Stop Flying Blind - A book by Michael Mace

4. How to organize a Competitive Analysis team

The three perspectives a company needs in order to map the future are competitive analysis, market research, and advanced technology analysis. This week we continue our deep dive on competitive analysis done right.

A competitive analysis group can be as small as one person or as large as about eight people (a manager, six analysts, and a lab manager if you’re in an industry that makes testable products). If the team gets larger than about eight people, it will be too big to sit in a room together and have an informal conversation, cutting off the give and take debate that generates a lot of the group’s insights.

You want to get a mix of product-lovers and business analysts. The product lovers are enthusiasts for your product or service who live to play with competitive offerings. They’ll do a lot of your competitive testing, and will prowl the world looking for new competing products.1 The business analysts will be more interested in company dynamics than technology. They’ll love financials and org charts, and will spend a lot of time soaking up the latest competitive gossip with their contacts.

It’s important to have a mix of these people because you need to know your competitors both as businesses and as products. Then when a competitive announcement happens (say, a new product is released), you can quickly assess what it means both in business and product terms.

Some people can do both business and product analysis, but usually they’re inclined toward one or the other.

Companies working in an industry that creates tangible products should have some sort of competitive testing lab. It’s run by a lab manager who’s usually a more junior product type, someone who’s interested in products but isn’t experienced enough yet to be a full-time analyst. This person needs to be good with details. You may end up collecting a lot of competitive products, and the lab manager keeps all of them inventoried and ready for testing. The inventory is especially important if you’re testing products that are small enough to be carried away by a person. If you don’t keep track of these devices, a lot of them will disappear. The problem’s not usually that your own group’s employees will steal things, but the lab is inevitably a target for anyone in the building who’s looking steal.

Your lab doesn’t need to be huge (when working in the handheld industry, where the devices are very small, I was fine with a single work bench in a development lab). The lab must be lockable, though, so you can do extended testing without the need to put everything away at the end of the day. Our competitive lab at Apple had close to a thousand square feet, and was a nice place to bring the execs to give them a quick education on a large variety of competitive products. But if you do that you have to keep the lab neat, which is a pain in the neck.

The lab manager can also work as a junior analyst on testing and other technical tasks.

Product testing is an essential part of the role. Most of the literature on competitive intelligence focuses on financial and structural analysis rather than product testing. I think that’s understandable – if you’re an academic writing a book on competitive theory, you look for factors that can be quantified and charted. But in the real world, competitive testing isalso an incredibly powerful analytical tool.

The amount of hands-on testing you can do varies by industry, of course. For example, I’m not sure how someone in a pharmaceuticals company would fully test the competition’s products. Taking a few pills home to try out over the weekend doesn’t seem like a good idea. (I’m very interested in feedback from people in industries like those – please post a comment) But I want to emphasize the importance of getting hands-on experience with the competition whenever you can.

Testing is important not just because you learn how you stack up competitively, but because it helps you get inside the mind of your competitor. Like people, most companies have distinct personalities that make them act in predictable ways. A small company usually carries the personality of its founder. A larger company will usually carry some residue of the founder’s personality, plus others that have been grafted into it. If the company has been built through mergers, it may have several competing personalities inside – in other words, it may be schizophrenic.

A company’s products say a lot about its personality. Ask yourself why they choose the features they do, and which ones they pay the most attention to. How much time do they put into packaging? How easy is it to understand the instructions? What are they assuming about their customers? Are they designing for their own engineers (a common flaw), or for the end user? If you do the right sort of testing, you’ll get a window into how your competitor thinks and what motivates them.

For example, Microsoft’s products give an endless essay on its thinking and motivations. The company’s tendency to slavishly cover any competitor’s product with its own version is one obvious example – Microsoft generally doesn’t pioneer, it co-opts. A subtler example is the company’s general inattention to small ease of use and fit and finish issues in its software. That speaks to a failure to fully understand and empathize with end users. You can’t make something truly easy to use unless you know how your users are thinking.

I once worked with a software company that makes enterprise software – programs that are used by large companies to manage things like payroll and customer databases. The competitive analysts there told me they can’t do hands-on testing because the competitive products cost millions of dollars and there’s no way to get a competitor to install one of them in your lab. I think that’s short-sighted. You should get creative – find one of their customers who’s willing to give you some hands-on time with the product, or send one of your analysts to a training class in the product.

The more you understand about a competitive company’s personality, the better you can explain its current motivations and predict its future actions.

Encourage interaction and discussion. The best competitive analysis teams work together as a single unit, feeding off one-another’s ideas, developing shared insights, and challenging each others’ conclusions. You should do everything you can to encourage this.

The analysts should brainstorm as a group at least once a week, rather than just working in isolation. An informal meeting over lunch at the end of the week works well. You should talk about the week’s events, and you can also set a specific topic to discuss each week (maybe a particular competitor, or a report that someone’s working on). The group should also get together whenever there’s an especially significant competitive event or announcement. Have the team assemble that day and compare thoughts on what happened, why the competition did it, what will happen next, and most importantly, what it means for your company. Smash the product analyst perspective against the business analyst perspective and see how they contrast. Chances are there will be a healthy debate about the implications, and you’ll end up with much more insightful analysis than you’d get with a single person reporting on his or her own.

