Editor’s note: John McGonagle and Carolyn Vella are managing partner and founding partner, respectively, of The Helicon Group, Blandon, Pa. This article is adapted from their book, A New Archetype for Competitive Intelligence (Westport, Conn.; Quorum Books).

Over the next several years, we will be seeing see the emergence of a new form of business intelligence, what we call Cyber-Intelligence(TM). By this term, we mean to elicit a vision of an intelligence function which operates almost without visible boundaries. Realistically, in the corporate world, everything must be somewhere. But intelligence is a function that is truly without boundaries. So we must allow for the need for a corporation to have discrete operations, yet recognize that they will necessarily overlap in focus and in operation. And, in seeing it in this way, we must also appreciate that this goes against the grain of corporate operations and structure.

As we view it, Cyber-Intelligence is currently composed of a variety of elements, which can be seen as building blocks. Each has several elements in common:

  • they are outward focused, at least in part, and
  • they are all linked, however indirectly, to the processes that make up competitive intelligence (CI).

Cyber-Intelligence does not yet exist in most companies. However, there are a variety of different disciplines which are all building blocks in the task of creating a true corporate intelligence. The building blocks of Cyber-Intelligence are the following:

  • competitive intelligence
  • strategic intelligence
  • market intelligence
  • crisis management
  • benchmarking
  • reverse engineering, and
  • defensive (or counter) intelligence

What are each of these building blocks?

Competitive intelligence - CI is based on the premise that at least 90 percent of the information that any company needs to make key decisions and to understand its market and competitors is already public or can be systematically developed from data that is already public using proven techniques. CI is thus made up of two elements.

1). Using public sources to develop data on competition, competitors, and the market environment.

2). Through analysis, transforming that data into usable information, usually on specific competitors.

CI as an element of aggressive competition is not new. For example, the late Sam Walton, founder of Wal-Mart Inc., used many competitive techniques in building Wal-Mart, Inc. to America’s largest retailer. Among the techniques he tried over his decades in the retail trade was buying clothing at a competitor’s store (and analyzing the stock that same night in a hotel room), and wandering through a store with a mini-tape recorder, making notes on merchandise, prices, etc.

Over time, competition has brought things full circle. Now firms competing against Wal-Mart, and other stores like it, are advised to study the competition by: reviewing annual reports; reading industry evaluations; looking at the way competitors display goods in high-traffic areas and near checkouts; and observing the type of customers shopping there.

While CI’s practical origins date back decades, CI has its intellectual origins with Harvard Professor Michael Porter’s first work on competitive strategy 1. That, in turn, means that CI was initially tied, in the eyes of many users, with strategic planning. However, through the efforts of a number of pioneers of CI, CI has become something separate and apart.

CI is still typically most often used by those in strategic planning. It most often focuses on the capabilities and intentions of direct competitors, as well as the competitive environment. Its time horizon is usually one year forward and one year back.

Strategic intelligence - Strategic intelligence, as articulated by Herb Meyer 2, is like corporate radar. It is designed to give a company a view of its total environment - competitive, regulatory and political. As with radar, it is designed to warn the company of impending problems, and alert it to upcoming opportunities - always in time to take needed action.

Strategic intelligence typically supports those in senior management. It usually focuses on the overall strategic, even global, environment. The direct competitive environment is included in that focus, as are indirect competitors, technology trends, and even political risks. The time horizon for its practitioners typically runs from two years past to five to 10 years in the future.

Market intelligence - Market intelligence as currently practiced is a child of the computer age (as is CI). In the U.S., companies sell thousands of makers of grocery and personal care products retail sales data on virtually a real-time basis. This data includes information on sales of targeted products, at what prices, with or without coupons. In addition, these firms offer the capability of knowing what else a food store customer bought at the same time.

As a result, U.S. firms are increasingly tracking what is going on in the trenches, at the retail level where competitors face off for customers and consumers, with market intelligence. Marketing intelligence’s customers are those in marketing and sales. It provides data and analysis on pricing, terms, promotions and their effectiveness. Market intelligence’s time horizon typically runs from three to six months in the past to no more than six months in the future

Crisis management - Crisis management involves preparing a company for those "shocks" which can do significant, sudden damage to its operations or to its reputation. The classic cases studied by crisis managers range from how firms handled the Tylenol tampering case to the Bhopal disaster.

Crisis management seeks to serve middle and senior management by developing a plan and creating systems which permit rapid response by a company to an external threat where swift reaction is critical. While its primary focus is internal, well-designed programs must look to the experience of competitors and others to try and anticipate probable crises and prepare options for responses.

