Chapter 1: Understanding Intelligence

Are there corporate spies? Sure. Do corporate spies account for most corporate success stories -- or corporate failures? No. Most corporate victories result from well-designed products or services, hard-won marketing campaigns, and the strategic use of intelligence. Most failures come from a combination of bad timing, poor judgment and misuse or underuse of business intelligence. Certainly, protect your corporate secrets. But don't equate a competitor's market savvy with illegal activity. A competitor that knows its market, its competition and how to leverage what it has learned is one that will continue to legitimately win in the marketplace.

(By the way, do what I do to learn about the spy business. Pick up a LeCarre, Forsyth, or Ludlum novel. There is certainly fact behind their fiction. Just don't apply too much of their fiction to the facts of your business).


What Is Competitor Intelligence?
Sometimes it's almost easier to describe what intelligence is not, rather than what it is. It is not reams of data base printouts. It is not necessarily thick, densely written reports. And most certainly it is not spying, stealing or bugging. In its most basic description, intelligence is "analyzed information."

It is intelligence -- not information -- that helps a manager to respond with the right market tactic or long-term decision. For example, to say that "the competitor's plant is up to 90% of capacity," or "the bank is launching a new product promotion," is merely information. It becomes decision-producing intelligence when you can conclude that "the manufacturer has reached a cost position that will knock us out of the market, unless we can reduce our overheads," or "the bank's new product presents no immediate threat and is only a me-too introduction. We can wait and watch for six months..."

Your analysis may end up being a 30-page report or just a two-sentence statement. (Don't confuse volume with value!). Nevertheless, if the resulting intelligence helps you succeed or overcome a market barrier, then it has done its job.

Should you think competitor intelligence is just some more "business-babble" for the 1990s, consider the business success stories of the past -- J.P. Morgan, Nathan Rothschild, John Rockefeller-- and the present -- Bill Gates, Akio Morita. They all have used intelligence. They just never gave it a name. By giving it a label and learning how to use it, you can understand how to turn information into a powerful weapon, a competitive advantage.

Unfortunately, the power of the intelligence concept is often diluted because the term itself is ill-defined or misunderstood. Popular business magazines frequently use the labels "data," "information," and "intelligence" interchangeably. You will more readily recognize, and thus effectively use, intelligence if you understand how very different these terms are. As you will see, companies often have a great deal of data, but do not develop it into intelligence. The example below shows how data and intelligence can lead you to two very different conclusions about a company.

Expert Advice: On the defensive? Don't ignore the intelligence!

As you will see from the upcoming sources and analytical techniques presented in this book, whether you are a small grocery store or a large conglomerate, information is a relatively inexpensive and easily obtainable commodity. Electronic data bases, CD-ROMs and other new information vehicles allow anyone the freedom to ask most any question about the competition he or she wants. Just keep asking the right questions and remember to analyze the resulting answers.

A final point here: Like a container of milk, intelligence has a short shelf life. Use it, apply it, but don't ignore it. Once intelligence is allowed to sit around and not be used, its value declines rapidly.


The Cardinal Rule of Intelligence

We all imagine our competitors entrenched in medieval castles with 30-foot thick walls. Surrounding those castles are deep moats infested with crocodiles and man-eating piranha. On top of the castle's parapets are the competitor's managers, wearing helmets and holding vats of oil, ready to pour the oil down upon any approaching competition. You may feel the competitor is virtually impenetrable -- at least from an information standpoint.

In reality, quite the opposite is true. Each and every day, the competitor inadvertently throws down informational bridges over the moat, allowing outsiders to peek into its operations. These bridges are the result of the many business transactions companies conduct.

The world's mightiest multinationals hire and fire, open facilities, deal with suppliers, negotiate with national, state and local governments, attend scientific conferences and present papers. Each and every one of these activities generates information about that company.

The cardinal rule -- wherever money is exchanged, so is information -- explains a great deal about how much information is truly available in the marketplace. This rule applies to finding information on customers, suppliers, and distributors, -- not just competitors.

