Intelligence, the outgrowth of processing vital information, is critical to the success of every business in every industry. Sometimes, though, companies may not understand the breadth and meaning of information that eventually becomes intelligence. One notable example of this tendency is to focus on just one component of information – the competition.

That is a limited informational perspective that is inadequate for competing in today’s economy. What is needed is a thorough understanding of three common forms of information that, when gathered and interpreted correctly, can offer a sustainable competitive advantage. Those forms of information are business intelligence, market research and competitive intelligence.

Business Intelligence
Business intelligence (BI) is not as broad as the term implies. Rather, in today’s terms, it represents an aggregate of various pieces of information that include diverse items, such as customer preferences, buying habits and order sizes. This type of data typically resides and is accessed and analyzed via a company’s IT systems. It has much more to do with data mining, analytics and management than creative thinking or developing a visionary perspective that can be used to predict the future.

Companies with tunnel vision on data analysis generally operate in a context of assumptions that may not be applicable to a future competitive environment. The same can be said about relying on data from the past or even the present to develop tomorrow’s model. In short, with business intelligence, the answers may be out of reach because someone is asking the wrong questions.

On the other hand, BI is certainly valuable and may provide a context for the present scenario. It cannot, however, be relied upon as a prognosticator of future trends. While BI may even include information about competitors, no one should conclude that this data is the most important weapon in a company’s arsenal. Actually, it falls far short of what is required to compete in today’s global economy.

Market Research
Market research in its two forms, primary and secondary, statistically tells us where we’ve been or where we are. In addition to data mining and data management, primary market research – whether it gathers business-to-business or business-to-consumer data – employs a variety of tools to help a company fully understand its market and customers. Among its tools are focus groups, phone, in-person and mail surveys, data from mystery shoppers and highly customized analytical services.

Through these and other approaches, primary research is capable of producing a highly critical assessment and evaluation of past and current information. Neil Goldman, president of Member Research – a California-based firm that provides qualitative and quantitative research to credit unions nationwide – offers this perspective: “In business, we have evolved from thinking of quality and service as being unique selling propositions to recognizing the importance of our customers’ experience. How can we know this without market research?”

Unfortunately, making primary research can be quite expensive, most likely out of the range of many startups or small companies with limited budgets. The alternative is secondary market research, which comes from information that already has been published or data that exists in other public sources. Both primary and secondary are, for the most part, statistically valid, but their focus, once again, is only the past and the present.

Competitive Intelligence
Competitive intelligence (CI) is more than its name implies. It goes beyond business intelligence and market research. Cipher Systems, a consulting firm, defines CI on its Web site as “an ethical gathering and analysis of competitor and market information from open sources.” Market information, as used here, is not an afterthought. Rather, it should be the forefront of information necessary for a clear picture of the future marketplace.

“It’s looking at the entire competitive business environment that impacts your business. Competitors are just a small piece,” says Seena Sharp, the president of Sharp Market Intelligence, who has been a practitioner of intelligence, research and analysis for 30 years. She recites a litany of factors she believes are often overlooked.

“It’s what’s going on with customers, marketplace, suppliers, distributors, regulations and demographics, and don’t forget industries that are indirectly related to yours,” Sharp says.

CI, unlike business intelligence, is pro­active and future oriented. Instead of limiting its conclusions to previously acquired data, CI asks questions about the marketplace, products and services being developed or offered, potential users and future trends. Inherent in CI is a recognition that past practices and assumptions do not always make for effective competitive intelligence.

Assumptions and Their Pitfalls
If CI were to have a mantra, it might be “the past is not a predictor of the future.” Such a credo may be outside the realm of thinking for those who rely on business assumptions in drafting what they believe to be competitive intelligence. Such assumptions, e.g. “we can make decisions because our customer and market research is comprehensive,” neither questioned nor tested, are viewed as absolute truth.

Once again, information is wrongly equated with CI and is not used to the company’s advantage. Why? Because the thinking that produced it is internal in nature, and competitive intelligence has to be external; that is, going beyond the industry into a seemingly unrelated environment that may impact it in the long run.

Such thinking overlooks gaps in the marketplace that can be exploited, especially when assumptions are challenged. General Motors may be the classic example of what happens when companies ignore competitors who take advantage of those gaps that meet customer needs. Even though foreign competitors were developing more fuel-efficient vehicles, including hybrids, GM ignored the warning signs and continued to put its eggs in the basket of sport utility vehicles (SUVs) while ignoring their poor gas mileage. The shock of $4 per gallon along with environmental issues crashed GM’s SUV market, which could not recover when gas prices fell to $2 per gallon. “We made mistakes,” GM executives admitted to Congress when the company asked for billions in federal bailouts.

Perhaps one of GM’s biggest mistakes may have been disinterest in competitive intelligence that might have presented a more comprehensive paradigm than reliance on long-accepted internal assumptions about what its customers wanted and needed.

Just Part of the Story
As GM and too many corporations have learned, CI is about more than the competition. Without consideration of the total business milieu along with other ongoing influences, such as the environment and public opinion, CI lacks the scope required for its primary purpose, which is actionable intelligence. CI, compiled correctly, is a thorough analysis of the global economy and its impact on domestic and foreign sales.

Above all, CI is proactive and sensitive to trends and their potential role in shaping a winning strategy. Its practitioners are open to challenging commonly held assumptions. Sometimes, those first questions are the first indicators of change.

Skeptics of CI argue that it is difficult to plan from information that does not meet their standards for quantitative analysis. It is an argument that holds no water for Sharp. “Information is just part of the story,” she says.

The focus on competitive intelligence should not be interpreted as ignoring the importance of primary and/or secondary market research. We have all read the philosopher Santayana’s admonition that those who ignore the mistakes of the past are condemned to repeat them. Although past practices and research merit consideration in drafting CI, they cannot, in and of themselves, be the foundation for future decision making. Competitive intelligence in the global economy requires a macro view that takes into account not only your industry, but those indirectly related along with an awareness of business trends elsewhere and their potential impact on your business.