Insights & Reports > Business Intelligence: Don’t fly blind

As a business leader, the primary focus of your concerns in the last six months has rightly been the impact of the economic crisis on your company, your employees, and your customers. You want to ensure that you maintain orders, reduce costs, and position yourself to survive.

You expect that your competitors are doing the same. After all, they are in the same industry and no one is immune to the financial pressures of a recession. But do you really understand the competitive landscape as well as you can? The increasing pace of competition has long been a leading concern for chief executives globally. While the economic downturn dominates the list of worries in the most recent data we’ve seen, nearly half of CEOs surveyed still cite low-cost competition as an important issue.

Businesses tackle the matter in a variety of ways. Some maintain a competitive intelligence unit that sits in, or reports to, marketing and monitors pricing and new offers. Others have a strategy group which might assess the financial performance of competitors on a quarterly basis. In both cases, the work tends to be retrospective rather than predictive.

In addition, sales forces can provide valuable intelligence – they are out in front of customers every day – but it is often hard to strip out possible reporting biases from their insights.

In our experience, firms struggle to benchmark their cost structures systematically and to develop the tactical insights that can win new business or improve margins. Legitimate concerns about respecting laws and corporate policies against economic espionage lead some companies to shy away from developing intelligence-gathering expertise. Yet, with competition rising around the globe, an ability to predict your competitors’ likely moves accurately becomes even more critical.

Consider revenue: a more nuanced understanding of where your competitors are succeeding or struggling helps you to evaluate your own performance better and to identify opportunities for growth. Is Firm X planning to offer a “lower cost, fewer features” service targeting customers such as yours? How are customers likely to respond? Has Firm Y closed down a line or reduced production shifts to cut costs? Have their customers reduced their purchases, or switched to a new supplier?

Insight into questions like these allows you to get out in front of, rather than be stuck reacting to, change in the market place.

Recently, Kroll was engaged by a specialty chemicals manufacturer. A new competitor had come from “out of nowhere” and filed for regulatory approval of an alternate to one of the client’s key products. After scrutinizing public records and carefully developing human intelligence from sources within the industry, Kroll determined the new firm had contacted hundreds of the client’s current customers, received expressions of interest from many, and contracted for manufacturing capacity. The advanced warning allowed our client to adjust its product offering and cost structure in order to meet the potential threat and maintain its business.

A similar set of issues and questions arises when a company examines its cost structure, particularly in difficult economic conditions. Advances in information technology and reduced trade barriers have led firms to source globally in search of lower costs. In tough times, you can expect competitors to seek to gain an edge by increasing their use of such suppliers. At the same time, leading firms are always examining their own manufacturing processes to determine where they can do better. Knowing whether a competitor is positioning itself to reduce costs is critical. What will this mean for their fixed costs? Will it give them access to raw materials at a lower delivered cost? How will it affect their lead time for new orders? At a minimum, a competitor’s actions should lead you to ask whether your firm could – or should – make similar moves.

Consider another example: a fast moving consumer goods manufacturer asked Kroll to help it benchmark the supply chain organization of one of its divisions against three more specialized manufacturers. We broke the process down into its distinct parts, including distribution and logistics, sourcing and production, and research and development.

After working with the client to review their current performance against a series of key indicators, we moved to collect data from industry journals, trade publications, customers, and other knowledgeable sources. We obtained information not only on how key competitors were doing, but also on how customers evaluated our client’s performance. Ultimately the client was able to take the process and insights from this assignment and successfully roll them out across its other divisions.

Still, a low-cost supply chain is not without its risks: transportation and manufacturing delays, quality control issues, and intellectual property theft are all associated with overseas suppliers. We usually find that aligning expectations across cultures is hard under the best of circumstances, which these certainly are not. Understanding in advance that a key competitor is facing fulfillment challenges could allow you to approach customers and expand your business.

In Kroll’s experience, you ignore such data at your peril. Yet with the daily pressures of monitoring current business, it can be hard to scan the horizon as closely as one should. Developing a plan for routine and ethical monitoring of your key competitors can be one way to stay ahead in difficult times.

Summary	In the current economic climate, competition will get more intense as companies seek a bigger share of shrinking markets. Using business intelligence to watch what your competitors are doing, and to search for signs of likely moves, lets companies stay one step ahead.
Time frame to complete	Typically a phased approach, with initial results ready within 3 - 4 weeks. Depending on complexity, full project can take from 3 - 6 months.
Cost considerations	Varies significantly depending on scope and geography. Completed assignments have ranged from US$50,000 to US$250,000.
Advantages	Provides current actionable intelligence upon which to base strategic and tactical decisions. Third party view can assist in resolving intra-company disagreements on data, extent of competitive threat.
Risks	Losing out to competitors and losing market share.

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Matthew Levey is a Managing Director in New York and can be contacted on +1 212 593 1000 or .