Most of my career has been spent in a large, multinational technology conglomerate. There are challenges a plenty in that kind of business. Because of the variety of businesses, there are many strong and diverse competitors. Cultural issues are also prevalent as conducting business and selling in many countries is difficult. Then there are the expectations of investors. Well-prepared analysts review the company’s operations and ask pointed questions about future prospects. Within the company, there are entrenched constituencies with their own histories and subcultures. There often is a tendency to reduce profitable practices to predictable processes. Documentation, standards and overhead are prominent. All of this breeds a certain set of competitive habits and sensibilities.

There is another world that is quite different.

Lately, I have spent more time with small-to-medium size businesses. These companies have emerged from the start-up phase and may have revenues between $10M-$100M. Their issues are different from the conglomerates. Typically, the product line scope is narrower. The markets served are fewer. Access to capital is sometimes difficult. While some business processes are beginning to emerge, they remain less important than the leadership’s intuition. There is an ever-present sense of vulnerability to competitors. Employees are stretched to perform multiple roles. Documentation, standards and overhead are minimized whenever possible.

Though they are different from large companies, SMB’s face challenges that require an understanding of the competitive environment. Competitive intelligence is important for SMB leaders.

Commonly, there are five critical strategic imperatives for SMB’s. Competitive intelligence, properly tailored, provides value for each imperative.

1. How to connect to customers. This is the most important task for an SMB. Often the first set of customers is the most difficult since there is no well-known brand backing the first products. Finding a customer and closing a sale dominates management thinking. Competitive intelligence helps to clarify a market need and determine how that need is presently being served. In practical terms, this means understanding how existing and potential customers perceive the currently available products and/or services. With that understanding, an SMB may refine their own offering to provide something valuable to customers.
2. How to focus to resources. Smart, motivated people run SMB’s. They are capable of doing many things and serving many types of customers. However, unchecked, that versatility is often a trap. The temptations to do more, expand quickly, address multiple markets prematurely – spread the company too thinly – have sunk many businesses. Competitive intelligence helps to determine the right ways to focus and the right time to grow. For focus, determining and refining the SMB’s value proposition and all that flows from it is critical. Equally important, is illustrating the market potential of focus. CI analysis can analyze profit pools and suggest how to exploit competitor vulnerabilities that justify patient focus.
3. How to grow to the next stage. On the other hand, the impulse to grow is powerful and, at the right time, is appropriate. The question is not whether to grow. Rather, the key questions are when and how. Extending the core capabilities, customers and values of the SMB by choosing the right timing and strategy to build on what already is established is key. Competitive intelligence can support growth plans through examination of adjacencies. Finding the right adjacencies to the company’s core is a fundamental principle for successful growth. This involves characterizing the existing business and comparing it thoroughly to markets, customers, products, services, etc., that are related but different. Identifying and assigning relative risks to each growth possibility is a critical CI service to SMB management.
4. How to protect current business. Conditions change rapidly. Competitors offer alternatives regularly to existing SMB customers. Customers, for their own reasons, constantly seek better terms and value from suppliers. Meanwhile, an SMB yearns for revenue and profit stability. Growth feels like a luxury when the current business is being attacked and retaining hard-won customers is essential. Competitive intelligence helps by identifying and describing competitive threats. Knowing the significance and likelihood of a each threat is invaluable since it allows an SMB to defend its business across a narrower front. Concentrated defense is far more effective and, in reality, is the only practical approach for an SMB.
5. How to prosper the business. At the end of the day, most SMB’s are concerned with cash flow and profit. After all, without adequate cash flow, it is impossible to meet the payroll. Without profit, an SMB cannot survive for long. This concern is different from the one about growth. Many SMB’s fail when they pursue growth without profit. Competitive intelligence is used to benchmark business models. Understanding how similar competitors are profitable can be instructive for an SMB. More fundamentally, competitive intelligence helps determine effective strategy. The classic determination of low cost versus differentiated is informed, in part, by an understanding of the competitive landscape. An SMB with a clear understanding is more likely to make the right choice.

I admire people that run SMB’s. This task is not one for the faint of heart. It is complex, risky and requires more personal growth than most corporate jobs. However, few things are as invigorating as creating something from scratch and making it successful.

Competitive intelligence is useful for SMBs. Later I will talk specifically how an SMB might do competitive intelligence within their financial, time and resource constraints.

What do you think?