Competitive Intelligence? What’s competitive intelligence? According to Wikipedia, “Competitive intelligence (CI) is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization.“
For the day to day, it means understanding what your competitors, direct and indirect are doing, how big their war chest is, whom they’re hiring, and then trying to figure out how you can outcompete them based on your realities. Competitive intelligence is an ongoing process. It is about accumulating relevant knowledge that your entire executive team can implement into the overall company strategy.
As a founder, how do you go about collecting competitive intelligence? A good starting point is reading about your industry, following investors who participate in your space, get a sense of whom they are investing in, set up alerts using Zapier, or IFTTT. These alerts will ping you when your competitors make moves or edit their profiles on popular investment sites like Crunchbase or here on f3fundit. Follow them on LinkedIn, follow their blogs, keep a spreadsheet of their offerings, prices, promotions. Review this periodically. If things look suitable for your competitors, remember the hype cycle, realities are often very different than what we see in the news. A new large client may mean difficulties scaling, and a new round may indicate they’re not growing as quickly as they’d like or generating insufficient revenue.
Competitive Intelligence Concepts and Approaches for Startups – Best Practices
Look at the Blue Ocean – Blue Ocean Strategy was management a book published a few years back that talks about companies competing in parallel markets. Tesla is competing among electric car market vs.’ GM, who competes in the traditional vehicle market. Tesla will have an easier time with competition than GM will due to the sheer number of players in the space. Blue Ocean focuses on making your competition irrelevant. Another company that’s great at this is Nintendo, which creates gaming consoles that target an alternative market segment to its two biggest competitors Sony and Microsoft.
Be Well Capitalization – A company with a more massive war chest will be harder to outcompete that one without it. If you’re not as well-capitalized, then you’ll need to be smarter and more creative than your competitors. If you’re better capitalized and brighter, you then ought to win. Capitalize your company by hoarding cash and investing it strategically or by taking on outside capital, but remember it comes with a cost. There is no need to expend resources where they are not needed, and hoping you’ll grow into something is like hoping you’ll lose enough weight to fit into your high school jeans.
Collect CI down operating channels – What are your competitors doing operationally that you’re not? Financially? How are they charging? How do they structure their product teams? Is the business based on a specific Intellectual Property (IP), or are your core assets people? Identify those elements of your business that give you a competitive advantage and track them. Ask yourself how they compete with your main competitors? At a minimum, you’ll know you’re following best practices; at worst, you’ll be able to bring a subset of your business to the level of your competitors and, at best, create strategies to outperform them.
Main Types of Competitive Intelligence
If you’re not sure where to start, I’ve outlined some standard types of competitive intelligence for you to think about.
Intellectual property. If you have IP, and depending on the company’s resources, you should do a comprehensive patent literature search at least once a year.
When searching for patents, it is useful to start with the European Patent Office, which publishes all patent applications within 18 months of when they are filed, usually after one year. In contrast, the USPTO will not issue patents until 18 months after they are filed. Most countries do not make a patent available to the public until the patent office has reviewed it.
If your competition isn’t potentiating inventions, what IP(s) do you own that give you a competitive advantage. Take each of those and run a comprehensive SWOT analysis on them.
Market need and size. Identifying target market segments will allow you to know what markets are complimentary for you and your competitors to move into, to which they are ignoring.
During long development periods required for most products (to get to product-market fit), the market needs may change. It is, therefore, vital to keep CI up to date by regularly consulting with customers, collect sentiment, gather data on what your audience needs.
Partnerships. Monitor technologies and startups entering the market. If you’re a product company, follow YC’s batches and TechStars’ classes. If you’re in services, look who’s making blips and investing marketing dollars. If any company is complimentary and makes sense to partner with, do it. An ideal partnership is one that provides value both ways.
Competitive environment. It is essential to monitor the competition continuously. Some players will drop out, while new, potentially disruptive technologies developed by small firms may enter the market and may not be readily apparent as competitors until it’s too late. You ought to be expansive in thinking about the possible kinds of competitors and track both direct and indirect ones as well as the overall industry. Attending conferences, reading competitor blogs, and marketing pages can give you an idea of your competitors’ product strategies.
Understand your competitor’s sales processes. Get quotes from your five main competitors. Quotes and walking through their sales processes can help you understand how your customer experience compares and where you need to improve in your sales process.
Capitalization. One of the most vital tasks for the leadership of any startup is ensuring that resources that the firm needs to operate are available and can be allocated to strategic goals.
In short, this means available cash. Cash-rich companies will outperform cash-poor companies every time.
Cash acts as a buffer to recessions, can be used to scale or invest in research and development activities. Growing businesses should aim to squirrel away 10% of their revenues into a cash account. Then utilize much of that money for long term strategic initiatives, be they new products or M&A activities. Being well-capitalized means, you can outperform your competitions.
Companies within a specific industry will, on average, have similar capitalization rates. Services businesses will have the cash to sustain operations anywhere from 1-3 months out; venture-backed startups will appropriate their war chests (cash) towards growth activities. Understand the capital requirements of your space and aim to have more.
Incremental innovation opportunities and risks. Incremental innovation is Apple’s bread and butter. There is a vision, and then there are additional steps to get to that vision; coupled with a deep understanding of the market, incremental innovation can lead to long term sustained competitive advantage. If you’re not conducting competitive intel on who is investing in what in your space, you should. Keep a matrix of new activities within your market and systematically analyze them.
Human capital. People can be a source of competitive advantage like anything else. Hiring practices and the caliber of people you bring on will directly impact your organization. Analyzing your best performing competitors’ employees can and will provide you with what types of people are behind the driver’s wheel at your competitors. Who and what does management structure look like? What types of folks are in roles that focus on the day to day operations and execution? Hire similar ones and bring in a wildcard to two into your organization to mix things up. Diversity at the end of the day is also a source of competitive advantage. If you’re looking where to start, go with LinkedIn.
Regulation. Some industries, such as finance, or biotech are subject to regulatory environments, and even the smallest changes in regulation can spell doom if those changes affect a niche you’re playing in. Understanding market trends in regulation can provide both a source of defensive and offensive intelligence. If regulators may be curbing what you can do, looking for alternative investment and operating activities is advisable. If regulation is loosening, then investment in your core activities is probably warranted.
Surveying applicable regulatory agencies is one way to determine current regulatory requirements and identify those issues that might affect the approval of a product or the way it is labeled and marketed.
Competitive intelligence should be an ongoing and active process at all organizations. We frequently forget that we’re conducting it by talking to people, networking, and reading up on relevant industry literature. But the rub is that if you’re not actively participating in it, you’re underperforming.