Pairing Up

More companies are folding Competitive Intelligence departments into Market Research. Here's why that strategy makes sense—and some hints on making the new relationship work.
Sep 30, 2005

Though Their Missions And activities may seem almost identical on the surface, competitive- intelligence and market-research teams serve distinct purposes. Market-research teams typically focus on supporting a specific franchise or therapeutic area by identifying market gaps for their products to fill. Competitive-intelligence teams, on the other hand, use similar data—along with countless other resources—to predict market changes, preempt competitor activities, and develop strategic contingency plans.

"Obviously, the focus on competitors is a unique purview of competitive intelligence," says one director of competitive intelligence. "Competitive intelligence has the greatest potential to see where competitors are going."

The CI-Market Research overlap
Still, there are large areas of overlap—so much so that some experts argue that market research is just a subset of competitive intelligence. A new study by business-intelligence firm Cutting Edge Information quotes one pharmaceutical executive as saying, "Any time you collect market research on a competitor's product, that's competitive intelligence."

That sort of insight has led to the latest trend in the world of competitive intelligence. Recognizing that competitive intelligence and market research overlap, companies across multiple industries are combining the two functions. The jury is still out on how effective this strategy will be in the long run, and on what the best way is to structure the two functions to work well together. But in the meantime, market-research groups have been turning their attention more and more toward collecting and analyzing competitive intelligence to support specific product goals. The pharmaceutical industry in particular has been integrating competitive-intelligence and market-research efforts to engender greater strategic impact from their market-research functions.

Market Research and CI Evolve

Fifty years ago, market-research groups enjoyed vast resources—large budgets and staffs to support almost any research need—as the industry began to adapt to more consumer-driven markets. Slowly, though, companies pulled back their market-research dollars and eventually shrank internal market-research groups to one or two team members.

The pharma industry witnessed some of the most drastic cuts in market-research resources. In the mid-1980s, pharmaceutical market-research teams were almost non-existent, even in the most-respected firms. Outsourcing became a quiet solution to data collection and cost savings. Most pharma companies outsourced all their market-research work during the 1980s.

The 1990s, however, saw a shift back to building internal market-research teams, which has lasted to the present. Those teams were built to support the blockbuster generation: Find a market gap, use the data to develop a first-to-market product, and brace yourself for the sales upswing. As scores of blockbuster products approach patent expiration and companies begin looking to lifecycle management teams to expand their franchises, market-research resources are settling to a more comfortable size.

Today's internal market-research teams consist of only eight to 10 employees, nowhere near the comparatively huge teams of decades past. And 86 percent of pharmaceutical companies still outsource much of their market research.

At around the same time that market research experienced its strategic boom, competitive intelligence grew as a core competency in a number of key industries—from aerospace and consumer goods to pharmaceuticals and healthcare. Companies gave their competitive-intelligence groups the same kind of treatment they'd given market-research teams, turning them into separately funded strategic-support functions. Dedicated competitive-intelligence functions sprang up, backed by tens of millions of dollars in budgets for a modest five-to-10-person staff.

Within pharmaceuticals, almost every major company enhanced its competitive-intelligence function between 1998 and 2001 by allocating more resources. And competitive-intelligence departments received praise for making major strategic impact. Pfizer, for example, relied heavily on its competitive-intelligence team's data on Warner-Lambert's potential suitors. Based on that information, Pfizer managed to swoop in and take the Warner-Lambert deal away from a major competitor, giving Pfizer exclusive rights to the blockbuster cholesterol treatment Lipitor (atorvastatin).