Economic Espionage: At Your Back Door
Corrections or additions?
These articles by Melinda Sherwood were published in U.S. 1 Newspaper on May 19, 1999.
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Mining the Information Lode
United States companies are much better at producing
competitive intelligence than protecting it, says John E. Prescott,
professor of business administration at the Katz Graduate School of
Business at the University of Pittsburgh. “You can reveal a company’s
trade secrets through simple analysis,” he says, “and as long
as you obtained the information through ethical means, the fact that
you ascertained trade secrets does not make it illegal.”
Prescott will be one of the guest speakers at the Fourth Annual Competitive
Intelligence Education Day on Wednesday, June 2, at 8:15 a.m. at the
Hyatt. The keynote speaker will be John Fialka, a reporter with
the Wall Street Journal and author of “War By Other Means,”
a look at economic espionage in the U.S.
Other leading professionals will discuss best practices in competitive
intelligence (CI), analyzing patents and their link to scientific
research, and targeted business. “Breaking Down Barriers to Implementing
CI in Your Organizations,” will be the focus of a panel discussion.
Panelists include Steve Adolt, BOC Gases; Clifford Kalb,
director of strategic business analysis, Merck; and Diane M. Russo,
market analysis director at Lucent Technologies. Cost: $175. Call
703-739-0696 or visit https://www.scip.org.
Prescott has a BA in psychology at Indiana University of Pennsylvania,
Class of 1976, an MS in industrial psychology from Stevens Institute
of Technology, and a PhD in business administration from Penn State.
He has been a professor at the University of Pittsburgh since 1984,
when he developed the first MBA-level course in competitive intelligence
at the university. Two years later, he helped found the Society of
Competitive Intelligence Professionals, which sets the industry standards
for ethical practices in competitive intelligence. He is also the
executive editor of the Competitive Intelligence Review, a quarterly
published by John Wiley in New York.
“If a company is doing poorly,” says Prescott, “it’s often
the result of two things: they are either poor implementors, or they
don’t have good information about what they’re supposed to do.”
Competitive intelligence, he says, gives companies the kind of information
they need to do to retain a sizable portion of the market.
The basic tools of competitive intelligence include the following:
Reverse engineering. “Taking a product apart and investigatingits design is a popular tactic in the automobile industry,” Prescottsays.Data mining. There is a vast amount of public recordsand databases that are all open sources. Still, Prescott says, electronicdata is not nearly as useful as the information that can be obtainedfrom talking to people.Human networks. “Businesses should develop a humancollection network, so that people in the sales field, or in any otherdepartment, are constantly talking to customers and suppliers andgetting that back to competitive intelligence professionals,”Prescott says. This, he adds, is one of the most difficult competitiveintelligence strategies.Regardless of how much information you dig up on the competitor,analytical expertise must always be applied. And, he adds, “agood analyst should have a human intelligence network in development,and many of them don’t.”Top Of PageMining Useful MindsWith competition fiercer and bloodier than ever, competitiveintelligence professionals rely on a vast wealth of open source informationto get the scoop on competitors. Contrary to what you may think, themost valuable information is not electronic; it’s in people’s minds,says Mitchell Audritsh, manager of market intelligence at LucentTechnologies. “One of the folklores within the competitive intelligenceprofession is that most of the information that a company needs canbe found outside the corporate walls.” In fact, he says, mostof it is inside the company. “The trick is to the harness thatinformation, so at one level everyone in the company is a contributor.How that is organized is really a matter of taste,” he says.Audritsh is the leader of the New Jersey chapter of the Society ofCompetitive Intelligence Professionals (SCIP), which sets the standardsfor ethical practice within the field of competitive intelligence.The organization is hosting its annual Competitive Intelligence EducationDay on Wednesday, June 2, at the Hyatt (see story above).At Lucent Technologies, Audritsh is one in a network of roughly 100competitive intelligence professionals. His job is to spark a dialoguewith authorities among the company’s 140,000 employees worldwide.”Information is not power,” he says. “The mutual sharingof information is the real power. If I can show how the informationI can get from you can powerfully help you do your job than that’sa lever to generate that information flow.” Spoken like a formerCIA agent.Audritsh holds a BA in political science from Kent State University,Class of 1981, and a graduate degree in political science from theMaxwell School at Syracuse University. Near the end of the graduateprogram, Audritsh applied to the Central Intelligence Agency, wherehe spent three years working as an intelligence analyst during thehigh-water mark of the Cold War.Competitive intelligence, Audritsh says, is not just about collectingand analyzing information; it’s about a well-organized defense aswell.First, he says, know what signals you’re sending out. “Merelyby existing,” he says “you’re sending valuable informationto someone who may be listening.” For example, he says competitorscan extract valuable information simply