Know Your Enemy
Therefore, I say: Know your enemy and know yourself; in a hundred battles, you will never be defeated. When you are ignorant of the enemy but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and of yourself, you are sure to be defeated in every battle.
-SUN TZU
From The Art of War
Before we can apply the wisdom of Sun Tzu, we need to start where strategy begins, with the identification of goals. Put very simply then: Your goal is to hit targeted profits via the procurement of capital in exchange for your products or services. But this Granddaddy Goal is just the root of the entire tree of financial, marketing and operational goals that are specific to your business. From cost and revenue goals, to public relations and supply chain goals, these components makeup the final picture of what you want: targeted profits.
It’s important to keep this perspective fresh in mind before you even think about strategizing. If we attempt to strategize without clear, measurable goals in mind, we will not identify success from failure. This is critical even more so when it comes to Competitive Strategy, where pride, inferiority and personal ambition can often cloud our achievement of the final picture, which again is your total profit goal.
In other words, your personal desire to be #1 in the industry, control 90% of the market share or put your rival competitor out of business, is of no interest to your stakeholders unless doing so achieves the profits your company has targeted for the year. If you’re interested in personal conquest, go play RISK or join World of Warcraft; Business is about making money. Your competitors are such, not because they want to be #1 in the industry or put you out of business, but because they seek the same profits you need to reach your goals; this is why they are indeed your enemy. With this very healthy preface in mind, let’s move on to the value of competitive analysis.
If you’re already engaged in regular and periodic analysis of your competition, there is a good chance that your business has shifted its approach from immediate, reactionary thinking to comprehensive, proactive strategizing. When you engage in competitive analysis, you gain greater sight over the battlefield and can now calculate one of the greatest barriers to victory when making decisions.
As indicated by Sun Tzu’s statement above, knowing the enemy is only valuable to the extent you know yourself. For this reason S.W.O.T. analysis, or some variation thereof, has become a popular tool for businesses to assess themselves in light of their own resources, environment and competition. A thorough self-examination is the first step to knowing where you stand against your competition.
After performing a full S.W.O.T. analysis of your own company, the next step is to identify your top two or three competitors. Any more than this will be too overwhelming for practical changes or insights to be drawn. Next, role-play as the customer of your top competitor. If possible, try to experience every stage of their sales cycle, from awareness to post-purchase. Be sure to write down your observations as you progress through each stage. With your own company’s strengths and weaknesses fresh on your mind, new ideas and strategies will pour forth effortlessly.
Every business has constraints, but a thorough competitive analysis will help you identify where to go to battle and where to lay low. Take their strengths and improve upon them. Illuminate your strengths where they hide their weaknesses. Tout your already existing strengths and pound their weaknesses (with tact and professionalism, of course). You get the point; Knowledge of the competition can be the greatest weapon in the battle for profits.
At the same time, a smart strategist will anticipate this same kind of examination from their enemy. For this reason you must carefully guard your most distinguished secrets. If a customer seems unnaturally curious about the core elements of your product or service, be mindful of the competition. Aside from strict information barriers, there are also creative ways to frustrate the intelligence efforts of the enemy; such as leaking vague information in hopes they will use it to make an erroneous strategic decisions. And once again, be wary of this same kind of counter-intelligence in your own efforts. Only use competitive intelligence when you know that it’s sound.
Competitive Analysis is one of the most insightful and empowering steps to reaching your profit goals. Shift your thinking from the reactionary to the proactive and victory is not far behind.
3 comments so far
Leave a reply
I think this will helps me alot while I am working on competitor analysis.Thanks for sharing such a Great information.
Nice post. You give a decent summary of competitive analysis but I would have liked some more meat into how you get the information on your competition.
On the internet its is easier to get info on your competition, just look at their website and order their product and you will get a wealth of information.
I do like that you mentioned the importance of an internal analysis as well. Just researching your enemies only gives you whats going on. It does not put it in a framework that you can practically apply it towards increasing revenues.
All in all, a nice post. thanks
john
Hi John, thanks for the feedback. I see two questions here.
1.) How do you get information on your competitors?
Regardless of your industry, I would say the best competitive intelligence will come from putting yourself in the shoes of the consumer and experiencing the competition.
It certainly seems that competitive intelligence is more accessible in the Internet marketplace, but the methods outlined above can be just as useful in the offline world as well.
Consider this, you’re the owner of a candy manufacturer that distributes product through various convenient marts and drug stores. The beginning of your competitive analysis could be as simple as visiting one of these retail outlets and “shopping” for candy, taking particular note of their placement, their packaging, and their price points. Then select two or three competitive candies (choose the ones that pose the biggest threat) to purchase. Look for any advantage, whether practical or aesthetic, in the wrapping, design or color of the candy, and of course the taste. Also see if there are discounts for repeat purchases offered, or see if there is any cross-selling (such as “Try our Brand X Milk with your candy”). You’ll find numerous points of contrast and comparison for your company to assess.
The best and most accessible intelligence will come from your assessment of the consumer experience.
When you start looking at competitive intelligence beyond the consumer experience, such as supply chain information, research and development, business models, etc… It becomes a game that is different for every industry. I would begin with any public records and financial statements that are available.
2.) How can I use competitive intelligence to increase revenue?
This is really a question of project management and resource planning.
For every point of Strength, Weakness, Opportunity, and Threat that you identify, formulate a plan of action. For every point that can not have a feasable plan of action, wipe it from the list, it’s dead weight in your decision making process. Once you’ve created a blue print for action for every Strength, Weakness, Opportunity, and Threat, estimate
(1.) The Revenue that Action Will Generate
(2.) The total investment cost, including opportunity cost, time and labor.
(3.) The time it will take to generate that revenue.
After this you should have a very informative list of projects from which you can prioritize your resources on a cost/benefit perspective. You’ll find that some are simply too costly, while others require minimal effort and may yield great returns.
Of course, the list of projects that you generate from your S.W.O.T. analysis should be acted upon in the context of whatever other projects you had on the table. In other words, don’t orient your entire organization around competitive intelligence. That would be Reactionary Thinking, which is the real enemy that competitive analysis seeks to defeat.
-Jason