Economic gardening: a role for government agencies in competitive intelligence

Most senior executives are happy to spend large sums of money on the firm's mouth - on advertising, promotion, and publicity - and rightly so. Yet they are often reluctant to invest in the company's eyes and ears. They have yet to be convinced that it may be more important to know what is going on (and to do something about it) than it is to tell the world about their products or services.

Simple research reveals that the most successful companies employ competitive intelligence (CI) to continuously monitor and respond to external events and conditions. This enables them to identify business opportunities and new markets, stimulate innovation, make sound decisions and improve their strategic planning. It allows them to benchmark against best-practice companies, enter alliances with confidence, and avoid risk.

A survey conducted in the USA compared 152 companies actively involved in CI with 1,396 in the same 19 industries. This revealed that, for those with a CI operation in place, their average:

• annual sales were US$9.8 billion compared to US$1.02 billion;
• market share was 5.4 per cent compared to 0.8 per cent;
• earnings per share were US$1.24 as against minus US$0.07.

Similarly, a benchmarking study of 24 firms in aerospace and defence found that, by using CI, three companies obtained outstanding results. The study showed that the industry average:

• bid success rate was 18 per cent, but the top three won 87 per cent, 75 per cent, and 57 per cent respectively;
• return for every dollar spent on proposals was US$78, but the top three averaged US$225.

Contrary to popular belief, CI is not a form of spying; it can, and should, be conducted both legally and ethically. The techniques available to professional CI practitioners may be used by any enterprise, large or small. CI can offer significant benefits, is easily concealed, almost impossible to prevent, and carries little risk. Intelligence operations do not have to be expensive or glamorous; even some fairly cheap and simple measures can be highly effective. In essence, companies need to find out what is going on, decide what to do about it, and take action before their competitors.

Government intervention

Unfortunately, most small and medium-sized enterprises (SMEs) feel that CI does not apply to them, or they fail to appreciate the potential benefits. Additionally, they are well aware that the cost of engaging professional CI researchers can be prohibitive.

In an attempt to overcome these problems, some government agencies have made serious efforts to provide various forms of support. Examples include Enterprise Singapore, the Irish Development Board, and the Japanese Ministry of International Trade and Industry. They recognise that government departments gather much information that concerns economic policy, business decisions, trade opportunities, export activities, and the ability of their companies to compete. They make sure that this information reaches the right people at the right time.

A somewhat different, regional approach (known as economic gardening) was pioneered in Littleton (Denver), Colorado, where the number of job vacancies doubled between 1989 (when the program began) and 2006. Sales tax revenues tripled during the same period. Many other government agencies and academic institutions have since established similar programs. Australian examples include Illawarra Enterprises, in partnership with the University of Wollongong, and Port Macquarie, working with the University of Newcastle.

Economic gardening refers to the provision of government support in order to encourage local economic development. Three critical aspects emerged from the Littleton initiative. The success of the program was directly linked to the provision of the following critical facilities:

• infrastructure: the development of community assets essential to the conduct of trade as well as those affecting the overall quality of life (for example, transportation, education, and cultural amenities);
• communication: the promotion and encouragement of interaction and cooperation between entrepreneurs and providers of critical resources (for example, establishing networks, supporting commercial and industrial groups, and liaising with academic institutions);
• competitive intelligence: the provision of actionable information concerning critical aspects of the business environment.

It has been shown that, of the three, CI offers the greatest benefits. In this context, Littleton compiled relevant databases and geographic information systems, produced marketing lists, noted industry trends, monitored new products, and carried out legislative research. It offered these information services either free or at a substantial discount. In any event, government employees serving overseas should be capable of providing businesses with information concerning particular business environments, the nature and extent of competition in specific markets, how competitors differentiate their products and services, and the regulations covering those markets.

Usually, the intention of economic gardening is to encourage the growth of local firms. Economic hunting, on the other hand, aims to attract an influx of new businesses and industries. Whatever the intention, pertinent information needs to be gathered and analysed, and distributed rapidly to entrepreneurial SMEs.

Government CI services should aim to provide businesses with information concerning particular business environments, the nature and extent of competition in specific markets, how competitors differentiate their products and services, and the regulations covering those markets.

For example, one company wanted to identify new markets and clients for their consulting business, one which worked with developers and municipalities to bring recycled water to residential areas. The regional government ensured that they received customised GIS maps showing water districts and municipalities in their state, a list of local residential developers and builders, lists of homeowners associations in their region, and market research reports on the recycled water industry.

Another business offering art instruction to adults and children wanted to improve their marketing efforts aimed at children. They received contact information for homeowner's associations that had been identified as having high income residents, together with contact information for local homeschooling associations. They also received quotations, extracted from the professional literature, about the connections between arts education and learning, to be included in their promotional literature. Finally, they gained access to a graphic arts intern to help them develop a new brochure.

In addition to providing information, SMEs should be encouraged to make a contribution by setting up their own CI operations. They should be made aware of the very low cost of doing so, and that this may be easily achieved by following the tips in my brief article, DIY Detection: Competitive Intelligence for SMEs, on the topic. It is worth pointing out that the most suitable people to carry out CI are a company’s own employees; they know the business best.

Finally, unless entrepreneurs take notice of what is happening around them, they will continue to blunder about in the dark, not knowing where they are going, what their competitors are doing, or what business opportunities are passing them by.