competitive intelligence adds value:: five intelligence attitudes

European Management Journal Vol. 19, No. 5, pp. 552–559, 2001 2001 Published by Elsevier Science Ltd.Pergamon

0263-2373/01 $20.00PII: S0263-2373(01)00069-X

Competitive IntelligenceAdds Value:Five Intelligence AttitudesDANIEL ROUACH, ESCP-EAP, European School of Management, ParisPATRICE SANTI, ESCP-EAP, European School of Management, Paris

The authors report on the growing importance ofcompetitive intelligence as a management practicein the majority of leading companies. Reviewingthe history and definition of competitive intelli-gence, they then go on to distinguish types of com-petitive intelligence, to analyse the competitiveintelligence process, and identify five categories ofattitudes towards competitive intelligence. Theadvantages of this practice are set out in the con-clusion. 2001 Published by Elsevier Science Ltd.

Keywords: Information, Competitive intelligence,Knowledge management

Introduction

Competitive intelligence tracks the activity of directand indirect competitors in a range of fields: generalbusiness activity, business development, strategy andtactics in different sectors or new activities(sometimes designed to confuse and mislead), mar-ket penetration, patent registration, research activityand so on.

It is a kind of radar screen spotting new opport-unities or helping to avert disasters, enabling the firmto observe its environment. It also empowers the firmin monitoring its own development. It is importantthat business leaders are not left uninformed throughthe overlooking of crucial data and information thatmay appear, at first sight, insignificant.

This article presents characteristics of the competitiveintelligence concept which is an important manage-ment practice in most leading companies. It presentsits own definition, and compares with those found inliterature on the subject. Key questions to be answ-ered are: what are the different types of competitive

European Management Journal Vol. 19, No. 5, pp. 552–559, October 2001552

intelligence? How do companies practice it, and arethere examples of best practice? Research has beenundertaken in the last three years on such questionsby the authors in ESCP-EAP’s GTI Lab.1

From Information to Intelligence

Porter and Millar (1991) have pointed out in an earlyarticle how information changes industry structureand alters the rules of competition. Clearly, the infor-mation technology (IT) revolution has created com-petitive advantage by giving companies new ways tooutperform their rivals. It is especially affecting theentire process by which companies create their pro-ducts. It permeates a company’s value chain at everypoint, transforming the way value activities are per-formed as well as the nature of linkages among them.It affects individual activities and, through new infor-mation flows, enhances a company’s ability to exploitlinks between activities, inside and outside the com-pany. IT affects competitive scope and reshapes theway products meet buyers’ needs.

Competitive Intelligence: An OldManagement Practice

Whilst it is integrated into the organisational cultureof many leading companies today, competitive intel-ligence practices are not new. Its benefits were longunderstood in the States of pre-modern Germany. Inthe fifteenth century, for example, the House ofFugger, from its base in Augsburg, disseminatedmanuscript letters which provided its key officerswith a steady flow of confidential political and com-mercial information. More modern German intelli-gence grew in the eighteenth century, and by scout-

FIVE INTELLIGENCE ATTITUDES

ing the European Continent the Germans discoveredthey could compete with British and French firms byapplying foreign scientific advances to their ownindustrial processes. They rapidly developed theirown base of education and research as a foundationfor technological innovation. By the late 1800s, theyheld international rights to many formulae and pro-cesses, particularly in chemicals.

Japan was also early endowed with a grasp of theimportance of competitive intelligence. With theAmerican invasion of 1854, the country opened up toexternal influences after two centuries of self-imposed seclusion. In 1868, Emperor Meiji (the‘Enlightened’) encouraged policies of community,nationalism and modernisation with the intention ofenabling Japan to compete with the West by absorb-ing the latter’s best practices. Emperor Meiji was anearlier adherent to global competition and stronglyagainst any ‘not invented here’ syndrome. Followingthe end of World War Two, Japan converted its mili-tary espionage capability into a system of economicintelligence, for example, in the early 1950s, tens ofthousands of market researchers were sent aroundthe world to assess the potential of the photographicmarket which was to be a major breakthrough for thecountry. It is the country to have created a nationalsystem of intelligence when more liberal economieshave been unable to integrate national and businessinterests. Japan and intelligence have grown hand-in-hand. As far back as 1868, the pledge of allegianceto the Imperial Kingdom called for every subject togather information about the rest of the world. Thesystem is mature and effective. Information serves asthe axis and central structural support of thenation’s companies.

