Can Competitive Intelligence lead

to a Sustainable Competitive
Rdvantale?
Henneth D. Corq
Deloitte G Touche Consulting Group

EIECUTIVE SUIIRRY
Are competitive intelligence operations producing the tangible results they promise? To help CI
managers answer t h i s question, the author provides guidance for analyzing which activities are
more likely-and less likely-to result in a sustainable competitive advantage. To begin with, CI
activities are shown to be an important resource that firms can draw on to enhance the
effectiveness and efficiency of their operations. Next, by using a simple four-question W O
model for determining if a resource is Valuable, Rare and/or Inimitable and whether the
Organization is capable of taking advantage of the resource, managers can separate those
activities that lead to competitive advantage &om those that can, at best, lead to competitive
parity-or worse. The following section steps the reader through a number of examples using
this model, taking a look at various attributes of a typical CI program and discussing why all CI
activities are not equally adept at providing opportunities for a competitive advantage. Finally,
ideas are offered regarding how the product of CI activity can help to secure the CI department’s
position as an invaluable firm resource. o 1996 J O W~ i e y 8r Sons, Inc.

As work in the area of competitive intelligence (CI)
grows, it is becoming increasingly important for CI pro-
fessionals to understand the true benefits, applications,
and drawbacks inherent in the field. Of particular con-
cern is whether or not CI actually can lead to a sustain-
able competitive advantage. That is, can an organization
gain and hold an advantage over its competition based on
Competitive Intelligence Review, Vol. 7(3) 45-55 (1 996)
0 1996john Wiley & Sons, Inc. CCC 1058-0247/96/03045-11
CI activities? To answer this question, let us start with an-
other.
What Is a Resource?
The above question may sound trite to experienced busi-
ness managers, but it is important nevertheless. This arti-
cle wdl use the following accepted academic definition:
A resource includes “all assets, organizational processes,
capabhties, firm attributes, knowledge, and information
controlled by a firm that enable it to conceive of and im-
plement strategies that improve its efficiency and effec-
tiveness” (Daft, 1983). Thus, a resource can be tangible
or intangible, human, mechanical, informational, or
property, but it must add to the effectiveness of organiza-
tional operations. Those people, machines, property, or
ideas that cost more than they provide to the firm are not
considered resources.
The role of unique firm resources as the engine driv-
ing competitive advantage has become a heated issue of
debate. Whereas traditional economic viewpoints focused
on the importance of industry structure, based on such
things as barriers to entry and monopoly power as the
major factors determining economic profitability, recent
research suggests that the decisions made by individual
businesses may be a vastly more important determinant of
performance (Rumelt, 1991). Furthermore, another
school of research based on firm-specific differences,
commonly referred to as resource-based theory, suggests
that intangible resources may be significantly more im-
portant contributors to sustainable competitive advantage
than tangible ones (Barney, 1991). All of this should be
excellent news to CI managers whose services are nor-
mally intangible and, hopefully, uniquely insightful.
Can CI Re Considered a Resource?
In general, competitive intelligence can be described as
“the systematic gathering, analyzing, storing, disseminat-
ing and protecting of specifically tailored information for
both operating and strategic managers” (Gilad and Gilad,
1985a, 1985b, 1986; Herring, 1988). Such information is
supposed to cover both the internal and external environ-
ments and can be either project-based (Prescott and
Smith, 1987) or more systematic in nature (Attansio,
1988). This definition, which encompasses a number of
smaller definitions, dustrates the applicability of CI tech-
niques to almost any aspect of an organization’s opera-
tions. For example, some of the specific areas that have
been suggested for CI attention include competitors,
markets, customers, labor relations, technological devel-
opments, political trends, and social trends (Ghoshal and
Ibm, 1986; Herring, 1988).
By comparing the definition of a resource with that of
CI, CI can obviously be viewed as a resource within 3
firm. First, a resource explicitly includes intangible inputs
such as those normally generated by CI managers. Sec-
ond, the intelhgence gathered is meant to be used to in-
crease firm performance. Some intehgence may be in-
correct or outdated, but that which is not can surely be
defined as a resource.
Most managers who have received a degree in business or
who have gained some experience mahng long-term
plans for a company are famhar with basic strategic plan-
ning methods such as SWOT analysis. Basically, a SWOT
analysis is a process whereby a firm systematically consid-
ers the Strengths, Weaknesses, Opportunities, and
7hreats facing the company. More specifically, strengths
and weaknesses refer to the firm itself, or the internal en-
vironment, whereas the opportunities and threats refer to
the external environment, including the industry, macro-
economy, legal factors, etc. The now famousfive-forces
model offered by Harvard Business School’s Michael
Porter helped practitioners to better understand and eval-
uate important factors in the external market. The five
forces included threat of entry into the industry, threats of
substitutes, power of suppliers, power of buyers, and in-
dustry rivalry concerns. In short, by using this model,
managers had a better tool by which to decide what were
the true opportunities and threats they faced in their ex-
ter nal environments.
