Organizing the Competitive Intelligence Function: A Benchmarking Study

Conway L. Lackman, Kenneth Saban, and John M. Lanasa

Duquesne University

EXECUTIVE SUMMARY

This article provides information on the current state of industry practice in the areas of competitive intelligence and market intelligence, and—building on a process model the authors previously developed—discusses how to take a closed-loop intelligence process model and evolve it into a living, breathing organization.
A benchmarking study of 16 companies was conducted to determine how the market-intelligence function is structured in these enterprises. The study’s purpose was to obtain information that can be used as input for organizing and staffing of a market-intelligence function. Implications of how to take a process model and change it into a workable, effective organization are discussed. © 2000 John Wiley & Sons, Inc

Introduction

Competitive intelligence (CI) is a strategic tool that enables senior management to improve its competitiveness
by identifying key driving forces and anticipate future
market directions (Kahaner, 1996). It is the process
through which information from multiple sources is
gathered, interpreted, and communicated. Competitive
intelligence can provide support for strategic decision making, early warnings of opportunities and threats,
competitor assessment and tracking, and advice on effective implementation. It is proactive, opportunistic, and
forward thinking (Montgomery & Weinberg, 1998).
Today, more companies are attempting to incorporate
some form of CI into their organization (Tresko, 1999).
With the competitive nature of the marketplace, companies are finding they have less room for mistakes. The Competitive Intelligence Review, Vol. 11(1) 17–27 (2000)

Lackman, Saban, and Lanasa

consequences of executing a business strategy without having actionable competitive intelligence are serious (Bernhardt, 1994). Despite the recognized significance of CI in an organization, little research has been done to demonstrate the process for effectively organizing the intelligence process (Rose, 1999). This article briefly describes a closed-loop model previously developed by the authors. It then presents a review of previous research and the results of a benchmarking study to answer questions regarding resources and organizational commitment in the development of a competitive intelligence function. Combining previous research studies and the benchmarking report, this study represents information about the organizational strategies of 569
companies.

Closed-Loop Model of Competitive Intelligence

The authors have developed a closed-loop model that incorporates various functions into a market intelligence system. The functions include: identify users, assess their intelligence needs, identify sources of information, gather information, interpret information, and communicate intelligence.
The closed-loop model is shown in Figure 1. Central limitations of these models include lack of benchmarks to analyze trends and reveal problems versus symptoms, i.e., low product-line margins (Bartholomew, 1999).

Identify Users

The market-intelligence process should begin and end with the users. There are two categories of users: strategic and tactical. Strategic users employ information to set and deploy long-range business strategy, while tactical users deploy information to enhance immediate decision making and programmming. Although the initial emphasis should be on strategic users, tactical users should become involved as the process becomes institutionalized.

Assess Intelligence Needs

This is a critical component that is sometimes overlooked and yet is the key to the success or failure of the intelligence function (Montgomery & Weinberg, 1998). There are certain guidelines a company should follow to assess the immediate and long-term intelligence needs of users. A company should establish a mechanism to continuously assess their needs. For example, a management process could be applied before and after the strategic planning process. Then, the needs must be prioritized and a future plan generated.

Identify Sources of Information

There are many diverse sources of information such as customers, competitors, associations, employees, and company records. From some of these sources, information is actively sought and for others it is accidentally found. Another critical stop is to properly align user needs with the information constantly flowing into the system from numerous sources. Many sources are housed within the organization itself. Sales reps, customer service agents, employees with relatives working for competitors, are all rich sources of information. Although CI is often thought of as corporate espionage, much of the competitive information is readily available in untapped public sources.

Gather Information

Companies gather information from four basic areas: secondary data, primary research, word-of-mouth communication, and management information systems (MIS) or information within the databases of an organization.

Interpret Information

The next phase includes the compilation of information from these various sources. Zaltman and Barabba (1993) compare it to a knowledge loom that weaves together various types of marketplace information.

