Let’s face it, whether you’re a first-mover pioneering a new space or simply an also-ran joining an established market, you will always have competitors. A new solution will compete with an existing solution, just as surely as an old solution must evolve to meet progress or die. So what can you do to ensure you understand your competitive landscape? How can you stay ahead in a world tumbling forward like the plot of a James Bond mystery? Here’s a tip: star-gazing, tantric meditation and the sage advice of Auntie Doreen can only get you so far. James C. Tuckerman caught up with Mindshifts’ Babette Bensoussan to discuss the finer points of Competitor intelligence. It’s time to get sleuthing.
WAKE UP SHERLOCK
Let’s first get something clear. Industrial espionage is illegal. And we don’t condone it. But, having said that, any dummy can tell you that ‘checking out your competition’ is a sensible – if not essential – business strategy, as old as commerce itself.
Over the past ten years, agencies have sprouted like whiskers on Poirot’s upper-lip to help corporations the world over collect, filter and extract conclusions from the hundreds of billions of information snippets (clues) currently littering the web. Algorithms and software programs are constantly being created and updated to track and, hopefully, extract meaning from the mountains of documents made publicly available, every day, by the media and government agencies.
And it makes commercial sense.
If you don’t know how your competition is changing, how can you evolve to meet the needs of your customers? If you don’t know what makes you different, how can you define your unique selling proposition and build a marketing strategy accordingly?
In short, if you don’t look beyond your own patch of turf, how are you supposed to compete?
Babette Bensoussan is Managing Director of Sydney-based MindShifts, a boutique consultancy that was launched in 1991 to help companies understand their competitive landscape. During her 16 year career as an advisor to major Australian businesses and global Fortune 500 companies, Bensoussan has learned a thing or two about ‘sussing out’ competitors.
So, what’s Bensoussan’s first lesson for budding corporate sleuths? Borrowing from the X Files’ famous tagline, Bensoussan contends, "The truth is out there!"
MOVE OVER SCULLY
"Most of the information a company needs to accumulate competitor intelligence is already available,"says Bensoussan. "Approximately 75 percent of what you need to know about your competition is already locked within your company. When you are looking for information, the best source is your own people – your salespeople, your distributors, your suppliers. They know a lot more than managers give them credit for."
"Then, of course, you have the internet – chatrooms, usergroups, blogs, search engines – and freely available resources, such as media and government agencies. And then you can also undertake your own research – market research – using methods as simple as a customer survey."
But how can a business sort and prioritise this information?
"There are two basic categories of information: hard and soft. Hard is written data. Soft is information extracted through conversations and interviews. It refers to the spoken word. The different types and combinations of information you use will depend on what answers you are seeking."
WHEN THE ANSWER IS 42
This becomes the crux of successful competitor intelligence. With so much information available, business owners can be lulled into a false sense of security. Knowledge is power, right? But the real challenge is not in the acquisition of information, but in the ability of a business to identify what answers it is seeking.
"The most common request we receive from customers is to find out how much competitors are charging for their products and services, when most of the time price is irrelevant. Why do I say that? Because price is rarely a determining factor in a sale. Purchases are built around relationships. If you can find out what your competition is doing to build better relationships, that would be better intelligence than price,"says Bensoussan.
"Twice recently, I have been asked to look into a ‘price war’, as anticipated by the client. In the first instance, the war was over. The market had already moved on by the time I was called in. In the second instance, it turned out that my client was, in fact, the cause of the anticipated war, without knowing it. The company’s over-zealous interest in competitive pricing had dragged prices down."
So, what sort of answers should a company be looking for? "Successful managers will seek competitor intelligence that allows them to look into the future. Successful managers consider the operational style of senior executives within competitive companies, what sort of decisions they have made and are likely to make. If a manager can second guess another company’s strategic intentions, they can also minimize risks and threats, and maximise opportunities.
"The important thing to remember is that competitor intelligence needs to have a purpose,"says Bensoussan. "You need to ask, ‘What decision will this information be supporting?’ All intelligence activity must be carried out for a purpose. To get information for the sake of getting it is truly a waste of time."
ELIMINATING THE IMPOSSIBLE
With so much information available, competitor intelligence also requires structure. As in most areas of business, there is a strategic approach to generating results.
"The first step is to identify what you want to find out. The second step is to identify what analytical technique you should use to identify the answer you are seeking,"says Bensoussan.
There are hundreds of analytical techniques that are used to evaluate information. The various techniques will differ in effectiveness, subject to the type of insights sought.
