The Three Basic Elements of Effective Competitive Intelligence

What is it about the word ‘intelligence’ that strikes such fear in American CEO’s?

It’s a relatively benign word, all things considered. Ironically, this is the very nature of the problem. CEO’s understand stakeholders. They understand markets. They understand corporate finance and the inner workings of the SEC. It is because they understand these many things that they are qualified to be a chief executive. It’s what they do not know that confounds them. This is where a functioning intelligence operation is useful.

The sole purpose of intelligence is to minimize uncertainty in conflict. Certainly competition is the most primary form of conflict. Competition for markets, even competition for stakeholders, and for the financial revenue of serving customers is the sole reason for the CEO to exist. One of Peter Drucker’s more understated and underappreciated points was that companies exist for one purpose – to serve a customer.

It’s rare that a company serves a customer alone. If nature abhors a vacuum then human nature truly despises it. Where a market exists there will be rivalries to serve it. While CEO’s know their own company they often know precious little about how their competitors are attempting to serve the same customers in ways different from their own. And that makes all the difference.

I’ve been in the intelligence business for twenty years as a collector, analyst, briefer, researcher, teacher, and writer. I’ve written for the President’s Daily Brief and for military commanders under fire in hostile areas around the world. I’ve been in violent agreement with globe-trotting policy makers and benevolent disagreement with policy wonks who never leave the security and comfort of the Beltway. 

In each of these instances and many others in between my responsibility was to help my client, my decision-maker, make the best choice possible. Leadership is the loneliest of professions and leaders routinely must make decisions in ambiguous situations with imperfect information. They need professional staff to advise them in how to answer these questions. They need specialists.

That’s what intelligence professionals are. We are specialists in finding and analyzing information to answers questions that aid decision makers in doing their jobs. I’m unusual in that unlike most others in this profession I didn’t start within a civilian or military intelligence organization. That portion of my career came much later. I learned the intelligence craft in the crucible of American business. And for that I’m eternally grateful.

Peter Drucker single-handedly bestowed legitimacy upon the fledgling field of competitive intelligence three decades ago when he advised Nutrasweet’s Bob Shapiro to start a formal corporate intelligence function as the company’s patent on Aspartame was about to expire. Drucker knew companies around the world were already building manufacturing capacity and preparing marketing campaigns. Both would have dramatic impacts on Nutrasweet’s bottom line.

Drucker found nothing of this significant at the time. He was doing what he always did; advise his client of the best course of action to protect their markets and serve their customers. And Drucker’s business experience from around the world, certainly one of the most salient parts of his multidimensional advise, told him the competition would know far more about Nutrasweet’s operations than Nutrasweet would know about theirs.

All the World’s a Stage

It’s unfair to say American business executives are Pollyanna when it comes to competition, but the accusation is not far off. While competitive “benchmarking” was a popular endeavor for years, few firms actually wanted to admit to their customers, shareholders, or themselves that they were actively engaged in intelligence gathering about the competition. Unfortunately, this puts businesses at a global disadvantage, especially in the current economy.

The Japanese External Trade Organization, or JETRO, has for decades been that nation’s clearinghouse for funneling competitive intelligence from around the world back to Japan. There it is analyzed, compiled, cross-referenced, and shared across several keiretsus, or networks of companies whose businesses are interlocked. These networks compete as unified systems, leveraging their individual strengths in particular areas (finance, logistics, supply, etc) to aggressively move into new markets when the time is right.

France is another nation with an aggressive, state-sponsored intelligence apparatus. More importantly, French business leaders have a far more pragmatic appreciation of the value of intelligence than their American counterparts. This is evidenced by a popular competitive intelligence school in Paris, the Ecole de Guerre Economique – the School of Economic Warfare. Founded by Christian Harbulot and Army General Jean Pichot-Duclos in 1997, their forthright aim is to prepare French (and other European) companies to defeat international competitors. They do this by adapting and teaching military intelligence methodologies to business leaders.

For several years now the US government has published the Annual Report to Congress on Foreign Economic Collection and Industrial Espionage. It details the myriad of ways foreign governments are collecting information about U.S. companies for heir own national firms to take our market share away by any means necessary. It also notes there’s much less espionage going on these days because it’s unnecessary. Legal collection and analysis is more than sufficient to place American firms at a disadvantage because they are not taking the same measures against their overseas competitors. This is nobody’s fault but our own.

Several years ago the company I was working for learned a foreign firm was using our corporate brand image for their own product. As they began legal action company executives soon discovered all the information they had was third hand and circumstantial. They needed reliable data to make decisions and I was tasked to collect it. Within days I’d sent a collection specialist inside the passport control office in St Petersburg, Russia. 

He found the offending advertisement on a wall and took several high-resolution photographs. An unusual case? Certainly, but it is indicative of how intelligence can respond to a problem and provide the information necessary to make decisions in a timely manner.

Ultimately, we learned Russian law allows domestic companies to use foreign brand images for their own purposes as long as the products are not identical. Microsoft had the same problem with a Russian firm selling Windows Beer. Same logo, different product and executives should expect more of these types of problems in the future. 

Of Counsel

It seems clear the future of competitive intelligence will be under the umbrella of the corporate counsel. Attorney-client privilege provides the discretion, legitimacy, and reassurance corporate leaders crave when they see the word intelligence. Involving counsel assures executives they will not be splashed across the front page of the Wall Street Journal for doing so, that intelligence can and will be collected legally and ethically. 

Competitive intelligence must have three key characteristics to be effective. First, it should be simple for clients to ask questions.  Second, it should use existing resources to answer those questions whenever possible. Third, it should manage the efficient creation of new sources of information to answer the remaining questions. That is the only way to ensure an executive has a positive experience. 

Focusing on the decision maker’s experience ensures the intelligence professional’s information will be specific to the executive’s needs; it will be distinct in its characteristics; and will be singularly beneficial only to the leader who requested it. This is not ‘one-size-fits-all’ guidance. This is highly customized analysis provided on an explicit timeline to prepare an executive for decisions that must be made now or in the very near future.  

Executives don’t want reports, presentations, or intangible advice.  They want to transform their businesses. Transformations are effectual; the result of taking action that alters the future.  Information is not intelligence unless it results in action. It is very similar to the legal profession in that it is highly subjective. The intelligence professional, like the attorney, doesn’t provide reports so much as they partner in business outcomes. 

Partnerships require learning relationships. The more an executive teaches the intelligence professional about his or her specific problems, questions, and biases the better that professional can provide exactly what that executive needs. This is one-to-one marketing between the intelligence professional and the leadership, a continuing feedback from one to the other to ensure a positive outcome.

Again, Drucker was prescient when he noted that effort was nothing – only outcomes matter. All decisions an executive makes must be consistent with a churning, chaotic, ever-changing environment external to the company itself. Executives don’t have time to lead their people and mind the competition too. They’ve got to turn the external monitoring over to a set of dedicated professionals whose sole purpose is to prepare executives to make risky decisions with incomplete information.

Risk and return. CEO’s understand these. And an increasing number of them understand a competent intelligence function is not nearly as risky as the complacency of its absence.

That is the greatest risk of all.


 T.J. Waters wrote  Hyperformance: Using Competitive Intelligence for Better Strategy and Execution” (Jossey-Bass) and is a senior consultant at U.S. Special Operations Command Headquarters, formerly with the CIA, with 20 years of private sector and government service in the intelligence field. Before that, he was VP of an intelligence consulting firm serving Fortune 500 corporations, law firms, and military units. He is also an adjunct professor in the Intelligence Management and Analysis program of Eckerd College (St. Petersburg, FL).

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