Unfortunately, analyzing the internal market-the
strengths and weaknesses of the firm-remained an am-
biguous and subjective process. For example, the defini-
tion of what constitutes a strength or a weakness can be
manipulated by the individuals performing the analysis,
leaving open the very real concern of politics and empire
buillng as a subjective basis for decision-malung. In
essence, what the following model does is to provide an
easy-to-use procedure, like the five forces model, that
helps managers to more accurately and objectively ana-
lyze their firms.
THEDEFINITION OF WHAT CONSTITUTES A
STRENGTH OR A WEAKNESS CAN BE
MANIPULATED BY THOSE PERFORMING THE
ANALYSIS, LEAVING OPEN THE VERY R€AL
C O N C E R N O F POLITICS AND EMPIRE BUILDING
AS A SUBJECTIVE BASIS FOR DECISION-MAKING.
Originally described by Barney (1991) and revised by
Barney and Griffin (1992), the VRIO model (Table 1) is
a simple 4-question framework that allows managers to
analyze individual resources as potential drivers of sustain-
able competitive advantage. To use the framework, simply

Table 1. Frameworkfor Analyzing Individual Resources Driving Sustainable Competitive Advantage
I DUffitilIfl
Is the resource Valuable?
Is the resource Rage?
Is the resource Inimitable?
Is the Organization in place
to take advantage of the resource?
select a resource to be analyzed and evaluate that resource
by aslung each question in order. If the answer is “yes,”
move to the next question. If the answer is “no,” the
analysis stops. The second column of the table shows the
likely outcome for each level reached.
IF T H E R E S O U R C E IS DEEMED TO BE VALUABLE,
R A R E , AND INIMITABLE, IT IS LIKELY TO LEAD
TO A SUSTAINABLE COMPETITIVE ADVANTAGE
FOR T H E FIRM.
For example, if a resource is determined to be valuable
but not rare, then the resource is likely to lead to a state
of competitive parity in the industry (basically, competi-
tive parity occurs when firms in an industry earn roughly
the same economic rate of return from a given input or
activity). If the resource is thought to be valuable and
rare, then a temporary competitive advantage is expected.
Finally, if the resource is deemed to be valuable, rare, and
inimitable-very difficult or impossible to copy-then
the resource is likely to lead to a sustainable competitive
advantage for the firm.
The organization question, step four, is the practical or
implementation side of the model. In essence, the fourth
question asks whether the firm has the organization in place,
such as distribution channels, technology, or personnel, to
actually implement or take advantage of the resource. No
matter what the answer to the previous three questions, if
the organization is not in place to take advantage of the re-
source, then the analysis is irrelevant. In sum, t h s model ar-
ticulates what about a resource allows it to create a sustain-
able competitive advantage for a firm. The following section
defines and gwes examples for the four steps in the model.
Valuable Resources
As defined earlier, no strategy or type of capital-human,
physical, or organizational (Becker, 1964)-can be a re-
source unless it adds value to the firm. A traditional
< Sustainable Competitive Advantage >
like14 Outcome If A~sluerIs YES
Competitive Parity
Competitive Advantage
Sustainable Competitive Advantage
strategic management definition of value would match
internal resources to the external environment and exam-
ine the fit of the match. In that context, a resource can
add value to a firm if it aids in the exploitation of an op-
portunity or in the reduction of a threat. However, the
VR.10 model uses a more specific adaptation of this defi-
nition; the VRIO model argues that for a resource to be
valuable, it must provide a net increase in revenues or a net
decrease in costs to the organization.
Rare Resources
A competitive advantage is not possible unless the valu-
able resource is also rare. In other words, it is &fficult to
argue that valuable resources will lead to a competitive
advantage for a particular organization when a large
number of firms have the same resources in common.
Thus, firm resources are rare when they are not currently
possessed by very many other firms. Unfortunately, there
is no way to specifj exactly how many firms are needed
in any particular situation to cause resources to lose their
rareness. However, for purposes of this article, a resource
is rare if the number of firms that have the resource is
small enough to allow for oligopolistic or monopolistic
economic returns.
Inimitable Resources
This refers to the abihty of other firms to copy, or imi-
tate, the composition and/or implementation of currently
rare resources. Whereas rarity deals with present attrib-
utes of firm resources, imitability deals with the future of
that same set of rare resources. The concept of imitability
is important because a sustainable competitive advantage
can only occur when other firms are unable to duplicate
the benefits of the strategy on which the competitive ad-
vantage is built; thus, imitability is key to determining the
sustainability of a competitive advantage. However, it
must be remembered that determining imitabhty is irrel-
evant if the resource is not originally valuable and rare.
 Because the abhty of other firms to duplicate strategic
benefits is so important to sustaining a competitive ad-
vantage, Barney derived three general sources of compet-
itive advantage that would be very dlfficult to imitate,
even in a world where information about organizations is
dispersed rapidly. These three general sources include
unique historical condltions, causal ambiguity, and social
complexity.
INIMITABEXTY IS IMPORTANT BECAUSE A
SUSTAINABLE COMPETITIVE ADVANTAGE CAN ONLY
OCCUR W H E N OTHER FIRMS ARE UNABLE TO
DUPLICATE T H E BENEFITS O F THE STRATEGY O N
WHICH THE COMPETITIVE ADVANTAGE IS BUILT.
