244 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
in the future. Also, it is important that we better understand
your requirements to assist us in delivering products that
meet your needs.
◾ You may be assured of our continued commitment to provide
you and our other consumers with quality products and an
exceptional level of service at all times.
12.5 Competitive Intelligence
“Never do anything you’d be afraid to read about on the front
cover of the newspaper the following day.” —Karen Rothwell,
Outward Insights
Competitive intelligence (CI) is the intimate know-how of the competitive
environment. In well-managed forms, CI is the prelude to strategic decision
and action. The competitive intelligence process is the organizational
means by which competitive information (the environment) is systematically
collected, analyzed, processed, and disseminated as actionable intelligence
to selected executives and managers “in need to know.”
6
Note that information is factual. It is numbers, statistics, bits of data, and
interesting stories that seem important. On the other hand, intelligence is
an actionable list of data that has been analyzed, ltered, and distilled. This
is what we call intelligence know-how.
CI is not for everyone. In fact, most companies do not use CI. Despite the
fact that most executives rely on the ow of information for decision-making,
only a handful of companies have a fully functional, integrated CI process in
place. Why is that? Perhaps the most important reason is attitudinal: the way
executives think about CI.
7
Have you ever heard some of comments listed
below? On the other hand, perhaps you have said them yourself!
◾ CI is spying; it is unethical. I don’t want any part of it.
◾ It was not part of my school curriculum. It must not be important.
◾ CI is a cost center. We do not have a budget for it.
◾ How do I quantify CI’s cost/benet ratio?
◾ Nothing happens in this industry that I don’t know already.
◾ If I don’t know it, is it not worth knowing.
◾ We tried it before, and it didn’t work.
◾ I am too busy to review all this garbage.
Strategic Management ◾ 245
CI requires authorization by the highest echelons of management. CI is a top
management function. It can provide vital analysis of competitor capabilities,
plans, intentions, and limitations. It spotlights industry structure and trends. It
may also reveal political, economic, and social forces affecting your company.
The CI life cycle is iterative, consisting of four major functions: (1) plan-
ning and direction, (2) information collection, (3) analysis and forecast, and
(4) information and dissemination, as shown in Figure12.3.
Note that CI is not merely a large collection of information; it must be
analyzed and presented in actionable form (intelligence know-how). CI is
most useful when presented in a forward-looking, predictive, and actionable
format such as the following:
Competitive Intelligence (CI) Process
CI is not a function; it is a process, or relegated to one area, division, or unit.
Method Reason
Strategic Predict how competitors are likely to react
Future intentions
Tactical Predict price or new positioning by likely competitors
Benchmarking
Planning and Direction
• Executive direction
• Funding
Information Collection
• Customers
• Competitors
• External factors
Analysis +
forecast
Inform and
disseminate
e CI Life Cycle
Figure 12.3 The CI life cycle—Competitive intelligence (CI) requires authorization
and guidance from the highest echelons of management.
246 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Offensive New market opportunities
Scenario planning
Defensive Early warning of enabling or disruptive technologies
Investment decisions
CI is particularly useful in industries with long development and approval
cycles, such as the pharmaceutical and biotechnology industries. These
industries are faced with long R&D times—sometimes 10 to 15 years for
innovative drugs—coupled with uncertain and hugely expensive clinical
trials. This allows continual tracking of a drug’s progress by competitors
through the public FDA approval process.
Thus, pharmaceutical/biotechnology companies utilize CI during the
years of drug development to help determine if a new drug development
should be continued or dropped. Likewise, it allows companies to monitor
competitors’ activities and decide whether to initiate their own drug develop-
ment for a specic indication.
12.6 Marketing Intelligence
“You can see a lot by watching.” —Yogi Berra
Marketing intelligence (MI) is the information relevant to a company’s
markets, gathered and analyzed specically for the purpose of accurate
and condent strategic decision-making in determining market oppor-
tunity, market penetration, true market size, market strategy, and market
development metrics.
8
MI is the systematic gathering of data from the
company’s current external environment to further a company’s sales
goals.
The four cornerstones of MI are (1) competitor intelligence, (2) product
intelligence, (3) market intelligence, and (4) environment intelligence,
9
as
seen in Figure12.4.
While the microenvironment refers to those elements closest to the com-
pany, customers, competitors, suppliers, etc., the microenvironment refers
to those elements that can affect a company, but cannot be controlled by
management. These include external factors such as the economy, culture,
demographics, politics, technology, and weather.
Strategic Management ◾ 247
MI provides management with a dispassionate look at their target market.
Data eats expectation for lunch. Founders generally have a distorted look
at their selected market, confusing their total available (global) market with
their target (niche) market, which is a much smaller percentage than they
anticipated. (Note that actual market is equivalent to market share.) This is
shown in Figure12.5.
Marketing Intelligence
Actionable intelligence
Competitor/Product Market/Environment
Macro-environmen
t
Micro-e
nvironment
Potential market size
Likely customers
Market growth potential
Legislative changes
Regulatory
Market penetration
Products
Features
Pricing
Utility
Developments
Sales force
Manufacturing costs
Figure 12.4 Marketing intelligence—The four cornerstones of marketing intelligence.
Market Types
Total Available Market (universe)
Served Market (technology)
Target Market
Market share (yours)
Figure 12.5 Market types—What is your real potential market share? No baloney,
please.
248 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
12.6.1 The Pizza Analogy
“Aim low, reach your goals, and avoid disappointment.” —Scott
Adams, Dilbert
Don’t overpromise on your revenues. You will have to ght very hard for
your rst dollar of sales. Leave the hockey sticks on the ice—knowledgeable
investors will not take you seriously if you claim your market size is in the
billions, and your revenues will grow from $10,000 to $500 million in three
years, although your sales history will likely resemble the proverbial entre-
preneurs’ “Hockey Stick” as shown in Figure12.6.
The author has used the “pizza analogy” to show aspiring entrepreneurs
the intricacies of market/sales terminology. Suppose you have a complete
pizza, as shown in Figure12.7.
The entire 8-slice pizza is the Total Available Market. However, your
technology can only address half of the market; that is, 4 slices (Figure12.8).
The 4 pizza slices now represent your Served Market. If you could
somehow eat 100% of the served market, you would walk on water.
Realistically, you could only expect to eat 25% of the served market, or
one slice. This is equivalent to your potential Target Market, as shown in
Figure12.9.
Entrepreneurial “Hockey Stick”
sales forecast
Projected sales ($)
Time (arbitrary units)
Figure 12.6 Entrepreneurial hockey stick—Will your revenues truly resemble the
stick part of a hockey stick?
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