More generally, the competitive intelligenceapproach benefits from other more recently-developed concepts like Knowledge Management,which most larger companies have institutionalised.

Defining Competitive Intelligence

The authors give their own definition of the Competi-tive Intelligence concept. They believe CompetitiveIntelligence has the following characteristics: it is anart of collecting, processing and storing informationto be made available to people at all levels of the firmto help shape its future and protect it against currentcompetitive threat: it should be legal and respectcodes of ethics: it involves a transfer of knowledgefrom the environment to the organisation withinestablished rules.

Although information is at the centre of the conceptof competitive intelligence, the latter covers widerobjectives than just the gathering of this information.

❖ Fuld (1995) describes what intelligence is not:

European Management Journal Vol. 19, No. 5, pp. 552–559, October 2001 553

It is not reams of database print-outs. It is not necessar-ily thick, densely-written reports. It is most certainly notspying, stealing, or bugging. Put most basically, intelli-gence is analysed information.

❖ Kahaner (1996) emphasises the need to distinguishbetween information and intelligence:

Information is factual. It is numbers, statistics, scattereddata about people and companies. Intelligence is infor-mation that has been filtered, distilled and analysed.Competitive intelligence requires knowing precisely thedifferences between information and intelligence. Intel-ligence, not information, is what managers need inorder to make decisions.

❖ Achard and Bernat (1998) point out that competi-tive intelligence managers have a role in enrichingdata throughout the information cycle — to trans-form information into exploitable intelligencewhich can be used by decision-makers. The infor-mation cycle is as follows:

Bringing value to information and being able totransmit it is the major purpose of intelligence initiat-ives.

❖ Drucker (1998) puts this succinctly and links it toknowledge. Drucker defines information as data‘endowed with relevance and purpose’, and statesthat, in order to survive, companies must buildsystems capable of fostering and optimising addedvalue. They need to be more knowledge-based.They should include specialists to direct and disci-pline their own performance through organisedfeedback from colleagues, customers and clientsand headquarters, who can transform their datainto information.

The Scope of Competitive Intelligence

❖ Deschamps and Ranganath Nayak (1995) categor-ise three types of competitive intelligence:

1. Market Intelligence. This is needed to provide aroad map of current and future trends in cus-tomers’ needs and preferences, new marketsand creative segmentation opportunities, andmajor shifts in marketing and distribution.

2. Competitors’ Intelligence. This is needed to evalu-ate the evolution of competitive strategy overtime through changes in competitors’ structure,new product substitutes and new industryentrants.

3. Technological Intelligence. This is needed toassess the cost/benefit of current and new tech-


nologies and to forecast future technologicaldiscontinuities.

For the authors, competitive intelligence can be wid-ened from these categories to include strategic andsocial intelligence. Strategic and social intelligenceincludes regulation, financial and tax, economic andpolitical issues, as well as social and humanresource matters.

This fourth category of competitive intelligence parti-cularly observes and analyses trends in social behav-iour. All four categories are linked.

Various aspects of the Competitive Intelligence con-cept are summarised in Figure 1.

The Competitive Intelligence Process

In this section, we see how knowledge managementand information technology can be processed to addvalue to competitive intelligence. The views of sev-eral writers are assembled to describe the process,although they place different emphases:

❖ Gates (1999) believes that information is the key tocompetitive differentiation — how it is gathered,managed and used. Competitive intelligence issupported and driven by technology:

For the first time, all kinds of information: numbers,text, sound and video, can be put into digital form thatany computer can store, process and forward. We haveinfused our organisations with a new level of elec-tronically-based intelligence.