The VRIO model argues that a unique organizational
history can endow a firm with valuable resources that are
out of the control of competitors and that are &fficult or
impossible to imitate. Furthermore, it argues that these
space- and time-dependent resources are very difficult, if
not impossible, to copy after that moment in history. In
other words, valuable, rare, and difficult-to-imitate re-
sources can be developed from a firm’s unique path
through history.
B Y ESTABLISHING ITSELF AS T H E PREMIER
INTERNATIONAL AIRLINE D U R I N G T H E INFANCY
O F AIR TRAVEL, PAN AM GAINED A
COMPETITIVE ADVANTAGE T H A T LASTED FOR
M A N Y YEARS.
One example might be the meteoric rise of Pan
American World hrways during the earliest days of com-
mercial air travel. After craftily gaining control of Pan Am
in the late 1920s, Juan Trippe used his strategic prowess
to position the airline as the pioneer for commercial air
travel. After purchasing Boeing’s China Clipper sea plane,
Pan Am offered the first trans-Atlantic and trans-Pacific
commercial flights. By establishing itself as the premier
international airline during the infancy of air travel, Pan
Am gained a competitive advantage that lasted for many
years. This advantage was so pronounced that prior to the
establishment of Ax Force One, President Roosevelt used
Pan Am to travel to the Yalta Conference of 1945. It
would be difficult to argue that the unique history, and
the resources that were generated by that history, could
be effectively imitated by subsequent carriers.
The second general source, causal ambiguity, occurs
when the relationship between firm resources and sus-
tainable competitive advantages is not understood, or is
understood very poorly, by both the firm itself and its
competitors. This is not to say that the firm does not
know which resources are at the heart of the advantage,
rather it simply means that the link between the resources
and how the advantage is created is not well understood.
In essence, the ambiguity faced by the original firm is
faced by the competitor firms wishing to copy the source
of the advantage (Lippman and Rumelt, 1982).
For example, say that one organization’s R&D depart-
ment has consistently generated ideas that, when imple-
mented, advanced the standards for the entire industry.
However, when asked how such consistently superior
R&D performance was accomplished, neither the CEO
nor the R&D manager could pinpoint the underlylng
cause(s). Although many factors could be put forward, no
one could articulate the process by which the R&D de-
partment maintained its industry dominance; thus, no
one could imitate it either.
Finally, the last general condition that frequently helps
resources be more difficult to copy involves social com-
plexity. This simply refers to resources that revolve
around “very complex social phenomena, beyond the
ability of firms to systematically manage and influence”
(Barney, 1991; 110). Examples of socially complex phe-
nomena include a firm’s internal culture, external reputa-
tion, group-level social interactions, and internal power
dynamics.
It is generally considered impossible to accurately imi-
tate the interactions of specific sets of individuals. Take,
for example, the effects of power and politics within a
firm. Assume that two firms in the same industry have
basically the same physical, financial, and geographical re-
sources. Furthermore, both firms recruit from the same
schools and offer the same basic training and develop-
ment opportunities. Even with this h g h level of homo-
geneity there is no way to match the personalities and
power dynamics among individuals. Since these power
dynamics have been shown to have a sipficant effect on
firm activities (Pfeffer, 1981), the two firms can be ex-
pected to develop and implement their resources very
differently.
TANGIBLE
FORMS OF CAPITAL ARE CONSIDERED
M U C H EASIER TO IMITATE BECAUSE THEY CAN
USUALLY BE PURCHASED IN T H E MARKETPLACE.
Noticeably absent &om the list of sustainable competi-
tive advantage generating resources are more tangible
 C Sustainable Eompetitive Advantage 2

forms of capital (e.g., plant and equipment). This does not
mean that such advantages cannot occur h m tangible re-
sources; rather it means that tangble forms of capital are
considered to be much easier to imitate because they can
usually be purchased in the marketplace. And, even if they
are not currently available in the market, a competitive
market for information and/or the use of benchmarkmg
techniques wdl eliminate substantive advantages quickly.
Furthermore, although patents can aid in prolonging a
competitive advantage, they may not be able to prevent
competitors fiom developing close substitutes that can
erode the benefits of the patent protection. Thus, compet-
itive advantages built upon tangible resources are more
susceptible to being imitated by competitors than those
resources that are more intangble in nature.
Organization
As described before, the organization component of the
model is its practical or implementation side. In essence,
it forces the manager to ask whether or not the firm has
the capabhty to actually take advantage of the resource.
Ths usually includes analyzing such things as lstribution
channels, personnel, technology, and laws that impact the
use of the particular resource.
Conchion: T h e VRIO model is a simple 4-step
j a m e w o r k that helps managers more accurately and
objectively analyze theirjrms. In other words, the model
articulates what about a resource allows it to create a
sustainable competitive advantage f o r a firm. Furthermore,
the model suggests that resources that are evaluated to be
valuable, rare, inimitable, and that have the organization
in place to be implemented should result in a sustainable
competitive advantage f o r the firm. Finally, intangible
resources such as those generated by CI activities are more
likely to lead to sustainable advantages than tangible
resources.