Filter: A filtering process must sift through the large
volumes of data and selectively choose which information
is significant and to whom. In that sense, one can minimize information overload and information anxiety. This
process can be benefited by technology.
Intelligence Library: This model proposes a departmentalized library as a repository for intelligence and a focal point of the entire intelligence process. The library should also be at the heart of the secondary data collection. A retrieval system should be user-friendly to encourage utilization

Communicate Intelligence

The key to success of any CI system is the infusion of market intelligence into the institution’s strategic business process. Communication can take many forms, such as competitive profiles, executive summaries, electronic mail, briefings, and executive meetings. The form (personal or systematic) presented should be consistent
with the desires of users.
In the next sections, literature is reviewed and we discuss the results of a benchmarking study conducted to determine how to take this process model and develop it into a living, breathing organization that is an effective, integral part of the company.

Previous Research on Organizing the Intelligence Function

While there is overriding consensus supporting the value of CI, business executives are generally dissatisfied with the performance of their “intelligence systems” in place. After studying 104 corporations, Swaka, Francis, and Herring (1995) found that on a scale of 1–10, the average effectiveness rating was 5.9. To understand where this “ineffectiveness” originated, three studies were identified that provide a rich description of current practices by U.S. firms on organizing the CI function (Prescott & Bhardwaj 1995; Jaworski & Wee 1993; Prescott & Smith). These studies looked at various organizational issues regarding the placement of the CI function and the commitment of resources to the intelligence function. The Prescott and Bhardwaj study examined 390 different companies; the Jaworski and Wee study examined 138 companies including 22 telecommunication companies, 11 packaged food companies, and 95 pharmaceutical companies; and the Prescott and Smith study looked at 95 different companies

Organizational Location of CI Programs

The location of CI programs is important because it often influences reporting relationships, budgets, and the type of projects undertaken. It is clear from the studies that there is no single organizational structure used by the majority of firms. Table 1 shows that the most common organizational location of this function is either in the marketing or planning departments.

Human Resources Allocated to the Intelligence
Function

Table 2 shows the human resources allocated to the intelligence function as reported in the three studies. The data includes 593 observations, and indicates there is wide variance in the employees allocated to this function. The data shows the average number intelligence staff to be 5.6—which lowers to 3.8 after adjusting for the potentially skewed results from the packaged-food industry. As shown, CI staffs normally constitute professional-level employees

Financial Resources Allocated to the Intelligence
Analysis Function

The average budget reported for the CI function also shows significant variance—from a high of $651,000 to a low of $350,000—creating a variance of some $301,000 per study. While difficult to explain, the authors suggest that the variance may stem from a variety of factors such as industry type, goals assigned CI, location of CI function, etc. Table 3 shows the financial resources allocated to the intelligence analysis function.

Benchmarking

Benchmarking activities can generally be divided into two types. The first is the formal partnership-based approach that is presented in most books, journal articles, and conferences. In a partnership-based benchmarking study, the best-practice information is developed through a formal sharing relationship with a single bestpractice organization. A second approach to benchmarking can be used when the formal partnership-based approach is not

Organizing CI: A Benchmarking Study

appropriate. This second approach, sometimes referred to as preliminary or fast-track benchmarking, is used to obtain information about industry practices when costs or time constraints prevent partnership benchmarking, or when the goal is to obtain a broader set of best-practice information than can be obtained from a single or small number of partners. In this study, the fast-track benchmarking approach was used to obtain information on various practices involved in the organization of a market intelligence function.

Description of the Benchmarking Study

A benchmarking study was conducted to determine the organizational structure of the competitive intelligence function in various companies. Telephone interviews were conducted with market intelligence directors from 16 companies considered leading organizations in market intelligence, as recommended by experts in the field. These leaders were

Minnesota Mining and Manufacturing (3M)
Arizona Public Service Company
AT&T
Eastman Kodak
US West
Aluminum Company of America (Alcoa)
Bayer
Pittsburgh Plate Glass (PPG)
Allina Health Systems (Minneapolis)
Astra Merck
Blue Cross of Illinois, Iowa, Minnesota
Health Net (CA)
Health Partners (Minneapolis)

The purpose of the telephone survey was to address
the following questions:

How is the competitive intelligence function structured
within organizations?
What are the personnel requirements of CI?
How does the library fit organizationally into the intelligence process?
How is intelligence stored and communicated?
How is the CI function evaluated?
What is the philosophical approach to CI within the
organizations?

