So how do companies find out what a rival is up to before its latest offering appears on the supermarket shelves? There's certainly no shortage of published information and professional advice available for those who want to step up their competitive intelligence activities. There's also no shortage of corporate spies at their disposal if they prefer to indulge in a spot of industrial espionage. While the casual observer may snigger at tales of cloak and dagger subterfuge to learn the secret behind a rising pizza crust or the latest toilet cleaner, the stakes are ridiculously high. Even a slight advantage can translate into millions of pounds gained or lost. Standard practice, according to US corporate espionage supremo Marc Barry, is to hire an outsider to do the dirty work and ensure he signs documents to the effect he will abide by a strictly ethical code of practice. Then, when he's caught rifling through the dustbins of a your biggest rival, you deny all knowledge and legal responsibility. The company is exercising "plausible deniability", says Barry, who is happy to share his expertise with corporations intent on studying the enemy's every move. So his story goes, Kraft discovered it was the victim of corporate espionage only when it saw a copy of Barry's best seller, Spooked: Espionage in Corporate America, last December. In it, New York based Barry recounts that it took him fewer than two days of phoning Kraft, local assessors offices, packaging companies and planning officials in a series of elaborate guises ­ from environmental activist to cardboard manufacturer ­ to gather a wealth of commercially sensitive data on the production capacity and marketing plan for Kraft's new DiGiorno pizza on behalf of rival Schwan's Sales Enterprises. Ironically, when Kraft began investigating Barry's activities ­ which were back in 1997 ­ it stumbled on what it alleged was a second case of corporate espionage, again involving Schwan's, the number two pizza maker in the US. As a result in February, Kraft filed a lawsuit against its rival claiming that Schwan's had violated Illinois trade secrets legislation when an ACNielsen Corp employee quit to take a job with Schwan's and fed the company confidential data about Kraft's pizza brands and, in the process, broke his confidentiality agreement with ACNielsen Corp. Kraft and Schwan's will say only that they have come to a "mutually agreed settlement" ­ the terms of which have not been disclosed. In his book, co-written with Forbes reporter Adam Penenberg, Barry says industrial espionage is the corporate equivalent of a threesome­ "Lots of people are doing it, but no one's admitting it. "I mean, ask yourself, what happened to all those hardcore spooks after the Berlin Wall came down and the Cold War was over? They had to find jobs somewhere." According to former US intelligence officer John Nolan, industrial spies get most of their information by standard ruses, such as the potential investor who'll call a firm and say: "I'm thinking about investing a lot of money in your company and I'm dying to know your latest R&D plans..." Like most competitive intelligence professionals, however, Nolan is contemptuous of those resorting to James Bond style tactics to acquire information. "You don't have to do the Mickey Mouse stuff to get proprietary information," he insists. "We get this kind of thing all the time by calling the right people, going through public records and putting the pieces of the puzzle together." The US Society of Corporate Intelligence Professionals (SCIP) acknowledges the presence of rogue operators but emphasises that dumpster diving' is not the way to get good information. Corporate affairs director Stephen Millar says some companies have even started putting false information in the corporate dustbin to mislead over-eager competitors. Marc Barry, however, is SCIP's public enemy number one. To the CI professional, spying represents a failure of competitive intelligence, says Millar: "Almost all the information a CI professional needs can be collected by examining published sources, conducting interviews and using other legal, ethical methods." Competitive intelligence expert and consultant Leonard Fuld is equally disparaging of self-confessed dumpster divers like Barry. "Competitive intelligence is an art," he says. "In my opinion, if it's in the dumpster, then its value is probably trash. Data doesn't magically lie in a secret safe or garbage can. By using industry expertise instead of gumshoes, you avoid crashing through china shops in the hope of locating the prize." So what do the experts make of the recent antics in the US involving a competitive intelligence operation that allegedly used third-party and in-house investigators to acquire the secrets of Unilever's haircare marketing plans for Procter & Gamble? Fuld, whose Massachussettes based business also has offices in London's Conduit Street, is clear: "If P&G had applied true competitive intelligence, it would never have found its way into the press in the first place." Few details of the case have been disclosed except that P&G paid Unilever an undisclosed sum and fired employees who had contracted third parties. It was widely reported that P&G itself alerted Unilever when it discovered the operation had breached "internal guidelines". Before the two settled out of court with a sum reported to exceed $10m, P&G chairman John Pepper offered his personal assurance to Unilever chief executive Niall Fitzgerald that P&G would not use the information gleaned to advance its own haircare business. Acres of column inches have subsequently been devoted to the veil of secrecy surrounding P&G's own alleged intelligence network which, it is claimed, operates via a safehouse in the US known as the ranch'. Head office is known as The Kremlin'. However, most CI consultants say dustbin rifling is not endemic in industry. "For the most part," says Fuld, "spies are found in espionage novels, not in the executive suite". So what is the secret of good, honest competitive intelligence gathering? The experts say it is to know your enemy. As Fuld puts it, if you only discover he has a new weapon when you confront him on the battlefield ­ or the supermarket ­ it's far too late to defend yourself, let alone take the offensive. First mover advantage is everything, whether you are