CI Attrihuteslflctivities and Sustainable Competitive Advantage
Perhaps the most important point to remember &om the
VRIO model is that to have a competitive advantage re-
quires having somethng unique that generates value for the
firm. For the competitive advantage to last for any period
of time requires that the unique quahty causing the advan-
tage must also be very costly--or impossible-to copy.
With t h s in mind, determining which attributes and/or
activities of a CI department are most likely to generate a
sustainable competitive advantage should be possible.
The most logical place to begin t h s lscussion is with
the activities included in the definition of competitive in-
telhgence-the gathering, analyzing, storing, Isseminat-
ing, and protecting of information. As w d be shown mo-
mentarily, analysis of information, which is a very person-
or group-specific activity, has the highest probablhty of
generating sustainable competitive advantages. The gather-
ing and disseminating of information are less likely to create
sustainable advantages due to an increased hkelihood of
being imitated. And finally, storing and protecting information
should not provide a sustainable advantage, but may serve to
prolong advantages created by other activities (Table 2).
lathering and Oisseminating Information
A wide variety of techniques have been offered for legally
gathering necessary intehgence. A small sample includes
combing through competitor’s published reports (e.g., 10-
Ks and press releases; Lee, 1990), using the sales force to
draw information &om customers regarlng competitor
strateges (Pollack, 1992), attenlng trade shows
(Konopaclu, 1990), engaging in various benchmarking ac-
tivities (Enslow, 1992), interviewing ex-employees of
competitors, and analyzing patent applications (Mogee,
1991). Sidarly, the process by w h c h accurate and rele-
vant information is given to the correct people in a timely
manner is also achievable through a variety of means, not
the least of which includes vertical information computer

Table 2. Summary of CI Activity‘s Potential to Generate a Surtainable Competitive Advantage

I ictivih RbiliQ To Generate a Sustainable CompelitiveAdvantage

Analysis Highest probabhty

Gathering & Dissemination Lower probability
Storage & Protection Should not provide a sustainable advantage,
but may help prolong one.
systems, liaison personnel, and in-house courier services.
The important: question is, “Are these activities likely to
generate a competitive advantage for a firm?”
lrRI0 Analysis
Value-Are the activities of gathering and disseminating
information likely to provide a net increase in revenues or
a net decrease in costs to my firm?
Answer: Most likely yes, unless the information is in-
correct, outdated or the process of dissemination costs
more than the benefits received from the information.
Rareness-Do other companies probably use sirmlar
gathering and dissemination sources and processes?
Answer: Since a large number of firms still do not engage
in systematic competitive intehgence activities, it seems
logical to assume that firms that increase the efficiency of
their information gathering and dssemination should, all
else being equal, have a competitive advantage over firms
that are more lax in these activities. However, when com-
paring two firms that have CI departments, it becomes less
likely that one has gathering and dsseminating systems that
could be termed rare under the model. Moreover, since
most techniques for gathering and dsseminating informa-
tion are based on findng public sources and efficiently d s -
persing that idormation through the firm, it is likely that
such activities wdl be used by multiple firms. In addltion, as
CI managers learn other techques fi-om sources such as
SCIP conferences, Competitive Intelligence Revim, and exter-
nal consultants, the number of unique gathering and d s -
seminating techques d surely decline.
However, there are a few major exceptions that should
remain “rare” even when comparing firms that have CI
departments. These include the personal contacts and/or
networks established by a firm’s representatives and the
abhty to discern who, withm a company, are the “cor-
rect” people to receive certain bits of information. The
reason that these two exceptions exist probably resides in
the fact that they are people-based competencies rather
than rote actions that can be easily replicated.
(The thud question should only be asked for resources
that are thought to be rare.)
Imitability-How likely is it for other firms to imitate the
gathering and dissemination techques used by the firm?
Answer: Thls was actually addressed to some degree in the
previous section. In sum, most generic processes of gather-
ing and dsseminating dormadon are just that-eneric. As
a result, the processes are hghly imitable. It seems that the
people-based aspects of gathering and dissemination should
be the most Wicult to copy by other firms.
MOSTGENERIC PROCESSES OF GATHERING AND
DISSEMINATING INFORMATION ARE JUST
THAT-GENERIC. AS A RESULT, THEY ARE
HIGHLY IMITABLE.
Organization-Does the firm actually have the gather-
ing and dissemination processes in place that are thought
to exist?
Answer: Normally, the VRIO framework would be ap-
plied to a particular firm’s resources and is a very firm-
specific question. Since this analysis is a general example
not applied to a particular firm, the organization question
is not applicable here.
Conclusion: In general, firms that engage in CI activities
that increase the eficiency o f information gathering and
dissemination processes are likely to gain a competitive
advantage overjrrns that do not. However, most of these
activities aregeneric and are highly imitable; thus, their
implementation should not result in competitive
advantages between firms that utilize Cl techniques.
Possible exceptions that may provide sustainable
advantages are people-based resources such as the
contacts/networks established by a jrrn’s representatives,
and competencies related to the matching o f relevant
information to appropriate individuals within thefirm.
Anal@
The analysis of information includes many compo-
nents. At the very least, analysis includes d e c i l n g what
information should be gathered, what information
should be retained, how the pieces of information re-
late to each other, what subtle implications may be
drawn from the information, which information needs
urgent action, and which can be sent through more
normal channels.
