Competitive intelligence gathering

Nov 01, 2008
<p>Competitive intelligence gathering has never been more important for an IRO, and more tools are available to help digest data, but qualitative analysis is just as vital<strong><br /></strong></p>

As with so many things, competitive intelligence is as much an art as a science and many IROs maintain that the nature of this kind of intelligence gathering varies greatly from company to company and sector to sector.

Eva Chan, head of investor relations at Chinese property developer CC Land, believes current market conditions have changed the nature of peer comparisons. ‘In different conditions, investors take different approaches, and right now the market is so bad investors are looking beyond the P/E ratio and net asset value benchmarks,’ she explains.

‘At the moment, investors care only about whether your balance sheet is strong enough and there is sufficient cash. It’s all about gearing, so our approach – and that of our competitors – has changed.’

Even the most determinedly numerate IRO will admit the qualitative elements of information gathering are at least as important as the hard mathematical data. While suppliers offer a range of products to assist with the gathering of quantitative data, however, it is often the case that the time-consuming element of intelligence gathering – the poring over countless press releases and pieces of research – gets left to the IRO.

The human touch
‘There is no tool I can buy that has situational judgment – you need a human being to interpret the data,’ explains Lynn Tyson, vice president of investor relations at Dell. She thinks her team is her most useful asset when carrying out intelligence gathering. ‘I feel the quality of competitive intelligence is a characteristic of the people that carry it out.’

For those who don’t have access to human resources, however, there are now more tools on offer. Some IR packages offer both quantitative and qualitative management expectations and aggregate them through an interactive online platform.

Like Chan, Katherine Husseini from food producer Del Monte relies heavily on sell-side research about her company’s peers. ‘We also look at the performance of our suppliers and the places that are selling our products, like Wal-Mart, and see what they are saying on their conference calls,’ Husseini says. ‘We pay for a transcript service that allows us to see any earnings call transcript produced by Thomson.’

By looking at the competitive landscape facing other constituents of their supply chain, IROs can be better equipped to field questions on pricing and costs. ‘We get a lot of questions about our price increases,’ Husseini continues. ‘Using these tools means we can refer to our suppliers’ calls, so it helps us to be much more informed about what is available in the market.’

As well as being helpful to the IR function when it’s under interrogation from investors, intelligence work is often valuable for other departments, such as operations and strategy.

The studious approach
But there are pitfalls to competitive intelligence. To do it thoroughly takes up a lot of time and resources. ‘We found that all of this was a full-time job and it was taking 30 percent to 35 percent of my time,’ says Husseini. ‘So we have now hired an analyst to do the bulk of the competitive intelligence.’

The difficult part is making sense of the enormous quantity of information available, notes Richard Davies of London-based IR consultancy RD:IR. ‘A key part of any IRO’s job is to understand the company’s competitive landscape,’ he explains. ‘And the big questions are centered around market share and managing risk. In many ways, there is more information on this now than ever before.’

In addition to gathering intelligence on your competitors, one of the easiest ways to measure your performance is with an investor perception study. ‘We’re finding that, increasingly, companies want to know how their stock is valued vis-à-vis their competitors,’ says Davies. ‘They want to know what strategies their peers are using and their various value drivers, and companies need to understand these drivers.

‘Getting independent insight into investor sentiment is something that needs to be done more – we know from speaking to investors that they will pick the company whose investment story they understand the best.’

Given the current economic situation, competition for capital has never been tougher. Market upheaval is undoubtedly putting a bigger strain on the investor relations function. Consequently, staying ahead of – or at least keeping up with – competitors has rarely been more critical in this unpredictable and rapidly changing corporate landscape.

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