The Importance of Competitive Intelligence in Spanish Firms

Héctor Izquierdo Triana. Professor. IE Business School

17 October 2012

We have to improve our production model, but not from a cost perspective. We have to focus more on intangibles, namely information and knowledge.

There is a small test I like to do in class with my students. I hand out a selection of different objects, some European made while others have been manufactured in emerging countries, and I ask the students to say which are which, based on quality and design. Generally speaking they are unable to distinguish where the objects have been made. The cost of manufacturing, however, is very different depending on where each object has been produced.

What is certain is that the current crisis situation has taught us that we need to improve the production model and adapt it to cater for a more globalized market, swayed by media, competitive, where the intangibles of information and knowledge are slowly gaining more influence. We cannot compete in terms of cost, nor should we want to, which is why the  only way forward is to replace an unsustainable construction-fuelled engine with innovation and a capacity to compete through differentiation. Moreover, it is not only military or political risks that countries face. There are increasingly weightier players appearing on the scene, including multinationals, funding for organized crime, and the impact of fluctuations in national funding.  Meanwhile national security is shifting its focus to another area of risk, namely the economy.

To avoid confusion, we have to understand how business intelligence, the ability to value data pertaining to the company’s operations, is basically an internal vision of the organization based on the management of mass data using the appropriate software like Data or Business Warehouse. Competitive intelligence, on the other hand, is an external analysis of the environment in which the company operates, and where the quality of information is more important than the quantity.  Finally, economic intelligence is intelligence related to economic content prepared by the state as a form of control and protection of strategic information for economic agents, within the limits of state intervention in the free market.

One way to help businesses be more competitive is for them to incorporate competitive intelligence tools that systematically apply the intelligence cycle (direction, collection/planning, processing/analysis and dissemination), thereby transforming information into intelligence in such a way that decisionmaking is optimized. This is illustrated by the fact that the shares of companies that have used these techniques - Volvo, Shell, ABB, Hewlett Packard, Coca Cola, IBM, General Electric, Microsoft and Procter & Gamble – perform better than their reference index.

The areas of work usually observed are the business prospective, in order to get a handle on the environment (competitors, regulations, etc.), a risk analysis of the company and the country in which it operates, intrusive defense of intellectual capital, where economic counterintelligence as a means to protect information must also be integrated in the day-to-day running of the company, the building of influence (lobbying, public relations) and, subsequently, the improvement of decisionmaking processes. It must be pointed out that this systematic and structured process must always respect the law and professional ethics. Do not confuse it with industrial espionage, which, given how easy new technologies have made it to access information through open sources, in addition to being illegal, is no longer profitable.

The development of economic and competitive intelligence has already come far in the US, Japan, France, Germany, Israel, Finland or the UK. In Spain, however, it still needs to advance in the form of greater cooperation between the private and public sectors. Both multinationals and small and mid-sized firms must be involved, using different channels to convert data into improved knowledge, which in turn must serve as a source of lasting growth and competitive advantage that will be sustainable over time.

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