To succeed in business, you must understand your competitors and keep up to date on market trends. Competitive intelligence is information that has been analyzed to the point where you can make a decision. It is a tool to alert management to early warning of both threats and opportunities. Basically, it helps you to better understand your industry and influences the actions of your company. A company set up for failure is one that only pays attention to its own operations and does not gauge itself against competitors. Competitive intelligence can be tactical or strategic - tactical focuses on short term gains and improvements while strategic focuses on long-term issues, such as large risks. Strategy is essential for any company driven by technology because technology is constantly improving and companies must adapt to this before they become outdated and are unable to compete with competitors.
During the 1980's, Kodak was one of the largest producers of film, closely followed by Fujifilm. A Kodak executive wrote a report in 1979 describing how the marketplace was shifting from film to digital, a huge change in technology. Instead of capitalizing on the new technology, Kodak continued to sell film products and dabbled in medical devices. Kodak stopped investing in film in 2003 and began to shift to a digital-focus, but this transformation occurred too late. Kodak should have paid better attention to its competitors and realized that it should have shifted into the digital marketplace during the same period that its competitors were.
It is clear from commercials and billboards that companies are constantly trying to trump each other to have the better product. Some companies will even directly compare a competitor's product in a commercial to show its product is superior. A perfect example -- smartphones. Every year, we see these phones evolve to have slightly more "hip" and "cool" features. The basis of the product is often the same, but new trends sway the production and design plans for these phones.
When discussing competitive intelligence, one must remember that is not analogous with industrial espionage. Industrial espionage is an attempt to gain access to information about a company's plans, products, clients, or trade secrets. Competitive intelligence involves using ethical and legal means to analyze and utilize publicly available information. Competitive intelligence is important to an organization, similar to a marketing department, finance department, etc. Without competitive intelligence, companies do not reach the strategic height that they can attain with knowledge of other companies' products, plans, or actions.
Competitive intelligence is essential in strategic sourcing because companies must know what other companies are charging for products in order to benchmark and help negotiate lower rates. I think we can both agree that it's pretty difficult to negotiate rates when you have nothing to compare them against. With the correct information, companies can avoid competitor surprises and stay on top of the marketplace. Understanding future trends and market requirements is important in the strategic sourcing industry, so all sourcing companies should keep a keen eye on their competitive intelligence.