Competitive intelligence is the process of gathering and analyzing data about competitors, market trends, and customer behavior to inform strategic business decisions and gain a competitive advantage. It helps companies anticipate market shifts, identify emerging opportunities, and make data-driven decisions to support long-term growth.

Imagine that you are planning on opening a coffee shop in a trendy neighborhood. To set yourself up for success, you’ll want to know everything you can about the market.

You find a few successful coffee shops in similar areas and begin gathering and analyzing data—everything from menu options and prices to online reviews—to gather competitive intelligence. For publicly traded coffee shops, like Starbucks, you can also view their financial records. Next, you collect as much information as possible on their customers—you might check their social media following or visit a few of the shops to get a feel for the general demographic. You can also survey target customers by visiting the neighborhood where you plan to open your location and determine what would draw people to your coffee shop. You might also research recent trends in coffee technology, analyzing the newest and best machines and POS systems to gather technological intelligence.

Through the collection and analysis of all that data, you can create a business plan that is more likely to succeed. The competitive intelligence you gain will allow you to make decisions that align with market and customer demands and give you an edge over the competition. 

Competitive intelligence is essential for a business to succeed and should be a frequent process in a company’s operations to ensure it is keeping up-to-date with technological advances, changes in customer behavior, and evolving competitors. In the age of big data, it is easier than ever to compile vast amounts of information and make data-driven decisions.

Competitive intelligence can be divided into two main types: tactical and strategic. Tactical competitive intelligence is useful for informing short-term decisions in response to immediate threats or emerging opportunities. For example, if you find out that your coffee bean distributor is going to raise their prices, you may look for cheaper alternatives. Strategic competitive intelligence, on the other hand, informs long-term direction. For example, you might monitor the success of a competitor’s sustainability initiatives to determine if you should invest in reusable cups or compostable materials.¹

Market Intelligence: Gathering and analyzing data about the environment in which a company operates. This can include information about the size of the market, its expected growth over time, and how saturated it is with competitors.³ 

Customer Behavior Analysis: The systematic study of how individuals engage with a brand or product, including their purchasing patterns, preferences, and interactions. To gain competitive intelligence, a business may conduct customer behavior analysis on a competitor’s clientele. 

Competitor Intelligence: An aspect of competitive intelligence focused on analyzing competitors’ operations and strategies using data such as cost structures, profit margins, and revenue growth to inform your own business decisions.³ 

Benchmarking: The process of evaluating the performance of your business or product against a competitor.⁴

Technological Intelligence: Analyzing and tracking technological advancements to remain innovative and competitive.³

Competitive Advantage: The unique value or factor that allows a business or product to stand out compared to its competitors and should be highlighted. By conducting competitive intelligence, a business can determine its competitive advantage.⁵

Product Positioning: The strategic process of highlighting the competitive advantage and unique value proposition of a product to make it appear desirable in the minds of target consumers compared to competitors. Competitive intelligence allows an organization to determine its ideal product positioning.

As long as humans have traded goods and services with one another, competition has existed. However, before the data-rich digital world, decisions were made based on gut feelings, observations, and anecdotes.

The mid-18th to mid-19th century was marked by significant economic and technological change as society became dominated by industry and machine manufacturing, a period known as the Industrial Revolution.⁸ As cities brought businesses within close proximity of each other and some saw unprecedented success, it became important to understand the market and competitors in order to continue climbing. Without digitally available data, competitive intelligence was achieved through the analysis of newspapers and market reports, as well as the observation of competitors.⁹ In his 1865 book, Cyclopaedia of Commercial and Business Anecdotes, author Richard Millar Devens described an anecdotal instance of business intelligence where a banker turned a profit by gathering and analyzing market information and acting on it before his competitors.¹⁰ The banker obtained information about a significant crop failure in Europe and wisely chose to invest in grain shipments before the shortage caused prices to rise.¹¹

Advances in technology prompted the emergence of the field of market research. The increase in consumerism in the 20th century after World War II led to a more saturated field and the need to better understand customers and their choices. 

In 1980, Michael Porter, an American businessman and Harvard professor, published his book Competitive Strategy, where he introduced the titular concept and outlined three fundamental paths to achieving a competitive advantage: 

• Cost leadership: To be competitive, a business should find the most cost-effective way of producing a good or service without sacrificing quality.
• Differentiation: A business needs to find its competitive advantage to set itself apart from competitors, whether with its prices, level of quality, or unique features.
• Focus: A business should target a specific market segment, tailoring its product or service to a particular customer base.¹²

Porter’s strategy is an example of the progression toward a more strategic and structured approach to competitive intelligence. However, collecting data was still costly and time-intensive. In the latter half of the 20th century, government and military organizations would covertly gather information about foreign countries to determine probable courses of action and make decisions about national security, policies, and defense, known as strategic intelligence.⁶ However, this approach was not feasible for most businesses, as data was not publicly available and expensive to collect.⁷ It wasn’t until the 2000s that competitive intelligence boomed following the advent of the internet.