Details of the responses to these queries are presented
in the Appendix. A general summary of the responses
follows each key to the Appendix as denoted by Q.1.–
Q.17.

Summary of Results

Organization of Marketing Intelligence Function

There is no single organizational structure which is used
by the majority of firms. (Q.1.) Flat organizations were
the modal case—25%
The CI function is usually housed in the marketing/
marketing research (46%) or sales (14%) departments.
(Q.2.)
At most companies, the CI function relies on internal
sources. (Q.3.) Two-thirds source outside, less than 6
times per year.
When CI personnel had both market intelligence and
marketing research responsibilities, the marketing research
responsibilities took precedence (90%) and the intelligence
shifted to a secondary function. (Q.4.)
Those organizations with a more established CI function
had senior management playing a critical role (67%) in
the assessment of intelligence needs. (Q.5.)
When a company emphasized active participation among
all company personnel to gather intelligence, the CI function seemed to be more effective (40%). Many used some
form of multidivisional teams (70%) to gather the intelligence. Training programs, motivational programs, and
other incentives were used to capture word of
mouth.(Q.6., 6A.)
The number of employees staffed in the intelligence function varied depending on the size of the organization (the
larger the organization, the larger the CI staff) and the
length of time the intelligence function has been in place
(the newer the CI function, the larger the CIstaff).
(Q.7.)

At 3M, the corporate portion of CI is part of the marketing department. The Cl department does most of the
analysis, while everyone within the company does data
gathering and assists with the analysis. 3M believes internal people should do CI gathering to get more buy-in
and to get better use of the intelligence. 3M uses the
multi-division team approach. In these multi-division
intelligence teams, people from manufacturing, the lab,
R&D, marketing, sales, and a variety of functions are
included.

3M USES A MULTI-DIVISION TEAM APPROACH, IN
WHICH PEOPLE FROM MANUFACTURING, THE LAB,
R&D, MARKETING, SALES, AND A VARIETY OF
OTHER FUNCTIONS TAKE PART IN DATA
GATHERING AND ASSIST WITH ANALYSIS

Competitive intelligence is critical at 3M and the company undertakes numerous activities to nurture this culture. 3M trains its personnel through formal training seminars to gather information. They bring in outside experts to conduct the seminars. A recent two-day conference (which included 95 VPs) devoted half a day to CI. 3M has its own CI group, started 12 years ago, which has 1200 members. They invite nationally recognized experts to address Cl issues.

PPG

Competitive intelligence at Pittsburgh Plate Glass (PPG) is positioned in the marketing research function. It was originally placed in the controller’s department, but that didn’t work due to the lack of commitment and support from the chief decision-maker. It was recommended

that the chief intelligence officer (CIO) should report to the CEO. With unneeded channels in the communication process, there is the likelihood of distorted or lost information.

PPG formed six CI cells that were organized within business units and serve as information-gathering groups. This is a cross-section of disciplines headed by marketing which includes engineering, manufacturing, sales, etc. The CI cells meet quarterly at a minimum. The CIO is a part of each group and provides the big picture. The members of the CI cells contribute what is going on in each of their divisions. Part of the meeting is devoted to the CIO asking what are the needs of the group. Everyone at PPG is involved in intelligence. An example given was of a shipping supervisor calling with information.

At the introduction of the CI function to PPG, the CIO did a great deal of “selling” throughout the glass group. The CIO’s role was to present CI as interesting, sexy, and fun. The CI group provided AWARENESS presentations. These were to educate and to sell the value of the function at the start. In the first year, 20 to 30 seminars were held. (To get the group’s attention and spark a level of interest, the CIO wore a trench coat and hat and played the theme from Pink Panther ashe walked in.) Counter intelligence training was also
provided

Personnel / Staffing

Education levels were high for CI personnel; a master’s degree was required by most firms (80%). (Q.9)
Seasoned veterans were best suited for the director position. (Q.10
Those surveyed suggested individual characteristics needed for success in CI (in rank order of importance) included: being well-connected in the industry, having integrity, being creative, having imagination, expressing curiosity, having good networking skills, and possessing good communication skills. (Q.11)

