Competitive Intelligence, Watch and KM for the Purchasing Function

K-Buy Newsletter , 02/01

CI results from the following observation: in order to develop and maintain a competitive advantage, one has to know, and then understand the conditions and the rules of the competition. The influence of the strengths and weaknesses and the supports of everyone within a specific marketplace must also be understood.

Regarding CI, the reason why information exists is to be used in decision-making and action.

Definition

The CIA describes CI as "the process by which raw information is acquired, gathered, transmitted, evaluated, analyzed and made available as finished intelligence for policymakers to use in decision-making and action". Moreover CI is to be undertaken with regard to ethical and legal considerations.

Competitive Intelligence: For whom and for what?

Although the notion is complex, CI aims to be useful to everyone since it allows for the management of various situations and the achievement of various objectives:

• For organizations in strategic niches, CI allows for the preservation of advantages towards potential competitors.
• For medium organizations that set the goal to become major players, CI provides tools that allow learning from the "best in the class".
• CI helps organizations to stay aware of the latest technical evolutions and to develop new products.
• CI allows decision-making while minimizing the risks.

The different steps of Competitive Intelligence

There are six steps that constitute the Cycle of Competitive Intelligence:

• Ask good questions and identify the needs: 90% of the information an organization needs to know can be obtained by legal available means.
• Identify information sources (papers, databases, patents, Websites, etc.)
• Approach information sources, each source may require a specific approach.
• Validate, compare and assess the information. One has to create the intelligence in order to package the information in a format appropriate to the decision-maker.
• Disseminate; share the information with the whole organization in order to improve common learning (information flow is important and not information storage).
• Continuously assess the information so that it is accurate and relevant. Implement a virtuous cycle of information.

CI must concern everyone from the implementation stage to the utilization of the information gathered.

The barriers to Competitive Intelligence

Organizations face two kinds of risks: those of the market and those of the administration. Organizations tend to isolate and protect themselves, which in fact is the contradictory of CI, which requires openness.

Corporate culture acts also acts as a barrier: information kept is too often a symbol of individual power. The implementation of CI comes up against the rigid nature of hierarchical structures.

Competitive Intelligence & Purchasing

Purchasers are largely involved in CI since they form one of the major interfaces of a company with the outside world.

Thus, purchasers participate in CI at two levels:

• As information collectors: Purchases are an important entrance of information flows within an organization. Therefore the purchasing department must be able to efficiently process the information collected in order to reconstitute it under a format useful to other departments: R&D, finance, sales, etc.
• As CI's users: A buyer has to understand their markets:
  • Available products (the products that are used and also eventual substitution products).
  • The various quality and security standards.
  • The main suppliers.
  • Their main competitors (potential source of competition with suppliers).

Buyers have a permanent need for information and therefore often practice CI without knowing it.

By structuring their processes thanks to CI, the purchasing function may save a lot of time and steadily become more efficient. We will see the contribution of this process more in depth throughout this study of Watch and Knowledge Management.

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