Today, competitive intelligence is a core tool for any business to build a strategic road map to success. In the age of big data, businesses have access to vast amounts of information, which can be analyzed at a rapid pace thanks to technological advances. A business no longer needs a team dedicated to competitive intelligence, as AI-powered technology has opened the door for even small and medium-sized businesses to easily leverage market and competitor data. Sophisticated tools and software allow companies to gather data in real-time, conduct predictive analytics, and make data-informed decisions.¹³

Richard Millar Devens

An American author who coined the term business intelligence in his 1865 Cyclopaedia of Commercial and Business Anecdotes. The volume included anecdotes of merchants, traders, and bankers, aiming to demonstrate how successful individuals gained a competitive advantage. For Devens, business intelligence was about the collection, storage, and analysis of data to provide insights about the market, which closely resembles what we now refer to as competitive intelligence.¹⁴

Michael Porter

An American businessman and professor at Harvard Business School, Porter is recognized as an influential thinker on business management and competitiveness. Porter developed a five-force strategic analysis model for a business to understand the market. The model outlines five different forces that need to be considered: competition, threat of new entrants, supplier bargaining power, customer bargaining power, and available substitutes.¹⁵ Later, Porter developed Generic Competitive Strategies in his 1980 book Competitive Strategy: Techniques for Analysing Industries and Competitors, which outlined three paths to gaining a competitive advantage: cost leadership, differentiation, and focus.¹² 

Leonard Fuld

A pioneer of competitive intelligence who founded Fuld & Company in 1978, a consultancy firm specializing in the practice. He wrote influential books that outlined systematic approaches to competitive intelligence, emphasizing the need for evidence-based insights from market intelligence to drive strategy. Fuld also co-founded the Fuld-Gilad-Herring Academy of Competitive Intelligence in 1996, establishing training standards and a global certification program for competitive intelligence.¹⁶

In today’s fast-paced and crowded markets, businesses face constant pressure to stay ahead. Competitive intelligence has emerged as a vital tool for navigating this complexity, offering organizations the insights they need to outpace rivals and create lasting value. 

Sustained Competitive Advantage

Most markets are incredibly saturated—just think about how many coffee shops you pass on your way to work—making it difficult for emerging companies and brands to achieve success. However, competitive intelligence provides a business with an edge, allowing it to find white spaces in the market to penetrate. 

Competitive intelligence also allows businesses to sustain their competitive advantage. Any edge or unique value proposition in a competitive field is small, with competitors quick to find ways to match your product or service. However, through competitive intelligence, you will gain insight into the baseline of competitors’ behaviors and be able to tell when they deviate from this norm. These shifts will act as a warning signal and help you prepare in the event of any market or competitor changes.¹⁷ 

Data-Informed Decision-Making

Competitive intelligence is a key factor in the success of an organization. Gone are the days of guesswork and gut feelings—with competitive intelligence, businesses are leveraging data to understand the market and their competitors to make informed, strategic decisions. By analyzing data from various sources—such as competitor activity, market trends, and customer behavior—organizations can uncover patterns and insights that drive smarter decisions. Competitive intelligence allows companies to reduce risk and optimize their operations. 

Enhancing Customer Experience

Conducting competitive intelligence forces a company to gain a deeper understanding of the market, competitors, and customers in order to design a product or business that will succeed. This level of insight enables organizations to design products and services that are not only aligned with market demands but also truly address customer needs and pain points. Competitive intelligence provides businesses with the information necessary for a customer-oriented approach, finding key differentiators that people appreciate. For example, if competitive intelligence reveals that there are a lot of people who pass by your coffee shop on the way to work, a mobile order-ahead feature is likely to draw in customers.

The customer-oriented approach means that customers receive high-quality products and stellar services, as businesses need to maintain their competitive edge. As Nancy Pearcey, author and scholar known for her insights on culture, said, “Competition is always a good thing. It forces us to do our best.”¹⁸

Competitive intelligence is a powerful tool, but gaining market insights can cause challenges if data is misused or the process is poorly executed. To avoid ethical complications and wasted resources, companies must be smart in gathering competitive intelligence. 

Accessing Confidential Information

While gathering information about competitors can provide companies with competitive intelligence, businesses should only gather publicly available data through ethical means. Sometimes, companies take competitive intelligence too far and try to leverage private, confidential data from their competitors. It’s important for companies to differentiate between competitive intelligence and engaging in trade secrets. Not only is it illegal, but it can also significantly damage a company’s reputation.