The director of CI at 3M believes that the stage of development should determine the number of people in the marketing intelligence function. He believes that the earlier development stages needed more individuals to get the MI function running. In CI at 3M, they claim that there is no game plan, no blueprint. Intuition and good people skills are needed

Kodak

Those individuals who do competitive intelligence need different mindsets than those who do traditional marketing research. Although Kodak hasn’t quite pinned down what it takes to be good at CI, they look for experience in the company, including a strong sense of curiosity and a lively interest in things that are not internal. “We look externally in the future rather than internally backwards.” They want courageous people who will stand up for things. And they require imagination, tenacity, and networking skills.

ALTHOUGH KODAK HASN’T QUITE PINNED DOWN
WHAT IT TAKES TO BE GOOD AT CI, THEY LOOK
FOR EXPERIENCE IN THE COMPANY, INCLUDING A
STRONG SENSE OF CURIOSITY AND A LIVELY
INTEREST IN THINGS THAT ARE NOT INTERNAL.

PPG

According to PPG, the CIO should be a seasoned veteran who knows people throughout all facets of the industry. The CIO should be well-connected. Those who work in the CI function must have a reputation for integrity. The CIO needs excellent communication skills, clever interrogation skills, and to know how to get more than is given.

Role of the Library

Although the placement of the library varies from company to company, 70% had it housed within the marketing function. (Q.12)
90% of directors believed the library should be within the marketing function. (Q.12A)
Much of the CI literature (90%) suggests that the library would be a strategic asset for the CI function. (Q.13)
96% of leading intelligence companies such as Kodak are looking to add the library to the CI function. (Q.14)

Storage and Communication of Intelligence

Electronic storage was frequently used (80% often used) and allowed for easy access by many within the firm. (Q.15)
80% of health care organizations provided monthly newsletters with competitive information. (Q.16)
94% considered technology as a critical component in the success of CI. The results suggest technology drives CI.
(Q.17)

Kodak
Kodak stores its information in the form of business reports. They have a standard format, in which reports are
numbered and entered into the business report INFO
system. Anyone in the Business Research organization
can access these reports. Kodak has been storing reports
in this manner for 20 years. In the competitive area,
Kodak has COINS, which stands for Competitive Information Systems. This is a collection of news clippings
and published information about competitors that any
employee can access.

HealthNet
Competitive intelligence comes from three sources at
HealthNet: public information, regulatory files, and
tracking of individual rates and benefits. A total of 127
data elements are tracked to determine what’s happening
with management, ratings, and financials of competitors.
Demographic components will soon be added. They
want to be able to cross-reference price with demographics and with D&B information to determine what’s
happening in a segment of a market, what they’re buying, and what’s growing.

US West
US West’s CI practitioners keep intelligence they have
created in a variety of formats but primarily in document form. They publish a regular newsletter and are
developing a dissemination approach that will rely on
visual and textual information. One example of the visual approach is that they are establishing a “war room.”
In this highly visual environment they are planning displays to show competitor alliances, mergers and acquisitions, and the progress being made by various customers
and competitors in their marketplaces.
US West’s CI staffers have also developed report
templates that enable them to boil down their communications into a two-page format. They have developed
several processes that they use to involve people at all
levels of the organization in the intelligence process:

War Games: Using simulation software senior executives play the roles of competitors in various marketplace
scenarios. This enables senior executives to more accurately recognize competitor information that they require.
Quarterbacking: US West turns conference attendants
into an information-gathering activity. Under the direction of a “quarterback,” conference attendees are given
specific intelligence-gathering targets. They are debriefed
upon return by the quarterback and other Cl staff.
800 Number: An 800 number has been established so
that people throughout the organization can call in with
information whenever they hear it.
Senior Management Briefing: They are trying to initiate a monthly 45-minute briefing of the executive staff to
disseminate recent competitor intelligence. They hope that
discussions following these briefings will better elicit the
intelligence needs of the executive staff.

