Competitive intelligence

Competitive intelligence is the process and forward-looking practices used in producing knowledge about the competitive environment to improve organizational performance. Competitive intelligence involves systematically collecting and analysing information from multiple sources as part of a coordinated competitive intelligence program. It is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, suppliers, competitors, and any aspect of the external business environment needed to support executives and managers in strategic decision making for an organization.
CI involves developing an understanding of what is happening in the world outside the business, so as to increase one's competitiveness. It means learning as much as possible, as soon as possible, about one's external environment including one's industry in general and relevant competitors. This methodical program affects the organization's tactics, decisions and operations.

Key points

Competitive intelligence is a legal business practice, as opposed to industrial espionage, which is illegal.
The focus is on the external business environment.
There is a process involved in gathering information, converting it into intelligence, and then using it in decision-making. Some CI professionals erroneously emphasize that if the intelligence gathered is not usable or actionable, it is not intelligence.

Another definition of competitive intelligence regards it as the organizational function responsible for the early identification of risks and opportunities in the market before they become obvious. This definition focuses attention on the difference between the dissemination of widely available factual information performed by functions such as libraries and information centers, and competitive intelligence which is a perspective on developments and events aimed at yielding a competitive edge.
The term competitive intelligence is sometimes viewed as synonymous with competitor analysis, but competitive intelligence is more than analyzing competitors; it embraces the entire business environment and stakeholders: customers, competitors, distributors, technologies, and macroeconomic data. It is also a tool for decision-making.
Commercial Intelligence can be obtained and analyzed in various ways that include:

Information on a supplier's financial performance
Political developments
Economic indicators
New product development
Currency market movements
Competitor performance
New market entrants

On the other hand, business intelligence is a misnomer for data mining and enterprise dashboards that present useful patterns or distillations of internal information to the executives.