For example, sometimes companies will try to poach an employee from their competitor and ask them to provide confidential data about their current employer. In 2016, Anthony Levandowski was working for Google’s self-driving car project when he got a role with Uber. Levandowski downloaded over 14,000 files with classified information about the project, which he intended to hand over to Uber. Consequently, Google sued Uber for trade secret theft, leading to a high-profile legal battle and landing Levandowski in prison for 18 months.¹⁹

Resource Intensive

Gathering and analyzing information about the market, competitors, and customers is resource-intensive. Competitive intelligence is an ongoing process that requires immense effort, and the time and money may not be worth it for smaller companies. 

Additionally, simply gathering and analyzing the data is not enough to provide a business with a competitive edge. The data must be carefully used to make smart, strategic decisions. In the age of big data, there is so much information available that competitive intelligence can become overwhelming. Businesses must focus on relevant insights to gain the greatest advantage while saving time and resources.³

Failing to be Proactive

If a company is dependent on competitive intelligence, it may tend toward being reactive to the market and competitors instead of proactive.³ If you only make decisions after you notice changes in the market, you’re already behind. Although it’s important to keep a pulse on the market, companies should be sure to embed a culture of creativity and innovation instead of solely waiting on competitors to make a move before they do. 

Apple has, in part, succeeded because it’s found the right balance of innovation and competitive intelligence. In the early 2000s, Blackberry was the dominant smartphone company, as the first brand offering a way to send and receive work emails on the go. While Apple was certainly tracking its competitor, it did not try to mimic the Blackberry. Instead, it launched the iPhone, the first phone with a fully touch-based interface.²⁰ This decision was driven by Apple’s own vision for the future of mobile devices rather than by copying competitors.

No More Late Fees: The Rise of Netflix

It seems that almost overnight, Netflix came to dominate the entertainment industry. In reality, this success can be attributed to a few key decisions that Netflix made in its early days that allowed it to gain a competitive advantage and become a leading brand. One of the pivotal moves Netflix made—based on competitive intelligence from its competitor, Blockbuster—was to eliminate rental fees.

When Netflix was founded, Blockbuster had a strong hold on the video rental market. At first, both companies followed a similar model, both offering video rental services by mail. However, Netflix was performing worse, unable to keep up with its competitors in terms of delivery speed, customer services, and ability to offer personalized recommendations. Netflix needed to find an area where it could beat Blockbuster, and through competitive intelligence, it discovered one of the biggest pain points expressed by Blockbuster customers: late rental fees. These fees could double or triple the cost of the original rental, leading to angry customers. This is how Netflix found its unique value proposition.

Netflix adopted a subscription-based model and got rid of late fees. Customers now had access to a wide range of movies and could keep three at a time without being charged an extra dime. When they returned one movie, they were able to order another. This not only increased the amount of money that Netflix could charge but also attracted both frequent movie watchers who wanted to be able to rent multiple movies a month and individuals who felt they were being punished through late rental fees. Netflix positioned itself as a customer-centric alternative to Blockbuster, which continued to rely on its late fee-driven revenue model.

This was one decision in a series of moves made based on competitive intelligence that led to the success of Netflix, while Blockbuster’s market share dwindled until the company filed for bankruptcy in 2010. Blockbuster largely failed to respond to Netflix’s evolution or address the late rental fee pain point, which quickly led to its demise. Had Blockbuster also utilized competitive intelligence to better understand its customers, it may have been able to replicate Netflix’s model and stay afloat.²¹ 

Competitive Intelligence in Sports

Although we don’t tend to think of professional sports teams operating like a traditional business, they do! Professional sports teams can be worth billions of dollars, which means that they, too, rely on competitive intelligence to remain successful. Their goal is to build the best team possible, which will lead to greater profit yield.

Talent scouts will visit college campuses to identify promising athletes, similar to how a smartphone company would attend an industry expo to stay ahead of emerging trends. This provides them with insights into which athletes they should recruit or draft. Coaches and analysts will watch other teams’ matches to identify the strengths and weaknesses of the team and adapt their own game plan accordingly. 
Beyond building a great team, professional sports teams will also utilize competitive intelligence to understand their fans. They monitor game attendance trends, merchandise sales, and fans’ social media behavior to inform marketing strategies, leading to greater ticket and merch sales and, ultimately, greater profits.²² 

Professional sports teams demonstrate that competitive intelligence isn’t just about winning games—it’s about staying ahead of the competition in every aspect of the organization.

Consumer Perception of a Company’s Sustainable Practice Initiatives

Part of competitive intelligence is understanding customers’ needs and preferences. Today, there is an increased awareness of the environmental harms faced by our planet and greater interest in engaging with businesses that are doing their part to diminish their impact. In this article, we describe the results of an experiment that showed consumers are a lot more willing to engage with businesses that are framed as green. 

Market Research

Conducting market research is an essential part of competitive intelligence. In this reference guide, we explore the questions that market research helps to answer, outline the steps involved in the process, and discuss its benefits and limitations. 

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