One of the most cited is Michael E. Porter’s ‘Competitor Analysis’, from his book ‘Competitive Strategy: Techniques for Analysing Industries and Competitors’. Porter uses four ‘purposes’ to second guess a competitor’s future behaviour. They involve the identification of competitor strategies and plans, their likely reactions to competitor initiatives, how well their strategies are matched to their capabilities and what assumptions the competitor has about itself.
Win/Loss analysis is another popular technique, whereby research is conducted either over the telephone or in a face-to-face interview. The purpose is to establish why, as in a tender process, business was won or lost, and learn what key distinctions potential and new customers saw between a company and its competitors, the importance of those distinctions and the value they assigned to each competitor.
Possibly the ‘sexiest’ and perhaps the most ‘faddish’ approach is the War Game method, despite its practice in Japan for centuries. This technique employs a battle strategy whereby teams representing the host company and a competitor ‘battle-out’ a scenario based on competitive intelligence research provided by an external source. The latest evolution of this method has been the development of supporting software.
"Through such techniques, information can be collected and analysed,"says Bensoussan. "Information itself does not offer an advantage. It is the insight derived from evaluated information that is of value. Only the human mind can create intelligence or insights, and what you have stacked around you, in your office, is either data or information – not intelligence."
CLOAKS AND DAGGERS
Dirty tricks like phone taps, dumpster diving and surveillance are generally considered an unnecessary aspect of competitor intelligence, simply because an estimated 95 percent of information a company might want is already publicly available.
According to Bensoussan, the other five percent, a competitor’s truly proprietary information, such as customer lists, margins, intellectual property, doesn’t usually stay valuable for long because the most successful companies are constantly creating new ways to satisfy customers.
"In my opinion, there are usually only two reasons why a company will engage in unethical practices, such as espionage,"says Bensoussan. "The first reason is a lack of training. If managers are not trained in the basics of competitor intelligence they may not be aware of the ethics. The second reason is incompetence. Managers seeking answers ‘Now!’, making knee-jerk decisions in response to unanticipated complications are more likely to give instructions leading to unethical behaviour than managers who are prepared in the face of competitor movements."
While most of the high profile cases of industrial theft have taken place abroad, should Australian business owners be worried about their competitors engaging in this sort of unethical behaviour?
SO WHO DUNNIT?
"One observation I can make is that Australian businesses are a little more laid back than their overseas counterparts. The Americans, French, Chinese and Japanese are very aggressive and aware of their competitors. If Australian companies want to compete with the rest of the world, they need to show greater interest in such things, beginning with robust measures to collect and analyse competitor information,"say Bensoussan.
While competitor analysis is essential, focusing exclusively on competitor movements is the surest way to develop tunnel vision and be blindsided by significant marketplace changes.
"Don’t get caught marching in lock step with your competitors, while failing to recognise your customer’s changing needs. Business history is filled with companies that lost their competitive edge through sheer ignorance of changing marketplaces,"says Bensoussan.
"The US auto industry is notorious for dismissing non-American manufacturers as serious competitors, allowing the Japanese to infiltrate the global automarket in the 1970s and repeat its success with luxury vehicles in the 1980s. Upstart VCR technology seized an opportunity when the major players neglected the importance of easy programming. Who wants a video player with a clock you can’t set? Disruptive technologies are more dangerous than competitors to a fast-growth business."
So when it comes to competitor intelligence it is worth remembering that, while the truth is out there, the most dangerous competitor is usually the one you cannot see.
Babette Bensoussan has worked with major Australian businesses and global Fortune 500 companies. She was a Founder and Vice President for the Society of Competitive Intelligence Professionals (SCIP) in Australia, and was awarded a Fellow of SCIP in the USA in 1996. In 2006, she was awarded the highest honour in the CI field: the 2006 SCIP Meritorious Award. Babette has also been an Adjunct Lecturer at the Sydney Graduate School of Management, University of Western Sydney and at Bond University. She is the co-author of the best selling book, "Strategic and Competitive Analysis�, published by Prentice Hall. Her second book "Business and Competitive Analysis"published by the Financial Times, will be released in March 2007.
SPOOKY SEARCH TOOLS
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Have you ever googled yourself? (Don’t deny it. we all have). Imagine being able to ascertain what your friends, employees and competitors are thinking by using similar technologies.
