financial resources they command and their personal
and corporate objectives. These will determine whether they are in
business for the long term as independent units, whether they are
seeking to build a position and then exit by selling to the highest
bidder or whether they will hang on until their financial resources are
depleted and are then forced to seek a buyer.

Pond life
Pond life describes small companies that have no unique product or
service to offer and have captured market share because of contacts,
proximity to customers or because they offer lower prices. In highly
fragmented markets the pond life as a whole can account for a
significant proportion of the market and apart from siphoning off
business can also set price expectations amongst customers that
disadvantage the activities of more significant suppliers.

The vulnerable
The companies that are vulnerable are those that are small but have
captured a large market share. By definition they do not exist in large
markets and do not coexist with defenders. However, they do emerge
in new markets (such as the dot com businesses) which they have
commonly been instrumental in creating. Their vulnerability arises
from the fact they may lack the resources to defend the position they
have established. They are prime acquisition targets because they
offer larger companies an easy route into business.
38 Competitive Intelligence

Multiple landscapes

Most companies of any size operate in more than one landscape each
of which can display significantly different competitive climates
defined by the characteristics of each separate business. High-level
landscapes, such as engineering, business services or banking, are
virtually useless even to companies that are active in all segments of
those businesses. It is essential to focus on the landscapes that
describe specific segments of the business in which a company
operates and within which separate competitive line-ups exist. Some
competitors may be common to all landscapes but there will normally
be a number of suppliers that are encountered uniquely in one
landscape.

Drivers of Behaviour and Change

The key drivers of behaviour and change within the competitive

landscape are a number of external forces and conditions within the
companies that occupy the landscape. To understand the current
situation and future trends fully, competitive intelligence provides
insight into all aspects of competitors' operations but the data
normally fit within the following topics:

. The competitive climate

. Cultivation

The competitive climate (market and business intelligence)

The simple description given above is rarely enough to explain the

development of a competitive landscape. To do that it is necessary to
study the competitive climate, which is itself a function of the general
business environment. As in nature, the competitive climate is deter-
mined by a number of elemental forces that combine to create
conditions that are periodically stable or highly changeable. The main
forces that determine the climate in the competitive landscape are:

. Market size
. Market growth
 Framework for Competitive Analysis 39

. Market trends
. Profitability
. The existence of parallel landscapes

Market size
Large markets can have very different competitive climates to small
markets. Large markets offer opportunities for companies of all sizes
and because they also tend to be mature markets they have a structure
and competitive climate that have evolved over a long period of time
and settled down to some form of orderly coexistence between
participants. Within large markets skirmishes can occur in particular
corners without disturbing the overall equilibrium. In contrast small
markets can be highly volatile. Large companies are not normally
attracted to small markets and may avoid them unless they see them
as interesting niche businesses or as offering high growth potential.
Even then, they often find them difficult to exploit because their
culture does not permit them to operate effectively when the pickings
are small and they cannot use their size in order to gain advantage.
Small markets therefore tend to be serviced by small or medium-sized
companies.

Market growth
Growth is another conditioning factor. High rates of demand growth
tend to lessen the level of competitive pressure by making it possible
to achieve sales objectives without increasing market share. In high-
growth markets the aggressors may be less aggressive and the
defenders less interested in building their defences. However, high
growth rates may also suck in significant amounts of pond life and
also provide the terrorists with fertile ground on which to establish a
business base from which they can assail the market in future.

Market trends and profitability

Market trends, such as changes in the structure of the business,
improvements in technology, the emergence of new customer groups
and fundamental changes in the way business is carried out, can have
a significant effect on the competitive landscape. They can encourage
new entrants or discourage traditional suppliers that cannot or do not
40 Competitive Intelligence

wish to keep pace with the changes that are occurring. They can boost
the profitability of companies positioned to take advantage of the
trends and reduce the profits of those that are not. The emergence of
e-business is a major example of a trend that will eventually change
the patterns of activity in all segments of business. By providing
suppliers with a direct route to their customer bases, e-business
creates a clear threat to traditional intermediaries and provides
opportunities for those that can embrace e-business techniques. Even
if the dot com businesses themselves fail to succeed they will have
shown traditional businesses how to revitalise their operations and
change the basis on which they compete.

Parallel landscapes
Parallel landscapes are those that are close to the landscape being
studied but sufficiently different to be regarded as separate. This
importance lies in the fact that even if they are not populated with
directly or indirectly competitive suppliers, they may contain compa-
nies that could be sufficiently attracted by the business to diversify
into it. Credit card companies, such as American Express, have been
diversifying to the extent that they are emerging as direct competitors
to accountancy practices, who have themselves diversified so that
they compete with merchant banks as sources of investment capital.
Unless the parallel landscapes are identified and understood it is
unlikely that the full extent of the competitive battle will be
understood.
At times there can be a strong tendency for parallel landscapes to
merge and obliterate the boundaries between businesses that existed
previously, thereby causing dramatic change to the competitive
situation. In the 1980s it would have been possible to define five
separate competitive landscapes concerned with the delivery of mail
and the shipment of products:
. Traditional post offices
. Courier companies
. Road transport companies
. Airfreight companies
. Warehouse operators
Competition was largely within each landscape, which was occupied
by different suppliers. Since then companies active in all five
 Framework for Competitive Analysis 41

landscapes have built up their service portfolio to such an extent that

the landscapes have converged into a new format. Logistics has
emerged as a service that encompasses all forms of storage, transport
and distribution and offers a single link between suppliers and
customers. The last bastion to fall is the post office who, in exchange
for taking on a broader distribution role, are faced with the prospect
of losing their monopoly in the delivery of letters.

Cultivation

Continuing the analogy further, landscapes can be cultivated by

active human intervention as well as by natural forces. The cultivators
in a competitive landscape are the companies that occupy it, each
seeking to alter what existed before by the processes of re-shaping, re-
planting and fertilising in order to achieve conditions that are more
conducive to their own performance and less advantageous to their
competitors. They do so by a variety of means including product
innovation, creating new needs, introducing new routes to market,
changing customer attitudes and perceptions and by pricing.
Cultivation can either be part of a deliberate competitive strategy
aimed at increasing market share or a consequence of competitors'
natural evolution. Although it is rare for any initiative to be taken
without some consideration being given to the effect it is likely to
have on competitive performance, activities that evolve naturally tend
to be more predictable and less threatening than those which form
part of a competitive assault. For this reason alone it is essential to
differentiate between the two. This point can be covered by asking not
only what competitors are doing but why they are doing it and in
what part of the landscape they are active.
The most active cultivators are likely to be the `terrorists', con-
sistently seeking to improve their positions by innovative actions and
with little to lose if they fail. Aggressors may also be drawn into using
cultivation activities as a means of disturbing the status quo. Defen-
ders and the vulnerable are better served if the landscape remains
unaltered though they too may be drawn, albeit reluctantly, into
cultivation if they are threatened. However they originate, cultivation
activities by companies can be as effective as the competitive climate
in changing the nature of the competitive landscape and therefore
need to be given equal priority in the analysis programme.
42 Competitive Intelligence

Types of Intelligence
Financial intelligence
Most profiles include an assessment of the financial performance of
subject companies. This can be relatively straightforward in the case
of all public companies, subsidiaries and privately held companies in
Europe that have to place copies of their reports and accounts with
the relevant authorities. It is also feasible when a regulatory authority
publishes key performance data for the companies active in the
business it is regulating, as is commonly the case for utilities and
telecommunications. However, it is far more difficult in the case of
private companies in the USA, for divisions of companies or for
specific locations.
One of the most challenging tasks for a competitive intelligence
analyst is to construct a profit-and-loss account for a business unit for
which no published financial data exist, relying exclusively on an
analysis of sales and estimates of costs. Hard data on competitors'
detailed cost structures are rarely obtained as they are rightly
regarded as highly confidential. The peripheral data that might be
expected to provide important clues to a cost structure can usually be
interpreted in a number of different ways. Accountancy is far more of
an art than a science and even the competitors themselves will employ
different conventions when accounting for their performance, de-
pending on what they are trying to prove. There are of course some
facts that cannot be easily distorted and that are worth having.
Legitimate targets can include the prices paid by competitors for
their raw materials or their energy, wage levels, other (non-wage)
costs of employment, manning levels, production efficiencies, selling
and marketing costs and outsourcing costs, all of which can provide
important insight into subsidiary or divisional profitability, but no
amount of analysis will provide some of the key items, such as
depreciation charges, that would permit the construction of an
accurate P&L.

Technical intelligence
In manufacturing companies technical intelligence includes the study
of competitors' products, technology, manufacturing processes, re-
search and development and technical support, all of which make
major contributions to the ability of a company to compete effectively
now and in the future. In service businesses it is the basis of the service
offer and the methods by which the service is to be delivered that need
to be studied.
 Framework for Competitive Analysis 43

Sales and marketing intelligence

The study of a competitor's sales record including an analysis of

segments serviced, customers won and lost, market share and sales
volumes provides a clear indication of performance. An analysis of
marketing resources, processes, procedures and routes to market,
coupled with a measurement of the volume (and cost) of marketing
activity, provides a highly visible barometer of where a company is
directing its effort and the intensity with which it is pursuing its sales
objectives. Analysis of the language used in advertisements and
promotional literature can also indicate how the competitor sees itself
and tells something of the culture that is prevailing within the
organisation.
The study of marketing activities can be extended to cover the
results of the process in terms of the customer base the company has
succeeded in acquiring and its key accounts. The analysis can be
taken further to consider the awareness of competitors, the relation-
ship between competitors and their client bases, satisfaction with
competitors' performance, the levels of client loyalty and the image of
competitors in the marketplace.

Pricing and discount intelligence

Price is one of the key elements in the competitive battle and although
competing on price is widely regarded as an admission of failure, it
may nevertheless be the final arbiter of who wins the business. Prices
are either extremely easy or extremely difficult to collect. Those that
are displayed or published can be easily observed but where prices are
tendered more sophisticated methods are required in order to obtain
them. Discounts to retail and wholesale channels, for volume pur-
chases or to encourage particular target customer groups may also be
largely invisible but still a significant factor in the supplier selection
process.

People intelligence

The methods by which companies compete, the intensity of compe-

titive action and the use that is made of the range of physical and
financial assets owned by companies is dependent entirely on people,
especially key decision-makers such as owners, management and
advisers. To understand competitors it is therefore imperative to
know as much as possible about the history and motivations of the
44 Competitive Intelligence

management that drive decisions and the calibre and experience of the
staff that have to implement them. It is also necessary to know the
pressures that are being placed on the company from external sources.
Owners, be they individuals or parent companies, bankers, auditors,
management consultants and partner companies can all exert pressure
or provide advice that influences the objectives of competitors and the
actions they take to achieve them.

Operational intelligence

Operational intelligence covers the way in which competitors are

organised, staffing levels, staff efficiency, the ways in which the
company makes decisions, partnerships and the prevailing culture
within the company. Much of this intelligence can be used for
benchmarking and providing an explanation for variances in financial
performance.

Key Intelligence Topics

Most organisations have neither the physical resources nor the budget
to study every aspect of their competitors' performance. Nor do they
often have the need to study everything. One of the main tasks of the
staff responsible for competitive intelligence is to ensure that only
those questions that will make a contribution to the performance of
their company are asked. There are many topics on which intelligence
may be nice to have but far from essential. Given the cost of
intelligence collection it is imperative that resources are concentrated
on the essential rather than the peripheral.
Defining key intelligence topics is a process, not a task.1 The most
valuable topics are those that managers will actually use in their
planning and marketing programmes and, although competitive
intelligence staff can provide guidance to line managers on their
requirements, they cannot make the final decisions. One of their most
valuable contributions is to steer managers away from topics on
which it will be impossible to provide meaningful intelligence, either
because it could not be collected using legal methods or because
whatever is collected will have so many caveats that it will be virtually
impossible to use. Oddly enough there is also a need to educate
managers on what it is possible to obtain. The intelligence sights are
set too low even more frequently than they are set too high.
 Framework for Competitive Analysis 45

Initiating an intelligence programme is the most difficult part of the

process since management and the competitive intelligence staff can
be equally ignorant on what is required, what is likely to be used and
what can make a contribution to performance. At this stage a
checklist of topics that could potentially be covered is helpful as a
starting point for decision-making (see Appendix ± Competitive
Intelligence Checklist). Once a range of topics have been identified
the next task is priority setting, which involves categorising intelli-
gence into that which is regarded as essential, that which is useful and
that which should be obtained only if it proves possible within the
constraints imposed on the competitive intelligence programme. As
managers become regular users of intelligence and intelligence be-
comes embedded in their decision-making process the task of defining
what is required becomes considerably easier. Regular meetings need
to be held between intelligence collectors and intelligence users at
which intelligence is discussed and evaluated. These normally identify
the priority topics for future intelligence programmes and set them in
priority order.
An active and effective competitive intelligence department sits at
the centre of a network of internal and external contacts. It:
. Collects requirements from the various intelligence users within the
company
. Eliminates the duplications
. Assigns the collection tasks to internal and external resources
. Assesses the results and calls for clarification and extension where
needed
. Feeds results back to the users
. Meets with users to discuss the results and collect further needs.

Format for Collecting and Presenting Intelligence

There are three formats within which intelligence can be collected and
presented for use:
. Profiles of competitors
. Tactical intelligence
. Tracking
. Strategic intelligence
The choice of format depends on the stage in the analytical process,
the time and budget available and the applications for which the data
are required.
46 Competitive Intelligence

Profiles of competitors
Competitor profiles are a core component of most competitive
analysis. A profile can be comprehensive or relatively superficial,
depending on the application for which it is intended. Full competitor
profiles provide a holistic view of competitors by bringing together
the intelligence topics discussed above.
The ultimate objective of a profile is not simply to describe the
activities of competitors but to draw deductions about their future
objectives, the means by which they intend to achieve them and the
intensity with which they will pursue growth or defend an existing
position. The analysis will commonly cover their commitment to the
business, their intended growth rates, their future positioning and the
market segments they are likely to be targeting. Direct intelligence on
these subjects is rarely obtained using the methods available to
competitive intelligence analysts but a full profile can support reason-
ably detailed deductions.

Tactical intelligence

A high proportion of competitive intelligence exercises are devoted

to obtaining tactical intelligence. This covers a wide range of enquiries
of varying levels of sophistication. Routine work involves the
collection of:
. Company brochures
. Product samples
. Price lists
. Credit agreements
More demanding tactical intelligence exercises can provide infor-
mation on any aspect of a competitor's operations such as:
. Orders gained
. Key customers
. Equipment purchases
. Sales force size and quality
. Product splits
. Terms and conditions
. Sources of raw materials
. Marketing and promotional activities
. Distribution channels
. Export markets
 Framework for Competitive Analysis 47

Factual intelligence is commonly required quickly to meet an im-

mediate need and there is invariably only a short period of time to
carry out the research.

Tracking

Competitors can be studied either on a one-off basis or by tracking

their activities at regular intervals. In practice most companies
monitor the activities of their competitors, at least on an informal
basis, and the decision whether to elevate this to a formal tracking
study depends on the amount of change which is occurring or is
anticipated, and the intensity of competitive activity.
Tracking studies are particularly beneficial when competitive ac-
tivity is in a state of rapid evolution. This can take the form of new
entrants into a market or an increase in competitive aggression by
established suppliers because they wish to launch new products,
increase their market share, enter new segments of a market or defend
their position against predators.
Changes in competitive activity can be triggered not only by
the ambitions of the competitors themselves but also by external
factors such as the introduction of new technologies and structural
changes in the market. Both of these can create opportunities for
significant realignments in the relationships between suppliers and the
customer base.
In such situations one-off analyses are soon out of date. Tracking
studies not only keep the information current but also permit a
continuous realignment of the competitors that are covered and the
intelligence that is sought.
The frequency at which the activities of competitors are re-examined
in a tracking survey depends on the pace of change and the ability of
the company to use the output. Monthly tracking surveys are
common but to make them worthwhile there must be sufficient
change each month to justify the cost and effort of collecting the
data. It is also imperative that systems exist within the company to
use the data on a continuous basis. There is little point in collecting
information only for it to sit on a database.
The main problem with tracking surveys is contact fatigue. The
process normally demands a network of contacts within and outside
the target companies. Whilst these can be induced to cooperate for a
while, there invariably comes a stage at which even the most unwary
respondents begin to get suspicious. Occasional interest in a company
48 Competitive Intelligence

can be given some plausible explanation; continuous interest is much

more difficult to explain.

Strategic intelligence

Knowing who competitors are, what they are doing and what they are
capable of doing has an immediate value but for most companies it is
infinitely more useful to identify their competitors' strategies. Intelli-
gence on strategic objectives and how competitors plan to achieve
them provides valuable clues to competitors' reactions to situations as
they arise. With strategic intelligence it is also possible to anticipate
competitors' actions and provide an opportunity for pre-emptive
action.

The Time Dimension

Time is a dimension that is critical to competitive analysis and
defines, amongst other things, the difference between the intelligence
that can be obtained and the intelligence that is required. As shown in
Figure 5 the three time dimensions within which intelligence operates
are (not surprisingly) the past, the present and the future. The past is

PAST PRESENT FUTURE

COMPETITIVE EVOLUTION TACTICS FUTURE STRATEGY

DAY TO DAY
SOURCE MATERIAL COMPETITIVE ADVANTAGE
BATTLE

VISIBLE INVISIBLE

OBSERVATION/RECORD EXTRAPOLATION

ACTIONS PROCESSES
STRATEGIC INTENT
RESEARCH EQUIPMENT
NEW PRODUCTS
PATENTS PURCHASES
NEW MARKETS
PERSONNEL ADVERTISING
ALLIANCES
PRICES ACQUISITIONS
MARKETING INITIATIVES
CUSTOMERS DEMERGERS
NEW MARKET ENTRANTS
RESOURCES APPOINTMENTS

Figure 5 The CI situation

 Framework for Competitive Analysis 49

straightforward since a high proportion of what happened there is

visible. Its importance is that it shows the evolution of competitors'
activities and provides source material for making projections.
The time dimension in which a high proportion of competitive
intelligence activity is focused is the present. Here the intelligence is
tactical in nature and is used in the day-to-day struggle with compe-
titors. Much of it is visible but may also involve short-term projec-
tions to make it more useful.
The fundamental objectives of competitive intelligence are to avoid
surprises and gain competitive advantage. These can be achieved only
if future actions by competitors can be predicted accurately. Forward-
looking, strategic intelligence is easier to discuss than it is to obtain.
Direct evidence of overall future strategy may exist in management
statements but intelligence on the methods by which the strategy will
be implemented is invariably fragmentary. It can however be inferred
from in-depth analysis of competitors, by long-term tracking of the
actions they take and by studying the personalities and objectives of
the management that run them. However, this type of analysis is good
only for as long as the past is a guide to what competitors will do in
the future. The analysis must also take account of major changes in
ownership, structure and management that may result in changes in
objectives and changes in the way in which competitors respond to
the market environment.

Note

1. Jan Herring, `Key Intelligence Topics: A Process to Identify and Define

Intelligence Needs', Competitive Intelligence Review, vol. 10, no. 2,
Second Quarter 1999, pp. 4±14.
5 Overview of the
Sources of Intelligence

Competitive intelligence can be obtained from a wide variety of

sources. Some of the sources are obvious but many are obscure.
Some are easy to use or access, others are extremely difficult or
uncooperative. The key skills in all competitive intelligence are the
ability to identify the sources that are likely to have the data that are
required and the ability to extract them. At its simplest competitive
intelligence can involve scanning the national and trade press for news
items on competitors and maintaining a watch on their websites. At
its most complex it could involve direct interrogation of competitors'
staff. The route that is chosen will depend largely on the data that are
required, the importance attached to having access to the intelligence,
the time and physical resources that are available and the budget.
Needless to say, complex intelligence-gathering exercises tend to use
more resources than those that have more straightforward objectives,
though there is always scope for surprises. Seemingly simple intelli-
gence objectives can sometimes prove unusually difficult to fulfil.

Primary and Secondary Sources

The basic division of intelligence sources, as in many other types of

research, is:
. Secondary sources containing information in the public domain
. Primary sources
As shown in Figure 6, both secondary and primary sources can exist
within and outside the company.

50
 Overview of the Sources of Intelligence 51

HIGH

EXTERNAL EXTERNAL
SECONDARY SOURCES PRIMARY SOURCES

DETAIL

INTERNAL INTERNAL
SECONDARY SOURCES PRIMARY SOURCES

LOW DIFFICULTY HIGH

Figure 6 The basic building blocks

Secondary sources of intelligence are defined as those that are

publicly available. This does not mean that they are readily available,
only that they are deemed to be in the `public domain' and can be
accessed by anyone who can make the effort to do so. As will be
shown, there are a wide variety of secondary sources, many of which
are easy to identify and some that take considerable time and
ingenuity to locate. All competitor analysts rely heavily on secondary
sources. For some they are the only permitted sources of information.
Companies that have an above-average sensitivity to antitrust or
other legislation on competition regard the use of any information
that cannot be collected from publicly available sources as being risky
if not outright dangerous. This obviously limits the depth to which
they can probe but still leaves them with rich veins of intelligence to
mine.
Secondary sources are published or held in databases. They include
all types of written publications and on-line or disk databases which
either report or store information on companies and the business
sectors in which they operate. With the notable exception of pub-
lished reports, secondary sources are generally inexpensive to access
and consult. The main requirement is time.
Secondary sources exist within and outside the company and it is
normally preferable to exhaust the internal sources before embarking
on any external search. Within companies secondary sources may be
held in databases, records or libraries but they are just as likely to be
held by individuals in their own personal filing systems. Traditionally
52 Competitive Intelligence

external secondary sources were found in locations such as public

reference libraries or trade associations. However, the Internet has
revolutionised the access to secondary intelligence. A high proportion
of, though far from all, relevant intelligence is no more than a few
taps on a keyboard away. No longer does the intelligence seeker need
to rely on the buying policy of the local or national reference libraries
or on the willingness of companies to send brochures and annual
reports. The Internet and its powerful search engines have short-
circuited the entire search and collection process, whilst at the same
time making available intelligence from increasingly esoteric and
previously unknown sources.
Primary sources are mainly people who are in a position to impart
intelligence about companies when questioned. They also include
direct observations of competitors' activities on the ground, from
the air or even by satellite. As with secondary sources, the people that
have intelligence on competitors include those employed by the
company seeking the intelligence as well as those working externally.
There is no limit to the people from which intelligence can be
obtained, providing they can be identified and contacted within an
acceptable timeframe. The most valuable sources are those that have
direct experience of competitors' operations. These include the staff
of competitor companies and the staff of companies that work with
them or have some form of business relationship. The latter include
suppliers, distributors, advisers and customers. Sources that are less
direct but also potentially valuable include the staff of organisations
whose role provides them with opportunities to observe the activities
of competitors. These include analysts, journalists, consultants, trade
association staff, the staff of Chambers of Commerce and other
observers of businesses at a national or local level.

Determinants of Methods Used

The key determinants of the mix of intelligence-gathering techniques
that are deployed are:

. The characteristics of the intelligence required

. The depth and detail of intelligence being sought
. The frequency at which intelligence will be collected
. The manpower available
. The time that is available
. The budget available
 Overview of the Sources of Intelligence 53

The characteristics of the intelligence required

As will be shown in subsequent chapters, considerable amounts of

intelligence are available from secondary sources. It is frequently
possible to fulfil straightforward intelligence briefs by doing little
more than scanning the daily press and trade literature, reviewing
brochures, downloading data off competitors' websites and analysing
published financial statements. Sophisticated intelligence users are
rarely satisfied by data derived from such sources, but it is wrong to
assume that all requirements require more than a rigorous secondary
search.
Nevertheless, secondary sources tend to suffer from a number of
deficiencies that are often severe enough to propel intelligence users
towards primary sources. The main weakness is that secondary data
are available to all who choose to collect them and although there is
room for approaches and interpretations that are more creative than
others, there is no clear opportunity to obtain intelligence that is
proprietary or unique. Furthermore, the companies themselves,
through press releases, analysts' briefings, brochures and websites,
supply much of the flow of data that can be obtained from secondary
sources. Although control of the data is far from perfect, there is
ample opportunity to insert contradictions and biases that can
mislead those studying their activities. Secondary data also suffer
from the fact that they are normally published after a time delay and
lack immediacy.

The depth and detail of intelligence being sought

For wholly understandable reasons, data from published sources will

commonly be lacking detail and open to a number of different
interpretations. Financial statements from companies rarely report
sales at less than a divisional or product category level, leaving the
details to be guessed at. Reports on the reasons for actions taken are
couched in generalities rather than specifics. Similarly, plans are
described in outline terms leaving out any details of how they could
be achieved. Lists of contracts and clients are usually partial rather
than complete.
If an overview is all that is required a profile based on secondary
sources may be adequate; however, when it is important to know
details, secondary source analysis needs to be supplemented by
primary research.
54 Competitive Intelligence

The frequency at which intelligence will be collected

Tracking competitors' activities poses particular problems for pri-

mary research approaches that are not shared by secondary sources.
The examination of secondary sources is invisible to the staff of the
target company itself. Primary contacts are not and whilst it is
normally possible to make successful direct contacts for a limited
amount of time, any sustained programme of calling will ultimately
draw attention to the fact that the company is being studied.
Normally this results in attempts to eliminate the outflow of informa-
tion by means of instructions to staff to refuse to answer questions
from outsiders. All competitive intelligence gatherers have experi-
enced a shutdown, the point at which it becomes evident that
respondents are suspicious and will no longer answer questions, and
it normally happens when they have been pushing their luck and
calling too frequently.
Although there are multiple sources of information within and
outside companies, long-term intelligence programmes need to use
primary research techniques sparingly or innovatively in order to
remain below the threshold of activity that will set alarm bells ringing.

Manpower available

The choice of techniques is critically dependent on the resources that

can be committed to intelligence gathering. In the relatively rare cases
in which competitive intelligence is a major activity, teams of analysts
are available to collect raw data, interpret them and disseminate the
results to those who will use them. However, a high proportion of
intelligence users rely on a single staff member to carry out all parts of
the intelligence process. Although they may be able to coopt other
staff members into the intelligence programme for specific assign-
ments, there are severe limits on what they can be expected to achieve.
Small internal intelligence teams tend to rely on a limited range of
secondary sources which over time have been shown to be the most
fruitful and the most cost-effective to access. They may extend the
range of their intelligence gathering by briefing and debriefing the
company's sales and marketing staff, especially when an industry
exhibition or conference brings them into contact with the staff of
competitors. For more extensive programmes they rely on a budget
being made available to employ external intelligence gatherers.
 Overview of the Sources of Intelligence 55

The time that is available

In all research, time is as important a resource as manpower and

budget. This is particularly true in competitive intelligence where
information on competitors' activities that have already happened has
already lost a high proportion of its usefulness. The premium on
timeliness can restrict the intelligence-gathering approach to those
research activities that can be carried out quickly or to a monitoring
process that ensures that all useful items are collected immediately
they are reported.
Although secondary sources can be consulted quickly, especially
when available on the Internet, primary intelligence-gathering ap-
proaches require more time to set up and complete. Apart from
planning and set-up time they depend on the availability of people to
speak to. Key information sources cannot be accessed at will and it
can take several days, if not weeks, to track them down, penetrate
voicemail systems and overcome defensive secretaries and personal
assistants.

Budget availability

Intelligence costs money but some approaches cost more than others.
Primary intelligence gathering is rarely cheap, even when carried out
by internal resources, largely because they take longer to complete
and require higher levels of skill. Companies that place a high value
on accurate and timely competitive intelligence are usually prepared
to allocate sufficient budget to ensure that the most productive
approaches can be used.
6 Secondary Sources
of Intelligence

As explained in the previous chapter, secondary sources are normally

the first to be consulted in intelligence-gathering programmes. They
vary in usefulness, timeliness and accuracy but they represent a
relatively low-cost and sometimes a reasonably comprehensive meth-
od of acquiring intelligence.
This chapter is not intended to provide a detailed listing of sources.
Such guides do exist and are referred to in the text where applicable.
The intention is to provide a reasonably complete description of
generic groups of sources, thereby showing the directions in which
researchers should be aiming their efforts. Even this limited objective
will be difficult to achieve given the variety of sources that exist.
Many sources are specific to industry sectors and using the guidelines
set out in this chapter it will be the reader's task to locate them for
themselves.

Internal Intelligence Sources

The first sources to be consulted should be those that are available

within the company. Even organisations that have not invested in a
corporate library will have amassed a wealth of information about
their competitors. The problem is finding it.

The intelligence audit

The intelligence audit is a process for discovering the intelligence that

is available from internal sources. It regards intelligence as a key
corporate asset that needs to be identified and put to work just like

56
 Secondary Sources of Intelligence 57

any other physical asset the company has invested in. The main
difference between intelligence and physical assets is that the com-
pany has not always made a conscious decision to acquire intelli-
gence. Much of what is valuable has been obtained as a by-product of
other activities, such as selling, and resides in various parts of the
organisation, not in some central repository where it can be easily
accessed. The objectives of an audit are to:
. Identify all sources and potential sources of intelligence within the
company
. Categorise the intelligence by type, relevance and quality
. Collect and examine the intelligence that they can provide
. Establish the sources from which the intelligence was obtained
. Check the credentials of the sources (are they qualified to provide
the intelligence?)
. Check the veracity of the intelligence
. Establish whether the intelligence can be updated or extended
The audit should cover fixed and renewable sources of intelligence.
Fixed sources include one-off documents, books, files and reports
that have been compiled or commissioned. They provide intelligence
covering a finite period of time. Their usefulness decays from the
moment they are completed until such time as they become comple-
tely out of date and worth retaining for historical reasons only. As,
over time, new fixed sources become available, they need to be added
to the available resource.
Renewable sources of intelligence are those which are automati-
cally updated. They include data feeds, subscriptions to journals and
the trade press, on-line databases and competitor websites. They offer
the ability to update the intelligence on competitors' activities on a
regular basis or when a special analysis is required.
The following types of internal sources should be included in the
intelligence audit.

Library files
Not all companies have them but where a corporate information
officer or a company librarian exists they are likely to be a significant
source of intelligence. In the course of providing an information
service covering all types of information required to operate the
company, information officers invariably collect a wealth of informa-
tion about the companies that are active in the company's business
sector. It is impossible to run an effective information centre without
58 Competitive Intelligence

being highly organised and the information that is collected should

therefore be easily accessible in files and databases.
A good company library should carry all official statistics covering
the business in which the company operates, trade statistics, company
annual reports, other official filings made by competitor companies
and brokers' reports on those of the competitors whose shares are
publicly traded.

Market research reports

Although commissioned for purposes other than competitive intelli-
gence, market research reports can contain useful data. Typically they
can include:
. Market share analysis
. Distribution channels used by competitors
. Key accounts of competitors
. Customer satisfaction with competitors
. An analysis of customers' perceptions of the strengths and weak-
nesses of competitors' products and service levels

Staff files
Staff with an outward-facing role often keep files of information
which they have collected for their personal or general use. These files
commonly cover the market and the competitors active within it and
are likely to include competitors' brochures and catalogues, press
clippings, newsletters, promotional pieces, notices of appointments,
copies of annual reports and other official filings, brokers' reports
and other privately compiled reports on competitors.
Other functions that could carry information on competitors are
research and development and production staff. R&D could keep files
of patents registered by competitors and articles describing competi-
tors' technologies. Production staff may collect information about the
production equipment and processes used by competitors, either
gleaned directly from discussions with fellow production staff or
from sales representatives promoting their products on the basis that
they are used by competitors.

Trade association reports and statistics

Membership of an industry or trade association offers a significant
benefit for competitive intelligence in the form of reports and
 Secondary Sources of Intelligence 59

statistics. It also provides a forum in which competitors can be met

officially (about which more later). Trade association statistics show
the total sales of members and may provide evidence of the sales of
individual suppliers. Reports show the general state of the business,
analyse trends and provide news of members.

Sales representatives' reports

Sales representatives have direct and indirect contact with the staff of
competitors. They often know their opposite numbers in competitor
companies and also hear about competitors' activities from custo-
mers. The sales reporting process can therefore provide trade gossip
about competitors, intelligence on competitors' sales and technical
staff, leavers and joiners, the reasons why competitors are winning or
losing business, new product developments, product and service
problems and the culture within competitive organisations.

External Secondary Sources

Internal secondary sources are likely to have their limits. Unless

carefully orchestrated by an efficient intelligence officer who has been
working to a plan of intelligence requirements, they are likely to be
patchy in their coverage and biased towards the specific interests of
those collecting the data. This does not invalidate their usefulness but
means that they must be supplemented by reference to external
sources. As hinted several times, there are vast arrays of sources that
can be consulted, though, as most researchers will admit, this can be
an intensely frustrating exercise. It is essential that the coverage of
potential sources of intelligence is comprehensive but at the same time
the amount of intelligence that is extracted from each source may be
little or none. Sifting through articles in endless issues of trade
magazines may yield no useful intelligence but is carried on in the
hope that a nugget of information is eventually located. The frustra-
tion is heightened by the fact that the task cannot be delegated to
junior staff since they may not recognise useful intelligence. The
intelligence mind must be trained to think along the lines, `if I cannot
find the exact data I am seeking, what is the closest I can get, what
will act as a surrogate or are there some overall data that will enable
me to make an informed guess?'
60 Competitive Intelligence

Official company filings

The most direct intelligence on competitors is gained from sources

prepared and published by themselves for statutory reporting or for
promotional purposes. No company can be silent about its activities
and although most are fully aware that their documents will fall into
the hands of their competitors there is nothing they can do to conceal
their activities without jeopardising their chances of winning business
or falling foul of the authorities.
The official filings are generally well-known and are invariably on
the shopping lists of competitor analysts. Their usefulness varies from
country to country but the extent to which they can distort the facts is
minimal even though the amount they reveal can be controlled.
The key sources to be collected and examined are the following.

Annual reports and accounts

All limited liability companies must produce an annual set of audited
accounts for tax purposes and to comply with legal reporting
requirements. These comprise a minimum of a directors' report, a
profit and loss account, a balance sheet, an auditor's report, notes to
the accounts, the allotment of shares and the ultimate holding
company. Depending on the country, the reporting requirements
may be extended to include a list of directors showing their date of
appointment, home address, nationality and other directorships held.
These data are particularly useful for tracing relationships between
companies.
There is a significant difference regarding the information that is
available between public and private companies. The former have to
conform to regulations on disclosure, which force them to reveal
considerable amounts of information about their activities to their
various stakeholders, particularly in the USA. The reporting require-
ments for privately owned companies are less onerous and although
in Europe private companies must file accounts with various national
and local agencies, in the USA they do not.
Copies of reports and accounts can be obtained from the compa-
nies themselves or from the relevant authority with which they are
filed. In the UK this is Companies House but in other European
countries the reports may be filed either with a national authority or
with a local body in the region in which the company is registered.
Obtaining copies of private company reports and accounts may
require a visit to the location at which the accounts are held.
 Secondary Sources of Intelligence 61

Stock exchange and SEC filings

Quoted companies must produce an annual report to shareholders,
which includes statements about the company's business, its trading
performance and its future prospects as well as a full set of accounts.
The annual reports are in part sales documents designed to maintain
the company's share price but, depending on the company, they can
provide considerable insight into its activities by product line or by
division. The published glossy reports on European companies tend
to be fairly full in their coverage whereas in the United States they are
little more than a chairman's statement, basic accounts and a lot of
colour photographs. However, US-quoted companies must also file
annual 10-Ks and quarterly 10-Qs with the Securities Exchange
Commission.1 These reveal considerably more information than that
contained in the average European annual report. Typically, in
addition to detailed financial information, they include:

. Company history
. Profiles of the key executives
. The markets in which the company is operating
. A statement on competition
. A review of trading conditions
. Product developments
. Properties
. Acquisitions
. Sales of assets
. Remuneration and pension schemes

The 10-Qs provide quarterly financial data and an abbreviated

version of the data contained in the 10-K filings.
Additional information must be made available to shareholders
when major changes to the company's business are proposed. The
most common event is an acquisition, which places an obligation on
the acquirer to state why the acquisition is proposed and on the target
company to state why a bid should be accepted or rejected. Major
defence operations yield considerably more information than uncon-
tested bids, much of which finds its way into the financial press for
easy access.
Companies are of course aware that the most avid readers of their
annual reports and other filings are their competitors. They may
therefore seek to minimise the damage by being as vague as the
regulations will permit and disperse information so that it is difficult
to pull together a complete picture. This must be done with care since
62 Competitive Intelligence

the readers for which reports are really intended are the shareholders
and their advisers and by being over-zealous in trying to protect
information they may also create an unfavourable impression of the
company and have an adverse effect on their share price.

Prospectuses
Prior to a new public issue of shares or a private placement,
companies must issue a prospectus. This is a legal document drawn
up by the company and its advisers and provides a statement of the
company's business in sufficient depth to inform potential or current
shareholders about the nature and value of the investment and the
risks to which investors are exposed. A prospectus is also a sales
document but it cannot contain misleading statements. They are
normally available at the office at which the company is registered
and can be obtained from the company itself or its financial adviser.