I like to see a competitive team seated in cubicles or other open seating where they’ll talk a lot. It can also be very helpful to get the whole group on an instant messaging system. Some people dislike all this communication, finding it distracting. It’s normal to have a mix of more and less introverted people in any group, but an analyst who wants to work completely alone is a problem. The group is a lot smarter than any individual, and all the members of the team have to be willing to engage in a lot of discussion.

I’ve known companies that had competitive analysts scattered in various locations, communicating by e-mail and phone. This is not desirable – it hinders the development of a shared perspective that is the group’s most useful output. People who are isolated geographically tend to go heads-down on individual projects most of the time. You’ll get a group of individuals rather than the gestalt you need.

Expose them to diverse information. You never know which tidbits of information will be relevant to an analyst, so you need to make sure they get a lot of data from different sources — trade shows, the web, trips, product testing, etc. The information discovered by your market researchers is another gold mine, and one of the main reasons for teaming market research with competitive analysis is so the analysts get exposed to a lot of customer data.

What to look for in a competitive analyst

Let’s start with a definition. A good competitive analyst must:

1. Understand the competitive environment,
2. Be able to identify objectively where your company stands relative to the competition, and
3. Have good intuition.

Item 1, understanding the competitive environment, means it’s impossible for someone with no experience in your industry to be a good competitive analyst. They have to know the companies and the products before they can make a meaningful contribution.

The second item, identifying objectively where you stand, is an uncommon skill. There will be plenty of people with opinions about where you stand, but their opinions will generally be colored by what they’ve heard from others. People inside your company will generally be a little over-optimistic about your prospects, if the marketing team is doing a decent job. People outside your company will generally parrot whatever the consensus is from the analysts and press. It’s a rare person who can filter out all those messages and make up their own mind about what’s happening.

The final item, intuition, is the hardest to find. Anyone can figure out what’s happening if given enough information. For example, if I gave you Microsoft’s official marketing plan for the next year, you could predict its upcoming announcements with amazing accuracy. But a good competitive analyst will predict future developments and problems long before they become obvious to the average person. They’ll hear a minor news report and suddenly be convinced that a major market change is about to happen, or that a competitor is about to change strategy. And they’ll turn out to be right.

Usually they can’t completely explain how they reached these conclusions. “It’s obvious,” they’ll say, with more than a little exasperation. But when you ask why it’s obvious, they often can’t give you details. I think what they’re doing is picking up small, seemingly unconnected tidbits of information, and finding connections between them subconsciously. But I can’t prove that. All I know is, there are people who can do it, and they make the best competitive analysts.

A competitive analyst is born, not trained. Although you can use training to make a good analyst better, all the training in the world can’t turn a non-analyst into an analyst. This is the most common mistake I see companies make regarding competitive analysts. They think they can make any bright employee into an analyst just by giving them an assignment and maybe having them read a book or two. What’s worse, they often have their most junior employees start with competitive analysis, to help them “learn the industry.” Think about it, if someone’s just learning the industry, how in the world are they going to generate any real insights for you?

A lot of book authors have unintentionally facilitated this syndrome by creating how-to books on competitive intelligence. They describe the various charts and numerical analysis techniques you can use to understand a competitor, and imply that these are tools anyone can use. The tools are nice, but giving me a chisel won’t let me carve Michelangelo’s David. I’d also need the talent.

It’s hard to find a good analyst. Unlike market researchers or engineers, there’s no university training I know of for competitive analysts. And you can’t limit your search to people who held competitive intelligence roles at other companies, since they’re often trained in information-gathering rather than analysis. To find a good analyst you usually have to go dig them out of the woodwork. Fortunately, natural competitive analysts are usually misfits. If you know what to look for, they tend to stand out.

How to spot a good competitive analyst

Technolust. This is the first symptom I look for in a competitive analyst. I don’t know who invented that term, but I heard it first at Apple. Technolust means an insatiable desire to touch, use, and play with technology products.

Take someone with electronics technolust to Akihabara, the massive electronics shopping district in Tokyo, and they’ll be lost in wonder contemplating a display of a hundred different electric razors, each with a slightly different set of features. Someone with technolust actually enjoys attending trade shows, and they hate it when companies there display new products inside acrylic cases, where they can’t touch them.

These people aren’t necessarily engineers; in fact, the best engineers are often too single-minded to be good analysts. What you want in an analyst is an intense but short attention span — they flit from one product to the next, constantly seduced by the new, always looking for that next techno-high.

I think you can find people with the equivalent of technolust in most industries. During the tech bubble in 2000, I was part of a delegation that made a pilgrimage to Detroit to work on joint venture possibilities (this was back in the days when Palm had a higher market capitalization than Ford, and everyone wanted to work with us). After an evening meeting with a very serious gray-haired executive, our group was headed back to the airport in a van. Suddenly a sports car rocketed out of the dark, cut us off, and spun out in front of our van. Once we started breathing again, we found out that the car’s driver was that same executive, attempting unsuccessfully to show off the car’s new ultra-stable suspension.

