Monday, April 26, 2010

Is Comptetitive Intelligence Worth the Effort?

How important is it to keep an eye on your competition?  I was thinking about this question as I read an article on competitive intelligence in the April issue of Inc. Magazine [link].  Part of Inc's How To Guidebook series on business basics, the article presents several easy ways for companies to gather intelligence on competitors.  As I read the article though, I couldn't help wonder if focusing on competitors is really worth the effort.

Okay, there are some obvious reasons for knowing what your competitors are doing, but I've seen many companies take it to extremes and become so obsessed with following their competitors that it took attention away from running the business.

Lead, Don't Follow

You're in business to serve customers.  If you continually provide better products and services to your customers, you won't have to worry about your competitors.  The key is to develop a deep understanding of your customer's fundamental needs - i.e., the value your product or service truly provides for the customer.  Clearly understanding this improves your ability to create innovative ways to meet the customer's needs - something that won't happen when you spend too much time studying your competitors.

Too much focus on competitors tends to limit innovation because it directs attention toward meeting or beating what competitors do rather than finding ways to improve the value customers receive by doing business with you.  There is a strong tendency toward a "me too" mentality when you worry more about what your competitors - instead of your customers - are doing.

In other words, when you focus on your customers; you lead.  When you focus on your competitors; you follow.

As an example, when Saehan developed the world's first MP3 player, it did so based on the customer's fundamental need to listen to music from anywhere quickly, easily, and comfortably.  Until that time, the only way to have portable music was to use a portable radio (where one can't personally select the songs) or a portable CD player (which limits the amount of music based on the number of CDs the user is willing to carry).  If Saehan focused on competitors, it would have put its efforts toward developing a better or cheaper portable CD player.  Instead, it focused on the customer's fundamental needs and introduced an innovative product that changed the market forever.

So, I guess I've answered my original question.  Although it's probably okay to have a basic idea of what competitors are doing, it can easily get out of hand and interfere with innovation and customer-focus.  Becoming obsessed with customers instead of competitors, however, can lead to the development of innovative products and services that will result in competitors following you.


Unknown said...

You nailed it. Focusing on competitors indicates that other companies know more about the market than your company does. Yes, you must be aware of competition; but you must be aware of ALL the elements that impact your ability to succeed. This includes suppliers, distributors, regulation, technology, industries indirectly related to yours, but mostly customers.

Success in business is largely related to how well a company pays attention to customers and to changes in the marketplace - which competitors may not notice.

BTW, I have an entire chapter in my new CI book on this issue - when to pay attention to competitors, but mostly why not.

Seena Sharp
Author, Competitive Intelligence Advantage

Gregg Stocker said...


Excellent point about admitting that competitors know more than you do. Although unintentional, focusing on the competition can easily create an organizational inferiority complex.

Thanks for the comment.

Rodgers Naylor said...

Hi Gregg,

I agree with you and Seena that thinking like your customer is the way to be rather than looking in the rearview mirror and fixating on the competition.

I find that having dialogs within the company with creative types and also outside partners helps "think like a customer" almost more than talking to the customer. After years of win loss interviews, so often their contributions help my clients retain their business through product tweaks and various customer service improvements, but not usually innovation!


Ellen Naylor
The Business Intelligence Source

PS I can recommend Seena Sharp's book "Competitive Intelligence Advantage" which provides the most thorough discussion around competitive intelligence definition you'll find anywhere!

Gregg Stocker said...

Thanks Ellen. When you think about it, no customer ever asked for CDs, flash drives, fuel injectors, MP3/iPods, Post-Its, automatic icemakers, or even the electric light. They can only tell us what they want in terms of what we've given them in the past.


Unknown said...

Your point is well taken, Gregg, about these innovative products, but they only account for a minuscule amount of new products. If you hit, the rewards are enormous, but most don't succeed. Improvements are far less risky, but satisfy customers, keep the company ahead of the competition, attract new customers, and make money.

Customers can't always articulate what they want, but they constantly indicate it by their comments, complaints, purchases of alternative products, etc.. "All" a company has to do is pay attention to what's changing in their industry as well as with others.