Planning applications
Planning applications must be made for all new premises and exten-
sions to existing premises. Critical subjects for planning authorities
are the effects of an application on the local environment, pollution,
waste water, refuse, the processes to be used and the equipment to be
installed. The extent to which detailed planning applications are
published varies from country to country but where obtainable they
provide direct evidence of competitors' production plans and
capacities.

Company documents

Promotional documents, technical data sheets and directory entries

provide detailed intelligence on competitors' products and services.
Since their primary audience is customers their accuracy is virtually
guaranteed though it is often necessary to cut through a level of
hyperbole in order to access the facts. The main documents that can
be obtained are the following.

Brochures
Brochures provide the standard descriptions of products and product
families that are available from suppliers. They can contain detailed
technical information and performance data plus a description of the
support services and service levels that are provided. They may also
 Secondary Sources of Intelligence 63

contain reference data on past clients in the form of lists or

endorsements.

Catalogues
Catalogues are useful for obtaining information on the product
ranges that are available from competitors and the key parameters
of each product type.

Directories, buyers' guides and exhibition catalogues

Directories and buyers' guides are useful as sources on products
available from all or most of the suppliers active in a market. Their
accuracy depends on the care with which they are compiled and the
frequency at which they are revised. Directories must always be
treated with caution. Entries based on forms completed by companies
themselves commonly exaggerate the range of products they offer
whereas those for which payment is required to enter will rarely be
comprehensive.
The catalogues from exhibitions will also contain omissions to
the extent that companies choose not to exhibit. The entries are
nevertheless useful since they tend to describe the new products or
technologies currently of interest to the supplier and therefore on
display.

Company house journals and newsletters

House journals and newsletters are intended for customers and
employees and are a means of disseminating information about the
company, new products being launched, new processes being used,
changes in the organisational structure, profiles of key managers, new
appointments (from within and from outside), office moves and new
manufacturing and warehousing locations. Success stories commonly
feature in these publications thereby providing intelligence on the
identity of and relationship with key customers. The personnel-
related items can provide intelligence about the culture prevailing
within the company.
House journals can also carry articles that provide managers'
perspectives on the development of their business and the issues that
they consider are important now and in the future. Whilst these may
be billed as personal views rather than official company policy they
nevertheless provide insight into the thinking within the organisation,
which may ultimately influence company actions.
64 Competitive Intelligence

Regulatory authority reports

Industries that are regulated, notably those that were formerly in

government ownership or are deemed to be in need of regulation in the
public interest, are subject to frequent reviews. Whilst these reviews
are normally designed to highlight the role (and success) of the
regulatory agency itself, the reports can contain data on the level of
activity in the sector and the performance of the regulated companies.
The sectors that are most frequently subject to regulation are:
. Telecommunications
. Transport
. Power utilities
. Water

Brokers' reports
The analysts working in stockbrokers' research departments and
competitive intelligence analysts are kindred spirits. Although the
reasons for their research are different much of the output is similar.
Stockbrokers' analysts cover only quoted companies and are biased
towards a financial evaluation. However, they have to take into
account product ranges and new product development, new produc-
tion technologies, the market and competition in order to draw
conclusions about future earnings levels. Their main usefulness to
competitive intelligence analysts is that their reports are based on
briefings they receive from companies. They are also able to question
the corporate staff. The reports they issue to investors and the
recommendations they make regarding the future of share prices
and whether they should be purchased, sold or held, are of vital
interest to the companies themselves. Investor relations departments
and company secretaries are therefore highly motivated to provide
them with information and it is rare for them to issue statements that
are misleading. Brokers' reports are easy to obtain and since it is
common for a number of analysts to follow the same company there
is usually a selection to draw from.

Credit reporting agencies

The reports issued by credit reporting agencies, such as Dun &
Bradstreet, are of greatest value when dealing with private companies.
Credit reports are designed to reassure suppliers and clients that the
company is safe to deal with. They analyse companies' payment
 Secondary Sources of Intelligence 65

records by questioning a sample of suppliers. The data can often

provide advanced warnings of cash or trading problems when pay-
ments become stretched.
Whereas they may add little to the information that is publicly
available on public companies, for private companies they are
frequently able to provide sales information not contained in
other sources, ownership details and management comments on
performance.

Financial databases
Examples of these are the financial databases held by Dun &
Bradstreet and its various worldwide subsidiaries and national
sources such as ICC and Jordans in the UK. Financial databases
are of most use in screening companies. The depth of information
they provide is limited but their coverage can be massive.

Company histories
Company histories appear as one-off books commissioned by the
companies themselves, in pamphlets issued by public relations depart-
ments and in compendiums, such as the International Directory of
Company Histories which covers over 2500 companies. The origins
and development of a company can have a defining influence on
current strategy if only through the culture that has been instilled as
a result.

Published media
Published media of all types are a key source for competitive
intelligence. Their main value is that they carry a large amount of
information and that it is relatively timely. The disadvantage is that
news coverage is rarely comprehensive, can be heavily influenced by
companies themselves and when it appears in the press it is available
to everybody.

The national and local press

Newspapers and journals provide coverage of a broad spectrum of
company and business news including:
. All types of news events relating to individual companies
. Commentaries on companies' performance
. Industry-wide information and reviews
66 Competitive Intelligence

. Technical developments
. Information on, and profiles of, management
. Joiners and leavers
. Job opportunities
. Legal notices published to comply with local laws and regulations
The articles are drawn from news items released by companies
themselves, interviews, investigations, technical and conference pa-
pers and commentaries prepared by journalists and others with an
interest in the business. Large quoted companies receive a dispropor-
tional amount of coverage in the national press, but smaller compa-
nies can be of equal interest to the local press servicing the
communities in which they operate.
The financial press, such as the Financial Times and the Wall Street
Journal, is of particular interest for competitive intelligence since it
focuses on the activities of companies.

Business journals
Key business journals, such as The Economist, Fortune, Forbes and
Business Week, and to a lesser extent the news journals, such as Time,
are all likely to contain items covering the affairs of specific compa-
nies. They are most likely to appear in such journals when they have
done something extraordinary or have suffered some grave misfor-
tune, events which are also likely to have picked up by the national
and trade press. Nevertheless, there is a chance that their more
investigative approach to journalism will uncover facts not reported
in the daily press.

The trade press

There are trade press magazines covering almost every business. Some
are relatively general and others are highly specific. The only criteria
that determine whether there is a viable opportunity for a trade
magazine are the number of potential readers and the number of
potential advertisers wishing to reach them. If the advertising reven-
ues that can be obtained cover the costs and yield an adequate profit,
then a magazine is likely to be produced. Once launched, trade
magazines need a continuous flow of news, feature articles and
editorial matter and act as a magnet to the news stories emanating
from companies. They can therefore be counted upon to record most
of the significant events in the sectors they cover.
Trade magazines fall into three categories, all of which need to be
 Secondary Sources of Intelligence 67

covered in competitive intelligence exercises. The first are those

devoted to a particular business sector. These are the most specialised
but are likely to record all that happens in the sector in the way of
product launches, company events, sector events (such as trade shows
and exhibitions) and the movement of people. The second are
manufacturing technique-related, such as welding or process control,
and cover developments in the technique in all industry sectors that
use it. The third are subject-related, such as marketing, advertising or
human relations, and cover the subject as it applies to all manufac-
turing and service sectors. Articles containing competitive intelligence
can appear in all three types of magazine.

Professional journals
Professional journals are the official publications of professional
societies. The articles they publish tend to be more `worthy' than
those in the trade press and are accepted on the basis that they
advance professional knowledge and practice. However, many of the
members of professional societies are working in companies and the
articles they write often expose internal company practices.

Academic and semi-academic publications

The academic press, such as the Harvard Business Review, and semi-
academic journals such as the McKinsey Quarterly, published by the
consultancy company, frequently contain case studies relating to the
use of management techniques by companies and interviews with
management about how their companies are run. The insights these
can provide into the strategic directions being pursued by the subject
companies are sometimes substantially more enlightening than those
providing the information intended.

Industry newsletters
Industry newsletters are commonly a compendium of information on
a business sector derived from secondary sources. Although they may
contain original information, their main use is as a short-cut to what
is generally available in other sources.

Conference papers
Most of the papers delivered at conferences organised for industry
sectors and on business topics are by people working in companies.
The papers are normally based on their working experience and, when
studied carefully, can often yield company intelligence.
68 Competitive Intelligence

Contract listings
In some industries contracts to be placed and contracts won are listed
in specialist journals. The Official Journal published daily by the
European Community provides insight into where government con-
tracts are being placed and a number of privately published sources
cover the construction, civil engineering and mechanical engineering
sectors.

Government statistics and reports

Governments worldwide are not only major users of information; they
also collect it on a vast scale. They do so for a variety of reasons, which
include the needs of government departments to perform their func-
tions, the need to prove that government is doing a good job and the
need to provide a service to their various constituents. The fact that
some information collection is politically motivated does not necessa-
rily detract from its usefulness, though it may suggest that it should be
examined carefully before it is accepted as being completely accurate.
Information collected by governments ranges from statistical en-
quiries, mainly covering production, distribution and trade, to in-
depth investigations of industry sectors, business practices and cor-
porate activity. Governments also collect information and report on
the economic performance of their countries as a basis for deciding on
economic policy and the measures to be taken to control economic
growth and inflation.
For competitive intelligence the main interest arises from the fact
that all governments assume responsibility for regulating the activities
of companies and are keenly interested in any activities that threaten
competition. The two instances in which a government enquiry can be
of most assistance to competitive intelligence analysts is when a
company or an industry sector is investigated for monopolistic prac-
tices or price fixing and when a proposed merger is investigated for fear
that it will create a monopoly. References to competition authorities,
either national or international, are feared by the companies involved
not only because of the delays and the large amounts of staff time such
investigations can absorb but also because of the amounts of informa-
tion that are disclosed when the final reports are published.

Venture capital reports

Venture capitalists provide finance for start-ups, young developing
companies and management buy-outs. The detailed financial arrange-
 Secondary Sources of Intelligence 69

ments between a venture capitalist and its investments are normally

secret but the industry is subject to constant scrutiny and reports are
published on the activities of companies in which investments have
been made and contain an outline of deals that have been concluded.
Analysis of these reports can provide advance warning of interesting
new technologies and potential acquisition candidates when the
venture capitalist is seeking to exit from its investment.

Trade association reports

Trade associations are commonly formed as a meeting point and as a

vehicle for lobbying government on industry matters. They also
provide a service to their members by collecting statistics and
commissioning reports. Trade association statistics normally cover:
. Aggregate sales by members broken down by key product types
and market sectors
. Growth in sales, month on month and year on year
. Average wage and salary levels by types of employee
The statistics provide measurements of activity from which mem-
bers can derive their overall market shares, their success in the various
segments of the market, the extent to which their own growth has
matched that of the business as a whole and their competitiveness in
the job market. The published statistics may need to be adjusted to
allow for companies that are not members or have chosen not to
report, but they are usually more accurate than sample surveys.
Associations may also provide more qualitative assessments of
trading conditions and news on developments by member companies.

Published market research reports

The market research business offers a wide range of products of use to

the competitive intelligence analyst. These can be categorised as
follows:
. Panel surveys, which track the sales of products through retail
channels and purchases by various categories of households or
customers; unlike the trade association statistics these normally
show the estimated market shares of each supplier
. Published reports on products or industry sectors; these usually
contain intelligence on the structure of the business, market share
analysis and the activities of the major suppliers active within it
70 Competitive Intelligence

Patent databases

Patent applications provide a leading indication of new technologies

and the directions in which companies are channelling their research
and development investment. Before the advent of patent databases,
such as Derwent's World Patent Index and a host of specialist patent
monitors, keeping track on competitors' patent applications and
patents granted was a laborious process made complex by the fact
that patent filings are required in each country or region in which
patent protection is to be sought. To track the patent situation fully
required the use of specialist investigators. The patent databases have
simplified the process considerably as has the Europe-wide patent
agency established in the early 1990s.
Patents show a number of items of value to those tracking product
development including:
. The inventor
. The identity of any company licensed to use the patent
. The characteristics of the invention
. How the invention works
. Citations
Patents place developments in the public domain but provide the
inventor with legal protection against any infringements. Companies
do not always seek patent protection for their developments particu-
larly if they feel there is a risk the patent will not be granted.

Satellite observation

Satellite images are being actively sold for competitive intelligence by

a number of vendors.2 High-resolution digital satellite images can
show:
. Plant layout
. External processes
. Transport facilities
. External stocks
. New plant construction
Images can also be used to track changes month by month or year
by year. Current satellite technology can show objects down to the
size of a large lawnmower.
 Secondary Sources of Intelligence 71

Locating External Secondary Intelligence

Secondary intelligence is physically located in three types of sources:
. Libraries
. Databases
. The Internet

Libraries

Despite the rapid rise in electronic communications the old-fashioned

library is still a useful repository of intelligence. Once entered,
scanning library shelves can be quicker than searching the Internet
and depending on the skills of the librarian and the budget they have
access to, the human search engine can still locate rich veins of
intelligence.
The libraries that are most valuable are:
. National reference libraries, such as the British Library, the Library
of Congress and the Export Marketing Intelligence Centre at the
Department of Trade and Industry
. Specialist libraries, such as the East European library
. Government department libraries
. University libraries, particularly those with business schools
. Institute libraries, such as that of the Institute of Mechanical
Engineers
. Trade association libraries
. Research association libraries
. Company libraries
The main disadvantage of libraries is that they have to be accessed
physically which can entail a long and expensive journey. Their
advantage is that they often contain obscure sources that will never
find their way on to the Internet.
Access to libraries, particularly those set up for the use of an
organisation's members, staff or students, may prove to be a problem
but the library community tends to be one in which there is consider-
able sharing of resources. It is therefore possible that a source not
held in a local reference library can be obtained on loan from another
library that stocks it. Special visitor permits to use a library that is
normally closed to outsiders may also be available on request or for
the payment of a small fee.
72 Competitive Intelligence

Databases

Since the 1980s there has been a growing trend to collect data into
proprietary databases, which are available either on-line or on CD-
Roms for efficient and rapid searching. Host organisations running
on-line services have a strong financial incentive to expand the range
of information they carry and owners of information are equally
interested in expanding their customer base by adding on-line chan-
nels to their conventional methods of distribution. Although many
databases are still available on CD-Roms, they are more difficult to
update than the on-line versions and their main application is for
intelligence that has a lasting value.
The key types of competitive intelligence that can be collected more
efficiently by database searches are:

. Local, national and international news items

. Trade press items
. Business and professional journals
. Company financial information
. Information on mergers and acquisitions
. Government information
. Economic data
. Patents
. Citations
. Trademarks
. Scientific and technical information
. Medical and healthcare literature
. Legal information
. Tax information
. Information on currency
. Share prices
. Biographies of businessmen and businesswomen

There are an increasing number of guides to the sources listed

above, such as Findex, and magazine indexes are available on-line
that offer the potential to identify useful studies and articles effi-
ciently, even if the documents themselves have to be obtained in hard
copy.
Proprietary databases are available only to subscribers or those
who pay as they go for their use. Annual subscriptions can be quite
high, commonly in the range of £5000 to £6000, and it is worth
subscribing only if the use that will be made of them will be sufficient
 Secondary Sources of Intelligence 73

to justify the cost. Other routes can source much of the more general
intelligence contained in the databases and their main justification is
the time that using a database will save.

The Internet

The Internet is rapidly becoming the `method of choice' for secondary

intelligence searches. The fact that its coverage is global, that the data
that can be accessed through it are extraordinarily diverse and
expanding at a phenomenal rate and that it is thought to be largely
free tempts analysts to seek the entirety of their secondary intelligence
requirements through the Internet. The use of the Internet as a
competitive intelligence tool is covered fully in Chapter 7 but it is
important to remember that it still has limits both in content and in
terms of the efficiency at which searches can be carried out.

Notes

1. Easily accessible on the SEC's website which hosts the EDGAR data-
base. The web address is [Link].
2. See Fred Wergeles, `Commercial Satellite Imagery ± New Opportunities
for Competitive Intelligence', Competitive Intelligence Magazine, vol. 1,
no. 1, April±June 1998, pp. 36±9.
7 Intelligence on
the Internet

The Internet has revolutionised the search for information. Data that
once took weeks to acquire can now be available at a few clicks of a
mouse. This applies to all types of information but those seeking
intelligence on competitors have been particular beneficiaries of the
Internet revolution. The number of websites put up by companies and
devoted to news about the activities of companies is disproportio-
nately large. It is rare to find a company of any significance that does
not have a website on which it posts a description of its activities, its
facilities, its product range, its partners, press releases, technical
papers, job opportunities and contact points. The wealth of informa-
tion available on even the most basic sites is far in excess of that which
could be obtained from hard-copy brochures and catalogues and
directory entries.
The web has become the primary route to all of the intelligence
sources outlined in Chapter 6. However, the Internet is not without its
problems. Those who promote the web as a vast store of free
information are not far from the truth, at least in areas where local
telephone calls are free and if the measure is volume rather than value.
The main problem is that a high proportion of the free information
on the Internet is useless for business purposes and it takes consider-
able amounts of time and ingenuity to sift through it to get to items
that are relevant. The second problem is that volume rarely equates to
quality. Research on the market for peanut butter will identify
hundreds of sites providing recipes for peanut butter cookies, some
telling the history of the peanut, some recording the size of the peanut
crop worldwide, a large number of sites outlining the services of
peanut wholesalers and very, very few giving any statistics on peanut
butter consumption.
Although, as stated above, a high proportion of the data available
from the web is free of charge, the most valuable information is not.

74
 Intelligence on the Internet 75

The web has to be seen not only as a means of accessing intelligence

but also as a method by which those who sell intelligence can deliver it
to their clients. Many of the more useful sources charge for their
intelligence and buying it on the web is simply quicker and more
convenient than placing an order and waiting for hard copy.
The only rule of the game on the Internet is to be prepared to be
surprised ± both ways. Sometimes the simplest item of information
proves incredibly difficult to locate whilst on other occasions a highly
esoteric topic may be covered in great depth. Making sense of what is
available on the Internet is far from easy and many of the guides that
have been written are more confusing than enlightening. This is partly
due to the fact that because of its diversity and scale it is impossible to
classify easily. The purpose of this chapter is not to list all that can be
found on the Internet but to describe that which is unique to the web
and its use as a means of accessing secondary intelligence. Although
some sites are mentioned the reader will have to look elsewhere for
specific listings of all that is available on the web.1

Search Engines and Web Crawlers

The most common way of identifying information on the web is to

use the powerful search engines that have been developed specifically
for this purpose. Most researchers start with the tried and tested
engines, such as Yahoo, Lycos, Excite, Go (formerly Infoseek) and
Alta Vista, that have an area of coverage defined by their search
algorithms. However, none of these search engines can offer complete
coverage of the web and to broaden the scope of the search it is
necessary to use several engines. This adds to the time taken to search
and can be avoided by using `web crawlers'. These make use of a
number of search engines to complete their task. Useful web crawlers
are Google, Metacrawler and Webcrawler, all of which make use of
the standard search engines listed above and extend the coverage of a
search considerably.
One of the main problems with conventional search engines is their
inability to search effectively using complex search criteria. Some,
such as Go, permit sequential searches within searches that make it
possible to zero in on specific topics but the results are still relatively
broadly based. The latest generation of search engines uses a `natural
language query system' that accepts direct questions rather than
strings of words. The best known is Ask Jeeves, which is heavily
promoted for personal users of the web. Less well known but more
76 Competitive Intelligence

tailored to searches for business intelligence are Elfsoft, nQuire,

English Query and English Wizard. In addition to the web, natural
language query systems can also be used to interrogate databases as a
replacement for the more complex SQL and are likely to be encoun-
tered more frequently as database providers seek to make their offers
more user friendly.
Hard copy web `yellow pages' are available to supplement the
search engines. Some of them have added value features such as
comments on sites. Their main disadvantage is that they are not
published frequently enough to keep pace with the growth of the web.
This is not quite as damning as it may seem, since the introduction of
sites which can make a major contribution to competitive intelligence
is nowhere near as rapid as the growth in the web as a whole, but it can
mean that some interesting sites lie unrecorded for a period of time.

Intelligence Content of the Web

Despite its size the web is particularly good for some types of
intelligence and next to useless for others. The web shines as a
method of accessing any intelligence that is published in the press,
journals, company documents, market reports, government reports,
conference proceedings and exhibition guides. It also contains facil-
ities to locate and communicate with highly specialised communities
by tapping into discussions on topics that have specific intelligence
applications and by reaching targeted groups of individuals to ask for
intelligence.
The most useful and most used published content of the web
includes:
. Press articles
. Newswires
. On-line databases
. Market reports
. Company news
. Financial data
. Company websites
. Recruitment
. Research reports
. Industry statistics
. Economic and demographic data
. Other government data
. Conference and trade shows
 Intelligence on the Internet 77

Press articles

The web can be used to access vast databases of press articles thereby
eliminating the time-consuming searches that used to be the case
when hard copy was all that was available. These databases exist in a
number of different forms, namely:

. Company websites on which press releases are posted

. Newspapers, trade press, magazines and journals that are published
(and sometimes indexed) on the web as well as in hard copy
. Indexing and abstracting services covering specialist topics
. Articles published on the web and accessible by the search engines

Most of the major national newspapers now have a website that

hosts the current and back issues of their publications. This makes
backtracking for information relatively easy. Access to local news-
papers and the trade press is more limited but, where it exists, no less
useful.
Some newspapers, most notably the Financial Times, have broa-
dened their business base to include major on-line databases that can
be searched by subscribers, as have some of the more specialised
broadcast channels such as CNN and Bloomberg.
Using services that filter stories according to criteria set by the
analyst can facilitate searching the news media. [Link]
can provide a daily feed of stories referring to selected companies,
thus eliminating the need to search each site manually. Northern
Lights is a favourite with analysts as a rapid route to news stories on
companies.

Newswires

Newswires are services to the media that distribute news items filed
with them by originators, such as company public relations depart-
ments, or developed by their own correspondents or stringers. The
major newswire services have been around since the main method of
distributing news was by telegraph. They include names familiar to
any newspaper reader such as Reuters, Associated Press, United
Press, Agence France Press and the Press Association as well as
government press agencies. The newswires no longer rely entirely on
the media for income and have opened up their services to anyone
willing to pay for access to their comprehensive databases of news
stories.
78 Competitive Intelligence

On-line databases

Databases can be accessed in three ways ± on CD-Roms, by direct

dial-up and via the Internet. As far as most users are concerned the
convenience of on-line databases has enabled them to supersede CD-
Roms and direct dialling as means of gaining access to databases
though the older methods still have a role to fulfil. Those that have
access to major public and university libraries may still find CD-
Roms the lowest-cost method of accessing data. Others may prefer
them because they do not incur communication costs, are free from
the delay problems still inherent in using the Internet and are often a
less expensive source of data even when purchased outright. Direct
dialling provides much faster access to data but requires knowledge of
the protocols and language used by each database.
However accessed, the subscription charges to on-line databases
can be substantial and justified only if the use to be made of them
is heavy.
The key on-line databases that can be considered for competitive
intelligence are:
. Dun & Bradstreet ± financial databases
. Disclosure
. Investext
. Dialog (Profound)
. Lexis (legal)
. Derwent (patents)

Market reports

An increasing number of research companies and report publishers

are distributing their product on the Internet. Not only does this
make reports more accessible but it can also lower the cost of data.
Hard-copy reports are available only as complete works, regardless of
the amount of the data within them that are relevant to the user. On-
line versions of reports can often be accessed by the page or table at a
price set for each data set.
The key publishers to be aware of for competitive intelligence are
shown below though the list is far from comprehensive:
. A.C. Nielsen ± sales by retail channels
. Datamonitor
. Economist Intelligence Unit
. Espicom (healthcare)
. Euromonitor (consumer products)
 Intelligence on the Internet 79

. Find/SVP
. Freedonia
. Frost & Sullivan
. Gartner Group (IT businesses)
. Goulden Reports (electrical markets)
. IAL Consultants (chemicals)
. IDC (IT businesses)
. Keynote (consumer products)
. Mintel (consumer products)
. Roskill (minerals)
. Taylor Nelson Sofres (consumer products)

Company news
Company news is provided in the national, local and trade press but is
also covered in specialist databases accessible on the web. Most are
long-established news providers that have successfully moved into the
age of the Internet. A number of them have packaged their data
specifically for competitive intelligence, recognising that it is an
important new community for them to service.
The main names to look out for are:
. Associated Press
. Reuters
. Dow Jones
. Hoover's Online
. Moody's Investors Services
. Northern Lights
. Standard & Poors
. Kompass
. Thomas Register

Financial data
The web has facilitated the process of obtaining financial data on
companies. A number, though far from all, official company registers
can be accessed through the web. In addition there are specialists in
the collection of company financial information, such as Dun &
Bradstreet, that make their data available through the web.
The more interesting sites to commence with are:
. Companies House
. EDGAR Online
. Investext
. Dun & Bradstreet ± Financial databases
80 Competitive Intelligence

In addition most of the world's major stock exchanges have their

own websites that include news and share data for companies quoted
on them. These may be complemented by sites aimed at investors such
as MoneyExtra that operate a portal to other sites offering company
reports and appraisals.

Company websites

Company websites are the first port of call for all analysts under-
taking competitive intelligence. They can contain substantial amounts
of information about companies including:

. A company history
. Divisional structure
. Current activities
. Product ranges and product descriptions
. Partners
. Frequently asked questions
. Staff
. `White papers' on topics related to the business
. News releases
. Head office and manufacturing locations
. Staff requirements

Some companies appear to have lost all of their inhibitions when

building their websites. Others have maintained a minimalist ap-
proach and reveal just enough to satisfy the needs of the audiences
they are pitching their sites at, mainly customers and potential
customers.
The main novelty of the web is that considerable amounts of data
can be presented without incurring heavy printing costs. It can also be
updated quickly and is therefore never out of date for very long. It
has not yet replaced traditional forms of communication completely
but is becoming a primary method of reaching target audiences to the
extent that most companies now expect to find one for a potential
supplier and see it as a sign of obscurity if it does not exist.
The prominence of the website as a promotional tool is a boon to
competitive intelligence analysts who are spared the drudgery of
calling for literature and scouring exhibition stands and distributors
for printed material.
 Intelligence on the Internet 81

Attack sites
A sub-set of the company Internet sites are `attack' sites on compa-
nies that have been established by ex-employees, dissatisfied custo-
mers and various pressure groups. The information contained on
them is often truly revealing. An `attack' site on Intel is said to be
consulted regularly by staff in order to find out what is really going
on inside the company. There are an estimated 5000 corporate attack
sites including most of the big names in banking, retailing, food and
other consumer products, airlines, telecommunications and automo-
biles. Many are very specific in the topics they cover and relate to
complaints originated by single consumers while others are fed with a
variety of information from diverse sources. Yahoo lists 300 attack
sites and [Link] provides links to sites that have the
word `sucks' in the URL.2 The data such sites contain have to be
treated with caution since their objective is to cause damage as much
as to enlighten and they have a tendency to maximise the amount of
bad news and exaggerate. Nevertheless, they should be consulted.

Recruitment
The growth of the web as a recruitment medium has two beneficial
side effects for competitive intelligence analysts. First, it provides an
additional mechanism for that most difficult of tasks, identifying
former employees of competitors. Second, it provides an additional
method of searching for the recruitment activities of competitors.

Economic and demographic data

Economic, demographic and international trade data for all countries
are widely available on the Internet from national and international
agency sources. Some are compiled in useful single sources such as the
widely respected CIA Yearbook.

Industry statistics
The web is surprising short of useful industry statistics. Despite the
massive amounts of statistical data that are collected and published
by national governments, international agencies and industry asso-
ciations, relatively little has gravitated to the web other than as
descriptions of reports that can be purchased. This reflects a trend
to make statistical services pay for themselves by charging for data.
82 Competitive Intelligence

There are exceptions, such as the US and Canadian governments,

who publish a high proportion of the industrial data they collect on
the web, but the rest of the world is poorly served. The UK
government statistical service sells data on the web but anyone
viewing the web as an alternative to a visit to the local reference
library for statistical data will be disappointed.

Other government data

International, national and local governments have taken to the

Internet on a major scale as a means of publicising their activities
and reporting progress. This has resulted in the publication of
considerable amounts of intelligence on aspects of companies' activ-
ities that previously might not have been identified. Some samples
that illustrate the diversity of intelligence that can be collected are as
follows:
. Research collaborations between European companies are covered
in detail on European Community sites
. Intelligence on environmental compliance by companies is pub-
lished on a number of state sites in the USA and national
government sites in Europe
. Wage rates specific to industry sectors are published by government
labour departments
. Listings of companies that have been awarded government con-
tracts are published in Europe and the USA together with details of
the contracts

Conferences and trade shows

The web simplifies procedures for identifying forthcoming confer-

ences and trade shows that might be useful for intelligence gathering.
It can also be used to access conference papers that have been
presented. Sites such as Eventseeker, Eventsource and Trade Show
Directory provide industry-wide listings but in addition there are
numerous listings of conferences within specific industry sectors.
Conference papers can be accessed through databases such as Lexis
but may also be published on the web by the individuals that wrote
them or the companies or universities that employ them. The Internet
has provided an opportunity for `vanity publishing' that was pre-
viously an option only for those with enough money to pay the
printing costs.
 Intelligence on the Internet 83

Short Cuts
There are several sites that provide useful short cuts to business
intelligence on the Internet. Some of the more useful are:3
. Business Information Sources on the Internet, by the University of
Strathclyde
. Internet Business Library
. The Michigan State University Center for Business Education
. Dow Jones Interactive Web Centre
These sites provide lists of business topics and links to Internet sites
that cover them.

Discussion Forums

Discussion forums are meeting places in which those interested in the

topic covered by the forum can exchange messages and information
and access files. Each forum tends to cover a single topic and can
include a message section, file libraries and a conference room.
Joining a forum provides analysts with the facility to observe what
is going on within it, obtain information and ask questions. It
therefore represents a convenient method of obtaining primary
intelligence. The main danger is that it is difficult to establish the
credentials of the people who inhabit discussion forums. Whilst they
may be perfectly legitimate they may also be self-proclaimed experts
or, even worse, out to cause mischief. A further danger is that
enquiries made on discussion forums may also be monitored by the
companies being investigated, thereby providing them with the in-
telligence that an investigation is in progress.
Discussion forms have two components, message sections and
conference rooms.
. Message sections ± can be used for obtaining answers to questions
on any topic from others entering the forum. Since these can be
individuals with an interest in the topic, there is a chance of
obtaining an informed response. However, the cautionary words
above apply
. Conference rooms ± as the name suggests, conference rooms
provide a facility for on-line conversations with others in the
forum. They provide a similar service to the message section but
without the wait
84 Competitive Intelligence

The usefulness of discussion forums varies depending on whether

one exists for the topic of interest and who can be accessed and their
level of knowledge. However, as the number of Internet connections
expands, forums provide an interesting alternative to a telephone
search for expertise.

Newsgroups (or Bulletin Boards)

Newsgroups provide another method of communicating with special
interest groups, of which there are hundreds of thousands already on
the net and new ones being added by the minute. Relevant news-
groups can be identified by using a keyword search in the newsreader
programme offered by the Internet service provider. Messages or
questions can be posted into a relevant newsgroup in the expectation
that they will be read by thousands of people worldwide and that
potentially valuable responses will be obtained. The responses are
`threaded' in that they contain the original question plus all the
responses and comments that have been made together with the
signatures of each person providing a contribution. This tends to
make the files extremely large but enables the reader to follow the
various threads of the discussion that has taken place. Some groups
are edited by an individual who chooses to receive all the responses
and decide what is added to the file.
As with forums, the usefulness of a newsgroup depends on the
calibre of the contributors to it. Questions can attract a high propor-
tion of uninformed and facile comments and need to be filtered
carefully.

Monitoring the Internet

Keeping pace with intelligence on the Internet can be just as difficult

as keeping pace in printed media. Relying on manual searches and
search engines alone is unlikely to produce comprehensive coverage
and can be extremely time consuming. Search engines have two
further and more serious problems. First, they cannot identify new
additions to the web so sequential searches have to be compared with
each other manually in order to isolate new items. This can mean
comparing thousands of items, a task which is virtually impossible for
the average analyst. Second, search engines are weak when it comes to
monitoring the daily news media on a timely basis. This is because
 Intelligence on the Internet 85

they index articles only after a six- to twelve-week delay and cannot
pick up those articles that the newspapers remove from their sites
within that period.
The main methods of avoiding these problems are to use news
databases or news feed services. The news databases, such as Dialog,
Reuters, Northern Lights and [Link], archive news items as they are
published and offer searchable databases to their clients. Most require
an up-front subscription plus a pay-as-you-go fee for each item
extracted. News feed services (or electronic news aggregation services)
are based on the output of the newswires and other publishers whose
output can be captured on the web. They filter company press releases
and other news items according to criteria set by clients and deliver
them electronically in batches, normally daily. Their main limitation
is the restricted number of sources they can cover, typically 200 to
1200 news sources.
Lower cost and more comprehensive alternatives that can also be
customised to individual users are the automated web monitoring
services, such as CyberAlert4 and e-watch. Automated web monitor-
ing services use proprietary software to search and filter items on the
totality of the visible web and make regular deliveries of intelligence
gathered according to complex search definitions. Their search area
includes not only publications but also commercial, academic and
government sites, user groups, forums and message boards. Unlike
manual searches they can also identify new items that have been
added since the previous search.

Notes

1. See, for example, Helen Burwell, Online Competitive Intelligence (Facts

on Demand Press, Tempe, Ariz., 1999).
2. See Amelia Kassel, Guide to Internet Monitoring and Clipping (Cyber-
Alert White Paper, [Link]/[Link].
3. Helen Burwell, op. cit.
4. Amelia Kassel, op. cit.
8 Primary Intelligence
Collection Techniques

Primary sources of intelligence represent a means of filling the

intelligence gaps left when secondary sources have been exhausted.
They can provide the most relevant intelligence but are also the most
difficult to access. As with secondary sources, there are internal
primary sources and external primary sources, both of which should
be covered. Most of those who have studied the availability of
competitive intelligence have concluded that internal sources can be
extremely productive but are rarely exploited fully. Obviously all of
the intelligence that is required can in theory be obtained from
external sources. The difficulty lies in the fact that they are rarely
easy to identify and there are invariably limits to the depth of
information they will disclose, particularly those sources that work
within the companies being studied.

Internal Primary Sources

The most valuable information can reside in the heads of the
company's own staff. Its value derives from the fact that it has been
gained by experience, either with the current or previous employers,
and that it can cover aspects of competitors that are more anecdotal
than the facts and figures available from published sources.
The staff members most widely referred to as sources of competi-
tive intelligence are those who have previously worked for the
competition. Though valuable sources, at least in the early months
following their defection, they are far from being the only sources that
can contribute to the collection of competitive intelligence.
Internal primary sources include all staff who have acquired
intelligence on competitors or have access to sources from which it

86
 Primary Intelligence Collection Techniques 87

can be obtained. As employees of the organisation that will use the

intelligence they stand to gain by providing it. They should be the
easiest sources to work with but it has to be admitted that this is not
always the case. Information is still considered as conferring power on
its holder and there is often a reluctance to part with anything that
might be used to advantage.
The information can be categorised as facts, rumours and guess-
work and the greatest danger in the use of human intelligence is that
the rumours and guesswork are treated as facts.

Who can contribute

Almost anyone that has contact with the outside world is in a position
to collect intelligence. The most obvious sources are:
. Staff joining from competitors
. Sales staff
. Members of professional associations
. Delegates to trade and industry associations
. Staff attending conferences and seminars
. Staff attending exhibitions and trade shows

Staff joining from competitors

New recruits who have previously worked for competitors can often
provide a particularly interesting perspective on the market. Debrief-
ing recruits about their previous companies is a regular process in
many companies but needs to be handled carefully to ensure that no
ethical boundaries are crossed. Absorbing the experience and intel-
lectual property that a staff member has acquired from previous
employers is a legitimate activity and may be a key reason why a
particular individual was recruited. However, it can go too far in that
the individual may be expected to provide information which is
seriously detrimental to the interests of the previous employer.
The boundary between ethical and unethical information expecta-
tions from recruits is easy to see at the extremes but far more difficult
to interpret in the grey, middle ground. All employers recognise that
past employees will use the knowledge and experience they have
gained whilst working with them to further their career prospects with
a new employer. They expect the employee to recount information
about how things are done by their previous employers, the client
base and the qualities of their former colleagues. They do not expect,
88 Competitive Intelligence

or find it acceptable for a former employee to take and pass on

anything tangible which is not in the public domain such as con-
fidential documents and plans ± even those they have compiled
themselves. But how do you treat detailed information about im-
pending new product launches, albeit not described in detail or
documented? Leaks of such information can be damaging to the past
employer but the employee's allegiance is to his or her new employer
and, however desirable it may be, it is unrealistic to expect staff to
remain completely silent.
In most cases the leakage of information via departing employees
has but a transitory effect and is treated as a risk of being in business.
Just occasionally it becomes a major issue and this is usually when the
amount of damage is judged to be severe and the methods of passing
on information can be shown to be illegal. When Jose Ignacio LoÂpez
left General Motors in 1993 to join Volkswagen and was followed by
a group of his former colleagues, they took enough information with
them for General Motors to initiate a legal case against Volkswagen.
In 1997 the move succeeded when General Motors obtained a $1.1
billion settlement from Volkswagen. The General Motors legal team
claimed that General Motors had been `victimised by international
piracy of their intellectual property rights'. They asserted that Gen-
eral Motors had been subject to unfair competition practices when
former executives illegally took boxes of trade secrets with them when
they left the company and used the Racketeer Influenced Corrupt
Organisation (RICO) Act to protect GM's intellectual property
rights. In 2000 LoÂpez was accused of industrial espionage in the
United States.
A more subtle form of retribution was exacted by Virgin when a
former British Airways senior employee joined them but left within
weeks claiming that the job was not what he had been promised. In a
letter published in the marketing press Virgin refuted his statement
and assured him that the files he had brought over with him from
British Airways were being posted back to him!