Visit Google News
"News Alerts"allows you to set up a search query that will send you an email (or an RSS news feed) whenever your keywords appear on one of the news sites Google searches. The easy-to-use service also allows you to customise how often you receive alerts.
Visit Technorati
This search engine tracks what people post on weblogs, which you can track using key words, via RSS feeds. ‘Technorati Watchlist’ lets users manage multiple keyword search alerts. Technorati also offers a small window you can display on your desktop.
Visit Topix.net
This service is very similar to Google News. However, it searches both news sources and weblogs. Topix.net also provides thousands of category searches that are already organised by topic. So, you may discover that an alert service on your subject is already available.
Visit Gnoos
This Australian technology, based out of Mornington in Victoria, offers a weblog search engine that is similar to Technorati but focuses on Australian weblogs. Just as large organisations are taking classified search local, Gnoos is giving weblog search a local face.
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BUSTED: FAMOUS RED FACES CAUGHT RED HANDED
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Not all companies observe the boundaries between ethical competitor intelligence and illegal industrial espionage. History is littered with high profile companies that have suffered red faces, and criminal proceedings, as a result of their determination to taste forbidden corporate fruit.
Hewlett-Packard exposed.
In mid-2006, HP acknowledged its involvement in obtaining private phone records belonging to HP board members, employees and at least nine journalists, in an attempt to locate the source of a leak on HP’s board. HP used pretexting, a controversial and possibly illegal practice that involves duping phone company or bank employees into turning over someone’s private information. This is not the first time HP has been at the centre of a privacy scandal. In May 2003, HP was the victim, when it was revealed that an espionage ring attempted to use various deception techniques to pilfer secret plans for a laser printer that was being developed at HP’s closely guarded printer labs in Boisie, Idaho.
Ferrari vs. Toyota.
The Italian auto manufacturer Ferrari, also in 2003, charged Toyota with stealing the design for its Formula One racing car, claiming that the Toyota TF103 was a copy of the Ferrari F2002. German police arrested an aerodynamics engineer who worked for Toyota in Cologne and had previously worked for Ferrari. Interestingly, the founder of Ferrari, Enzo Ferrari, admitted to once being an industrial spy for Alfa Romeo!
Bill Gates vs. Larry Ellison.
In 2000, the Oracle Corporation hired a DC-based private investigative firm to dig up information embarrassing to Microsoft in its antitrust battle with the US Justice Department. The investigative firm had agents successfully infiltrate several offices in Washington, and even paid janitors for Microsoft’s trash. Oracle founder and CEO, Larry Ellison, considers himself to be the nemesis of Microsoft’s Bill Gates, but we’re not sure that even Sherlock’s Moriarty stooped to dumpster diving.
Procter & Gamble vs. Unilever.
In 2001, Proctor & Gamble (P&G) was busted for hiring a ‘consulting firm’ to rummage through Unilever’s trash and steal the secret formula for a new hair-care product. The two companies eventually reached a settlement, whereby P&G agreed to pay Unilever US$10 million. The firm hired to do the dirty work was headed by a former Green Beret who served in the Phoenix Program, a covert operation during the Vietnam War. Remarkably, this wasn’t the first time P&G had been caught in corporate espionage against Unilever. In 1943, a P&G executive bribed an employee of Lever Brothers (as Unilever was then called) to steal prototype bars of a new soap. P&G used the stolen formula to rework its own Ivory Soap, which soon became one of the most popular brands in America. P&G ended up paying Lever US$5 million for patent infringement, a significant sum for the 1940s. In this scenario, it is still unclear whether crime did or didn’t pay.
Lone Wolves vs. The World.
In 2001, Proctor & Gamble (P&G) was busted for hiring a ‘consulting firm’ to rummage through Unilever’s trash and steal the secret formula for a new hair-care product. The two companies eventually reached a settlement, whereby P&G agreed to pay Unilever US$10 million. The firm hired to do the dirty work was headed by a former Green Beret who served in the Phoenix Program, a covert operation during the Vietnam War. Remarkably, this wasn’t the first time P&G had been caught in corporate espionage against Unilever. In 1943, a P&G executive bribed an employee of Lever Brothers (as Unilever was then called) to steal prototype bars of a new soap. P&G used the stolen formula to rework its own Ivory Soap, which soon became one of the most popular brands in America. P&G ended up paying Lever US$5 million for patent infringement, a significant sum for the 1940s. In this scenario, it is still unclear whether crime did or didn’t pay.