VRIO Analysis
Value-Is our process of analyzing information likely to
provide a net increase in revenues or a net decrease in
costs to the firm?
Answer: There is always the possibhty that incorrect
judgments w d be made, problems with “groupthnk”
could exist, or overanalysis could occur resulting in
higher costs than benefits to the firm. Overall, however,
most people would probably agree that attempting to un-

derstand the issues confronting a company is likely to lead
to fewer mistakes and lower costs than moving forward
blindly.
Rareness-Do other companies probably perform the
same analyses and reach similar conclusions as our
company?
Answer: This is one of the most pivotal issues facing CI
professionals who are trying to gain r e c o p t i o n as a po-
tential source of competitive advantage. And, tiankly, the
answer demands empirical analysis. However, since it is
well documented in psychology that indwiduals, when
given the same information, tiequently reach very hffer-
ent conclusions, it is logical to assume that companies too
w d exhibit significant dfferences with respect to how in-
formation is analyzed. For example, just as eyewitnesses
to an automobile accident frequently report very different
versions of the same event, so too might companies reach
very dissimilar conclusions about what information is im-
portant, who should receive it, and what should be done
about it. Ths is even more true when firms have gath-
ered different information to begin with.
JUST AS EYEWITNESSES TO AN AUTOMOBILE
ACCIDENT REPORT DIFFERING VERSIONS O F THE
EVENT, COMPANIES REACH DISSIMILAR
CONCLUSIONS ABOUT WHAT INFORMATION IS
IMPORTANT, WHO SHOULD RECEIVE IT, AND
WHAT SHOULD BE DONE ABOUT IT.
In addxion, the necessity of having rare analyses has
strong implications regarding the use of external versus in-
ternal analysts. To have analyses that are unique to the firm,
they must be specifically tailored to the firm. Ths suggests
that external consultants should be used to help reduce the
opportunity of malung incorrect decisions, to provide cre-
ative insights not normally considered, and to provide as
much detded knowledge of relevant factors as possible.
However, a fKm should not stop with general suggestions
offered by external consultants; moreover, it should seek to
insure confidentiahty of decisions reached through the con-
sultant’s assistance. Ths is not meant to suggest that external
consultants engage in any unehcal activity that might hurt
the operations of a client; it would be unwise for a consul-
tant who wants to maintain a viable reputation to do such a
thing. Instead, it is sirnply a recoption that, to some de-
gree, external consultants who have competing frms as
clients decrease the kehhood of having rare analyses if no
other in-house analyses are performed.
c Sutainahle Competitive Rdvantage ’3>
Imitability-How likely is it for other,firms to imitate
the processes and resources used to perform my firm’s
analyses?
Answer: In all respects, it is hghly udkely that com-
petitor firms will be able to successfully duplicate the re-
sources and processes used by a firm to analyze gathered
information. Not only do individuals differ significantly
in their opinions, but group relationshps are also &EL-
cult, if not impossible, to copy. This particular aspect of
CI seems particularly relevant to Barney’s dscussion on
the inimitabhty of socially complex phenomena. How-
ever, t h s is not to say that firms will not reach s i d a r
conclusions from their analysis activities. Rather, it simply
means that over time some firms wlll develop either indi-
vidual or group competencies that are practically impossi-
ble to copy by competitors wanting to create their own
CI departments.
Conclusion: In general, the process of analyzing
information is a very complex, usually person- or
group-based, activity. This leaves open a high
probability for generating opportunitiesfor competitive
advantages for afirm. Furthermore, because these
activities are very difficult to imitate, it is possible for
sustainable competitive advantages to result. Finally,
the need for rare analyses suaests that using an
external consultant is helpful, but “in-house” C l
departments are vital to systematically generating
intelligence from which a Competitive advantage can be
generated.
TIME som FIRMS
OVER WILL DEVELOP EITHER
INDIVIDUAL OR GROUP COMPETENCIES THAT
ARE PRACTICALLY IMPOSSIBLE TO COPY BY
COMPETITORS WANTING TO CREATE THEIR
OWN CI DEPARTMENTS.
Storage and Protection
Storage is basically the process in which relevant, or
potentially relevant, information is kept in a manner
that allows for quick and accurate recall for future deci-
sion making and/or legal requirements. Alternatively,
protection includes those activities aimed at making
sure that information is dispersed only to those individ-
uals who are officially cleared to receive that informa-
tion. This includes controlling information flows both
within the firm and from the firm to external parties
(Tanzer, 1992).
 VRIO Analysis
Value-Is the storage and protection of information that
is vital to my firm likely to provide a net increase in rev-
enues or a net decrease in costs?
Answer: To the extent that proper storage of informa-
tion allows for more efficient use of the information
when needed, then storage activities can be valuable.
Similarly, protection of information, especially of that
which is vital to the competitive position of the firm in
its industry, helps to prolong economic rates of return. In
other words, if the &sclosure of certain information
would lower the profits of the firm, then protection sys-
tems are certainly valuable.
Rareness-Do other companies probably utilize similar
storage and protection processes?