With a myriad number of transactions, how can you identify the important ones? As a start, look at your own operations and see how you do business. For example, if your question involves your competitor's information systems, speak to your director of information systems and find out what hardware and software suppliers the systems group uses and whom they talk to in the industry. Most likely, the competitor does business with the same or similar groups of suppliers. Start your research with this thought in mind: No matter how big and powerful (or small and supposedly secretive) the company, it must deal with the outside world. The minute it does, it has to pass along information. Use this immutable intelligence law as your guide, and you will likely find the information you need. Later chapters will discuss specific interviewing, research and analysis techniques.

Are There Truly Any Business Secrets?
The answer is yes. Within the bounds of ethical and legal research techniques, there are definite secrets. The Coca-Cola formula or the source codes for a computer program are trade secrets, and the only way to obtain them is through theft or subterfuge.

According to James Pooley in his 1982 book, Trade Secrets (McGraw-Hill), a trade secret is "...any formula, pattern, device or compilation of information used in a business that gives the owner an advantage over competitors who neither know of nor use it."

Practically speaking, a trade secret may represent only 5% of all the information you may need on a competitor. In many respects, it is the least important piece of that competitor's makeup.

Unearthing trade secrets is not what most companies need in order to compete. They need tactical and strategic intelligence they can develop from the information sources all around them. For instance, does Pepsi truly need to know Coke's secret formula? What it actually needs to know is the style of its rival's vending machines, its new pricing and advertising strategy or its distribution plans. These are not trade secrets, but examples of intelligence that Pepsi can develop as it strives toward long-term success.

Your needs are very much like those of Pepsi. You too can determine your competitor's, customer's or distributor's tactics and strategy. The information is out there -- if you know where to look.

The Pointillist Painting . . . An Intelligence Metaphor
If you understand how impressionist paintings are created, you understand the fundamentals of intelligence.

Stand six inches from a Seurate or Monet pointillist painting, or a newspaper photograph. Up close all you will see is an assembly of dots in various shades. There is no pattern, no sense of the complete image at this close range. Take a few steps back and you see an entire picture. You see forms, images, shadow and light.

The same process can be applied to the development of intelligence. As you are collecting the bits and pieces of data, you often do not know how they will all fit into the larger picture. It is only when you see all the "data dots" lined up next to one another that you see the entire image. Intelligence is exactly this: a combination of dots made whole by comparison.

This artistic metaphor teaches the intelligence-gatherer many lessons:

1. You Must Find Information; It Does Not Find You: Eleventh-hour research assignments are almost sure to miss critical points because the information you seek is not there when you want it.

2. Intelligence is Constant: You must track your competition (or your customers, distributors, and suppliers) constantly, otherwise you may misinterpret what you find. You need the entire picture, or at least the most complete picture you can assemble in a given time period.

3. Competitive Assessment Is a 3-D Picture: Information floats in time. Just as competitors change, so does their competitive environment. You must find a way to capture competitive snapshot, continuously, historically -- not just during strategic planning time. .

Ethics and Legalities
Most of the information you will need is in the public domain and will not infringe upon any laws or personal ethics. That point aside, most lawyers will also tell you that what is legal is not necessarily ethical. Laws may vary from state to state, and from country to country, but they exist and their boundaries are clear.

In the world of ethics, boundaries can become dangerously fuzzy. That is why it is often easier to discuss and set legal limits on what kind of information you can gather and how to collect that information. Personal ethics vary widely and often involve individual, rather than group decisions.

For a more complete discussion on the subject of intelligence and ethics, I refer you to Ethical and Legal Guidelines (Chapter 9) of Monitoring The Competition (Fuld, John Wiley & Sons, 1988).

The Legal Issues
News articles worldwide frequently offer stories of patent infringement, outright theft, and all sorts of illegal acts. Some of these illegalities are easy to understand and require little discussion. Other information-related legislation, such as antitrust, enter the realm of the arcane and are little understood by the average business person. At the same time, every intelligence analyst needs to realize what those legal limits are and how to comply with them.

The first rule: Contact your company's legal department for details on laws affecting your industry or business activity. Surprisingly, you might discover very few instances where Legal will tie your hands. In any case, as the axiom goes, ignorance is no excuse in the eyes of the law.