Sales staff
Sales staff meet regularly with customers and distributors and are
occasionally in contact with their opposite numbers from competi-
tors. In business-to-business markets, where customers tend to be
reasonably well-informed about their suppliers, exchanges with them
can yield substantial amounts of intelligence. In business and con-
sumer markets wholesalers and retailers can be useful intelligence
 Primary Intelligence Collection Techniques 89

sources that sales representatives can question. In order to maximise

the intelligence yield the interrogation of customers and distributors
must be correctly structured and the sales representatives must be
briefed sufficiently for them to be able to distinguish between facts
and information that the customer or distributor would like the sales
representatives to believe. Price intelligence is particularly sensitive to
distortion by customers and distributors because they may stand to
gain by convincing sales representatives that their prices are too high.
Using sales representatives as a source of intelligence is subject to
two problems. First, sales representatives are not usually the most
objective observers of the competitive situation and are prone to hear
what they want to hear rather than what is being said. Good sales
representatives should be totally biased in favour of their products
and their employers and therefore more likely to recognise the
weaknesses in competitors rather than their strengths. Attempts to
make sales representatives more objective risks diluting their effec-
tiveness in their sales role and should therefore be treated with
extreme care.
The second problem is that any activity that takes time away from
the primary task of selling means that the sales task may not be
performed effectively. Customers do not give sales representatives
unlimited access to their time and questions designed to collect
intelligence can make major inroads into selling, especially if the sales
representatives think they are James Bond and get over-enthusiastic.
Over-inquisitiveness about the competition represents a danger in its
own right. Customers can interpret it as a sign of insecurity, which
they may then translate into evidence of competitive weakness.
Competitive intelligence is valuable but not so much so that it is
worth risking sales in order to obtain it.
Sales representatives are best when they obtain intelligence by
listening or observing rather than by direct questioning. Unprovoked
(or moderately stimulated) comments about competitors by custo-
mers or distributors, information obtained from documents seen in
customers' premises (often upside down), documents collected from
customer reception areas, observed activities, such as deliveries being
made by competitors, and industry gossip can be more valuable than
direct questioning and intrusive probing.

Members of professional, trade and industry associations

Members of professional associations and delegates to trade and
industry bodies have frequent and entirely legitimate opportunities to
90 Competitive Intelligence

meet with the staff of competitors. Whilst papers presented at meet-

ings and the subject matter of subsequent discussions may themselves
be useful, the real benefit arises from the opportunity to ask the staff
of competitors direct questions over coffee or during dinners. Ob-
viously a considerable amount of `verbal fencing' takes place at such
meetings as each delegate attempts to maximise the information they
obtain yet minimise what they give away, but as in any encounter
there is an almost inevitable flow of intelligence.

Staff attending conferences and seminars

Conferences and seminars provide another opportunity to meet
competitors and exchange views. Many delegates find the breaks
between sessions infinitely more valuable than the sessions themselves
since they provide an informal setting for exchanges.

Staff attending exhibitions and trade shows

Exhibitions and trade shows are mechanisms for disseminating
information about exhibitors' products and services and, not surpris-
ingly, they are a happy hunting ground for those seeking intelligence.
Their usefulness is enhanced by the fact that they permit contact with
competitor staff outside the protection of their offices and in a frame
of mind which encourages openness rather than secrecy. The avail-
ability of refreshments and alcohol can add to the feeling of goodwill
towards visitors to their stands. As public shop windows manned by
the suppliers' own staff, exhibitions and trade shows provide a unique
opportunity to:
. Examine competitive products
. Identify the product features that are being promoted as unique or
new
. Collect brochures, product descriptions and company handouts
. Talk to sales and technical staff
. Hear the current marketing pitch being made
Since exhibitions are usually attended by a number of competitors
they are a highly efficient method of collecting intelligence and permit
comparisons between competitors.
The use of an exhibition or trade show as a source of intelligence is
further enhanced by the fact anybody can attend. A serious data
collection exercise will involve multiple attendance by technical and
marketing staff each with a different objective.
 Primary Intelligence Collection Techniques 91

Motivating staff to participate

To maximise the value of internal intelligence, staff need to be

motivated to collect it and provide reports on a regular basis. This
is more difficult than it sounds. With a few exceptions, notably the
sales force, collecting information is not a natural part of the daily
routine of most staff nor are they necessarily in a position to assess
the significance of the information they obtain. Nevertheless, a system
for information collection and some type of formal or informal
encouragement to report intelligence should be put in place to
maximise the information flow. The danger in doing so is that the
information flow may be overstimulated and that too much useless or
inaccurate information will be reported, potentially resulting in a loss
of credibility in the system.
The flow of competitive intelligence from internal sources requires:

. Careful briefing of all staff that are in a position to collect

intelligence covering the reasons why the intelligence is required,
the applications for which it will be used and the types of
intelligence that are likely to be of value
. A reporting system that makes it easy for staff to pass on the
intelligence they have collected to a central reception point
. A feedback process that provides those that can use intelligence (as
well as collect it) with findings that will help them perform better,
and those that can only collect intelligence with the reassurance
that they are performing a valuable task
. (Potentially) a reward system: they have sometimes been consid-
ered but it is extremely difficult to come up with anything that will
work on a long-term basis. The best reward is visible evidence that
intelligence collected is being used and is useful

The accuracy of internal information

The fact that intelligence is available from internal sources does not
mean that it is necessarily accurate. Sales people are not the only staff
members that can lose their objectivity when observing competitors.
Folklore and wishful thinking are just as likely to be believed as hard
facts by all staff, especially if they show the competitors in a bad light.
It is therefore essential to verify all internal intelligence. Some of the
key checks are:
92 Competitive Intelligence

. The time intelligence was obtained ± old intelligence is likely to be

less accurate or representative of the current situation than recent
information
. The method by which the intelligence was acquired ± intelligence
that has been collected from first-hand sources (for example, from
customers or competitors' staff) may be more reliable than indirect
reports
. Who acquired the intelligence ± some internal sources are more
objective and reliable than others and some are in a better position
to establish the accuracy (or inaccuracy) of intelligence
. The purpose for which the data were acquired ± data may be biased
or incomplete because they were obtained to solve a highly specific
problem

External Primary Intelligence

When secondary and internal sources of intelligence have been
exhausted the competitive intelligence professional turns to primary
intelligence gathering from external sources. It is last in the list for
very good reasons. It is technically the most challenging, can be
carried out only by the most skilled researchers and is by far the most
costly method of collecting intelligence. Furthermore, nobody who
abides by the ethical constraints of the competitive intelligence
community can guarantee success. There are too many factors that
can frustrate the effectiveness of the primary intelligence collection
process, not the least of which is a flat refusal of respondents to
cooperate when the questioning gets too sensitive.

Sources of external primary intelligence

Primary intelligence collection from external sources relies on two
conditions:
. That fragments of information collected from diverse sources can
be pieced together to reveal enough of the overall picture and some
of the detail
. That there are numerous people in a variety of organisations who
are in a position to provide a complete or partial view on
competitors' activities
Competitive intelligence can be likened to building jigsaw puzzles
of a landscape when significant proportions of the pieces are missing.
The overall content of the picture is likely to be revealed, some of the
 Primary Intelligence Collection Techniques 93

detail will be present and other details will be missing but can possibly
be guessed. The problem of determining what is there will depend not
only on the proportion of the total pieces that are collected but also
how they are spread over the complete canvas. The problem of
interpretation becomes really serious only when every piece collected
is blue and none of them has a straight edge!
The key to success lies in the diversity of sources that can be
identified and accessed. Any intelligence-gathering activity that relies
on a few contacts has only a limited chance of success. As the number
of potential sources that can be tapped expands, the chances of
finding any specific item of intelligence increase dramatically. For-
tunately in all markets there are a large number of individuals who
may know what is going on. They include:
. Subject company staff
. Ex-employees now working in other companies
. The staff of other competitors
. Customers
. Suppliers
. Brokers' analysts
. Journalists
. The staff of regulatory authorities
. Professional and trade association staff
. Industry research organisations
. Pressure groups
. Universities and business schools
. Consultants
. Chambers of Commerce

The staff of the competitors being studied

The most accurate sources of intelligence are staff working within the
companies being studied. By all normal standards they should also be
the least likely people to be willing to engage in a dialogue. A
common comment that is made when discussing competitive intelli-
gence is, `if anyone asked me questions like that, there is no way I
would answer them'. If this were true for everybody competitive
intelligence would be extremely difficult and unproductive but the
fact is that employees do reveal information. They do so when they:
. Do not feel that the information they are being asked for is
confidential
. Are engaged in a dialogue from which they feel they stand to
benefit by learning something
94 Competitive Intelligence

. Feel they are in control of the discussion and will reveal only the
information they are prepared to release
. Are not suspicious about the reason for the discussion
. Are asked for information which it is their job to provide
. Have no inhibitions about revealing information
This usually means that the competitor staff who are most likely to
cooperate are the most senior and the most junior. Middle manage-
ment are more inclined to be nervous and aware of the real or
imaginary dangers to their job security if they make an error and
release too much information. Senior management normally have the
confidence to feel they can control the situation; junior staff are less
likely to be aware of the risks, but they may also be less knowledge-
able.
The staff to approach depends entirely on the types of information
required but the most productive sources of intelligence tend to be:
. Product and brand managers
. Staff with a responsibility for advertising or below-the-line activ-
ities
. Sales representatives and sales engineers
. Service engineers
. Call centre staff
. Production management
. Product design staff
. Staff with the responsibility for investor relations
. Information officers
. Market research personnel
The staff to avoid are accountants, human resources managers and
competitive intelligence staff.

Ex-employees
Ex-employees suffer from fewer inhibitions than current employees
and, provided they can be located within a reasonable time after
leaving the company, they can be valuable sources. The key problem
is locating them. In most circumstances they are few in number and
although a high proportion tend to stay within the same industry
sector, there are very few guides to where they may be. Even the
growing number of CVs posted to recruitment websites are a drop in
the ocean compared to the total level of employment, and locating a
knowledgeable ex-employee by that route within the timeframe for
the analysis is likely to be a lucky rather than a planned event. The
 Primary Intelligence Collection Techniques 95

planned identification of ex-employees requires a careful trawl of

knowledgeable sources within and outside competitors. Potential
contacts in this context include:
. Former colleagues (where did they go?), though this assumes that it
is known that a particular staff member has left
. New colleagues
. Recruitment consultancies specialising in the sector

Other competitors
Although most respondents can be expected to be reluctant to discuss
the activities of their own companies, they are usually less inhibited
about discussing other competitors. This is especially true if they feel
they can learn something. The most common difficulty is that central
sources may be equally unaware of other competitors' activities and if
they are knowledgeable they may have paid a substantial amount for
the data and are unlikely to give them away freely. Nevertheless, the
outward-facing staff of all participants in a market can be expected to
have obtained intelligence in the course of their day-to-day activities
and they also include staff who have worked previously for the
companies being targeted. It is therefore logical to use them as an
extended contact base for competitor intelligence.

Customers
In business markets customers have access to considerable amounts
of information on their suppliers. This is imparted not only during the
selling process but also during the casual exchanges that take place
when supplier and customer meet. Unlocking this source can provide
a powerful injection of factual intelligence, rumour and gossip,
though customers are generally reluctant to provide intelligence that
they think might harm their own interests or their relationship with
important suppliers.
For companies collecting intelligence on their own behalf, custo-
mers fall into three categories: customers they currently supply,
customers they have supplied in the past and potential customers.
Contact with current customers can be regular and sufficiently
friendly to expect some level of exchange of intelligence about the
activities of other suppliers. Relationships with potential customers
are likely to be less cordial and, although a flow of intelligence can be
stimulated, care must be taken to avoid creating a situation that could
threaten a sale. Relationships with ex-customers may still be friendly
and there is less to lose by quizzing them.
96 Competitive Intelligence

Competitive intelligence consultants collecting intelligence on be-

half of clients have neither the advantages of friendly relationships
with customers nor the problems of projecting the wrong image. For
them customers represent a large community of intelligence sources
that can be trawled for as long as time and budget permit.

Suppliers
Like customers, suppliers into competitor companies also have access
to intelligence, which, depending on the nature of their contractual
relationship, it may be possible to access. The existence of non-
disclosure agreements may prevent them from participating in an
intelligence-gathering exercise, but these tend to apply only when the
supplier had to be given extremely sensitive information in order to
provide the service required or to manufacture the product being
supplied.
Most companies have a wide range of suppliers and the nature and
volume of what is purchased from them can provide considerable
insight into their activities. The spectrum of purchases includes:
. Raw materials
. Components and sub-assemblies
. Production equipment
. Consumables
. Packaging
. Logistics and delivery services
. Stationery
. Printing services
Competitive intelligence literature abounds with descriptions of
how packaging suppliers have provided vital clues on production
volumes, how delivery schedules have enabled customer bases to be
traced or how information obtained from brochure printers has
provided evidence of a planned new product launch or a price rise.
In reality direct evidence of competitors' activities of this type is
extremely difficult to obtain and suppliers are more generally useful
as sources of the rumour and gossip that may also be obtained from
customers.

Brokers' analysts
All quoted companies are reported on regularly by stockbrokers. The
official broker for a company has a responsibility to promote its
clients' shares as well as undertake the various tasks required by the
Stock Exchange; other brokers study companies to provide invest-
 Primary Intelligence Collection Techniques 97

ment advice to their share-buying clients. Quoted companies provide

considerable amounts of information to the analysts working in
brokers in order to enable them to make accurate assessments of
future performance. Misleading the investment community is not
something that is encouraged, though when the news is bad compa-
nies may be defensive and less informative. Although brokers'
analysts rely heavily on companies for their information and have
full access to investor relations staff to get it, they still endeavour to
extend their knowledge and verify the facts they have been given by
carrying out independent research of their own. It is at this point that
the competitive intelligence analyst and the broker's analyst come
together with a mutual interest.
Identifying the brokers that follow the companies being studied and
establishing contact with them should be one of the first steps in an
intelligence programme covering public companies. To be made
productive analysts need to be fed and it is therefore helpful to have
data that can be traded with them. It is also useful to identify topics
that the analysts are interested in ± usually those that companies are
reluctant to cover themselves. These can be included in the scope of
the project for the specific purpose of rewarding analysts, even if they
are not required for the client.

Journalists
Journalists that report on business and companies are in a similar
position to the brokers' analysts and are afforded similar contact
privileges. Knowledgeable journalists can be found working for
the national press, the local press, the relevant trade press and as
freelancers.
The interests of journalists are not restricted to quoted companies
or even large companies. The local press can cover small companies
that are important or newsworthy in their local community. They
may also report on the activities of divisions of large companies that
can be invisible at a national level. Trade press journalists can get
closer to their subjects partly because they have a continuing interest
and partly because they have specialised industry knowledge.
Journalists make their living out of information and are generally
willing to discuss the activities of a company they have covered
providing there is a chance they will learn something in the process.
As with the brokers it is therefore helpful to have information to trade
when approaching them.
The most common tactic in competitive intelligence is to identify
journalists that have filed a story on a company being investigated
98 Competitive Intelligence

and interview them for any background not contained in the pub-
lished item. It is not always the case that additional information exists
since news items are often based exclusively on press releases by the
companies themselves. The best items to follow up on are those that
contain an investigative component and where the journalist has
made an obvious attempt to get behind the official story.
When interviewing journalists it is useful to remember that journal-
ists working to tight deadlines do not always have time to verify the
facts they report and that once a story has been filed their interest
often ceases.

Regulatory authority staff

In regulated industries the staff of the regulatory bodies have close
and constant contact with the companies whose activities they
regulate. They may be reluctant to discuss the activities of specific
companies in detail but they may be prepared to provide background
to any reports that they issue.

Professional and trade association staff

The staff of professional and trade associations are close to their
members, particularly those that are most active in the association,
and are likely to have informed opinions as well as access to facts.
Other members of the association can access these most easily.
Outsiders have difficulties that arise from the fact that associations
tend to work on the wholly reasonable assumption that they are in
existence to help the members that pay their subscriptions rather than
non-members.

Industry research organisations

In many manufacturing industries research associations have been
established to carry out technical research on behalf of members.
Although the decline in manufacturing industry has meant that a
number of these have been disbanded or passed into private owner-
ship, many still survive in their original form. They are staffed by
technical experts who have wide contacts within the industries they
service and who are potentially knowledgeable on developments by
member companies.

Pressure groups
Pressure groups embrace a diversity of subjects, many of which cover
commercial activity. Whether for or against an activity they amass all
 Primary Intelligence Collection Techniques 99

types of information about governments and companies that they feel

will help their cause. Their willingness to disclose intelligence on
companies may depend on whether they feel that by doing so they will
obtain new information or help their cause. They may also suffer
from a biased view of the world and any data they provide will require
careful corroboration before they are accepted as accurate.

Universities and business schools

Experts on a number of industries can be found in specialist depart-
ments within universities and business schools. They devote consider-
able time to tracking developments and following the activities of
companies and are normally very willing to participate in discussions.

Consultants
Consultants specialising in industry sectors collect large amounts of
intelligence in order to support their consulting activity or provide a
basis for reports that they publish. They are generally unwilling to
provide intelligence unless they are paid for it but an exchange of
information may be possible if they feel that the researcher has access
to sources or intelligence that they have not managed to obtain
themselves.

Chambers of Commerce
Local Chambers of Commerce act as a voice for member companies
in the localities in which they are based. In some countries member-
ship is mandatory but in most it is optional. The staff of Chambers of
Commerce are not likely to reveal detailed intelligence on their
members but they can be extremely useful on such topics as trading
and employment conditions in the region, taxation and local regula-
tions affecting business.

Obtaining Intelligence Directly from Competitors

Companies seeking intelligence directly from their competitors have

two options: use their own staff to collect it or use an external
intelligence collection agency. Using staff to collect intelligence suffers
from one serious disadvantage ± the competitors normally know who
they are and therefore why they are interested. Although some
activities can be carried out incognito, such as examining competitors'
products on exhibition stands, any form of direct questioning will
100 Competitive Intelligence

provoke those on the receiving end to ask for the identity of the
questioner and why they are interested. Unless staff are prepared to
lie (not a practice to be considered under any circumstances) the
shutters will inevitably come down.
This does not mean that direct questioning by staff is impossible,
only that the results may be limited in value. Intelligence that is
shared between competitors, particularly in situations where they
could be accused under antitrust legislation, tends to be little more
than each party would be happy to publish. It is therefore more
common to use external consultants for the task. Fortunately there
are a number of consultancies that specialise in the provision of
intelligence-gathering services for clients. These have developed skills
that maximise their chances of obtaining what is required but above
all else they shield the identity of their clients. An open display of
interest in a competitor is, in itself, intelligence that is best kept secret.

Questioning competitor staff

Whoever carries out the task, covert questioning of the staff of

competitors is the very apex of the range of competitive intelligence
skills. It is the equivalent of entering the lion's den and carries with it
not only the risk of failure but also the risk of exposure. The worst
outcome of a failed primary intelligence-gathering exercise would be
one in which no intelligence is obtained, the target company finds out
that an intelligence operation against them is in progress, identifies
the means by which the intelligence is being sought and identifies the
competitor seeking it. This would provide the target company with an
intelligence coup, permitting them to scream `foul' to the rest of the
world and then take steps to frustrate any further attempts.
The difficulties involved in questioning the staff of competitors
means that careful consideration must be given to whether it should
be attempted and, if so, how it should be done.
When deciding whether interrogating competitors is worthwhile
there are a few simple questions that can be asked:

. What value is ascribed to the intelligence if it is collected?

. Is the collection programme likely to succeed?
. Even if the programme succeeds what are the chances of being
caught?
. If the programme is discovered, how serious are the likely con-
sequences in terms of exposure and adverse publicity?
 Primary Intelligence Collection Techniques 101

High risks of failure, being caught and exposure may be worthwhile

if the value of the intelligence is extremely high, but not otherwise.
Those planning the programme should be asked to assign a prob-
ability to the likelihood of them being able to deliver the intelligence.
If it is between 50 per cent and 80 per cent the exercise is probably
worth trying. If it is 90±100 per cent they are either over-optimistic or
have some reason to know that the intelligence is available.
Maximising the chances of success in primary intelligence collection
is not a matter of luck but of careful planning. The main factors to be
considered when planning an intelligence-gathering programme in-
volving direct questioning of competitor staff, are:
. Identifying sources
. Initiating the discussion
. Inducements
. The discussion guide
. Relationships

Identifying sources
It is axiomatic that the quality of the sources is the key to the quality
of the intelligence. It is therefore imperative that time is spent
identifying sources and verifying their credentials to provide the
information requested. The options for identifying individual sources
are:
. Secondary research
± Papers and presentations
± Company websites
± Recruitment sites
± Appointment announcements
. Switchboard
. The reference trail

Secondary research. Secondary research can be used to identify staff

members who have written papers or spoken at conferences. Staff
thus identified are easy to approach since their papers or presenta-
tions can be used to initiate a conversation. Company websites may
list staff members together with their area of responsibility but a visit
to the rapidly growing number of recruitment websites may also
identify individuals working in specific companies. Announcements
of new appointments in the national, professional, trade or local press
can be equally productive.
102 Competitive Intelligence

Switchboards. Getting through to staff through the switchboard by

job function rather than by name is becoming increasingly difficult as
companies seek to protect themselves from the ravages of head-
hunters or improve efficiency by cutting out telephone operators. It
is therefore advisable to spend some time trying to identify named
individuals to approach using the methods identified above. This is
less difficult when tracking an industry on a continuous basis since,
over time, it is possible to construct a network of contacts.
Where direct-dialling systems are in use, an alternative to using
the operator is to dial numbers using the area code prefix and the
first two digits of the switchboard number followed by a random final
two digits. In most cases this will route to a staff member who can
then be used as a source for the correct contact. On some switch-
boards a redirected call from another internal number has a different
ring tone and may therefore bypass the screening practice applied to
external calls.

The reference trail. Once one contact has been identified he or she
should be used as a source of additional contacts within their own and
other companies. The ability to refer to a previous source has some
effect in reducing suspicion, especially if they know them well.

Initiating a dialogue
The most difficult task when questioning the staff of competitors is
initiating the dialogue. The effectiveness of a discussion with a
potential source is determined in the first few minutes (some would
say seconds!) of the conversation after contact has been made. It is at
this stage that the respondent is most suspicious and least inclined to
cooperate. As the conversation proceeds barriers tend to be lowered
and the information flow increases.
One of the most common questions from respondents when first
approached is `How did you get my name?' Respondents need to be
reassured that the process is legitimate and they are not the targets of
a plot. Being able to say `I have been given your name by Mr X who
thought that you might be able to help me' is a more reassuring
response to the question than `I was put through to you by the
switchboard'. Ideally Mr X would be their boss or a respected
colleague, but this is too much to hope for; it is equally possible that
Mr X would prove to be someone they have no respect for. A useful
additional method of lowering the defences is to state that the
respondent has been identified as an `expert' in that field. Being
accorded guru status is not only flattering but also increases will-
 Primary Intelligence Collection Techniques 103

ingness to provide the facts and opinions that usually emanate

from gurus!
Unfortunately it is necessary to cover the two most difficult topics
in an intelligence-gathering exercise at the beginning of a conversa-
tion. These are the identity of the organisation that requires the
information and what it is required for. If a direct and honest answer
is given to both of these questions it is virtually certain that no
intelligence will be obtained. The exceptions are those rare contacts
that display no curiosity and are happy to talk.
So what should be said? The Code of Ethics under which compe-
titive intelligence is collected specifies no lying, no misrepresentation,
no law-breaking and no bribery. Fortunately they do not stipulate
that the complete truth is told. This means that:
. A consultant can identify his own employing company (that is, the
consultancy) without revealing the name of the sponsor of the
analysis
. In response to a direct question, a consultant can state that the
sponsor has asked to remain anonymous
. It is fair and truthful to state that an analysis is being undertaken of
an industry or market and those companies that are operating
within it, without elaborating by stating specifically that it is a
competitive intelligence programme
. It is acceptable to induce cooperation by engaging the respondent's
interest or curiosity and the promise that they will learn something
from the exchange
. It is acceptable to use intelligence already gathered as a bargaining
chip or as a stimulus to initiate a discussion

Inducements
The main inducement to cooperate is the promise that the conversa-
tion will be worthwhile to both parties. The offer to trade or pool
information has a far better chance of success than a request for
information to be provided.
There are many situations in which useful exchanges of information
can take place between the staff of competitive companies, especially
when they know each other and there is strong mutual advantage in
sharing knowledge. It can happen when both companies:
. Face a common external threat that can be dealt with more
effectively by pooling their intelligence
. Stand to make efficiency gains by pooling information on their
business processes
104 Competitive Intelligence

. Can solve joint problems, such as recruitment or training, more

effectively by sharing information
. Can extend their knowledge on third parties by pooling their
intelligence
Consultants are more likely to use the intelligence they have already
collected in their programmes as means of inducing cooperation from
future respondents. Obviously they cannot do this to the extent that
they give away everything that their client has paid for, but on the
basis that it is always difficult to `get without giving', it is legitimate to
pass on some intelligence either as a primer for the discussion or as
recompense.

Discussion guide
No discussion with competitors' staff should be carried out without a
guide that sets out the planned progress of the discussion. The basic
rules of discussion guide construction are:
. Whatever is really intended or even proves to be practical, present
the discussion as an exchange and avoid the suggestion that the
information flow will be all one-way
. Never plan to overload a respondent with topics. Many analysts try
to obtain a wide range of intelligence from a single respondent on
the basis that he or she may prove to be the only person who will
speak to them. Whilst this expectation may be fulfilled, it is better
to plan for a shorter first discussion and come back for more at a
later date than to attempt to get all that is needed in one session
. Prioritise the intelligence into `must ask', `try to ask' and `ask if all is
going well' categories. This will help ensure that the essential topics
are covered in the event of an early shut-down of the discussion
. Within each group, the topics should be sequenced so that they
commence with the least sensitive and move on to the most
sensitive. Respondents are at their most cautious and most nervous
at the beginning of the discussion. As time progresses they generally
become more confident and more willing to cooperate
. Ensure that the questions are tailored to the probable knowledge of
each respondent and that no one is asked questions that they
cannot conceivably answer. Repeated admissions of ignorance
can induce an early termination of the discussion
. Despite the point above, always bear in mind that some staff may
have knowledge outside their normal sphere of operations and,
unaware of its significance, be less reluctant to reveal it
. Ask direct questions as infrequently as possible. Use the informa-
tion already obtained to lead the discussion. It is far better to ask
 Primary Intelligence Collection Techniques 105

respondents for clarification or to confirm or deny what has been

picked up from other sources than to ask direct questions
. Remember that when it comes to numerical information, asking for
brackets and approximations is more likely to produce a response
than a request for precise data
. Ensure that as many as possible of the awkward situations that can
arise in the discussion are anticipated in advance and that responses
have already been framed. These will include repeated requests
for the identity of the sponsor and requests for access to the final
results
The term `discussion guide' has been used deliberately. Unlike
market research, competitive intelligence should never use question-
naires. These may be comprehensive and structured but they are also
rigid. In intelligence gathering the analyst must be free to respond to
any statements made by respondents that appear to provide an
opportunity for interesting supplementary questions. The more the
discussion appears to flow as a conversation and the less it seems like
an interrogation, the greater the chances of success.

Relationships
When intelligence is sought regularly in the same industry sector it is
possible to build a network of contacts amongst competitors for the
purpose of exchanging information on best practices. All parties must
be prepared to give something but stand to gain much in return.
When this happens care must be taken to ensure that any exchanges
that could be construed as `collusion', especially discussions on prices,
are avoided.

Naive or knowledgeable
When questioning respondents, analysts have the option of being
naive on the subject matter or knowledgeable. Naivety offers the
prospect that respondents will not perceive a threat and will explain
matters fully. The main risk is that respondents will think the enquiry
is frivolous and will refuse to cooperate. Being knowledgeable
suggests that the enquirer is worth dealing with and may provide
some valuable information. Being too knowledgeable may raise
suspicions. The balance is difficult to achieve and the effectiveness
of either approach will vary from respondent to respondent. It is
commonly the case that female researchers working in male environ-
ments, such as engineering or chemicals will benefit from a naive
approach. Whether the same is true of male researchers working in
female environments, such as cosmetics, remains to be proved.
106 Competitive Intelligence

Graphology

Although graphology was long regarded as one of the blacker arts as

far as business applications were concerned, it is now widely accepted,
especially in continental European countries, that the analysis of
handwriting provides a valuable guide to personality. As such it has
gained widespread use in the screening of job applicants. Although
rarely used on its own in the selection of candidates it can show
personality traits that are difficult to uncover by conventional inter-
views. It is therefore logical that in order to understand the person-
ality and skills of the executives and key staff of competitor
companies an analysis of their handwriting should be carried out.
One of the key advantages of handwriting analysis is that it covers the
totality of the writer's personality and can cover attributes such as
leadership, energy, drive, enthusiasm, organisational ability and
sociability. It can also uncover physical and mental ill health,
tendencies to over-indulge in drink or drugs, feelings of resentment,
greed and repressions. Obtaining samples of current handwriting may
prove problematical but not impossible and the added dimension it
can provide to personal profiling makes it well worth the effort.

Reverse engineering

Reverse engineering is a well-established approach to obtaining

product intelligence. It involves dismantling competitors' products
in order to learn their features, the materials that have been used, how
they are constructed, the design of components, finishing and the
assembly method.

Overcoming the roadblocks

When gathering primary intelligence it is normal to encounter a

number of roadblocks. These work in addition to suspicions of the
motives for enquiries referred to above. Overcoming the roadblocks
calls for high levels of ingenuity and even then they may prove
insurmountable. The most common barriers are:
. Switchboards
. Voicemail
. Lack of availability or time to cooperate
. E-mail
. Counter-intelligence
 Primary Intelligence Collection Techniques 107

Switchboards
Getting through to staff through the switchboard by job function
rather than by name is becoming increasingly difficult as companies
seek to protect themselves from the ravages of head-hunters or
improve efficiency by cutting out telephone operators. It is therefore
advisable to spend some time trying to identify named individuals to
approach using the methods identified above. This is less difficult
when tracking an industry on a continuous basis since, over time, it is
possible to construct a network of contacts.
Where direct-dialling systems are in use, an alternative to using
the operator is to dial numbers using the area code prefix and the
first two digits of the switchboard number followed by a random final
two digits. In most cases this will route to a staff member who can
then be used as a source for the correct contact. On some switch-
boards a redirected call from another internal number has a different
ring tone and may therefore bypass the screening practice applied to
external calls.

Voicemail
One of the main barriers to initiating a discussion is the increasing use
of voicemail. Meant as a method of receiving messages whilst absent
from an office, voicemail seems to be growing in use as a method of
screening calls. Messages left on voicemail are rarely responded to
unless the caller or the company they are calling from is known or
there is some inducement to respond. Calls from telesales and market
and other research organisations are widely ignored. There are few
methods of dealing with voicemail except persistence.
A more controllable method of stimulating a response is through
the message that is left. A combination of an interesting `voice' and a
tantalising message may provoke sufficient interest to achieve a call
back. However, this is not a route down which analysts should
progress too far. Messages that are highly provoking may result in
so much disappointment when the call back is made that the
respondent refuses to cooperate further.

Lack of availability or time to cooperate

An inability to make contact with key respondents either because they
are physically absent from their offices or unable to spare the time to
respond to questions is a common roadblock. The only workable
response to this problem is to allow sufficient time for them to
become available. If this cannot be achieved within the time frame
108 Competitive Intelligence

for the survey alternative respondents should be sought. Theoretically

they could be tracked down to their homes or to the locations in
which they are working or called on their mobiles. Unless it is known
that the respondents are prepared to accept calls away from their
offices, the risk in all three approaches is that the analyst may
antagonise the respondent to the point that they will refuse to
cooperate.

E-mail
The third most common roadblock is a request for an e-mail (or fax)
setting out the purpose of the enquiry and the topics that will be
covered in the discussion. Often this information is sought in the hope
that the enquirer will not make further enquiries. Unfortunately this
may well be the case since written notification not only makes the
nature of the enquiry explicit, it also gives the respondent time to
reflect. Complying with a request for a written explanation is worth
doing only when the nature of the enquiry can be made to sound
compelling and innocent.

Counter-intelligence
The existence of a counter-intelligence programme can cause a
complete shut-down to enquiries and, if well executed, can be
extremely difficult to circumvent within the target organisation.
Normally the best method of evading its effect is to concentrate the
search on external sources of intelligence.

The Demise of Primary Intelligence?

Direct interrogation of competitors has never been easy and can only
increase in difficulty as awareness of competitive intelligence spreads.
The use of intelligence by companies heightens their sensitivity to
intelligence programmes carried out against them. The introduction
of counter-intelligence programmes will have the same effect. The
response to any erosion of the ability to collect direct intelligence can
only be greater inventiveness in both the collection and interpretation
of information. With fewer pieces of the jigsaw available it will be
more difficult to deduce the full picture unless more effective inter-
pretation techniques are deployed.
9
Market Research as a
Source of Competitive
Intelligence

Market researchers often seek to distance themselves from competi-

tive intelligence, usually on the grounds that the provision of such
information infringes their code of practice. In doing so they ignore
the fact that some of the most valuable information about competi-
tors is provided by standard market research techniques and pro-
grammes. Indeed it is difficult to see how a market can be fully
analysed without taking account of the competitive environment and
many of today's most effective competitive intelligence analysts cut
their teeth in the market research business rather than starting out in
the intelligence world.
Although there are significant differences between market research
and competitive intelligence the two disciplines have more in common
than market researchers tend to think. Many of the customer analysis
services that have been designed to help marketing staff to format
their own marketing programmes can also be applied to the study of
competitors' clients.

Market Research and Competitive Intelligence

Market research is widely associated with the analysis of customers.

Whilst it is true that customer surveys form a major part of the
market research business, customers are not the only targets for
analysis. Market researchers spend considerable time studying retail
and wholesale distributors, service providers such as transport and
logistics companies, professionals, advisers, specifiers such as archi-
tects and opinion leaders such as politicians and journalists. Indeed

109
110 Competitive Intelligence

any type of individual and organisation that plays a role in a market

can be included in the scope of a market research survey. Competitive
intelligence does the same. It uses all sources that have knowledge of
the activities of suppliers (competitors) in a market, including custo-
mers, to build its intelligence base. The data-gathering techniques
used in competitive intelligence are broadly similar to those used in
market research, though the mechanics by which they are applied are
quite different, as is the interpretation of the results.
The key difference between market research and competitive
intelligence is in the primary focus of the information that is gathered.
Whereas market research is largely concerned with the collective
requirements, activities and behaviour of the customer groups that
make up a market, competitive intelligence is concerned exclusively
with the activities of suppliers into a market, their performance and
their plans. Market research does not normally report on the activities
of individual customers but competitive intelligence does provide
information on each competitor.

Customers as a Source of Intelligence

The common ground that market researchers and competitive intelli-

gence analysts often overlook is the use of customers as a source of
intelligence. In consumer markets customers can provide data on
their perceptions, their use and their preferences with respect to
competitive suppliers of all the products they purchase. These data
are collected regularly by consumer product manufacturers for mar-
keting purposes but not always seen as being part of the competitive
intelligence process. In industrial markets use and perceptual data on
suppliers can also be collected but in many cases the customer is also
a potential source of direct intelligence on competitors' activities. The
exchange of information between suppliers and buyers of industrial
products is significantly higher than that which is required in con-
sumer marketing and increases as the value of the purchase goes up.
Buyers committing multi-million pound sums to the acquisition of
raw materials, equipment or key services need considerable reassur-
ance that the supplier is reputable and is likely to stay in business long
enough not only to fulfil the contract but also to provide long-term
support. This means that they develop a relationship with suppliers
that results in a high level of knowledge of their suppliers' activities.
Tapping into this knowledge is part of the skills developed by
competitive intelligence analysts.
 Market Research 111

Surveying Markets for Intelligence

The range of market research services that can be used to provide
competitive intelligence is surprisingly wide and none of them require
any modification to make them useful. The data that can be obtained
are both quantitative and qualitative. The quantitative data permit
analysts to position competitors within the markets they are servicing
with a considerable degree of precision. The qualitative data permit
analysts to understand how the competitors are perceived at the sharp
end of the competitive battle, namely by their customers. Using
qualitative research it is possible to detect impending problems for
competitors some time before they are reflected in performance.
The following sections describe the market research services that
can be used for competitive intelligence and the types of data they can
generate.