Benchmarking - Benchmarking, as popularized by Robert Camp at Xerox 3, is still in the development stage. Basically, benchmarking involves analyzing what you do, quantifying it, and then finding ways that other firms do it better, or better and differently, or not at all. Then, you adapt (not adopt) what you have learned to your own firm.

One form of benchmarking, competitive benchmarking, is most often used by those in planning and marketing. It focuses on what the competition does better and how your firm can catch up (or even overtake) those competitors. Its time horizon is the present, rarely the future.

Forms of benchmarking, other than competitive benchmarking, are designed to have your firm learn from dissimilar industries and companies, by the exchange of information on techniques and practices. Here, the focus is more often on manufacturing, engineering and distribution practices, with the customers being the "owners" of those processes in your own firm. And, as with competitive benchmarking, the time horizon is the present.

Reverse engineering - The next building block is reverse engineering. Here, a firm takes apart a product, studies how it was assembled, what it cost, and what the entire package and its components tell us about the competition and its activities.

Typically, the customers of reverse engineering are those in product development and engineering. The time horizon is always retrospective, since the company is looking at what has already been done. And the targets are competitors, direct and sometimes indirect.

Defensive (counter) intelligence - Defensive (or counter) intelligence is a variant of internal corporate security. While corporate security usually stresses protecting the physical and information assets of a company by barring access or preventing direct damage, defensive intelligence has a different role.

Defensive intelligence involves looking at what competitors may be learning about you through their CI, understanding what they have already learned from it and then devising responses to thwart their efforts. These efforts may be as simple as closing your plant to tours 4, or as complex as developing policies on how external information is generated and made available. Its audience should be the same as that of corporate security, senior and middle management. The time line is the recent past.

How are these building blocks related now? The following table illustrates where these groups overlap and separate - now.

CI - Competitive intelligence

SI - Strategic intelligence

MI - Market intelligence

CM - Crisis management

BM - Benchmarking

RE - Reverse engineering

DI - Defensive intelligence

Of particular interest to market research specialist should be the way the relationship between market intelligence and Cyber-Intelligence should develop.

Establishing linkages

As with every one of the building blocks, market intelligence will contribute to Cyber-Intelligence through establishing and exploiting current and potential linkages with its components. These linkages will tie marketing intelligence directly to four of the six building blocks (and indirectly to the other two). 5

Market intelligence and competitive intelligence - Market intelligence should provide some direct input to CI, chiefly by giving current information on what is happening in the marketplace. In turn, CI should be able to provide those using market intelligence with a sense of perspective so that they can understand or even predict changes. This may be a prediction of changes in marketing plans of a competitor, limits on its capabilities, lead-times for new product introductions, and so on.

To the extent that market intelligence encompasses market planning, the skills of the CI analysts would also be applicable to market intelligence.

Market intelligence and crisis management - Market intelligence may be in a position to provide a warning to the firm’s crisis management team on current problems in the market, particularly with customers. That input may be critical when the crisis management problem involves the restructuring of a product which is doing poorly against its competition.

Market intelligence and benchmarking - Benchmarking should provide market intelligence with a sense of the "metrics" of its competitors, that is how fast it can respond, where it stands in the competitive environment in terms of skills, etc.

Market intelligence and reverse engineering - Reverse engineering should be closely linked to market intelligence. That is because reverse engineering can provide specific, relatively current information, on product performance. In addition, it may be able to provide estimates of the costs of manufacturing and distribution by an analysis of the packaging and the protective measures, if any, that are taken with the product. Such data can be invaluable to determining the proper response to immediate market moves by competitors.

Destructive competition

What we are painting here is a picture of a process - a difficult business at best. But, if those involved in intelligence do not prepare for co-optation, they will face destructive competition, in the form of turf wars, which no one can win.

Notes

1 Michael E. Porter, Competitive Strategy; Techniques for Analyzing Industries and Competitors. (New York: The Free Press, 1980). See in particular pages 71-74, "The Need for a Competitor Intelligence System."

2 Herbert E. Meyer, Real World Intelligence. (Friday Harbor, Washington: Storm King Press, 1991).

3 Robert C. Camp, Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance. (Milwaukee, Wisconsin: ASQC Press, 1989).

4 See, e.g., Robin Estrin, "In Woburn, there isn’t always room for Jell-O," Associated Press, January 21, 1996.

5 Strategic intelligence and defensive intelligence have no direct linkages to market intelligence.