Mtm2 white paper competitor analysis (featuring the four corners)

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Competitor Analysis (Featuring the Four Corners)

Intelligence Collaborative - Mastering the Methods Series

Competitor Analysis feat. the Four Corners

This White Paper is #2 in a series of intelligence methods being offered to members of the Intelligence Collaborative. It was developed by Dr. Craig S. Fleisher to provide a concise overview of how to apply key intelligence methods to support analysis. Although every effort is made to ensure that the information is accurate and fit for its purpose, the author and Aurora WDC make no implied or explicit warranties as to its applicability or use in your particular work context.

Please direct any questions about this paper to its author at the following:Craig S. Fleisher, Ph.D.

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Other White Papers are available on a regular basis from http://IntelCollab.com. Related Methods in the series are:

Driving Forces

Industry Analysis

Financial Ratio and Statements


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Abstract

The Competitor Analysis (featuring the Four Corners) is a primary method in the competitive and market intelligence tool kit. It is not a single concept, but rather a deliberate combination of several techniques (featured here as one of which is Four Corners analysis originally popularized by Harvard’s Michael Porter) that help the analyst to determine how rivals may affect and influence the success of their own organization’s efforts out in the competitive marketplace. The managerial focus of this analysis tool is that important decisions should incorporate knowledge of the relational dynamics between your company and its market or industry rivals.

The Method’s Primary Value

Competitor analysis featuring Four Corners analysis encourages your company to adopt a confident, aggressive and proactive position toward competitive strategy and the broader business environment.

The inclusive nature of competitor analysis encourages the sharing of insights and perspectives across functional boundaries of the company. It helps the company develop a competitor-conscious culture amongst those involved in its development, thus enabling you to employ your intelligence networks in support of data and information gathering that can further help you exploit opportunities and ameliorate threats.



The knowledge provided about competitors allows your company to help shape and define the parameters of strategy rather than react to unexpected competitive sideswipes.

It creates an efficient and effective approach to strategy formulation. The relevant, timely, concise and visually accessible presentation formats of this technique are an excellent vehicle to communicate strategy.

Overview of the Method

Another competitive analysis model that was popularized by Harvard Business School Professor Michael Porter, Four Corners analysis is a useful method designed for analyzing competitors as well as your own company. The four corners refer to the four elements that are critical in analyzing a market rival, including independently and collectively assessing its 1) assumptions, 2) capabilities, 3) current strategy and 4) drivers/future goals. Unlike (mostly) static models like SWOT that are often inappropriately used for the purpose of competitor analysis and don’t actually help the analyst understand what would motivate a competitor to take particular actions, the four corners method was developed to capture insights about what competitors plan to do from the present forward.

What Drives the Competitor?

DRIVERS – Covering All Levels of Management

What Can the Competitor Do?

STRATEGY - How the business is currently competing

MOTIVATIONS

COMPETITOR'S INSIGHT PROFILE: Is the Competitor satisfied with its current position? What likely moves or strategy shifts will the competitor make? Where is the competitor vulnerable?

ACTIONS

ASSUMPTIONS - Held about the company and the industry

CAPABILITIES – Both Its Strengths and Weaknesses

Source: Adapted from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter, 1980, New York: Free Press (referred hereafter as Porter, 1980).



The drivers/future goals section is derived from the important perspective that

companies have various unique goals and thus pursue unique market-focused moves. For example, a competitor’s financial goals reflect its current situation or whether it is looking to implement change, while its operating goals can signal whether it is building capacity or re-orienting along the industry’s value chain. The background of the top executives offers indications of what goals they prefer achieving and external constraints often signal whether a company is likely to be more sensitive to certain stakeholders in the industry, such as public officials like government regulators or advocacy groups (Porter 1980). From the analyst’s perspective, the rival will likely be focused mostly on these things, and may not have their “eye” on other developments that your company can leverage in the marketplace.

The assumptions section helps the analyst better understand the competitor and its

strategy. This perspective is related primarily to two aspects: a) the rival’s assumptions about a competitor company (possibly your company) and b) the competitor’s assumptions with respect to the industry and the other companies competing in it. This component can comprise questions and characteristic elements such as perceived industry forces (e.g., Porter’s 5 Forces method) and a company’s relative position (i.e., attractive or unattractive position) regarding these. Similarly, beliefs about competitor goals have influence, as well as cultural, experiential, geographic and national differences, that can be seen as the orientation towards the opponent’s competitive market approach (Porter, 1980). The key here is to be able to identify any incorrect assumptions your rival might have, or any blind spots of which you may be able to take advantage.

The next component of the analysis framework is a competitor’s current strategy. Key

aspects included in the analysis here are: 1) its stated (and unstated or implicit) goals; 2) its competitive posture; 3) its scope; and 4) its recent moves. Others to be considered are its business model, path of creating value, and the executive team’s statements of future direction. The strategy characteristics can be simply regarded as built from key operating procedures that a competitor actually employs (Porter 1980). In general, analysts should be looking for those areas where the rival claims they want to be doing something (goals), but they do not have the appropriate or timely resources or capabilities to execute it.



