Corrections or additions?
These articles by Kathleen McGinn Spring were prepared for the
September 5, 2001 edition of U.S. Newspaper. All rights reserved.
Guarding the Gates
It’s Now Easy to Grab Competitors’ Secrets,
But it’s More Difficult to Safeguard Your Own
John Nolan, co-founder and chairman of the
intelligence firm Phoenix Solutions, says an amazing number of people
have a "Push to Talk" button. He knows this because many of
the 32 full-time and 85 part-time employees of his Huntsville, Alabama
company spend considerable time dialing up graphic artists,
ad directors, engineers, and workers in dozens of other job
Their mission? Get unpublished information for clients about their
competitors’ new projects, products, and plans of all kinds.
The approach to unsuspecting informers goes something like this, Nolan
says: "Good morning Fred, I’ve been told you’re the smartest man
who ever wore hair on the subject of … (fill in the blank)."
Nolan finds the Freds of the world, very probably feeling at least
a little under-appreciated by their bosses, and rarely given an
to show off their expertise, are remarkably willing to chat at length.
"Fifty out of 100 go for it right away," he says. His
always identify themselves by name and company, and say they are
on a project for a client. Contacts who do not start talking
most often want to know who the client is. Thirty-five percent, told
that information can not be revealed, talk anyway. Only 15 percent
of the people Nolan’s trained interviewers call are unwilling to enter
into a conversation during which they will be skillfully probed for
all sorts of secret information.
While Nolan’s company makes these calls to clients’ competitors, he
finds it is considerably more productive to hunt information less
directly. "If money changes hands, information changes hands,"
he says. Any company’s customers, vendors, suppliers, PR firms, copy
centers, and accounting firms know a great deal about what a company
is about to do next. It is in this web of business partners that Nolan
instructs his employees to collect information for his clients.
This is just one of the ways that information — the new economy’s
most valuable currency — can be uncovered. Nolan’s firm
both in finding information for clients, and in helping them keep
their own vital information securely under wraps. Nolan, president
of the board of directors of the Society of Competitive Intelligence
Professionals, speaks at the organization’s NJ Education Day on
September 10, at 8 a.m. at the Newark Airport Marriott. Cost: $135.
Call 908-979-0570. (Nolan is also author of the book,
an excerpt from which is printed beginning on page 47 of this issue.)
Nolan is a native of the Garden State. He grew up in Haddon Heights
and spent his summers in Cape May. Now living in Alabama, he points
out, as those who enjoy Cape May tend to, that he hasn’t moved all
that far, because, after all, "Cape May is below the Mason Dixon
Nolan graduated from Mt. St. Mary College (Class of 1976), where
he majored in international relations and foreign policy. He then
served as an intelligence officer for the government for 22 years.
He was an Army officer, but says he was "detailed to other
dividing his time almost equally between intelligence and
He planned to obtain a Ph.D. and teach after leaving the Army, but
his wife nixed the idea. "She was tired of the relative poverty
of the Army life," he says, and was not eager to trade it for
the relative poverty of the academic life. She volunteered to relieve
him of family responsibilities for a time so that he could devote
time to studying business, which he did, earning advanced degrees
from the University of Central Michigan and the University of Southern
California. He founded Phoenix Consultants in 1991, and in 1997
up the Center for Operational Business Intelligence in Sarasota,
That organization provides practical intelligence training for
Here are some of Nolan’s insights on corporate intelligence.
difficult. "On the collection side, it’s immeasurably
he says. "It used to take us weeks and months to find 75 good
sources." Thanks to the Internet, the same number of quality
can now be unearthed in a matter of hours. The flip side, of course,
is that the other guy has access to the same wealth of information,
and is using it to undermine your business.
from what has been written," Nolan says. Keeping an edge requires
finding sources in the know who have not yet talked to a reporter.
Generally, leads to such primary sources are available by the hundreds
on the Internet. Look, Nolan says, for people within the target
who are published authors. Scrutinize job postings to find individuals
who have worked for the company, or are knowledgeable about the work
of the companies that are most aggressive in seeking intelligence
are based overseas. Common ploys, he says, include dumpster diving
to piece together projects from discarded notes, and staging fake
In the latter instance, the company trolling for inside information
advertises positions calling for the exact skill set people working
on the project it wants to know about are likely to have. Stated
and benefits are generous enough to entice candidates. When applicants
are interviewed it is only natural that they talk about what they
are doing in an effort to demonstrate that they would do a good job
for the new "employer." Nolan has worked this scam himself
in the course of helping clients identify ways their information could
leak out, and finds it is very effective indeed.
