For Your Eyes Only

For Your Eyes Only

Competitive intelligence doesn't involve any dark alleys, secret handshakes or Swiss bank accounts. In fact, it's quite legal. So why are you ignoring it?By DefinitionCompetitive Intelligence (CI): the collection and analysis of public information to paint a picture of a company's competitors, customers, market or industry. Unlike its dark sister espionage, CI is completely legal and ethical.

Reader ROI

Companies that consider competitive intelligence (CI) when making strategic decisions have a major advantage over their competitors. Yet many executives don't even know what CI is. Read this article to learn -How CI can benefit your company (it could save you millions) -The surprising number of ways there are to learn about your competitors -How to protect your company against competitors' CI effortsIntelligence gathering. The term evokes images of shadowy Walther PPK-toting loners in Macintoshes living deep under cover, engaging in relentless pursuit of clandestine information and routinely putting their lives on the line. Their nerves are steel, their tools of trade deception and misdirection, their ethics malleable. Their primary aim in life is to find out far more about their enemies than their enemies will ever find out about them -- whatever the danger and to hell with local law. The images -- unrealistic as they are, a literary hangover of post-Cold War spy fiction -- help explain why far too many executives still equate competitive intelligence (CI) with espionage. Dreading possible litigation or moral opprobrium, they avoid it like the plague. This attitude does them ill service, because competitive intelligence is one of the single most powerful weapons available to executives today, and can provide at least some results using perfectly legal, ethical and inexpensive information-gathering techniques.

CI can -- and has -- given companies several years lead-time on new technologies coming out. It can -- and has -- warned companies about competitors trying to force prices down and negotiating deals with their customers. It can -- and has -- helped companies react to competitive threats from abroad. Better still, intelligence operations are hard to detect and all but impossible to prevent.

Using CI to anticipate the market and the activities of competitors can prevent bad decisions, reap huge savings and deliver significant competitive advantages. And thoughtful use of CI has another benefit: executives become aware of the dangers of making their own company's information too openly available. Used properly, the experts say, CI can underpin strategic planning and help organisations maintain their competitive advantage. Companies can conduct CI through intelligent use of open source information (OSI) -- information freely available in libraries, corporate reports, newspapers and magazines -- and, of course, on the Internet. According to Vernon Prior, vice president, Society of Competitive Intelligence Professionals, a recent study of 24 US defence and aerospace companies found that three organisations using business intelligence obtained outstanding results in several categories of performance. Against an industry-average bid success rate of 18 per cent, the top three companies won 87 per cent, 75 per cent, and 57 per cent of bids respectively. Better yet, while the industry average return for every dollar spent on proposals was $US78, the top three averaged $US225.

Yet according to US consultancy Herring & Associates president Jan Herring, even with more than 90 per cent of Fortune 500 companies having an "intelligence group", less than 10 per cent of senior managers understand CI and use it wisely. CI is filled with uncertainty and requires a futuristic outlook, which conflicts with the business fundamentals that executives are conditioned to care about. "A large percentage of business managers just have no way to learn about this subject," Herring said. "It's not taught in business schools, and it isn't seen as a management discipline."In Australasia CI is sorely under-used -- as delegates heard late last year at the Optimising Open Source Information Conference that the Australian Defence Studies Centre hosted in Canberra. (Many of the papers are now on the Internet at When Sean Trengrove and Barry Vryenhoek of the NZ Army ran a survey on the state of competitive intelligence within New Zealand private and public sector organisations they found their subjects fully recognised the need to monitor the competition and the competitive environment. Yet the companies remained predominantly domestically focused and insular in outlook, making them vulnerable to the threats of external or international competition. "If the business environment is very competitive it would be logical to suggest that companies would have established sophisticated information-gathering processes supported by modern analytical and dissemination methods or a competitive intelligence process.

This is generally not the case" says Trengrove and Vryenhoek's report. Instead competitive intelligence processes were narrowly focused. They were not integrated and did not effectively use all the information sources available to ensure the quality of information before a company embarked on processing and analysis.

In particular the survey found severe under-use of external sources, databases and electronic material and government-generated information. The results suggested few organisations seriously focused on possible long-term threats, while existing information and intelligence systems appeared muddled and unsophisticated, putting those companies below world best-practices standards in maintaining robust competitive intelligence systems. Sadly, the authors found a fair correlation between the findings of the New Zealand survey (March 1997) and a more recent Australian survey and concluded both nations needed to improve competitive intelligence processes.

