This is a transcript of the CI Life Podcast, Episode 32. If you’d rather listen to the podcast, click here.
Sean Campbell: Welcome to another episode of “CI Life.” In this episode, we’re going to tackle a connection between two topics, business plan development and competitive intelligence. Some of this discussion comes from a course that I teach at the Atkinson Management School, but it honestly struck me that I haven’t seen a lot of people talk about this, and I wanted to connect the dots between these two topics. And, Scott, you and I have talked about this before. In short, how can competitive intelligence help someone who’s developing a business plan?
Some of the areas that jump to mind immediately are looking at competitors, looking at industry forces, and adjacent industries, and obviously competitive intelligence as a discipline has lots of tools to bring to bear here.
Scott Swigart: Absolutely. I think the obvious thing is that you are not building a business plan into a vacuum. You’re not setting up shop on a brand new planet, in which your potential customers have never seen anything like what you’re going to do and no competition exists.
Sean: Right. I would almost say that if that is actually 100 percent true, you’re probably going to fail, [laughs] because unless you have a lot of marketing money, and you have a lot of staff behind you, to be that much of a first‑mover in a market is a really challenging position to be in. Unless of course your product is truly a wonder of the world that we will be talking about 20 years from now.
Scott: And even for things that are disruptive, they’re disruptive because they eliminate the need for part of a value chain. They’re not necessarily disruptive because they do something that nobody has ever imagined.
Sean: Let’s pause on that for a minute. Value chains, so where would we go if we were looking for how to analyze the value chain that supports an industry? There is of course somebody we can turn to that CI folks talk about a lot, right?
Scott: Oh yeah, the esteemed Michael Porter. Value chain is one framework among many that he brought to the discipline of CI that are still in wide use today, and for very good reason.
Sean: So what about looking at competitors? Because nearly the second you enter a market, competitors begin to react. Of course you don’t want competitors to move towards you, or to try to get rid of you, but at the same time, if you’re successful, the competitors will try to do that. One of the things you have to think about is, “How can I understand how my competitors might move in this space? How could I understand the actions they might take against me?” Here, we’ve got another tool. This is where something like Four Corners really comes into play.
Scott: Four Corners lets you put on your competitor’s clothing. When you do a Four Corners analysis, and you are forced to think through how they view the world and not how you view the world.
Sean: I think of Four Corners as one part history and one part psychology, and from time immemorial, if one general wanted to understand another one, you had to look at psychologically how they would react to the battlefield, as well as historically what have they done, what assets they have to bring to bear in a given situation.
If you just look at the history, you’re only looking at a piece of it, and if you over‑focus on the psychological aspects, you may forget how they’re actually constrained in the real world. You might start to invent strategies that they’re not really capable of executing on. It’s a two‑part process that you really have to focus on every time.
Then there’s this other issue. To borrow a quote, from Andrew Anker, a venture capitalist, “The problem comes when you think you’re in one market but you’re really in another.”
And there is a framework that can help when you’re facing this problem as well.
Scott: Yeah. I hope you’re thinking of Porter’s Five Forces as a framework…
Sean: Exactly. I’m not trying to play, “Fill in the blank and test my business partner on this podcast,” but we both use these tools all the time, and you’re exactly right. A Five Forces analysis asks you to consider questions such as, “What are the substitutes that are threatening my market?” Another question is, “How do my rivals typically react to each other?” And yes, it’s been around for a while, but if you’ve haven’t even thought of doing one on your industry, it might be something to think about.
Scott: For example, the airline industry basically retains no profit because of the forces that are at work, and Porter’s Five Forces explains why profit is so hard to come by. Just to take a few examples, airlines only have a couple of companies they can buy airplanes from, so those suppliers have a lot of power. Consumers also have a lot of information at their fingertips to compare rates. So if you’re going to enter a market like that, and you really don’t want to be just a “me too” with a two percent profit margin, you have to think about how you’re going to do things different. Of course, Southwest Airlines comes up because they just simply refuse to play by the same rules as everyone else.
Sean: We should close with a brief mention of macro frameworks that force you to look at longer-term forces. These help you to look at forces that might impact you over the long haul such as 5 or 10 years out. And the tools that come into play here are things like STEEP, PEST, and PESTEL analysis.
Scott: Political, economic, legal…
Sean: Societal, technology…
Scott: All of these things. What are our energy sources going to be in 10 years? Is it the same mix? etc.
Sean: And with that, we’re going to wrap things up, and let folks get back to work. Thanks for listening.
By Sean Campbell
By Scott Swigart
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