Antitrust and Sharing Information

Antitrust laws in the United States explicitly prohibit companies from fixing prices or exchanging price information. The legislation's primary goal is to stop companies from conspiring to monopolize markets. One way an analyst could contribute (at least on the surface) to monopolizing these markets would be to swap prices with an employee at a competing company. The Justice Department might see this act as an attempt to control a market.

For more information on antitrust laws and their impact on overall business activities, I recommend reading the Antitrust Compliance Manual: A Guide for Counsel, Management and Public Relations, Walker B. Comegys, Practicing Law Institute, NY, April 1986).

Ethical Considerations . . . What Are Your Personal Limits?
Make no mistake: A person collecting information can be as aggressive as any sales person trying to win an account or a purchasing manager who tries to win the best deal with a supplier. Your goal is to gather and use information properly to help your company. It is a legitimate job and a necessary one. But just as a sales person or a purchasing manager can step over the ethical line, so can the intelligence analyst. Because this is a dilemma that potentially must be addressed on a daily basis, it's important that you consider the following questions early on in the process:

• How should I represent myself?
  
  
• Do I identify my sources in a report?
  
  
• Did I "trick" the individual into giving me the information?

The rule drives home the point that unethical behavior can quickly translate into lost dollars. Most information-gatherers who keep the Harm Rule in mind will find themselves stopping at the same point, often a conservative point. They will ask themselves if they are possibly causing harm to their company by going one step further. If the answer is yes, they will stop.


Do's and Don'ts For Your Company
I have saved this section for last, because formal codes of ethics are only useful if they are read. If a code is vague or difficult to memorize, it becomes an unused fixture. Nevertheless, organizations need to establish some sort of code if for no other reason than to declare a position.

The Society of Competitive Intelligence Professionals, based out of Alexandria, Virginia, has published the following ethical guidelines:

• To continually strive to increase respect and recognition for the profession at local, state, national and international levels.
  
  
• To pursue his or her duties with zeal and diligence while maintaining the highest degree of professionalism and avoiding all unethical practices.
  
  
• To faithfully adhere to and abide by his or her own company's practices, objectives, and guidelines.
  
  
• To comply with all applicable laws.
  
  
• To accurately disclose all relevant information, including the identity of the professional and his or her organization, prior to all interviews.
  
  
• To fully respect all requests for confidentiality of information.
  
  
• To promote and encourage full compliance with these ethical standards within his or her company, with third party contractors, and within the entire profession.

1. Thou shalt not lie when representing thyself.
   
   
2. Thou shalt observe thy company's legal guidelines as set forth by the legal department.
   
   
3. Thou shalt not tape-record a conversation.
   
   
4. Thou shalt not bribe.
   
   
5. Thou shalt not plant eavesdropping devices.
   
   
6. Thou shalt not deliberately mislead anyone in an interview.
   
   
7. Thou shalt neither obtain from nor give price information to thy competitor.
   
   
8. Thou shalt not swap misinformation.
   
   
9. Thou shalt not steal a trade secret (or steal employees away in hopes of learning a trade secret).
   
   
10. Thou shalt not knowingly press someone for information if it may jeopardize that person's job or reputation.

• State the facts with little or no dramatization, no "purple prose."
  
  
• Support all statements with sources (either printed documents or interview transcripts)
  
  
• Avoid flashpoint words, such as dominate, that could set off an antitrust law suit.

Public Does Not Always Mean Published
We are all taught, from grade school on through our university training, that whatever is in print is true and whatever is not in print does not exist. Of course this sounds absurd, but notice how people truly react. If the news is in The Wall Street Journal it's credible. If you simply heard the same piece of news, it's deemed a rumor.

In stark contrast to this notion, you will find that most competitor and market information is out there and available, just not in printed form. Based on the thousands of research projects my firm has completed, I would guess that the vast majority, arguably less than 1% of all business information will ever find its way to print.

This brings to mind another perplexing question. If so small an amount of information is in print, why use published sources at all? The answer is that published sources (data bases, government filings, news articles, etc.) can lead you to the people who know the information you need. That is why it is so critical to know where and how to find the vital published information. Without it, you will have a hard time finding the experts or other primary sources.