Vast Resource

Intelligence gathering has been practised in all sorts of competitive situations for millennia. Almost 2500 years ago, General Sun Tzu, author of The Art of War, said: "A hundred ounces of silver spent for information may save ten thousand spent on war." And Sun Tzu didn't even have the World Wide Web at his disposal. The development of Internet technologies including the World Wide Web has made staggering amounts of OSI available to all. Used wisely, the information can be of benefit to the corporate bottom line -- and you don't even have to give your executives spy cameras and a double-O rating to achieve it. While OSI is far from the be-all and end-all of CI, there's enough information out there -- freely available to any who care to look -- to be worth exploiting to the hilt. Martin van Creveld, another speaker at the Optimising Open Source Information Conference, professor at the Hebrew University, Jerusalem, and an expert on military history and strategy, said it would be naive to think that -- either in Israel or elsewhere -- open sources could ever completely substitute for covert ones. Yet Israeli intelligence does make wide use of available open sources, including the Internet and older printed sources and the electronic ones developed during the first half of the twentieth century. A great deal of economic, industrial and technical information is available in open sources of every kind and used to the utmost, Creveld said.

Now companies must learn to integrate such information into their environment and to manage it effectively, while learning how to reduce information glut and to separate the chaff from the wheat. "Intelligence operations are relatively cheap, very effective, and carry little risk; they are difficult to detect and almost impossible to prevent. Given adequate training, your staff will be able to employ information-gathering techniques that are perfectly legal and ethical while at the same time being highly effective," Prior said. But there are considerable risks associated with use of OSI, even if they don't involve interrogation and torture. According to two long-time researchers, one risk is a lack of trust in the information provided, and that risk is best managed by learning to effectively handle your people. The mission of Nola Adcock and Derek Woolner, of the Commonwealth Department of the Parliamentary Library is to support the parliamentary process by providing senators and members with quality information services, analysis and advice. The two researchers have embraced sophisticated information-gathering and analysis skills in the interest of improving the quality of members' parliamentary deliberation through access to an independent source of information and advice. "If intelligence in the military sphere is designed to dissipate the 'fog of war', interpretation and analysis in the parliamentary setting is needed to illuminate the clamour of opinions -- performing the task common to any intelligence operation, generally typified as converting 'information' and 'data' into 'knowledge' and, sometimes, 'wisdom'," Adcock said.

Since the interpretation and analysis function had to reflect the purposes of the operation, it was essential that Information and Research Services (IRS) staff were fully informed of the intended recipient's requirements. "When our procedures work at their best, the IRS information specialists and analysts and parliamentarians form a loop where each influences the other. The more we know about the nature of the parliamentarians' needs for information, interpretation and analysis, the better the IRS specialists can target their responses. The more the parliamentarians know about our processes and capabilities, the better the use they can make of our expertise," Woolner said. Such were the measures that helped develop that important but potentially fragile degree of trust that closed the loop in an effective intelligence operation. "Simply, the process will work best where the requirements of each person in the loop are understood by all parties involved," he said.

Deep Digging

When it comes to data mining of open sources, it can take a lot of mining to turn up nuggets -- and some nuggets might not be refined at once, noted Intellectual Capital principal Dr David Stephens and Research Services director Rod Olsen in their conference paper. "One of the terms of art in Internet searching, 'data mining' is misleading if it makes us think of open cuts -- just whack in a few sticks of gelignite, press the plunger and expose the whole seam," they said. "The better analogy is deep-lead mining with the lift taking us down a kilometre or so and the tunnels heading out in a number of directions, intersecting and overlapping, but in accordance with some overall map." Such are the complexities of effective Internet searches that the authors recommend the use of contract Internet researchers. Properly briefed, these could devote the necessary time to the pick-and-shovel work of delivering the rich ore that adds value to commercial, government and academic endeavours.

Think of them as spies without the licence to kill.