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WHEN SOMETHING’S ON THE NOSE:
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What should you do if you suspect that your company’s proprietary information is being leaked? Or worse, what if you have become the victim of fraud? Cassandra Michie is a specialist forensic accountant for leading business advisory firm PricewaterhouseCoopers.
With over 17 years experience tracking down the doers of dirty deeds and protecting companies from potential future attacks, Michie recommends the implementation of a four-staged ‘investigative plan’.
- The first step is to ask whether it is possible that your intelligence has been compromised. One tell-tale sign might be that a competitor has demonstrated awareness of your inside knowledge (through comments or actions). You might have lost a staff member to a competitor recently or discovered a personal or commercial relationship between a staff member and a representative (or representatives) of a competitor. Remember, competitive intelligence can be transferred just as easily through innocent conversation, as it can through malicious actions for personal gain. Another signal might be the transfer of faxes and emails at unusual times of the day, out of hours or on weekends when few people are around.
- The next step is to capture any evidence. Evidence can take three forms: electronic (including emails, mobile phone data, fax records, diary information, letters and spreadsheets), physical (such as a hardcopy faxes, letters or personal notes, taken from filing cabinets and desktops) and witness statements (through interviews and surveys). Forensic accountants, such as PricewaterhouseCoopers, will capture an electronic image of a computer’s contents before accessing files. This method is used to prevent IT staff from compromising information, who have been known to accidentally alter file dates by simply opening a document.
- The third step is to collect evidence around your suspect or suspects. Suspects might be identified as a result of step two. However, it is more likely that the investigative plan was instigated, in the first place, as a result of suspicious activities, or relationships, surrounding an individual or individuals. The purpose of this stage is to find a link between the suspect and the competitor, such as a family or financial relationship. Forensic accountants will conduct a media search, an ASIC search and review the Register of Company Names. If allegations of fraud are raised, the investigator may want to check the asset environment of an individual. One way is to check the land title office for property acquisitions dated around suspicious activities.
- It is then time to analyse the evidence, verify the facts if necessary and calculate any losses. A forensic accountant will look at options for recovery, such as ‘accounting for profits for breach of intellectual property rights’ (as a form of damages calculation). They will also isolate the appropriate parties to seek damages from. Most importantly, they will suggest ways to put a stop to the activities being investigated. By asking parties to cease activities, forensic accountants simultaneously put suspicious parties on ‘notice’. A company can then decide whether or not to initiate legal proceedings.
Note:When undertaking witness interviews, interviewers must be mindful of relevant whistleblower laws (which prohibit the interviewer from revealing the identity of the whistle-blower without permission). They must be careful not to form opinions (witness statements are collected for the purpose of finding facts) and make sure that they can corroborate interviewee statements before taking any action. Best practice is to ensure that the interviewee is participating voluntarily, has the option of having their lawyer present and has given consent if the interview is likely to be taped. In short, witness interviews can be tricky. If you are serious about developing an investigative plan, it is always best to engage an expert.
Cassandra Michie is a PricewaterhouseCoopers partner in its Forensic Services group and specialises in forensic accounting. She assists clients with their strategies to prevent, detect and investigate fraud. She holds degrees in commerce, law and economics and is an Australian Chartered Accountant.
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ESPIONAGE VS. COMPETITOR INTELLIGENCE
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Competitive intelligence is a systematic and ethical programme for gathering, analysing and managing information about the external business environment that can affect a company’s plans, decisions, and operations. It is commonly referred to as CI.
Competitor intelligence is a subdivision of CI that concerns the current and proposed business activities of competitors only.
Competitor profilingis the systematic analysis of competitors in order to learn from their strengths and exploit their weaknesses. The knowledge acquired is used to gain and maintain a competitive advantage.
Espionage is the use of illegal means (spying) to collect information, more particularly secret or unpublished information. Offences may range from trespass and theft to treason.
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7 WAYS TO GET THE EDGE ON YOUR COMPETITION
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- BUY THEIR PRODUCT
Always buy your competitor’s product, if possible, to determine their sales process and get on their mailing list to see future promotions. The feeling that you are lining their pockets might hurt temporarily, but the relatively small price you pay for their product will pay for itself many times over in the knowledge you gain about what they are doing and how they are doing it. Also, by purchasing their products you will be able to experience exactly what a regular customer would go through and you can then judge their product, service and operations against yours.