Panels and retail audits

Consumer panels, retail audits and specialist audits, such as hospital
panels, supply data that are heavily competitor-orientated. Although
users of panel data may see them primarily as a method of tracking
their own performance their real usefulness arises when they are used
to track the performance of competitors. The data that can be
obtained from panels and retail audits include:
. Total sales within a product category
. Sales by distribution channel
. Regional sales
. Sales by customer category
. Brand (or supplier) shares
. Brand shares per distribution channel
. Brand shares within each region
. Brand preferences of each customer category
. Prices paid per brand in each distribution channel and region
. Growth in total sales
. Growth in brand sales and market share changes
The ability to commission special analysis of the panel data means
that it is possible to access additional intelligence such as the launch
and success of promotional initiatives by competitors. Indeed the
availability of panel-generated competitor data to suppliers of con-
sumer goods eliminates the need for direct interrogation of competi-
tors on any subjects relating to sales and the segments of the market
they are servicing.
112 Competitive Intelligence

Awareness surveys

Awareness surveys are a standard market research process for mea-

suring the degree of exposure suppliers have succeeded in achieving in
a market. Customers tend to purchase from suppliers that they have
heard of and feel they can trust. High levels of unaided recall and the
creation of a favourable impression of the company are therefore key
objectives of most marketing and promotional programmes.
In awareness surveys it is normal to measure the awareness of
competitors as well as that of the research sponsor. If a company is to
maximise its impact in a marketplace, awareness levels need to be not
only high but also as high as, or even higher than, those of
competitors. Competitors' awareness profiles tell much about the
intensity of their promotional effort and the success they have
achieved. Before attempting to emulate a clever marketing initiative
by a competitor it is worth checking its effectiveness in terms of the
awareness level it has actually achieved.

Image surveys

It is said that `a pound of image is worth a ton of performance' and

nowhere is this statement truer than in marketing. Competitors
abound that have images that are far worse or far better than their
actual performance would seem to justify. Corporate images are
based on a large number of factors not all of which are controllable
by the current management of the companies themselves. Historical
performance can be more influential than current performance.
Memories of bad performance linger long after the problems that
created it have been cured. The privatisation of state-owned compa-
nies did not change their reputation for being bureaucratic overnight.
The country of origin can have a beneficial or an adverse effect that
outweighs the quality of the service or product provided, as McDo-
nald's has found to its advantage in Russia and to its cost in France.
It is also said that `perception is reality' and however much a
company may disagree with the judgement of customers the image
that customers retain of suppliers is a powerful contributor to their
performance. This means that if the image projected by competitors is
known it will provide a guide to the success they are likely to enjoy
when promoting their services. It may also explain why some compe-
titors' marketing budgets work more effectively than others. Compe-
titors with a poor image have to spend proportionately more to
achieve the same effect as those with a favourable image.
 Market Research 113

Customer satisfaction surveys

Customer satisfaction surveys measure the extent to which companies

meet the expectations of their customers. This complements image
profiling by covering the tangible aspects of performance. The
measurements usually involve identifying the product and service
criteria that customers consider when evaluating supplier perfor-
mance and then obtaining customer ratings of performance on each
criterion. High average ratings on criteria that are also regarded as
being extremely important indicate supplier strengths whereas low
weightings on high-importance criteria indicate problems.
The criteria normally include those that relate directly to the
product or service supplied, such as its quality, consistency or
performance, and those that relate to the service support that is
provided, such as delivery speed, delivery reliability, the quality of the
suppliers' sales and technical staff, product literature and the clarity
and accuracy of billing. Most surveys measure performance on 20±25
evaluation criteria which permits a very detailed examination of
performance.
In the past suppliers tended to concentrate on measuring their own
performance within their customer base. It is now normal to measure
the performance of competitors within their customer bases in order
to determine whether a supplier is doing better or worse than the
competition. The same results provides a clear indication of the
strengths and weaknesses of competitors and, with repetitive mea-
surements over time, can show which aspects of their product and
service package they are investing in.

Loyalty surveys

Loyalty surveys use relatively simple questions to test whether

customers are likely to remain loyal to their existing suppliers. If
applied to competitors, loyalty surveys show the extent to which they
have been able to create loyal customer bases and their vulnerability
to competitive attack.

Mystery shopping

Mystery shopping is a technique designed to test the sales perfor-

mance of a supplier. It can be used to report on the effectiveness of
sales staff and the extent to which they conform to company
procedures. Studies are normally commissioned by companies to test
114 Competitive Intelligence

their own selling systems particularly at retail level, but it is obviously

tempting to use them as a vehicle to test competitors' performance or
even to obtain details of competitors' offers. Pretending to be a
customer breaks one of the basic rules of competitive intelligence in
that it is clearly misrepresentation. However, it is possible to conceive
a survey in which the experience of genuine customers shopping for
products or services is captured for competitive intelligence purposes.

Media research

Media research covers a range of services that are designed to test the
use and effectiveness of various marketing media. The main types of
media research that have a direct application in competitive intelli-
gence are:
. Expenditure by competitors on advertising
. Breakdown of advertising expenditure by type of media
. Analysis of the content of advertising
. Analysis of the effectiveness of competitors' advertising

Perceptual mapping

As the name implies, perceptual mapping provides a picture or a map

of a marketplace that defines the perceptions respondents have of
products, brands, services or companies. The technique defines the
key characteristics by which products, brands and companies could
be described and locates the products or brands on these dimensions
in accordance with respondents' perceptions. The technique shows
the perceived differences between brands or suppliers. Minimal
differences, which show up as brands or suppliers mapped in close
proximity, indicate strong competition; large differences, which show
up as brands or companies in isolation on the map, indicate unique-
ness in the marketplace. The results need to be combined with market
structure data in order to show whether the territory that the brands
or suppliers are perceived as occupying is that in which the supplier
actually wishes to be.
For competitive analysis perceptual maps are useful in the
analysis of:
. Competitors' product positioning
. Segments serviced by competitors
. Competitors' strengths and weaknesses
10
Analysis ± Filling the
Gaps and Stretching
the Data

Unlike market research, the analytical process in competitive intelli-

gence is not something that begins once data collection has ceased. To
obtain the best intelligence, analysis and data collection should run
hand in hand until a satisfactory result has been achieved or until it is
evident that no further progress can be made. Competitive intelli-
gence analysis is used for two purposes:

. Filling gaps in the data yielded by an intelligence-gathering

programme
. Drawing conclusions from the data that extend the understanding
of competitors' actions and plans

The combined assaults of secondary and primary intelligence

gathering rarely provide detailed responses to all of the intelligence
topics. They may cover 80±90 per cent of requirements but there are
always items that cannot be covered. These are often the most
sensitive issues and therefore the most interesting. By analysing in
tandem with data collection it is possible to identify barriers as they
arise and to evaluate their implications. It is then possible to develop
new lines of questioning and to identify alternative sources of
intelligence that may circumvent the barriers.
Once intelligence has been collected analytical techniques can be
used to extend the coverage into those aspects of competitors'
activities on which it is unreasonable to expect direct evidence to be
available. At this point analyses of the company's history, personal
profiling and scenario development take over as tools by which a
company's probable objectives and the means by which they will seek

115
116 Competitive Intelligence

to achieve them can be deduced. Most of the time spent on competitor

analysis is used to obtain data; analytical techniques can convert the
data into a deeper understanding of the threat that competitors
represent. The data will show what competitors are doing whereas
the analysis may reveal why they are doing it.
The labyrinthine twists and turns of a typical investigation in which
analysis and interviewing are combined to produce a result are
illustrated in the following example. In a survey designed to evaluate
a small rubber products company as a potential acquisition candidate
it was decided that there were three main sources of intelligence that
could be used. The first was the company itself, the second was the
customer base and the third was published sources. The company had
three lines of business, all of which involved the supply of customised
products produced to order for individual clients; it had no standard
products. The three lines of business were rubber linings for contain-
ers, bridge bearings and rubber-to-metal components for the engi-
neering industry. In the first days of the investigation it was found
that the linings business was for a single customer and was relatively
straightforward to understand. The two other businesses serviced
highly fragmented customer bases and the visibility of the target
company was extremely low, mainly because it was a small player. It
was therefore felt that intelligence collection should concentrate on
the company itself by means of telephone discussions with staff and if
possible a visit. Once activated, this approach fell foul of a common
problem in small companies, namely, that all incoming calls were
screened by an administrative assistant and that it was impossible to
dial directly to any individual staff member. The `gatekeeper' relayed
messages and requests for interviews to contacts within the company
but always came back with a refusal.
A third line of attack, using published sources, was being imple-
mented at the same time as the requests for interviews and yielded a
copy of the annual reports and accounts and a series of articles in the
local press. The annual reports provided all of the financial back-
ground on the company plus a limited amount of information on the
container linings business. Profits looked good but the company had
not grown in the years preceding the investigation. The local press
reports showed the reason for the sensitivity within the company and
led the research team to decide that further direct approaches would
be fruitless at that time. The founder of the company had recently
died and two sons and a daughter had inherited the company. Only
one son had worked previously in the company but after the father's
death the second son had joined him. The daughter remained outside
the business. The sons had made statements to the effect that they
 Analysis 117

were going to develop the company and maintain the family tradition,
which may have been true but is often code for `we are fattening up
the company for sale'.
The research team decided that there were two options at this
point. The first was to recommend to the client that they make a
direct approach to the target and ask whether a sale would be
considered. The second was to carry on collecting data before an
approach was made. The client decided that they needed more data
before making an approach and the only method by which this could
be achieved was to carry out a screening exercise amongst companies
that could be doing business with the target and interview anyone
who knew them. A painstaking programme involving a large number
of short screening calls to procurement managers in bridge-building
and engineering companies across Europe eventually identified a
small number that were buying from the target company and an even
smaller number that had recently been approached by their sales
representative. From these it was found that the company was indeed
trying to expand its client base and was making presentations about
its services, its solution development skills, its advanced production
facilities and its existing clients. One of the contacts that had been
approached provided a copy of the presentation materials and these
not only answered some of the intelligence topics but also provided
the identities of more customers. From here the investigation picked
up speed until a components buyer in a major engineering group,
when asked whether he knew the target company, replied, `Sure, I
think we have just bought them!' The sales programme activated by
the target had led them to the door of a buyer for the company. The
follow-up was swift and conclusive and the investigation was halted.
Although the data collection process was highly successful, the
outcome was unsatisfactory in that the client failed to make an
acquisition. The loss was made worse by the fact that the data
showed that the company could have been a good acquisition at
that time!

Filling the Gaps in an Incomplete Picture

There is very little magic that can be applied to the task of filling gaps
in an incomplete set of data. Most analysts rely on common sense,
triangulations of data from various sources, comparisons with their
own experience, comparisons between competitor companies, estima-
tions and guesswork. At its most basic this type of analysis relies on
deductions of the kind which says if A equals X and B equals Y then
118 Competitive Intelligence

C must equal Z. However, the more advanced analysis will use

comparative data to show:
. What are the outside limits of data that could be reasonably
expected
. What is the likely point within the range that applies to this
particular company
In making these deductions spreadsheets have mechanised hand
analysis and speeded the process to the extent that it is possible to
run large numbers of alternative observations and arrive at a `most
likely' deduction in a short period of time. The spreadsheet approach
is, in effect, a model of the business that uses simple ratios to
determine whether the data make sense. For example if independently
derived sales and employee data result in a sales per employee ratio
that is outside the norms for that business then one or other of the
numbers is suspect and needs to be re-examined.
The first problem with this type of analysis is that it tends to make
the results for all companies analysed conform to assumed norms for
the business. As a starting point this is acceptable but the real task of
competitor intelligence is to show what is different about each
competitor. It is at this stage that original data are required, even if
they only provide a hint at whether a company is better or worse at a
particular function than the rest of the industry. As stated in the
opening paragraphs, the investigative process needs to hold time in
reserve for carrying out more interviews at this stage so that any
deductions can be tested with respondents. It is much easier to test
deduced facts for reasonableness than it is to ask for them outright.
Paradoxically, problems can also arise when the data that have
been obtained are too voluminous. Fitting large numbers of frag-
ments into a coherent pattern can be far more difficult than dealing
with small numbers of facts. The main danger arises from the
possibility of adding error to error and arriving at a result that is
too far from the truth to be useful. This is not an argument for
limiting the amount of data collected, only a warning that volume is
not necessarily a method of improving accuracy.

Extending the Level of Understanding

At the apex of the analytical skills required in competitive intelligence

are those required to interpret results to identify competitors' inten-
tions. This can never be a precise activity and is a high form of art
 Analysis 119

rather than a science. It involves bringing together the full range of

data that have been collected and using them as a basis for deduction.
Whether, in the words of Sherlock Holmes, it is `a two pipe or a four
pipe' task depends on the importance attached to the conclusions but
there is no doubt that extended thinking time, brainstorming and
internal workshops will normally provide better results.
A range of quasi-scientific approaches have been used for the
purpose of deducing competitors' intentions but in many cases the
science obscures the fact that the foundations on which the deduc-
tions are based are very shaky and can lead to conclusions that have a
spurious level of accuracy. One of the basic rules of research, garbage
in±garbage out, applies strongly in the case of competitive intelli-
gence. A process that works well is one in which the analysts:
. Establish a set of hypotheses
. Use parallel teams to evaluate them
. Recycle hypotheses externally
. Check fit of new data as they emerge
. Run `what if?' analysis

Establish hypotheses

The first task is to establish a range of hypotheses that could fit the
facts that have been revealed by the research. In the unlikely event
that there is only one hypothesis that fits there is a possibility that it is
close to the truth. More normally there are several interpretations
that fit the facts to varying extents. The degree of fit can be used as a
basis for assigning a probability to each hypothesis. In forming the
hypotheses the key inputs are:
. Current situation ± what is the marketing, production and financial
situation of the company?
. Problems ± what are the key problems that the competitor is
facing?
. Pressures ± what pressures are being placed on the company to
improve performance or correct problems?
. Past trends ± what is the history of the competitors' activities and
how successful have they been in resolving problems and meeting
objectives?
. Personality profiles ± what is the track record of the management
team and how have they faced up to problems in the past?
. Resources ± what resources does the competitor have at its
disposal?
120 Competitive Intelligence

When considering the data it is essential to remember that the past

is a guide to the future only if there are no significant changes within
the organisation or in the competitive environment in which it is
operating. Forecasting by reference exclusively to the past is like
driving a car looking only in the rear-view mirror ± it works until you
come to a bend! Although company cultures tend to change on a
relatively long time-scale, events can occur that cause a significant
break with the past. Fortunately, these are normally quite visible and
include changes of ownership, changes of senior personnel and
diversifications into new business sectors.

Parallel teams
Having established the hypotheses it is necessary to evaluate them,
eliminating those that are highly unlikely and deciding which of the
alternatives are most likely to describe competitor actions. Whilst
competitor analysts can do this themselves to an extent, by this time
they are so immersed in the data that they will find it increasingly
difficult to take an objective view. They are also likely to lack
operational experience in day-to-day decision-making. It is therefore
useful to increase the evaluation team to include operational manage-
ment. They can be given the task of placing themselves in their
competitors' shoes in order to determine what they would do if
confronted with a similar set of facts. The process needs to include
a certain amount of role playing since there is little point in the
executives being themselves. They must project themselves into their
competitors' cultures and react accordingly.
The output from the parallel teams is likely to be:
. A shorter list of hypotheses
. New hypotheses that may be hybrids of the original set
. Hypotheses that are favoured for further analysis

Recycle hypotheses externally

Once they have been subjected to scrutiny by staff the hypotheses can
then be tested with external observers who are thought to be in a
position to comment. In the case of public companies these could be
analysts working for the stockbrokers that follow the companies. In
the case of private companies the closest that it may be possible to get
are partners, distributors or major customers, though in all three
cases there is a risk that the results of the evaluation will find their
way back to the competitors being covered.
 Analysis 121

Check fit of new data as they emerge

The next step in the process is to monitor the progress of each

company and determine the extent to which the moves that they
make fit one or more of the favoured hypotheses. The dynamic
element is vital not only as a method of determining whether the
assumptions are correct but also as a means of refining them and
reshaping them as the competitive situation evolves. Over time a
single hypothesis should emerge as a logical explanation for the
company's actions though the clarity with which this will be seen will
depend on the amount of change that is occurring in the competitive
environment. Like all other suppliers, competitors have to respond to
environmental change and this is likely to alter their tactics and
possibly their strategic approach.

Run `what if?' analysis

The development of a model that explains competitor behaviour is

useful only if it is used. One of the most useful applications is to run
`what if?' analyses, which use the model to predict competitor
behaviour in the event of assumed circumstances. To be effective
for these applications the model needs to include characteristics that
define the behaviour of management. These could include such
fundamentals as confidence, insecurity, arrogance, humility, subtlety,
aggression and passiveness, which determine whether the company is
likely to fight its way through problems or retreat from them.

Environmental Analysis

No competitive intelligence programme can be complete without an

analysis of the competitive environment. To a very large extent this
overlaps with market and economic analysis. It includes all factors
that can influence the evolution of competitive activity, such as:

. Changes in customer requirements

. Growth or decline in satisfaction with competitors' offers
. Awareness of new competitors
. Demand changes
. Structural changes in distribution
. Changes in technology
122 Competitive Intelligence

. Changes in costs and pricing

. The development of the macroeconomic environment
Programmes for tracking these factors are well-established in most
large companies, mainly within the market research department and
all that is necessary is to make them accessible to the competitor
analysts.
11 Verifying
Intelligence

As with all data, competitive intelligence needs to be accurate to be

useful. Unfortunately, by its very nature competitive intelligence is
prone to be inaccurate. This is partly because it is difficult to obtain
complete information but also because inaccurate intelligence about
competitors' activities circulates widely in all markets and is often
accepted as fact. The rumour mill works hard on news about
companies, particularly when the news is adverse. It therefore essen-
tial that careful checks are made to ensure that errors are minimised.
It is also essential that when the checks are completed the probable
quality of the intelligence is assessed and is clearly stated in any
reports issued. To do this requires the use of verification procedures
that are applied during the data collection process and retrospectively
once the intelligence has been analysed. These procedures are parti-
cularly important for intelligence obtained from the Internet but also
applies for that obtained from other secondary sources and even from
primary sources.

Verification of Published Intelligence

The basic checks that should be carried out should cover the follow-
ing attributes of each item of data:
. Author
. Publisher
. Date
. Purpose
. Methodology
. Cross-checks
. Internet

123
124 Competitive Intelligence

Author
The identity of the author, be it an individual or an organisation, is
the primary indicator of the authenticity and accuracy of intelligence.
The easiest to check are known names whose other work can be read.
Prolific publishers of intelligence, such as major research companies,
are likely to have a reputation that can be checked by reference to
other users. However, the fact that an author is unknown does not
make the work inaccurate; it just means that the verification process is
more complex. The signals of authenticity are:
. The provision of complete provenance and contact details on the
author; a desire for anonymity is a sign of potential problems
. References to the author in other documents, which suggests that
others have used the work and found it to be accurate
. Biographical details and experience statements, which permit the
reader to judge the level of authority from which the author is
writing
. Attribution of data that have been extracted from other secondary
sources which is an indication that the author takes the research
process seriously
Authors who are employed by the company which the intelligence
covers can generally be regarded as being more accurate than those
who derive the intelligence from third parties or secondary sources.
In-house authors are more likely to know the truth and are unlikely to
have much desire to mislead any customers that might read what they
have written.

Publisher
If the publisher of the data is different from the author, the publish-
er's identity can help authenticate the data. As with authors, known
publishers with an established track record and a reputation for
quality are generally more trustworthy than unknown publishers. If
the publisher is unknown, the availability of information on who they
are and how they can be located provides an opportunity to check up
on them either directly or by seeking information from others that
may have used their data.

Publication date
As with any information, the date it was published shows its currency.
Statistics are usually (though not always) tied to specific dates but
 Verifying Intelligence 125

technical information and company data lose value as they age.

Intelligence users should therefore check the publication date of any
document consulted.

Purpose

It is useful to establish the reason for which intelligence has been

published. Government and international organisation publications
that set out to provide factual information are likely to be reasonably
accurate. However, there could be a significant difference in objec-
tivity between a document published by a government statistical
service, which is designed only to inform, and one published by a
government tourist authority which is designed to attract visitors.
Company publications have an obvious promotional purpose which
means that although it is unlikely that the data they contain will be
knowingly inaccurate, they may be slanted to place the company in
the most favourable light with potential clients. This may lead to a
level of exaggeration or to the use of broad statements that are
ambiguous. Broker's reports published by a company's official broker
may lose some of their objectivity in their enthusiasm to please their
employers and boost share prices.

Methodology

The provision of details on how the data in a publication have been

collected is a primary indication of quality and authenticity. Data
that have been collected by techniques that are fully described have
more credibility than a set of facts or statements whose origins are
completely unknown.

Cross-checks

The ultimate test of authenticity is whether the data cross-check with

similar data obtained from other sources. Similar data sets arising
from a number of independent sources suggests accuracy, though it is
always possible that inaccurate data emanating from a single source
are being picked up and broadcast by a number of independent
publishers. This is common in the newspaper world where different
journals pick up and publish the same press release without checking
its accuracy. Unfortunately facts gain in stature the more frequently
they are published, regardless of their accuracy.
126 Competitive Intelligence

Intelligence from the Internet

Verification of the information available from Internet sites is essen-

tial. There is no control over what is placed on the Internet and
although a high proportion of what can be accessed is accurate and
useful there is also a considerable amount of rubbish. The openness of
the Internet means that it attracts a large number of cranks who use it
as a low-cost way of seeing their name in print. This means that
researchers using the Internet need to develop a mechanism for
checking the quality of the information they have identified.1
The ease with which anyone can put up a website on a host system
means that there is no cost barrier that might deter the more spurious
Internet publishers. Use of a host organisation does not necessarily
indicate poor quality but publishers who run their own server are
easier to check up on. It is also likely that personal web pages are
more dubious in quality than organisational pages. Documents which
are `self-published' have always been more suspect than those that
have gone through the hands of a recognised publisher.
The most reliable intelligence to be obtained from the Internet is
that which is obtained from:

. Company websites
. Government websites
. Commercial databases
. The websites of educational establishments

Those that should be treated with more suspicion are:

. Websites created for political purposes

. Pressure group websites
. Corporate attack websites

These websites have a purpose that could well compromise their

objectivity and cause them to distort the intelligence they provide. A
prime example is websites created by ex-employees whose main
purpose is to disseminate intelligence that places their former employ-
er in the poorest possible light. The same applies to sites that purport
to publish facts about companies that other media refuse to publish.
The refusal may be based on the fact that the publisher is worried
about a libel case but it could also be that they know the data are
wrong.
 Verifying Intelligence 127

Verification of Primary Intelligence

Primary intelligence requires an even greater amount of verification
than secondary intelligence. It is far easier for respondents to make
misleading or inaccurate statements than it is to write them. The
verification of primary intelligence relies on establishing:

. The identity and job function of the information provider

. The circumstances in which the intelligence is obtained
. The degree of security surrounding the company or the type of
intelligence being sought
. Corroboration from independent sources

Identity and job function of the intelligence provider

Obviously, any intelligence provider must be in a position to know the

information being elicited. Information diffuses throughout compa-
nies and it is possible for relatively low-level staff to be in a position to
pass on accurate intelligence but it is also possible for them to have
heard information that is distorted or which they distort themselves.
It is therefore necessary to balance the need to speak to sources that
may be less guarded in what they reveal against the possibility that
their knowledge is inaccurate.
When collecting primary intelligence a careful log must be kept of
all calls and conversations showing:
. Name, company and telephone number of each respondent
. Respondent's stated job function
. The relationship between the respondent and the company being
studied (for example, employee, supplier or distributor)
. The date and time of the conversation
. The intelligence provided
. An assessment of the difficulty of extracting the intelligence
from the respondent (for example, willing respondent or highly
suspicious)
Apart from the potential need to recontact respondents, the
importance of the log is that when looking back it is often impossible
to remember the circumstances surrounding each call that was made.
Yet these data will be extremely useful if there is a need to decide
whether intelligence from one source is likely to be more accurate
than intelligence from another.
128 Competitive Intelligence

Circumstances in which the intelligence is obtained

The circumstances in which intelligence is obtained provide a further

indication of accuracy. The ideal situations are those in which the
respondents have no reason to suspect the motives for the enquiry
and are evidently unguarded. The most worrying are those in which
the respondents display a high level of suspicion and reluctance to
talk. The latter are usually poor sources of intelligence anyway but
there is an added risk that they will seek to deceive by providing
misinformation.
Examples of ideal situations are encounters engineered at confer-
ences and exhibitions and intelligence that is obtained by direct
observation. That which the analyst has seen personally is likely to
be more reliable than intelligence conveyed exclusively by word of
mouth. The more difficult situations are invariably those in which
employees are telephoned directly for intelligence and where the
reason for the request cannot be clearly defined.

Security surrounding the company or type of intelligence

Some companies are naturally more suspicious than others. Suspicion

may be a consequence of the business sector in which they operate
(for example, defence), the level of competition they encounter, the
fact that they are actively involved in competitive intelligence them-
selves or a management culture that discourages contact with any
part of the outside world that is not a customer or a supplier. High
levels of suspicion normally mean that the intelligence yield will be
low but they may also indicate that any information that is obtained
might be distorted.
The type of intelligence being sought may itself cause respondents
to dissemble in their responses. Whilst there are many questions that
respondents would regard as being reasonable, such as those covering
products, supply conditions and even prices, there are others where an
employee would find it difficult to understand why an outsider would
want information unless they were carrying out an intelligence
programme. It is common for a conversation with a competitor to
proceed amicably up to the point at which a question on a sensitive
topic is asked and for it then to cease because the questioner has
stepped over a boundary line and into territory that the respondent
regards as being confidential to the company. A conversation that is
terminated represents no problem other than an inability to obtain
the intelligence. Dangers arise if the respondent continues the
 Verifying Intelligence 129

conversation but gives misleading replies to questions. Intelligence

gatherers need to be well tuned in to the mood of the conversations
they have with competitors so that they can detect potential problems
of this sort. The most obvious signals of problems are the questions
that are asked. `Wait a minute, what are you collecting this informa-
tion for?' or `Tell me again, who are you doing this survey for?' are
clear indications that the respondent's receptivity to questions has
changed for the worse.

Corroboration from independent sources

The most valid check on all intelligence is the extent to which the facts
are either repeated consistently by several sources or where different
facts all point to the same conclusion. It is possible for a group of
respondents to sing the same inaccurate song providing they use the
same song sheet but it is unlikely that companies would go to such
lengths to mislead their competitors unless they felt they were under
an intense competitive intelligence attack.
Seeking intelligence from multiple sources is a basic tenet of
competitive intelligence and care must always be taken with data
obtained from companies that direct all requests for intelligence to a
single source. Commonly this is the department for `Public Affairs'
whose task is not only to provide information about the company but
also to limit the outflow to that which is essential.

Sanity Checks

The final check on all data is that of `reasonableness': not only

`whether it fits with all the other facts that have been obtained' but
also `whether it is reasonable' in the light of general company and
industry norms. This is easiest to see with performance data where
sets of figures result in averages, such as sales per employee or output
per member of the workforce, that are unlikely. Testing whether
intelligence is reasonable is easier if several competitors are studied
simultaneously and when data for the commissioning company are
available (providing they are in the same business). This provides a
multiplicity of observations that can be compared.

Note
1. For further information see the writings of Elizabeth E. Kirk to be found
through the [Link] Internet site.
12
Competitive
Intelligence
Resources

A key decision facing all companies developing competitive strategies

is how to collect, analyse and disseminate the intelligence they
require. As with market research the options are to establish a
competitive intelligence department, to use external intelligence col-
lection agencies, or a combination of the two.

In-House Resources or External Agencies

In-house competitive intelligence departments have a number of

advantages but are not suitable for all companies or for all types of
intelligence. The most obvious advantage of an in-house department
is that they develop a high level of expertise in the business in which
the company is operating, they become very familiar with the
competitors, can build up a range of intelligence sources, can develop
a network of contacts and can continuously track developments.
They can therefore obtain intelligence relatively efficiently and
quickly. Their main disadvantage is the difficulties they face when
collecting primary intelligence. Under the rules of engagement they
must identify themselves and their employer when speaking with
sources and this places a severe constraint on the questions they
can expect to get answered. In smaller companies there is an added
problem that arises from the fact that there may not be sufficient
demand for intelligence to keep even one specialist busy full-time. If
employed they may be used only because they are there, rather than
because their services are genuinely required. The compromise solu-
tion for those organisations that do not require a complete intelli-
gence facility but do not wish to dispense completely with an in-house
research resource, is to employ a competitive or business intelligence

130
 Competitive Intelligence Resources 131

manager.1 Their role would be to collect internal and secondary

intelligence and fill the gaps by employing external suppliers whose
main strength is primary intelligence gathering. The final option is to
use external specialists for all intelligence provision.
Outsourcing offers a number of advantages which in-house services
find it difficult to replicate. The most important of these are:
. Anonymity
. Objectivity
. Cross-fertilisation
. Intermittent services
. Cost savings

Anonymity
In any primary intelligence-gathering programme it is essential that
the identity of the company planning to use the data remains
confidential. In-house departments cannot disguise their identity
but external suppliers are under no obligation to reveal the name of
the client that has employed them.
Anonymity is also a method of increasing the objectivity of
the intelligence provided by respondents. Knowledge of who the
intelligence is for may well encourage respondents to distort their
responses.

Objectivity
All intelligence needs to be objective and unbiased if it is to be useful.
It also needs to be seen to be unbiased. Internal intelligence resources
risk being exposed to internal opinions on competitors and the fact
that these may colour their findings. This danger is particularly true
when the facts that are gathered are thin on the ground and can be
made to fit a number of different interpretations. An external
intelligence agency can be isolated from the internal cross-currents
of opinion about competitors and the results they present can be
shown to be free of any bias.

Cross-fertilisation
Internal competitive intelligence analysts develop valuable expertise
in their industry sector which may improve the efficiency of the
research process and the depth of analysis. However, an external
agency generally sees many different industries and is in a position to
import new thinking and fresh solutions.
132 Competitive Intelligence

Intermittent services

An external competitive intelligence agency can be employed only

when required. The continuous availability of internal research
staff may lead to the generation of low-priority problems to keep
them busy.

Cost savings

By not imposing a continuous overhead burden on the company the

use of external intelligence agencies tends to incur lower costs than the
maintenance of an internal department. More importantly, agencies
that specialise in competitive intelligence develop skills that result in a
more efficient and therefore less time-consuming process.

The Internal Competitive Intelligence Organisation

Despite the growing use of competitive intelligence there are very few
internal competitive intelligence departments that have more than one
or two employees. Large departments exist only in companies for
whom detailed knowledge of competitors is deemed to be critical to
their performance. This exists in certain industries such as pharma-
ceuticals and financial services where the investment in new products
is high and the shape and structure of the competitive landscape are
changing rapidly.
For efficiency, the competitive intelligence function either lies
within the market research function or is a separate unit within a
general market or business intelligence department. Occasionally it
may also be allied with the information department or corporate
library. However it is structured organisationally, competitive intelli-
gence staff rarely divide their time between the study of markets and
the study of competitors. Competitive intelligence is a specialisation
that demands a different skill set and it does not mix with the
quantitative and qualitative research skills of the market researcher.
The reporting channels for competitive intelligence are also differ-
ent to those for market research. For better or worse market research
is fed primarily to line product development and marketing staff.
Competitive intelligence can be fed down the same channels but is far
more likely to be transmitted directly to strategic management and
board members. In a number of major competitive intelligence users
the reporting line is direct to the Managing Director or CEO.
 Competitive Intelligence Resources 133

A typical full-scale competitive intelligence department in a large

company contains the following resources:
. Competitive intelligence manager
. Competitive analysts
. Information specialists
. Support personnel
Between them these can handle all of the liaison and research
functions that are suitable for internal staff, including:
. Identifying the intelligence requirements of various departments of
the business
. Assessing the importance of the intelligence objectives and the
feasibility of meeting them
. Producing a list of key intelligence topics
. Liaising with the legal department to ensure compliance with legal
requirements
. Carrying out secondary research
. Establishing an internal competitive intelligence network
. Collecting intelligence from internal sources on a systematic basis
. Establishing an external network of contacts that can provide
intelligence
. Maintaining a list of agencies that can provide competitive intelli-
gence that cannot be acquired from secondary sources, internal
contacts and external networks
. Ensuring that agencies comply with the company's ethical guidelines
. Briefing external agencies for projects
. Liaising with external agencies during projects
. Receiving reports from external agencies and ensuring that the brief
has been fulfilled
. Building a database of intelligence and maintaining it
. Filtering competitive intelligence from all sources and issuing
results to selected staff by means of reports, a newsletter, an
intranet site or a competitive intelligence system
. Interpreting intelligence and producing strategic analyses on
competitors
. Collecting follow-up questions and new intelligence requirements
and initiating a new round of the intelligence collection process
As the above sequence implies, competitive intelligence tasks run in
loops that never end. Each round of intelligence collection, each
new set of facts, each change in the competitive environment breeds
new tasks.
134 Competitive Intelligence

Competitive Intelligence Staff

Establishing and running a competitive intelligence unit requires staff
that are capable of delivering results. As indicated above, the range of
tasks is extremely diverse and the availability of trained candidates is
limited. There is no shortage of people that would like to work in
competitive intelligence but the proportion of them that are suitable is
very low. The ideal competitive intelligence employee requires a
unique basket of skills that include:
. Data collection ± the ability to take a patient semi-academic
approach when looking for secondary sources and then match that
with an aggressive approach on the telephone or face-to-face when
seeking primary intelligence
. Resourcefulness ± the ability to devise unique methods of obtaining
data after all the obvious routes have failed
. Persistence ± never giving up on a project until all avenues have
been tried
. Insensitivity ± the ability to withstand constant rejection
. Inquisitiveness ± a genuine love of problems and the search for
solutions
. Clarity ± the ability to see through complex and often conflicting
sets of data
. Analysis ± good pattern recognition ability and the ability to infer
relationships between disparate facts
. Sound business sense and a basic knowledge of financial analysis
. Communication ± the ability to listen to the requirements of
intelligence users and convert them into an intelligence brief then
communicate the findings in written documents and orally
. Systems ± the ability to install and run a system for intelligence
distribution
. Discretion
Although some of the best competitive intelligence analysts combine
all of these skills, it is more likely that for a fully functioning
department a team of analysts will need to be formed ± some with
skills in intelligence gathering, some with analytical and interpretative
skills and some with communication skills.
Within companies the choice when searching for competitive
intelligence staff is to seek them from within or to recruit from the
outside. Internal candidates have the advantage of knowing both the
company and the industry in which it operates. This is extremely
useful but does not override the personal characteristics that make a
 Competitive Intelligence Resources 135

good competitive analyst. Looking outside the company is an option

but the pool of trained competitive intelligence staff is small and it is
likely that the result of an external recruitment exercise will be a
novice that appears to have the right personal qualities but no
relevant experience.
The activities in which suitable candidates for competitive intelli-
gence roles might be found are:
. Market research ± the data collection and analytical skills of
market researchers can be readily adapted to competitive intelli-
gence
. Strategic, business and market planning
. Police ± support specialists rather than police officers
. Military intelligence
. Security services
A large number of competitive intelligence analysts have entered
the business after an initial career in the security intelligence services.
The training they receive in intelligence collection and interpretation
translates very readily into the gentler art of competitive intelligence
even if some of the interrogation techniques used by the security
services do not. Former police officers are a different matter. They
tend to find that the transition, from the ability to force responses to
questions to a situation in which responses have to be solicited gently,
is difficult to manage. Police training is better employed on company
security rather than competitive intelligence.