Police have traditionally relied upon multiple information sources as part of their day-to-day operations, said NSW Police Service State Intelligence Group director Nola Watson. Her group is the central intelligence entity providing strategic and operational support to the Service. Watson said rapid development of electronic forms of open source information had led to a dramatic increase in the quantity and variety of data and reference material available to law enforcement. Now the Service has established an Online Unit to maximise the use of the Internet within the Service. The unit has the dual role of supporting analysts in the production of strategic assessments and of providing information relevant to the tactical and operational needs of front line police. The Service is also exploring further methods and systems to capitalise on this potentially rich resource for policing in Australia. Analysts use open source information to conduct research on specific areas of crime, and access news services from Reuters and AAP, as well as media feeds for newspaper, radio and television. Strategic analysts also use the Internet to access information vital to law enforcement strategic analysis, including government data sets and publications, academic and research papers and commercial information.

But while Watson said OSI could be a valuable tool for predictive criminal intelligence, the State Intelligence Group also sought to temper police enthusiasm for OSI with a respect for its shortfalls. "The backbone of good intelligence is credibility and reliability of the source. Some users may not be aware that much of the information found on the Internet is unevaluated and unsubstantiated. "A report from the one source may be quickly disseminated electronically and appear in a number of manifestations. Thus, what appear to be different sources of data may, in fact, all trace back to a single origin," Watson said. "Most 'free' information on the Internet has little evaluation or independent analysis. Specialist online services that charge a fee add a layer of filtering and reliability. However, even they may be skewed by a particular ideological, philosophical or political orientation." Moreover, Watson warned, the sheer volume of information can also swamp the operational police officer.

To help minimise the risks, Local Area Commanders are encouraged to limit Internet access to intelligence officers trained in search techniques.

Equally aware both of the value and limitations of OSI is the Australian Defence Organisation (ADO), said PhD student and army captain Jeff Malone, platoon commander at 1 Intelligence Company, Enoggera, Queensland. To him we will leave the last word. A systematic OSI program had only begun to emerge within the Australian Defence Organisation in the previous 18 months, Malone said. The strategy was based on awareness that a systematic OSI program within the ADO had the potential to improve greatly the provision of intelligence support to ADF in precisely the kinds of missions on which it was likely to be deployed. "That said, OSI is no intelligence panacea. OSI cannot replace intelligence derived from covert collection means. What OSI can do, however, is allow Australia's scarce covert collection capabilities to be more efficiently targeted, be this in support of ADF operations or in support of other national goals," Malone said. "More to the point, OSI provides a means by which intelligence support can be provided to operational deployments that are otherwise unsupported (or at least, supported poorly) by traditional intelligence collection means," he said.

Society of Competitive Intelligence Professionals( Chapter of the Society of Competitive Intelligence Professionals: SCIPAUST (02) 9411 3900Technology resources to sharpen your competitive edge Information Gathering -Internet -Electronic news delivery services -Automated alert software Information Storage -Databases or data warehouses -Information security measures Information Analysis -Data mining -Data visualisation -Simulation modelling -"Intelligent" systems that analyse data and offer recommendations Information Dissemination -Intranet -Lotus Notes or other groupware -E-mailVulnerable Points What your competitors use to get the skinny on your company -Executive speeches and interviews -Engineering and scientific presentations at conferences -Government permits and loan forms -Web sites-Suppliers or partners who brag on your -- or their behalf -Press releases-Help wanted ads-User manuals-Tours of your facility-Overheard conversations in public places -Unsolicited phone calls answered by overly obliging employees-Executive biographies Softly, softly Published information (including that available on the Internet) is not always the most important source of intelligence, nor is published information always accurate, said Vernon Prior, vice president, Society of Competitive Intelligence Professionals. Indeed, the real gems for intelligence purposes are derived from soft information; in this context, the most useful intelligence-gathering tool is a simple contacts database. "Many companies go to considerable effort and expense to build massive databases -- designed either to cover everything they will ever need, or as a tool for database mining. The most useful, however, is one that gives access to contacts, experts, networks, existing and potential customers or clients, and so on; to sources of soft information, in other words," Prior said.

Since routine, repetitive information is rarely of any value in the intelligence role, one must look for the unusual: changes and trends; extraordinary events; deviations from the norm; and startling, surprising, or bizarre happenings. And the most likely source is soft information: including rumour, suggestion, opinion, gossip, hints, and speculation. "Because it invariably constitutes the first evidence of impending change, [soft information] represents the more colourful and significant parts of the intelligence puzzle. It can act as a trigger in identifying potential business opportunities, and it can reveal innovative ideas and technologies that may be adopted with advantage," Prior said. You can find soft information by direct observation, by browsing the Internet, or through exposure to the mass media, while keeping your mind alert for possible triggers. Prior lists direct observation, customers or clients, competitors, trade displays and exhibitions, industry and professional associations, seminars and conferences, investment brokers or financial analysts, mentors or advisers, journalists, editors, and specialist writers as likely sources of soft info. All should be keeping that contact database as full as possible.

Support Your Local Intelligence Group

For all the reasons executives ignore CI, there are many more compelling reasons to embrace it. Simply put, CI generates mammoth bottom-line results.

And there are many other unquantifiable benefits. "What's the value of competitive intelligence? I might be able to give you three or four years' lead time on new technologies coming out. What's the value in that?" says Jonathan Calof, associate professor of administration at the University of Ottawa.

Robert Flynn, former chairman and CEO of The NutraSweet and now chairman of the board at AMBI, a microbiology company in Tarrytown, New York, is one of the few executives willing to go on record with how much CI was worth to his company -- he said in a speech that it had saved NutraSweet more than $US50 million per year. At the time of Flynn's departure, NutraSweet's tabletop product became part of Chicago-based Benevia. Benevia stopped conducting CI when its patent on aspartame ran out, says Flynn. But when NutraSweet still had the patent, CI was a critical resource in fending off competitors.

In 1990, two years before the patent ran out, the company started hearing rumours about other companies preparing to low-ball aspartame prices and negotiate deals with NutraSweet's customers. "We knew that if we guessed wrong and our customers weren't bluffing, we could lose two-thirds of our business," says Flynn. "CI was incredibly important in trying to gauge which companies around the world were in a position to build aspartame plants and produce a quality that would be acceptable to Coke and Pepsi." Using EPA filings, zoning documents for competitors' manufacturing facilities and conference proceedings at which competitors spoke, NutraSweet assessed its competition and offered discounts to all the right customers. "We ended up maintaining all of our customer relationships," says Flynn. Because Flynn was directly involved in NutraSweet's CI process, he had access to intelligence that might otherwise have been blocked due to internal politics. Often, the CI group's findings conflicted with the inclinations of other departments. For example, when several executives wanted to expand into a new market, CI said the plan was inadvisable because that country's government was determined to protect its sugar industry and would never allow an aspartame plant on its soil. Similarly, when NutraSweet's marketing department pushed to launch an $US86 million brand positioning campaign, CI determined it would be a waste since the company's closest competitors were at least five years behind. Flynn often went with CI's recommendations over those of other departments. "The CEO has to take his staff and senior management along so they don't take pot-shots at the CI people," he says. "It puts the CEO in the middle -- but then again, it's better to be in the middle before the fact than after the fact."Do Unto OthersIf arguments about the financial benefits of CI (competitive intelligence) leave you cold, consider another powerful reason for adopting it: the fact that your competitors may already be using it against you. How can you protect yourself from the probing eyes of your competition? Jennifer Bresnahan, writing for US CIO magazine, extracted a few ideas from John McGonagle, managing partner of US-based CI consultancy The Helicon Group and co-author of Protecting Your Company Against Competitive Intelligence (Quorum Books, 1998).

First figure out what you should protect. You can't hope to protect all your information from the outside world and it would be dangerous to try, since being invisible to your competitors means being equally invisible to your customers. Protect only information it would be difficult for the competition to get their hands on without your cooperation, such as your intentions, goals and targets.

Next, look at the methods and data analysis techniques those responsible for CI within your own organisation are using. If they find financial ratios or turnaround time helpful in analysing the strengths and weaknesses of your competitors, it's a fair bet those competitors are using those very measures against you. Deprive them of at least one key piece of information they need to calculate those measures.

Finally, develop and articulate an enterprise-wide defensive policy that defines ground rules for employees who need to know competitors are hanging on their every word. If they understand why they shouldn't answer questions from unsolicited phone callers or brag about the company's latest invention to fellow attendees at a conference, they are less likely to suffer from loose lips. Let them know they should tell the public only the barest minimum. For example, they can tell someone that the company is growing rapidly -- just don't tell them how rapidly.

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