But the most vivid example I can remember was an exterminator who had a huge case of pesticide-lust. My parents’ small business had leased an office that turned out to have a serious cockroach problem. The exterminator cackled as he went through the building, demonstrating how he could use squirts of pesticide to drive the roaches into killing zones. He called to the roaches as he hunted them. That’s what you want — people who have a basic love for your industry’s products or services. That enthusiasm will give them the stamina needed to research the competition’s products in detail. They won’t see it as a chore, they’ll actually enjoy it.

For example, competitive analysis of technology products involves a huge amount of hands-on testing, and people with technolust are the best ones to do it. They’ll finish faster (they may even take work home for the weekend), and more importantly they will learn a lot more, because they’ll actually use all the features, just to see what happens. They’ll take joy in finding ways to make the competition’s products break.

Remember I said above that there are two types of competitive analyst — those who focus on products, and those who focus on business issues. Business analysts obviously don’t have technolust, but they usually have a similar enthusiasm for the dynamics of the business. They’ll be boiling over with gossip about the management at various companies, or fascinated by the new distribution system that a competitor just put in place. The obsessive interest is what you want.

Technolust is pretty easy to test for in an interview. Just ask the candidate what products they use, and what they’d change in those products. Ask them what products they’d like to have, and watch their level of enthusiasm. If you make products that are small enough to keep in the room during an interview, leave a couple of new ones on the table. If the candidate’s eyes start drifting over to the products instead of looking at you, it’s a good sign.

If you’re looking for a business analyst, ask them what they think of a recent event in the industry, or a recent reorganization at a competitor. If they start gushing industry gossip, you have a winner.

Anger is the second symptom of a good analyst. I don’t mean scream-at-the-boss, bring-a-shotgun-to-work anger, but instead a deep-seated slow burn of intense frustration because your company’s not doing the right thing to win. Anger is a symptom that the analyst is thinking hard about the marketplace, and has the energy needed to lobby effectively.

You need to be sure, though, that the anger hasn’t soured into contempt. The ideal analyst feels his or her company is flawed but fixable, and will be passionate about influencing others to do the right thing. An analyst who gets too frustrated will lose faith in the ability of the company to win, and will start believing that others in the company are idiots. That dismissiveness of coworkers rapidly destroys an analyst’s influence.

It’s very easy to test for anger. Just ask them what they think the company should be doing, and stand back.

Good thinking skills. The best competitive analysts are information sponges, soaked to capacity with information they’ve picked up. They question other people’s assumptions about the industry, even if those people are prominent. And they won’t accept the consensus about anything until they have proved it to themselves.

To test this, get the candidate talking about what’s happening in the industry and what they think will happen next. The more original ideas you hear, the better. If they just parrot back the consensus from the press and analysts, challenge them about it — ask them how they reached those conclusions, and what evidence they have.

What you’re looking for is not what the candidate thinks, since that will change once they’re in your company and have more information. But you want to understand how they form their ideas. Do they question the industry consensus? Are they good at forming conclusions from the information they do have? Can they use that information to say what your company should do about a situation?

I try to quiz the candidate on a subject that I know more about than they do. For example, I’ll ask what they think of a competitor that I’ve studied extensively, or what they’d change about the company I work for. If they come up with insightful answers even though they have less inside information than me, that’s a very good sign of not just strong thinking, but also intuition. If they give weak answers, or just repeat the industry consensus, you should move on.

For example, I once asked a competitive analyst candidate for his view of a particular competitor who happened to be weak in the US but very strong in Europe. “They’re weird and they’re going to die,” he said, which is pretty much the standard opinion in the US. He didn’t get a second interview.2

On the other hand, I once had a candidate lecture me in depth on how my company was positioning itself completely wrong in the industry. He suggested a couple of new strategies that we were already thinking about internally. In most job interviews, you don’t get points for criticizing the hiring company, but in this case he showed exactly the sort of insight I was looking for.

Other characteristics. In addition to having technolust, anger, and thinking skills, an ideal competitive analyst will be a good writer and talker, so they can communicate their findings to the rest of the company. That’s easy to test — just listen to them talk, and get a writing sample.


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Next week: The recruitment and hiring process.

  1. I’m using the term “product” pretty loosely here. Most of what I’m saying applies equally well to companies that create services. [↩ back]
  2. The best answer in this case would have been an enthusiastic rant on what we could learn from the competitor’s success in Europe. But a perfectly acceptable answer would have been, “you know, I haven’t been able to track them much from here.” As long as the candidate had good knowledge in other areas, I’d be satisfied. What’s not acceptable is a candidate who doesn’t know the limits of his or her knowledge, or who mistakes superficial opinions for analysis. If you hire that person, they’ll inevitably feed bad information to your team and the company. [↩ back]

One Response to “4. How to organize a Competitive Analysis team”

  1. Adam Li said on August 8th, 2009 at 7:40 pm

    This chapter actually sets a very good gateway into how to recruit qualified CI analysts. In terms of the “Anger” part, I would probably hesitate before I challenge the company seniors. This might be because of the culture I am from(China). However, this characteristics is aligned with the famous” Constructive Conflict”.

    Adam Li

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