Identifying Potential External Suppliers

The steps in identifying potential research companies are reasonably

straightforward. The first is to obtain a list of specialists in compe-
titive intelligence that identifies:
. The types of service they offer, notably secondary, primary or both
. Their skills and experience in specific product or industry sectors
. Their size (personnel and sales)
. The countries they cover
It is also tempting to ask for a list of previous clients, but do not
expect an answer. All intelligence gathering is done on a confidential
basis usually supported by non-disclosure agreements under which
agencies agree to maintain the confidentiality of their clients, even to
the extent of not revealing their names.
136 Competitive Intelligence

Because of the nature of the work, competitive intelligence tends to

be a relatively secretive world, a characteristic that is enhanced to an
extent by the fact that a number of practitioners have entered the
business from government intelligence agencies and there are many
others that make a fetish of secrecy. It can therefore be quite difficult
to identify suitable agencies. The most valuable source of a list of
competitive intelligence agencies is the membership directory of the
Society of Competitive Intelligence Professionals (SCIP): most,
though not all, agencies employ members of SCIP and are therefore
listed in the directory. For inclusion in the SCIP lists members must
subscribe to the SCIP Code of Ethics. This provides a safeguard that,
if used, the members will not engage in practices that are likely to get
their clients into a situation that will result in adverse publicity. SCIP
publications also carry advertisements for competitive intelligence
agencies but these are rarely carried in the general marketing press
and buyers' guides for marketing services.
An Internet search using the words `competitive intelligence' will
identify some 9000 sites, many of which are the websites of vendors of
various types of intelligence-gathering services. Others are listings of
competitive intelligence services and information about competitive
intelligence of varying degrees of sophistication and usefulness.
Company listings on the Internet need to be treated with some
caution since they often contain only those organisations that have
registered with the site operator. This is not to say that the companies
listed are unsuitable, only that the lists are likely to be incomplete. A
further problem with websites is that they provide ample illustration
of the old adage that `empty vessels make the most noise'. It is
commonly the case that sole practitioners establish websites of some
substance in order to suggest that they have sizeable organisations.
Each year there are a number of conferences on competitive
intelligence at which practitioners speak. Some are regular fixtures,
such as the annual US and European conferences organised by SCIP,
and others are organised on an ad hoc basis by professional con-
ference organisers. Although the latter tend to ebb and flow in
frequency depending on the level of interest in the subject, they are
used by competitive intelligence companies as a method of showcas-
ing their services and specialisations and therefore provide an oppor-
tunity to see them in action.
It is always worth asking known users of competitive intelligence,
trade associations and business consultants (including the Business
Links) for qualified suggestions on suitable intelligence agencies. This
is an excellent method in that anyone recommending an agency
should also be in a position to identify their strengths and weaknesses.
 Competitive Intelligence Resources 137

Finally, a number of competitive intelligence agencies actively

promote their services by direct mail. Rather than consign such
material to the waste bin, it is worth reading and filing for future
reference when a need arises. Active promotion suggests that an
agency has confidence in its services and should be worth considering.

Assessing the Suitability of Competitive Intelligence

Agencies
Many of the normal methods of assessing the suitability of a service
provider do not work when it comes to competitive intelligence. A
reputable agency will not reveal the names of clients they have
worked for nor will they show examples of reports they have written.
As all of their work is custom-designed to meet the specific needs of
each client's specific requirements, they are not able to show general
studies that provide some tangible evidence of their ability to obtain
high-quality intelligence. Nevertheless, there are other indicators of
apparent suitability. The most important of these are:
. Ethical standards
. Size and organisational structure
. Personnel
. Language
. Understanding
. Supervision and control
. Apparent compatibility with the client organisation
. Track record
. Conflicts of interest
. References
. Premises
. Responsiveness
. Brochures and Internet sites

Ethical standards

Before considering any other aspect of a competitive intelligence

agency's operations it is essential to establish the ethical standards
by which they operate. This applies primarily to the techniques they
are prepared to use and the basis on which they are prepared to
collect intelligence. The ethics of legitimate competitive intelligence
collection are set out at length in Chapter 15 and agencies that are
prepared to ignore these guidelines can cause their clients severe
embarrassment. The acid test is whether they would do anything that
138 Competitive Intelligence

their client would not like to see reported in the media and could not
defend if challenged. In initial discussions it is worth establishing the
types of intelligence the agency would not be comfortable trying to
collect. In other words, when does the agency say `no'? Agencies that
claim to be able to collect highly confidential intelligence should be
avoided since they are likely to be using techniques that are either
unethical or illegal.

Size and organisational structure

Competitive intelligence is a business into which the cost of entry is
low. This results in a proliferation of sole practitioners and small
companies working alongside medium-sized companies. Within the
normal definition of the term, there are no large competitive intelli-
gence agencies. The size and legal format of the organisation say little
about its suitability to carry out any individual project, but it is
essential to recognise that not all organisations will have the skills and
resources to carry out projects equally well. A small specialist unit
may be ideal if they have directly relevant experience and/or the top
person is going to devote a high proportion of his or her time to the
project. Even so, companies with substantial resources and a broad
range of skills may be better positioned to carry out large complex
projects.
There is a perennial question about whether it is better to be a big
fish in a little pond or a little fish in a relatively big pond. The
advantage of being a major client of an agency is that it will normally
result in preferential treatment. No agency wants to lose a major
source of business and will tend to perform consistently well to ensure
that this does not happen. The size of company in which this can
be achieved depends entirely on the volume of business that is to be
placed.

Personnel
The quality of all projects is dependent on the professionals that will
carry them out. A primary indicator of suitability is their educational
background and their experience in intelligence collection. Particular
attention should be paid to the senior staff assigned to the account
since it is their abilities, even more than those of the executives, that
will determine the quality of the project. Beware of professional sales
representatives who have a high order of skill but will vanish off the
scene as soon as a contract is placed. They have a role to play but may
not have the time or the ability to influence the quality of the project.
 Competitive Intelligence Resources 139

Supervision and control

The level of involvement of the management of the agency in the

conduct of the survey is an important indicator of quality. Most
clients will be best serviced by an organisation that involves its senior
staff in the specification of the research, monitoring progress and the
interpretation of the findings. Indications of excessive delegation to
junior staff should be treated as a serious warning signal.

Language

Agencies that make excessive use of security jargon and military

anecdotes should be viewed with caution. It suggests that they see a
close association between the worlds of military and competitive
intelligence and may be somewhat cavalier in the techniques they
are prepared to use on behalf of their clients.

Understanding

It should be clear from the first encounter that the agency fully
understands that obtaining competitive intelligence is not an easy task
and that there are certain types of intelligence that may prove
impossible to get. They should also show that they realise that an
intelligence programme should be stopped if it becomes evident that it
will not succeed. There is little point in wasting a client's budget on
seeking the unobtainable.

Compatibility

The research process requires considerable interaction between the

client and the agency. The primary contact in the agency therefore
needs to be a person who not only has the appropriate level of skill
but also commands the confidence and respect of the client as well as
being sensitive to the client's requirements.

Track record

Relevant experience can be an important indicator since it is likely to

shorten the learning curve within the agency and will enable them to
bring a higher level of industry knowledge to the problem. Although
agencies cannot reveal the nature of specific projects in which they
have been involved they should be able to state the sectors in which
140 Competitive Intelligence

they have extensive experience and be able to support that by talking

knowledgeably about each sector. However, it is important to distin-
guish between the experience of the company and that of the
individuals within it. Company experience may be irrelevant if the
individuals that gained it have left. Individual experience is relevant
regardless of the company within which it was gained.

Conflicts of interest
High levels of expertise in a sector may mean that an agency has
potential conflicts of interest. Unlike other research services, it is
difficult for an agency to work for more than one client in a sector. In
order to be effective agencies need to be party to intelligence about
their client's operations and aspirations, and it must be perfectly clear
that there is absolutely no risk that this will fall into the hands of
competitors. This is difficult to guarantee if an agency works for
direct competitors. The exception is where sectors are so fragmented
that they can be treated as a number of separate businesses. Pharma-
ceutical companies compete but are not necessarily active in the same
therapeutic areas. It is therefore possible for an agency to work for a
number of pharmaceutical companies but on separate therapies.

References
No competitive intelligence agency should volunteer a list of previous
clients. However, if required, they should be able to persuade some
previous clients to provide references for them. However, when
considering these it should be remembered that agencies will refer
potential clients only to their successes, not their failures.

Premises
A visit to the agencies' premises will show whether the physical
resources of the company appear to match their written or oral
statements. A visit permits observation of the approximate number
of staff, the type of staff employed, the corporate culture and the
quality and organisation of the premises. Lavish premises can be
variously interpreted. They may indicate that the organisation is
successful, believes that a good working environment is conducive
to quality workmanship and that it looks after its staff. It may also
suggest that the fees are high. Poor-quality premises may suggest that
the fees will be low but also that the quality of the research output will
also be low.
 Competitive Intelligence Resources 141

Responsiveness

A company will be at its best when in the process of winning business;

any shortfalls in responsiveness at this stage could indicate that
there will be more serious delays once assignments are actually
commissioned.

Brochures and Internet sites

Sales literature has to be treated with caution but its quality and
content say something about the company. Poor brochure material is
probably more significant than high-quality documentation. It is
relatively easy to put a good brochure together and a company that
is not concerned with brochure quality may not be committed to the
overall quality of its service.
Internet sites are also easy to construct but a number of companies
use them as an opportunity to demonstrate their expertise. A simple,
well-designed and interesting site can be equally as effective as a good
brochure but the Internet provides an opportunity to extend data
provision to include white papers on competitive intelligence techni-
ques and applications and other material which can boost confidence
in the company's abilities.

Compiling a Shortlist

The review of intelligence agencies should be used to compile a

shortlist of potential suppliers who are apparently capable of carrying
out intelligence exercises satisfactorily. The shortlist should contain a
maximum of three or four agencies ± any more will impose a heavy
burden when briefing potential suppliers, will tend to be confusing
during the evaluation of proposals and is unfair to the intelligence
agencies, given the effort required from them in the next stages of the
selection process. Furthermore, intelligence agencies will tend to put
far more effort into the preparation of their proposals if they have a
one-in-three or -four chance of success, rather than a lottery involving
tens of suppliers.
The shortlist will tend to gravitate towards companies that appear
to have the right background but it is advantageous to select
companies of different sizes and types since they are likely to
construct different approaches.
142 Competitive Intelligence

Approved Research Contractors

It can be advantageous to seek a meeting before a brief is issued or
even at a stage when no specific research project is in mind.
Companies intending to use intelligence collection services regularly
should have a list of agencies they could use and which covers all of
the skills and resources they are likely to require. Some companies
that contain a number of divisions that could commission research
projects go as far as having an approved list of suppliers from which
all vendors have to be chosen. Vetting suitable intelligence agencies is
a time-consuming process, which should be repeated as little as
possible. Educating intelligence agencies into the practices, ways of
thinking and the specific requirements of an individual client is also a
lengthy process which is best carried out with a limited number of
potential suppliers but will pay major dividends in getting what is
required. There is also a security problem. The more agencies that
are briefed the greater the risk that information about a client's
intelligence-gathering activities will leak into the outside world.
Knowledge that a company uses market research has no value to
its competitors; knowledge that a competitor engages in competitive
intelligence is extremely valuable if only to ensure that counter
intelligence techniques are fully deployed. Companies included in
the shortlist of suppliers should all be asked to sign a blank non-
disclosure agreement covering all information provided to them by
the company.
The final stage in commissioning an intelligence project is the
selection of the agency to use. Buying competitive intelligence is
much like buying any other intangible service and has much in
common with selecting market researchers, lawyers, accountants
and management consultants. The main task is to select an organisa-
tion that is comfortable to work with and will deliver accurate
intelligence at a price that matches the budget available.

The Proposal

Those invited to quote for intelligence projects should respond with a

proposal that will be the basis for selection of the agency to be used.
At its simplest in situations where the client has provided a very
precise specification of what is required the proposal will contain the
agencies' credentials, a response to any questions raised in the brief,
suggestions for improving the project or reducing costs, and a fee.
 Competitive Intelligence Resources 143

Where the brief does little more than outline the problem the proposal
needs to be much fuller and should contain:
. The intelligence objectives
. The intelligence topics to be covered
. An indication of the likely success in obtaining each item of
intelligence
. The approach, the types of intelligence-gathering techniques to be
deployed, the numbers of interviews and the intelligence sources to
be targeted
. The methods by which the results will be presented to the client
including the structure of the written report and the number and
format of meetings
. The fee
. The time the process will take to complete
. The intelligence team and their qualifications
. Any related experience the agency has
It should be borne in mind that some agencies write better
proposals than research documents, but the content, format, presen-
tation and amount of thought provided in the proposal should give a
reasonable guide to the ability of the agency.
When evaluating proposals there are a number of indications of the
suitability and competence of the agencies that have prepared them.
The most important is the amount of thought that has gone into the
definition of the information to be sought and the methodology.
Proposals that merely add a cost figure to the brief suggest that the
agency has not given much thought to what is required and may not
fully understand the problem. High levels of value added in the form
of analysing the intelligence objectives, adding questions that will
enhance the ability of the project to solve the specified problem and
creative thought to the methods of obtaining the intelligence are all
signs of an organisation that is not only competent but is genuinely
interested in carrying out the project. Marks should also be given for
a proposal that suggests alternative approaches which result in
different costs ± thus permitting the client to match the research with
the budget that is available.

Assessing Alternative Offers

The primary yardsticks by which the quality and suitability of

alternative offers should be assessed are:
144 Competitive Intelligence

. The degree to which the agency understands the competitive

situation of the user and the purposes for which the intelligence
is required
. The extent to which the offer meets the information requirements
specified in the brief
. The extent to which the proposal shows that the agency has
thought about the problem and has modified the approach and
the intelligence yield to provide a better overall result for the client
. The proposed methodology for collecting intelligence and the likely
success in achieving the intelligence objectives
. The extent to which the methodology is caveated ± vague promises
and caveats may be used as reasons why important items of
intelligence are omitted from the report that is finally delivered
. Presentation ± be wary of proposals that are double-spaced and
printed on thick paper to give an impression of bulk
. Irrelevant content ± be equally wary of proposals that contain a
high proportion of standard and irrelevant content which is
obviously designed to impress, is obviously included in all propo-
sals but adds nothing to help the reader assess the suitability of
the agency
. Language ± the use of intelligence jargon, such as `humint' and
`sigint' is often a sign that the agency has a perception of itself as
bordering on the espionage business and may be prepared to use
unethical techniques if the normal processes fail to provide a result
. The cost

Cost will be a primary consideration for most intelligence buyers

and one aspect of proposals that sometimes surprises clients is the
extreme variations in the cost that can be attached to alternative
approaches. The cost of a research project is normally made up of a
daily rate for executive time, overheads and expenses. In most
countries, when comparing like for like, the costs tend to be very
similar. This means that variations in cost can occur for a number of
fundamental reasons including:

. The fact that the executives employed on the project are of differing
levels of seniority and are remunerated at different rates ± even sole
practitioners can operate at significantly different daily fee rates
depending on their experience and their confidence that they can
persuade clients that they are worth higher rates
. An overhead structure that varies according to the levels of super-
vision and the costs of the staff and premises
 Competitive Intelligence Resources 145

. The varying efficiencies of the organisations, some working on a

high intelligence yield per day and lower inputs of executive time
than others that require more time input to achieve the same result
. Varying levels of profit expectations
Other factors that can cause significant variations in cost are:
. Differing interpretations of the difficulty of obtaining the intelli-
gence that is sought
. The fact that some agencies may already have inside knowledge of
the business which they will contribute to the solution
. The amount of contact time between agency and client that has
been budgeted
. The desire, or lack of desire, to cost keenly in order to win the
contract
Whilst the above can all be true, the most likely reason for
variations in the cost of proposals produced in response to an
identical brief is that the different agencies have interpreted the brief
differently and are offering different solutions. This may not be
obvious from the words contained in the proposal and before
accepting a low-cost proposal, or dismissing one that is offered at a
higher cost, it is well worth discussing the offers in detail in order to
understand precisely what the differences are due to.

Presentation of Proposals
In the case of large complex assignments the intelligence agencies may
be invited to present their proposals to the client organisation. This
provides the agency with an opportunity to stress the reasons why
they feel they are suited to carry out the exercise. It provides the client
with an opportunity to ask further questions and test the statements
made in the proposal.

Negotiations
A more acceptable but higher-cost proposal does not have to be
accepted without negotiation. Professionals no longer place them-
selves in a position in which discussions of fees are avoided and there
is always a deal to be done. Normally this will involve a compromise
between trimming the methodology, trimming the intelligence yield
and cutting the agency's profit margin.
146 Competitive Intelligence

Note

1. The job title given to in-house competitive intelligence managers can be

critical. Although a title containing the words `competitive intelligence'
may be completely accurate it is not one that can be used outside the
company when collecting data. The words Business Intelligence have
therefore become a euphemism for Competitive Intelligence in many
organisations.
13 The Intelligence
Briefing

Obtaining competitive intelligence involves four key stages. They

commence with the definition of the intelligence topics to be covered,
as already discussed, and follow with a decision on who is to collect
the intelligence, briefing them and obtaining a proposal, which is the
internal analyst's or intelligence agency's response to the briefing they
have been given.
An intelligence exercise is only as good as the initial brief. If
intelligence users fail to set out what they require it is unlikely that
the right result will be obtained. A good briefing, which may comprise
a briefing document and a briefing meeting, flows naturally from the
definition of the key intelligence topics but to ensure that the exercise
is successful the analyst must be given more than a list of questions.

The Briefing Document

An intelligence brief needs to contain all of the information required

to decide not only what intelligence is to be collected but also the
potential sources of intelligence and the data collection methods that
are to be used. Obviously the briefing document needs to be more
comprehensive for external agencies but it is a mistake to assume that
internal intelligence staff will automatically know all of the details
required to ensure a good project. The content of the ideal intelligence
brief should include:
. Background information
. The product or service to be covered
. The competitors to be covered and any relevant internally available
information on them
. The overall objectives of the exercise

147
148 Competitive Intelligence

. Type of intelligence programme required

. Key intelligence topics
. Thoughts on the intelligence approach
. Documents
. Potential intelligence sources and contacts
. Exclusions from the intelligence process
. Confidentiality
. Timing
. Budgetary constraints
. Requirements from the agencies submitting proposals
. Date by which a proposal is expected
. Contacts within the client organisation
. Code of ethics

Background information

Background information should be given on any aspect of the

company and its activities that could be relevant plus the market
and competition situation in which the company operates. The need
for background information will be greatest in the case of relatively
unknown companies and highly specialised businesses which analysts
are unlikely to have encountered before. Useful background informa-
tion could include:
. An outline history of the company
. The nature of the market in which it operates
. The company's development within the business sector being
covered
. The overall competitive environment
. The situation which has created the need for the intelligence

The product or service to be covered

The products or services to be covered by the exercise should be

described in full. The description should cover:
. Product or service characteristics
. Applications
. Product or service strengths
. Distribution methods
. Users
. Known prices
. Points of differentiation between competitive products
 The Intelligence Briefing 149

The need for a detailed description is more important in the case of

technical or specialised products or services. However, even in the
case of well-known consumer items it may be helpful to describe the
attributes of the product which have helped it gain its current market
share and the methods by which competitors are believed to have
achieved their positions within the market.

Competitors to be covered and relevant information

The brief should state which competitors are to be covered in the

programme, the aspects of their services that are to be covered and
any basic reference data that are already known. The latter may
include their main locations, their products and services, segments of
the market they are operating in and length of time in the business.
Intelligence users are sometimes reluctant to hand over information
they already hold on the grounds that the data may be played back to
them or may bias the findings. However, there is little point in paying
again for intelligence that already exists and is thought to be reason-
ably accurate. Anything that improves the efficiency of the intelli-
gence collection process should be regarded as beneficial and it is far
better to use the budget to collect new intelligence.

The overall objectives of the exercise

The objectives of the exercise must be clearly stated in terms that are
as specific as possible. They should commence with a definition of the
problem that has given rise to the need for intelligence (such as
bidding for a major contract, planned introduction of a new product,
entry into a new market, loss of market share, poor profit perfor-
mance or suspected impending competitive action). The objectives
should also state how intelligence is expected to help solve the
problem (such as assisting tactical competitive decisions or providing
the basis for an overall competitive strategy).

Type of intelligence programme

The brief should state the type of intelligence programme that is

required, namely quick tactical intelligence gathering, competitor
profiles or an on-going competitor-tracking exercise.
150 Competitive Intelligence

Key intelligence topics

The key intelligence topics specified by the intelligence user should be

stated. At this stage the list can be as comprehensive as possible,
though experienced intelligence users and others who have a feel for
the magnitude of the task should ensure that the shopping list is likely
to be achievable, given the difficulties of collecting intelligence, and is
broadly consistent with time and budgetary constraints.
The topics should be prioritised so that the analysts know the items
that are regarded as essential, those that are very useful and those that
would be nice to have but not worth a special effort to obtain.

Thoughts on the intelligence approach

A high proportion of intelligence users have no contribution to make

on the intelligence-gathering approach that should be adopted and
nor should they. It is up to the professionals to convince users on the
most effective, the most cost-efficient or the least-cost routes to
obtaining intelligence. Nevertheless, there are areas on which users
that know the business can comment and, in doing so, provide
analysts with better insight on how intelligence can be collected.
The most valuable contribution could be an analysis of the structure
of the business and the types of organisations operating in it with an
assessment of which types of organisation are likely to know most
about the activities of competitors.

Documents

The brief can usefully include any documentation that is relevant.

This normally includes brochures and catalogues but can be extended
to internal reports and other evidence that might be helpful in
orientating the agency preparing the proposal.

Potential external intelligence sources and contacts

The intelligence-gathering process normally requires as many con-

tacts and references as possible. Intelligence users should therefore
provide any assistance they can from their knowledge of the business,
including:
 The Intelligence Briefing 151

. Potential sources of intelligence ± this could include published

sources, useful websites, employees that have worked previously
for competitors, other staff that might have competitor knowledge,
known staff of the competitors, and external contacts that might
have knowledge of competitors' activities, such as trade association
contacts, journalists or brokers' analysts that are known to have
studied the competitors
. Opportunities to reach sources ± such as forthcoming conferences,
exhibitions or trade shows
. Related research already completed and potentially available
. Current industry issues that could be used by analysts as a method
of initiating a dialogue with intelligence sources

Exclusions from the intelligence process

If there are organisations or individuals that should not be contacted

in the exercise, for whatever reason, they should be identified in
the brief.

Confidentiality

All competitive intelligence is carried out on a confidential basis and

the results should remain the property of the sponsor. Requiring
agencies to sign a non-disclosure agreement before sending them the
briefing document may reinforce this. It is also reasonable to solicit
an undertaking that an external agency will not carry out assignments
for competitors for a defined period (18 months to two years) after
the completion of the current project.

Timing

The brief should state clearly when the results of the exercise are
required. Timing is always critical in competitive intelligence and the
delivery of the results will often need to be tied in with other activities
that are taking place. It is helpful for internal analysts and external
agencies to know the overall timescale that is envisioned, such as:
. The dates by which the project is expected to be commissioned
. Key meetings during the programme
. The expected completion date
. The anticipated date for a discussion of the findings with the
intelligence users
152 Competitive Intelligence

Even in the best-run companies these dates may slip for reasons
which are nothing to do with the research, but knowing what is
expected will enable the analyst to design an approach which will
meet initial plans. The only word of warning is that tight sets of
commissioning and delivery deadlines which are consistently missed
soon earn companies reputations for not being serious.

Budgetary constraints

There are two diametrically opposed schools of thought on providing

an indication of the budget in the briefing document. The first
believes that agencies should be handed a problem and it is up to
them to design and cost the most appropriate intelligence collection
approach. The second thinks that the provision of an indicative
budget will ensure that the approaches proposed are within the limits
that the company can afford. If money is no object the first of these
two alternatives poses no serious problems. Nor is it a problem if the
intelligence user already has a reasonable idea from previous experi-
ence of what the exercise should cost. The problem arises with new
competitive intelligence users who have no idea of what it can cost.
For them an open-ended request for proposals will commonly result
in surprises, usually unpleasant. Giving a budget indication avoids
this problem, providing the budget is realistic. To get to this point the
first-time intelligence user may need to do a little preparatory research
on costs, part of which should be discussions with the intelligence
agencies selected to submit proposals.

Requirements from the research companies submitting proposals

The brief should state any information that the client particularly
requires the internal analyst or intelligence agency to include in the
proposal. This could include:

. An indication of the feasibility of achieving the intelligence

objectives
. An outline of previous experience in similar types of project
. A biographical note on the analysts who would carry out the
exercise
. Organisations from which the client can seek references on the
intelligence agency
 The Intelligence Briefing 153

Date by which a proposal is expected

As a separate item the briefing document should state when the

proposal is required. Reasonable time should be permitted for
proposal preparation, taking account of the fact that the analysts
may require a meeting to discuss the project before preparing a
proposal. Proposal writing, particularly for large, complex projects
requiring preliminary research, can take a considerable amount of
time but the norm lies between several hours and several days.

Contacts within the client organisation

Finally the brief should state the points of contact between the client
organisation and the analysts. This should include the primary point
of contact, to whom the proposal should be sent and to whom
questions can be addressed.

Code of ethics

Many users of competitive intelligence have prepared codes of ethics

that their own staff and external agencies working for them must
adhere to. If these exist they should be sent with the briefing
document.

The Briefing Meeting

The briefing document should be sent to agencies that have been

shortlisted as capable of carrying out the project, together with an
invitation to quote. Except in the case of the smallest and most
straightforward intelligence requirements, the submission of a brief-
ing document should be accompanied by an offer to meet with
analysts to discuss the requirement in more depth. The meeting can
take place at either the client's premises or the agency's offices. The
former permits the client to invite additional staff members to discuss
the requirement, to demonstrate products and to call for additional
documentation; the latter provides an early opportunity for the client
to see the analysts in their own environment.
The purpose of the briefing meeting is to provide an opportunity
for the analysts to ask questions and to get the intelligence user to
elaborate on the brief. It also enables the analyst to obtain a feel for
the scale of the intelligence exercise that is expected, to obtain
154 Competitive Intelligence

feedback on the likely acceptability of alternative approaches and to

impress the client with his or her knowledge and competence. Both
client and analyst should benefit from the exchange, the former by a
better understanding of what is required and the latter through a
deeper appreciation of what it is possible to obtain for the budget that
is likely to be available.
A briefing meeting is an opportunity to observe agency personnel
in action. The indicators of agency suitability that can be gained from
the meeting are:
. The quality of the agency representative ± he or she will tend to be
one of their best staff and may not be typical of the rest of the team
but if he or she is not good enough the remainder are unlikely to be
better
. The level of market and industry knowledge that is displayed
. The apparent level of skill in competitive intelligence and the ability
to explain the processes, the factors which determine the quality of
the output and the compromises which may need to be made to
achieve a result which is cost-effective for the client
. The level of honesty and the extent to which the agency will keep to
ethical guidelines
. The extent to which the agency is prepared to be flexible to meet
client requirements
. The commercial approach of the agency ± an overtly `hard nosed'
commercial approach may indicate that the information will be
superficial; an uncommercial, academic approach may indicate that
the results will be too theoretical and unusable
14
Controlling the
Intelligence
Collection Process

Good intelligence results from an effective working relationship

between intelligence users and intelligence gatherers, be they an
internal department or an external agency. Each partner in the
relationship must contribute the knowledge and skill that they derive
from their respective backgrounds in order to get the most from the
intelligence budget. Although it may be tempting to users to let the
intelligence gatherers work to the brief and implement the project
without interaction (or interfering), this can result in the outcome
being less satisfactory. This is truest when working with outside
intelligence agencies who are not party to the working culture within
the commissioning company and do not have automatic or ready
access to internally available intelligence.
Clients require skills in working with outside agencies so that they
can make an effective contribution to the intelligence-gathering
process. The steps by which clients can make an effective contribution
to projects are:
. A full face-to-face briefing of the intelligence-gathering team prior
to the commencement of the assignment
. Approval of any discussion guides that will be used during the
primary intelligence-gathering activity
. Regular progress reports during the survey
. Regular reviews of the intelligence yield
. Final presentation of findings
. An independent assessment of the quality of the results

155
156 Competitive Intelligence

Project Briefing or `Kick-Off' Meeting

At the commencement of all assignments the intelligence users should
meet the entire intelligence-gathering team and brief them. In an ideal
world these meetings should be in person but if this is not possible
there should at least be telephone conference calls with enough time
allowed to cover all the questions that could be asked. The briefing
should be designed to ensure that the staff responsible for collecting
intelligence are equipped with all the background information they
need to carry out the project efficiently and within the time deadlines
set for completion. On short assignments it is sometimes tempting to
dispense with briefings. This is usually an error, largely because too
much of the time available to collect intelligence is then wasted
learning background information and seeking intelligence that is
already available within the client department.
The topics that a typical project team briefing should cover are:
. Company background and products or services to be covered
. Reasons for requiring the intelligence
. Decisions that the intelligence is intended to support
. Key characteristics of the competitive environment
. Intelligence that is already held and known to be accurate
. Contacts
. Client actions
. Timetable

The company background and products or services to be covered

If the client is using an intelligence agency for the first time or an

internal staff member that has not had previous contact with the
commissioning division, the briefing should cover the company, its
structure and its product ranges or services. This should include the
provision of any brochures and technical literature that describe the
products that are to be covered in the project.

The reasons for requiring the intelligence

The reasons for commissioning the intelligence-gathering programme

should be covered in depth. This will provide the analysts with a clear
idea of why they are being employed and will increase their sensitivity
to intelligence that may not be in the original brief but that may prove
to be available and relevant to the problem that the company is facing.
 Controlling the Intelligence Collection Process 157

The decisions that the intelligence is intended to support

The key decisions that the company is facing should be described

together with the relevance of the intelligence to those decisions. It is
important to make the distinction between tactical intelligence that is
required quickly to support short-term decisions and intelligence that
is required on a longer-term or continuous basis to inform strategic
decisions.

Key characteristics of the competitive environment (where known)

Those responsible for intelligence gathering need to be fully briefed

on the nature of the competitive environment. This will help them
organise the intelligence-gathering process and ensure that all relevant
segments and sources of information are covered. Remember that
good intelligence requires the broadest circle of contacts possible and
the client briefing should be designed to ensure that as many as
possible are made known to the intelligence-gathering team.

Intelligence that is already held and known to be accurate

There is no point in asking the intelligence gatherers to regenerate

what is already known by the client. Rumours and suspicions about
competitors should also be discussed, as long as it is made clear that
they are not confirmed and should be tested. Any documentary
evidence of competitors' activities in the form of reports, papers or
price lists should be provided to the intelligence-gathering team. If the
client is aware of any relevant exhibitions or conferences that are
taking place, they should be made known to the research team. If
practical the timescale for the project might need to be adjusted if
particularly useful events are scheduled to take place outside the
original deadlines.

Contacts

Primary intelligence requires contacts and if these are not readily

available they have to be identified as part of the research process.
Time can be saved and the quality of the intelligence improved if
known potential sources can be identified and provided to the
intelligence-gathering team. Where practical, the team should be
given the opportunity to speak to any previous employees of compe-
titors that are now employed by the commissioning company.
158 Competitive Intelligence

Client actions

Any actions to be taken by the client such as the provision of contacts

or the provision of any documents need to be agreed together with the
timing of their availability.

Timetable

The timetable for the assignment should be agreed together with

milestone events, reporting points and meetings.

Review of Discussion Guides

A full review of the discussion guides to be used for primary

intelligence gathering is usually helpful. Clients can make a valuable
contribution to the questions themselves by helping to ensure that
they make sense in the context of the enquiries being made and sound
neither too naive nor too informed. The client should also ensure that
any technical terms are correct and provide guidance on the outer
limits of the responses that should be expected. This information will
permit the researcher to spot unreasonable answers and challenge
them in the course of the discussions.

Progress Reports

Throughout the duration of the project the client should seek regular
formal and informal updates of progress. These should be designed to
ensure that the project is running on time, that the data that are
required are being obtained, whether modifications to the approach
or the intelligence yield are required and whether there are additional
contributions that the client can make to the project. Progress meet-
ings can take the form of informal telephone contact and interim
presentations at which findings are presented and discussed.

Reviews of the Information Yield

One of the key skills in primary competitive intelligence gathering is

knowing when the limits have been reached and that it is time to stop.
This calls for considerable frankness on both sides. Gatherers should
 Controlling the Intelligence Collection Process 159

not see a failure to obtain intelligence as a sign of weakness. Providing

they have exhausted all potential sources it is preferable to admit that
there is no point in proceeding further than to waste resources on
seeking to obtain the unobtainable. Clients need to recognise that
failures will be inevitable for a number of good reasons and that there
comes a time when it is not reasonable to insist that intelligence
gatherers continue to pursue sources. The benefit of frequent report-
ing meetings is that warning signals can be identified at the earliest
practical moment and resources reallocated to more fruitful enquiries.
In addition to intelligence that is unobtainable the review process
should also be structured to consider whether:
. The research findings suggest that there are additional aspects of
competitors' activities or the competitive environment that require
investigation
. There are additional competitors that should be covered
. Strongly held beliefs about competitors are being challenged and
that additional supporting evidence will be required in order to
convince management that the new information is accurate
. New competitive challenges have been identified that are outside
the original framework of the assignment and will require extra
effort to cover

Final Review of Findings

Once the intelligence report has been written and submitted to the
client, the intelligence-gathering team should be invited to present its
findings to those of the staff and management that will use the data.
This makes a vital contribution to the process of selling competitive
intelligence internally by permitting management to understand the
results and, if necessary, challenge the methodology, the interpreta-
tion and the conclusions reached by the intelligence team.
15 Legal Factors and
Ethical Guidelines

Ethics, or what is deemed to be good or bad in human conduct, is a

key issue in all types of research activity. The part of competitive
intelligence that focuses on the study of competitors is particularly
prone to ethical assessment and is also subject to legal constraints.
This is partly because there are many who regard it as an invasion of
privacy, and therefore inherently unethical, and partly because there
have been widely publicised situations in which the methods used to
collect intelligence have been open to criticism. Competitor intelli-
gence suffers from the fact that it is frequently compared with
activities that do not adhere to the same ethical standards as other
research activities and also that there are organisations that are
prepared to break the law in order to acquire intelligence, if the price
is right. These organisations are not part of the competitive intelli-
gence community but are trading on the back of the growing demand
for competitor intelligence.
An eminent journalist once gave a presentation on how his team
obtained information for investigative reports. He stated that there
were three main methods. If people wanted to see a situation exposed
in the press they often volunteered information to journalists. If it was
not volunteered the journalist might decide to pay for it. If it could
not be obtained voluntarily or by payment the journalist might
engage in some sort of subterfuge to obtain it. Given the types of
assignments the team of journalists was working on, it was felt that
the ends more than justified the means. The audience of competitive
intelligence professionals silently wished that their task could be that

160
 Legal Factors and Ethical Guidelines 161

easy but also wondered why the press displays such a high propensity
to portray competitive intelligence as unethical.
Competitive intelligence takes place within a legal framework that
has strengthened over the 1990s though not as dramatically as the
legislators would have the world believe. Much of what is actionable
under the new laws was already possible, though the routes were less
clear and they were not aimed specifically at intelligence. Although
the need to protect the assets of organisations and individuals was
universally recognised, soft assets, such as information, were not
regarded with the same level of seriousness as tangible objects. The
dawn of the information age and the mushrooming of companies that
had very few assets other than their intellectual property has changed
the perception of what it is necessary to protect.
The legal and ethical issues of which competitive intelligence
analysts must be aware are:

. Criminal law
. Copyright law
. Antitrust legislation
. The Economic Espionage Act
. Data protection legislation
. Industry and corporate codes of ethics

Criminal Law

Criminal law protects companies and individuals from theft, fraud

and trespass. It also covers some specific activities such as phone
tapping. Unfortunately the law can be difficult and expensive to use
by organisations as protection for their trade secrets, except in the
most blatant cases, and the penalties are often too low to provide
a real deterrent. There are a number of grey areas that tempt
organisations that are prepared to turn a blind eye to practices that
are not strictly illegal but are clearly unethical. The classic case
relates to documents that are thrown into waste bins. Obtaining them
whilst they are still on the company's premises is theft and may also
involve an act of trespass; retrieving them once they had left the
company's premises and are therefore `in the public domain' has been
judged to be legal, though there are few that would regard it as
ethical.
162 Competitive Intelligence

Copyright Law
Copyright law prevents the copying and redistribution of all written
material without the permission of the author. Companies operating
competitive intelligence systems are probably more likely to infringe
copyright law than anything else. The `fair use' rules state that it is
possible to post extracts from published works, journals and news-
papers on a corporate competitive intelligence system but posting
complete articles is an infringement of copyright. On-line vendors of
information, such as Dialog or Reuters, normally restrict their
customers' rights to copy, store or sell the information that they
provide, in its original format. Copyright law also protects informa-
tion on competitors' websites.
There are two options for those wishing to use published informa-
tion. If it is required in its original format it is possible to buy a licence
that permits the use of articles in their original format. If this is not
required, copyright law does not apply to information that has been
reworked into an analysis, which is what most analysts require it for.

Competition and Antitrust Legislation

In Europe and the United States all in-house staff gathering compe-
titive intelligence must take care that their activities cannot be
interpreted as being anti-competitive. In particular, exchanges of
information on pricing, discounting and marketing practices can
easily fall foul of antitrust and competition legislation by suggesting
either collusion between suppliers or the formation of an illegal cartel.
It is worth noting that the Office of Fair Trading in the United
Kingdom and its equivalents elsewhere are quite vigilant in their
searches for anti-competitive activity and keen to prosecute when they
feel they can prove that companies have infringed competition law.