Answer: Without a doubt, there are significant differ-
ences in the effectiveness of systems meant to store or
protect information. However, with the advent of com-
puters, and with the assumption that firms can find a way
to significantly eliminate leakage, these two factors are
not likely to be highly unique across firms.
(Once again, the thrd question should not be completed
since storage and protection system are probably not rare.
However, it is being dscussed here for sake of practice.)
Imitability-How likely is it far other firms to imitate
the storage and protection techniques used by my firm?
Answer: If necessary, the assistance of a number of
competent consultants should allow firms to have equally
effective storage and protection systems.
Conclusion: In general, the storage and protection .f
information is not likely to produce competitive advantages
jirfirms. H o w e v q the protection o f information may serve
to prolong competitive advantages generated by otherfactors.
ITo Generate Competitive Rdvantaqe
"Motive" Rffects the Rbility of G
Aside fiom CI activities themselves, another important
factor affecting the ability of CI systems to generate a
competitive advantage is "the purpose" for which CI
techniques are used. It seems logical to assume that if the
goal of CI managers is to simply keep up with a competi-
tor's actions by copying any move made, then competi-
tive parity would be the main result. Using the VRIO
model, one would say that copying advances made by
competitors probably has value but is not rare because the
result would be approximately equal products at approxi-
mately equal prices.
For example, assume that a competitor is planning the
release of a new product that is thought to be a sigmficant
technological advance over what is currently on the mar-
ket. A viable goal for a CI department would be to gather
intelhgence about the new product and the introduction
date ahead of time so that a competitive product can be
produced as soon as possible. Eliminating the amount of
time that the first company can benefit &om the intro-
duction of its new product can greatly decrease any first-
mover advantages that might accrue.
First, is such a strategy valuable? Assuming that the pro-
duction and sales price of the new product allows for a net
increase in revenue or a net decrease in cost, then the an-
swer certainly is yes. Ths is logical given that most new
technologies can demand prices well above their cost of
capital. In addtion, by bringng the product to market as
quickly as possible, the economic profits derived by the
first firm are reduced. Ths is important because the first
firm could then use the advantage in cash flow to produce
other technologies that might provide addtional advan-
tages in the future. Unfortunately, however, the product of
this type of CI activity does not seem to be rare. Successhl
introduction of the imitation product would drive down
the advantage of the original firm untd both firms earned
about the same return for the simdar products.
IF CE DEPARTMENTS ARE USED TO REDUCE THE
TIME AND DEVELOPMENT COSTS O F R&D
DEPARTMENTS, WHICH IN TUFLN MAKE
ADVANCES TO THE ORIGINAL INFOEWIATION,
THEN OPPORTUNITIES FOR SUSTAINABLE
COMPETITIVE ADVANTAGES COULD RESULT.
O n closer inspection, however, a hfferent argument
might also be offered. It is likely that the firm using CI
t e c h q u e s may be able to acquire information that took
the first firm months or years to develop. Ths means that
the amount of time and money spent on developing the
imitation product may be substantially smaller than that for
the first firm. If t h s is true, then the firm using CI tech-
niques may be able to generate a one-time economic rent
by producing the same product at a lower overall cost.
Ths deeper insight suggests that CI activities and research
and development activities may be used by some compa-
nies as economic substitutes for each other. Whether or
not this is true is an empirical question but the point re-
mains the same, CI activities focused on copying competi-
tor's actions may actually provide a one-time economic
rent due to lower overall research and development costs.

In either case, there seems to be no opportunity for a
sustainable competitive advantage because the goal of the
CI manager was to copy the actions of a competitor. For
sustainable advantages to be created, the firm must use CI
proactively to create products and services that are unique
&om those of competitors. In this case, research and devel-
opment activities are needed to complement the intelli-
gence gained by CI departments. In other words, ifa firm
is set up so that CI departments are used to reduce the
time and development costs of R&D departments, which
in turn make advances to the original information, then
opportunities for susrainable competitive advantages could
result.
Conclusion: Whether or not CI activities generate a
competitive advantage or competitive parity depends on the
goal ofthe operation. Ifthegoal ofthe Cl operation is to
copy the actions ofcompetitors in order to assure that the
competitor does not gain a competitive advantage, then
competitive parity is likely to result and/or a one-time
economic rent might be achieved. For sustainable
competitive advantages to occur, the goal o f CI operations
must be to aid in the development ofproducts and services
that are superior to those ofcompetitors. This need for
proactive work by CI departments suggests that CI
operations and research G. development operations should
be used to complement rather than substitute for each
other.
Areas for Future CI Consideration
Working from the previous discussion, this section uses
basic V R I O logic to offer additional insights into
where CI might lead to the development of a sustain-
able competitive advantage. For example, since im-
itability is key to sustaining a competitive advantage,
the V R I O model suggests that CI managers should
focus on developing resources that are socially complex
or that would position a firm to take advantage of
unique historical conditions.
Social Complexity
O n e way to develop CI resources that are socially com-
plex is to use CI to proactively identify people who
have the potential to influence the way the firm pro-
duces its goods or services and attempt to develop in-
terpersonal bonds offriendship and trust. Much like an
individual’s networking activities, these actions have
the potential to satisfy each condition of the VRIO
framework.
