Competitive Intelligence

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INDUSTRY SNAPSHOT

Loosely defined as the legal and ethical collection of information regarding the operations of rival corporations, the term "competitive intelligence" implies an almost academic quest for knowledge. In pursuit of competitive intelligence, analysts, librarians, and research specialists study documents and survey computer databases in an attempt to identify trends and help manufacturers produce safer and otherwise improved products. In some cases, competitive intelligence may more correctly be called "corporate espionage." This second application entails a variety of possibly illegal and largely unethical practices, such as foraging through trash cans, bribing employees, and wiretapping phones and offices, with an ultimate goal of undermining a company's opposition. By the early twentieth century, the industry of information gathering, in its various formations and practices, had been elevated to a professional pursuit.

By 2006, more than 3,000 professionals belonged to the Society of Competitive Intelligence Professionals, and many more were employed by companies of various sizes to scope the competition. Most large companies, such as Motorola, Procter and Gamble, AT&T, and Kraft, had dedicated internal resources to the endeavor. Called by various names, including Competitive Intelligence (CI), Market Research and Analysis, and Strategic Planning, these departments had a single goal, to stay one step ahead of the competition. Mid-sized firms, which cannot justify the expense of full-time staff, often contracted with independent firms on a project basis. The increasing number of firms established primarily to scope the competition signaled the growing market for this service.

Heading into the later years of the first decade of the twenty-first century, some kind of competitive intelligence was considered a key part of a company's operations. According to Information Management Journal, "CI is so critical that it can literally make the difference between a corporation's success or failure." Accordingly, all companies participate in CI to some degree, whether formally or informally, and whether they call it competitive intelligence or not.

ORGANIZATION AND STRUCTURE

In the middle years of the first decade of the twenty-first century, not every company relied on hired professionals to provide competitive intelligence. Small business owners did it themselves or relied on informal networks to gather feedback on competitors. Operating on a large scale, this word-of-mouth process could yield incredible results. Countries had also joined the ranks of business information gatherers and often depended on members of the business community to pass corporate information to government contacts for analysis. Japan was a recognized leader in the art of competitive intelligence, and used it without benefit of a designated state intelligence agency. Executives of corporations and trading companies regularly collected and disseminated strategic information to appropriate officials in policy-making roles within the Japanese government. Other nations pursued their fact-finding initiatives in a more institutional manner. Government agencies were enlisted to procure sensitive, useful data, such as financial statements or patent applications, or any information that might secure an advantage for the companies driving their nations' economies. The United States had traditionally distanced itself from such government-business collusion, although increased global trading may eventually sway policy makers to assist corporate efforts.

The services offered by competitive intelligence (CI) companies varied depending on the specific industry and the scope of operations. The most basic corporate intelligence work included research, data collection, and analysis. This information gathering translated into hours of searching public documents, databases, and tracking media coverage. As global competition for consumer dollars intensified, so did the need for information. Cutting-edge techniques were developed that promised to identify and deliver warnings of competitors' important developments and revolutionary technologies. Corporate war games allowed company executives to implement hypothetical situations to determine the most prudent course of action. Patent tracking provided a glimpse into what new products might be just beyond the competitive horizon. Trade shows provided "target rich environments" and could offer access to the inner workings of a rival's operation or plans. Some companies even went so far as to commission psychological profiles of top executives in their industry in an attempt to predict behavior.

In the realm of corporate spying, or at least snooping, the professionals might operate as independent entities without ties to any one firm. Unlike employees of a particular company, such as IBM, who spend their days studying every nuance of the computer business from high-speed processors to shipping costs, these individuals or companies had no loyalty to a particular brand or employer. They could be hired to provide analysis of the corporate environment in any industry. The goal was to amass information rather than produce a detailed analysis. Competitive intelligence agents were experts at ferreting out the desired facts and figures, but the client generally possessed the specific industry knowledge to place that information in a useful context.

At first glance, it might seem impractical and even cumbersome to involve a third party in such confidential matters, but there are reasons for using outside personnel. It can prove more cost effective to pay for the temporary services of trained professionals as opposed to covering the overhead costs involved with recruiting, training, and benefits administration for an in-house staff of employees. Companies that find themselves in time-sensitive negotiations with suppliers, vendors, or employees may also choose to seek the aid of experts who can launch an operation quickly and without risk of internal leaks. Finally, some companies opt for autonomous agencies simply because the subject matter being investigated is questionable or even litigious. In these extreme cases, mainstream corporations do not want to be perceived as "playing dirty" and so pay others to do so. If the contracted party does engage in illegal or unethical behavior, the company is able to maintain deniability of any wrongdoing.

In the early years of the twenty-first century's first decade, the practice of competitive intelligence or corporate spying raised many legal and ethical questions. Since the industry was relatively new, practitioners were not bound by established professional guidelines, such as the Hippocratic oath for doctors or the Oath of Admission for attorneys. However, the Society of Competitive Intelligence Professionals (SCIP) authored a code of conduct for its membership. According to the SCIP Web site, the code encouraged its constituents to do the following: to continually strive to increase the recognition and respect of the profession; to comply with all applicable domestic and international laws; to accurately disclose all relevant information, including one's identity and organization, prior to all interviews; to fully respect all requests for confidentiality of information; to avoid conflicts of interest in fulfilling one's duties; to provide honest and realistic recommendations and conclusions in the execution of one's duties; to promote this code of ethics within one's company, with third-party contractors, and within the entire profession; and to faithfully adhere to and abide by one's company policies, objectives, and guidelines.

Ultimately, though, as of early 2003, there was no regulatory agency to police the practice of information gathering. Should a member of SCIP or anyone else have violated the aforementioned guidelines, there was no mechanism for sanction or discipline, except in the case of illegal activity. Even then, it was likely to be difficult to seek retribution.

Laws governing economic crimes were virtually nonexistent before the mid-1990s. Until that time, legal recourse at the national level was available under the Computer Fraud and Abuse Act, the Interstate Transportation of Stolen Property Act, or the Mail and Wire Fraud statutes. None of these laws specifically addressed the crime of economic espionage, and this omission resulted in failed prosecutions. Finally in 1996, after two years of debate, President Bill Clinton signed the Economic Espionage Act of 1996 to stop the proliferation of corporate spying. The act...