The Right Stuff: Traits to Watch For
Expert corporate intelligence analysts are often hard-nosed perfectionists --at least when it comes to finding and analyzing information. They can smell out a source. They doggedly pursue answers to particularly tough questions. Most important of all, good researchers are not born, they are molded and shaped.

Something else to note: educational degrees can be almost meaningless when it comes to succeeding as an interviewer or analyst. Education certainly can help here, but experience and talent are far more important. A business or engineering degree, for example, teaches a general body of knowledge; it does not teach you how to pursue a line of questioning, or how to read the "rust on the rails." I have found talented intelligence analysts packing a raft load of diplomas and others with little more than a high school education. Do not ignore a prospective analyst's education, but also concentrate on the following specific traits:

1. A Good Listener: I have formally interviewed scores of intelligence managers and asked them what trait they considered most important. Almost universally, they cited "listening." Your best listeners may fall far outside your own market research or intelligence group. The best sales people are terrific listeners. Your "listener" may come from R&D, Customer Service, Field Engineering, or any number of groups within the corporation.

2. Creativity: The successful analyst spots the "rust on rails," the oddball or quirky information that may indeed be the smoke trail left behind by a competitor.

3. Persistence: Rock climbing is the image that comes to mind when I think of the high-performance analyst. Not giving up, until he or she latches on to some sort of an answer -- or onto another solid lead. The persistent analyst will not give up just because a contact firmly states: "If I don't know it, it just doesn't exist." Nine times of ten, I have managed to prove such a source wrong. If I couldn't find the exact answer I wanted, I found a proxy. You can, too.

4. Strategy: In order to save precious time -- especially with an eleventh-hour deadline -- the astute researcher will devise a plan of attack, an efficient means to find the vital intelligence. Random research means wasted time, lost dollars, and failure to meet deadline.

5. Experience: Think Fat Rolodexes. Companies need to identify or hire analysts with 5, 10 or 20 years of industry experience. These are individuals with the long list of contacts and industry experience. They can quickly qualify an answer, add value to the information and find someone else to confirm or disprove a so-called rumor. The young M.B.A., fresh out of school, generally cannot accomplish the same feat. So take heart, if you are an engineer, sales person or other manager with years of industry experience, you may be a far better analyst than you ever thought you were. Knowing whom to contact and what questions to ask is critical. That takes experience.

Expert Advice: Rust, Chicks and Jade...The Tale of Intelligence

In all this discussion of traits and experience, also be aware that the analyst needs some basic information-related skills. These skills include:

Understanding data bases: You need to become a good consumer of intelligence, but not necessarily an information technician. Have your librarians, or a company such as Dialog, train you in the structure and use of on-line data bases. Just knowing what they are and can do for you will help you ask better questions on your next literature search.

Know your library: Too many executives know where their library is but not what it contains. Take a detailed tour of its collection, particularly of the files and unique internal data bases its staff has built.

Train on software packages: You will find that a spreadsheet package or a statistical analysis package may save you a great deal of analytical time in the long run.

Writing and Interviewing: Find ways to improve your communications skills, writing and interviewing in particular. Good analysts know how to state a fact convincingly and quickly. They also know how to make people listen and respond to their questions.

Assembling Your Research Team or Cluster
We have already discussed what characteristics make a good researcher or intelligence analyst. Taking that thought a step further, you also have to ask yourself, "What individuals and roles does a well-oiled intelligence team consist of?"

The ideal team consists of an analyst, a project manager and a librarian. For purposes of this discussion, each position is defined as follows:

1. Librarian/Data base searcher: This person will gather all published data and organize that data.

2. Analyst: The individual who conducts the interviews and gathers other unpublished data, and then adds value to the resulting information by analyzing it.

3. Manager: A manager will coordinate the research team and possibly settle any political issues with clients.

What if you could not afford a formal three-person team, such as the one described above? Understanding that one person may wear all three of the above hats, which job is most critical? Which job adds the most value to the ultimate product -- the intelligence?

Certainly the librarian serves a critical role, as does the manager. But analysis is the watchword here. Without it you do not develop an accurate picture on the competition. So, next time you need intelligence and must hire someone to meet that need, think analysis and think analyst first. The analyst remains the cornerstone for any intelligence effort.

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