Competitive Intelligence for the small business
Large companies have deep product lines and a lot of diversification. They can afford to take risks, and to write off losses. As an example, with the introduction of OS/2, IBM quickly captured 30 percent of the desktop operating system market, and had a high probability of dominating the desktop operating system market. However, it is rumored that IBM made a business decision that the projected support costs for such a consumer product simply weren’t warranted for a market as small as the desktop market. Their reasoning: Instead of having a single field engineer supporting an enterprise, they had to staff a help line explaining to twelve-year-olds why Yahtzee wasn’t running. They simply walked away from it, and wrote off the costs.
Small businesses lack the deep pockets and diversification of the big companies. More often than not – over 80 percent of the time – small businesses are a one-product and one-location company. Small businesses are therefore keenly and highly sensitive to competition and threats of competition, and one slip of information can be fatal. Because of this, they need business intelligence as much as – or even more than – the large enterprise.
The cost of bad business intelligence
Señor Taco was a very good one-store location for the Mexican mood. The restaurant had a good reputation and regular customers. The owner, Carlos, decided he would open a new store on another side of town. He spent a lot of time looking at different locations and settled on a location on the southeast corner of a major intersection. This location had it all. It had high traffic counts, good visibility, several other (but different) restaurants, two large apartment complexes nearby, and several large employment centers within blocks. He signed the lease and, at what was to him great cost, opened.
As it turned out, he opened concurrently with a Taco Bell one mile away, and a Rubio’s Baja Grill and a Baja Fresh on the other two corners of the intersection. All four opened within weeks of one another. Carlos’ Señor Taco closed in three months. Had Carlos looked at applications for business licenses and food permits filed in the area, or paid attention to what possible competitors were doing (rather than concentrating on location, location, location), he would have saved himself a lot of heartache and a lot of money.
The reward of good business intelligence
A bar owner was looking to do something different with his location. As part of his decision-making process he visited a number of his competitors. He had overheard two conversations that were important, one in a bar that had live music, and the other in a bar that had pool tables.
The bar with the music was keen to sign a new local band. It was a band all of the younger kids seemed to like, and they usually drew a good crowd. The owner of the bar couldn’t get the new band to come and play. It was not that the band had any other commitments, it was that the bar owner just could not seem to connect with the band’s leader.
The bar owner hatched a plan. He had his daughter speak with the band’s leader. She told the band leader that she really like the band’s music – which, in fact, she did – and wondered if they would like a place to play, where they could collect and keep the cover charge. She also asked what other local music groups the band thought worthwhile. The bandleader could not stop talking about all the good bands he knew, and how he would like to help others, and how some bar owners just didn’t get it…
The bar with the pool tables always had a good crowd on weeknights for tournament play but it was slow Friday and Saturday nights after about 10 o’clock. The tournament organizer at the bar complained that the bar was taking too much of the rake on the tournament fees.
Our bar owner approached the pool tournament organizer and offered his bar for pool tournaments. The organizer could keep all of the fees and entry money, but the players had to pay $1.00 per game to the owner of the bar. The tournament organizer and the bar would split the table revenue 50-50 after the end of each tournament.
The pool tournaments moved to the new bar almost immediately. The bar now opens at 11:30 a.m. and pool tournaments are held through out the week, except lunchtime, Thursday, Friday, Saturday, and Sunday, and not after 10 o’clock on Friday and Saturday evening.
The lunch times and evenings reserved are for music. The bar owner, working with his daughter as a translator between generations, had the new local hot band playing Saturday and Sunday evenings. The band leader was given the opportunity to invite other bands to open for his band on week ends, and to schedule other bands for the lunch time music so new bands could get some experience, all without actually competing with his time slot.
In three months, the bar went from slow to packed, 12 to 14 hours a day. The pool tournament had a new, lively, and more profitable home. The hot band had a place to play, make money and become the leader in the community by helping to give new talent some experience.
The bar owner’s gross grew five-fold and his net tripled. By using business intelligence to find weak points in other locations, and to co-opt those who could drive business to his location, he sold a lot of food and booze.