The Economic Espionage Act

In the United States, any analyst tempted to step outside the ethical
code that governs their activities must consider the Economic Espio-
nage and Protection of Proprietary Information Act. Enacted in 1996
this makes it a Federal criminal offence to carry out certain actions
that are designed to obtain the intellectual property of another
organisation. The Act specifies that it is
 Legal Factors and Ethical Guidelines 163

an offense to steal, take or defraud another of a `trade secret'

relating to a product or service that has been produced by or placed
in interstate or foreign commerce, for the economic benefit of
someone other than the owner or for the benefit of a foreign
government. `Trade secrets' are defined as all kinds of financial,
business, scientific, technical, economic or engineering information
that their owners have taken reasonable measures to keep secret
and which have independent economic value because they are not
generally known to the public and are not readily known through
proper means.
Clearly the Act provides no protection for information that can be
identified by what it calls `proper means' or which the owner has not
taken `reasonable steps' to protect. But it is also clear that the types of
activity that are generally understood as being `espionage' are likely
to fall well within the bounds of the Act as could extremely aggressive
and deceitful primary data collection.
Misappropriation of trade secrets is also covered by individual
State laws that have adopted either the Restatement of Torts (1939)
or the Uniform Trade Secrets Act. This gives the owner of a trade
secret the right to sue for damages if they can show that it has been
acquired by improper methods. Improper is defined as taking it
without the owner's permission when reasonable steps had been
taken to protect it.
In addition to the specific Acts relating to trade secrets there are a
variety of other legal traps that the unwary collector of intelligence
can fall foul of if the data collection procedures can be shown to be
unreasonable. These include Unfair Trade or Business Practices and
Unjust Enrichment.1

Data Protection Legislation

European countries do not have the equivalent of an Economic
Espionage Act and rely on the broader protection provided by laws
protecting companies from theft, fraud, bribery, trespass and illegal
phone tapping. However, they have enacted legislation that has a
more directly restrictive effect on competitive intelligence in the form
of data protection legislation. In 1995 the European Union adopted
the European Data Protection Directive that required all member
countries to enact data protection legislation. This was designed to
protect the privacy of individuals by controlling the content and use
of databases containing personal information. This wording might
 164 Competitive Intelligence

suggest that it affects only large electronic databases but in practice

the definition covers any compilation of personal information about
an individual that is stored ± however small. Although this may seem
absurd and unenforceable, it has to be taken into account when
profiling the management of competitive companies. Given the im-
portance of individual managers in determining the actions of com-
petitors and the consequent need to know who they are and how they
work, data protection legislation strikes at the heart of competitor
intelligence.
The United Kingdom version of the legislation is enshrined in the
Data Protection Act enacted in March 2000. The requirements are
being introduced gradually over the period 2000 to 2007. The Act
states that in order to process personal information one of six possible
conditions must be fulfilled. These are that the data are being used:
. With the consent of the individual being studied
. In the performance of a contract
. To comply with legal obligations
. To protect the vital interests of the individual being studied
. For the administration of justice
. As a necessary component of legitimate interests
Some of these conditions seem very general and open to an
interpretation that permits personal profiling for competitive intelli-
gence. However, it is unlikely that a competitive intelligence assign-
ment would be regarded as being a legitimate interest, certainly when
viewed from the perspective of the subject.
Although purely European the legislation affects the activities of
analysts based in the United States through a privacy pact negotiated
between the European Union and the United States. This requires US
companies to abide by European rules when dealing with data on
European individuals.
The United Kingdom data protection legislation is policed by a
Commissioner for Data Protection who has the power to investigate
possible infringements and institute proceedings. Similar arrange-
ments apply in other European countries that have complied with
the European Directive.2

Codes of Ethics

Members of the Society for Competitive Intelligence Professionals are

required to abide by a Code of Ethics that provides a measure of
protection for their information sources, themselves and the compa-
 Legal Factors and Ethical Guidelines 165

nies they work for. The most important consideration in the Code is
the protection of information sources, since it is they that stand to be
damaged most in the event of any unacceptable practices. The
requirements the Code places on professionals are:
. To continually strive to increase respect and recognition for the
profession
. To pursue one's duties with zeal and diligence while maintaining
the highest degree of professionalism and avoiding unethical
practices
. To faithfully adhere to and abide by one's company policies,
objectives and guidelines
. To comply with all applicable laws
. To accurately disclose all relevant information, including one's
identity and organisation, prior to all interviews
. To fully respect all requests for confidentiality of information
. To promote and encourage full compliance with these ethical
standards within one's company, with third party contractors,
and within the entire profession
A cynic might say that the details of the Code are in the eye of the
beholder and that it leaves the door wide open for very liberal
interpretation. However, it does specifically exclude everything that
is illegal and any act of misrepresentation.
Most large companies have developed codes of business ethics for
their employees. Whilst these do not normally cover competitive
intelligence specifically some companies that make heavy use of
competitive intelligence have incorporated guidelines that they re-
quire their staff and any contractors working on their behalf to
adhere to. These tend to be substantially more restrictive and far
more detailed than the SCIP Code and are clearly designed to ensure
that there is no chance that their competitive intelligence activities will
result in a court action or, as is more likely, bad publicity.

Non-Disclosure

Competitive intelligence tends to be central to the strategies of those

companies using it and in order to provide actionable intelligence it is
often necessary to know highly sensitive information about the user
company. When it is necessary to provide such information to out-
siders in order to enable them to fulfil intelligence-gathering contracts
it is normal to require them to sign non-disclosure agreements that are
binding on any individual working on the contract. This provides a
166 Competitive Intelligence

measure of protection that the clients' trade secrets will not be passed
on to third parties. It is clearly in the interest of agencies to ensure
that such agreements are taken seriously and that all possible steps
are taken to ensure that no client information leaks out of their
organisations. This implies that agencies should operate secure work-
ing environments in which:
. The staff that are employed are discreet and honest
. Sensitive documents are accessible only to those staff that have a
need to see them
. When not in use documents are stored in secure cabinets
. Access to the premises is controlled
. All client documents are returned to clients on completion of the
contract
. Staff leaving the company are asked to provide an undertaking that
they will not disclose client secrets that they have been party to

Conflicts of Interest
Agencies providing competitive intelligence must exercise great care
when working for clients that compete in the same business. By the
same token clients need to be careful when selecting agencies, to be
sure that there is no risk that data that are client-confidential will be
passed, even inadvertently, to a competitor. The risk is greatest when
using agencies that specialise in a business sector, commonly the case
in pharmaceuticals and telecommunications. There are nevertheless
distinct advantages in working with agencies that know the business
well and in many cases these may override the fear that there could be
a conflict of interest.
The ultimate protection is for agencies to volunteer to work
exclusively for a single client in the sector or a specific segment within
the sector. Clients may also request an undertaking that the agency
does not work for a named list of competitors within a reasonable
time-frame.

Market Research and Competitive Intelligence Ethics

The ethics for competitive intelligence and market research have
much in common but differ in some key respects. The market
research business requires that practitioners protect the interests of
respondents by:
 Legal Factors and Ethical Guidelines 167

. Providing a full disclosure of information relating to the purpose of

the survey and the uses to which the data will be put before any
interviews are carried out
. Maintaining respondents' freedom to participate in a research
exercise or not
. Establishing the bona fides of the research agency
. Protecting the identity of respondents
. Not disclosing information provided by specific respondents
. Protecting respondents from sales approaches based on the data
they provide

The respondent is the most valuable asset that the research business
has and anything which reduces respondents' willingness to cooperate
in future surveys is not only unfortunate for the respondents but will
also undermine the ability of researchers to collect information. In
practice only a small proportion of the population have ever parti-
cipated in research programmes but there is a much higher level of
awareness of research and if awareness is accompanied by adverse
opinion it can be a powerful disincentive to cooperate.
In a competitive intelligence enquiry some of the above constraints
apply but given the purpose of the investigation some are clearly
unworkable. When dealing with primary intelligence sources it is not
feasible to tell respondents the full purpose of the enquiry. Were this
to be done, no intelligence would be obtained. Respondents are
protected in that there is no misrepresentation but not to the extent
that there is full disclosure. All respondents have the freedom to
participate or not depending on whether they feel it is in their interest
to do so and this may be based in part on the credentials of the
individual or agency carrying out the investigation.
The identity of respondents certainly can be protected and it is not
essential to make a link between data provided and the individual
providing it. It should be possible to demonstrate that the sources used
are qualified to provide the intelligence without going so far as to state
who said what. Nevertheless, in competitive intelligence it is common
to provide a list of intelligence sources, by job title if not by name.
The key difference between competitive intelligence and market
research is that whereas in research information about individual
respondents is rarely useful, in competitive intelligence information
about employees and the companies that employ a high proportion of
the respondents is the sole purpose of the enquiry.
A question that is rarely asked but is occasionally relevant is what
happens if, within a wholly ethical research approach, a respondent
168 Competitive Intelligence

discloses intelligence that they obviously should not have revealed

and, if used, could have a serious adverse effect on the future
performance of the company being investigated. One school of
thought takes the view that all is fair in love and war and whatever
a respondent can be tempted to disclose automatically enters the
public domain and can be used. The other admits that the respondent
has made an error of judgement and suppresses the intelligence.
Opinion may differ according to whether the observer is a source or
a recipient of intelligence but many users state clearly that intelligence
obtained under those circumstances will not be accepted. A similar
debate surrounds intelligence that is `found' in discarded waste, from
documents mislaid in public places or from laptops that are lost.

Deliverables

Agencies and in-house competitor analysts have a responsibility to

deliver the research programme that the client company or client
department has paid for. Unless alterations in methodology and
coverage are agreed in advance with the client, the number and type
of interviews, the content of the investigation and the depth and
quality of the analysis should be as set out in the research proposal. If
there are deviations these should be agreed with the client, they
should be explained and their impact on the results should be stated.
The report that is delivered to the client must be a fair representation
of what was found. Spurious levels of accuracy must not be claimed
and, where relevant, the levels of confidence in the data should be
stated. If for any reason the investigation failed to work or did not
yield the quality of results that were expected, this should be admitted
and a course of corrective action agreed.

Sanctions

Although the sanctions for breaking the law can be severe, unethical
behaviour does not necessarily result in any significant penalties.
Furthermore if ethical codes are not strictly enforced they may be
forgotten or ignored because the chances of being caught out are
remote. In practice, the worst sanctions that can be incurred from
unethical intelligence collection are the adverse publicity that can
 Legal Factors and Ethical Guidelines 169

result from public exposure and a possible loss of trust from

customers. The latter could offset any gains in profit that might
result from using the intelligence.

Regional Variations

Rather like beauty, ethics are in the eye of the beholder. Taken at a
global level, what is clearly unacceptable from an ethical standpoint
in some countries is regarded as normal practice in others. In large
parts of the world paying for information, for business and for
political favours in cash or kind is regarded as a perfectly normal
business practice but is not acceptable in Europe or North America.
Some governments permit their security services to collect commercial
intelligence, which they then disseminate to companies; others regard
this as an unethical use of publicly funded resources. The dilemma
this creates for multinational companies is whether they should apply
a global standard for all their operations or whether they should work
to local standards. Whilst there is undoubtedly a problem in persuad-
ing local staff to fight local battles with one arm tied behind their
back there is an even greater problem if local practices are exposed
internationally and used to demonstrate that a global company is
behaving unethically. Whatever explanation is given, it never sounds
convincing to audiences that have never worked outside Europe or
North America.

Notes

1. These and the Economic Espionage Act are described in detail by

William Duffey Jr, `Competitive Information Collection: Avoiding Legal
Landmines', Competitive Intelligence Review, vol. 11, no. 3, Third
Quarter 2000, pp. 37±53.
2. Chris Brogan has written extensively about European data protection
legislation. See John McGonagle and Chris Brogan, `The EU Directive
and the British Data Protection Act ± A Transatlantic Conversation',
Competitive Intelligence Magazine, vol. 3, no. 4, October±December
2000, pp. 45±8.
16
Processing and
Distributing
Intelligence

One of the key tasks of competitive intelligence analysts is to ensure

that their findings reach the staff that can use them within an
acceptable time-frame. This may sound obvious but is worth stating,
first, because a high proportion of intelligence is useful only for a
short period of time and, second, because staff that collect competi-
tive intelligence tend to be more security-conscious than most and
have a tendency to keep the most useful data to themselves.
The demand for competitive intelligence evolved long before the
development of computerised communication systems. This meant
that most intelligence changed hands manually in the form of written
documents. Written reports are still used in a high proportion of
companies, though now they may be e-mailed rather than physically
copied. However, the advent of efficient and secure internal commu-
nication systems means that there are ready mechanisms for collecting
intelligence from internal sources, for verifying it and for ensuring
that it is distributed quickly to the staff that can use it. Systems can
also be used by staff to notify the analysts of their competitive
intelligence requirements.
A common problem faced by all internal competitive intelligence
analysts is generating sufficient enthusiasm about their programmes
to persuade executives to spend time contributing information and
studying the results on a regular basis. Although they have no
problem gaining attention at times of intense competitive activity,
the enthusiasm for competitive intelligence tends to evaporate once
the crisis has passed. The threats posed by competitors are ever
present and unless staff continuously update their knowledge and

170
 Processing and Distributing Intelligence 171

act on the basis of small signals, what starts as a minor threat can
soon escalate into a crisis. This means that there is a considerable
premium to be placed on delivering intelligence by means that gain
the attention of its potential users and minimise the amount of time
they need to spend assimilating it.
The processing and distribution options that are available are:

. The distribution of written reports

. Meetings and forums in which competitive intelligence is presented
and discussed
. E-mail
. Corporate intranets
. Management (or marketing) information systems
. Knowledge management systems
. Tailored competitive intelligence systems

The choice will depend on the size of the organisation, the importance
attached to the use of competitive intelligence and the budget that is
available.

Written Reports

In medium and small companies the written report remains the most
cost-effective method of distributing competitive intelligence. Manual
systems are cumbersome and carry the risk of finding their way into
the wrong hands but are more user-friendly to the majority that still
prefer to absorb data off a page rather than a screen and at times and
in places where screens are not available. The attraction of the printed
page is amply demonstrated by the high proportion of electronically
distributed documents that are printed before being read.

Meetings and Other Forums

Meetings and other methods that bring executives together are rarely
time-saving but are more likely to gain attention than intelligence
reports. They also have the advantage that they can be organised at
times that do not eat into the working day, such as breakfast or lunch
meetings with a modest bribe in the form of refreshments!
172 Competitive Intelligence

The value of competitive intelligence is considerably enhanced

when staff using intelligence have the opportunity to discuss it with
those that collect it. The personal interface permits users to describe
their requirements in detail and, after the data have been obtained, to
ask questions. Meetings between staff are the most common method
of interacting but internal seminars, workshops and exhibitions are
also being used with considerable success. Seminars and workshops at
which intelligence is presented formally and then discussed bring the
benefit of collective working. This is further enhanced in the case of
workshops in which intelligence is used as the basis for developing
solutions to specific competitive problems.
Exhibitions have been used with some success to display material
on groups of competitors. Each `stand' at the exhibition covers a
single competitor and is manned by staff that have studied the
company. The material on display can comprise profiles of compe-
titor companies, examples of products, marketing materials, profiles
of the key management and deductions about their strategies.

E-mail

E-mail has the major advantage of gaining instant attention from

recipients. It is therefore an ideal medium for distributing competitive
newsletters or `alerts' containing information that needs to be acted
upon quickly.

Corporate Intranets

Intranets, the internal equivalent of the Internet, are rapidly gaining

acceptance as a vehicle for collecting and sharing information within
organisations. They have the advantages of simplicity and ease of use,
but are more difficult to tailor to competitive intelligence purposes
than database management systems. Furthermore, the intranet is a
passive participant in the knowledge management process. It connects
information gatherers with information users but does not in itself
overcome the cultural problems that act as a barrier to information
exchange. Nor can it filter or manipulate information unless special
software packages are installed on it.
Security is a serious issue with intranets and competitive intelli-
gence reports posted on them should be at least password-protected
in order to limit access to those authorised to read them.
 Processing and Distributing Intelligence 173

Management Information Systems

Management, or, more specifically, marketing information systems,
have been in existence for some time and can certainly incorporate
competitive intelligence. To be fully effective an information system
must be something more than a passive store of information. It also
needs to be dynamic in the sense that it:
. Stimulates the flow of information to users
. Triggers the actions required to fill information gaps
. Ensures that the information available from the system is con-
tinuously updated to meet the changing needs of the organisation
This suggests a system that is an important component of the working
environment of the various departments that use it and that is used
continuously. It also suggests that they are electronic though a
number of manual systems are still in existence.
The key functions of a management information system are:
. To act as a repository for all intelligence that is relevant to the
company's management, including data generated internally from
the company's own records, data collected regularly from key
secondary sources, data that have been purchased or commissioned
from external sources and anecdotal information on customers,
distributors and competitors collected by the sales force and others
having regular external contacts
. To ensure that the intelligence which is used continuously is always
up to date
. To sift and interpret incoming information, determine its accuracy
and grade its importance to the company's current and future
operations
. To identify intelligence gaps either by matching information needs
with information available on the system or by processing intelli-
gence requests from line managers
. To distribute data that have been acquired and alert management
to significant developments, threats and opportunities
By bringing together all of the intelligence that a company collects
from internal and external sources and by means of secondary and
primary research, an effective management information system can
not only improve information utilisation but can also save money.
Regardless of the purpose for which the information was collected, it
can often be recycled for other applications. Furthermore, large
organisations can duplicate intelligence-collection costs as different
174 Competitive Intelligence

departments specify the same needs and either commission their own
exercises or purchase the same published reports.
To be useful, and to encourage staff to use it, a management
information system must contain most (if not all) of the intelligence
that managers require on a regular basis. Whilst managers will accept
that exceptional or unusual intelligence needs are not catered for by
the system and therefore have to be resourced separately, they will
soon run out of patience with a system that fails to answer routine
questions. The definition of what constitutes routine intelligence will
vary from company to company but generally includes current
news, the latest financial information, products and services offered,
management changes, prices, market segments serviced and key
customers.
A system can also contain a facility for staff to enter information
and interpretations of their own, to make comments on data or trends
for others in the company to consider and to request additional
intelligence. Security systems need to be in place to prevent intelli-
gence being overwritten or lost and, more importantly, to prevent
unauthorised access.
Whilst there is no physical limit, other than storage space, to what
is placed on a management information system, the system must be
easy to navigate and users must be able to locate and retrieve the
information they require quickly. Large systems need not be cumber-
some but they must be well-designed to make them user-friendly.
Some of the standard software packages which have been developed
to handle large-scale information systems are notoriously difficult to
operate and may require considerable modification.
Like all databases, a management information system requires
constant updating. In the case of competitive intelligence this can
be daily. Data inputs can come from a wide variety of sources within
and outside the company and the management of the system and
control over what is placed on it needs to be the responsibility of one
person (or team of people). The primary management task is to
ensure that what is placed on the system is relevant to the company's
business, accurate and timely. Without proper stewardship the data-
base will either atrophy and fall into disuse or will become so
overloaded with irrelevant data, fed in by enthusiastic but uninformed
staff, that it will become impossible to use efficiently.
In the case of competitor information using electronic newsfeeds
can facilitate the task of inputting news items. Similarly all custo-
mised reports on competitors should be received in electronic format
so that they can be entered directly without retranscription.
 Processing and Distributing Intelligence 175

Knowledge Management Systems

Knowledge management systems and the older management informa-

tion systems have much in common but differ in one key respect. A
management information system is, as its name implies, solely con-
cerned with the storage and processing of information whereas a
knowledge management system incorporates systems that assist its
users to elevate information to knowledge and then store and
disseminate the resultant output. Knowledge management systems
are replacing management information systems and knowledge man-
agers are beginning to supplant information officers.
The problem of integrating knowledge into the decision-making
processes of a company is not unique to competitive strategy devel-
opment. Most other corporate functions use information that needs
to be collected, processed, interpreted and distributed and there can
be considerable overlap in the information needs of departments. For
example, competitive intelligence is directly relevant to the sales and
marketing department but may also be important to corporate
strategy, production and human resources, particularly if it contains
benchmarking data. Knowledge management is a new discipline that
encompasses the total information needs of a company obtained from
internal and external sources. It feeds into all business processes and
integrates hard data with `soft' assets of an organisation, namely the
creative contributions that can be made by staff.
A key difference from traditional information systems is that
knowledge management acknowledges the importance not only of
explicit knowledge ± that which is written down and incorporated in
inventories ± but also tacit knowledge ± the understanding that
individual staff members carry around in their heads or in their
personal records. Within the marketing function, for example, sales
representatives are a major repository of information that is rarely
acknowledged, let alone brought together. Even though it may be
subject to all sorts of distortions and biases, it can provide consider-
able insight into the status and development of a market and the
competitors active within it. The focus of the picture of the market
that is provided may be considerably sharpened when data from all
sales representatives are compared and rationalised.
The system improves efficiency by increasing the availability and
use of the information assets that the company has acquired by:
. Tapping the data collection and creative resources of all relevant
staff in the organisation
176 Competitive Intelligence

. Minimising the chances of the same tasks being repeated in

separate parts of the organisation
. Making a consensus interpretation available to all
. Maintaining the currency of the information
Knowledge management systems are usually associated with
powerful database management systems, such as Lotus Notes, which
are capable of handling large volumes of data. The hardware and
software are indeed a valuable component, especially in large orga-
nisations, but are not essential to the process. The primary task is to
gain acceptance that knowledge is required throughout the organisa-
tion and that it can be created and distributed if all of the relevant
staff have access to raw data and can work on them for their own
purposes and for the common benefit of the system. This can be
achieved manually without the burden of designing an automated
system. Indeed, it is advisable to establish a manual system and prove
that it works and is accepted before major investments are made in
hardware and software.
Nevertheless a growing number of custom-designed knowledge
management systems are being developed and made available to
organisations that embrace the concept. Some typical systems are
described below and have been selected to show how knowledge
management differs fundamentally from more traditional methods of
sharing information within organisations.

Knowledgex ([Link]

This is a software application for acquiring, discovering, publishing

and distributing knowledge across an organisation. It aims to tap into
employees' knowledge about a market, to share this information with
people who need to know and develop a knowledge base with a
simple-to-use visual interface.

6DOS ([Link]

This system offers connecting, tracking and rewarding facilities. The

connecting facility provides a question-and-answer system to help
reach those individuals within an organisation who will know the
answers to questions. The tracking function follows through the flow
of information of questions and answers to create an archive for re-
use. The rewarding function encourages people in the organisation to
participate by providing incentives.
 Processing and Distributing Intelligence 177

Wisewire ([Link]

Wisewire is held on an organisation's website or intranet. It feeds in

real-time information or delivers personalised profiles to interested
parties. The content comprises on-line sources, premium sources,
newsgroups, mailing lists and the organisation's own proprietary
information. The most relevant information can be archived to
provide a searchable resource.

Intraspect ([Link]

Intraspect enables the collection, organisation and re-use of informa-

tion via a single interface. The contents of the organisation's memory
are indexed to enable filtered and focused searching. The search
results show the contexts of the returned documents so the user can
easily see what parts of the organisation are relevant. Comments can
be attached to documents and discussion groups set up through the
interface or by e-mail.

Tailored Competitive Intelligence Systems

Analysts can use any of the large number of standard packages that
have been developed for database management, data filtering, data
mining and text retrieval in order to access, organise, store, manage
and distribute competitive intelligence. Where they have already been
installed as part of an overall management information system they
probably represent the most cost-effective solution for competitive
intelligence, even though they may require adaptation to maximise
their usefulness. In the absence of an existing commitment, compe-
titive intelligence analysts can consider investing in a tailor-made
competitive intelligence system. Typically these are based on database
management and groupware systems, such as Lotus Notes, and a
corporate intranet. The attraction of these systems is that the work of
adapting the standard systems to meet the specific requirements of
competitive intelligence has already been carried out and they can be
installed on a turnkey basis.
Tailor-made competitive intelligence systems bear a strong resem-
blance to the management information and knowledge management
systems described above.1 The differences are in the detailed features
that have been inserted for competitive intelligence purposes rather
178 Competitive Intelligence

than in the overall concept. Indeed, suppliers of competitive intelli-

gence systems see themselves as being members of the broader
knowledge management community.
Although there are companies that prefer to have a separate
competitive intelligence system rather than a management informa-
tion system that contains competitive intelligence, tailored systems are
a costly investment and are not necessarily the best method of starting
a competitive intelligence function. Their justification lies in the fact
that they can save considerable set-up time and also import the
expertise that their developers have gained over many years in the
competitive intelligence business.
A typical competitive intelligence system will carry out the follow-
ing functions:
. Database ± hold an indexed and searchable database comprising
internal and externally generated material from diverse sources in
text, graphic, HTML, voice and video formats
. Inputs ± permits staff to input intelligence and comments whenever
they review material held on the database; this meets the need to
engage as many staff as possible in the intelligence collection and
appraisal processes
. Tasking ± requesting individuals throughout the company to carry
out tasks that result in intelligence being created and then monitor-
ing their activities
. Analysis ± organising and sorting complex sets of data in response
to specific problems in order to facilitate the achievement of a
solution
. Reports ± using the database to create reports on topics as they
arise
. Communications ± sharing the data and analysis that have been
created with all those who are mandated to use them
The content of these systems is updated continuously by automatic
data feeds and by the manual insertion of data.

Access to Competitive Intelligence

Competitive intelligence needs to be accessed by all staff involved in

the development of corporate strategy by senior marketing manage-
ment, by market planners and by certain line marketing staff such as
brand and product managers, sales staff and specialists such as
advertising and PR.
 Processing and Distributing Intelligence 179

In the security world intelligence systems are defined as being either

`open' or `closed'. In a closed system all of the content is classified as
secret and only those that have a `need to know' can have access to it.
`Need' can be defined in a highly restrictive manner and access can be
limited to very few people. It is evident that the unlimited access to an
`open' system poses security risks, which could be avoided by
removing temptation, but it is equally clear that if access to compe-
titive intelligence is too restricted it will not gain the widespread use
that is required to justify the cost of collecting it.
Most competitive intelligence systems limit access to:
. Those who can contribute to the database either by inputting facts
or commentary
. Those who have the ability to use the output from the database
This does not include all staff and minimises the risk of staff
passing intelligence contained on the system out to third parties,
either deliberately or inadvertently.
The conflicting demands of maintaining overall security whilst at
the same time ensuring that intelligence reaches all of those that can
make use of it can be overcome by manual intervention. `Need to
know' does not mean need to know everything that is on the
competitive intelligence system any more than the existence of a
system will ensure that those that need to consult it will actually do
so. Some of the most prolific and effective users of competitive
intelligence rely on their internal analysts to distribute manually
specific items of intelligence to those they feel can use it, together
with an interpretation of what they feel it could mean to the recipient.
This process can be far more effective in stimulating a dialogue
between intelligence gatherer and intelligence user than any system
can achieve on its own.

Note

1. In a 2001 survey of competitive intelligence software systems Leonard

Fuld of Fuld & Company covered the following twelve systems: C-4-U
Scout (C-4-U Ltd.), Competitive Intelligence Spider (Knowledge Com-
puting Corp.), Knowledge Works (Cipher Systems), Market Signal
Analyzer (Docere Intelligence), E-Sense (Vigil Technologies), Corporate
Intelligence Service (Intelliseek Inc.), TextAnalyst (Megaputer Intelli-
gence Inc.), Plumtree Corporate Portal (Plumtree Software Inc.), Power-
[Link] ([Link]), Strategy (Strategy Software Inc.), Wincite
(Wincite Systems LLC), Wisdom Builder (Wisdombuilder LLC).
 Measuring the

17
Effectiveness of
Competitive
Intelligence

The effectiveness of all business processes and activities should be

measured and competitive intelligence is no exception, especially since
it is an activity that can absorb a considerable budget. Even if
companies do not feel a need to demonstrate that they are spending
their money wisely, competitive intelligence managers should be
interested in proving that they are making a contribution to perfor-
mance, if only to create some measure of protection when the next
round of redundancies is being considered.
Unfortunately it is rarely possible to detect a direct correlation
between the use of competitive intelligence and company perfor-
mance. Management therefore has to rely on a series of separate
indicators in order to determine whether the investment in competi-
tive intelligence is worthwhile. Most of the indicators are qualitative
though in some instances it is possible to use quantitative measures.
The five key indicators of the effectiveness of competitive intelli-
gence are:
. Quality of intelligence provided
. Use being made of competitive intelligence
. Development of an intelligence culture
. Event analysis
. Market share

Quality of Intelligence Provided

In order to be effective, competitive intelligence must be of sufficient

depth and quality to make a contribution to decisions and must also
be sufficiently timely to eliminate surprises. Reviewing the output of

180
 Measuring the Effectiveness of CI 181

the competitive intelligence department can test all of these. The key
questions that should be asked regularly are:
. Accuracy ± does the intelligence normally prove to be accurate?
. Depth ± is the intelligence provided sufficiently detailed to facilitate
the definition of counter measures?
. Relevance ± does the intelligence cover topics that are relevant to
the day-to-day management of our business?
. Responsiveness ± when special requests are made does the system
provide a response within an acceptable timescale?
. Timing ± is the intelligence received with sufficient lead-time for the
company to make effective plans?
. Comprehensiveness ± how frequently do events occur that were not
flagged in advance by the competitive intelligence system? How
frequently are we taken by surprise?

Use Being Made of Competitive Intelligence

The primary indicator of whether competitive intelligence is working
for an organisation is the extent to which it is being used and the
build-up of demand for intelligence. Use does not necessarily mean
effectiveness but if staff are demanding increasing amounts of intelli-
gence as part of the process by which they make decisions and
formulate their plans, it is reasonable to assume that they feel it is
making a contribution.
This assumption can be made more tangible by asking users to pay
for intelligence. Many competitive intelligence departments have been
set up as profit rather than cost centres and cross-charge for their
services. As willingness to spend money on a service normally means
that it is thought to be making a contribution, growth in the demand
placed on a competitive intelligence department that charges for its
services suggests that its output is working.
A further refinement of the assessment is the extent to which
demand is sustained through periods of recession. There are examples
of competitive intelligence departments that have been established
and heavily promoted internally and that have built up a loyal group
of users within the company. At first the demand may be driven by
the novelty of the service as much as by its usefulness. However, at the
first sign of problems and a reduction in departmental budgets,
intelligence of all types can be an early casualty. This level of
dispensability suggests a service that is regarded as being peripheral
to performance rather than essential. If this happens it is an extremely
182 Competitive Intelligence

harsh judgement on the perceived effectiveness of competitive intelli-

gence. It is much easier to ignore competitors when markets are
growing. Competition strengthens in times of recession and this is
the very time when the intelligence can make its most valuable
contribution.

Development of an Intelligence Culture

The third indicator of the effectiveness of competitive intelligence is
the extent to which an intelligence culture builds up within a
company. A strong intelligence culture is one in which:
. Large numbers of staff contribute intelligence on competitors and
business trends to their corporate system
. Intelligence is always demanded before decisions are made at all
levels of the company
. Staff who are not permitted access to intelligence make strong
representations in order to gain access
. Victories over competitors are strongly celebrated
The acid test is whether a proposed withdrawal of the system or
service would produce howls of rage or a whimper.

Event Analysis
Although it is difficult, if not impossible, to take an overall view of
the contribution of competitive intelligence, at a tactical level an
analysis of orders won and lost can show whether the availability of
intelligence contributed to the wins and a lack of intelligence con-
tributed to the losses. This demands a certain amount of openness on
the part of sales teams, who might prefer to attribute successes to
their personal capabilities and failures than to things happening
elsewhere in the company, but when the analysis is brought down
to each individual skirmish the role of intelligence is usually evident.
This works in a negative as well as a positive sense. A lack of
intelligence that would have helped win a sale is simple to determine.
How often is the statement `if only I had known . . .' made? Evidence
of how intelligence would have worked had it been available is just as
powerful a justification as evidence of successes. Indeed one of the
main triggers to the establishment of a competitive intelligence
function is a major loss that has been incurred by being taken
unawares by competitive action.
 Measuring the Effectiveness of CI 183

Market Share
The ultimate expression of successful competitive action is growth in
market share. Although this can never be attributed entirely to better
knowledge of the competitive environment, companies that make
active use of competitive intelligence and achieve sustained growth in
their market share can normally see some connection. Unfortunately,
it is equally possible for users of competitive intelligence to lose
market share!
18 Counter-Intelligence

PricewaterhouseCoopers have estimated that in 1999 the theft of

proprietary information cost Fortune 1000 companies $45 billion.1
The losses caused by successful competitive intelligence could be
many times this figure since competitive intelligence is much more
widely practised than theft. Counter-intelligence programmes repre-
sent a partial but essential defence against competitive intelligence
and they should not be confused with counter-espionage. The civilian
version of counter-espionage is used to counter the threat to busi-
nesses arising from:

. Industrial espionage using conventional and electronic

techniques
. Bribery of staff
. Extortion
. Kidnapping of key executives
. Sabotage

Counter-espionage uses physical and electronic methods and is

every bit as rough and ready as the espionage it seeks to prevent.
Counter-intelligence is altogether subtler and has to be capable of
dealing with intrusions that are neither illegal nor unethical. Whilst it
can use barriers to prevent an exodus of information, they must be
placed in company procedures and in the minds of staff, not across
the entry points to sites.
In most companies responsibility for preventing the loss of secret or

184
 Counter-Intelligence 185

sensitive information is in the hands of corporate security. These

departments play a policing role and are often staffed by ex-police-
men. The most common security role is to control access and thereby
prevent incursions by those who do not have a legitimate purpose on
the company's sites. They are most closely associated with gate
guarding, perimeter surveillance, logging of visitors on and off the
sites and night patrols, all of which are designed to prevent the theft
of equipment and documents. If security does develop a wider
mandate, it is normally into the realms of counter-espionage and
not counter-intelligence.
The adoption of procedures to counter competitive intelligence is in
its infancy. The need for specific programmes to vet the information
flowing out of the company, to prevent information leaks by stopping
staff overstepping the mark when talking to third parties and to
control the outflow of sensitive information from third parties
associated with the company is barely recognised. This is particularly
true in companies who themselves make no significant use of compe-
titive intelligence.
It is also true, and therefore one of the key differences between
counter-espionage and counter-intelligence (as defined for this book),
that counter-espionage cannot afford to fail. In the world of espio-
nage, failure spells disaster. A failure to control competitive intelli-
gence activities may have serious consequences but is rarely elevated
to the realms of being a disaster. Those countering competitive
intelligence generally recognise that it is impossible to eliminate the
outflow of information from their companies and counter-intelligence
programmes are not designed to do so. Their objective is to restrict
information outflows to that which is essential for them to trade
effectively, to protect information until it is too late for competitors to
use it effectively and, just possibly, to confuse competitors by using
misinformation programmes.
To a very significant extent the vulnerabilities in any organisation
lie in the channels through which information can pass to the outside
world. Counter-intelligence therefore focuses not on information but
on the channels that competitors can exploit in order to profile their
organisation's activities.
The value of counter-intelligence programmes is not restricted to
defence. Counter-intelligence activities themselves provide useful
competitive intelligence. In addition to providing an early warning
of a competitive attack, knowledge that a competitor is targeting the
organisation and the types of information they are seeking may also
provide an indication of:
186 Competitive Intelligence

. The source of the attack

. The subject of the attack (for example, product categories or
distribution channels)
. The purpose of the attack
. The scale of the attack (if a substantial exercise is being carried out
this suggests that it is being used to underpin major competitive
action)
. The timing of the attack
Counter-intelligence can therefore make an important contribution
to the counter-attack, which should be the inevitable response to any
competitive action.

The Structure of Counter-Intelligence Activity

Like any other serious business activity, counter-intelligence should

be formally structured, resourced and provided with an `activity
champion' or team. Informal activity is unlikely to be effective nor
is it likely to be applied consistently. Whilst it is true that serious
intelligence breaches will result in a heightened sensitivity to the need
to prevent information passing out of the company, this does not
usually last long unless programmes are in place to ensure that
vigilance is maintained.