The fourth component is labeled capabilities. These underlie and determine a

competitor’s ability to respond to strategic moves or industry changes. This “corner” often includes a lengthy list of characteristics to be used as bases for analysis. Some examples are its human resources, intellectual assets and capital, marketing prowess, and of course, their financial wherewithal. SWOT analysis approaches are often used to gather and organize this information, which is then incorporated into this section (Porter, 1980). The idea is to make an assessment about external issues to which the rival could easily respond – for example it might have great long-term staff it can rely on to drive the business forward. You also need to make an assessment about competitor weaknesses – for example, it might not be financially viable enough to survive another global economic downturn.

Where the Method Fits in Planning and Strategy

Unfortunately, a number of surveys by the (former) Society of Competitive Intelligence Professionals (and now the Strategic and Competitive Intelligence Professionals - SCIP) done as recently as 2005 suggest that Four Corners analysis does not feature in the list of the most commonly used tools in the analysis methods tool-kits of their respondent companies. Competitor analysis featuring Four Corners can support several important business and planning needs, including but not limited to the following:

1. Generate a profile about strategy changes a competitor is making and likely to make and to help the analyst better gauge how successful these moves may be.

2. Help determine how different competitors will react to one another’s market moves.3. Gauge how rivals will most likely respond to environmental, industry and market trends.

When completed, the competitor analysis framework is used to plot the offensive and defensive “game plan” of a competitor. Alternatively, if the analysis is intended for company self-assessment, it focuses on creating robust strategic positioning scenarios (Porter 1980).

Cautions with Applying this Method

The primary criticism of competitor analysis relates to the temptation for companies to make it the cornerstone of their competitive strategy. In attempting to become an industry leader, a company will eventually become a follower if it defines leadership too closely in respect to current competitors because comparisons to competitors must always relate to the notion of customer value, and thus this should complement and further enlighten your competitor analysis.

Constantly referencing a company’s strategy to existing competitors will eventually blind a company to innovative approaches of potential new competitors from outside the periphery of the industry who



deliver superior customer value. Thus, it is important to keep an eye on potential new competitors from seemingly unrelated sectors and industries.

The copycat nature of outpacing the competition may prevent any competitive advantage from becoming sustainable – companies should focus on generating real customer value, not ‘me-too’ imitation, in their search for profitable innovation.

Many of these limitations can be overcome by 1) astute analysis and 2) using this tool as a complement with additional tools of competitive analysis. See our section on complementary tools below about this.

Applying the Method

1. Agree with your executives and colleagues about who your competitors are.2. Determine who your competitors may be in the future.3. Decide what information you need about these companies; acquire it.4. Build the four corners map for own company; we recommend doing it visually using a four corners

grid.5. Draw conclusions in the form of a Competitor Insight Profile (CIP) per rival, across your four corners

in parallel. Ask questions such as “how satisfied is this rival with its current position?” “What are the likely moves or tactics is it likely to use in response to developments?” “Where can we attack the rival where it is most vulnerable and least able to respond to our action?” and “Are there areas so sensitive to the rival that they will surely retaliate against one of our actions?”

6. Develop your response strategy, and further refine it based on additional analysis.7. Continually monitor the competitor set and scan for potential competitors.

Complementary Methods

• Competitive Simulations/War Gaming• Enhanced SWOT analysis• Executive Profiling• Financial Ratio and Statement Analysis (FRSA)• Functional Capabilities and Resources analysis (FCRA)• Industry analysis• Red/Blue Team analysis• Shadowing• Strategic groups Analysis



Additional Resources

See chapter 4 (pg. 45-62) on Competitor Analysis featuring Four Corners in the (2013) book Analysis without Paralysis: 12 Tools to Make Better Strategic Decisions, 2nd Ed., by Babette E. Bensoussan and Craig S. Fleisher, Upper Saddle River, NJ: FT Press.

Business and Competitive Analysis: Effective Application of New and Classic Methods by Craig S. Fleisher and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.

Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter, 1980, New York: Free Press.

Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition by Craig S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.



Additional Resources

See chapter 4 (pg. 45-62) on Competitor Analysis featuring Four Corners in the (2013) book Analysis without Paralysis: 12 Tools to Make Better Strategic Decisions, 2nd Ed., by Babette E. Bensoussan and Craig S. Fleisher, Upper Saddle River, NJ: FT Press.

Business and Competitive Analysis: Effective Application of New and Classic Methods by Craig S. Fleisher and Babette Bensoussan, 2007, Upper Saddle River, NJ: FT Press.

Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter, 1980, New York: Free Press.

Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition by Craig S. Fleisher and Babette Bensoussan, 2003, Upper Saddle River, NJ: Pearson/Prentice Hall.


Presentations & Public Speaking

Mtm2 white paper competitor analysis (featuring the four corners)