Nolan says that, while manufacturing employees in the Mid-West may
wear ID badges and pass through security checkpoints without
the same measures could send Silicon Valley software developers in
search of new employment. Employers need to balance a need to keep
information secret with allowing their workers to operate in an open
atmosphere, and must know how far they can push.
and about their work, says Nolan. A tendency to complain is pretty
much a given, too. That being the case, employers need to appeal to
their workers’ and business partners’ self-interest in urging secrecy.
Talk to them, Nolan says. Explain that keeping a project under wraps
can make the difference between a big market lead, and none at all.
Between big raises, and a freeze on wages. In the South, says Nolan,
such a talk is called a "Come to Jesus" meeting, and it can
be very effective in silencing those "Push to Talk" buttons.
Morris Blatt, a competitive intelligence
tells about a meeting with a client company. The president and eight
high-ranking staffers were in attendance. "What is your biggest
security problem?" Blatt asked. "`Leaks to the press,’"
replied five of the nine executives.
Blatt knew press leaks were the least of that company’s problems,
and he proved it. He set up another meeting early in the morning of
the following Wednesday. Arriving in the conference room with the
executives, Blatt watched as they read the whiteboard, which said
"Blatt: 8:30 Wednesday morning."
He had written the message hours before, in the dead of night, long
after the building was officially closed. He proceeded to hand the
executives 50 business cards, a couple of employee ID badges, and
a stack of documents he had collected in his unchallenged nocturnal
stroll through their offices. Sure, that company needed to worry about
press leaks, but first, says Blatt, it had to go out and hire a chief
Owner of three-year-old On Trac Solutions, a West Windsor competitive
intelligence company, Blatt is also a longtime member of SCIP, the
Society of Competitive Intelligence Professionals. He speaks at the
organization’s New Jersey Education Day on Monday, September 10, at
8 a.m. at the Newark Airport Marriott. Cost: $135. Call 908-979-0570.
Blatt holds a bachelor’s degree in engineering from Polytechnic in
Brooklyn (Class of 1968) and an MBA in finance from Monmouth
University (E-mail: email@example.com)
His interest in competitive intelligence began nearly 30 years ago
at one of his first jobs. He was working in operations for a chemical
company and wondered what the competitors were doing. It was a
that continued to interest him as he moved among industries and job
titles. Gathering information on what the competition is up to is
a function of many corporate divisions, he points out. Marketing,
pricing, technology, strategic planning, sales, research and
— all of these departments need to know who their competition
is, and what it is doing, or not doing.
After stints in chemicals, electronics, and telecommunications, Blatt,
who had been volunteering up to 40 hours a week to SCIP, and spending
significant time volunteering for the Special Libraries Association
too, decided to become a full-time competitive intelligence
"It was a logical extension of what I was doing," he says.
Blatt does not sell data, but rather sets up competitive intelligence
departments, and offers training in gathering data, disseminating
it throughout layers of management, and acting on it. He also performs
Blatt himself has a mighty appetite for data. "I read 400 to 500
annual reports a year, 200 magazines a month, and five newspapers
a day," he says. He also spends time surfing the Internet for
information and says, "what you don’t know about data will kill
No casual reader, Blatt can extract much of what he needs from a
in one-and-a-half minutes flat. First, he looks at the advertising.
Who is spending big bucks on ads? And, perhaps more important, whose
ad budget obviously has been slashed? Then he reads letters to the
editor. Next, he looks for new product announcements. Only then does
he turn to the articles, clipping the ones that look interesting,
and filing them in a cross-referenced system for easy access later.
"Ninety to 95 percent of all information is publicly available
— if you know where to look," Blatt says. Beyond magazines
and newspapers, companies would do well to spend time at town hall,
where corporate building plans are likely to be on file, and even
at the local fire department, which will contain records of what
of which chemicals a corporation is storing where. (Information that
can go a long way toward giving away what the company is
Even press releases by elected officials gathering glory by announcing
plans to reel in a new corporate citizen can be valuable.
