Sault Ste. Marie Innovation Centre Competitive Market Intelligence Workshop

1. Sault Ste. Marie Innovation CentreCompetitive Market Intelligence Workshop June 18, 2008

2. Speaker David Lithwick is a partner at Market Alert Limited (www.marketalert.ca ), a Toronto based competitive intelligence consultancy. He has 25 years experience in CI, including completing over 800 studies. David has written, in conjunction with the Marketing Research Intelligence Association, a manual on competitive and sales intelligence techniques. He also co-authors a monthly CI column in VUE Magazine. Prior to joining Market Alert, David worked as a CI analyst for a major bank and as an account manager in advertising, servicing SC Johnson, Wendy’s and Pfizer.

3. Let’s Begin

4. Definition Active CI - gather intelligence on your competitor to learn about their capabilities, strategies and intentions. Defensive CI - prevent competitors from learning about your marketing initiatives and your employees from leaking sensitive information.

5. What CI Is • Early warning of threats and opportunities. • Approximations and best views of the market and competition. It is not a peek at the rival's financial books. • Means many things. A research scientist sees it as a heads-up on a competitor's new R&D initiatives. A salesperson considers it insight on how their company should bid against another firm in order to win a contract. • Short and long-term. Can use intelligence in immediate decisions, such as how to price a product or use the same data to decide on long-term market positioning. • (Source http://www.fuld.com)

6. What CI Is Not • Crystal ball. There is no such thing as a true forecasting tool. Intelligence will give you good approximations of reality. • Database search. Databases do not replace human beings who need to make decisions by examining the data and applying their experience, analytical tools and intuition. • 20th century invention. (Nathan Rothschild, cornered the market on British securities by receiving early warning of Napoleon's defeat at Waterloo.) • News story. Too broad and not timely enough for managers concerned with specific competitors and competitive issues.

7. Example 1 A pulp and paper company needed to know if a new competitor was going to start competing aggressively on costs. Their CI supplier tracked down from the internet a profile of the rival firm's CEO, which said that to save $, the CEO takes buses versus a limo to visit their firm's plants. This was a tip that the competitor will compete aggressively on costs.

8. Example 2 A bank hired a CI firm to see whether any competitor will preempt them in being the first to offer internet banking. The CI supplier subsequently discovered that ING Direct was planning to enter the market shortly . The supplier tipped off a major newspaper who interviewed ING Direct, got confirmation and then published an article on the front page. As a result, the bank fast tracked their launch before ING was able to enter the market.

9. Example 3 Getting information on a privately held start up venture proved to be very challenging for a hi tech company, until they discovered Deja News (www.Dejanews.com ) which allowed them to tap into some online discussion groups. One participant disclosed that the start up had posted 8 job openings on one Usenet group. That posting was a road map to the start up’s development strategy.

10. Best Practices • Competitors are regularly monitored versus conducting CI in reaction to a threat • Formal set of ethical guidelines in place for collecting CI • CI is tracked to see: • how many people are using it • how they are using the findings • what their level of satisfaction is with the CI • what impact CI has on the company’s overall business performance

11. Worst Practices • Rushing to set up your CI program versus actively collecting CI based on a real threat • CI is managed by someone who is too busy, too junior or not interested • CI is assigned too many tasks that end up confusing what the deliverables should be and not meeting key needs • Overly simplistic view of how easy it is to collect and analyse CI • Concentrating only on traditional competitors

12. Non Traditional Threat - Research in Motion When RIM first introduced the BlackBerry, the major telecoms did not consider RIM to be a threat. The original Black Berryhad limited capabilities and RIM itself seemed to be on the edge of financial ruin. RIM’s technology and financial situation both improved dramatically. Now the telecoms are playing catch up and missed an opportunity to truly compete.