Historic development

Competitive intelligence literature can be exemplified by the bibliographies that were published in the Strategic Consortium of Intelligence Professionals' now discontinued academic journal The Journal of Competitive Intelligence and Management. Although elements of organizational intelligence collection have been a part of business for at least a century, the history of competitive intelligence as a discrete topic began in the U.S. in the 1970s, although the literature on the field pre-dates this time by at least several decades.
In 1980, Michael Porter published the study Competitive-Strategy: Techniques for Analyzing Industries and Competitors which is viewed as the foundation of modern competitive intelligence. This has since been extended most notably by Craig Fleisher and Babette Bensoussan, who through several popular books on competitive analysis described 48 competitive intelligence analysis techniques to the practitioner's tool box.
Although Michael Porter first discussed the importance of monitoring and analysing competitors, the discipline became a separate branch of business strategy in 1985, when Leonard Fuld published a book dedicated to competitor intelligence. However, the institutionalization of competitive intelligence as a formal activity among American corporations can be traced to 1988, when Ben and Tamar Gilad published the first organizational model of a formal corporate competitive intelligence function, which was then adopted widely by US companies. The first professional certification program was created in 1996 with the establishment of The Fuld-Gilad-Herring Academy of Competitive Intelligence in Cambridge, Massachusetts - now known as the Academy of Competitive Intelligence. Within Europe, the Institute for Competitive Intelligence, based in Germany offers similar training and certification.
Also in 1986, the "Society of Competitor Intelligence Professionals" was founded - later changing names. SCIP was initially an independent non-profit but ran out of money and in 2009 was merged with the Frost & Sullivan Insitute. SCIP grew in the late 1990s to around 6,000 members worldwide, mainly in the United States and Canada, but with large numbers especially in the UK and Australia. SCIP was then renamed "Strategic & Competitive Intelligence Professionals" to emphasize the strategic nature of the subject, and also to refocus the organization's general approach, while keeping the existing SCIP brand name and logo. More recently SCIP was renamed again to the "Strategic Consortium of Intelligence Professionals". The renaming was intended to reflect the organization’s expanded global scope, encompassing practitioners in competitive, strategic, economic, and social intelligence.
A number of efforts have been made to discuss the field's advances in post-secondary education, covered by several authors including Blenkhorn & Fleisher, Fleisher, Fuld, Prescott, and McGonagle. Although the general view would be that competitive intelligence concepts can be readily found and taught in many business schools around the globe, there are still relatively few dedicated academic programs, majors, or degrees in the field, a concern to academics in the field who would like to see it further researched. These issues were widely discussed by over a dozen knowledgeable individuals in a special edition of the Competitive Intelligence Magazine that was dedicated to this topic. In France, a Specialized Master in Economic Intelligence and Knowledge Management was created in 1995 within the CERAM Business School, now SKEMA Business School, in Paris, with the objective of delivering a full and professional training in Economic Intelligence. A Centre for Global Intelligence and Influence was created in September 2011 in the same School.
Practitioners and companies regard professional accreditation as important in this field. In 2011, SCIP recognized the Fuld-Gilad-Herring Academy of Competitive Intelligence's CIP certification process as its global, dual-level certification program.
Global developments have also been uneven in competitive intelligence. Several academic journals, particularly the Journal of Competitive Intelligence and Management in its third volume, provided coverage of the field's global development. For example, in 1997 the was founded in Paris, France. It is the first European institution which teaches the tactics of economic warfare within a globalizing world. In Germany, competitive intelligence was unattended until the early 1990s. The term "competitive intelligence" first appeared in German literature in 1997. In 1995, a German SCIP chapter was founded, which is now second in terms of membership in Europe. In 2004, the Institute for Competitive Intelligence was founded, which provides a postgraduate certification program for Competitive Intelligence Professionals. Japan is currently the only country that officially maintains an economic intelligence agency. It was founded by the Ministry of International Trade and Industry in 1958.
Accepting the importance of competitive intelligence, major multinational corporations, such as ExxonMobil, Procter & Gamble, and Johnson and Johnson, have created formal competitive intelligence units. Organizations execute competitive intelligence activities not only as a safeguard to protect against market threats and changes, but also as a method for finding new opportunities and trends.
Organizations use competitive intelligence to compare themselves to other organizations, to identify risks and opportunities in their markets, and to pressure-test their plans against market response, which enable them to make informed decisions.
One of the major activities involved in corporate competitive intelligence is use of ratio analysis, using key performance indicators. Organizations compare annual reports of their competitors on certain KPI and ratios, which are intrinsic to their industry. This helps them track their performance, vis-à-vis their competitors.
The actual importance of these categories of information to an organization depends on the contestability of its markets, the organizational culture, the personality and biases of its top decision makers, and the reporting structure of competitive intelligence within the company.
Strategic intelligence focuses on the longer term, looking at issues affecting a company's competitiveness over the course of a couple of years. The actual time horizon for strategic intelligence ultimately depends on the industry and how quickly it's changing. The general questions that strategic intelligence answers are, ‘Where should we as a company be in X years?' and 'What are the strategic risks and opportunities facing us?' This type of intelligence work involves among others the identification of weak signals and application of methodology and process called Strategic Early Warning, first introduced by Gilad, followed by Steven Shaker and Victor Richardson, Alessandro Comai and Joaquin Tena, and others. According to Gilad, 20% of the work of competitive intelligence practitioners should be dedicated to strategic early identification of weak signals within a SEW framework.
Tactical Intelligence: the focus is on providing information designed to improve shorter-term decisions, most often related with the intent of growing market share or revenues. Generally, it is the type of information that a person would need to support the sales process in an organization. It investigates various aspects of a product/product line marketing.
With the right amount of information, organizations can avoid unpleasant surprises by anticipating competitors' moves and decreasing response time. Examples of competitive intelligence research is evident in daily newspapers, such as The Wall Street Journal, Business Week, and Fortune. Major airlines change hundreds of fares daily in response to competitors' tactics. They use information to plan their own marketing, pricing, and production strategies.
Resources, such as the Internet, have made gathering information on competitors easy. Analysts can discover future trends and market requirements. However, competitive intelligence is much more than this, as the ultimate aim is to lead to competitive advantage. As the Internet is mostly public domain material, information gathered is less likely to result in insights that will be unique to the company. There is a risk that information gathered from the Internet will be misinformation and mislead users, so competitive intelligence researchers are often wary of using such information.
As a result, although the Internet is viewed as a key source, most competitive intelligence professionals should spend their time and budget gathering intelligence using primary research—networking with industry experts, from trade shows and conferences, from their own customers and suppliers, and so on. Where the Internet is used, it is to gather sources for primary research as well as information on what the company says about itself and its online presence. Online subscription databases and news aggregation sources, which have simplified the secondary source collection process, are also used.