Today, more companies than ever embrace the concept of data analytics. More data exists than ever before, in more areas than business owners would have dreamed just a decade ago. But with this proliferation comes a modern dilemma: how to make sense of all the available information. When competitive analysis exists for its own sake, those using it get lost in the quagmire. Your business analytics should focus in on what truly matters: how to understand the competitive landscape, and then use that understanding to improve strategic planning. With this in mind, these seven factors should help you focus your competitive analysis.
1. Understand Core Products and Services
Every successful business begins with a product or service. When you move your company into analytics, you should begin with this core. Trying to collect data on the world creates a potentially endless loop of information that you cannot pull back into anything meaningful. Instead of looking at everything your business or a competitor does, focus on the core and what matters most to creating and building on success. This starting point defines the direction for the research and allows your analysis to take shape.
2. Long- and Short-Term Trends
The information that matters most depends on many factors within your industry. For a company emerging into a new niche, some long-term trends in the industry may not matter as much as those short-term trends from more recent quarters. Conversely, examining longer-term data should not create panic if a temporary event creates an alarming data spike. Smart companies look at both long- and short-term trends, but dig deeper to examine the context within which those changes occur. By contextualizing competitive analysis within real-world circumstances, your organization can develop a more complete picture of the landscape in which you operate.
3. Focus on the Right Competitors
Similarly, overreacting to information about other companies in the same market space may be counterproductive when those companies do not compete directly with you. Identifying the competitors inside what Forbes calls the addressable market is key. If your company operates in brick-and-mortar locations without a heavy online presence, competitors operating outside of those physical markets have little bearing on your results. E-commerce trends will matter to anyone working online, but moving in closer to find the competitors penetrating the same markets makes the difference between effective competitive analysis and spinning your wheels in a muddy field of data
4. Keep a Purpose
Smart businesses constantly analyze the competition. But this should never be the end in itself; rather, companies must maintain a focus on the purpose of the analyses. As Entrepreneur states, the purposes of competitive analysis should include fostering strategies to develop a distinct marketing advantage. Collecting data and creating a picture of the competitive landscape serve as tools in the arsenal, rather than end goals in themselves. You should use the information you glean from analytics to build forward toward improving your positions within the competitive market.
5. Be Flexible
While data analysis should aim toward understanding the competitive landscape and building competitive advantages, this process works best when you build and follow a flexible approach to what you see. Data may move in directions that do not align with your expectations or current understanding of the competitive landscape. When surprises pop into the equation, reacting and adjusting well to the new information places you in the best position to succeed. This may mean adjusting your strategies, re-assessing who serves as your primary competitive threat, or even capitalizing on new market opportunities outside your initial business model. Stay nimble by using multiple data sources, finding success where it presents itself, and moving quickly when your analysis turns up opportunities for your business.
6. Don’t Act too Hastily
At the same time, bailing out of a sound business strategy based on data emerging from your current competitive analysis should not be your first reaction. Competitive analysis identifies emerging and longstanding trends, but often your business strategy is built to withstand some of what comes out of this. When your organization develops a strategy based on market research and a firm understanding of itself and its capabilities, knee-jerk reaction to unfavorable data, or even to data that suggests new opportunities, can push you further from your goals. At times, a full understanding of the data requires you to make smaller adjustments while you stay the course.
7. Move Forward
All of the competitive analysis your company conducts should be part of a forward-looking strategy. You need to look to the past and present as a way of directing moves into the future: for both the industry and company. Analytics necessarily focus on historical data as the starting point; you cannot collect analytical information on what has not yet occurred. But if you remain mired only in what has been without incorporating the information into a set of goals and expectations, you will miss out on the full potential of competitive analysis. Instead, take the historical information you have and identify the trends you can use to chart a more effective course–both to define more clearly what success should include, and then to drive toward that success. The companies that find ways to organize this information within a coherent strategy for the future gain significant advantages over those that fail to do so.
Competitive analysis in the business world allows the companies that work effectively with new information to build. Not only does historical and current information help your organization adjust on the fly, but emerging trends that the data reflect can help clarify your corporate visions and identify powerful strategies to take advantage of the changing and emerging competitive landscape.