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Developing a competitive strategy begins with a rigorous apples-to-apples evaluation of how your organization performs relative to one or more of your rivals. Guesswork and gut feelings aren't rigorous; meaningful comparisons are possible only when you assess your own and other firms on the basis of quantitative data and thorough research.
Doing this legwork enables you to clearly define the challenges your firm faces: Perhaps a rival is entering a foreign market first, or has found a way to lower prices through more efficient production. Perhaps your competitor's new management team has streamlined a sloppy organization, leaving the company with reams of excess cash to spend on acquisitions. Having a handle on this kind of information makes it possible to redeploy your firm's money, time, manpower, or R&D efforts to maximum effect.
To avoid analysis paralysis, it's essential to define what competitive questions you want to ask and what kind of research data you will need to formulate meaningful insights. Generally speaking, most strategic problems boil down to one or more of the following questions:
Although the number of potential research questions that can be asked is almost limitless, these are two of the most common conceptual tools:
Competitive intelligence professionals often use an analytical technique called SWOT — an acronym for Strengths, Weaknesses, Opportunities, and Threats. Though some downplay SWOT's effectiveness, it's not a bad starting point for analyzing your position relative to that of your rivals. The output of a SWOT analysis varies, but key data typically includes a comparison of financial muscle, strength or weakness of management teams, strength or weakness of marketing capabilities, presence or absence of patents or intellectual property protection, and an assessment of distribution channels. A SWOT analysis will also look at external market conditions to assess potential opportunities and threats. Find out more about SWOT in "Analyzing Your Business's Strengths, Weaknesses, Opportunities, and Threats."
Harvard Business School professor Michael Porter developed a list of five basic forces that define the competitive landscape for any company: customer bargaining power, supplier bargaining power, product substitutes, barriers to entry, and potential new competitors. Detailing these factors provides a foundation for establishing your firm's strengths and weaknesses, as well as those of your rivals. Learn more about this method in "Porter's Five Forces."
The quest for competitive intelligence begins under your own roof. To assess your competitor's strategic position, you first need to get a handle on your own business situation. The critical information you need — your company's financial data, marketing plans, R&D roadmaps, product plans, distribution processes, supplier relationships, productivity figures, and so on — is probably kicking around somewhere inside your building. But you'll to have to ask for it, and you'll probably need help to get it.
If you're not in charge of the business, enlist a C-level executive, president, vice-president, or division head to facilitate access to and cooperation from relevant information-gatekeepers.
Just getting a top dog's calling card and list of names isn't enough, however. Once you get an introduction, meet with these gatekeepers face-to-face to emphasize that their participation is crucial. You want to collect the needed data, of course, but you also want context. If sales are up, is that because the new product finally gained momentum after marketing launched an ad campaign, or is it because prices were cut and a rival discontinued a competing product?
Mine your internal sources for information about the competition. Jack in marketing may know Jill in marketing over at your rival, Acme Widgets. He may also know that she was hired specifically for her ability to market to seniors, suggesting that Acme Widgets intends to concentrate on that demographic. Likewise, your factory foreman may have heard union gossip about how Acme Widgets is shaking things up with new production methods. Such little tidbits can point to big insights as you pursue your research.