Corporate Approach to Competitive Intelligence

3M
In assessing senior management needs at 3M, CI does
not ask senior management “What intelligence do you
need?” but asks, “What are you worried about?” “What
decisions are you going to be making in the next few
years?” According to 3M, the focus is on SUPPLY, not
demand. The emphasis is on how management will use
the intelligence. Intelligence must be focused on the
executive decision. They believe that CI is still a relatively new field. 3M views the ’90s as the Decade of
Knowledge. Companies must do everything to bring in
knowledge. Companies must be learning organizations.
“You must out-learn your competition to survive.”

Alcoa
At Alcoa, there is an evaluation plan that determines
what information is working and what is useful. This
occurs on a continuous basis. Competitive intelligence
interacts with senior management in many ways. There
are “scoping meetings” and “kick-off meetings.” At
these meetings, senior management is kept abreast of
what’s going on.

Allina Heath Systems
The implementation of the CI function has started out
rather slowly at Allina Health Systems. Other projects
deemed more important have delayed the implementation. To many at Allina, being a non-profit organization
which serves the community does not allow for competitive analysis to be a top priority.

AT&T
There is enormous awareness of CI by everyone at
AT&T. It is part of the corporate culture designed into

the organization top-down. It has been in place for a
number of years. This mentality is reinforced over and
over through their reward system. Intelligence is a big
part of the vision statement. What drives the intelligence
focus is the customer focus. Making the customer the
critical component of everything they do is what drives
everyone at AT&T to know as much as they can about
that consumer.

US West
The intelligence group at US West is undergoing a
transition from a project-orientation to one based on
more systematic ongoing assessment. They are also shifting their focus to become more oriented toward the
senior executive team, while they would previously take
on intelligence needs of anyone throughout the organization they now regard senior management as their primary client. They are trying to better understand what
intelligence-gathering projects are most actionable. They
are making a formal effort to strengthen the link between the creation of intelligence and corporate decision and action.

THE INTELLIGENCE GROUP AT US WEST IS
UNDERGOING A TRANSITION FROM A PROJECT
ORIENTATION TO ONE BASED ON MORE
SYSTEMATIC ONGOING ASSESSMENT. THEY ARE
ALSO SHIFTING THEIR FOCUS TO BECOME MORE
ORIENTED TOWARD THE SENIOR EXECUTIVE
TEAM.

Practical CI Implications
Based on the research presented, herein, three recommendations are appropriate to any organization preparing to build a CI function:

Recommendation #1: CI Development
To insure that your CI function has the staying power to weather pending and longterm challenges, it is important to:

1. Select a reporting relationship where leadership embraces the core values of CI and will support it during its formative
years
2. Attract and hire top-flight professionals who are highly motivated and committed to CI.
3. Obtain the required capital and operating budgets to support the CI function over the long haul.

Recommendation #2: CI Structure
The process of CI requires three basic building blocks. They can be combined in a couple of ways. The three
building blocks are:

Research—This group will have responsibility for
gathering the four major classes of information described
in the closed-loop model (Fig. 1). This group will also
perform a significant amount of data filtering. Functions performed by this group will be task- and projectoriented. Members will be presented with prescribed
information objectives and will carry out the activities
necessary to bring appropriate data streams to the intelligence process.
Intelligence Library—This unit will have the responsibility for building and maintaining the corporate intelligence repository. This database will integrate both paper
and digital media. The library will also be responsible
for exploring new information management technologies,
which may be useful in gathering and disseminating
information throughout the organization.
Strategic Marketing Intelligence—This unit will be
responsible for planning and analytical aspects of the
intelligence process. It will filter, synthesize, and interpret information that is developed by the research unit.
This group will provide the expertise in content areas
that will permit the translation of external data into
market intelligence

Recommendation #3: CI System Selection
The third recommendation involves the selection of a
closed-loop intelligence system such as described in Figure 1. It is important for practitioners not to equate
popular CI tools—e.g., data-mining, data warehousing,
and information software products—as functional “intelligence systems.”