Figure 1 Aspects of Competitive Intelligence


But Gates observes that even companies thathave made significant investment in informationtechnology, have not got the results theyexpected:

The gap between what companies are spending andwhat they are getting stems from the combination ofnot understanding what is possible and not seeing thepotential when you use technology to move the rightinformation quickly to everyone in the company.

❖ The second writer, Fuld (1995) believes that com-petitive intelligence should build on and aroundthe culture of an organisation. Intelligence sys-tems — despite the computer-based applicationsthis concept conjures up — are very much ahuman issue.

❖ Kahaner (1996) states that competitive intelligenceis a total process, not just a function in the com-pany. He conceives the competitive intelligenceprocess to be made up of four steps:

Planning and directionCollection of dataAnalysisDissemination

These can be examined in more detail.

Planning and Direction

The intelligence action is defined and launched, start-ing the process. It is important to understand theuser’s need; upon this depends the success of the pro-cess. The time-frame is also important, as it will


determine the allocation of resources and whichtypes of collection processes to use.

Collection

This step involves collecting the raw data to turn intousable intelligence.

❖ The authors distinguish three types of data:1. ‘White Information’ (open-source information).

It can be found publicly in databases, news-papers, etc., and more recently on electronicdatabases and the Internet.

2. ‘Grey Information’. This covers private domaininformation such as trade shows or publicationsthat are ignored by competitors. Salesmen col-lect such intelligence on competitors by visit-ing firms.

3. ‘Black Information’. It includes illegally-obtained data, e.g., through computer piracy ortelephone wire-tapping.

As illustrated in Figure 2, category 1 represents some80 per cent of information collected, and grey infor-mation is 15 per cent.

Analysis

The core element of the process; it turns seeminglyunconnected information into intelligence.

It is both an art and a science. As illustrated byJoseph Rodenberg in Figure 3, it represents the finalpart of a pyramid through which the added valueof information is increasing from simple informationgathering to intelligence production.

Figure 2 Classification According to Information Types


Dissemination

The analyst suggests possible courses of action anddistributes it to end users. Fuld (1995) would like toinclude a fifth step: storing and delivering the infor-mation in this step together with the implementationof security measures.

❖ Ashton and Stacey (1995) add a sixth step in theprocess of competitive intelligence: auditing thesystem’s performance.

Five Types of Competitive IntelligenceAttitudes

Competitive Intelligence is conducted by analystswhose vigilance ranges from ‘lookout’ (alert with aview to reacting) to ‘hunter’ (who knows what he’sseeking with a view to acting).

B. Goffinet of Roussel Uclaff, describes CompetitiveIntelligence analysts in a vivid metaphor:

A corporation can be compared to a naval fleet. The vesselsare kept shipshape, must sail together in precise formation,staying on course to arrive safely in harbour (the corporateproject). These vessels must avoid hitting reefs or icebergshidden in the fog, being dazzled by false lights or carriedoff course by currents. They need precise and reliable navi-gational instruments. Each boat has a lookout in the crow’snest who must signal useful information to the rest of thecrew. He must indicate favourable land sighted to enabletask forces to disembark. The lookout’s mission is to pro-vide information collected outside the vessel.

The authors have identified five types of analysts atti-tudes towards competitive intelligence.

1. Warrior attitudeAn offensive stance. The intelligence analyst is


Figure 3 The Intelligence Production Process

very pro-active in managing the competitive intel-ligence process, and continuously on the look-outfor opportunities.Corporate examples are:(In Europe)

Ericsson, Nokia, L’Oreal, Snecma (EADS),Gemplus, Schlumberger, STMicroelectronics,France Telecom, Michelin, Shell, Aerospatiale(EADS), ABB, Bouygues, Danone, ThomsomMultimedia, Airbus, Hoffman Laroche.(In the US)IBM, Boeing, Corning, AT and T, Motorola,Xerox, General Electric, Rockwell, Marriott, Kraft,General Mills.(Asia): Sogo Shoshas, NEC, Mitsubishi, Toshiba,Canon.