by counting the number ofcars in the parking lot. “Be aware of what you’re communicating;you’re always communicating something.” In short, know thyself!Once competitive intelligence professionals have a grasp on what messagesthey are sending, the company is in a position to stage offensivecounter-intelligence. “If you know what your signals are, youcan give off a choreographed set of signals to mislead your competition,”he says. Misinformation requires a lot of mundane planning, he adds,and cooperation from individuals at every level. “In an idealworld everyone is a CI contributor,” he says.Regardless of whether a company is taking an offensive or defensivestance, CI professionals should make every effort to build a seamlessrelationship with the strategists in the company. “A lot of ourburden is to be proactive and make connections with the key-decisionmakers in the company,” he says. “We lose business when wedon’t pay attention to what’s going on outside our own company.”Top Of PageEconomic Espionage: At Your Back DoorEven after the Taiwanese-born scientist Wen Ho Lee wascaught leaking classified information to China, Americans continueto think economic espionage is stuff of spy novels, says John Fialka,a reporter for the Wall Street Journal. “Americans think we’reat peace,” he says. “There’s a sense of insularity over here.”In fact, says Fialka, the U.S. loses billions of dollars every yearto foreign competitive intelligence.In “War By Other Means” (W.W. Norton and Co., 1997), Fialkacontends that the U.S. is engaged in an economic war against China,Japan, France and Canada — and is losing sorely. His book is loadedwith wonderful facts. For example, between 1985 and 1989, Japan’saggressive efforts cost $105 billion in lost U.S. sales. “I triedin my book to keep all anonymous sources out of it,” he says.”It should scare the hell out of executives.”Fialka will be the keynote speaker at the Society for CompetitiveIntelligence Professionals education day Wednesday, June 2, at theHyatt (see story above).A member of the Wall Street Journal’s Washington bureau, Fialka hasreported on issues of military, diplomatic and national security mattersfor nearly two decades. Although he holds a law degree from GeorgetownUniversity, he chose not to practice law..In 1992 he wrote “Hotel Warriors,” a first-hand account ofthe relationship between the press and the military during the GulfWar. A Woodrow Wilson Fellowship enabled Fialka to spend two yearscollecting information for his second book.In “War By Other Means,” Fialka traces accounts of economicespionage back to the 18th century, when an American opportunist bythe name of Francis Cabot Lowell stole the intellectual property necessaryto bring the industrial revolution to America. In the past severaldecades, however, U.S. intelligence has fallen far behind other countries,in part because of the proliferation of information in America, anda cultural attitude towards openness. “We’re the most open societyin the world, and an inviting target to everybody,” he says. “China,Russia and Japan have had a field day at our universities, where thingsare not classified until there is a weapons application.”Freedom of information is just one of the country’s weaknesses. Historicallyskeptical of foreign competitors, many U.S. business have lost a portionof the market when they least expected it. He offers as an examplehow American steelworkers scoffed at warnings about Japan’s growingsteel industry, and then later saw their companies annihilated byJapanese imports.If American companies have been foolhardy in their assessment of foreigncompanies, it derives in part, says Fialka, from a cultural tendencytowards rugged independence. Fialka writes:”In the arena of competition, most American companies are JohnWayne against the Indians. They act individually. The opposition sometimesacts and thinks by drawing on the resources of a nation. Americancompanies don’t go sniveling to government agencies for advice. Itis an image that readily blends into the American dream — theFrontiersman, the Lone Ranger — except that it is an image ofthe past. Lately, the `Indians’ have been winning. There are a fewintelligent cowboys out there, like Motorola and Amgen, that haveset up their own internal intelligence operations. The rest are likethe United States before Pearl Harbor: there are plenty of clues aboutthe competition around, but no one has the time or responsibilityto collect and analyze them.”While Fialka doesn’t believe that America should become some kindof fortress, he maintains that the best defense is a good offense.”If you want to compete with them, you better learn how they operateon their terms,” he says. “We need to send more U.S. researchersabroad and equip them with both the right language and cultural skills.”Fialka also urges more aggressive prosecution of espionage cases.”Until 1996, when they passed the Economic Espionage Act, youhad to find a guy with a sign that says `I am Chinese’ running outof a company with a box labeled `secret’ in order to prosecute.”Today, he says, the law has gotten better, but it’s still murky. “Onlyone percent of economic espionage cases are criminal,” he says.”There’s a lot of art involved.”Ultimately, Fialka says, the U.S. needs to think about long-term strategy– to make competitive intelligence a national priority that involvesbusinesses, government and its citizens. After all, it is somethingthat affects everyone, he says. “As taxpayers, we have spent anamazing amount of money to develop technologies, and when people takethat overseas and develop products overseas that out-compete ours,I feel I’ve lost something.”– Melinda SherwoodNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