Summary and Conclusion
This article examines the functions of the competitive
intelligence process within 16 leading intelligence companies. The building blocks proposed are the foundation
of constructing an effective closed-loop intelligence system within an organization. A company committed to
CI needs to lay the foundation, build the infrastructure,
and leverage market intelligence on an ongoing basis. A
user orientation, total corporate commitment beginning
with the CEO, and effective distribution channels are
key elements to the success of any CI function.

References
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Bernhardt, D. (1994). I want it fast, factual, actionable.
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Caudran, S. (1994, October 3). I Spy, You Spy. Industry
Week, p. 3540.
Gilad, B. (1991, May/June). Intelligence system: Model for
corporate chiefs. Journal of Business Strategy, 2025.
Jaworski, B., & Wee, L.C. (1993). Competitive intelligence
and bottomline performance. Competitive Intelligence Review, 3(4), 2327.
Kahaner, L. (1996). Competitive intelligence. New York:
Touchstone Books.
Montgomery, D., & Weinberg C. (1998). Toward strategic
intelligence systems. Marketing Management, 6(4), 44–52.
Prescott, J., & Bhardwaj B. (1995). Competitive intelligence
practices: A survey. Competitive Intelligence Review, 6(2),
414.
Prescott, J., & Smith, D.C. (1989). The largest survey of leading edge competitor intelligence managers. The Planning Review 17(3), 613.
Rose, R. (1999). CI effect: Not luxury, its survival. Computing Canada, 25(5), 21.
Sawaka, K.A., Francis, D.B., Herring. J.P. (1995). Evaluating
competitive intelligence systems: How does your company
rate. Competitive Intelligence Review, 6(4), 22–25.
Tresko, J. (1999). Leveraging the ERP backbone. Industry
Week, 248(3), 25.

Related Reading
Competitive/market intelligence takes varied forms; offers key lessons (2000, January–March). Competitive
Intelligence Magazine, 3(1), 7–8.

About the Authors
Conway L. Lackman, associate professor of marketing at Duquesne University, specializes in marketing research, industrial
marketing, and new product development. He has over 25
years experience in marketing management. He holds a Ph.D.
from the University of Cincinnati. He can be contacted by
e-mail: lackman@duq2.cc.duq.eduKenneth Saban, assistant professor of marketing at Duquesne
University, specializes in new product development and marketing strategy. He has over 15 years experience in marketing
management. He holds a Ph.D. from the University of Pittsburgh. He can be contacted by e-mail:saban@duq2.cc.duq.edu
John M. Lanasa, associate professor of marketing at Duquesne
University, specializes in sales management. He has over 15
years experience in sales management. He holds a Ph.D. from the
University of Pittsburgh. He can be contacted by e-mail:
lanasa@duq2.cc.duq.edu
The authors can also be contacted at the Graduate School of
Business Administration, Duquesne University, Department of
Marketing, Rockwell Hall, Pittsburgh, PA 15282-0107, USA.

Appendix
Summary of Survey
Q. 1. Please indicate which organizational structure below best fits your company

N %

a. Structural functional 7 15
b. Matrix organization 5 10
c. Flat organization 25 50
d. Other 13 25

Q. 2. What department is “primarily responsible” for monitoring the flow of information, evaluating its relevance, and analyzing the data. Check one.

46% 23 Marketing 6% 3 Finance 4% 2 R&D
24% 12 Sales 6% 3 Planning 14% 7 Other

Q. 3. Over the last 5 years, how often has your business employed the services of an outside market research firm to conduct tailored customer or competitive research. Check one

67% 31 0–5 24% 11 6–10 ?% 5 11–15
times times times

0 16–20 7% 3 .21

times times

Q. 4. When do you have dual accountability between CI and marketing research? Indicate which takes precedence.

Marketing research 45 90

CI 5 10

Q. 5. Indicate:
(A) How well-established is your CI function and; (B) What level of management plays a critical role in same

Number: SR Middle Lower % SR Middle %

Well-established 25 5 0 67 25 0

Somewhat 10 10 0 28 50 0

Not 2 5 3 5 25 100

Q. 6. How (A) broad and (B) effective is CI participation among employers?