How to Gather Competitive Research

Establish the Strategic Problem

Goal: Define your question before you begin the search for answers.

Developing a competitive strategy begins with a rigorous apples-to-apples evaluation of how your organization performs relative to one or more of your rivals. Guesswork and gut feelings aren't rigorous; meaningful comparisons are possible only when you assess your own and other firms on the basis of quantitative data and thorough research.

Doing this legwork enables you to clearly define the challenges your firm faces: Perhaps a rival is entering a foreign market first, or has found a way to lower prices through more efficient production. Perhaps your competitor's new management team has streamlined a sloppy organization, leaving the company with reams of excess cash to spend on acquisitions. Having a handle on this kind of information makes it possible to redeploy your firm's money, time, manpower, or R&D efforts to maximum effect.

To avoid analysis paralysis, it's essential to define what competitive questions you want to ask and what kind of research data you will need to formulate meaningful insights. Generally speaking, most strategic problems boil down to one or more of the following questions:

1. What products and services do you and your rivals offer, and what are their comparative benefits?
2. What companies might launch offerings that are similar to yours?
3. How significant are the resources (marketing budget, R&D budget, spin-off, or upgrade plans) your rival plans to deploy?
4. How much does it cost you and your competitor to produce comparable products? Does one of you enjoy a cost advantage?
5. Where do you and your rival sell products, and to which target audiences?
6. How do your sales perform for different customer segments?
7. What products does your rival have in the pipeline, and how will they be marketed?
8. How is your rival's company organized? How well are operations performing?
9. What are your rivals' sales channels (store, mail order, web)? What is their sales mix, and will it change?
10. Is your rival considering a joint venture or strategic partnership?

Know Thyself

Goal: Compile relevant information about your company to provide an objective basis for comparison with others.

The quest for competitive intelligence begins under your own roof. To assess your competitor's strategic position, you first need to get a handle on your own business situation. The critical information you need — your company's financial data, marketing plans, R&D roadmaps, product plans, distribution processes, supplier relationships, productivity figures, and so on — is probably kicking around somewhere inside your building. But you'll to have to ask for it, and you'll probably need help to get it.

If you're not in charge of the business, enlist a C-level executive, president, vice-president, or division head to facilitate access to and cooperation from relevant information-gatekeepers.

Just getting a top dog's calling card and list of names isn't enough, however. Once you get an introduction, meet with these gatekeepers face-to-face to emphasize that their participation is crucial. You want to collect the needed data, of course, but you also want context. If sales are up, is that because the new product finally gained momentum after marketing launched an ad campaign, or is it because prices were cut and a rival discontinued a competing product?

Mine your internal sources for information about the competition. Jack in marketing may know Jill in marketing over at your rival, Acme Widgets. He may also know that she was hired specifically for her ability to market to seniors, suggesting that Acme Widgets intends to concentrate on that demographic. Likewise, your factory foreman may have heard union gossip about how Acme Widgets is shaking things up with new production methods. Such little tidbits can point to big insights as you pursue your research.

Follow Your Competitor's Paper Trail

Goal: Use publicly available data to compile a detailed picture of your target.

Competitive research is all about doing the legwork. Lots of it. According to Wendy Schmidt — who leads the Forensic & Dispute Services practice at Deloitte Financial Advisory Service in New York — three-quarters of the information you'll need in order to research a U.S.-based company is available publicly, in the form of regulatory filings or legal documents.

For example, publicly traded companies must make quarterly financial and other filings (such as legal versions of "insider" stock sales) to the United States Securities and Exchange Commission, and filings are viewable via the EDGAR database, which offers free and paid search options.

Wondering about a competitor's next move? Check the company's annual filing with the SEC (called a 10-K) to see if it alludes to future plans in an "Outlook" section. From there, examine additional SEC filings to learn about plans to sell shares or borrow money in order to finance future activities. Look for a "Use of Proceeds" section that explains if the company has used money to expand and grow, repay debt, or to shore up general operations — in other words, whether the company is stocking up cash for specific goals.

Private companies have fewer disclosure requirements, so they're harder to research. As a start, financial reports on private companies are viewable on services such as Hoover's or Dun & Bradstreet. Hoover's offers a free service that discloses headquarters locations, names of principals, head counts, and revenues for larger companies. Finding this same data on smaller firms may require a paid subscription.

The important thing to remember is that every company generates a paper trail: tax filings, legal disputes, bankruptcy proceedings, reports from watchdog agencies, patent and trademark filings, and so on. Richard Combs, a competitive intelligence analyst who runs Combs Inc. in Chicago, cites as an example a company that disclosed financials during a court case with the Environmental Protection Agency. In doing so, the company's otherwise-secret information became part of a public legal record.

Paying a visit to the town where a competitor is headquartered, or where it has significant operations, may also be worthwhile. Local government offices often contain a treasure trove of public documents, such as building blueprints from the planning department or staffing details from the tax assessor. In smaller towns, local newspapers don't always post their articles online or in databases like Nexis, but many keep a clipping file on local companies to facilitate their own research. If you ask nicely, they may let you see it.

