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Market Intelligence Is Evolving. Are You Ready?

A director of market intelligence at a Fortune 50 company called me last week. He wanted my advice about how to recharge the competitive intelligence process in his company. I have been getting more calls like that in the last six months than in the last decade. It seems that competition has intensified for many global companies, yet their available competitive intelligence is no longer sufficient. They erroneously think that it’s a matter of getting more competitor data. They are dead wrong.

The director from that company, a global powerhouse in its industry and a household name around the globe, was tasked with providing competitive intelligence to the marketing organization of two units of his company, and the two units had a completely different view of what constituted competitive intelligence. He was lost.

Dominant Players Accepting Death

One of the units in that Fortune 50’s company was the “cash cow” with a dominant market share and slowly declining but still enormously profitable business. Its marketers considered competitive intelligence to be market “news,” mostly product and technical tidbits about competitors. When the director sent them this “news,” they only occasionally followed up with questions. I call this the “push” model.

Since the users had little actual use for the data and reports, the director’s job performance was assessed by productivity: the number of reports sent per period. This is typical in many marketing organizations in leading (and often complacent) companies. It’s also a complete waste of money. Only data worshippers think that is a good use for scarce corporate resources. My director client knew that it was a waste of time and money, but his audience—the dominant unit’s senior marketers and product managers—were too set in their ways to ask tough questions about the value of such “competitive intelligence.” In short, this gigantic unit accepted its continuous march toward death and basically waited it out. The marketers didn’t see any other use for competitive intelligence aside from cursory monitoring of competitors’ moves.

The SEW Process

The other unit was the “star” of this company and garnered a lot of attention from top management, Wall Street and the press. The unit was in a hotly contested competitive arena, coming from behind, and analysts regarded its success as crucial to the company’s future prospects. The top executive in this unit wanted strategic intelligence, not “news.” As he said it, he can read The Wall Street Journal for news. The director was asked to run a war game known as Landscape to help create the strategy going forward for that unit. The success of the war game established his credibility. With credibility came a willingness to rethink the whole market intelligence paradigm. Instead of a costly competitor data dump, the director started implementing a strategic early warning (SEW) process. The principles behind a SEW are simple and powerful if done correctly: Replace the volume of “reports” with substance and replace a “nice to have” mindset with measurable impact on projects and decisions. This is what I call the “pull” model.

Do you remember Continental Light? No? There’s a reason for it. In the ’90s, as discount airlines started to make an impact, Continental Airlines decided to join the game and operate a low-cost unit, Continental Light. After two short years and a loss of $300 million, the company learned the hard way that it was impossible to run high-quality and low-quality operations under the same roof.

It’s the same for market intelligence, and marketers should heed this lesson: Buying a lot of data, and crawling the Internet and social media for competitor data, doesn’t provide one iota of strategic insight. It provides mostly noise at a high price. If you have money to spare, keep going.

The Abuse of Competitive Intelligence

Close to 60% of competitive intelligence positions are in marketing organizations. The natural tendency of marketers is to consume a large amount of tactical “news”—not because it actually affects their decisions or their ultimate performance, but because this is the nature of work in a large company. Few question the fundamental value of the mountain of information that they receive, despite evidence that it is the lack of big-picture competitive insight, which is a major cause of decline, not the insufficient detailed information on competitors. Sony, Hitachi, P&G and McDonald’s are just a few examples of companies that fell on hard times despite heaps of marketing information available to their management.

The irony is that a strategic early warning process is cheaper—both in human resources required and in budget—than the old “push” model of competitor minutia. CMOs need strategic insight on a macro competitive arena scale. One company’s CMO instructed his analyst to provide data on close to 100 competitors. What type of data can make a difference if you think 100 companies are worthy of close attention as competitors?

What’s Common to Twitter and FAO Schwarz?

The lack of understanding of competitive intelligence by marketing organizations can have consequences far beyond just wasting scarce corporate resources. Take two recent examples: Twitter and FAO Schwarz. Twitter’s marketers achieved a remarkable feat of 90% brand awareness. FAO Schwarz is a brand with a 150-year legacy with unparalleled name recognition in toys. By all traditional measures, marketing has done a tremendous job with both brands. Yet last month, Twitter’s CFO was appointed its CMO because the company hasn’t found a way to monetize its brand power. FAO Schwarz’s iconic store location in New York is closing in July. The owner, Toys “R” Us, admitted that the huge traffic in the store never translated into purchasing.

Here are some questions that an astute CMO reading about Twitter and FAO should ask himself or herself, the kinds of questions that would lead to gathering the right kinds of competitive intelligence:

· Am I responsible for profitability or only for increasing market share/brand awareness? The answer depends on how strategic the marketing function is.

· Do I have an objective perspective on the big-picture competition out there? The answer depends on what CMOs consider “big-picture.” Many mistake it for direct competitors.

· Do I get a reading on early signs of trouble and windows of opportunity? The answer depends on how CMOs define “early” and their tolerance for uncertainty.

· If I knew every detail of my direct competitors’ plans for the next five years, would it make a difference in my strategy? To answer that, think hard: Have any of your five-year plans made it through market changes?

· What is the role of market intelligence in my organization? Is it a glorified Flipboard? A data junkie’s dream? Is it worth the investment?

What’s Next? 

In recent years, I’ve witnessed a re-thinking of competitive intelligence’s role, scope and design, starting with a CFO taking over SEW from the marketing organization as part of enterprise risk management. Maybe this is the solution, though my experience is that some CFOs tend to be too narrowly focused on short-term cash flow risks alone. Given the prevalence of “market intelligence” positions in marketing organizations, a better solution is for more strategic CMOs to redesign the market intelligence process from scratch to venture beyond competitor minutia.

In helping to redesign the intelligence process at the Fortune 50’s company mentioned above, the first advice that I gave the director was to simply stop sending competitors’ tidbits to the marketers at the dominant unit and see what happens. Care to guess how that played out?

Benjamin Gilad is president and CEO of the Boston-based Fuld-Gilad-Herring Academy of Competitive Intelligence and author of Business War Games.