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The Right Kind of Competitive Intelligence

In a world of WikiLeaks, Galleon, and increased scrutiny of how businesses access and exchange information, many companies are getting timid about developing intelligence. This is a mistake. As someone who helps companies gather and analyze intelligence about their industries, competitors, and markets, I know that one can obtain and use valuable information legally.

That is not to say, however, that getting these results is easy. Many companies new to the intelligence business (or that don’t really "get" it) mistakenly believe they can find all the information they need on Google (GOOG). Using the Internet is only scratching the surface. Unique insight comes from blending and analyzing street knowledge and market savvy with public domain data. Abide by the following three rules to obtain and harness intelligence.

Rule No. 1: Marshall your company’s competitive knowledge.

One of my favorite stories of how a company used intelligence to increase market share predates the Internet. In the early 1980s, Campbell Soup Co. (CPB) was launching the then-little-known Prego—to go up against market leader Ragu (UN). (Disclosure: I worked with Campbell on other initiatives, although I didn’t work on this one.)

The goal was to anticipate Ragu’s response to Campbell’s entry and devise a strategy to win shelf space in grocery stores across the country. Always a believer in assembling groups to solve problems, the president of Campbell Soup North America created a war room inside company headquarters. There the entire product management team drawn from sales, marketing, promotion, and manufacturing collected all available information from the company’s brain trust.

They plastered the war room’s walls with advertisements, competitor packaging, grocery store layouts, pricing comparisons, and more. Each day, the team entered this room and faced the competition head-on. They immersed themselves in the intelligence and used it to devise market initiatives, focus groups, and sales tactics that ultimately led to Prego gaining 25 percent market share.

Rule No. 2: Build information filters to reduce competitive distraction.

Unnecessary distraction can be a bigger threat to a company than any single competitor. In the mid-1990s Pacific Enterprises—now known as Sempra Energy (SRE)—found itself in the middle of a deregulation maelstrom. With the advent of state and federal deregulation, hundreds of nontraditional players sought to enter the energy market. So not only was Pacific Enterprises concerned with its usual competition, it also had to anticipate an acquisition threat from far outside its traditional competitor set. Chuck Rooney, the company’s strategic planning director at the time, developed a simple early-warning system based on a series of weighted information filters. He monitored signals by asking: (1) Do any of the companies we are tracking have an expressed energy strategy? (2) Have they amassed enough financial resources to acquire a company of our size? (3) Have they suddenly expressed a need in the retail energy market of which we are a part? And (4) Do they have plans to enter the West Coast marketplace? When all these signals lit up, he knew this was a potential threat or acquirer that needed to move to the top of his list from among the few hundred he monitored. He aimed to eliminate unnecessary concern and keep the company focused. The screening mechanism allowed Pacific to drop scores of companies from its radar screen and instead focus on bigger, more likely threats. It also enabled management to prepare a better defensive strategy once it had identified likely acquirers.

Rule No. 3: Stress test your strategy to identify future threats.

It’s one thing to develop a strategy and another to demonstrate its resiliency when faced with unimagined market threats or opportunities. Stress testing is another way to scope out the potential competitive landscape. Placing your strategy in a type of pressure cooker, such as a war game, is an effective way to demonstrate or stress test your strategy’s resiliency. In a 2009 public war game, we stress tested the strategies of four companies: GE Healthcare; Allscripts, a relatively small firm but a pure play in this business; health-care giant Kaiser Permanente; and McKesson (MCK), the largest distributor of medicines worldwide. This was a demonstration war game, yet it yielded great insights. (This is much the same process as in the private games we run for clients, which are confidential.) Out of the heated discussions about how to advance its strategy came a half-dozen or so eye-popping insights. For instance, the Allscripts team realized it needed to merge with another major player to avoid being marginalized or reduced to an also-ran in a very active, very fast-moving market. In 2010, about one year after these findings, Allscripts announced a merger with rival Eclipsys.

These are only a few of the business challenges competitive intelligence can address. Competitive intelligence isn’t magic and it isn’t illegal. It’s about gathering honest and hard-won information and analyzing it so that executives can make sound decisions.

Leonard Fuld is president and founder of Fuld & Co., a global consultancy providing competitive insights through its research and advisory services. His most recent book is The Secret Language of Competitive Intelligence.

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