Behind Enemy Lines

BEHIND ENEMY LINES - Spying on rivals is an underhand and often illegal practice. But many firms are happy to collect 'intelligence' on the competition.

Last year, the dark underbelly of business was revealed when software giant Oracle admitted hiring detectives to rifle through rubbish for information on rival Microsoft. Oracle's spooks, headed by a former Watergate investigator, offered #800 to cleaners emptying bins at a trade association that supported Microsoft during its anti-monopoly trial.

The case, which became known as Garbagegate, gave a rare glimpse of the cloak-and-dagger world of corporate espionage.

While Oracle-Microsoft is an unusually high-profile and extreme example, companies of all sizes routinely keep tabs on each other - a practice some would say is spying, but others call competitive intelligence.

Strictly speaking, industrial espionage and competitive intelligence are not the same thing. Spying is the grubby business of bin-sifting and office-bugging - often illegal and always unethical; competitive intelligence is gathering information on rivals through legitimate means, such as published data and interviews.

CI, as the latter is known, even has its own representative body, the Society of Competitive Intelligence Professionals (SCIP), and is taught as a key business skill. Henley Management College, for one, includes CI on its MBA course.

The SCIP, which was founded in the US in the 80s, is seeing 40% annual growth in its membership. It currently has 7000 individuals on its books, 220 of whom are from the UK. Well-known member businesses include global giants Unilever, Motorola, BT, BP Amoco, Visa, GlaxoSmithKline and British Aerospace.

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Staying within the law

It is generally accepted that 80% of a company's information is public, while only a few details are officially secret. As Arthur Weiss, managing partner of UK CI consultancy Aware, says: 'You don't need to know Coke's secret formula to compete with it.'

Attempting to gain trade secrets such as the Coke formula is against the SCIP code of ethics and, in many cases, is illegal.

This was illustrated in 1996 in a case concerning Volkswagen and General Motors. Jose Ignacio Lopez, a senior executive at GM subsidiary Opel, defected to VW in 1993. He was alleged to have taken crucial documents detailing GM's new product development plans with him and, after an 18-month investigation, was indicted for espionage.

The case highlighted how hard it is for a company to keep anything secret, especially when it comes to product innovation. But you don't have to resort to illegal tactics to discover what's in a competitor's NPD pipeline.

Keeping track of a rival's patents is one of the most reliable methods of anticipating forthcoming product launches. Any meaningful innovation or new manufacturing process should be protected with a patent and, as soon as this is done, the information is essentially in the public domain. It may only provide a clue as to the company's intentions, but a clue is invariably enough.

Patent tracking is particularly prevalent in the pharmaceutical, electronics and consumer products sectors, and explains why a major innovation by one company is often replicated almost simultaneously by its competitors.

Procter & Gamble and Unilever are well-versed in such cat and mouse games.

Mutual understanding

One example is Unilever's ill-fated launch of Persil Power, the detergent that had the unfortunate side-effect of rotting clothes.

'P&G knew well before Persil Power was launched that Unilever was working on a new soap with manganese compounds,' says Weiss. 'It had looked at doing the same itself, but abandoned the research because it knew the formula cleaned certain materials very well, but rotted others. At one point, P&G even approached Unilever directly to warn it of the danger.'

An ex-Unilever and P&G marketer confirms the lack of secrecy between the rivals' R&D departments. 'The way they do research is very similar, so they frequently come to the same conclusions at the same time,' he says. 'If one gets a new product to market first, the other usually has the same thing in the pipeline and can rush it out quickly.'

Despite the difficulty of keeping NPD secret, Unilever and P&G are two of the most advanced users of CI - both as a means of gaining information and protecting against leaks.

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