While Blatt says he "strongly believes in ethical standards,"
he knows that not everyone does. "Oh yes," he says, "there
are people who buy garbage, and try to put shredded documents back
together. There are dumpster divers."
Dumpster divers are unlikely to be a company’s biggest information
security problem, though. The enemy most likely is within, and in
many cases has no idea that he is giving away company secrets. What
is the one document you need to know all about a company? Blatt asks.
The answer, surprisingly enough: The phone directory. Get that, he
points out, and you know exactly how many secretaries, chemists,
vice presidents, and media relations employees a company has, and
very likely, how the company’s departments are organized. Yet, he
says, few employees know the value the document has to competitors,
and take measures to safeguard it.
While gathering intelligence on competitors is vital to business
at least equally important is keeping the intelligence that
want away from them. Here is Blatt’s advice for keeping proprietary
information under wraps.
directory, every company has documents, plans, products under
legal issues, and hiring plans it does not want its competitors to
know about. Give employees guidelines. Let them know what information
is to stay in-house. And, if possible, mark documents — like that
phone directory — with a stamp that reads "proprietary."
meeting with a client, and, by chance, drawing a plane seat in a row
directly behind two of that client’s employees, who merrily chatted
about proprietary company information all the way across the country.
On another occasion, he ate in a company’s cafeteria — a big
badge affixed to his lapel — while employees all around him talked
about new products under development. Employees should be drilled,
he says, on not talking about their company’s proprietary information
in public places, and particularly not in restaurants near the
venues, says Blatt, where companies in a particular industry gather.
"All your competitors are there," he says. "You want to
look good. You get caught up in the moment." At such times, it
is especially easy to let secrets slip.
firewall. Twice in the last year, Blatt has had E-mails
On one occasion, a person added an obscene sentence to the beginning
of an E-mail going to a client. "People don’t realize," Blatt
says, "that if you send an E-mail to Philly, it doesn’t go
there." The message may pass through eight servers, and at each
location it can be opened, read, and even modified.
stand up and walk out at lunch time, leaving whatever document they
have been working on up on their computer screens. Visitors walking
through are free to read whatever is there, possibly learning about
agreements or products the company had planned to keep under wraps
employees should sign off from their computers, and should stow
documents in locked drawers.
general, though, he says "don’t be paranoid. Getting information
out can be a good thing." Just make sure employees know which
subjects are off limits — things, for example, like the fact that
a consultant was able to roam freely through the offices well after
the last employee had left for the night.
In this excerpt from his book, "Confidential"
1999), John Nolan, former government intelligence officer, and founder
of both a competitive intelligence company and a competitive
training institute for executives (see page 14), talks about how to
protect vital company information.
under wraps, some organizations — both government as well as
— often miss these simple truths and expend precious resources
in a wasted effort. They fail to follow Bismarck’s admonition, "He
who seeks to protect all, protects nothing."
While it could be argued that there really are some things in a
program environment that demand complete protection, it’s rare that
a business can afford to keep absolutely everything about their
secret. For example, the Coca-Cola formula story. They know what to
protect, and they’ve taken virtually every step known to man to keep
it secret, and it seems pretty clear that they want to protect it
forever. Yet they don’t go so far as to keep their product off the
shelves lest someone break down a sample into its precise ingredients,
quantities, and process, and be able to replicate it. No company can
stay in business if it keeps its products or services under lock and
key so that a rival can’t see them, and at the same time keeps them
away from customers too.
Let’s stay with the Coca-Cola formula for a little while longer as
we try to figure out this problem of knowing what to protect. Clearly,
anybody who has ever heard from Coca-Cola’s lawyers has learned that
trying to get the formula would be a long and very costly process.
That goes for anyone who has spent — and is making — billions
on a product that is worth protecting through all means possible.
Are you going to try and gain some competitive advantage from
any of your competitors by attacking their strongest and most
defended asset? Hardly. Instead, you’re going to attack other aspects
of their business base. You’re going to go after their distribution
channel, for example. New packing approaches. New co-branding and
strategic relationships. New line extensions and where they’re headed.
