IN SILICON VALLEY California last year, an employee of Applied Maserials
Inc. allegedly copied blueprint designs and sold them to a tiny rival company.
The competing firm had even paid for a fax machine to be installed in his
house to help send the blueprints, according to court documents opened to
the public this spring.
Last fall in Dallas, switch maker MC Communications sued a small competitor,
accusing it of stealing trade secrets. In the competitor's possession: ten
thousand pages of documents taken from a dumpster that it said proved the
rival stole its secrets.
Cases of corporate espionage like these make headlines when they're uncovered.
But they're only the tip of what goes on in business each day as competitors
try to discover others' secrete and protect their own. In fact, there's
so much intelligence gathering going on that it has evolved into a full-fledged,
emerging industry—one of the fastest growing in the country. It's called
competitive intelligence, and chances are your company or its competitors
are already engaged in some form of it.
With global trade barriers falling, companies operating more smartly, and
competition growing ever fiercer, more companies are starting or expanding
competitive intelligence units. Others are hiring companies that specialize
in gathering information to get the low-down on competitors.
"Intelligence is more important than ever in part because the playing
field is bigger, and markets are emerging so quickly it's
easy to get blind-sided," says Daniel Burton Jr., president of the
Council on Competitiveness in Washington, D.C.
The line between what companies legally can do in gathering information
to compete against each other is well defined. But the ethics of intelligence
gathering is at times murky (and still non-existent with some consulting
firms that do spying for hire). That fact raises questions about what companies
should and should not do in the quest for information.
"We think you should be as aggressive in gathering intelligence on
a company as you are selling a product or service," says Leonard Fuld,
head of Fuld & Co., a competitive intelligence firm based in Cambridge,
Massachusetts, and author of The New Competitor Intelligence (John
Wiley & Sons Inc.). But that aggressiveness doesn't mean a company should
break the law or bend ethics to get the kind of information it needs to
stay ahead of the competition, say Fuld and other specialists in gathering
business intelligence. Fuld estimates that 99.9 percent of intelligence
gathering is legitimate. Fortune 500 companies, in particular, can't afford
to stray over ethical or legal lines to get information, partly because
of the threat of costly lawsuits, he says. "If for no other reason
than to protect their flanks, they don't want to go out on a limb and do
something stupid that will lose stock prices and gain bad publicity."
Yet there is no question that some people or companies will go to any length
to get information, including stealing patents, diving into dumpsters, pulling
a rival's telephone records, accessing its electronic data, electronically
eavesdropping, or obtaining a competitor's list of suppliers. Workers are
sometimes planted in companies to dig up information. And flat out misrepresentation
is widespread: about 46 percent of the respondents to a questionnaire given
to 451 participants at intelligence gathering seminars a few years back
said it was all right to get information by posing as graduate students;
47 percent felt comfortable posing as a private research firm, according
to a research paper done by Harvard Business School Associate Professor
Lynn Sharp Paine.
There are consulting firms that are well known within the competitive intelligence
community for their willingness to apply the techniques mentioned above.
But those who know refuse to identify them. Such services are still in big
demand because, "you want everything quantified. You want research
studies, memos. And when that information comes out, it's paid for,"
and somebody else has done the digging, says one refugee of the corporate
world who asked not to be identified. That's unethical, he adds, but it's
the way business is done in some quarters.
Little wonder the issue of ethics reared its head at the tenth annual conference
of the Society of Competitive Intelligence Professionals (SCIP) in Phoenix
in May. The very name "competitive intelligence" conjures images
of spies and cloak-and-dagger work, but the organization stresses that its
work; is above board. "There's always a risk somebody will think they
are James Bond and behave foolishly," says Michael Sandman, senior
vice president of Fuld & Co. "Companies don't like them to do that."
SCIP and its twenty-four hundred members maintain a code of ethics that,
in part, requires members to comply with all applicable laws; accurately
disclose who they are and who they work for prior to an interview; respect
all requests for confidentiality of information; and adhere to and abide
by company policy.
"The real spy conducts his or her business on the basis of' 'get it
by any means,' " says Bill DeGenaro, managing director of The Futures
Group of Bloomington, Minnesota, and a founding member of SCIP. "We
have to use innovative, ethical, and legal approaches.We find we can do
an incredibly complete job within those ethical and legal guidelines."
Specialists gather information by scouring data bases, going through public
records, and then talking to countless people familiar with a particular
company, including suppliers,customers, consultants,competitors, and "eminent
officials. Then they begin contacting people within the company to see what
they can learn. Often, more information is spilled than companies might
realize. "The key thing is not so much what's company's secret processing
technique
or how do you get this technology somebody else has," Burton says.
"The basic question is: what's the world class benchmark?" Once
that's known, he says, one can go back to the drawing board and improve
production or other areas.
"When it comes to the ethics of intelligence gathering, the ethical
intrigue is high and the stakes are even higher," says Thomas Donaldson,
Connelly Professor of Business Ethics at Georgetown University. He says
that small ethical missteps within a company can doom a competitive intelligence
effort and large mistakes can trigger highly publicized scandals.
It's acceptable for companies to require former employees to safeguard secrets,
to employ outside intelligence contractors to collect business intelligence,
and to collect that information from third parties who may unknowingly divulge
secrets, Donaldson says. But it's not acceptable to collect the information
through blatant misrepresentation, cause other parties to violate their
ethical duty, or force a supplier, for example, to divulge secrets.
Dan Hutcheson, president of Research Inc., a monthly publication in San
Jose, California that tracks the chip making market, says the fact is that
if someone wants to find out about your company, he or she can. "You
can't keep anything secret. Ultimately, the best protection is to run faster
than the competition."
Almost all information collected is in the public domain. "It's just
a matter of collecting it and analyzing it," Hutcheson says. "People
think it's real exciting work, but it's really hard work. It's more like
being an accountant, than being James Bond."
DOUGLAS HOUSE LOVES tracking down secrets. "I'm basically in the business
of helping companies acquire your secrets and then giving them to your competitors
so they can beat up on you in the marketplace," he says. "Most
companies aren't that hard to learn about. Many will open up and share what
you want to know, when you want to know it."
Roughly 10 percent of the information leaked from a company comes from employees
or ax-employees wanting to hurt their company or accepting a bribe, according
to House, the head of Washington Information Group, a Washington, D.C.-based
competitive intelligence company. This can include something as basic as
volunteering proprietary information to their competitors at trade shows.
A bigger source of information is workers who know they're not supposed
to talk, but just can't hang up the phone. And another source of employee
information is workers who don't have a clue what they're supposed to keep
secret, House says. As an example, he says a client wanted to know about
a rival's plans to introduce a new toothpaste. After casting about, House
called the rival's 800-number for new products and asked the operator about
the new toothpaste. She didn't know anything about it, but three days later
she called House back with everything he needed to know about its roll-out,
based on her talking to the marketing department. While it would make life
much tougher for him if they did so, House says companies need to motivate
their employees to protect information. He lists fivepractices that successful
companies follow in protecting information:
· Educate employees and non-employees like suppliers who are close
to the company about the importance of protecting information.
· Build an awareness of the need to protect information. Remind employees
on sensitive projects that they can't discuss it. Tell employees that rivals
are trying to "get them" and that if they succeed, it could mean
lost market share and jobs.
· Provide employees with the name and number of someone in corporate
security or public affairs to whom nosy callers can be transferred.
· Put a formal organization in charge of protecting company information.
· Look for ways to build reladonships within the company to help
employees want
to protect secrets. —K. W.