I Spy
Keep your business on track by scouting out the competition — legally.
BY NEAL LEARNER
Do you consider yourself a corporate James Bond?
Are you able to smooth talk a competitor into divulging confidential strategies aft er a few cocktails at a trade show? Not afraid to dive into a dumpster to snag those marketing plans? If so, you probably should not apply for work in the field of competitive intelligence. While often misconstrued as corporate espionage, CI is not the gathering of industrial trade secrets. Rather, CI involves the legal and ethical gathering and analyzing of crucial information that lets management anticipate market trends and make smart, strategic decisions. It’s also about understanding the risks posed by competitors, some experts say. Th e practice of CI, however, should involve more than simply “competitor monitoring”—something that oft en is mistaken for the CI function, notes CI guru Benjamin Gilad, president of the Fuld Gilad Herring Academy of Competitive Intelligence in Cambridge, Massachusetts. CI is about gaining insight into the evolution of your industry, “which enables you as a company, or an executive, to identify strategic risks early enough to act on them and strategic opportunities early enough to take advantage of them,” Gilad says.
Companies need to see the “tsunami before it arrives and actually see the next Google before somebody else sees it,” he explains. If you miss these signs, “you’re going home.” Such was the fate of Interstate Bakeries Corp., the largest wholesale bakery in the US and producer of such household names as Hostess Twinkies and Wonder Bread. Th e company filed for bankruptcy in 2004. “We’re talking iconic company with icon brands,” Gilad says. “And the only thing they didn’t pay attention to was the rising number of old people and sick people and fat people who need less white flour, less sugar, less fat and more fiber. Many other companies paid attention to it, and multigrain became popular and whole grain became popular—while these people continued to produce yesterday’s food. Well, things change. They went bankrupt because of operational problems, but ultimately because they missed out completely on those trends.”
ANALYSIS IS THE KEY TO CI.
Aware of such cautionary tales, an increasing number of companies have recognized the value of instituting a CI function. A recent survey found that seven out of 10 companies say they have formal CI systems, up from roughly four in 10 companies only five years ago, says Kenneth Sawka, partner at Outward Insights, a consulting firm with offices near Boston and Washington, DC, that helps companies design and install CI systems.
While the practice is growing, some industry players already excel at CI, including pharmaceutical manufacturers, which have long kept close tabs on competitors’ experimental drugs as they move through the pipeline.
But many other firms’ CI functions are really competitive intelligence in name only.
“What they are largely missing is the analysis that adds value in terms of judgments and insights around competitive intelligence,” Sawka says.
In fact, information by itself provides very little competitive advantage, he notes. Someone has to sit down, connect the dots and then make a strong case to management. According to Sawka, the conversation about a competitor’s move might go: “Here’s what they’re doing, and here’s why we think they’re doing it, and here are the risks and opportunities presented to our company as a result.”
Unfortunately for the cloak-and-dagger set, gathering data for this analysis doesn’t require stealth. A full 80% of information that members of the Society of Competitive Intelligence Professionals gather is publicly available, says Alexander Graham, executive director of the Alexandria, Virginia-based group that works in part to promote ethical standards in the industry. Sources include the internet, trade publications and paid databases.
GATHERING INFORMATION
The other 20% of information needed for CI is gathered using methods similar to market research, Graham says. Th is is where a human touch comes into play. Sawka adds that primary sources of information may come from talking with customers, suppliers, industry observers and consultants, as well as going to trade shows and networking with people to get their insights on matters that the company is within its right to know.
Conferences and trade shows can be particularly fruitful. Sawka recommends companies take an organized approach to attending a show, and have employees gather CI through predetermined questions.
Chatting up suppliers and customers is another strong source of CI. “Ask them if their business is booming, are they getting new customers,” Sawka says. “A new customer of a supplier could be a competitor. Do they see any supply disruptions? Are they having a hard time meeting their order book? Of the customers, who is out there that is meeting your needs well? Ask them directly, ‘Hey, how do we compare to Company X in terms of product and marketing approach and services?’”
Timothy Kindler, director of CI at Eastman Kodak Co., says his group aims to provide the film giant with three basic services: deliver an early warning against risks, eliminate the element of surprise and provide an external viewpoint for internal decision making. “We have been successful in all three of those areas,” he says, declining to off er specific examples.
Another facet of CI is scrutinizing a competitor’s stated ambitions versus the reality of their capabilities, Kindler explains. “We’re clearly looking at what companies say they’re going to do, and then making an assessment as to whether or not they’re able to do as they say they’re going to do, or want to do,” he says. “Do they have the management team to pull this off? Do they have financial wherewithal to do what they say they’re going to do? Do they have the R&D capabilities to do what they say they’re going to do?”
Answers to some of these questions may come from employees who have jumped ship from the competition. To be sure, certain ethical and legal boundaries limit the kind of information that companies can extract from new hires, including anything that might be considered confidential or proprietary.
“But beyond that, I think it is fair to talk to new employees about their former employer,” Kindler says. “You might want to speak with them about company culture, company executives and how they might make [decisions] in a certain situation.”
AVOIDING ETHICAL DANGERS IN THE GRAY ZONE
While it’s never a good idea to pump your new hires for trade secrets, other ethical guidelines also apply to CI practitioners. One basic rule is to always identify yourself and the nature of your inquiry when probing a competitor. (Most companies are quick to sniff out someone posing as a business school student working on a purported research project.)
Avoiding the ethical line should not be a problem for true CI, Gilad says. Ethical issues “come into play when people confuse competitive intelligence with competitor monitoring, and they go for the details of their marketing plan,” he says. “To get those types of details, you have to inquire and get into trade secrets, and all kinds of nonsense that doesn’t have any kind of strategic value anyway.”
Still, CI usually is spotlighted when an ethical emergency hits a company, says Graham, who oft en fields calls from the media asking about the role of CI. Sawka stresses that no single piece of information is worth jeopardizing your company’s reputation and good standing. “You can learn just about everything you need to learn by being aboveboard and ethical,” he says. “It may take you longer, but you can still learn it.”