09 Feb 16 Revisiting ROI on competitive intelligence
Very few if any organisations have found reliable ways to measure the ROI on competitive intelligence activities. However, competitive intelligence teams do need to establish their value in helping the organisation meet its business objectives to justify their very existence.
Very few formal studies have been done to establish the correlation between the quality and quantum of competitive intelligence and company performance; so the ROI remains indeterminate.
On this background, I was pleased to see a quantitative study published in the HBR by none other than Benjamin Gilad and Leonard Fuld, leading authorities in competitive intelligence today.
- The study confirms some of the hunches I already had, and offers a few new insights.ROI is high when CI helps organisations make better decisions. However, 45% of respondents felt their inputs were not incorporated in the decision making. Over a third felt their inputs were merely confirmatory. Their analysis was used to justify a decision that had already been made – an “obligation to be checked off a list”.
- Interestingly, the study also found that the key factor that had the highest impact on how the CI analyses impacted decision-making was a signoff authority given to the analysts on strategy decisions taken. In some organisations, strategic decisions are required to be approved by the market analysts. This was the single most important factor that differentiated “intelligent organisations” – ones where CI had a high influence on decision making.
- The study also identified the types of decisions where the influence of CI on decision making was the highest. The top application of CI was for product launches, followed by others such as decisions on pursuing new opportunities, reducing risks, pricing decisions, investments and so on.
While the debate on ways to measure the ROI on CI will continue to evolve, the study found that companies do use CI for making a wide range of decisions. And that itself is evidence that its ROI is significant.
I feel a good way to figure out whether or how much you should invest in competitive intelligence, is to estimate the risk and cost of taking a wrong decision. That should give you an indication of how much the CI is worth to you. And if the cost of having the intelligence is less than the cost of not having it, you know that you definitely need it!