If all else fails, there's always the eyeball test. Former Bain consultant Jared Heyman recalls a client who wanted to know how many people worked at a rival's factory. Public documents were of little help, so Heyman positioned a member of his team on public property near the factory's entrance. The researcher counted how many cars passed through the gates in the morning to develop an estimate of how many people worked there.

Trying to research a foreign rival? Schmidt warns that publicly available data is scarce outside the United States. Overseas, she says, about 80 percent of intelligence will come from interviews or private sources, and only 20 percent will be found in public records. That's the bad news. The good news is that if the foreign company has substantial American operations, you may have some luck by following its U.S. paper trail.

These suggestions are just a framework to get you started; where you look for answers will be determined by what kinds of questions you ask. Competitive research demands resourcefulness and creativity, but as you proceed, be mindful of the ethics and legalities of your sleuthing work. For more about what practices to avoid, see "Thou Shalt Not Steal Thy Competitor's Secrets."

Talk to People

Goal: Fill in gaps in your knowledge by conducting live interviews.

Tracking down a vexing piece of information about a competitor can be as simple as discussing the industry with a contact at a trade show. It's all about knowing what you don't know, asking a lot of questions, and paying close attention. There are many environments where people exchange information freely: Conferences, trade associations, industry chat boards, alumni networking events, and social networking sites are all venues where people maintain their professional identities and boundaries but also trade information for one reason or another.

It helps to learn some basic interviewing skills. To be sure, getting a source to talk is harder for a competitive intelligence researcher than it is for a journalist; reporters can fall back on their affiliation with a publication, and their sources have a general sense of how their words will be presented. Competitive intelligence researchers have to speak more generally, and a certain amount of (truthful) ambiguity is often required. This can yield surprising results: It's amazing how much people will tell you when you simply explain that you are "conducting industry research."

Consider what motivates the person you're talking to — and whether you can help them without compromising your own goals. An MBA job-hunter who thinks you have contacts may be happy to share details about his conversations with rival companies — and in so doing reveal a few secrets. A parts supplier who wants to learn the names of your company's key decision-makers may talk about his experiences selling to your competitor — giving you details about your rival's purchasing and procurement patterns.

Here's how you might mine a trade show contact for information about a rival:

1. Identify yourself in general terms: "Hi, I'm John. I work in telecom like you."
2. Make the source comfortable and establish respect for their expertise: "I understand you've been a supplier to Acme Widget for more than 20 years. You must be happy with them!"
3. Ask friendly and flattering questions to build rapport: "So, you're in sales now. But isn't that competitive? How did you work your way up?"
4. Start with simple questions, and couch them as assumptions or rumors that the source can correct or amend: "I hear Acme Widget is offering more service in rural communities. Is that what you've heard, too?"
5. Begin to dig deeper: "It seems like there's not that much money to be made there. I wonder why Acme Widget. is getting into that market?"
6. Don't follow a script. Let the source lead or change the subject. Don't let on that you're only concerned with one type of information.
7. Get the source's card — and more leads: "Thanks for your time. I had no idea how firms like yours work. Do you know anyone else in the biz?"
8. Remember: Keep it ethical. Never lie about your identity.

Connect the Dots

Goal: Compile your data and do the analysis to create a useful picture of your competitor's activities.

In some ways, competitive intelligence research is like detective work. It requires patience, thoroughness, resourcefulness, a keen eye for detail, and a little bit of luck. But competitive intelligence is different from police work in one very essential way: As a researcher, you don't need to prove your case "beyond a reasonable doubt." So don't get flustered if some pieces of competitive information resist your best attempts to track them down.

Likewise, don't let the thrill of the chase obscure your true objective: Developing an informed picture of your rivals' business activities. It's tempting to wait until you have every last scrap of information at your fingertips before you begin your strategic analysis, but if a hole in your data simply can't be filled, it's time to move on.

Competitive strategy is ultimately about similarities and differences: What do you have in common with your competitors, where do you differ, and how do you maximize your strengths at the expense of your rivals' weaknesses? Figuring this out requires a rigorous analytical framework in which every competitor is compared side by side, on the basis of the same characteristics.

The specifics of those characteristics will vary based on the question at hand: Are you looking at production costs? Distribution strategies? Product development roadmaps? Acquisition plans? The information needed to evaluate these questions is different in each case, but the important thing is that the data sets remain consistent throughout the analysis.

If you determine how much it costs your company to produce a widget, for example, you should also estimate how much it costs your rivals at Acme Widget to produce a similar item, as well as estimating an industry average so you can determine how you both stack up against the rest of the playing field. Informed guesswork may be required at times, but as long as your estimates are properly sourced and disclosed, and the analysis as a whole is logical and well-documented, occasional gaps shouldn't diminish the value of your insights. Competitive researchers seldom have 20-20 vision into the activities of their rivals, but that's no barrier to being able to figure out what's really going on.