The Importance of Competitive Intelligence
I have always claimed that no such thing as a company exists. In best case it’s a group of people who work together towards a common goal. I know it’s a bit provocative, but there is some truth to it and when it comes to competitive intelligence there is actually a lot of truth to it. Because who is it that determines the strategies of your competitors? Their owners, management and other internal decision makers and influencers.
So if you want to predict your competitors next moves – including their reactions to your strategic moves – you need to figure out their background (e.g. education and experience), values (e.g. profit at all costs or Corporate Social Responsibility), attitudes (e.g. offensive or defensive) and preferences (e.g. spotlight or anonymous). If you know that – or at least have a good idea about it – then you have come further than most in terms of having your competitive intelligence deliver real value.
Understanding Your Competitors
Let’s start with the owners. If the owner is a flamboyant type, such as Richard Branson for example, then you can be pretty certain that innovation is number one on the corporate agenda. If, on the other hand, your competitor is family owned, then it’s likely that history, values and relationships decide the strategy. What if a company is owned by an equity fund? Then aggressive growth is most likely guiding their strategic decisions. This is actually quite obvious, so let’s dig one step further and look at the top management.
Imagine the very likely difference in strategic decisions based on whether the CEO has a financial background or a sales/business development background. The latter is most likely more adventurous and has a longer time horizon and probably also more interested in growing the topline, expecting the bottom line to follow suit. On the contrary, if a person has a financial background the focus will be on the bottom line and only if it makes financial sense will he consider increasing the turnover. Also, he will not be very patient but want to see results after only few quarters (yes, he most likely thinks in terms of quarters whereas others with a sales/business development background typically have a longer perspective).
How Will Your Competitors React?
But what about experience? If a top executive in a previous job has been successful at implementing e.g. e-business or Six Sigma or Key Account Management then he will most likely attempt to do the same in his new job. Of course, if it has worked for him previously then why not try again (even though the circumstances may be very different). Now consider values. Are the people at top chasing profit at basically all costs? If so, then you can expect them to play dirty, whereas if they care about their company being seen as a good corporate citizen then most likely they will not be quite as aggressive. This has also a lot to do with their personal attitudes. If they love a good fight then they will be very aggressive and fight you in any way possible, even to the extent of trying to drive your company into bankruptcy. If, on the other hand, they feel that it’s a good thing to have strong competitors (“they keep us on our toes”) then they will still react to your strategic moves, but not in an aggressive way. And finally, if the CEO just loves to be the center of attention in the media then you can expect many initiatives – most of them short-term and maybe not even seriously considered.
Oh, and don’t forget their incentives. Fact is that many incentive programs are constructed in a way that first and foremost serves the persons – not the company. So how is the top management incentivized? Find out and you have a pretty good idea about their personal objectives which are not seldom more important to them than what is best for the company.
Our Experience With Competitive Intelligence
Today it’s quite easy to get a first impression of your competitors’ top executives. Start with reading about them on LinkedIn (including what they share and like and which groups they are members of) and then follow up with a general online search on Google. This is a good starting point, but you can go much further
than that and sometimes you need to. The outcome can be very positive as you can see in this real-life example:
A few years ago we were asked to take a thorough look at a German company that our client considered acquiring. We did all the usual stuff like finding out if their customers were satisfied, analyzed their financial statements, looked at their distribution network etc., but we also looked at the top management. It was a company that went through a generational shift where the founder handed over the company to his daughter and son-in-law. We took a very close look at these two persons and found out that more likely than not they would not be able to lead the company properly due to lack of experience and because of “wrong” values.
Our conclusion was that our client should not acquire the company at that time because the price would decrease significantly two or three years later because the company would run into problems. As it turned out we were right, our client postponed the acquisition for three years and still got a relatively strong company, but at a much lower price than originally expected. All because we analyzed in detail the daughter and her husband and found out that they didn’t have what it took to run the company successfully.
Which strategic decisions can you make - with more certainty of the outcome - from better understanding your competitors’ top management?
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