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Kenneth A. Sawka, managing partner of competitive intelligence and strategy consulting firm Outward Insights in suburban Boston, writes occasional pieces on competitive intelligence issues for Kiplinger Recommends. He has more than 20 years' of business and government intelligence experience and has been featured on CNBC's Squawk Box. He has also been quoted extensively on matters of competitive strategy and intelligence in Time, Investor's Business Daily and other prominent journals.
Quick. What words do you think of when you hear the term "competitive intelligence?" If phrases like "corporate espionage" or "spying" came to mind, you're not alone. Despite the growth in competitive intelligence as a legitimate business discipline, it still conjures up inaccurate images of trench coat-clad individuals sifting through a competitor's trash in the dark of night.
Competitive intelligence best practices dictate that a company's CI program is governed by a strict set of legal and ethical guidelines. Indeed, companies that I have helped develop formal competitive intelligence systems tend to have fewer legal and ethical quandaries than companies that do not maintain formal CI programs, because these programs' legal and ethical guidelines make it clear to employees what is and is not acceptable when it comes to gathering competitive information.
Still, the false promise of gaining competitive advantage by acquiring a rival's secrets can cause some companies to abandon common sense and behave in an unethical manner. In 2001, John Pepper, then chairman of Procter & Gamble, was surprised to learn that members of P&G's competitive intelligence group participated in corporate espionage practices targeted at its rival, Unilever. P&G inappropriately gathered dozens of documents that spelled out Unilever's plans for its U.S. hair care business over the next three years, including information on prices, launch plans and margins.
How did P&G gather this information? First, P&G hired an outside firm to undertake the operation. This firm and its subcontractors participated in "Dumpster diving" -- rummaging through the garbage on Unilever's property in search of documents containing key strategic plans. Moreover, the firms P&G hired misrepresented themselves to Unilever employees in order to learn other information, claiming that they were market analysts, journalists and students. P&G denied accusations that it directed these firms to do so.
Pepper and other P&G executives were aware that the company's actions did not violate U.S. law, but they admitted that they did "violate strict guidelines" set by the company itself. In September 2001, P&G reportedly agreed to pay Unilever $10 million for its transgressions; the damage to P&G's reputation in fact may have been much greater.
What, then, are acceptable behaviors for a company's competitive intelligence function? A CI program must be subject to two types of rules -- those based on law and those based on ethics. Sadly, U.S. law does not offer much guidance with regard to CI-related behavior that is clearly out of bounds. Generally speaking, there are two legal areas that come into play with regard to competitive intelligence: the Economic Espionage Act of 1996, which prohibits the theft of trade secrets, and antitrust legislation, which imposes stiff penalties on the improper sharing of price information and market plans between rivals. Defining the legal boundaries of CI functions requires expert legal opinion, and any business setting up corporate CI functions are well advised to consult with legal counsel in the development and promulgation of these boundaries.
The second set of rules -- those stipulated by a company's and an individual's code of ethics -- provides even greater challenges. Why? Because unlike the law, ethics are a matter of personal perspective and interpretation and will vary from company to company, as well as between individual CI practitioners. Some companies, for instance, strictly prohibit any interaction or discussions between their employees and the employees of competitors to avoid even the appearance of illegitimate conversations, while for other companies, engaging in conversations with the competition is expected and encouraged. What then, are some common ethical guidelines that companies have put in place? Based on the CI programs I have helped establish in a variety of companies, here are a few ethical considerations:
CI practitioners should not misrepresent themselves, or the nature of their relationship with a rival, to gather information. Examples of misrepresentation include calling into a rival posing as a graduate student to collect information, removing your name badge when approaching a competitor's booth at a trade show, and posing as a customer to gather pricing or other related information that otherwise would not be available to the public.
Companies should not hire a third party to do what they will not. Consultants should not be asked or expected to behave unethically. Any CI consultant should agree to adhere to your company's code of ethics and should have its own ethics policy that is in conformity with that of your company.
CI practitioners should not knowingly ask a contact for information that he or she knows to be proprietary or otherwise restricted. Individuals gathering competitive information must respect the confidentiality obligations of others, including customers, new hires, suppliers and so on.
If you do receive information that you know to be proprietary or suspect is proprietary -- say from a "helpful" e-mailing of a competitor's exclusive price list -- contact your company's legal staff immediately and forward the information to them. The lawyers can then decide how to handle the information. Simply put, no single piece of competitive information is worth risking your company's, or your own, hard-earned reputation. Developing a set of legal and ethical guidelines to govern your company's competitive intelligence program makes it clear to all concerned what is and is not acceptable behavior, and ensures that the information you gather is legitimate and a sound basis for competitive analysis and strategic decisionmaking.
This article was written for Kiplinger Recommends by Ken Sawka of Outward Insights. For information about competitive intelligence from Sawka, click here.
POSTED BY: Jim (June 24, 2008 12:16 PM)
What about hiring people from your competitors? This is almost always legal and is also very common. Virtually every manual on job hunting recommends readers to seek interviews with competitors of their current and former employers and employers always ask recruiters for candidates with "industry" experience.
CI experts never seem to say much about this source of CI. Why?
POSTED BY: Kenneth Sawka (June 27, 2008 05:14 PM)
Actually, leveraging the knowledge of employees hired from competitors is a CI "best practice." However, it has to be done under a strong legal and ethical framework. An employer, for instance, should avoid knowingly ask a new hire from a competitor a question that would cause him/her to reveal confidential information. Generally, before interviewing new hires from competitors, legal advice on what is in and out of bounds should be sought.
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