Competitive Intelligence Systems: Relationships to Strategic Orientation and Perceived Usefulness

The 1980s and 1990s have seen the formal introduction of competitive intelligence (CI) tools and processes in the context of the strategic planning/strategic decision-making functions of the firm. Increasing competition for stagnant or shrinking markets and the significant inroads of foreign competition have been a major impetus for practitioners to implement CI functions within their organizations. Gilad and Gilad (1988) note that monitoring the competitive environment is required in today's strategy development since a strategy requires an assumption about the behavior of competitors and their reactions to the firm's strategic moves. Thus, the comprehensive gathering of information about competitors and the critical analysis of such information has become recognized as a key part of the firm's strategic planning activity. At the same time as the perceived importance of CI has risen, there is a high degree of skepticism regarding the ability of a competitive intelligence system to effectively generate information pertinent to strategic decision making. A recent study of corporate competitor analysis systems found a significant gap between what was needed by the organization and what was being delivered by the company's competitive analysis system (Ghoshal and Westney, 1991). Other authors have pointed out that the significance of competitive intelligence is that it is actionable and that it is needed and used by decision makers (Weston, 1991; Herring, 1990; Herring, 1991; Gilad and Gilad, 1988). Given this premise, the purpose of this paper is to describe four basic types of competitive intelligence approaches and to consider whether the firm's perceived usefulness of these approaches is related to the strategic orientation of the firm. Several propositions concerning competitive intelligence effectiveness based on strategic orientation of the firm are developed. Finally, managerial and research implications are discussed. The materials used in the development of the paper include a synthesis of published conceptual and empirical research, and a field study of 74 U.S. based firms conducted by the authors. TYPOLOGY OF COMPETITIVE INTELLIGENCE Prescott and Smith (1987) make the case that central to the usefulness of competitive intelligence is the tailoring of the type of CI collected and the way in which it is organized to meet the requirements of the firm. They specifically propose a project based framework for the competitive analysis of specific problems, as opposed to an ongoing comprehensive approach for broader strategic problems. Thus, an issue is raised regarding the relationship between the value of competitive intelligence and the way in which competitive intelligence is used. Fundamental to this issue is the concept of organizational learning. Organizational learning refers to the organization's knowledge base and the process by which knowledge is acquired, distributed, interpreted and made useful. Sinkula (1994) notes that externally focused, market directed organizational learning results in the fundamental bases of competitive advantage. It is through market directed organizational learning activities that a firm develops the capability to adapt to market shifts and to formulate a strategy in response to changes in the environment. Competitive intelligence can be classified as an organizational learning system that addresses the capabilities and behavior of current and potential competitors in order to assist decision makers in making strategic decisions (Shrivastava and Grant, 1985). McKee et al. conclude that "because building market-adaptive capability into a firm is expensive, it seems reasonable that the level of this capability will vary, depending on the strategy of the firm" (1989: 22). The value of competitive intelligence can therefore be seen to vary according to the type of competitive intelligence gathered and the strategic orientation of the firm. Four broad categories or types of Competitive Intelligence are considered in this research. …