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Conducting regular competitor analysis is an important strategic activity for all types of businesses: from established Fortune 500 corporations to fast-growing startups. It’s a huge predictor of success. Many of the world’s most successful organizations, regardless of their industry, have one thing in common: they undertake regular competitor analysis on all of their key rivals. 

Embracing competitor analysis gives your business a complete picture of the competitive landscape it operates in, putting you in the best possible position to be successful. Without competitor analysis, you’ll likely lose ground to your competition. Your strategies will be poorly developed and their execution will be flawed, resulting in your business underperforming its true potential.

A competitor analysis is an in-depth analysis of a specific competitor. It establishes their strengths and weaknesses, predicts how they might respond to changes in market conditions, and helps drive the creation of strategies you can leverage to gain a competitive advantage. 

Before we begin, it’s important to note that a competitor analysis differs from a competitive analysis, which evaluates multiple competitors at once. If you want to learn about conducting a competitive analysis, consider this article: What Goes Into a Competitive Analysis? 

If you haven’t done competitor analysis before, or are in the process of setting up a competitive intelligence team in your organization, it can be difficult to know where to start. After all, industry landscapes seem to be changing faster than ever, with new competitors emerging at breakneck speed amidst a constant stream of innovations. 

But with the right process, toolkit, and competitor analysis framework, you can conduct a meaningful competitor analysis for your organization. To do so, we recommend you use this four-step process. It’s been battle-tested over many years with businesses in all kinds of industries: from consumer packaged goods to insurance

By following the four steps, it’s possible to pull together an in-depth competitor analysis that enables your team to make important strategic decisions with higher levels of confidence. Let’s explore each of the stages in more detail. 

Step 1: Sourcing & Collecting Competitor Data

Every single competitor analysis process begins with raw data. Take the time to consider which types of data are most important to your competitor analysis. There are endless data sources available, and even with the support of a sophisticated market and competitive intelligence platform, it’s unrealistic to effectively incorporate all of them into your competitor analysis. 

Instead, ask yourself where the best places to collect data for each competitor would be. Consider the online platforms they maintain, advertise on, and publish content through. Think about the news sources that provide the best information about your industry. For a technology company, this might be a platform like PitchBook, TechCrunch or Crunchbase, whereas a financial services company may find more relevant data on Morningstar

Once you’ve established the most relevant sources, it’s time to start collecting data. While you could do this manually, you’ll be much more successful if you enlist the help of a software platform. There are various categories of software tools that you could use here. 

  • Entry Level: these tools will source data automatically, but you’ll have to manually sort through it yourself. 
  • Mid-Tier: mid-level tools will source and organize data, flagging up important trends and patterns automatically. 
  • Advanced: the best tools will source, organize, and present your data in real-time shared dashboards that anyone can collaborate on. 

 

🔎 Related Articles: 7 Best Competitor Analysis Tools (Updated for 2022)

Step 2: Analyzing Competitor Data

Once you’ve collected your data, it’s time to get into the analysis. In this stage, your primary concern should be understanding what the data is telling you. Don’t worry about figuring out what it means yet – that comes at the next stage. 

Establish some metrics that you can use to evaluate your competitor. Exactly what these are will be driven by the scope and focus of your competitor analysis. Perhaps you’re interested in understanding the geographical areas a competitor operates in, or perhaps you have a more tactical remit and want to understand the search terms they spend advertising dollars on. 

 

Ideally, these metrics should apply to multiple competitors. This gives you the scope to create benchmarks and evaluate the wider landscape, rather than just one competitor in isolation. 

In addition to this sort of analysis, look for anomalies in the data. These may signify a major strategic change or a notable event. Examples might include product launches, surges in hiring in particular departments or geographies, or a significant increase in your competitor’s marketing spend. Once you’ve collected and analyzed all of this data, it’s time to start interpreting what it means in the context of your own business. 

Step 3: Interpreting Competitor Analysis Data

In this stage of your analysis, it’s time to determine what matters the most to your own business. One simple way to do this is to use the “so what” test. This helps you understand which parts of your analysis you should pay the most attention to, and build an understanding of how these facts will impact your own business. 

 

Only by having a clear understanding of the first and second-order effects of your findings can you design strategies that mitigate your competitor’s strengths and capitalize on their weaknesses. It can often help to apply strategic frameworks in this phase: two of the most popular are the SWOT Analysis and the Product Capabilities Analysis. 

 

A SWOT analysis maps out a competitor's internal strengths and weaknesses and also outlines the external opportunities and threats their business is exposed to. Creating a SWOT analysis is a relatively straightforward process: all you have to do is draw a matrix and note down your key insights for each area, ranked from most important to least important. 

🔎Related Articles: Cipher’s Guide to Competitor SWOT Analysis

A product capabilities analysis maps out the value propositions of each of a competitor’s key product or service offerings by assigning a numerical value to every core feature. Compare these scores directly to your own products and services to establish points of differentiation and sources of competitive advantage. 

Learn more about how to conduct both a SWOT analysis and a product capabilities analysis in Cipher’s 2022 Competitor Analysis Template

Step 4: Sharing Insights & Shaping Strategic Responses

Your competitor analysis might be packed with groundbreaking insights, but if you don’t effectively share these with decision-makers who actively use them to shape corporate strategy, the entire process will have been a waste of time. 

Focus on condensing the insights from your competitor analysis into a few key points that executives can quickly read, understand, and act on. You might have dozens of pages of insight, but the reality is that executives simply don’t have the time for this level of detail. Keep your deliverable short and to the point. Include visual elements, bullet points, and tables that capture your key insights. 

The best competitor analyses are done on an ongoing basis and enable you to spot patterns of behavior in competitors and understand how they tend to respond to external market forces or competitive activities. Once you know this, you can build a strategy that enables you to take proactive steps to cement a sustainable competitive advantage.  

🔎 Related Articles: How to Build a Competitive Intelligence Deliverable

Incorporating Competitor Analysis in Your Overall Strategic Framework

Competitor analysis should be a major input in shaping your organization’s competitive strategy, but there are also many other elements of competitive strategy that you should embrace. 

In the newly-published Competitive Strategy and Analysis Education Series, the experts at Cipher share 18 of the most commonly applied competitive strategy frameworks and show you how to apply them to your own business. 

You can sign up to receive one lesson a week straight to your inbox, giving you the opportunity to level up your competitive strategy skills on your own terms. 

Enroll in the course for free today.