The Basic Steps

Counter-intelligence can be constructed as a nine-step programme as

set out below. The requirement for each step and the amount of
resources allocated to it depend on the nature and scale of the
competitive intelligence programmes that are being mounted and
the subject companies' interpretation of what is at risk.
. Assign responsibility for counter-intelligence programmes
. Identify the potential sources of competitive intelligence threats
. Identify the means by which the intelligence can be sought
. Identify and assess the vulnerabilities
. Categorise information
. Reduce the chances of intelligence being obtained
. Test the counter-intelligence system
. Monitor the threat
. Publicise willingness to take action
 Counter-Intelligence 187

Assigning Responsibility for Counter-Intelligence

Programmes

For most companies it is reasonable to assume that at some stage

they will be the target of an intelligence-gathering programme. Some
companies, typically the largest, the most innovative, those using or
producing the most advanced technology, those occupying market
leadership positions, the most profitable and those growing the
fastest should always assume that one or more of their competitors
is seeking information on their activities. However, the intensity of
the attack will vary over time and it is always useful to know when
intelligence-gathering activity is gathering pace. Any intensification of
information-collection activity may provide early warning of a com-
petitive attack and may also suggest that the company is treading on
some delicate toes in the marketplace and forcing them into retalia-
tory action.
Whilst an assumption of intelligence activity may be reasonable, it
is not always possible to determine that an intelligence-gathering
exercise is actually being carried out. Some attacks leave no trace. For
example, when data are being collected by methods that require no
contact with the company or its close affiliates, there is no mechanism
that will automatically alert the company to the fact that intelligence
is being collected. Furthermore, not all direct enquiries are easy to
link to intelligence-gathering. For example, enquiries by seemingly
genuine customers will not normally be regarded as suspicious, unless
there is an obvious incompatibility between the enquirer and the
information being requested.
The key organisational aspects of counter-intelligence are:
. The fact that competitive intelligence can be extremely difficult to
detect means that counter-intelligence operations must be con-
sciously organised if they are going to be in any way effective
. Counter-intelligence programmes must be in place and working
continuously regardless of whether a competitive attack is under
way or not.
. The nature of a competitive intelligence attack means that the
whole company must be involved in the counter-intelligence pro-
gramme. The only safe assumption is that all employees are likely
to be targeted as sources of intelligence and all of them must
therefore be made aware of the fact and made party to the counter-
intelligence programme
188 Competitive Intelligence

In order to meet these objectives it is necessary to assign respon-

sibility for counter-intelligence and to establish an alert system into
which all information relating to possible competitive intelligence
activities is fed. This can be a manual system or a software solution
designed to capture relevant information, analyse it and search for
patterns of activity. Responsibility for counter-intelligence can be
assigned in various ways, depending on the likely scale of the threat,
the amount of damage that an information leak could inflict and the
resources that are available, but there is no simple or obvious method
of coping with the problem. The options to be considered are:
. Recruit a counter-intelligence specialist to coordinate the pro-
gramme. This is the best but most difficult option to implement,
since few such specialists exist. The next-best option is to train a
recruit into the job
. Broaden the mandate of the head of security beyond the respon-
sibility for physical security. This is an option but depends on the
character of the incumbent and their ability to handle the subtleties
of counter-intelligence in addition to the more physical (and some-
times more pressing) demands of access control and general
policing activities. Whilst the ex-police and military personnel
commonly used for security are generally able to recognise an
intruder, they do not normally have the right temperament or
experience to deal with the multiplicity of methods by which
information can leak out of an organisation
. Assign responsibility to an existing staff member who is close to
intelligence-gathering operations, possibly the head of competitive
or business intelligence. This approach is not ideal since their
existing roles are already likely to be quite demanding. However,
it would ensure that counter-intelligence becomes integrated with
the competitive and business intelligence-gathering processes and
therefore that the threats exposed by counter-intelligence pro-
grammes are fed into the competitive strategy and acted on
. Assign responsibility to the staff member responsible for control-
ling the dissemination of information about the company, such as
the Director of Public Affairs. This is an option but good PR staff
are better at getting messages across to the various `publics' they
need to address than restricting the outflows of information
Once recruited, the tasks of the head of the counter-intelligence
operation would need to be all-embracing if effectiveness were to be
assured. These would include the following:
 Counter-Intelligence 189

. Ensure that all written documents passing out of the company are
vetted in order to ascertain that they do not contain details which
are unnecessarily revealing or data which would permit external
analysts to deduce the plans and strategies of the company. The
vetting process can be delegated to those in a position to determine
whether the information contained in documents and websites is
too explicit. The most useful staff in this context are:
± Competitive intelligence analysts
± Business intelligence staff
± Strategic planners
± Marketing planners
all of whom are likely to be able to distinguish the latent threats in
any information provided
. Ensure that all staff are briefed on the dangers of competitive
intelligence and are fully aware of:
± Who they can disclose information to
± What information they can disclose
. Ensure that staff are sufficiently well-informed to recognise con-
tacts from external sources which may be designed to collect
intelligence
. Brief staff on the types of contacts which are likely to be suspicious
. Brief staff on the situations in which they are most likely to receive
calls soliciting competitive intelligence
. Ensure that staff know that they need to report suspected compe-
titive intelligence contacts
. Establish a reporting system to which all staff have access and
through which they can communicate their findings and suspicions.
This can be based on e-mail or via a dedicated software system
. Record and analyse competitive intelligence contacts
. Produce regular reports which identify:
± The intensity of competitive intelligence calls
± The probable originators of the calls
± The types of information being sought
. Analyse the findings to identify the probable implications of the
intelligence activity
. Define whether those suspected of collecting intelligence have the
capability to use it and, if successful, the impact it could have on
the business
. Assess the need for deception programmes and their practicality
190 Competitive Intelligence

Identifying the Potential Sources of Threat

The effectiveness of counter-intelligence programmes is enhanced
considerably if the probable sources of attacks can be anticipated in
advance. It is not too difficult to identify the main companies that
could be seeking intelligence. They are likely to be known competi-
tors, companies that have revealed an interest in entering the business
and companies who, by nature of their skill base, their past history
and their needs, ought to be considering entering the business. The
difficulty arises with companies that have no current links with the
business but may nevertheless see it as a diversification opportunity.
In these cases the counter-intelligence process must itself identify the
sources of threat.
An obvious first step to determine how serious companies are
about studying their competitors is to check whether they have
appointed staff with a responsibility for competitive intelligence.
Sometimes this can be as simple as examining the annual directory
of the Society of Competitive Intelligence Professionals, which lists
members. More commonly, those practising the art within companies
do not like to advertise their presence by joining a society, in which
case calls to competitors could be used to establish whether the
function, or a near relative such as business intelligence, exists. If a
functional responsibility is located it is reasonable to assume that they
are monitoring all of their competitors. However, the absence of an
internal function does not necessarily mean that they are uninterested
in their competitors. Competitive intelligence may be the part-time
responsibility of a member of the marketing or market research team
or they could be using external consultants.
Detecting whether a competitor is using consultants is extremely
difficult. No competitive intelligence consultant publishes a list of
clients and they use a variety of techniques to conceal their intent and
the identity of those that have hired them. Whilst it is possible to limit
the amount of intelligence the specialists can gather it is rarely
possible to do better than guess who their clients are.
The identification of potential threats will rely heavily on informa-
tion gathered by marketing and sales teams who are in the front line
of contacts with the market, but should also involve strategic and
business planning teams that are considering the future evolution of
the business.
Sales and marketing teams need to briefed to provide a regular flow
of information on current and potential competitors active in the
 Counter-Intelligence 191

market and any indications that they are actively studying their
competition. The key points in the briefing will overlap with those
set out for engaging sales teams in collecting competitive intelligence,
namely:

. Identify the competitors most frequently encountered in the market

and report continuously on their current activities
. Maintain a constant watch for information (rumours, gossip and
evidence of intensifying (or diminishing) activity) indicating that
current competitors are becoming more (or less) interested in the
business
. Identify competitors that have a presence in the market but a low
market share
. Seek information that suggests whether they will become
more active in the business or whether they are likely to exit the
market
. Collect and report any information that suggests that companies
not active in the business are considering market entry. The most
likely candidates are:
± Companies servicing the same client base who have the technical
capability to enter the market
± Companies with technology that is capable of meeting customer
needs but not currently used in the market
. Monitor market trends in order to determine whether fundamental
changes are taking place in demand that would open up the market
to new competitors
. Monitor supply technologies in order to determine whether new
suppliers have acquired the means of entering the business

As previously noted, sales and marketing teams are a difficult

resource to use in the collection of competitive intelligence. They are
equally difficult to use in counter-intelligence. This is partly because
sales representatives' natural paranoia may cause them to identify
threats that are far from realistic and partly because it is difficult to
encourage them to share information that they might be able to use
for personal advantage. As with competitive intelligence, the answer
is to draw them into the company's intelligence community and to
permit them to help define competitive intelligence objectives and use
the results of competitive analysis. Their engagement in counter-
intelligence will flow naturally from the same process.
192 Competitive Intelligence

Identifying the Means By Which Intelligence is

Being Sought

The word intelligence is usually associated with `agents' or, in a

more covert world, `spies'. Whilst some of those practising competi-
tive intelligence might like to think of themselves as James Bond,
most competitive intelligence is gathered by individuals with far more
modest ambitions and even more mundane titles. Indeed the more
innocuous and innocent they seem the less likely they are to be
detected.
Intelligence that is collected entirely from secondary sources is
impossible to detect. The only defence is to assume that everything
that is published by and about the company will fall into the hands of
the competition and its content modulated accordingly.
Primary intelligence collection, that is, that obtained directly from
sources within the company, is a different matter. All primary
intelligence activities leave a trace of one kind or another, largely in
the form of the identity of the individual making the enquiries. If not
James Bond, who should be looked for? The list of titles that are used
for competitive intelligence-gathering fall into two categories: those
that are close enough to the truth to be regarded as a legitimate
description of the caller and those that are a misrepresentation of the
caller's true identity:
(a) Actual or near representation
. Market researchers
. Business consultants
. Management consultants
. Staff of the competitors themselves
(b) Misrepresentation
. Students (carrying out research for a thesis)
. Head-hunters
. Recruitment specialists
. Actual or potential customers
. Journalists
The first group includes those who present themselves legitimately
but who fail to disclose the full purpose of their enquiries. The code of
ethics under which legitimate competitive intelligence professionals
collect data states that they must not misrepresent themselves. It does
not state that they must explain precisely why the enquiries are being
made and on whose behalf. Obviously they cannot make calls
 Counter-Intelligence 193

disclosing that they are employed by a competitive intelligence agency

seeking information for a competitor, since this would reduce their
chances of gathering anything useful to zero. On the other hand a
statement to the effect that they are market researchers or business
consultants seeking information for a report on a market and the
activities on the businesses operating within it is close enough to the
truth to satisfy most consciences.
Misrepresentation is harder to deal with and is most likely to be
practised by private detective agencies, corporate investigators and
individual consultants who, although they will rarely undertake tasks
which are illegal, do not subscribe to the code of conduct which
constrains the activities of competitive intelligence professionals.
These individuals may go to considerable lengths to support their
deception. This includes establishing dummy companies, allocating
dedicated telephone lines to receive return calls, placing false job
advertisements or having articles published in the media. They are
also not averse to paying for information.
Most staff will have considerable difficulty in distinguishing genu-
ine enquiries from those whose purpose is the collection of intelli-
gence. A common response is to ban all discussions with third parties
unless their bona fides are proven or senior management approval is
given. Although secure, this approach risks alienating potential
customers and frustrating a number of business activities from which
most companies benefit from time to time. Conducting market
research surveys is becoming increasingly difficult as companies
instruct staff not to speak to outsiders under any circumstances.
However, it is equally important for both customers and suppliers
that the needs of the former are fully understood by the latter and
frustrating the process by which this information is collected system-
atically and cost-effectively is to nobody's advantage. A further
reason for avoiding outright bans is that, if dealt with correctly,
counter-intelligence activities can themselves provide valuable
competitive intelligence.
The middle path is to train staff to recognise potentially suspicious
calls and to funnel them to a central department capable of probing
the reasons for calls, deciding which are genuine and controlling the
outflow in information.
The most obvious tell-tale signs that an intelligence exercise is
under way are:

. Calls to staff from previously unknown sources and with motives

that seem vague or unbelievable and who are unusually persistent
194 Competitive Intelligence

. An overdose of visitors to the company's exhibition stands

. An increase in the number of contacts with the sales force by the
sales representatives of rival companies
. Requests for information from organisations that claim to be
acting for an unnamed client
. Requests from students, journalists and unknown consultants
. Invitations to share information with the staff of competitors
. Enquiries from potential customers which contain requests for
detailed or unusual information
. An increase in calls from head-hunters (not easy to spot since staff
rarely report approaches by head-hunters)
. An upturn in market research activity within the customer base
. Initiation of contacts by staff in competitive organisations or an
upturn in contacts from rival company staff who are already in
touch
. Requests from anyone who refuses to leave a return telephone
number
The main difficulty arises from the fact that much of this activity will
pass unnoticed unless it is so blatant that it cannot fail to be
commented on or the company is geared up to detect suspicious
activity.

Identifying and Assessing the Vulnerabilities

A major task for the counter-intelligence unit is to assess the areas of

vulnerability in the company. The task can be exceptionally difficult
because the number of areas of weakness can be huge. The key
vulnerabilities in all organisations lie in:
. All information issued by the company and about the company
. Corporate databases and knowledge management systems
. People
. Physical surveillance
. Accidental loss of documents and data
. Deductions

Published information and official filings

The first task in any search for information on companies is to

examine all published sources. Intelligence experts scour a wide range
of sources for descriptions of companies' activities and the tiniest
 Counter-Intelligence 195

clues to strategy. Even the most innocuous statements and the

smallest items of information may add pieces to a jigsaw puzzle,
which over time builds up to an increasingly precise portrait of an
organisation. The most advanced may apply techniques such as
semiology to advertisements in order to detect how competitors
perceive themselves. The sources that can be searched include all
those listed in Chapters 6 and 7.
Many of the secondary sources are essential, their content dictated
by legislation, official reporting requirements or the need to commu-
nicate effectively with customers, shareholders and business partners.
However, much of the information that is disseminated does not play
an essential role in the business process and has more to do with
corporate and individual pride or an over-inflated view of the need
for openness.
The Internet has expanded the availability of information available
about companies exponentially and the companies themselves origi-
nate a high proportion of what is available. Some corporate web
designers, liberated from restraints imposed by cost and space, appear
to have gone mad and include a variety of documentation on their
sites which exposes the company to inspection by outsiders on a scale
not previously practical.
The more traditional ways of disseminating information pose no
less of a risk, even though they may less accessible. The materials
disseminated at exhibitions and trade shows, on training courses and
in open seminars can be valuable source documents, as can the
content of papers presented by staff at conferences and professional
meetings. There is also great value to be derived from brochures and
catalogues distributed as part of the sales process. The transfer of
much of this material to the Internet serves only to exacerbate the
problem.

Corporate databases and knowledge management systems

In the past companies have been to some extent protected by the fact
that information was fragmented throughout the organisation. Very
few staff had access to anything approaching a complete database of
information. Corporate databases and knowledge management sys-
tems are changing this situation by creating a central record that is
accessible by large numbers of staff. Although this enhances their
ability to perform their jobs it also increases the risk that data will be
accessed and passed on to third parties.
196 Competitive Intelligence

People

After the published sources, the softest targets in an intelligence-

gathering exercise are people. A common factor in business all over
the world is that people like to talk about themselves, their work and
the company that employs them. Some of the worst offenders are
executives who forget the need for security when confronted with a
microphone or a journalist's notebook. Others do it at all forms of
social and business gatherings, with friends, with other passengers on
airlines or trains, at conferences, at exhibitions, at the hairdresser ±
indeed in any situation where the alternative is standing or sitting
silently in groups. Controlling the volume and quality of information
passed out about an organisation by word of mouth is the most
difficult challenge in counter-intelligence.

Staff

In all companies the main threat arises from the staff. A combination
of personal characteristics ± including unawareness, pride, arrogance,
stupidity, envy and anger ± can induce them to reveal information
that is commercially sensitive. The staff that are most exposed to
competitive intelligence activities are those whose role includes con-
tact with outsiders, principally:
. Telephonists
. Receptionists
. Call centres
. Sales and marketing
. Maintenance
. Installation
. Warehouse staff
. Delivery staff
. Customer service staff
. PR/Corporate Affairs
Other staff can also be exposed but since external contact is the
exception rather than the rule, they should be more alert when
questioned ± though it would be most unwise to rely on this
observation. The very fact that they are not normally questioned by
outsiders may mean that they are less aware of the dangers of
revealing information.
All staff are party to the information that they need to have in
order to do their jobs. This may not always be particularly sensitive
 Counter-Intelligence 197

but in addition to the information that they know of officially they

also hear details of company activities, plans and performance on the
grapevine that exists in all organisations. The difficulty with most
staff lies in their inability to recognise what is sensitive and what is
not. For the competitive analyst seemingly innocuous information
can be extremely useful when piecing together a profile of a compe-
titor. Telephonists who might readily recognise the inadvisability of
disclosing some hearsay that the company was in financial difficulties
would not necessarily see any harm in revealing the number of staff
on the site, the identity of key managers or the absence or presence of
specific operating departments.
Staff in the front line of contact with outsiders can be asked for
information in a wide variety of situations. These include:
. Day-to-day contact with customers, potential customers, distribu-
tors and suppliers
. Direct and indirect contact with various external stakeholders and
others with an interest in the company ± such as investors, brokers'
analysts and journalists
. Manning exhibition stands
. Participation in conferences
. Fellow passengers ± particularly on aircraft
The identity of the enquirer, the situation in which the information
is requested and the method of communicating (face to face, tele-
phone conversation, e-mail or fax) all influence the willingness to
respond to questions. Few would hesitate to respond to a direct
question from a known customer during a sales meeting, providing it
was the type of information a customer needed to have or could
legitimately ask out of curiosity about a supplier. The same question
from an unknown enquirer on the telephone should normally produce
a negative response. However, conferences and exhibitions tend to
desensitise the critical facilities to the point at which fellow delegates
and stand visitors often receive responses to the most impertinent
questions, despite the fact that their credentials have never been
established.
Some of the most significant intelligence coups have arisen inad-
vertently from conversations between staff that have been overheard.
Others have resulted from conversations between complete strangers
who happen to be travelling together. Clearly it is a major piece of
bad luck if you happen to be sitting next to a staff member from a
competitor or someone working on their behalf, but the forces which
bring people together are often related to the fact that they have some
198 Competitive Intelligence

common interest. For example, an above-average proportion of

travellers to a destination in which an industry conference is being
held will have an interest in that industry. Major intelligence coups
have also resulted from accidents and carelessness rather than clever-
ness on the part of the intelligence gatherers. Briefcases and papers
left in taxis, in telephone booths, at restaurant tables and on park
benches have all been gratefully received by intelligence gatherers at
some stage in the past.

Ex-staff
Ex-staff can be a major area of vulnerability, particularly senior staff
who have left the company under some form of cloud or nursing a
grievance. Apart from high-profile cases, ex-staff are not always easy
to locate. However, the chances of finding them are increasing not
only because they commonly move on to companies active in the
same or similar businesses but also because of the growing use of the
Internet as a recruitment medium. This is resulting in a substantial
number of published CVs which can be searched by previous employ-
ment record. The main protection from damage inflicted by previous
employees passing on information is time. The usefulness of the
information they hold in their heads or even in any documents they
may have taken with them diminishes as time passes.
Not surprisingly, companies regularly debrief new recruits who
have previously worked for competitors. This process can cause
maximum damage since the information they have is current.

Associates and customers

The most difficult group of individuals and organisations to control
are those that are outside the company but nevertheless party to
information about the company's activities. These include:
. Joint venture partners
. Advisers ± such as banks, lawyers, consultants, advertising agencies
and PR companies
. Customers
. Suppliers
. Trade press journalists
. Stockbrokers' analysts
Some of these ± most notably the professions ± would be difficult
information sources to attack since their profession requires them to
protect the confidentiality of their clients. Others are more inclined to
 Counter-Intelligence 199

discuss the companies they deal with and some, such as brokers'
analysts, may see a positive benefit in sharing information. When
considering associates and customers it is always worth remembering
that only occasionally do customers and suppliers owe any real
allegiance to the companies they deal with.

Accidents

Accidents plague all organisations and some are bound to result in

information finding its way to competitors. Whilst it is wrong for
competitors to `organise' accidents and it is bordering on unethical to
use information that falls into their hands accidentally, the onus is on
companies to protect their secrets and if they leak accidentally they
cannot be too surprised if the information is used against them. The
most common accidents that afflict companies are:
. Lost documents
. Lost laptop computers
. Misdirected faxes
. Overheard conversations and phone calls

Physical Surveillance

Although some forms of physical surveillance are illegal, others are

not and are used regularly within the competitive intelligence process.
Observing, counting, measuring and appraising can produce valuable
intelligence when applied to a company's facilities, its products, those
of its activities, such as transport, that can be seen externally and the
staff that it employs. Although much of what a company does can be
hidden from public gaze, there is even more which cannot. Company
sites can be measured and what is going on within the site can be
observed from the air and even by satellite. Products can be pur-
chased and `reverse engineered' in order to identify the technology
that has been employed. Transport fleets can be counted, inward
shipments of goods can be observed. The calibre of staff can be
assessed at public meetings and exhibitions.

Deductions

The element of competitive intelligence that is virtually impossible to

control is the use of fragmentary information as a basis for deduc-
tions about a competitor's strategy. Some elements of strategy may be
200 Competitive Intelligence

publicly articulated, as in items contained in annual and quarterly

reports, periodic releases to shareholders and articles written by or
about the company and its senior personnel. However, even for public
companies, these rarely add up to a comprehensive statement of
strategy and there is usually nothing available at all for the large
number of private companies. To gain insight into their competitors'
strategies analysts have devised or adapted a number of tools to put
together plausible additions to the incomplete data they have col-
lected. These processes, which include brainstorming, scenarios, war
gaming and a variety of computer models, can produce credible and
sometimes surprisingly accurate simulations of competitors' position-
ing and strategy.

Categorise Information
As set out above it is not practical to protect all information within an
organisation, only that which could do serious harm in the hands of a
rival organisation or is assessed as being commercially sensitive. In
order to mount a realistic defence it is therefore essential to classify
company information according to its sensitivity. Defence measures
can then be focused on the information that it is essential to protect
and time and effort are not wasted on blocking competitor access to
information which is not worth defending. The school of thought
which says that making it difficult and therefore costly for competi-
tors to obtain even the simplest information ignores the fact that
those processes may alienate others, in particular customers, and
cause loss of business. The practice of prohibiting switchboards to
route calls to staff unless the caller knows the name of the person they
are trying to contact may seem like a laudable and justifiable barrier ±
particularly as a means of preventing calls from head-hunters ± but
what is a genuine customer likely to do when confronted with a
potential supplier that appears to be impenetrable? He usually gives
up and seeks an alternative, more friendly, source of supply.
Company information can be categorised into four bands:
. Information that must remain completely confidential and de-
fended at all cost
. Information that the company would prefer not to pass into
competitors' hands but is not worth a `spare no expense' defence
. Information which does not need to pass to third parties but is not
worth defending
. Information which must pass to third parties
 Counter-Intelligence 201

The criteria by which information is allocated to each category

should include not only the damage that the knowledge can inflict but
also the ease by which it can be obtained by other routes. Defending
information incurs a cost and there is little point in paying for defence
mechanisms that can be easily circumvented.
The content of each category will be specific to each company and
will also vary by industry sector. However, typical categorisations will
be as follows.

Highly confidential information

. Strategic and business plans
. Proprietary company technology (such as product formulations
and production technology)
. R&D projects
. New product development plans
. Product launch dates
. Capacity expansion plans
. New markets being targeted
. Acquisition plans
. Planned divestments
. Segmentation strategy and target markets
. Sales by product line
. Sales by customer group
. Customer lists
. Future pricing plans
. Discount policy
. Future distribution plans
. Promotional plans (advertising, below the line and PR)

Moderately confidential information

. Staff breakdowns by division
. Staff qualifications
. Key customer accounts
. Suppliers of raw materials
. Equipment suppliers
. Production equipment installed
. Subcontractors used
. Packaging suppliers
. Volumes of packaging used
. Importance of each of the distribution channels used
. Guarantee policy
202 Competitive Intelligence

. Staff training methods

. Exhibition plans
. Future sponsorship plans
. Exports (volume and countries serviced)

Information not worth defending

. Staff numbers
. Key executives
. Ownership
. Organisational structure
. Production locations
. Patents and licences held
. Distribution channels
. Advertising media used
. Advertising expenditure
. Exhibitions attended
. Sponsorships
. Overseas subsidiaries

Information which must be provided to third parties

. Current product specifications
. Technical literature
. Impending new product launches requiring advanced publicity
. Claimed product advantages
. Product availability
. Supply points (retail and wholesale)
. Prices and discount structures
. Support services
. Maintenance services
. Guarantees offered

Reducing the Chances of Intelligence Being

Obtained
It should be clear from what has been said above that it is impossible
to protect all information, nor is it desirable to do so. Much of the
information that flows out of any organisation is an essential part of
the processes by which it does business. The requirement for counter-
intelligence is to minimise the outflow of information that is commer-
cially sensitive and to try to ensure that it does not get into the hands
of the competition. The main lines of defence are to ensure:
 Counter-Intelligence 203

. Close scrutiny of all written information produced by the company

. That sensitive information is, in as far as possible, confined to those
that appreciate its value and can be trusted not to divulge it
. That staff and others associated with the company are well-briefed
on the dangers of competitive intelligence and handle their relation-
ships with outsiders with due care

Written information audit

All written information produced by the company must be reviewed
in order to ensure that, whilst meeting the purpose for which it is
required, no superfluous or highly sensitive information is contained.
The audit must cover:
. Official filings which must enter the public domain (such as Annual
Reports, SEC and Stock Exchange filings)
. Brochures
. Newsletters
. Recruitment advertisements
. Directory entries
. Exhibition guide entries
Everything published by the company on the Internet must be the
subject of the audit as well as hard-copy documents.

Limiting the availability of information

`Need to know' is a basic rule of intelligence that ensures that staff
have access only to the information they need for the roles they fill.
However, it is extremely difficult to apply in a civilian organisation
mainly because, between themselves, staff do not normally conform
to security practices that are applied regularly in the military. Natural
curiosity about the organisation they work for and a moderately
active rumour mill generally ensures that information circulates
through unofficial channels more quickly than it can be disseminated
officially. Furthermore, the current thrust of employee relations and
initiatives such as Investors in People is to encourage employers to
make staff party to business plans and the strategic direction of the
company that employs them. It is felt that openness, participation
and consultation will encourage staff to pull together within the
company, increase enthusiasm and improve productivity. Whatever
the theory and its impact on performance, the result is that staff are
party to more of the type of information which could damage the
company if it was passed to competitors.
204 Competitive Intelligence

Press, analyst and shareholder briefings must be carefully con-

trolled. All information passed to any of these groups immediately
enters the public domain and it must be assumed that it will inevitably
find its way to competitors.
Whatever the company policy, it is the day-to-day actions by staff
that determine the extent to which intelligence will leak out of the
organisation. Venetian glass manufacturers sought to protect their
secrets by confining their staff to the island of Murano, where it was
virtually impossible for them to meet outsiders and disclose informa-
tion. Extreme measures like incarceration cannot be applied today
and management must rely on careful staff briefings to instil the
discipline that will minimise information outflows. Staff should be
told to assume that everything they write or discuss with third parties
could find its way to a competitor and its content should be judged
accordingly. However, taken to an extreme, this approach could stifle
the company's ability to do business. Customers and distributors will
generally react badly if a supplier displays a tendency to paranoia.
The solution is to develop a body of information that it is acceptable
to release to outsiders, for whatever purpose, and to instruct staff that
no information should be released beyond that contained in the
documents. An increasing number of companies are enshrining this
instruction in their terms of employment, thus giving them the power
to discipline staff who are found to be in breach of standard operating
procedures.

Documents

Documents released by the company have been identified as a major

potential source of vulnerability and must be prepared and handled
accordingly. Some simpler rules to follow are:
. All documents for release outside the company should be vetted to
ensure that they contain the minimum information to meet the
needs of the purpose for which they are designed ± superfluous
information increases the chances that valuable intelligence will be
divulged
. All information published on open Internet sites must be treated
even more carefully than published documents. Whilst there is
some control over the distribution of company documents, there is
absolutely no control over access to public sites on the Internet
. If the Internet is felt to be a useful method of distributing
information, consider the use of closed sites with access by password
only. This can give some measure of control over who sees the data
 Counter-Intelligence 205

. No interviews can be given to journalists (for the national or trade

press) unless the company has the right to review the content of the
resulting article and to exclude from it any information that is
subsequently thought to be dangerous
. Copies of all internal documents should be numbered so that in the
event of a leak the source can (possibly) be traced
. Keep copies of all sensitive documents in locked cabinets
. Password-protect all computer files and strictly control access to
the passwords
. Documents must not be taken off the company's premises unless
for a purpose for which the document was designed

Conversations

Conversations with third parties constitute a major risk and the onus
is on all staff to verify the bona fides of the individuals making
requests for information, establish that the reasons for the enquiries
are genuine and regulate what they say. The basic ground rules should
be as follows:
. Verify the credentials of all organisations whose staff approach you
for information. This should include:
± The name of the company
± The company's location
± The telephone number and the extension to call back to
± The business in which the company is active
. Verify the identity and job function of the person calling
. Ask for a clear explanation of why the information is being
requested and the purpose to which it is being put
. If the information is said to be required for another organisation
ask for the identity of that organisation. If the identity is not
revealed, either establish the bona fides of the intermediary and
that the client's use of them is genuine or refuse to provide
information and suggest that the client company makes direct
contact
. Test the responses given for accuracy by asking a few simple
questions. For example, if the enquirer states that the information
is required for a market survey ask the name of the sponsor of the
survey, the aspects of the market that are to be analysed and the
sources of information that are being used. (Note: a genuine
market researcher will normally volunteer this information at the
outset)
206 Competitive Intelligence

. If not satisfied that the reason for requesting the information is

genuine, ask for written confirmation (letter, fax or e-mail) stating
the information required and the purpose to which it will be put
. Check with close colleagues to see if similar calls have been received
. Report all suspicious calls to the staff member responsible for
counter-intelligence, regardless of whether any response has been
given reporting:
± The timing of the call
± The identity of the caller
± The stated reason for the request
± The information requested
± The reason for suspicion
± The action taken

Briefing sales staff

Sales staff (working in the field and in telesales centres) are a major
source of vulnerability. Their primary task is rarely easy and they
generally feel that they need all the help they can get. A major part of
their role is to provide clients and potential clients with information
that will convince them that the product or service will meet their
needs and that the company is a credible supplier. In fulfilling this
role there is an ever-present temptation to maximise the information
they provide and step over the boundary of what is reasonable. This
commonly happens when they are confronted with a customer who is
proving difficult to convince and who is asking for increasingly
detailed information. There is an additional risk that sales staff will
be less discriminating in whom they provide information to. Thus
anyone who, however vaguely, indicates that they could be a buyer
may be able to access intelligence from members of the sales force.
The sales training process must include a component that provides
guidance on recognising genuine prospects and on controlling the
levels of information provided, even during the thrill of the chase for
business. Sales briefings need to be tailored to each business sector
and the company itself but should include instructions such as:

. Verify that all those who identify themselves as potential customers

could legitimately be so
. Meter the flow of information in accordance with an assessment of
how likely business is to result from the contract. In other words
those whose interest is judged to be casual should be provided
 Counter-Intelligence 207

minimal information but more information can be provided as the

level of interest in buying increases
. Establish `levels of interest milestones' which you will use as
pointers for the provision of more detailed information. For
example,
± The provision of detailed information on the buying organisa-
tion
± Detailed statements of the use to which the product will be put
± Written specifications or requirements
± Agreement to a personal meeting to discuss requirements
± Making some written or financial commitment to buy
could all be used as triggers for the release of more detailed
information on the product and the supplier

Briefing of staff providing press, analyst and shareholder

briefings

Those whose role is to deal with the press and, in the case of public
companies, with brokers' analysts and shareholders, require addi-
tional guidelines of which the most important are:
. It is generally assumed that all publicity is good publicity; this is
not true if it results in sensitive information being channelled to
competitors
. All three groups can be very demanding in terms of the level of
disclosure they seek
. Whilst analysts and shareholders can be assumed to have a healthy
interest in the performance of the company, the sustainability of
performance in the future and the factors which are contributing to
performance, the desire to create a favourable impression that will
result in an improvement in the share price (or the success of a
floatation or a placement of shares with investors) needs to
balanced against the dangers that will arise from the information
passing into the hands of competitors
. The interest of the press in a company is usually less benign. Their
primary concern is to sell their newspapers or magazines and in this
respect detailed and sensational stories about companies are
preferable to bland news items. As with the analysts, the usefulness
of press coverage in reaching a wide audience of potential custo-
mers and creating a favourable impression of the company must be
balanced against the harm that excessive disclosure can do
208 Competitive Intelligence

Briefing of affiliates and customers

Affiliates of all kinds are more difficult to brief than staff partly
because anything that is said may threaten the relationship and partly
because, in the final analysis, there is little that can be done to control
what they say. Nevertheless it is worth setting out some guidelines in
an attempt to control the amount of information they pass on to third
parties. This could take the form of a reminder that the relationship
between a supplier and its customers and affiliates has to be one of
mutual trust. In order to do business together it must be possible to
have a full exchange of information, including that which is con-
fidential and commercially sensitive and which could cause damage if
it got into the hands of competitors. Customers and affiliates must
also supply sensitive information and it is to the advantage of all
parties that confidences are protected.

Briefing staff attending exhibitions, trade shows and conferences

The exposure to staff questioning by competitors is heightened when

they travel off site. Exhibitions, trade shows and conferences all
provide multiple legitimate opportunities for them to be approached
outside the protective cocoon of their offices and internal security
systems. At exhibitions and trade shows it is often difficult to
distinguish between inquirers with a legitimate purpose and those
whose objectives are only to obtain intelligence. On exhibition stands
it is also difficult to prevent conversations with clients or potential
clients being overheard by other visitors. The congregation of staff in
public areas such as restaurants, receptions and rest rooms further
increases the chances of indiscreet conversations being overheard.
It is almost inevitable that in the general excitement of an event and
the multiplicity of contacts that are made defences will be lowered, a
process that may be exacerbated if alcohol is available. Paradoxically,
the level of vulnerability is at its highest in the slack periods,
lunchtimes, the times when especially interesting activities are being
mounted and the wind-down period at the end of a show. At these
times the flow of visitors to stands abates, senior staff leave and the
stands are manned by juniors, who suddenly find themselves in the
limelight and eager to prove their worth. This is when intelligence
analysts know they can make a kill.
Simple precautions can reduce some of the problems, for example
by ensuring that all presentations and sensitive discussions are held in
private areas and not in the open where they may be overheard and
 Counter-Intelligence 209

by carefully examining the credentials of all visitors before they are

given information. Briefing those staff that attend conferences, trade
shows and exhibitions on the dangers that are present can tighten
defences. This should take the form of a general briefing to staff likely
to attend events and specific briefings before any event at which the
company is exhibiting. The general briefing is an essential catch-all
since counter-intelligence staff may not always have the opportunity
to make a specific briefing.
The briefings should cover:
. The need for all of those attending conferences and exhibitions to
exercise great care when engaging in discussions with anyone they
meet, even if it appears to be a chance encounter
. The need for particular discretion when holding conversations with
colleagues about business matters
. Possible methods of recognising intelligence gatherers
. The standard methods used by intelligence gatherers
. Methods of establishing the credentials of all questioners before
information is supplied without alienating genuine customers
. The limits of what it is permissible to disclose
The briefings could usefully involve the company's own competi-
tive intelligence staff who can impart the tricks of the trade and
recount useful war stories of their successes as a warning.

Briefing staff about to leave the organisation

The leavers can only be cautioned on the inadvisability of revealing

company secrets plus a warning that they and their new employer
could be held liable should any serious damages arise from their
disclosures. Their loyalty will inevitably be to their new employer but
there are some appeals that may work over and above the threat of
sanctions. For example:
. We trust that you have enjoyed your time working with the
company and that the skills and information you have gained from
that experience will stand you in good stead in your future career.
Not all of what you have learnt from us will be of use to you, but
much of what you know about us could be of high interest to our
competitors. We therefore request that you be circumspect in what
you say about this company either to your new employer or to third
parties
. It is always inadvisable to disclose information about previous
employers too readily. Your new employer may regard it as
210 Competitive Intelligence

unethical and refuse to accept or use the information you proffer

and the fact that you offered it may jeopardise your career
prospects
. If asked for information about us, remember that passing on trade
secrets may be deemed to be theft, which is a criminal offence
. It is also worth remembering that you may have been hired only to
obtain information and once you have given it you may cease to be
useful
None of these points will have much effect on those who leave the
company harbouring a grievance, either because they have been fired
or because they feel they have been badly treated by the company.
These individuals may deliberately seek to damage the company by
revealing information.

Non-disclosure agreements

Management can reinforce its briefings with non-disclosure agree-

ments. In the case of staff these can be incorporated into the terms of
employment, where the sanctions that will be applied in the event of
any unauthorised disclosure can be spelt out. Non-disclosure agree-
ments can also be requested from external organisations to whom
sensitive information may need to be made available, notably custo-
mers, suppliers and business partners. These will not necessarily stop
information disclosure but they will make those that sign them aware
of the fact that they have a duty to maintain confidentiality. The non-
disclosure agreement should typically contain:
. A statement outlining why confidentiality is required
. The types of information that are covered by the agreement
. The types of organisation to which information should not be
provided
. The circumstances under which a release from the agreement may
be granted
. The steps that need to be taken in order to gain a release
Suppliers and business partners will tend to take such agreements
more seriously than customers, mainly because they stand to lose
business if they are found breaking the agreement. Supplier and
partner agreements can therefore be worded strongly, spelling out
the sanctions that can result from breaches in confidentiality. Custo-
mers need to be handled more carefully, since they can always take
their business elsewhere, but there is no harm in reminding them of
their obligation.
 Counter-Intelligence 211

Testing the System

Once a counter-intelligence system has been established its effective-
ness should be tested regularly. This can be done quite effectively, by
commissioning a competitive intelligence exercise on the company
itself. The exercise needs to be carried out by an intelligence organisa-
tion that has no prior knowledge of the company and the effectiveness
of the defence system should be judged by:
. The amount of intelligence that is gathered
. The accuracy of the intelligence
. The ease with which the intelligence is collected
Any such test is of course a test of the effectiveness of the intelligence-
gathering organisation as well as of the defence system and a wholly
negative result should be treated with caution.

