This article discusses Competitive Analysis - what it is, where to find it and how to effectively use it.

In my last article forASI(“Avoiding Misalignment between Corporate Strategy and the Sales Process,” February 2008), I wrote about a company’s need to capture feedback from its sales organization in order to ensure that its corporate strategy was being factored into day-to-day sales activities. Through a Strategic Feedback Loop, management would be in a position to know what elements of the strategy were working and what needed to be revised based on changing market dynamics. One such dynamic that was superficially mentioned at that time was competition. Because no company operates in a vacuum, knowing who your competition is, where they are, what they are doing and what products they offer is crucial information. Yet not enough effort is put into collecting, understanding and using that information. To that end, this article will cover Competitive Analysis - what it is, where to find it and how to effectively use it.

Competitive Analysis, also known as Competitive Intelligence, means different things to different people. However, one thing that it definitely cannot be is industrial espionage - the illegal gathering (i.e., theft) and use of proprietary competitive information (e.g., computer files, trade secrets, cost/financial data, etc.). And while it may be technically legal to go Dumpster diving through a rival’s trash on public property, it certainly borders on the unethical. Competitive Analysis, on the other hand, is a legitimate business practice and one that should be an important element of any strategic planning process. Because no plan is ever executed in a vacuum, the impact on - and the resultant response from - one’s competitors should be actively considered once a plan moves to implementation. This is not to suggest that a well-conceived strategic plan should be altered solely based on what the competition may or may not do, as that assumes they are doing all the right things for all the right reasons. You should, though, have a sufficient enough understanding of your key competitors that their response will not be a complete surprise. Competitive Analysis involves a lot of market research and really could be considered a form of benchmarking. It is as much about analyzing the competition as it is about identifying ways for you to make your strategic plan better and your underlying organization stronger.

As discussed in my earlier article, the Sales Process is very dynamic and multi-dimensional. At each juncture, there are defined Measures and Metrics that are created with the corporate strategy in mind. There is also a Strategic Feedback Loop. While this should be self-evident, the fact is that many companies do not require a regular and steady flow of market information from their sales organization. So, where does Competitive Analysis fit into the Sales Process? It is another component of the Strategic Feedback Loop (Figure 1) that provides a steady flow of crucial, timely information that is: 1.) vital to gauging the success of the overall strategy; and 2.) crucial to making any strategic adjustments that may be necessary in response to changing market dynamics, technology developments, competitive responses, etc.

So what are we looking for and where do we find it? Frankly, the information is readily available - all you have to do is gather it. In today’s electronically connected world, so much information can easily be found via the Internet. Company websites routinely provide information like annual reports and other financial disclosures; product data sheets and MSDSs; technology/product/market focus data and associated case studies; and more.  Internet searches often uncover trade journal articles with useful references to the competition, press releases announcing new products and/or key personnel changes, patents filings, etc. At the same time, it’s likely that your company already has access to a lot of competitive information but doesn’t realize it. If the Strategic Feedback Loop is functioning as it should, there should be a constant stream of disparate informational “tidbits” that individually may appear insignificant but in aggregate are meaningful. This could be as simple as comments made by customers, other competitors or suppliers. It could be feedback on a competitor’s successful (or unsuccessful) product evaluation.

Now that you’ve gathered your information, you can begin to create a competitive market profile like the one shown in Figure 2.

Figure 1.

While a competitive market profile is useful, real value only comes from truly analyzing and understanding what all of this information really means. Unfortunately, this effort often takes a backseat to day-to-day activities, making the gathered information more or less inconsequential. And yet, with a concerted effort, you could extract useful information about your competition, like:
  • Are they market leaders or followers?  This will give you a little insight into your competition’s overall strategy, letting you know whether they’re proactive or reactive. It might also provide you with an idea of a company’s underlying corporate culture.
  • What markets do they really focus on vs. merely participate in?  No one likes to lose any business, but this will give you an idea of which markets will garner the strongest response to any sort of competitive incursion (i.e., the proverbial “line in the sand”).
  • Do they sell on price vs. quality, performance and/or service? This will give you a clue as to how the competition might react to such a competitive threat, particularly if they are a “reactive” company.
  • What is their core technological competency? Companies are rarely good at everything, and understanding where your competition is both strong and weak will allow you to plan accordingly. This doesn’t mean that you need to shy away from their strengths; instead, look for ways to offer a more compelling value proposition.
  • Where do they appear to be spending their R&D time and energy?  Researching patent filings offers a glimpse at where the competition may be heading in the future. This is not to suggest that your company should blindly follow.  It will definitely reduce the surprise, though, when the competition launches a brand new product line or “pops up” in a new market. It will also afford your organization the opportunity to have a competitive response at the ready.
  • What type of sales organization do they have?  What are their channels to market?  Answering these questions will reveal where your competition is vulnerable due to a lack of suitable coverage, and where you might enter a market via an “unlocked back door.”
  • How will they react - or not react - to your plan? The true test of a well-conceived plan can be measured by its resiliency to real-world market dynamics. Understanding how your competitors will likely respond to your new market presence will allow you to build in that effective “counter-punch.”

Figure 2.

So, again, how do you do this? First, information gathering needs to become a standard component in all facets of the Sales Process. Next, information for each competitor needs to be compiled to facilitate analysis. One proven method is to assign a sales and marketing team for each competitor to ensure that any and all information flows to one spot. Then, on a regular basis, the team presents its latest findings, summarizing what they think the information means and offering predictions as to where they think the competition is headed. Previous predictions can also be revisited and reviewed in light of the newest information as a way of refining future predictions. Over time, teams can also build organizational charts to better understand the competition’s management structure, and to identify position vacancies (and the resultant exposures). Representatives from the technical staff can offer input regarding product strengths and weaknesses, thereby providing a benchmark for how well your products measure up. The most important aspect, though, is to factor all of this information into the strategic plan. Do you need to make adjustments where your plan isn’t working as well as it could now that you have a fuller appreciation of the competitive landscape? Are there plan modifications that should be made to take advantage of a weakness and/or vulnerability that your Competitive Analysis has uncovered (e.g., a serious product shortcoming or a significant gap in sales coverage)?

Finally, regarding your competitive targets, do not limit your focus to the “usual suspects.” Instead, be mindful of the entire market space and look out for the potential “shark attack from below.” As everyone in the industry knows, adhesives have become a very viable method for attaching metal substrates, but it’s likely that the suppliers of mechanical fasteners didn’t see this coming until it was too late.

To again paraphrase the famous Prussian General Carl von Clausewitz in his classic book On War: No plan survives contact with the enemy. As such, strategic plans are never meant to be static, particularly in a competitively dynamic, global marketplace. The recent economic downturn has only heightened those competitive pressures as companies struggle for survival and search for sustainable business. Without a disciplined effort to gather and analyze all types of crucial market data in a timely manner, companies risk creating “blind spots” that could quickly become costly vulnerabilities.

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