Competitive Intelligence (CI) can be defined as knowledge and foreknowledge about the external operating environment. The ultimate goal of each intelligence process is to facilitate decision-making that leads to action.

It is the ongoing process of developing a holistic picture of the operating environment including competitors, customers and markets. An effective intelligence process continuously contributes to an organization’s knowledge base and leads to cumulative organizational learning.

A successful business strategy requires awareness about the company’s external environment, including its customers, competitors, industry structure, competitive forces, etc. Information about these issues is the key target of Competitive Intelligence. The intelligence process enables turning information into intelligence by processing it via analysis, interpretation and synthesis, and utilizing it in future oriented decision making. As the ultimate goal of each intelligence process is to facilitate decision-making that leads to action, information that is not leading to intelligence that can be acted upon is useless and should be eliminated over the course of the intelligence process before reaching the decision maker.

Competitive Intelligence is regarded as the broadest scope of intelligence activities covering the whole external operating environment of the company and targeting all levels of decision making: strategic, tactical and operational. While market research often focuses on fulfilling a specific information need or set of needs, intelligence is an ongoing process of developing a holistic picture of the operating environment, including competitors, customers and markets. 

• A strategic tool that enables senior management to improve its competitiveness by identifying key driving forces and anticipate future market directions
• The process through which information from multiple sources is gathered, interpreted and communicated
• A support function for strategic decision-making, early warnings of opportunities and threats, competitor assessments, and tracking and advice on effective implementation
• A process which provides key insights into all levels of an organisation
• A proactive, opportunistic and forward looking approach

• What are the industry’s strategy-shaping economic features?
• What kind of competitive forces are industry members facing, and how strong is each force?
• What forces are driving changes in the industry and what impact will these changes have?
• What market positions do industry rivals occupy?
• What strategic moves are rivals likely to make next?
• What are the key factors for future success?
• Does the outlook for the industry present the company with sufficiently attractive prospects for profitability?

Competitive Intelligence can focus on the following areas:

• Strategic intelligence is concerned mainly with competitor analysis or gaining an understanding of a competitor's future goals, current strategy, assumptions held about itself and the industry, and capabilities -- diagnostic components. Intelligence about the firm's major customers, suppliers and partners (in marketing or research and development alliances) is often also of strategic value. It provides support in areas of strategy, providing higher levels of management with intelligence on the competitive, economic, legal and political environments in which an organisation and its competitors operate, both now and in the future.     

• Tactical intelligence is generally operational and on a smaller-scale, not so centered on being predictive. Tactical issues include competitors' terms of sale, their price policies and the plans they have for changing the way in which they differentiate one or more of their products from yours. Middle-level marketing and sales managers number among some of the main users of tactical intelligence. They want to know how to win the day, today.

• Technologically oriented CI allows the organization to identify opportunities and threats, arising from technical and scientific change. This part of CI supports technological strategies, as well as research and development.
  
  
•  Target oriented CI focuses solely on the competitor’s capabilities, current activities, plans and intentions.
  
  
• Counter intelligence is defending company secrets. Every firm has competitors as interested in knowing your plans as you are in knowing theirs, maybe even more so. Often, this area of endeavor will involve security and information technology, but also the human factor, which is usually the weakest link when containing competitor opportunities within the firm.
  
  
  The field of competitive Intelligence can be divided into eight competitive intelligence elements, which can be visualized in a 3 dimentional matrix:
  
  

The horizontal axis reflects the industry value chain, while the vertical axis in the matrix determines the scope of the competitive intelligence operations, i.e whether the focus is on companies, industries or general trends prevailing in the business environment. Finally, the third axis highlights the geopolitical dimension of business information

 While most of the elements concentrate on one part of the value chain, the category “General Trend Intelligence” includes business information types and themes along the whole length of the value chain. Examples of these include environmental issues, political environment and general business trends such as the impact of industry consolidation on the value chain. Similarly, the category “Interest Group Intelligence” covers companies that don’t belong to the company’s value chain, but are strongly linked to it. Examples of interest groups are partners, owners, research companies, regulative bodies and academia.

The matrix framework is useful when considering target areas of r a company’s Competitive Intelligence development, but should always be adapted to each company’s specific requirements.

The Competitive Intelligence Cycle

The Competitive Intelligence Cycle is the process by which raw information is acquired, gathered, transmitted, evaluated, analyzed and made available as finished intelligence for policymakers to use in decision-making and action." There are six steps which constitute this cycle: "the process by which raw information is acquired, gathered, transmitted, evaluated, analyzed and made available as finished intelligence for policymakers to use in decision-making and action." There are six steps which constitute this cycle: