Competitive Intelligence

Tactical, Operational & Strategic Analysis of Markets, Competitors & Industries

Financial Post article about ethics in CI - are CI practitioners truly an unseemly sort?

I am copying in an article from today's Financial Post which is a major business paper publioshed here in Canada. It reports about some research done by a business school professor at Canada's largest B-school, York University. I think the content and tone of the article speak loud enough for themselves, so won't belabor this comment with anything beyond the question I asked above: Are we truly beyond helping ourselves ethically? here's the piece for your reading pleasure (?|!):

Source: The original article can be accessed at: http://www.financialpost.com/executive/story.html?id=950876

Andrew Crane discusses how to manage competitive intelligence

Lack of attention to industrial espionage can have repercussions for the entire ethical culture of an organization

Andrew Crane, Professor of Business Ethics, Schulich School of Business, York University, Canada
Published: Wednesday, November 12, 2008

In a knowledge-based economy, intelligence is king, so it is hardly surprising that from time to time firms will be tempted to test the boundaries and resort to what some would call commercial spying. In fact, generating and using competitive intelligence has become a key strategic activity in today's highly competitive knowledge economy. Knowing what technologies your competitors are using, what products they are developing, and what costs they are incurring can give companies that all-important competitive edge.

However, the practice of gathering and using competitive intelligence is an ethical and legal minefield. Just last year, for instance, the McLaren-Mercedes Formula One team was fined US$100-million and thrown out of the F1 constructors' championship after the FIA World Motor Sport Council found the team guilty of possessing a secret Ferrari dossier that provided full technical details of the Italian team's cars.

But it's not just in the glamorous high-stakes world of F1 where the spectre of industrial espionage raises its head. The American Society for Industrial Security suggests that U.S. companies lose more than US$50-billion every year in proprietary information and intellectual property. Some estimates put the figure even higher, at more than US$300-billion a year. Unearthing accurate statistics in this most sensitive of areas is of course fraught with difficulties, but it is clear that companies in Canada and other leading industrialized countries face similar risks.

Our research at the Schulich School of Business, conducted in partnership with the Institute of Business Ethics and the University of London, has been investigating the ethical challenges in competitive intelligence from those who know best - intelligence professionals themselves, and the people in their organizations whose responsibility it is to ensure compliance with ethical and legal standards. The questions we've asked them, about what can go wrong, why, and how firms can avoid getting into the ethical quagmire, have produced some striking insights.

Perhaps the most surprising finding is that among the troubling incidence of misrepresentation, manipulation, covert surveillance and theft, one of the most common ethical problems in competitive intelligence is the unsolicited discovery of a competitor's trade secrets. Managers in our study repeatedly recounted incidents where sensitive competitor information had been disclosed by customers, suppliers, or disgruntled former employees of their competitors. Sometimes these were not sent purposefully, but were accidentally conveyed by e-mail, or as one corporate lawyer put it, "the mysterious fax problem." Sometimes, simple eavesdropping of one's competitors at a trade show or on the plane can reap precious inside information. Quite simply, information insecurity is widespread, and there is no lack of competitors that might be tempted to take advantage.

In these cases, it is easy to rationalize that this is not as bad as industrial espionage - if you have not actively sought out the information, why should you worry about reading and using it? Isn't it the competitor's fault for not managing their data better? However, this presented our managers with some of their most difficult challenges. Use of competitor information known to be confidential can breach trade secret law and goes against the golden rule of "do unto others as they would do unto you."

Perhaps even more of a concern for companies is the revelation that a lack of attention to the ethics of competitive intelligence gathering can result in employees assuming they have tacit approval for an anything goes approach to competitors. This can instil a culture of moral laxity that incrementally takes hold in other practices, roles and functions within the organization. Bottom line: lack of attention to industrial espionage can have repercussions for the entire ethical culture of the organization.

So what can firms do? Our research suggests a range of concrete actions. For example:

- develop clear guidelines and integrate competitive intelligence into the corporate code of conduct;

- extend guidelines to business partners and back up policies with targeted training to those most at risk;

- and facilitate regular reviews of competitive intelligence practices and guidelines for all departments where competitive intelligence is an issue.

More broadly, firms should also consider supporting further professionalization of competitive intelligence through industry and professional associations. But co-operation within clear parameters; anti-competitive practices are no solution to excessive competitiveness. As with many matters of business ethics, getting the right balance is critical.

Financial Post

- Andrew Crane is the George R. Gardiner Professor of Business E thics at the Schulich School of Business at York University. The Institute of Business Ethics report, Ethical Challenges in Competitive Intelligence, by Andrew Crane and Laura Spence, will be published in December, 2008.

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Thanks Craig - I wrote a very short blog post recently on the use of competitive i... that touched on why ethics was ever a problem in the first place and how we could and should just "get over it" today.

I often refer to the "Era of Asymmetric Information" (the first generation of CI, aka 'Intelligence 1.0' in my nomenclature) as having been governed by the leverage of information gaps (e.g., "I know something you don't know") to gain a temporary competitive advantage. My cornerstone argument is based on the contemporary transition to an open source world of "info-glut" where these kinds of information gaps are exceedingly and increasingly difficult to obtain and the interpretation of all this information becomes far, FAR more important.

Thus, the first generation of CI was focused on a drive toward acquisition of these very short-lived information advantages, however fleeting and magnificently risky to the firm's reputation, in the absence of some other mandate to the firm's employees, past-present-or-future. Ergo, ethics is an issue - even employees like the recent Intel example who thought the secrets he was stealing were valid knowledge capital in his move to competitor AMD have been mislead by this persistent ignorance of CI's real definition.

Today we are living in what I have called the Era of Asymmetric Interpretation, where analysis becomes paramount; likewise, the "2.0" part of Intelligence 2.0 is no accident - Web 2.0 and Enterprise 2.0 objectify my point about culture (repeated in the article Craig shares above) almost perfectly. Everyone in the organization are low-engagement virtual members of the intelligence team and therefore must be trained, whether you like it or not, in how to do what needs to be done.

It is a governance priority for businesses everywhere that they learn what this next generation of intelligence in the enterprise is all about. If they don't, there is a real fiduciary liability for managers who fail to educate their staff in these matters.

Happily, this plays extremely well to the growth prospects for CI going forward and a HUGE marketing opportunity - we just need to get our leading lights and intelligentsia focused on CI as a cultural skill at the lowest ranks of the enterprise a much as it is a managerial one at the highest. Not as glamorous, but at least a couple of orders of magnitude larger a business development opportunity.

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