Monitoring the Threat

Competitive intelligence programmes are rarely one-offs. They are

normally mounted at regular intervals either by the same or different
competitors. The threat is continuous. This means that there can be
no let-up in the counter-intelligence programme. Management and
staff must be continuously vigilant, recognising when programmes are
being directed against them and attempting to identify the sources of
attack. The attacks are likely to occur in waves initiated by any event
that disturbs the equilibrium in the competitive environment, such as:
. The launch of a new product
. The introduction of a new production technology (even if thought
to be a closely guarded secret)
. Bids for a major contract
. Changes in the direction or intensity of marketing activities
. The emergence of a new competitor in the business
The three key problems in spotting an `intelligence attack' are:
. Bringing together the data in a way in which changes in the level of
activity can be detected
. Covering attempted contacts with an entire company, especially in
the case of large multi-site organisations
. Covering contacts with related third parties such as customers,
suppliers, partners and advisers
212 Competitive Intelligence

To overcome these problems some companies have installed call-

monitoring systems on which a central record of incoming `suspi-
cious' calls can be logged and made accessible to all staff. These
systems provide staff with the facility to check how many calls have
been received previously from:
. The same person
. The same organisation
. The same telephone number
The systems can also log the nature of the enquiry made during
each call. A high frequency of calls from a specific source can signal
an attack but a more significant warning is given when:
. The same individual calls from different numbers
. The same telephone number appears for different company names
. Different staff call from the same company

Publicise Willingness to Take Legal Action

The failure of the public at large to recognise the real difference
between competitive intelligence and industrial espionage provides an
opportunity to stifle the more overt activities by publicising any
attacks that are detected. Recent high-profile cases (of industrial
espionage), such as Oracle's attempt to obtain intelligence which
proved that Microsoft was funding an apparently independent lobby
group to influence the antitrust case against Microsoft, have ended up
with the press criticising Oracle heavily. This resulted from their use
of a detective agency that chose to obtain the information by
attempting to buy the lobby group's rubbish.
The risk of embarrassing disclosures will not stop attempts to gain
intelligence but may serve to curb the intensity of the approaches that
are used.

Implementation

The implementation of each of the steps defined above requires one or

more of the following:
. Investment in people and time
. Investment in systems and software
. Staff briefings
. Changes to employment contracts
 Counter-Intelligence 213

The resources required for counter-intelligence are primarily people

and time. In large and small organisations the resources may be the
same as those devoted to the collection of competitive intelligence. A
close alliance between the two tasks ensures that the information spin-
off from counter-intelligence is fully exploited in the competitive
intelligence programmes. The scale of the need for dedicated coun-
ter-intelligence personnel is driven by:
. The size of the organisation, and therefore the scale of the counter-
intelligence task
. The volume and sensitivity of the information to be protected
. The amount of damage that can be inflicted by competitors
Large, multi-site organisations with substantial volumes of highly
sensitive information to protect and whose performance could be very
vulnerable to an informed competitive attack should certainly con-
sider a dedicated counter-intelligence manager. In smaller organisa-
tions with lower levels of vulnerability counter-intelligence could be a
part-time function.
If a security team is employed there is obviously some overlap
between their tasks and counter-intelligence, though they have a
much closer relationship with counter-espionage. Security teams are
primarily concerned with the prevention of trespass, theft, vandalism
and sabotage largely by preventing unauthorised physical intrusion
into the company's sites. Maintaining physical security requires a
totally different skill set to that required for counter-intelligence and
there is little real point in trying to combine the two activities.
Investment systems and software are an additional resource that
can be considered only when the scale of the task is sufficiently large
and complex to justify the sums involved. The main systems that exist
at present monitor incoming telephone calls and analyse them as
identified above.
Systems permit any staff member receiving an enquiry from an
external source to check, before responding:
. Whether the caller, the company from which they have stated they
are calling from and the telephone number from which the call is
being made have been encountered before
. The staff members they have spoken to
. The enquiries they have made
Such systems provide a powerful defence against repeated tele-
phoning, which is one of the standard research tools used in compe-
titive intelligence.
214 Competitive Intelligence

Staff and business partner briefings are required to alert staff and
business partners to the dangers of competitive intelligence, the means
by which they can detect that they are being targeted for intelligence
and the actions they should take in the event that they suspect that
they are being targeted.
Changes to contracts can be used to support the staff briefings by
giving contractual weight to the need to protect proprietary informa-
tion. The contracts that need to be considered are:
. Employment contracts issued to staff
. Contracts issued to suppliers of raw materials, equipment and
services
. Contracts with joint venture partners
. If appropriate, contracts with customers and clients
It is not necessary to draw up contracts specifically to cover the
need to protect proprietary information, only to add clauses to
existing contracts. These should prohibit the disclosure of all com-
pany information to third parties, unless it is essential for the
performance of the task being carried out for the company. The
weakest links in the chain are customers and they obviously need to
be handled carefully. Staff, suppliers and joint venture partners are
dependent on the company for income and stand to lose if they are
found in breach of contract. Customers are not beholden to the
company in the same way, though they are not immune to sanctions if
they reveal information that is damaging to their suppliers.

Note

1. `Corporate Spying Firms Thrive', The Wall Street Journal Europe, 4 July
2000.
19 Deception and
Misinformation

A major task both of (national) intelligence and security authorities

is to hamper the intelligence gathering of unfriendly powers. This is
done not only by restricting their intelligence gathering activities,
but also by inducing them to draw incorrect conclusions from such
information they do acquire . . . Although it is not possible to
prevent the enemy from acquiring some information, it is possible
to ensure that the intelligence he does so acquire is misleading or
false.1

The use of deception and misinformation programmes by companies

seems highly attractive but must be treated with care and to be
successful three conditions must be fulfilled.

. The company carrying out the deception programme must have

reasonable insight into the intelligence and opinions that competi-
tors hold on them
. The company must have a sufficiently secure system to ensure
reasonable control of the information flowing out of the company
. There must be channels of communication between the deceiver
and the competitors that the deceiver can control

Deception offers an opportunity to achieve the element of surprise

that is so valuable in competitive marketing.
Deception and misinformation cover all types of information that
can be deliberately `spun' into the marketplace or passed directly to
competitors. It also includes procedures that shield activities from
competitor observation. The process is dangerous, primarily because:

215
216 Competitive Intelligence

. Competitors are not the only organisations that could be deceived

and harm could be done to customer, supplier and partner
relationships
. Maintaining a consistently deceptive story from all parts of the
organisation requires an effort which may be out of all proportion
to the impact it will achieve
Despite the fact that it is fraught with problems, deception is
nevertheless worth considering since, if it works, it represents a major
competitive action in its own right. Warfare abounds with examples
of deception campaigns that were designed to `mislead the enemy into
doing something, or not doing something, so that his strategic or
tactical position would be weakened'.2 These range from the Trojan
Horse to the elaborate campaigns designed to conceal the fact that the
invasion of France in 1944 would commence in Normandy and the
deceptive information that is planted in documents on order to trap
plagiarists and illicit users. In a recent case, the United Kingdom
Ordnance Survey, which sells its database of maps of the country to
other map publishers as well as direct to users, proved that the AA
had made illicit use of its database by planting false information.
These included extra stream tributaries, imaginary farm buildings,
tiny kinks in rivers, exaggerated curves in roads and missing apos-
trophes in names.3
It is tempting to think that comparable commercial activities could
be used to put competitors off their guard or persuade them to waste
resources responding to activities that will never take place.

Intelligence Held on the Company

The first requirement is to assess the intensity with which competitors
study their competition and the methods that they use. This is a
routine competitive intelligence topic that will show whether the
competitors will be receptive to a deception programme. Competitors
that are not in any way curious about the competitive environment in
which they are operating will be difficult to deceive. Those that
actively and continuously seek competitive intelligence will provide
multiple deception opportunities, though they may also be more
adept at distinguishing truth from fiction.
In order to provide a platform for a deception programme the
company needs to determine what competitors know about them. In
the first instance this is a process that can be allied with the
requirement to test the intelligence defences described in the previous
 Deception and Misinformation 217

chapter. An inward-looking competitive intelligence programme will

provide a good indication of the intelligence competitors are able to
collect and, if analysed according to the first principle of competitive
intelligence, will indicate the deductions that competitors have drawn.
To be most effective this exercise should be carried out by an
independent agency briefed to provide the most insightful report
possible within the levels of budget competitors would be likely to
deploy.
The main weaknesses in the analysis is that it will be difficult to
build in the intelligence that competitors have access to from their
internal sources such as the sales force or from previous employees.
Nor is it easy to replicate the interpretation of the intelligence that has
gone on within competitors. This could however be corrected by an
intelligence-gathering activity designed to uncover the perceptions of
the company that each of its competitors holds. This approach is used
as a method of seeking additional intelligence within a normal
competitive intelligence programme but comes into its own when
planning a deception campaign.

Channels of Communication
The feasibility of launching a deception programme is enhanced if the
company has access to communication channels that can be relied on
to pass intelligence to competitors. External sources that would be
perceived as being independent are preferable to company sources
even though they are difficult to identify and control. Whoever is
considered would have to have a close relationship with the company
and would have to be party to the deception. The dangers this poses
can be so great that in many instances it should be discounted.

Internal Sources of Information

A misinformation campaign is practical only if there is a nominated
source in the company for all information requested by unknown
third parties to whom all enquirers are automatically referred. Many
companies already direct enquirers to the Public Affairs or PR officer
as the sole source of information. When this is done it is possible to
exert some control over the information that is released and avoid the
risk that different staff will `sing from different hymn sheets'. An
authoritative Public Affairs officer is in a strong position to misin-
form since callers' natural tendency will be to believe, rather than
218 Competitive Intelligence

challenge, what they are told, especially if they can be convinced

that they have coaxed a nugget of intelligence from an unwilling
respondent.
To further aid the believability of the data given out the nominated
source can co-opt other staff members to assist in deceptions on a
case-by-case basis. One of the tests of the accuracy of intelligence is
the identity of the sources from which it has been acquired. The two
key questions are:
. Is the respondent likely to know the information?
. Can the respondent be believed?
Whereas legitimate competitive intelligence gatherers are bound by
a code of ethics not to deceive, no such constraints exist on those
giving information. It is therefore possible to set up either a genuine
source with the right credentials or a spurious information source
with a convincing title whose role is to provide misleading informa-
tion which either confirms the information given by the initial source
or elaborates on it.
In order to avoid confusing those who have a legitimate interest in
the company, misinformation should be leaked in such a way that it
reaches only the ears of those for whom it is intended. Generally this
means that it must be told directly to sources rather than dissemi-
nated though press releases or interviews with journalists. However, it
should be borne in mind that normal information channels, particu-
larly the press, will often contain inaccurate information. The mis-
information process may dictate that no attempt is made to correct
such errors, providing they are unlikely to harm the company's
business.

Types of Deception
Deception can cover:
. Information collected from the company
. Observations of the company's activities
. Information disseminated about other competitors

Deception by information
To work, information passed out in deception campaigns has to be
believed. This means that it must be reasonably, though not necessa-
rily entirely, consistent with what is generally known about the
company. Competitive intelligence analysts are used to the need to
 Deception and Misinformation 219

reconcile conflicting information. This is a natural consequence of the

way in which intelligence is gathered from a variety of sources, some
of whom are well-informed and some of whom are relatively unin-
formed. Deliberately adding misinformation to the data available for
analysis makes it less likely that the outcome will be accurate.
However, this is a rather crude outcome from the deception process.
A more sophisticated approach would be to deceive competitors in
such a way that they reach a predetermined erroneous conclusion and
change their own actions accordingly. This is relatively easy with facts
and internal opinions or assessments such as:
. New product developments ± type and timing
. Launch dates for new products, which can be extended or reduced
to confuse competitors
. Geographical expansion programmes
. Staff numbers
. Organisational structures
. Production capacities
. The relative importance of distribution channels
. Strengths and capabilities
. Weaknesses and vulnerabilities
It is much more difficult with topics that can be independently
verified or checked for consistency with information publicly avail-
able about the company.
The requirement for credibility means that the misinformation
must stand a chance of passing normal sanity checks. Figures that
are totally inconsistent with industry norms and the experience of
other suppliers will be quickly discarded as erroneous. It is therefore
sensible to `bend' the truth rather than to distort it completely. Thus,
embellishments, stretching the facts or exaggerations are preferable to
complete lies, providing they achieve the desired effect. There is little
point in releasing information which exaggerates your staff numbers
by only 10 per cent; since they will always assume a margin of error in
the data, this level of distortion will do little to change the competi-
tors' perception of your capabilities. It would be more worthwhile to
concentrate on misleading competitors about the skills that are
present or lacking in the workforce.

Deception by observation

Physical deception ± disguising or concealing what is going on ± has

been widely used to provide an enemy with false observations. It is a
220 Competitive Intelligence

staple activity in wartime and is still used regularly by the automobile

industry when road-testing new models for which the styling and
performance features need to be kept confidential until the models are
launched. Unfortunately, the motor industry's practice is well-known,
as are the normal test locations, and motoring journals spend con-
siderable sums on advance pictures and artistic representations of new
models. But this does not invalidate the use of physical deception in
other areas.
The types of deceptions that could work in the competitive arena
include:
. Camouflage ± a wartime favourite for concealing what exists in the
way of military hardware either by covering items or by changing
their shape. In civilian operations, camouflage can be used to
distort the intelligence gained by aerial or satellite reconnaissance
of company sites
. Dummy activities ± the competitive equivalent of dummy tanks and
aircraft used to deceive the enemy into raising their estimates of
resources could be the `deliberate loss' of documents describing
company resources and plans in a way or place which would be
likely to result in them finding their way to a competitor
. False campaigns ± test-marketing programmes are used regularly to
determine how a new product will perform and are watched eagerly
by competitors. A false test-marketing programme using a different
product and/or a different marketing approach would be an
expensive but highly effective method of deceiving the competition
Physical deception requires innovative thought and a sense of
theatre to be successful. It may also be such fun that the budget it
demands is out of proportion to the effect it achieves. When it is
vitally important that the competition is deceived, a significant
deception campaign may be justified but if this is not the case the
activity should be treated with considerable caution.

Ethical Considerations
Deception involves telling lies and it may be challenged whether this is
ethically acceptable. Whilst telling lies about competitors' activities in
order to harm their business is unethical, it can be argued that lying in
order to protect one's own business interests is ethical. Indeed it could
be said that although there is always an option to say nothing, in
some circumstances it could be unethical to tell the truth if by doing
so the interests of the owners and employees could be damaged.
 Deception and Misinformation 221

Propaganda
Deception does not necessarily stop at the company itself. Consider-
able mileage may be gained by disseminating false information about
competitors, the equivalent of the `black art' of propaganda used in
wartime. As with all false information, care must be taken to ensure
that it is credible and is not libellous, but there is little doubt that
carefully placed rumours will be readily absorbed by the marketplace
and can cause havoc to competitors' plans and force them onto the
defensive. These activities can be used to buy time or act as a
smokescreen for developments.
The main problem facing the propagandist is that the activities may
trigger retaliatory action. False information is easy to place and all
companies can engage in the process if they so wish. An escalating
propaganda war could do considerable harm to all participants in a
market. A secondary problem arises if the propagandist is found out.
Such a discovery would inevitably lead to considerable opprobrium
being heaped on the head of the propagandist and a loss of reputation
on a scale that could damage business.

There is no doubt that misinformation, deception and propaganda

can be very useful weapons in the competitive battle not only as
defence mechanisms but also as a means of attack. They are, however,
fraught with dangers and are not for the faint-hearted. If there is any
doubt that they will be successful they are probably better avoided.
As far as is known they are not widely practised even though it is a
logical activity to undertake. Time spent thinking about deception
could pay off but might be more valuable as a source of entertainment
than a contribution to strategic advantage.

Notes

1. Michael Howard, British Intelligence in the Second World War (London,

Her Majesty's Stationery Office, 1989).
2. Charles Cruickshank, Deception in World War II (Oxford, Oxford
University Press, 1979).
3. The Times, 6 March 2001.
Appendix: The Competitive
Intelligence Checklist

The coverage of any competitive intelligence exercise will vary

according to business area, the companies to be covered and the
purposes for which the results will be used. The checklist that follows
lists the generic topics that can be covered.

(A) Who Are the Competitors?

. Current direct competitors

. Current indirect competitors
. Potential future competitors

(B) Profiles of Current and Potential Competitors

1. Company details
. Headquarters
. Company structure
. Production locations
. Sales offices (domestic and foreign)
. Key executives (background, previous employment, track record)
. Total number of employees (administration, production and sales
and marketing)
. Ownership
. Subsidiaries
. Affiliates

2. Organisation
. Organisational structure
. Key operating divisions
. Resourcing of each division
. Activities of each division

222
 Appendix: The Competitive Intelligence Checklist 223

3. Financial performance
. Consolidated key financial performance data
. Divisional financial performance

4. Products
. Products/services supplied
. Specifications of products/services
. Claimed technical/specification advantages
. Major product applications
. New product development
. Investment in R&D (history)

5. Production
. Production employees
. Production capacity
. Capacity expansion plans
. Production technologies
. Claimed production skills
. Licences held/given

6. Suppliers
. Raw material suppliers
. Equipment suppliers
. Subcontractors used
. Packaging suppliers
. Length of time suppliers have been used
. Use of electronic data exchange
. E-procurement (see section on e-business)

7. Sales and customer base

. Size and structure of the sales force
. Characteristics of the sales force (technical or commercial)
. Qualifications of the sales staff
. Length of time sales representatives have been with the company
. Role of the sales staff (representation, order-taking, provision of
technical advice)
. Use of field sales agencies
. Total sales (volume and value)
224 Appendix: The Competitive Intelligence Checklist

. Key accounts/customers and contribution to total business

. Contribution of each product/service line to company sales
. Sales by applications
. Sales growth

8. After-sales and technical support

. Types of support provided
. Support methods (telephone, on-site, return of items to support
centre, Internet)
. Number of support staff
. Number of maintenance personnel
. Qualifications of the support and maintenance staff
. Regional organisation
. Use of technical literature, CD-Roms, video and other methods of
distributing technical information

9. Physical distribution
. Distribution channels used
. Key distributors
. Relative importance of each distribution channel
. Distribution methods (own transport resources, subcontracted
logistics services)
. Size and structure of transport fleet
. Use of vehicle livery for advertising

10. Marketing

. Target market segments

. Market shares in key segments
. Size and structure of the sales and marketing department
. Outline of marketing and promotion methods
. Brochures and catalogues
± Format
± Coverage
± Content
. Newsletters
. Advertising
± Advertising objectives
± Advertising expenditure
 Appendix: The Competitive Intelligence Checklist 225

± Media used (TV, radio, national press, trade, technical and

professional press, cinema, posters and non-conventional media)
± Advertising messages
± Advertising agencies used
. Direct marketing
± Direct mail programmes
± Telesales
± Role of the telesales department
± Balance between inbound and outbound activity
± Locations of call centres
± Number of telesales agents
± Sources of databases
. PR (programmes and resources)
± Agencies used
± News items issued
± Volume of coverage obtained
. Sales promotion
± Programmes
± Incentives
± Resources
. Exhibitions attended
. Sponsorship
± Events sponsored
± Value of sponsorships
. Corporate hospitality
± Events used
. Merchandising
. Customer/distributor service programmes
. Market research
± Commitment to research
± Size of research department
± Types of research carried out

11. Website
. Role of the website within the e-business strategy (see below)
. Format (text, graphics)
. Coverage and content
. Extent to which the website is transactional and types of transac-
tions available
. Hyperlinks to other sites
. Number of visitors/hits to website
226 Appendix: The Competitive Intelligence Checklist

12. E-business
. Existence of an e-business strategy
. Role of e-business in the overall strategy
. E-business objectives
. E-business initiatives
± Electronic information exchanges with suppliers and customers
± E-procurement
± Transactional services (ordering, inventory data, order status,
payment information, payments)
. Proportion of sales made through e-business channels
. Use of Internet trading sites
. Use of extranets and web portals

13. Prices and discounts

. Price of ranges per product line
. Price positioning
. Discount structure

14. Relationships/partnerships
. Licences
. Joint ventures
. Distribution agreements
. Marketing partnerships
. Length of time relationships/partnerships have been running
. Affiliations/membership of trade bodies

15. Export activity

. Export sales
. Importance of exports in total revenues
. Export methods (through overseas subsidiaries, agents, distributors)
. Countries in which export sales are made and local resources in
each country
. Export marketing activity

16. Overseas subsidiaries

. Countries
. Locations
. Activities (representation, local production, sales and marketing)
. Products sold
. Contribution to consolidated revenues
 Appendix: The Competitive Intelligence Checklist 227

(C) Interpretation
The data collected on each company can be analysed and interpreted
in order to deduce those aspects of their activities on which direct
information is unlikely to collected. These will include:
. Apparent overall strategic intent
. Strategic directions
. Methods of implementing the strategy
± Apparent market positioning
± Products
± Technology
± Target markets (customer segments, geographical)
± Apparent distribution strategy
± Apparent pricing strategy
± Promotion and communications strategy
. Extent and nature of competitive threat
. Resources and resource limitations on the business
. Potential retaliation to competitive action (intensity and direction)

(D) Counter-Intelligence
On the assumption that all companies seeking competitive intelli-
gence are also likely to be the subject of competitive intelligence-
gathering exercises by their competitors, equal consideration should
be given to the task of minimising information outflows. A key task
is to balance essential information outflows (for marketing, procure-
ment and other purposes) with the need to restrict information flows
to competitors or those acting on their behalf. The relevant questions
to be asked are:
. Who is likely to be seeking information about our activities?
. What information needs to be protected?
. Who has access to the information?
± Within the organisation
± Externally
. Are we vulnerable to information outflows from distributors?
. Are we vulnerable to information outflows from customers?
. Are we vulnerable to information outflows from advisers and
consultants?
. Have those with access to the information signed confidentiality
agreements?
228 Appendix: The Competitive Intelligence Checklist

. What physical measures are in place to prevent/control information

outflows?
± From full-time employed staff
± From part-time staff
± From the staff of distributors and associates
± By observation
. Who screens all documents passing out of the company for their
information content?
± Brochures and catalogues
± Newsletters
± Annual reports
± Other official filings
Further Reading

Competition
R. D'Aveni, Hyper-Competition, The Free Press, New York, 1994.
L. Fahey, Competitors, John Wiley, New York, 1999.
J. Moore, The Death of Competition, HarperBusiness, New York, 1996.
M. Porter, Competitive Strategy, The Free Press, New York, 1980.
M. Porter, Competitive Advantage, Macmillan, New York, 1985.
M. Porter, The Competitive Advantage of Nations, The Free Press, New York,
1990.
M. Porter, On Competition, Harvard Business School Press, Boston, 2000.
D. Ramsey, The Corporate Warriors, Houghton Mifflin Company, Boston,
1987.
C. Stern and G. Stalk Jr (eds), Perspectives on Strategy, John Wiley, New
York, 1998.
M. Treacy and F. Wiersema, The Discipline of Market Leaders, Addison-
Wesley, Reading MA, 1996.

Marketing Warfare
C. von Clausewitz, On War, Penguin Classics, Harmondsworth, 1983.
R. Duro and B. Sandstrom, The Basic Principles of Marketing Warfare, John
Wiley, Chichester, Sussex, 1987.
A. Ries and J. Trout, Marketing Warfare, McGraw-Hill, New York, 1986.
Sun Tzu (ed. J. Clavell), The Art of War, Delacorte Press, New York, 1983.

Competitive Intelligence
H.P. Burwell, Online Competitive Intelligence, Facts on Demand Press, Tempe
AZ, 1999.
L. Fuld, The New Competitive Intelligence, John Wiley, New York, 1995.
D. Hussey and P. Jenster, Competitor Intelligence, John Wiley, Chichester,
1999.
L. Kanahar, Competitive Intelligence, Simon & Schuster, New York, 1996.
R. Linville, CI Boot Camp, Society of Competitive Intelligence Professionals,
Alexandria VA, 1996.
J. McGonagle and C. Vella, A New Archetype for Competitive Intelligence,
Quorum Books, Westport, 1996.
J. Nolan, Confidential, HarperBusiness, New York, 1999.

229
230 Further Reading

A. Pollard, Competitive Intelligence, Financial Times Pitman Publishing,

London, 1999.
K. Tyson, The Complete Guide to Competitive Intelligence, K. Tyson
International, Chicago, 1998.
How to Find Business Intelligence in Washington, Washington Researchers,
1997.
How to Find Information on Private Companies, Washington Researchers,
1999.

Industrial Espionage
H. Cornwall, The Industrial Espionage Handbook, Century, 1991.
P. Hamilton, Espionage and Subversion in an Industrial Society, Hutchinson,
London, 1967.
I. Winkler, Corporate Espionage, Prima Publishing, Rocklin CA, 1997.

Techniques Useful to Competitive Analysts

D. Bernstein, Put Together, Put It Across, Cassell, London, 1988.
B. Cooper, Writing Technical Reports, Penguin, London, 1964.
E. Gowes, The Complete Plain Words, HMSO, London, 1954.
R. Hoff, `I Can See You Naked': A Fearless Guide to Making Presentations,
Andrew and McMeel, Kansas City MS, 1988.
J. Honeycutt, Using the Internet (3rd edn), Que, Indianapolis IN, 1997.
R. Jolles, How to Run Seminars and Workshops, John Wiley, New York, 1993.
M. Moroney, Facts from Figures, Penguin, London, 1992.
J. Paterson, Sign Here, Ashgrove Press, Bath, 1998.
E. Tufte, The Visual Display of Quantative Information, Graphics Press,
Cheshire, Conneticut, 1983.
K. Waterhouse, English our English, Viking Books, London, 1992.

Knowledge Management
V. Allee, The Knowledge Evolution ± Expanding Organisational Intelligence,
Butterworth-Heinemann, London, 1997.
T. Davenport and L. Prusak, Working Knowledge: How Organisations
Manage What They Know, Harvard Business School Press, Boston, 1997.
R. Ruggles (ed.), Knowledge Management Tools ± Resources for the
Knowledge Based Economy, Butterworth-Heinemann, London, 1997.
Index

A.C. Nielsen 78 Business

AA 216 intelligence 38, 146, 188
Academic publications 67 intelligence manager 131
Accidental loss 194 journals 66
Acquisitions 6, 61 planning 135
candidates 18, 19 plans 203
Agence France Press 77 schools 99
Agents 192 strategists xiv
Airfreight companies 40 Business Links 136
American Express 40 Business Week 66
Annual Reports 61, 60, 203 Buyers guides 63
Anonymity 131
Antitrust legislation 162 Call centres 196
Asda 9 Call monitoring systems 212
Associated Press 77, 79 Camouflage 220
AT&T 5 Cartels xi
Attack sites 81 Catalogues 63
Automated web monitoring CD-Roms 72, 78
services 85 Chambers of Commerce 52, 99
Automobile industry 219 CIA Yearbook 81
Awareness surveys 112 Cisco Systems 19
CNN 77
Bates, Ted 3 Code of ethics 153, 164
Bloomberg 77 Commissioner for Data
Bond, James xiii, 192 Protection 164
Brainstorming 200 Companies House 60, 79
Briefing 206 Company
meeting 154 brochures 46
British Airways 88 handouts 90
British Library 71 histories 65
Broadband technology 5 secretaries 64
Brochures 53, 62, 90, 141, 203 websites 80
Brogan, Chris 169 [Link] 81
Broker's analysts 96, 97 [Link] 77
Brokers reports 64, 125 Competition
BT 5 laws 2
Budget 152, 181 legislation 162
Budgetary Competitive
constraints 152 attack 187
consultants 136, 192 climate 38, 39
Burwell, Helen 85 intelligence consultants 96

231
232 Index

Competitive (cont.) Deregulation 5, 2, 29

intelligence manager 130, 133 Derwent 78
intelligence systems 177±9 Derwent's World Patent Index 70
landscape 34, 35, 38 Deutsche Telecom 5
map 34, 35 Dialog 78, 85, 162
strategy 10, 28 Differentiation 4
Competitive Intelligence Direct competitors 14, 15
Services xv Director of Public Affairs 188
Computer-based CI systems 27 Directories 63
Computer models 200 Directory entries 62, 203
Conference papers 67 Disclosure 78
Conferences 54, 82, 90, 197, 208 Discount intelligence 43
Confidentiality 151 Discussion
Conflict of interest 140, 166 forums 83
Consultants 99, 104 guide 104, 105
Copyright law 162 Distributors 20
Corporate Diversification 7
databases 194, 195 Dow Jones 79
fraud 21, 22 Interactive Web Centre 83
intranets 171, 172 Duffey, William, Jnr. 169
investigators 193 Dummy activities 220
Corroboration 129 Dun & Bradstreet 64, 65, 78, 79
Cost 144
Counter-espionage 184
Counter-intelligence xii, 31, 32, East European library 71
107, 184±214 E-commerce xii
Courier companies 40 Economic data 81
Credit Economic Espionage Act 162, 169
agreements 46 Economist Intelligence Unit 78
reporting agencies 64 EDGAR 73, 79
Criminal law 161 Electronic newsfeeds 174
Cross-fertilisation 131 Elfsoft 76
Cruickshank, Charles 221 E-mail 5, 108, 171, 172, 197
Cultivation 41 Employment contracts 214
Customer English Query 76
analysis 28, 25 English Wizard 76
panels 111 Environment 62
satisfaction surveys 113 Environmental analysis 121±2
CyberAlert 85 ESOMAR 32
Espicom 78
Ethical research approach 167
Data Ethical standards 137
communications 5 Ethics 160, 166, 169, 220
protection legislation 31 Euromonitor 78
Database 72, 174, 178 European Community 82
management 177 European Data Protection
Datamonitor 78 Directive 163
Data Protection Act 164 Eventseeker 82
Deception 215±21 Eventsource 82
Demographic data 81 e-watch 85
 Index 233

Exhibitions 54, 90, 172, 197, 208 IAL Consultants 79

catalogues 63 IBM 16
guides 203 ICC 65
Explicit knowledge 175 IDC 79
Export Marketing Intelligence Illegal access xiii
Centre 71 Image surveys 112
Indirect competitors 14, 15, 16
False campaigns 220 Inducements 103
Financial Industrial espionage 21, 22, 212
data 79 Industry
databases 65 associations 89
intelligence 42 newsletters 67
statements 53 norms 129
Financial Times 66, 77 research associations 98
Find/SVP 79 statistics 81
Findex 72 Information
Forbes 66 audit 203
Fortune 66 flow 8
France Telecom 5 Intelligence
Frances, Deborah 23 audit 56
Free competition 1 Intelligence brief 147
Freedonia 79 databases 21
Frost & Sullivan 79 teams 54
[Link] 85 International Directory of Company
Fuld & Company 179 Histories 65
Fuld, Leonard 179 Internet xii, 55, 73, 74±85, 26, 136,
152, 172, 195,
Gartner Group 79 Business Library 83
General Motors 88 conference rooms 83
Global marketing 30 message sections 83
Globalisation 7 newsgroups 84
Goulden Reports 79 search engines 84
Government Internet sites 141
reports 68 Investext 78, 79
statistics 68 Investment prospects 18, 20
Graphology 106 Investor relations departments 64
Groupware systems 177 Investors in People 203

Hanafi, Ammar 23 Joint venture partners 20

Harvard Business Review 67 Jordans 65
Head of security 188 Journalists 97, 98, 218
Head-hunters 192
Henderson, Bruce 9 Kassel, Amelia 85
Herring, Jan 23, 49 Key intelligence topics 44, 150
Hewlett Packard 16 Keynote 79
Hoovers Online 79 Kirk, Elizabeth E. 129
Hospital panels 111 Knightly, Philip xiii
House journals 63 Knowledge management
Howard, Michael 221 systems 171, 175±7, 194, 195
Hypotheses 119 Kompass 79
234 Index

Legal framework 161 Northern Lights 77, 79, 85

Levitt, Theodore 7, 11 NQuire 76
Lexis 78, 82
Libraries 71 Objectivity 131
Library files 57 Observation 219
Library of Congress 71 Office of Fair Trading 162
Local press 97 Official company filings 60, 194
LoÂpez, Jose Ignacio 88 Official journal 68
Lotus Notes 176, 177 On-line databases 78
Loyalty surveys 113 Operational intelligence 44
Oracle 212
Management Ordnance Survey 216
consultants 192 Outsourcing 8
information systems 171, 174,
177, 178 Panel surveys 69
Market Parallel teams 120
growth 39 Password protection 205
intelligence 38 Patent databases 70
planning 135 Patents 58
research xiv, 21, 24, 109±15, 130, People intelligence 43
135, 166, 167, 192, 193 Perceptual mapping 114
research reports 58 Phone tapping xiii
share 183 Physical surveillance 194, 199
size 39 Planning applications 62
trends 39, 40 Police 135
Marketing information system 27, Pollution 62
173 Porter, Michael 30, 32
Marks & Spencer 9 Post offices 40
McDonald's 4 Press
McGonagle, John 169 articles 77
McKinsey Quarterly 67 releases 53, 218
Media research 114 Press Association 77
Michigan State University Centre Pressure groups 98
for Business Education 83 Price
Microsoft 212 intelligence 43, 89
Military intelligence 135 lists 46
Mintel 79 PricewaterhouseCoopers 16, 184
Misinformation 215 Primary
Mobile communications 5 intelligence 55
MoneyExtra 80 sources 52
Monopolies xi Private detective agencies 21, 22,
Moodey's Investor Services 79 193
Mystery shopping 113 Privatisation 2, 5, 29
Product
Natural competition 9 descriptions 90
News databases 85 samples 46
Newsletters 63, 203 Professional
Newswires 77 associations 89, 98
Non-disclosure agreements 165, journals 67
210 Profiles 46
 Index 235

Profit and Loss Account 42 Go 75

Promotional discounts 62 Google 75
Propaganda 221 Infoseek 75
Proposal 142, 145 Lycos 75
Prospectuses 62 Metacrawler 75
Public Webcrawler 75
affairs 129 Yahoo 75, 81
reference libraries 52 SEC Filings 61
Published Secondary
information 194 data 53
market research reports 69 sources 50, 51, 55
media 65 Securities Exchange
Commission 61, 203
Questioning competitor staff 100 Security 128
services 135
R&D 58 systems 174
Racketeer Influenced Corrupt Seminars 90, 172
Organsation (RICO) act 88 Shareholders 62
Receptionists 196 Sherlock Holmes 119
Recession 30, 182 SIS International xiv
Recruitment 81 Smith, Adam 1, 11
advertisements 203 Society for Competitive Intelligence
specialists 192 Professionals xii, 136, 164,
Reeves, Rosser 3, 11 Specialist audits 111
Refuse 62 Spies 192
Regulatory authorities 64, 98 Spreadsheets 118
Renewable sources 57 Staff
Restatement of Torts (1939) 163 ex- 94, 198
Retail audits 111 files 58
Reuters 77, 79, 85, 162 Stanat, Ruth xiv
Reverse engineering 106 Standard & Poors 79
Road transport companies 40 Stasi 22
Roskill 79 Stock exchange 61, 97, 203
Strategic
Safeway 9 competition 9
Sainsbury's 9 intelligence 48
Sales planning 135
briefing 206 Suppliers 20
and marketing intelligence 43 Switchboards 102, 107
representatives 59
Sanctions 168 Tacit knowledge 175
Satellite 199 Tactical
images 70 competition 11
observation 70 intelligence 46
Sawka, Ken 23 Tasking 178
Scenarios 200 Taylor Nelson Sofres 79
Search Engine 75 Technical
Alta Vista 75 data sheets 62
Ask Jeeves 75 intelligence 42
Excite 75 Technology 7
236 Index

Telecommunications 5 Uniform Trade Secrets Act 163

Telephone conference calls 156 Unique Selling Proposition 3
Telephonists 196, 197 Uniqueness 3, 4
Tesco 9 United Press 77
Text Messaging 5 Universities 99
The Boston Consulting Group 11 University of Strathclyde 83
The Economist 66 Unjust Enrichment 163
The Sunday Times xiii
Theft xiii Venture capital reports 68
Thomas Register 79 Venture capitalist 37, 68
Time 66 Verification 123±9
Timetable 158 Video conferencing 5
Timing 151 Virgin 16, 88
Tracking 47, 54, 149 Voice communications 5
Trade Voicemail 107
associations 58, 59, 69, 89, 98, Volkswagen 88
136
association reports 69 Wall Street Journal 66
magazines 66 War gaming 200
press 66, 97 Warehouse operators 40
show directory 82 Waste water 62
shows 82, 90, 208 Websites 53
Trojan Horse 216 Wergeles, Fred 73
Wilson, Aubrey xiv
Unethical behaviour 168 Workshops 172
Unfair Trade of Business
Practices 163 Yellow Pages 76