May 23, 2007

Competitive Intelligence vs. Espionage

May 22, 2007

By Fred White

Business intelligence, corporate intelligence, manufacturing intelligence, industrial intelligence -- whatever you call it, we do it openly but prefer the target company be unaware. How do we pursue aggressive but legitimate competitive intelligence-collection activities without being liable for espionage?

In April, two former Ferrari engineers accused of stealing trade secrets were convicted of industrial espionage. And earlier this month, five Kia workers were indicted for selling car manufacturing technologies to China. Since last November, the five Kia workers allegedly delivered 57 corporate secrets, including the technology to assemble a certain sport utility vehicle and plans for new models, to a local consulting firm established by some of Kia’s former workers.

The National Intelligence Service said among the leaked Kia corporate secrets, files on welding, assembly and quality control were handed over to a Chinese automaker.

It’s pretty clear, thanks to the increasingly rapid occurrences of technological disruptions, that support and focus on innovation and invention play a huge role on profitability. Yet given a morass of uncertainty about how much to invest in R&D to generate new products, technologies and services, what do top managers do? They hire someone or outsource someone or some group to gather competitive intelligence (CI) — not corporate or industrial espionage.

The difference? Espionage by definition is using spies to obtain information about the plans and activities especially of a competing company. CI practitioners generally abide by local legal guidelines and ethical business norms. There is a strict code of ethics followed by reputable CI practitioners, laid down by the Society of Competitive Intelligence Professionals (SCIP), the only global not-for-profit membership organization for everyone involved in the development and use of CI. The SCIP code includes the stipulations that CI professionals:

• Must abide by all applicable laws — whether domestic or international;
• Must accurately disclose all relevant information, including one's identity and organization, prior to all interviews; and
• Must provide honest and realistic recommendations and conclusions in the execution of one's duties.

Over the last several years, SCIP surveyed its members and, in its "State of the Art: Competitive Intelligence: A Competitive Intelligence Foundation Research Report 2005-2006", revealed that most respondents allocate their limited resources among the various components of the CI cycle (planning, collection, processing, analysis, dissemination), with the majority of their time spent on analysis and secondary data collection. For them:

• Internal employees are the most important primary sources of information; publications and Web sites are the most important secondary sources.

• Competitor analysis and strengths, weaknesses, opportunities and threats (SWOT) are the most frequently used analysis methods.

• E-mail has surpassed hard copy reports, personal delivery, and presentations as the most commonly used method for acquiring and disseminating CI. Competitive intelligence practitioners have many delivery options, and they need to know-how to determine the best method for selecting specific deliverables.

• Many tools and technologies are internally available to help collect information and report intelligence. Almost half of the survey respondents are confident they use the most appropriate technology.

Gathering competitive business intelligence is not so difficult as it may seem, and is far less glamorous than the popular Riley of the "Spies" TV series might lead us to think.

According to the namesake of international CI consulting firm Richard Combs Associates, in Chapter 3 of his “Competitive Intelligence Handbook”:

Some 80 to 90 percent of the information a project requires can usually be found through publicly available channels, and the rest often can be deduced or estimated.

Businesses are in a Catch-22. They want to provide as much detail as possible to persuade, with credibility, financial analysts that they are on the right track to improving profits, while not giving so much detail that they tip their hand to competitors. Of course, corporations are going to be freer with near-future plan details than with long-range plans.

For some specifics on where to find public information, a classic Fast Company editorial provides some sources used by experienced intelligence gathers, including the following:

• Conference proceedings;
• Fee-based information services;
• Chitchat with those operating trade-show booths;
• Company Web sites;
• Local newspapers (many can be found online); and
• Search engines.

Additions to this list can include:

• Government sources, (patents, court documents, environmental agency records, local building and zoning records);
• Interviews or surveys;
• On-site observations as during press tours or consumer tours;
• Academics who interface with or advise target company;
• Trade associations;
• Consumer groups;
• Other competitors;
• Suppliers;
• Distributors;
• Customers; and
• Media such as journals, wire services, financial reports and in-the-know blogs.

Many companies are concerned about keeping their practices above board. One of the ways to ensure CI over espionage is through internal training and providing employees with clear-cut, written policies (such as in an employee manual) regarding what is acceptable practice.

It isn’t necessary to use illegal or unethical methods in CI, says SCIP. In fact, doing so is a failure of CI, “because almost everything decision makers need to know about the competitive environment can be discovered using legal, ethical means.

“The information that can’t be found with research can be deduced with good analysis, which is just one of the ways CI adds value to an organization.”


Society of Competitive Intelligence Professionals

F1 engineers plan appeal in Ferrari espionage case
by John Leyden
The Register, April 30, 2007

Industrial Espionage Reveal Problems at Kia
The Chosun Ilbo, May 11, 2007

State of the Art: Competitive Intelligence; A Competitive Intelligence Foundation Research Report 2005-2006
by Dale Fehringer, Bonnie Hohhof and Ted Johnson (editors)
Society of Competitive Intelligence Professionals, 2005-2006

The Competitive Intelligence Handbook
by Richard Combs
Scarecrow Press, April 1, 1993

Competitive Intelligence – Get Smart!
by Gina Imperato
Fast Company, March 1998

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