The other day I came across this quote by Henry Ford (cited in Personal MBA by Josh Kaufman): “The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.” While that statement can be true, it may seem to undermine the importance of competitive intelligence (CI) function. But to make one’s business better, one must know and understand the competition well.
In the recent years the need for CI has become more pronounced and nowadays most organizations allocate full-time resources to CI. I served as a principal CI analyst in enterprise software for three years. In certain other product marketing roles, I also spent time covering the competition. I often get asked about what this role is like and how it is done. So I thought I’d write a couple of pieces on CI. My comments are primarily from a B2B perspective specifically in enterprise software. While the principles are the same, there may be differences in doing CI in other markets especially consumer market.
CI can be defined as the process of research and gathering information on the target markets, the competition and their products and customers, synthesizing and analyzing it, and delivering it to through appropriate channels (primarily internal) groups within the organization such as sales, marketing, products and management, who can use the analysis and intelligence for better decision making.
Note that CI is an iterative process. The gathered information should get updated and the analysis should be validated and revised periodically. Markets and the competition change all the time so CI information and intelligence can become outdated quickly. CI also deals with a lot of unknowns. So certain analysis may be incorrect because of lack of enough information or wrong assumptions. Additional information about a competitor may correct such errors. The graphics below depicts this CI process.
Understanding the Target Market and the Vendor Landscape
Before zooming in on any competitor, one must understand the target market — its size, growth, and trends. Typically in young markets, the growth rate may be very high (e.g. in double digits) but the size of the segment may not be significant. On the other hand, size of a mature market segment may be large but its growth rate may be insignificant. For example, according to Gartner, the total ECM (enterprise content management) software market was $4.7 B growing at a rate of 7.2% in 2012. The CRM market size in 2012 was $12.5 B growing at 12.5%. For emerging markets that are not as well-defined and established, such market data may not be readily available. Then a vendor may have to do its own primary research to size the market.
There are many important questions to ask and answer at this level. What are segments within a larger segment? What is the size and growth rate for each segment. What are the sizes and growth rates by geography, as in North America vs. EMEA vs. APAC? What is the breakdown by industries; e.g. financial services, pharmaceutical, and healthcare?
Mapping out the vendor landscape for each market segment should follow the market sizing. Such a landscape should include competitors as well as other vendors who may offer complementary value (in terms of technology, geography, industry, etc.) Any such vendor is a potential partner but it may also become a competitor depending on how things evolve. It is also important to look at the market breakdown by each vendor in the landscape. For example, salesforce.com had a 14% market share in CRM in 2012 growing at about 26%, much faster than the overall CRM market.
Market research and analysis is beyond just CI. Some organizations refer to this as Market Intelligence (as opposed to CI) and may allocate dedicated resources to it in addition to CI. Market intelligence is part of the strategy work that should be done early on, but it is imperative to go through this exercise and repeat it periodically.
Identifying the Primary Competitors
The next step is deciding on the primary competition. In a hot growth market, there may be many competitors with small market shares, while in an aging and established market the players may be few with established leaders who own the majority of the market. It is often useful to categorize the competitors as primary and secondary. Determining the key competitors in markets that are well-established and mature, should be fairly easy. But in emerging and younger markets that are still taking shape and where typically there is confusion and unknowns, it may not be so obvious.
For example CRM is a well-defined market segment with leaders such as salesforce.com and Oracle (that includes Siebel). Marketing automation is another relatively well-defined segment (though younger than CRM) with vendors such as Oracle Eloqua and Marketo. The broad social and collaboration space is an example of a segment that is fairly young and not as well-established. Enterprise social platforms such as Jive, Microsoft Yammer, and Lithium play here with differing capabilities. From a collaboration perspective, there are also vendors like Huddle as well as sync-n-share players such as Box. But the capabilities are evolving and converging. Big data analytics is another broad and somewhat vague area that may mean different technologies, offerings and use cases.
Deciding on one’s competition, is part of the strategy and positioning work that is beyond just CI. Whom a vendor declares as competition actually positions that vendor. A business may not to acknowledge a serious competitor publicly and instead choose another to serve as its public face of enemy. It is also noteworthy that the competition is not always a vendor. Sometimes one’s offerings may compete with internal development. That is, a prospect may decide to build its own solution instead of buying a 3rd-party product or service.
In the follow-up post, Competitive Intelligence Process and Best Practices, I discuss this topic in more detail and provide some guidelines.
Strategic and Competitive Intelligence Professionals (SCIP) is a non-profit membership organization for CI professionals that provides resources, training and career support for its members. Though I am personally not a member, you may want to check it out and join them.