2. Assault attitudeAlso a pro-active field. Intelligence analyst are fre-quently ex-military intelligence specialists.Corporate examples are:(In Europe)

Thomson CSF, Nestle, Saint Gobain, Siemens,Dassault Systems, Hutchinson, Cegetel, Alcatel,Air Liquide.(In the US)Nutrasweet, Federal Express, Merck, 3M, GeneralElectric, Eastman Kodak, Ford.(Asia)Toyota, Nissan, Daewoo, Nomura.

3. Active attitudeThe intelligence analyst is always looking for stra-tegic information through normal sources, but thecompany’s information system is not really struc-

Analyst type State of mind Methods

1. WARRIOR War mentality Sophisticated tools (war room incertain cases)

Ruthless fight against disinformation Variable methods (code of ethics)Patent and counterfeit war Unlimited or significant resourcesOffensive position Team of leaders


Figure 4 The Five Types of Intelligence Attitudes

tured.Corporate examples are:(In Europe)

Many large French firms and French SMEs.(In the US)American SMEs.

4. Reactive attitudeThe intelligence manager responds only whencompetitors are overtly hostile.Corporate examples are: French SMEs.

5. SleepersThe firm’s management team shows no interest incompetitive intelligence or knowledge manage-ment and does not fear competition.The status of intelligence analysts tends fromexperts (warriors) to amateurs (sleepers) (Figure 4).

The following chart summarises the respectiveapproaches Competitive Intelligence analysts canadopt:


2. ASSAULT Former Secret Service agents Significant resourcesSharp processing of data Professionalism and ethicsHunt for strategic information A lead lookout

Value put on human intelligence3. ACTIVE Observatory of competition Limited resources

Beginning of operational CTI network4. REACTIVE Opportunists Reacts to attack

Very limited budget5. SLEEPERS No particular action Blind, passive

NIH syndrome

Two Examples

Nutrasweet (US) faced problems in 1982 when itspatent on the artificial sweetener, aspartame, wasdue to expire. Competitors planned moves on themarket. Under the erstwhile chairman, RobertFlynn, the company began examining competitors’prices, customer relations, market plans and adver-tising campaigns. This information — competitiveintelligence — was used to cut costs, improve ser-vice, and protect 80 per cent of the sweetener mar-ket. Flynn estimated that his competitive intelli-gence process was worth $50 million to hiscompany.

Nestle (Switzerland) is deeply wedded to the com-petitive intelligence process. Over 130 years it grewfrom a two-product company focused on infantnutrition to a multinational food company. Itlaunches many new products each year, driven byresearch and development. R and D itself is charac-terised by a high degree of multidisciplinarity: itrequires the combination of many fields and skillssuch as food science, processing, nutrition andbioscience. Nestle built its success on technicalinnovation.

Its R&D lies at the core of a vast exchange of infor-mation where external researchers bring in newideas and concepts, and data collection and marketanalysis help to establish the R&D agenda. Nestecis an important driver of R&D in Nestle, acting asa separate body in charge of basic research. Inparticular, Nestec uses external researchers in disci-plines outside the core competence of Nestle, e.g.,in fine chemicals, pharmaceuticals or the aircraftindustry.

Setting Up a Competitive IntelligenceUnit

Developing a Competitive Intelligence culture andprocess within an organisation can be done usingmany different models which have been progress-ively tested by all companies and experts men-tioned in the article. Based on the analysis of these


experiences, the authors propose its own process,which can be summarised in Figure 5:

Phase 1: Incubation

This phase aims to evaluate the necessity to set upa proper Competitive Intelligence structurethrough the analysis of the company’s efficiency inthe treatment of information. In particular, it isnecessary during this phase to identify the gapswhich exist between the perception by the com-pany of its external environment and the reality,between the knowledge base and its effectiveexploitation within the company, or between thecompany’s practice and that of competitors. Thre-ats and emergency level must be determine as pre-cisely as possible.

This phase should provide a clear visibility onwhat attitude to adopt and on the objectives to befollowed all along the process.

