Analytical methodologies will help you assess gathered information more effectively or more quickly, or help you get to the core pieces of information necessary to address the topic at hand, but they will not spit out answers to these questions. Methodologies are catalysts toward judgment; they do not achieve insight on their own. Here are four analytical methodologies that I believe every analyst must know to perform competitive intelligence well.
1. COMPETING HYPOTHESES ANALYSIS
The Competing Hypotheses Analysis (CHA) is a basic methodology that can help make sense of a dizzying accumulation of industry, competitor, or other external information. Intelligence analysis follows the inductive scientific approach, demanding that you evaluate data and information based on preconceived explanations for the reasons behind competitive activity. Though it’s oftentimes uncomfortable for analysts to envision explanations to competitive issues before they’ve begun the research process, inductive reasoning is a more efficient method than blindly gathering data and information and then trying to figure out what it all means.
Competitive intelligence (CI) problems are likely to have several possible outcomes, so CHA asks that we develop multiple hypotheses — simple explanations, not complex scenarios— that can explain the goings on in the competitive market.
The CI team develops half a dozen hypotheses that provide explanations about how various competitors will act. Then demands that all hypotheses get equal and simultaneous treatment by letting each compete for relevance given the data and information that has been collected.
Employing this technique allows you to illustrate logically why your chosen explanation makes more sense than the one management may prefer.
Furthermore, if the hypotheses you’ve generated truly are competing, it would be impossible for a single piece of information to support them all. CHA lets you look for discrepancies or deficiencies in your research process and sources, and determine whether additional data confirmation is necessary.
Generating hypotheses ahead of intensive data collection and evaluating them by using this technique is rigor that serves analysts well. It is often hard enough to compel management to pay attention to and use intelligence analysis, not to mention that analysts are constantly under pressure to prove their judgments and conclusions. CHA is a way to provide the credibility and strength behind forward-looking judgments to compel management to act on your findings.
2. PORTER’S FIVE FORCES ANALYSIS
Porter’s Five Forces Analysis has been applied principally in strategic planning to help managers understand likely future directions of industries and the drivers that influence industry participants. But the technique has also found a home among CI analysts as a means to examine the competitive intensity of an industry and the relative strengths, weaknesses, and leverage of key players. While strategic planners might use Five Forces to look holistically at industries and their companies’ place within industry structures, we tend to use it to first look at industry players individually, and then in the aggregate to identify competitive pressures impacting our company.
There are four primary advantages to using this analysis. Five Forces:
Someone once told me that to successfully deal with management, you need to do four things:
- Allows both analysts and management to isolate the areas of an industry where there is the greatest potential for change, as well as identify areas where a company – you or your competitors – may have little or no leverage.
- Provides management with a focused list of strategic options for improving your company’s competitive standing.
- Helps identify which players may be the weakest, or most disposed toward alliances, partnerships, or acquisitions. It also identifies those players in the best position to acquire another player. This helps you anticipate acquisitive behavior among your direct competitors, and also assesses the prospects for forward or backward integration within an industry.
- Helps management determine the attractiveness of an industry in a relatively short time. It can also help chart shifts in product or business unit strategy
3. SCENARIO ANALYSIS
Perhaps one of the most versatile analytic tools out there, I have seen companies use scenario analysis to:
- Assess likely future competitor strategies.
- Evaluate the impact of emerging technologies.
- Forecast overall future industry health.
Scenarios are wonderful for making sense out of complex, fast moving, and otherwise murky industry and competitive developments, and they help identify possible outcomes for emerging competitive situations. But few competitive analysts use scenarios for decision-making and contingency planning.
Specifically, scenario analysis helps CI analysts develop a set of plausible descriptions of likely future competitor and industry outcomes that emerge from the competitive forces starting to present themselves today. The output of the method is a set of distinct stories. These stories capture how a competitor, technology, regulator, supplier, or other industry force or participant can merge to change industry dynamics in ways that have obvious implications for your own organization.
The process of developing these stories relies on identifying, analyzing, and describing the behavior of a set of industry drivers – the variables that, depending on how they behave, determine future outcomes. Instead of simply presenting these four outcomes to management and letting them sort out what to do, scenario analysis provides the analyst with the ability to catalyze management debate around appropriate competitive strategy, given all plausible outcomes and develop a plan to address the possible scenarios in isolation and combined.
4. WIN-LOSS ANALYSIS
Of all the techniques covered, win-loss analysis has strayed farthest from its analytic purpose, becoming synonymous with win-loss interviewing. Win-loss analysis is not about the process of interviewing customers, sales representatives, or others involved in business development as a means of gathering market intelligence. It is a means to compare your company’s win themes with the actual customer, competitor, and industry drivers of purchase decisions.
When done properly, win-loss analysis reveals strengths and weaknesses in your company’s selling strategy and tactics, based on influences applied by customers, competitors, regulators, and other external players. If you find your organization consistently beaten by one competitor, or even better, consistently successful with one customer, win-loss analysis can help explain why, and help identify and capture best practices associated with a string of your own sales victories on certain accounts.
Strategically, win-loss analysis can also help prepare for a major product or market expansion by identifying the win themes likely to be associated with that new market or product, and can contribute to discussions around proper product mix and product evolutions or successions.
Win-loss analysis is most effective when you are trying to correct a perceived deficiency in your sales process, and are prepared to take corrective action. It is not an on-going process, but rather ends when corrective actions have been identified and put into action, not when a series of customer interviews have been completed.
Conclusion
Analysts must realize that these analytical techniques are not a crutch upon which to rely as a substitute for your own sound judgment and opinion. These methodologies are valuable tools to help organize your thoughts so you can arrive at compelling conclusions.
About the Author
Ken Sawka is a recognized competitive intelligence and strategy development expert, and published author. He has worked as an intelligence practitioner and consultant to Fortune 500 companies. Prior to joining Outward Insights, Sawka directed the pricing and competitive analysis and strategy and operations groups at Deloitte Consulting. Earlier, he led the CI consulting practices at Fuld & Company, Inc. and The Futures Group, and was an intelligence analyst with the U.S. CIA. A long-time SCIP member, he served on its Board from 1999—2002, and is a member of the Association for Strategic Planning. He can be reached at ksawka@outwardinsights.com.
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