The question of what competitive intelligence (CI) consists of is not as necessary to understanding its importance in business than understanding a bigger and more important question—why do some firms in an industry win and achieve hegemony where others, often with superior resources, fail? 

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In short, CI is the purposeful and coordinated monitoring of your competitor(s), wherever and whoever they may be, within a specific marketplace. Your "competitors" are those firms which you consider rivals in business, and with whom you compete for market share. CI also has to do with determining what your business rivals will do before they do it strategically, to gain foreknowledge of your competitor's plans and to plan your business strategy to countervail their plans.

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As you might expect, this will involve many methods at the tactical collection level, but it will also require integration into your existing information infrastructure, analysis and distribution of the information, and finally, the calculation of business decisions on the grounds of that information and the analysis of same. This is the "intelligence" part of the formula. 

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Most of the value-added in manufacturing or product companies is created by knowledge-based service activities such as research and development, marketing research, product design, customer service, advertising, or distribution. Winning firms are organizations that most successfully master the business issues critical to their performance, and develop the most precise understanding of definitions of value and creation of value.

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Competitive advantage has a lot to do with leveraging the knowledge assets of the firm, while at the same time determining how competitors are likely to leverage theirs.