Information about these kinds of things is what a competitor would
be after. Information that the rival can use either tactically or
strategically. That’s the information that Coca-Cola, you, or anybody
else is going to have to protect.
government official realized that he needed to provide some protection
for a major project that he’d been involved in for some time. He
for some assistance in protecting his project from disclosure,
to the Soviets.
The planning meeting started poorly and went downhill rapidly. He
started off by saying that the program was well enough along that
it looked like the technology would work, and that it would be another
18 months before it could be fielded. In the meantime, it absolutely
needed to be kept under wraps.
A few well-pointed questions got some awkward answers. "How many
people know about this project?" When the answer was "over
300," eyes began to roll, especially after hearing that there
was no "knowledgeability list" of those who had been made
aware of the project. But at least it was a place to begin fixing
The next answers were even worse. The project had been going on for
over three years at that point, and one room held nearly 50 safes,
all filled with the written materials and technical drawings related
to the technology. Virtually no other measures had been taken to
the project, its open contracting for research assistance, or any
of the other, myriad elements that should have been in place for
The recommendation: get 25 junior people with appropriate security
clearances, get 25 photocopy machines, 50 more safes, and an
Photocopy everything in all the safes, and put the copies into the
new safes. Put the new safes on the tractor trailer and drive it into
Washington. Drive it through the front gates of the Soviet embassy
and leave it. Abandon it. In their suspicious, paranoid, and
way, the Soviets will look at every single document and every element
as if it was all part of a massive deception operation. They’d spend
far more than the 18 months needed to safeguard the new technology
in trying to figure out what was true and what was not, and they’d
be paralyzed. In the meantime, the project could go forward with new
protections built in.
Needless to say, the out-of-the-box solution set was not what the
humorless bureaucrat was looking for. But you get the point.
that, when aggregated and analyzed, tell the tale. Cues and signals
that can be elicited from the person who has them. The person who
doesn’t attach any particular significance to the cues and signals
because he doesn’t understand the piecing together of the jigsaw
that is the hallmark of the intelligence process. Cues and signals
that tell a competitor where your firm is headed.
Cues that are sometimes individual items themselves. Cues that are
sometimes patterns that reveal how and when something is going to
happen. Cues and signals like the pattern that one of your competitors
likes to make new product launch announcements with a great deal of
fanfare at a particular resort — and because they made the travel
and hotel reservations six months early, that provided their main
competitor an early warning to counter the product.
a gazillion with America’s Number One Pain Reliever Tylenol.
really thought that there was a place in America’s bloodstream for
another painkiller and developed Datril. They test-marketed it in
Peoria, Illinois, and Albany, New York, two bastions of
Middle America. Two cities that they’d used many times for test
in the past. Two cities that helped Johnson & Johnson identify when
and what new products Bristol-Myers was planning on launching. Two
cities that were part of Bristol-Myers’s pattern of cues.
Johnson & Johnson’s monitoring of these patterns revealed the Datril
test marketing. Cues that revealed that Bristol-Myers was going to
attempt a price penetration for Datril at $1.89 a bottle, compared
with Johnson & Johnson’s $2.89 a bottle for Tylenol. Cues that
Datril’s entry on April 15. Cues that led Johnson & Johnson to tell
Mr. and Mrs. America and all the ships at sea that in making Tylenol
America’s number one pain reliever, J&J had recovered their
costs years earlier than projected. Cues that let J&J tell the folks
at home that J&J wanted to pass along savings to them in the form
of an immediate price reduction to $1.89 a bottle, complete with
coupons for anyone who’d bought a bottle in the last month. Cues that
let J&J do this on the first of April. Cues that let J&J completely
disrupt the entire Datril advertising campaign, to include the media
blitz that would have to be put on hold until the new Datril strategy
could be developed. Cues that let J&J take the offensive in a campaign
that eventually made the media refuse to take any Datril ad space
until they had their act together.
Cues that kept Datril from gaining anything more than a 1 percent
share a year later, when Tylenol was able to withstand the
murders. Imagine. Something that is supposed to help people overcome
pain winds up killing them instead. Certainly, not through any fault
of Johnson & Johnson’s. But what would’ve happened to Tylenol if
been a strong number two at the time of the murders? Anybody’s guess.
But it wasn’t Datril.
— Kathleen McGinn Spring
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