Mining Useful Minds

Economic Espionage: At Your Back Door

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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 http://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 investigating

its design is a popular tactic in the automobile industry," Prescott

says.

Data mining. There is a vast amount of public records

and databases that are all open sources. Still, Prescott says, electronic

data is not nearly as useful as the information that can be obtained

from talking to people.

Human networks. "Businesses should develop a human

collection network, so that people in the sales field, or in any other

department, are constantly talking to customers and suppliers and

getting that back to competitive intelligence professionals,"

Prescott says. This, he adds, is one of the most difficult competitive

intelligence strategies.

Regardless of how much information you dig up on the competitor,

analytical expertise must always be applied. And, he adds, "a

good analyst should have a human intelligence network in development,

and many of them don’t."

Top Of Page
Mining Useful Minds

With competition fiercer and bloodier than ever, competitive

intelligence professionals rely on a vast wealth of open source information

to get the scoop on competitors. Contrary to what you may think, the

most valuable information is not electronic; it’s in people’s minds,

says Mitchell Audritsh, manager of market intelligence at Lucent

Technologies. "One of the folklores within the competitive intelligence

profession is that most of the information that a company needs can

be found outside the corporate walls." In fact, he says, most

of it is inside the company. "The trick is to the harness that

information, 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 of

Competitive Intelligence Professionals (SCIP), which sets the standards

for ethical practice within the field of competitive intelligence.

The organization is hosting its annual Competitive Intelligence Education

Day on Wednesday, June 2, at the Hyatt (see story above).

At Lucent Technologies, Audritsh is one in a network of roughly 100

competitive intelligence professionals. His job is to spark a dialogue

with authorities among the company’s 140,000 employees worldwide.

"Information is not power," he says. "The mutual sharing

of information is the real power. If I can show how the information

I can get from you can powerfully help you do your job than that’s

a lever to generate that information flow." Spoken like a former

CIA agent.

Audritsh holds a BA in political science from Kent State University,

Class of 1981, and a graduate degree in political science from the

Maxwell School at Syracuse University. Near the end of the graduate

program, Audritsh applied to the Central Intelligence Agency, where

he spent three years working as an intelligence analyst during the

high-water mark of the Cold War.

Competitive intelligence, Audritsh says, is not just about collecting

and analyzing information; it’s about a well-organized defense as

well.

First, he says, know what signals you’re sending out. "Merely

by existing," he says "you’re sending valuable information

to someone who may be listening." For example, he says competitors

can extract valuable information simply by counting the number of

cars 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 messages

they are sending, the company is in a position to stage offensive

counter-intelligence. "If you know what your signals are, you

can 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 ideal

world everyone is a CI contributor," he says.

Regardless of whether a company is taking an offensive or defensive

stance, CI professionals should make every effort to build a seamless

relationship with the strategists in the company. "A lot of our

burden is to be proactive and make connections with the key-decision

makers in the company," he says. "We lose business when we

don’t pay attention to what’s going on outside our own company."

Top Of Page
Economic Espionage: At Your Back Door

Even after the Taiwanese-born scientist Wen Ho Lee was

caught leaking classified information to China, Americans continue

to think economic espionage is stuff of spy novels, says John Fialka,

a reporter for the Wall Street Journal. "Americans think we’re

at peace," he says. "There’s a sense of insularity over here."

In fact, says Fialka, the U.S. loses billions of dollars every year

to foreign competitive intelligence.

In "War By Other Means" (W.W. Norton and Co., 1997), Fialka

contends that the U.S. is engaged in an economic war against China,

Japan, France and Canada — and is losing sorely. His book is loaded

with wonderful facts. For example, between 1985 and 1989, Japan’s

aggressive efforts cost $105 billion in lost U.S. sales. "I tried

in 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 Competitive

Intelligence Professionals education day Wednesday, June 2, at the

Hyatt (see story above).

A member of the Wall Street Journal’s Washington bureau, Fialka has

reported on issues of military, diplomatic and national security matters

for nearly two decades. Although he holds a law degree from Georgetown

University, he chose not to practice law..

In 1992 he wrote "Hotel Warriors," a first-hand account of

the relationship between the press and the military during the Gulf

War. A Woodrow Wilson Fellowship enabled Fialka to spend two years

collecting information for his second book.

In "War By Other Means," Fialka traces accounts of economic

espionage back to the 18th century, when an American opportunist by

the name of Francis Cabot Lowell stole the intellectual property necessary

to bring the industrial revolution to America. In the past several

decades, however, U.S. intelligence has fallen far behind other countries,

in part because of the proliferation of information in America, and

a cultural attitude towards openness. "We’re the most open society

in the world, and an inviting target to everybody," he says. "China,

Russia and Japan have had a field day at our universities, where things

are not classified until there is a weapons application."

Freedom of information is just one of the country’s weaknesses. Historically

skeptical of foreign competitors, many U.S. business have lost a portion

of the market when they least expected it. He offers as an example

how American steelworkers scoffed at warnings about Japan’s growing

steel industry, and then later saw their companies annihilated by

Japanese imports.

If American companies have been foolhardy in their assessment of foreign

companies, it derives in part, says Fialka, from a cultural tendency

towards rugged independence. Fialka writes:

"In the arena of competition, most American companies are John

Wayne against the Indians. They act individually. The opposition sometimes

acts and thinks by drawing on the resources of a nation. American

companies don’t go sniveling to government agencies for advice. It

is an image that readily blends into the American dream — the

Frontiersman, the Lone Ranger — except that it is an image of

the past. Lately, the `Indians’ have been winning. There are a few

intelligent cowboys out there, like Motorola and Amgen, that have

set up their own internal intelligence operations. The rest are like

the United States before Pearl Harbor: there are plenty of clues about

the competition around, but no one has the time or responsibility

to collect and analyze them."

While Fialka doesn’t believe that America should become some kind

of fortress, he maintains that the best defense is a good offense.

"If you want to compete with them, you better learn how they operate

on their terms," he says. "We need to send more U.S. researchers

abroad 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, you

had to find a guy with a sign that says `I am Chinese’ running out

of a company with a box labeled `secret’ in order to prosecute."

Today, he says, the law has gotten better, but it’s still murky. "Only

one 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 involves

businesses, government and its citizens. After all, it is something

that affects everyone, he says. "As taxpayers, we have spent an

amazing amount of money to develop technologies, and when people take

that overseas and develop products overseas that out-compete ours,

I feel I’ve lost something."

— Melinda Sherwood


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