Phase 2: Conception

This phase is particularly crucial, as it deals withthe definition of the whole process components:What sources to use? Which users? What structure,Which tools? Which involvement from managersand top management? What financial investment?What priorities? It must therefore result directlyfrom the first identification phase, and should leadto concrete orientations as regards the method-ology and means to implement.

Phase 3: Implementation

The third phase consists in the launching of theprocess, notably in developing the services andtools linked to the unit, in specifying key topics tobe worked on, and in initiating the sensibilisationprocess. It deals with the positioning of the Com-petitive Intelligence culture within the companyand must take into consideration ethical and legalissues in order to ensure the integrity of the com-pany’s actions.


Figure 5 Development of a Successful Competitive Intelligence Unit

Phase 4: Structuration

This phase mainly concerns the selection of theexperts to be recruited for the development andmanagement of the unit. Both internal and externalcontributions must be considered, and a preciseanalysis of the network opportunities should bedone.

Phase 5: Evaluation

A deep evaluation must be made of the system,placing emphasis on the level of acceptance andparticipation of people within the company. Theefficiency of the tools (software and hardware) andof the team must be assessed in order to adapt andimprove the unit, thereby re-initiating a cyclethrough which the unit is continuously re-orientat-ing according to the necessities expressed by thecompany and by its external environment.

Postcript

Interest in competitive intelligence is strong and itis still true that it takes its strongest form in Japan:the Japanese spend a high proportion of revenueon patents, and buy four times as many as theysell: nonetheless, Japan registers 15 times as manypatents annually than France. Japanese expertise inthe competitive intelligence process is still a majorcompetitive asset for Japanese companies.

There is a deficiency in management educationwhich does not seem able to cope with the impactof new technology and know-how. Since data andknowledge are increasing so rapidly, in new forms,


there is a need for management education to shiftto self-directed learning, using new documentationsources, multimedia and computer simulationwhich are close to reality.

The advantages of competitive intelligence canhardly be over-rated. It identifies relevant infor-mation quickly and helps the make more successfultechnological choices. It increases the chances ofpatent approval. It audits a company’s scientificand technical assets and compares them with itscompetitors. It detects market threats and opport-unities and identifies winning strategies inunknown areas.

Note

1. GTI Lab’s website is located at http://research.eap.net/gtilab/ The Lab specialises in the managementof innovation, technology transfer and competitive intel-ligence.

References

Achard, P. and Bernat, J.-P. (1998) L’Intelligence Economique;Mode d’Emploi. ADBS Editions,

Ashton, W.B. and Stacey, G.S. (1995) Technical intelligencein business: understanding technology threats andopportunity International Journal of Technology Manage-ment 10(1), 79–104.

Deschamps, J.-P. and Ranganath Nayak, P. (1995) Product-Juggernauts. HBS Press,

Drucker, P. (1998) The Coming of the New Organization (in)Harvard Business Review on Knowledge Management.HBS Press,

Fuld, L.M. (1995) The New Competitor Intelligence. JohnWiley, Chichester.

Gates, B. (1999) Business at the Speed of Thought. PenguinBooks, London.


Kahaner, L. (1996) Competitive Intelligence. Simon and Schus-ter, New York.

DANIEL ROUACH, PATRICE SANTI, ESCP-ESCP-EAP European EAP European School ofSchool of Management, 79, Management, 79, Avenue deAvenue de la Republique, la Republique, 75543 Paris,75543 Paris, Cedex, France. Cedex, France.

Dr Daniel Rouach is Pro- Patrice Santi is Researchfessor at ESCP-EAP Euro- Assistant at ESCP-EAPpean School of Management, specialising in market andParis. His fields of research competitive studies. Hisare technology transfer, work focuses on high-tech-innovation and competitive nologies, competitive intelli-

intelligence management. He also leads the GTI Labora- gence, IT (notably smart cards and semiconductortory, a research unit dedicated to these areas. fields), and technology transfer.


Porter, M. and Millar, V. (1991) How information gives youcompetitive advantage. Harvard Business Review.

competitive intelligence adds value:: five intelligence attitudes

Documents