Sustainable Competitive Rdvanhge ->
C.-
Government relations
One particularly important example includes the political
environment of a firm. Researchers have argued for some
time that governmental activities can have a strong effect
on firms and industries (Epstein, 1980). Yet, only recently
have researchers begun to analyze how inhvidual firms
might be able to significantly influence governmental de-
cisions (Cory, 1993).
Pursuing friendly government relations can lead to
0 Increased opportunities for government contracts
0 Requesfsf o r assistance in writing the specijcationsfor
government contracts
0 Access to information o f impending opportunities or threats
0 Delaying o f detrimental legislation to allowfor appropriate
reactions by t h e j r m
0 Signaling otherfirms that you have political clout and
would be a formidable opponent $attacked-or ally f
needed
0 A n ability to protect a product market reputationfrom
political attack and
0 A potential ability to engage in strategies that could
disproportionately raise rivals’ costs (Cory and
Mc Williams, 1994).
Not only are such outcomes valuable to the firm, but
close interpersonal relations are difficult to imitate and
costly to find substitutes for.
Media relations
Other targets for increased intehgence work could in-
clude the mecha. Such relationships could lead to
0 A public relations advantage,
0 A reduction in investigatory probes, or
0 A softening of the analysis oforganizational mistakes.
Conclusion: CI personnel should work closely with the
firm’s public aJairs departments. More spec$cally, CI
operations should focus on determining the individuals
with potential inzuence over organizational activities, such
as government o@cials and members of the media.
Information to be gained about these individuals might
inrfude their personal likes and dislikes, their needs for
information, and/or their career aspirations. Then, by
helping to supply these individuals with the accurate and
timely information that they need, afirm can support the
individual’s concerns and establish a potentially beneficial
a
 relationship offriendship and trust. 'This is not to su&gest
any unethical manipulation ofgovernment ojicials or
media representatives. Instead, it is simply a recognition
that individualsfrom these two institutions can have a
significant impact on the way afirm operates, and it makes
sense to try to establish a relationship oftrust and
cooperation. In this regard, CI could be quite beng'icial.
Unique Historical Conditions
It is obviously difficult to prelct which activities are llkely
to have historical sigruficance. However, if such activities
could be identified, organizations could position them-
selves to benefit &om these unique moments in time.
Company crises
One particular circumstance in w h c h such moments can
occur includes organizational crises (Barton, 1993). By
preparing plans to deal with a crisis with speed, compe-
tence, and compassion, firms can take a potential disaster
and turn it into an inimitable opportunity to build subse-
quent trust and respect.
FIRMS CAN TAKE A POTENTIAL DISASTER AND
T U R N IT INTO AN INIMITABLE OPPORTUNITY TO
BUILD SUESEQUENT TRUST AND RESPECT. ONE
OBVIOUS EXAMPLE IS T H E REACTION BY T H E
MAKERS OF TYLENOL.
One obvious example is the reaction by the makers of
Tylenol to quickly and competently remove all of its po-
tentially tainted product from market shelves. Although
the immediate cost of such action was sipficant, Tylenol
gained a reputation for quality and compassion from
w h c h it has benefited in the long run. In fact, this action
set a precedent for other firms, such as Perrier, that have
found themselves in similar situations.
Conclusion: B y establishing a plan to deal with
organizational crises, including maintaining contacts with
the media and government representatives, and establishing
emergency communication systems, firms can position
themselves to build trust and respectfrom unique historical
situations.
Other possible strategies include creative signaling
techniques and a focus on internal resource evaluation.
Signaling techniques attempt to relate information from
the firm to the market or to a competitor. In the politi-
cal strategy context, increased political involvement on
issues not immediately relevant to firm interests could
be used to signal that the firm has ties that could pose a
formidable threat to likely opponents, or could serve as
an invitation to interested partners. A more common
example of signaling activity includes a manager buying
stock to increase hidher ownership in the company
(Leland and Pyle, 1977). This action is recognized as a
signal of an optimistic forecast of the firm's future prof-
itability.
For CI practitioners, innovative ways of communicat-
ing idiosyncratic intehgence to the market or to com-
petitors could prove quite beneficial. For example, vari-
ous sources of disclosing information such as
inconspicuous leaks to competitors, public press releases,
and comments in annual reports could signal a wdmgness
to fight over a particular issue, a desire to end current
competitive hostilities such as price wars, or a call for po-
litical allies, just to name a few. And, this does not even
include the potential uses of disinformation for a com-
petitor's consumption. Each of these activities can be
valuable to a firm, rare, if based on firm-specific informa-
tion, and costly to imitate.
Evaluating internal resources, similarly, can aid in the dis-
covery of advantage creating opportunities. Organiza-
tions frequently overlook beneficial opportunities by not
becoming familiar with the resources that are already in
their control. By using the VRIO fiamework, new in-
ternal sources of competitive advantage may be discov-
ered.
Summary
Overall, work in CI has grown tremendously in the
past few years. However, not all CI activities are
equally capable of generating competitive advantages.
