Competitive Analysis vs. Competitive Paralysis

Competitive Analysis: knowing what your competitors are up to at all times and what their actions mean to your marketplace.

Competitive Paralysis: a state of inaction brought about by trying to outguess the trends and motions in your marketplace.

Competitive Intelligence is the result of correct Competitive Analysis and is without doubt the most valuable and proportionately the most troublesome form of market research, bar none. Though its name conjures images of industrial espionage and other covert operations, 99.9% of the time there's no "cloak & dagger" aspect to it at all. Its benefits span the organization, from the call center to the boardroom and can never be overstated. The companies that do it best are generally at the tops of their industries, and those that do it badly don't live long.

Yes, it's true, doing it right is expensive. Doing it wrong is even more so. Not doing it at all can be fatal.

Believe it or not, I've heard more than one business owner say "I'm just here doing my own thing - I don't really care what my competitors are doing."

The statement "I don't care what my competitors are doing" is often the swan song of a business on the way down the chute. What your competitors are doing has everything to do with the long-term success or failure of your business. Everything.

Every business either has or will have competitors. That's right, I said "Every". And no one knows this better than a certain Mr. Gates, right across Lake Washington from here.

What is competition?

Competition essentially consists of A VIABLE ALTERNATIVE to your product that fills or nullifies the need you serve. Let's say you and your company make hats. Your hats fill a need - printed hats allow your customers to express support for their favorite team or company; they keep the rain and sun off the head, they hide bald spots and they look good. It's a valid business proposition.

Your competition could take any or all of the following forms:

A- another company that makes the same type of hats you do, or

B- a company that makes hats of a different color, style or material, or

C- a company that makes umbrellas, raincoats with hoods, or hooded ponchos

D- the dictates of some fashion pundit that hats in general are "out" of style this season.

E- the same or a similar fashion pundit suddenly declares that bald spots are sexy

E- a sudden government decision to tax hats (OK that's far-fetched, but the government's done weirder things)

F- a local ban on hats with slogans or logos

So you get the idea...competition can take many forms - it's not always some other company doing what you do and doesn't always threaten ALL of your business- it could only apply to one market segment. A hooded-raincoat company wouldn't take away ALL of the above hat company's business, but it could impact a portion of it. The hat company might not even notice right away, but sooner or later they'd wonder what happened.

BASIC Competitive Intelligence

Many companies already have a "features table", a matrix chart that compares their product, feature-by-feature, with those of their main competitors. This is basic competitive analysis at its nearly irreducible minimum. Product features are generally listed across the top of the chart, while competitive products are named in the far left column. The intervening squares in the matrix "checkerboard" are filled in with information about the competing products in the category in question. This takes only a small amount of mathematical acumen to complete and can most likely be done in a couple of hours. The effort it takes to complete such a chart is nothing compare to the courage it takes to really look at it and distribute it to everyone in your organization. Every salesperson in your organization should know where and how your product or service trumps your competitors.

They should also know where your competitors can beat you, so they're never caught off guard, and should be briefed on how to work around this in speaking with a prospect or customer: "Yes, it's true, their cars get slightly better mileage than ours, but will you really save enough gas to make it worth paying their higher price? And what about reliability?"

Obviously, the more detailed your chart, the better your understanding of your competitor's products will be and the better chance you'll have of beating them consistently. I've created such charts with over three hundred columns. In creating such a chart, use brochures, web page info and other data your competitors publish about themselves and their products. Read product reviews, trade magazine articles and online business analysis - there are several sites that specialize in offering for sale exactly this sort of info about companies in many different industries. If there is vital information you can't find in your competitor's literature or online, call them up and ask them. Much of the time, they'll tell you anything you want to know, if you don't make the mistake of identifying yourself as being from a competitive firm. You don't want to be dishonest, but you don't have to volunteer the information either. If you feel it'll make for better relations, you can have a friend, family member or trusted associate call them and simply ask the questions that you, as a direct competitor, can't ask. Don't ever lie to your competitors...simply persuade others to do it for you (joke, but....).

Many companies make the mistake of omitting from the chart any categories where they don't beat out their competitors, because it appears embarrassing. This isn't wise, as it doesn't accurately reflect their standing in the marketplace. This in turn can lead to demoralized salespeople when they run up against competition in the field and find out the truth firsthand.

Additional information that doesn't necessarily belong in a published feature table but can really help you long-term are the relative size of each competitor, how long established, how well-financed a competitor is and their sales model (resellers? direct? online?) How well does that model seem to be working for them? Call whoever sells their products (retailers, sales offices, others) and ask WHO is buying your competitors' products and why. There will probably also be additional, industry-specific information that would only apply to your business category.

Uses for Competitive Intelligence within an organization:

1 As discussed above, knowing what your competitors have to offer can help your sales staff sell more, as they'll know where the high ground is and the pitfalls to avoid. Make sure your sales force has read all competitive sales literature thoroughly - it'll give them a new perspective on their own products and they'll know what to say to an educated public that asks tough questions.

2 Knowing where your competitors advertise can help you understand their market segmentation and help you create an effective marketing strategy.

3 Knowing what features your competitors offer can help you plan new products, product improvements and upgrades.

4 Knowing the channels through which your competition sells can help decide marketing and sales strategies at the executive level.

5 Knowing competitive strategies and systems can help determine when to buy, sell, start or close a business - example: if you are one of three equal-sized main competitors in your industry or area and the other two merge, you're in trouble, pal. You'd better either start buying out smaller competitors or make a deal with the big guys - you're going to find yourself squeezed very soon.

On that same note: here are some MIS-uses of Competitive Intelligence within an organization.

1 Spending large or small fortunes to develop a product feature just because a competitor has it. Remember, just because a competitor has a product shaped like a horned toad doesn't mean they're actually selling any of them. Before you make yours look like a horned toad too, make sure horned toads are really selling. Never do anything ONLY ONE competitor is doing unless you survey it and the survey results come back overwhelmingly positive. ONLY emulate competitors when the MAJORITY of competitors are doing it. Every new product feature developed should be surveyed with your existing public to make sure it's something they need and want before it's put into development.

2 Leaving it up to Marketing to create, maintain and use it. No. The marketing department staff are the keepers of the Competitive Intelligence information and systems, but it is not their sole responsibility to create, maintain and especially not to use it. Marketing should create a central repository for Competitive Intelligence information, but should provide a means for anyone in the organization to contribute to the company's competitive knowledge base. The sales staff, who speak with clients and the public daily, are the most fruitful source of competitive intelligence data.

I can't teach the entire discipline of Competitive Intelligence in a single article, but there are principles here that will help you stay ahead, or at least aware of, your competition. I hope they are of use to you.