racing to build the first atom bomb or the latest concept in liquid detergent. The bottom line, literally, is that companies with well established competitive intelligence programmes enjoy greater earnings per share than companies without them. Former Nutrasweet chairman Robert Flynn estimates his company saved $50m every year from CI from as far back as the early 1990s ­ a "combination of revenue growth and revenue not lost to competitive activity." So how does the grocery sector rank in the competitive intelligence stakes? Not surprisingly, manufacturers were reluctant to divulge any details of CI activities. The official line from PepsiCo ­ a major player in an industry that CI experts say is "exceptionally advanced" in the intelligence field ­ is "Pepsi will not discuss how it gathers competitive information". A spokesman adds: "I'm confident that we're not up to the P&G nonsense though." Heinz UK says it reads The Grocer to stay at the cutting edge, while Nestlé reports that "no inhouse staff are deployed for this sort of thing". Most manufacturers and retailers say mutual suppliers are the best source of intelligence, along with good old fashioned rumours picked up on the industry grapevine. Another particularly effective means of finding out what your rivals are up to is poach their staff. Interestingly, several UK companies suggest that corporate intelligence is "something the Americans do" or is "rather alien to our corporate culture". However, Richard Withers, who heads Fuld's London office, disputes that view, saying there is a significant and growing demand for the services of competitive intelligence professionals in the UK, especially since the lawsuit filed by Unilever on Procter and Gamble. And in the US SCIP's membership is growing 40% year on year. Withers says that UK companies are more likely to label competitive intelligence as market research' or market analysis'. "The European competitive intelligence market is certainly less mature than in the US, but it's growing all the time," he maintains. "There has been a definite spurt of activity in consumer products, especially over the past six months. We've been training staff and skilling up people right across businesses. But it's not about training one individual, rather switching on everyday employees to competitive intelligence." Just because a manufacturer or a retailer haven't got a competitive intelligence manager on their payrolls does not mean they don't have highly sophisticated intelligence gathering systems to keep tabs on rivals, says Withers: "All large firms have some labour devoted to monitoring the competition." Senior executives can no longer rely on their instinct and intuition to make strategic business decisions, says SCIP's Millar: "There's too much at stake." Back in 1997, research by The Futures Group showed that 82% of companies with an annual turnover exceeding $10bn had a system in place for collecting intelligence on rivals. Fuld, who has dealt with more than half of the Fortune 500, says that if your biggest rival is able to put out a better quality product than you at a lower price, you need to know how he's doing it. "Corporate intelligence is a tool to alert management early to both threats and opportunities. It offers approximations and best views of the market and the competition. It is not a peek at your rival's books," he says. He cites an enterprising example from Mitsubishi, which employed engineers to measure rust on a railtrack outside the manufacturing plant of a US competitor so it could estimate how often trains passed by and deduce from that, and other intelligence, how much business its rival was doing. Fuld hypothesises­ "Let's say you drive past a sign announcing a company in your field of business is setting up new offices that will employ more than 1,000 staff. At a trade conference a year later, you overhear that the offices you drove past actually employ closer to 800 staff. "When you put those two pieces of data together, they become meaningful. "Is your new rival short of cash, or has it developed a more efficient way of doing business that requires fewer staff? More importantly, what are you going to do about it?" Corporate intelligence, he says, is the "careful analysis of information that brings critical insight into business decision making." Stephen Sarao, who runs a consultancy in New Jersey specialising in competitive intelligence, says more than 90% of the information needed is publicly available from published reports, till roll data, permit filings, environmental or building reports. In fact, most firms are engaging in competitive intelligence when they buy competitors' products, hire their staff, talk to their suppliers and visit trade conferences, he adds. So which industry sectors are in the CI premier league? Sarao says fmcg companies are pretty near the top of the list, with soft drinks companies leading the field. Grocery retailers have been slower to catch on, but are rapidly becoming more sophisticated. However, an increasing proportion of Sarao's time is spent advising clients how best to protect their own physical and intellectual assets rather than get hold of anyone else's. While Unilever appears the victim in the recent dustbin rifling incident, several less charitable trade sources pointed out that leaving commercially sensitive documents open to the opportunistic dustbin rifler is asking for trouble. Acres of cyberspace are devoted to companies offering advice on how to protect businesses from hackers and from corporate spies masquerading as suppliers, researchers, investors or journalists. Not to mention the wealth of agencies supplying all manner of bugging and surveillance equipment. "You may be unaware that you have become the target of industrial espionage until you find your new product or service copied or undercut in price," warns one company that offers "investigative services". Another says: "In today's high-tech world, the industrial spy has many effective electronic tools at his disposal with which to siphon off your company secrets." If the recent spate of negative publicity has done little for corporate images, say the experts, it should serve as a wake-up call for everyone else to give their intellectual assets the protection they deserve. n {{COVER FEATURE }}

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