Business Industrial Espionage - Are your secrets safe?

Information is a powerful tool that can give businesses that all-important edge over competitors. But some companies cross the line between competitive intelligence and industrial espionage. Matt Warner investigates.

In the information age, knowledge is power. It's vital to have better information than the competition, especially since business decisions are very often subject to time pressure. All businesses need to know what their rivals are doing, be they General Motors or the local pizzeria.

Having no idea of competitors' prices or likely intentions would make one's own planning redundant and lead to failure.

Most businesses gather intelligence in a legal and ethical way, but some do not. These are the employers of industrial spies. The perpetrator of industrial espionage is determined to find that piece of information that will give his client the edge. He may be dressed as a vagrant, rifling through a company's bins in search of documents; he may be disguised as the phone engineer, talking his way into the heart of an office to install a bug or copy a disk; or he may be a hacker sitting a continent away, attacking the computer system until he finds confidential files. He may even be a disgruntled employee sitting 10 feet away.

Industrial spies can be found through outwardly legitimate organizations such as detective agencies, corporate security companies and the less scrupulous providers of competitive intelligence (CI), although no organizations would admit to being associated with them. Industrial espionage is illegal, coercive and clandestine, and is used to gain access to economic intelligence for economic advantage. However, CI, when carried out in an ethical fashion, is quite a different beast.

'You can find out a great deal about people and companies from open sources,' explains Peter Sommer, a fellow at the London School of Economics, who has studied industrial espionage for many years and appeared as an expert witness in numerous espionage trials. 'CI people will say that they concentrate on what is openly available, but do so in a highly disciplined fashion. It's a question of ethics - nothing else distinguishes it.'

A question of ethics

Arthur Weiss, managing partner at Aware Competitive Intelligence, is adamant that his businesses activities are entirely ethical, although he admits he is occasionally approached by ex-police and ex-military personnel offering their 'surveillance' expertise. 'I wouldn't employ them if you paid me to,' he says. 'I want people who've got a business degree, who know how business works and how to do research.' Aware Competitive Intelligence is a member of the Society of Competitive Intelligence Professionals (SCIP), which has strict rules concerning ethics.

Weiss says he is tired of all CI businesses being blamed for the shady practices of the few who use unethical methods. But Sommer, with his court experience, is more cynical. 'The smart front-office guys avoid getting themselves into trouble by calling in freelancers, who are increasingly from technical backgrounds. Then if something goes wrong, they can say how shocked they are by the behaviour of their casual acquaintance.'

The technical ability many freelancers may be offering is expertise in hacking. There have been high-profile cases of hackers penetrating supposedly secure computer systems and stealing files. Microsoft had vital source codes - the blueprints for its products - stolen from its database in 2000: hugely embarrassing for such a technological company. Hackers accessed the system by e-mailing software called QAZ Trojan to the Microsoft computer.

This looks like an ordinary attachment but in fact contains a hidden code that opens a back door into the system. The hackers, who it appears were working out of St Petersburg in Russia, had their way in. They were never caught.

Hacking has a certain glamour to it and, according to the PricewaterhouseCoopers Economic Crime Survey 2001, 43% of European companies see cyber crime, which includes hacking, as the biggest fraud risk to their businesses.

But Weiss feels that the fear of hacking is misplaced: 'It is a risk, of course, but if you're going to take the hacker route, you need to be either extremely lucky or extremely targeted, or you'll be going through tons of rubbish before you find any gold.'

The fact that Hollywood makes films involving hackers perhaps raises the profile of the crime - no one makes movies about 'dumpster divers'.

But rifling through a rival's bins is still a popular intelligence-gathering tool. In a recent industrial espionage case, Proctor & Gamble paid Unilever $10m after the CI company that P&G was employing had carried out 'waste archaeology' activities. It should be noted that P&G itself alerted Unilever when it became clear that unethical methods had been used, and the $10m was essentially a symbolic payment that kept the courts out of the situation. ... (Article continues)

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