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Sharp Market Intelligence

Hermosa Beach, CA
P: (310) 379-5179
E: ssharp@sharpmarket.com
W: www.sharpmarket.com

Experts in strategic market intelligence – current, accurate growth and trend information and analysis on industries, companies, products, services.

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Competitive Intelligence: What You Don't Know Will Hurt You

by From "Competitive Intelligence Advantage" by Seena Sharp

CompetitIVE intelligence and competitOR intelligence are not synonymous, and knowing the difference will have consequences for the prosperity of your company or product.

(an excerpt from Chapter 3)

Are we serious when we ask, "Is there a difference between competitive and competitor?"

For most business people, these terms are one and the same. They are not, and those who understand the difference will always have a significant advantage. It’s similar to believing that selling and marketing are identical disciplines. They are not. And when you don’t understand the difference, you miss the value of both.

Competitive intelligence and competitor intelligence are not synonymous, and knowing the difference between them is more than mere semantics. In fact, the distinction is so significant that it will have consequences for the prosperity of your company or product. If that sounds like hype, take the measure of your attitude after you ?nish reading the chapters on competitive and competitor intelligence (Chapters 3 and 4).

What is the difference between these two? Competitor intelligence has a narrow focus that excludes critical information; competitive intelligence takes a broader, more objective and more accurate view of what business faces and what can derail or challenge your company.

The puzzle shown in Figure 3.1 graphically and deliberately demonstrates that competitor intelligence is merely one element in the business environment. Competitive intelligence is more expansive in that it considers all the elements that impact the company’s success — customers, suppliers, distributors, substitutes, regulations, technology, the economy, other industries, demographics, culture/societal issues— and competitors. Ignore these other elements and you’re setting yourself up to be blindsided.

Competitive Environment

Competitive Intelligence: The Larger View

The two examples that follow should shift your thinking about the value of the entire business environment beyond the notion of competitors and turn you into an ardent believer in the value of competitive intelligence.

Imagine that you are buying a home or renting an apartment. If you were doing the equivalent of competitor intelligence, you would compare house A to house B to house C and so on. You would evaluate the number of bedrooms and bathrooms, the square footage, number of floors, kitchen space and appliances, fireplaces, style of the house (traditional, Tudor, contemporary), size of property and amenities (pool, deck, grassy area), and so on.

Even a renter, however, looks at far more data points than these. They consider the neighborhood: What does it look like? How well is the area maintained? How noisy is the location? How far apart are the homes? They also consider the commute to work, quality of schools, presence of the venues for things they like to do or that they consider important such as movies, sports, restaurants, parks, gourmet supermarkets, and specialty shops.

The latter would comprise the competitive landscape, which includes those elements that are important in making this decision, even if you’re planning a short-term stay. I doubt that you would choose a place to live based strictly on the number of rooms, without considering the other details.

This applies equally to business decisions. For example, one of my clients manufactured metal frames that supported handles of plastic bags used in the supermarket or drugstore. The company was performing well, and in looking to expand, the executives wrote a business plan and submitted it to the bank. The bank was sufficiently impressed and agreed to give them the loan, provided they would improve the market section. They asked us to provide sufficient market intelligence to satisfy the bank’s demand to determine how viable the market was, going forward.

We first performed an industry assessment with the usual elements: market size (current and growth trends), distribution channels, competitors and comparable product information for each, and a summary on the industry and how it’s changing. That was step one, and even that included far more than only addressing competitors.

Next we reviewed and analyzed all the other industries that could impact our client’s success, which led us to look at ?ve other industries, the entire business environment as it applied to this client:

Supermarket business. Since most of the frames were sold in supermarkets at that time, we focused here first. We compared the number of plastic and paper bags that supermarkets purchase, as well as the costs of storing and shipping for plastic versus paper. The differences in weight, storage space, and costs for each type were quite significant.

Packaging industry. There was a time when the only option was paper bags. Then plastic bags began to replace them. Now there are paper bags with handles and customers using their own bags. Is there another option on the horizon?

Plastics industry. Plastic is the raw material of these bags, so they needed to understand what is happening in this industry regarding price or availability. Are any manufacturers switching to plastic frames?

Petroleum industry. Plastic is made from petroleum, and petroleum prices have been extremely volatile over the years. This will impact the price and availability of plastic bags, so this industry was relevant and deserved inclusion.

Environment. Consumers continue to be concerned about the biodegradability of products made from plastic. Although this concern has ebbed and gained momentum over the years, it had to be factored into the outlook. There are biodegradable bags made from corn that look like plastic, but since the customer doesn’t know which ones are "green," environmental concerns continue.

After evaluating all these additional industries, our client had a comprehensive and realistic overview of the entire competitive environment, a conclusion that gave the bank the confidence to approve the loan.

The bonus was that the company also used this information for strategic and marketing purposes. Further, because of the thorough intelligence they now had, they gained even more confidence about expanding, moving faster and more aggressively, thereby increasing sales sooner and at a greater pace than previously.

If we had only looked at competitors, would that have been sufficient? We are certain it would not, and the client and bank obviously agreed that a broader, macroview was more advantageous. Excluding any one of these industries could have posed a serious challenge to a realistic understanding of what the company might face. After all, the purpose of competitive intelligence is to support the development of more resilient, more robust strategies and tactics and to minimize risk. A narrower focus will not help achieve that purpose.

Seena Sharp authored the recently published Competitive Intelligence Advantage: How to Minimize Risk, Avoid Surprises, and Grow Your Business in a Changing World (Wiley). She founded one of the first competitive intelligence firms, Sharp Market Intelligence, serving clients from Fortune 500 firms to those whose names are unfamiliar – throughout the US, Europe, Asia and Africa. She speaks to business groups globally and has published numerous business articles.

Visit www.sharpmarket.com or www.competitiveintelligenceadvantage.com.