Want Business Success? Pick Up Some Intelligence!
By Jon Kenton
Making decisions is a fact of life. We make many every day—what to wear, eat, or watch on TV. Business-decision making is one of the key elements necessary to build and manage a successful business. Although these decisions tackle more heavyweight topics, they nonetheless must follow the same process as making everyday decisions. We must assemble all available facts, assess the situation, develop alternatives, and then choose one of them.
The ability to consistently make good and timely decisions is based significantly on the availability and accuracy of the data and information you have—a solid, up-to-date fact base. Business and competitive intelligence are two of the primary strands required by most businesses. Whether you have the staff and resources to have a permanent function or outsource to specialists as required, the benefits from gathering intelligence cannot be underestimated.
Business intelligence
Business intelligence is all about understanding as much as possible about the markets you focus on and the business and economic environments in which they operate. Before starting a new business or expanding into new markets, the creation of a business and marketing plan is necessary. A vital part of such a plan—business intelligence—helps to paint the opportunity picture. It also enables the construction of a model that can evaluate business outcomes based on potential changes in the environment. There are two main elements: target markets and environment.
Target Markets
Target markets are the definition, size, and growth of the market your products will serve. For them to be most useful, they should be divided into segments in order to identify which parts of them may be most attractive to your business. Take the automobile market, for example. It is subdivided into categories—compact, midsize, SUV, truck, sport, and so on, and there are other attributes such as economy and luxury. Each category or segment has its own specific attributes, for instance, 2WD/4WD, petrol/diesel/hybrid, manual/auto. For each combination, it is possible to identify how many units will be sold in a given period. Multiplying this by a price factor leads to the market size in dollars. No matter your business type, you can identify divisions and segments relevant to you, and will be able to associate unit and dollar volume estimates.
Environment
Every business is affected by environmental factors that it cannot necessarily control. These factors may positively or negatively have an impact on potential revenues and profits. The key here is to identify which elements will affect your business and how they interact with one another, as well as with internal factors that you can control. For example, if demand is less, should you lower prices to stimulate sales?
The environmental factors will be different for every business, and some will be more obvious than others. In the following examples, consider your environment and write down the factors that affect your business. Keeping a watch on them will let you plan better.
Interest rates Lower rates mean cheaper lending and more cash in your customers’ pockets, as well as cheaper borrowing costs for your business.
Exchange rates Foreign exchange rates can lead to a more or less healthy tourist trade, which is important for businesses such as hotels, restaurants or anybody catering to visitors.
Weather Rain illuminates leaks and is therefore good for the roofing business; not so good for golf courses. Extreme heat is great for AC companies and ice cream and cold drink sales.
Regulations Think of how tax changes might affect your business.
One of the most crucial environmental factors is the existence and activity of one’s competition. This leads us to our next topic.
Competitive intelligence
Simply put, competitive intelligence focuses on identifying and tracking all the other companies that offer the same or similar products and services as do you. When considering the competition, it is important to not ignore the “similar” category, as these represent valid alternatives, even if you don’t think so, that a potential customer of yours may choose. It is the information gathered from competitive intelligence that allows you to make decisions about positioning your product in the eyes of your customers to highlight why they should buy your product or service rather than one of the many others.
Does your product have distinctive features? Maybe it’s made from 100 percent recycled material (attractive to the “green conscious”) or is significantly faster, smaller, or lighter (all the better for portable items) than your closest competitor. If so, highlight these differences in your marketing materials and efforts, and make sure your potential customers can see the benefits and know they won’t be able to get the same anywhere else.
There are many questions that competitive intelligence aims to answer. Develop your own list. Here are a few to get you started:
• How many competitors are there in the same geographical area as you?
• What products do they have?
• How do their products and services compare to yours in such areas as features, prices, and quality?
• Does you market have seasonal dynamic pricing? If so when do your competitors change their prices, and how much do they change them?
When it comes to the bottom line, revenue and profits are generated based on a sound strategy and plan, and the many decisions that are made along the way. Good decisions mean good business. If you want to make good decisions, you need all the facts, so go out and collect some intelligence!