13. Your Turn If you were the chief information officer at Algoma and concerned of having too much sensitive information on your website, where would you look to cut back: • Corporate Mission? • Corporate Governance? • Facilities (e.g. steel making, cold mill, etc.)? • Career Opportunities? • News media (e.g. press releases, executive bios)? • Investors (e.g. financialreports, quarterly conference calls)? • Customer News? • Business Partners? • Supplier News?

14. Ethics

15. CI vs. Espionage CI sources information within the public domain. Espionage implies illegal activities and is an infrequent activity. Think about it; corporations do not want to find themselves in court, nor do they want to upset shareholders. For the most part, you will find spies in espionage novels, not in the executive suite.

16. Trade Off The greater the sensitivity of information you seek, the higher the risk of being unethical Open source - readily available info (e.g. websites)  Open proprietary - obtained through concerted efforts (employee interviews, databases, etc.)  Closed proprietary - info obtained through “back channels” (e.g. friend of a friend works for your competitor)  Strictly Classified - information obtained covertly

17. Ethical • Attending a conference where the competitor is speaking • Becoming a shareholder of your competitor • Paying industry experts an honorarium for their opinions about your competitor

18. Unethical • Misrepresenting yourself • Accepting competitor information or documents from someone with a possible hostile intent (e.g. disgruntled ex-employee) • Interviewing competitor employees for a position that doesn’t exist at your company • Hacking into your competitor’s website (Please see handout - “Is CI Ethical?”)

19. Your Turn On a business flight, you are sitting beside a sales manager of your main competitor. Is it unethical to let him talk about his company's marketing initiatives without telling him who you work for?

20. Planning Your First Study

21. CI Brief

22. CI Brief (Cont’d)

23. Work in Progress

24. Sources

25. Sources Competitor Call centres, investor relations, sales, suppliers to your competitor, competitors of your competitor Third Parties Customers, journalists, stock analysts, government, associations Alliances Suppliers, companies who co-market your product Secondary Annual reports, brochures, market research, press releases, newsletters, industry reports (Please see hand out – “ Helpful Internet Sources”)

26. Sources Cont’d Internal • Accounting – interpret competitor financial data • Customer Service - daily contact with customers who hear information about competitors • HR - helpful at reconstructing competitor org charts • Legal - interpret competitor patent data and possible trademark infringements • Sales - in contact with competitor reps

27. Tips • Don’t ask too many people to help you; you may get overwhelmed with conflicting information. • Never restrict your search. Not only can one source provide several important types of data, but multiple sources should be cross-checked to generate data on the same point. • Corroborate findings by speaking to 3 different sources. • Be wary of relying too much on sales reps, as they frequently will provide CI to fit their agenda and/or fail to separate their opinions and conjecture from fact.

28. Example- Sourcing Internal CI • You work in sales support for Bombardier Aerospace. A key competitor, Embraer, recently hired a lobby firm to help procure Chinese government contracts. • Which 3 departments at Bombardier would you contact to learn more about the demand by the Chinese for small jet planes?

29. Findings Purchasing More companies are using lobbyists to help break into the Chinese market, where the China Aviation Industry Corporation is the key central buying unit. Sales Embraer just completed a tour of their new small jet plane, Embraer 170, to 5 Chinese cities last week. Product Specialists China will need another 950 jet planes of 30 to 120 seats in next 5 years. (Right now they have about 600 small jet planes. This represents a market worth of $16 billion US.)

30. Trade Show CI Conference Speakers As someone who has paid to attend the conference, you are entitled to ask questions, even if they are your competitors. Competitor Booths Instruct colleagues before visiting your competitor ‘s booth on what questions to ask. People Visiting Your Booth Put together a survey and hire a researcher or consultant to intercept buyers, brokers, etc. for their insights.

31. Analysis

32. Stages • Incorporation - read all materials, two or more times. • Incubation - assemble the facts in various ways so that a logical picture emerges. • Enlightenment - after studying the data and reflecting on what you need to get answered, the real meaning (and thus a solution) becomes clear. • Validation - draw specific conclusions and then test these conclusions against facts.