- AUDIT THEIR WEBSITE
Drop by your biggest competitor’s website and compare their site to your own. To go the extra mile, select Tools from the Microsoft Internet Explorer toolbar (if you are using Microsoft) and then "Show Related Linksâ€?. Here, you may uncover other companies you’d never heard of, doing the same thing or in the same business. Changes to a website can also say a lot about a company. TimelyWeb, by EldoS, has several ways of notifying you when page changes occur, including via e-mail. The free program can monitor ten web pages. If your competitor has a large site, you may want to buy the commercial version.
- GET THEIR GOSSIP FROM NEWSGROUPS
Usenet discussion groups are the bars and pubs of the internet, where individuals meet online by sending emails to likeminded people. One of the most popular ways to hunt through newsgroups is with DejaNews. Simply type in the subject you are interest in to sort through the web’s 20,000 Usenet discussion groups. To get the good oil on a person, click ‘Author Profile’. Everything that person has written to any other newsgroup is instantly available.
- CHECK OUT THE CLASSIFIEDS
Is your competitor expanding? Is he or she going in a new direction? You might get a clue through help-wanted advertising. The listings can tell you more than what your competitor is planning. You can also check salaries being offered. If your competitor is pushing up salaries, you need to know that. Otherwise, your best people could be heading for the door. Through the use of search engines, such as DejaNews, you can also tell whether a company is experiencing tough times.
- READ UP ON PLANS AND FINANCES
Drop by your industry association’s internet site. It won’t cost you a cent. If you’re lucky, you may find additional information about a member who is your competitor. Perhaps they were interviewed for the association’s website or publication. You can also learn a lot by reading what people say are their future plans. If your competitor is a large publicly-listed organisation, it is required under Australian law to file quarterly and annual financial reports and announce any activities that are likely to be of investor interest.
- ENGAGE A MONITORING SERVICE
By paying for an online monitoring service, such as eWatch and MarkWatch, you can outsource the hassle of monitoring domain names, URLs, newsgroups and websites for activity by your competitors. However, it will cost. Most online companies offer free trials so you can compare them before you commit. Clipping services, such as Rehame and Media Monitors, provide media intelligence, such as a daily fax-stream of articles on chosen companies (or search terms). When using online monitoring or clipping services, keep a careful eye on cost. It can spiral out of control.
- HIRE A ‘BIG GUN’
With so much information available, competitive intelligence agencies can help a company define what information will genuinely assist their business objectives. They can provide strategies to help a company collect, monitor and, most importantly, analyse intelligence. Look for a company that has a strong ethics policy. This represents a clear signal that the agency is credible, has considerable experience and is aware of the boundaries concerning responsible corporate behaviour.
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SNEAKY MOMENTS IN HISTORY
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Smooth as silk
Industrial espionage can be traced back to the sixth century, when the Byzantine emperor Justinian hired two monks to visit China. At this time, China held a worldwide monopoly on the production of silk. The monks smuggled silkworm eggs and mulberry seeds out of China in hollow bamboo walking sticks. In a few short years, Byzantium had replaced China as the world’s leading producer of silk.
Lacking invention
In the 19th century, the inventor Thomas A. Edison enlisted one of his lab assistants to steal plans for an electrical generator invented by George Westinghouse, so that Edison could discredit Westinghouse’s invention and thereby defeat him in the marketplace. Edison was indeed an ideas man, but historical proof that not all ideas are well-conceived.
Weaving deceit
It could even be suggested that the industrial revolution grew out of a single act of industrial espionage. In his book "War by Other Means: Economic Espionage in America�, John Fialka vividly describes how a Boston merchant, Frances Cabot Lowell, absconded from Britain with plans for the Cartwright power loom, thus launching the textile industry that sparked the industrial revolution and started the US on its journey to become an economic super-power.
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WHO’S WATCHING YOU?
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- US$888 million in illegal eavesdropping equipment is sold each year in the US alone US State Department
- 2% of Canadian businesses (regardless of size) without counter-espionage protocols are destined to suffer financial loss within 2 years – Canadian Security Intelligence Service
- 44% of UK businesses suffered at least one malicious information security breach in 2001 – UK Department of Trade & Industry
- 80% of employees will disclose sensitive info to people they do not know over the phone "Companies Remain at Risk for Information Theft"- PrWeb Newswire, November 11, 2005
- Combined costs of foreign and domestic economic espionage, including theft of intellectual property, are as high as US$300 billion per year and rising – Annual Report to Congress on Foreign Economic Collection & Industrial Espionage, 2002
Source: www.esd-australia.com/Statistics.htm
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