This article suggests that sustainable competitive ad-
vantages have the highest probability of being gener-
ated from the analysis component of CI activities. O n
the other hand, the gathering and dissemination of
information have a lower probability due to an in-
creased likelihood of being imitated. Finally, the stor-
age and protection of intelligence is not likely to
generate competitive advantages, but may help to
prolong advantages established through other activi-
ties.
In addition, the goal of CI operations also plays a sig-
nificant role in generating competitive advantages. If the
goal is to copy competitor actions, then competitive par-
ity is the likely result. Whereas if the goal is to use CI to
assist the development of superior products and services,
then sustainable competitive advantages become a possi-
bility. Finally, using the VRIO fiamework, several sugges-
 C Sustainable Compeiilive Rdvantage 2

tions are offered whereby CI departments can focus their gence-The Quiet Revolution,” Sloan Management Review,
attention to increase the likelihood of generating sustain- Summer: 53-61.
able competitive advantages.
Goshal, S. and Kim, S.K. (1986) “Building Effective Intelli-
Overall, by dustrating the use of the VRIO frame-
gence Systems for Competitive Advantage,” Sloan Management
work and by offering recommendations for h o w CI op-
Review, Fall: 49-58.
erations might generate sustainable competitive advan-
tages, it is hoped that this article might help CI managers Herring, J.P. (1988) “Building a Better Intelligence System,”
better demonstrate their department’s contribution t o TheJournal of Business Strategy, May-June: 4-9.
firm value.
Konopacki, A. (1990) “CEOs Attend Trade Shows to Grab
‘Power Buyers,’” Marketing News, 24: 5-18.
References Lee, PM. (1990) “Keeping Your Ear to the Ground: How
Attansio, D.B. (1988) “The Multiple Benefits of Competitor
Competitive Intelligence Can Help You Beat the Competi-
Intelligence,” TheJournal $Business Strategy, May-June: 16-19.
tion,” Small Business Reports, 15: 27-37.
Barney, J.B. (1991) “Firm Resources and Sustainable Competi-
Leland, H. and Pyle, D. (1977) “Informational Asymmetries,
tive Advantage,”]ournal $Management, 17(1): 99-120.
Financial Structure, and Financial Intermediation,” Journal of
Barney, J.B. and Griffin, R. (1992) The Management $ Organi- Finance, May: 371-388.
zations. Boston: Houghton M i f i n .
Lipprnan, S. and Rumelt, R. (1982) “Uncertain Imitability: An
Barton, L. (1993) “CRISIS! Protecting competitive advantage Analysis of Interfirm DXerences in Efkiency Under Compe-
with crisis management plans and other strategic tools,” Pre- tition,” Bell Journal of Economics, 13: 418-438.
sented at The Society o f Competitive Intelligence Professionals, An-
Mogee, M.E. (1991) “Using Patent Data for Technology Analy-
nual Cor$rence, L o s Angeles, CA.
sis and Planning,” Researck-Technology Management, 34: 43-49.
Becker, G.S. (1964) Human Capital. New York: Columbia.
PfeEer, J. (1981) Power in Organizations, Cambridge, Mass:
Cory, K. (1993) “Management Theory and Corporate Political Ballinger Publishing Co.
Strategy,” Presented at Southern Academy of Management Meetings,
Pollack, T. (1992) “Learn From Your Competition,” American
Annual Conference, Atlanta, GA.
Salesman, 37: 20-24.
Cory, K. and McWilliams, A. (1994) “Raising Rivals’ Costs:
Prescott, J.E. and Smith, D.C. (1987) “A Project-based Ap-
An Application of Resource-based Theory,” Presented at the Na-
proach to Competitive Analysis,” Strategic ManagementJournal,
tional Academy of Management Meetings, Dallas, T X .
8: 411-423.
Draf?, R. (1983) Organization Theory and Design. New York
Rumelt, R.P. (1991) “HQWMuch Does Industry Matter?”
West.
Strategic ManagementJournal, 12: 167-185.
Enslow, B. (1992) “The Benchmarking Bonanza,” Across the
Tanzer, M. (1992) “Foiling the New Corporate Spy,” Security
Board, 29: 16-22.
Management, 36: 38-42.
Epstein, E. (1980) “Business Political Activity: Research Ap-
proaches and Analytical Issues,” Research in Corporate Social Per-
tlbout the Ruthor
formance and Policy, 2: 1-55.
Kenneth Cory recently received his Ph. D in strategic
Gilad, B. and Gilad, T. (1985a) “A Systems Approach to Busi- managementfrom Texas AGM University. His primary area o f
ness Intelligence,” Business Horizons, September-October: researchfocuses on the eJects o f corporate political &overnment
65-70. relations) activity on firm peformance and sustainable
competitive advantage. A SCIP member sinceJuly 1994, he is
Gilad, B. and Gilad, T. (1985b) “Strategic Planning: Improving
currently a Senior Consultant with Deloitte G Touche
the Input,” Managerial Planning, May-June: 10-1 3.
Consulting Group, Suite 1600, 2200 Ross Ave., Dallas, T X
Gilad, B. and Gilad, T. (1986) “SMR Forum: Business Intelli- 75201-6778; 21:2 1 4 - 7 7 7 - 7 7 4 5 OY 800-877-4725.