“Thus, what enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknowledge.” – Sun Tzu on the Art of War.
Let’s have a conversation about intelligence. More specifically, let’s talk about the use and misuse of “business intelligence” vs. “competitive intelligence” vs. “market intelligence.” Take a look at Figure 1.
Yes, we’re geeking out a bit here, but it is important to understand the distinction between these terms.
These three terms are often used interchangeably – but have distinct differences. Let’s start off with some very simple definitions.
- Business intelligence is about your business
- Competitive intelligence is about your competitors and more tactical, external business environment
- Market intelligence is about the larger market, including indirect and unconventional threats
Understanding what these ideas are – and more importantly how or when to acquire the right kind of intelligence – will help you make more informed and (hopefully intelligent) decisions.
Business Intelligence (BI) is inward looking towards your own organization. BI is used to analyze your business’s performance in areas such as marketing, products, personnel, strategy, etc. to create a hypothesis on the future of the business. BI is centered on internal factors that the organization can affect and the impact that may result from altering those factors. Value chain analysis is an analytic technique commonly used to evaluate the core competencies of a business.
Example: A business decides to vertically integrate logistics to help reduce costs by removing their third-party service provider. The business is now able to move its products without paying a premium for the third-party logistics broker. An analysis using Business Intelligence techniques and internal company data would have estimated the impacts of such an integration on price and, ultimately, profitability.
First and foremost, Competitive Intelligence is NOT industrial espionage. That is unethical and illegal. Competitive Intelligence is generated from open source information and through conversations with customers (or competitors), rather than under-the-table activities.
Competitive Intelligence (CI) is an analysis of the all external components of the business environment that impact your business, and the impact that these components may have. CI involves using analytic methods and techniques such as SWOT (Strengths, Weaknesses, Opportunities, Threats) and Porter’s Five Forces. Many businesses engage in CI activities either formally or informally. However, they may lack the focus, maturity, and process – or combination thereof – to execute CI effectively. Effective CI derives an actionable analysis on how to improve your own position, distinguishing “competitive intelligence” from just “gathering information about a competitor.”
Example: A business is preparing for a contract re-compete in the next 12 months. The re-compete capture team begins to work with the program team to identify the customer concerns that will inform the new solution. The same team also identifies competitors who are working on a takeaway bid, and analyzes what approaches each competitor may map – typically through a Black Hat review. The re-compete team crafts their solution and bid strategy to not only address what the customer wants, but also to defeat what they think the competitors can offer.
Market intelligence and competitive intelligence are both environmental (outward facing) assessments that consider external forces on the company.
Market intelligence (MI) involves surveying larger field and typically is far broader in scope with long-term implications. Rather than simply focusing on direct competitors and customers, it expands your vision to other aspects that can have an impact on your business. A major intelligence technique in Market Intelligence is STEEP (or PESTEL): Social, Technological, Economic, Environmental, and Political/Legal.
Effective use of MI helps make the business environment more manageable. Market intelligence can help companies recognize new, unconventional competitors as well as new opportunities. MI is necessary to guide more long-term strategy – whereas CI is frequently more short term and tactical.
Example: A company provides internal training to their personnel and is looking to sell this service to the U.S. Government. A market intelligence analysis would assess the overall and addressable sizes of the federal training market, identify which federal customers procure training services, analyze the competitors who also offer training services, and barriers to entry (such as socioeconomic status or contract vehicles). The end result of a well-executed market analysis is an actionable pipeline of real contracts and a strategy for the company to pursue.
BI + CI + MI = Competitive Advantage
Successfully employing all three forms of intelligence within your business can help drive strategies and tactics leading to competitive advantage. The three most commonly referred to competitive strategies are cost-leadership, differentiation, and niche.
Cost-leadership is one of the easiest to understand and involves a company winning market share by having the lowest price in the market and typically favors economies of scale. We in the wonderful world of GOVCON know this all too well.
Differentiation is slightly harder to define concisely but for our purposes we will refer to it as value; a customer may not be as price-sensitive and so is looking for a product or service that addresses a customer’s needs better than alternatives – even though price may not be lowest. This is where we often find ourselves on a quest to identify, communicate, and win based on differentiation.
Niche strategy relies on a business’s ability to fill a gap in the market by fulfilling a specific need in a very narrowly defined market. As the name suggests, niche markets are small but may be used to create a specialized market within a larger market. Defending a niche market against broader, more generalist competitors is easier due to a narrow focus and competitive advantage. Sometimes, you have a niche need which demands a similarly niche approach to win and thrive.
How do you realize which of the above dictates the path to success? Use your BI + CI + MI to find the path to winning. Establish competitive advantage and win through the use of BI + CI + MI.
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The biggest challenge with effective BI-CI-MI efforts is identifying and dispelling bias. Your recent blog about bias was an excellent example of how this can creep into our assessments of ourselves, our competitors, and our market. Most of the time, we aren’t even aware that we are applying our own bias into our analysis. We are so accustomed to our own viewpoint that our bias takes over. Style and fashion guru Tim Gunn refers to this situation as “living in the monkey house.”
Often, the only way to identify bias is to bring in someone from the outside to freshen things up a bit.
Well said, John! Thanks so much for your comment. I’ll confess that I have never seen Tim Gunn in a comment on the topic, but I LOVE how you did that with a very smart observation. – Brian