Earlier this week, the article Competitive Intelligence: The New Supply Chain Edge hit the on-line edition of the Supply Chain Management Review. Almost immediately, Jason did a complementary post over on Spend Matters on Building Supply Chain “Competitive” Intelligence.
However, consistent with the original article, I think Jason missed a key point in his post. Jason quotes the article, which defines competitive intelligence as the art of acquiring, presenting, analyzing, and refining knowledge about the competition’s supply chains and then reaching actionable conclusions about improving your own, when he points out the following questions that indicate types of competitive intelligence worth considering:
- Would the availability of metrics for your competitors’ supply chains help improve your own supply chain?
- Would it be helpful to know if your competitors’ supply chains were relatively better (cheaper, faster, more cost efficient, and so forth) than yours?
- If they are better, what actions should you take in response?
- Are your competitors automating parts of their supply chains to reduce costs and gain speed?
These questions are a good start, but they simply echo the sentiment of the article that states the basis for good competitive intelligence is a consistent probing and analysis of the competitive environment using primary and secondary data. However, as far as I’m concerned this is not the basis of a competitive analysis. It’s part of a good competitive analysis, but not the basis.
The true basis of a competitive analysis is understanding how well you are doing, compared to how well you could be doing. This will require studying the market, to get some general perspectives on how well you could be doing based upon the performance of your competition, but, more importantly, it will require studying your processes and identifying areas for, and means of, improvement.
If you do not know how much you are spending on a certain raw material, then it doesn’t matter how much you think your competitor pays. Competitively, you are doing poorly and even without knowing how much your competitor pays, you know you need more visibility (and a visibility tool). If you’re producing 1,000 units a day, but six sigma efficiency experts think you should be producing 1,200 units a day, then you know you probably need to shore up your processes even without knowing how many units your competitor produces with similar resources. Moreover, although your competitors might have some good ideas, they are not the only sources. Third party consultants, analysts, industry experts, and even your own people might have the ideas you need to improve. Just take the time to listen. Furthermore, a market comparison will only tell you whether or not your competitor appears to be doing better than you given the same resources. Thus, even if the analysis were to indicate that you are doing better than a competitor, it cannot indicate whether or not you could be doing better still.
As the article states, analysis, conclusions, feedback – and then ongoing refinement of those conclusions in the face of new information – are the key actions driving this process, but this process goes beyond just an analysis of your competition, it also includes an analysis of your operations. It’s a good article, and worth checking out, but just remember that although a competitive analysis will definitely point out weaknesses, it will not always provide you with the solutions.