You don't have to be a spy to know what your competitors' next moves might be.

By Thomas R. Schori, Ph.D., and Michael L. Garee, Principals,  Millennium Marketing Research, 808 E. Ironwood, Normal, IL 61761-5239. 

Being a spy might sound pretty exciting to those of us who grew up watching James Bond movies. And, while being a spy for the good of one's country can certainly be viewed as a patriotic undertaking, being an industrial spy is both immoral and illegal. So, obviously, industrial espionage is something we would neither practice nor condone under any circumstances. Fortunately, though, you don’t have to be the industrial equivalent of "007" to learn what next moves your competitors are likely to take. Indeed, you need only do what intelligence services everywhere do¾ simply collect and analyze publicly available information.

Now, we know, to the skeptics among us, this simply sounds too good to be true. But it's true nonetheless. One of us was first introduced to doing such a competitive analysis years ago while associated with one of the major tobacco companies. Just before the intelligence assessment team was to make a presentation to top management as to what they concluded various competing organizations were likely to do within the next year or so, the company's president said something like this: "I can't imagine how you would have any idea whatsoever what our competitors are likely to do."

Still, we were able to determine what our competitors were likely to do. As a matter of fact, even though some of the predictions presented that day seemed almost unbelievable even to the intelligence assessment team, during the next year or so, the majority of that which we had "predicted" did indeed come to pass!

How do you go about doing such a competitive assessment? There are several key steps involved.

• Pick a team of individuals (an intelligence assessment team) who are good thinkers, and are knowledgeable about your organization, its competitors, and your industry.

• Collect publicly available information¾ what's been written about your company, your competitors and your industry, paying special attention to things such as what their brands are doing, what their share is doing, their financial well-being, and their management. (Of course, you’ll want to collect the same sort of information about your own business.) That such information is readily available is attested to by the fact that recently we performed an on-line literature review of the soft-drink industry and found that 57 articles had been written about the industry just within the last two years.

• Have the intelligence assessment team evaluate the information as a group, openly and candidly discussing and debating what they think it means.

• Have the intelligence assessment team identify actions which the information suggests various competitors might reasonably be expected to take in reaction to or in anticipation of existing circumstances. This should be done, by the way, one competitor at a time, and should be done for your own organization as well. In doing this for your own organization, use only the same publicly available information which was used for competitors. Of course, you'll find it to be particularly challenging not to use "insider" information for your own organization.

• Next, the intelligence assessment team needs to establish criteria, for each competitor, on which to judge the value of that competitor’s potential actions, as well as the relative importance of the various criteria. For example, as illustrated in the table below, the team might decide that, for Competitor X, the criteria for judging whether a given action has merit should be four fold: share and profits, both short- and long-term. Furthermore, for that competitor, the team may determine that a short-term share should be given a weight of, say, .40, short-term profits a .20, long-term share a .15 and long-term profits a .25. At this point, the team will have created, for each competitor, a matrix which looks something like this, though with many more possible actions:

• Then, the team's task is to assess collectively the impact that each action can be expected to have on the criteria. We suggest that each team member individually judge the impact each action would have on each of the criteria by assigning values of zero, low, medium, or high. Thus, if a given individual believed that Action 1 would have a high impact on short-term share, he or she would assign a "high." After the team members have made their judgments individually, the team should collectively discuss the "whys" of those judgments. For example, if the six team members individually assigned values of "low," "low," "medium," "zero," "medium," and "high" for a particular criterion, you might want the individuals who gave the "zero" and "high" ratings to explain their reasons for having done so, then, collectively, determine the "true" score it should have been assigned and then assign that score.

• Once the team has made the final judgments for all the potential actions that were identified for Competitor X, the above matrix would be filled with some combination of "zeros," "lows," "mediums" and "highs," representing the team’s collective assessment of the impact the potential actions would have on the criteria. According to the psychological literature, the judgments individuals make using "zero," "low," "medium," and "high" are exponential in nature, rather than linear. Therefore, in order to evaluate the overall merit the team saw in the various potential actions identified, a value of "1" should be substituted for the "zeros," "2" for the "lows," "4" for the "mediums," and "8" for the "highs."

• All that remains now is to apply the weights and add across rows. For example, suppose that the elements for Action 1 had collective ratings of 2, 4, 8, and 4. Summing that up, Action 1 would have an overall rating of 2 x .40 plus 4 x .20 plus 8 x .15 plus 4 x .25, i.e., 3.80, out of a possible total of 8.

For the sake of this illustration, assume that the team's overall assessment of the five potential actions for Competitor X looked like this:

Given these assessments of Competitor X's potential actions, the intelligence assessment team would advise management that they believe the most likely courses of action for Competitor X to take are Action 2, Action 5, or both. Of course, they'd also let management know of the other possible actions they had considered for Competitor X, along with the likelihood of their taking those actions as well.

The moral of this story is that you don’t have to be a spy to have some reasonably good expectations about what competitors are likely to be doing in the future. Instead, you simply must gather publicly available information about competitors, assess that information, and make logical inferences about likely actions from that assessment. If done thoroughly, the chances are that you will have identified those actions your competitors are likely to take soon.