33. Tip Avoid falling into: • “Group Think” - pressure to play it safe and compromise vs. stressing diversity or even dissension • “Rosy Scenario” - seeing events through a mental filter that blocks out “inconvenient facts” • “Sherwin Williams Mentality” - provide analysis on every aspect of the topic in order to predict every possible action by a competitor

34. Data Cell Screening Maps out cells to obtain a visual on which gaps to fill. Steps • Calculate the total # of possible cells to be filled. • Ask yourself: Of those categories listed, which are the ones to focus on? Is there a key product per competitor to concentrate on? • Narrow the cells to 5 or 6 tofocus your investigation. • Construct a matrix.

35. Example – Northern Credit Union You work for Northern Credit Union and have been asked to collect copies of competitor customer statements. Which statements would make most sense for you to assess?

36. Data Verification Corroborates data from multiple sources E.g. estimating the daily volume of cell phones sold by a competitor who recently launched a 1-800 order centre • Press release - 196,000 sold in 5 weeks or 5,600/day • Call centre reps - sell 1,750 /day in Ont. Assuming Ont. accounts for 40% of all sales, 1,750/40% = 4,375/day • Your staff - each call center rep sells an average of 50/day and there are 90 call center reps. 50 x 90 = 4,500/day Conclusion: 4,375 - 5,600 per day

37. Blind Spot Analysis Uncovers flaws in your competitor’s decision-making process that are caused by bias and misinterpretation such as Winners Curse - It is common at auctions to pay too much. Similarly in business acquisitions or geographic expansion, some competitors falsely assumed that the long term advantage will outweigh cost. Escalating Commitment - when something does not meet expectations, but professional pride or fear of accountability prevents your competitor from admitting that it is a mistake. For example, instead of cutting losses, allocation is escalated in the hope that this will solve the problem.

38. Ratio Analysis Used to better understand your competitor’s strengths and weaknesses 4 types: "liquidity”, "leverage”, "turnover” and "profitability." (Please see handout – “Using Ratio Analysis to Better Understand Your Competitor’s Strengths and Weaknesses”)

39. Predicting Techniques • Historical Review - see what the competitor did previously in a similar situation • Global Strategy - find out what the competitor is doing in other countries and apply this to your own situation • Veto - see if the competitor has any obvious restrictions (e.g. plant size, regulatory, manpower) that automatically rules them out as a threat • War Gaming -simulate a business situation, where each team represents a competitor. Helps pinpoint most likely attack and defensive positions of your key competitors

40. Reporting Your Findings

41. Tips • Assign a level of confidence to findings • Promote CI positively (e.g. limit any mention to military and avoid joking about being a spy.) • Clarify whether the information is fact or assumption • Avoid floating comparison such as “a 60% increase” • Weed out misinformation

42. Example • You work for a pharma company. A competitor is rumoured to be introducing a new drug that will compete with your company’s “blockbuster”.

43. 1 - Record Interviews

44. 2 – Set Up Summary Table

45. 3 – List Observations • Competitor X has already submitted an application for notice of compliance with Health Canada. • Approval is likely to be in the next 3 to 9 months, with launch occurring soon after. • Key selling message will focus on the new product being a safe alternative and equally effective. • The key target audience are dermatologists. • Approximately 150 specialty reps and 300 GP reps will be detailing the generic drug.

46. 4 – Assess Threat Level The threat that Competitor X poses is high: • already filed with Health Canada • expect approval as early as a few months from now • will directly position their product against ours • are committing a large sales force to support their product

47. Templates • Eliminate the need to start from scratch each time you write a new report . • Ensure continuity when more than one person is submitting findings.

48. Example – Product Profile Scan

49. CI Software

50. Pros • Saves time by creating a structure for quickly accessing, analyzing and sharing competitive data. • Good for storing, centralizing and monitoring large volumes of information. • Helps avoid information overload by filtering data from a number of sources.