To gain an edge, firms hire sleuths

This is a job for computer-savvy data browsers, not James Bond

John Nolan's assignment: Find out everything possible about the CEO of a company targeted for acquisition by another firm.

Talk with his friends and rivals. Scour public records and newspaper stories. Glean quirks and details about his personality. In short, develop a complete psychological profile - right down to his facial tics when he negotiates.

The task was perfectly legal, and, in the end, worked. "They closed the deal and credited our work with playing a key role," says Mr. Nolan of the dossier he and his colleagues at the Phoenix Consulting Group put together.

Score another victory for "competitive intelligence" - the corporate spy game, minus the cloak and dagger, not to mention the guns and gadgets. Outside consultants like Phoenix, based in Huntsville, Ala., sometimes perform the work. But more often it is being done by in-house units.

And in an age of growing global competition and mergers, corporate sleuthing is on the rise:

* In May, Simmons College in Boston started the first master's degree program in competitive intelligence offered in the US.

* This month, Fleishman-Hillard, the world's largest public-relations firm, unveiled a 40-employee competitive-intelligence unit it has been developing for clients for more than a year.

* The Society of Competitive Intelligence Professionals (SCIP) has seen membership grow from 150 in 1986 to 7,000 today.

"Companies have realized some huge earnings through intelligence efforts," says Leonard Fuld, founder of Fuld and Co., one of the oldest and largest competitive-intelligence consulting companies in the country. "It has quietly insinuated its way into the business process."

A definition of competitive intelligence is as elusive as a well-trained spy. It involves gathering and analyzing bits of information from every imaginable source - the Internet, court documents, patent filings, conversations with rival salespeople or engineers.

CI, as it is commonly called, is more than a database search but falls short of 007. Indeed, CI professionals often define their work by what it is not. The work doesn't include "dumpster diving" - scouring a rival's trash for data - or involve sending exploding cigars to rival CEOs.

Ethics in theory and practice

SCIP maintains a code of ethics that proscribes aberrant behavior.

Virtually all Fortune 500 companies and smaller ones involved in CI, concerned about maintaining their reputation and avoiding legal entanglements, adopt their own ethical creeds. And often, CI is used to ferret out and avoid partnering with firms involved in shady activities.

Still, interpretation of what is ethical and what isn't can vary widely. An example is debriefing newly hired employees from rival firms who, even if they signed confidentiality agreements, might be able to provide tangential information of interest to their new company. CI professionals say some corporations view such debriefs as totally unethical, while others not only conduct them, they have CI staff participate in job interviews of prospective employees at rival firms who may never be hired.

No one factor seems to be driving the proliferation of CI units. There's globalization, which creates new overseas competitors; mergers and acquisitions, which spawn new competitors overnight; and the Internet, which provides both a flood of new data and also new information-gathering opportunities.

"There was a time when businesses assumed that all they needed to know was within the four walls of their company," says Mark Sullivan, who runs one of three General Motors CI units. "[Now] if you are going to be making informed decisions, especially in a world that isn't as predictable as it used to be, [you need] to have some understanding of what is happening externally."

Nolan chuckles at the novice's view that companies must engage in skullduggery to have effective CI units. He says his experience and independent studies have shown that if an information-seeking caller states his name and affiliation and says he's doing a marketing study, half of all people will provide data immediately.

The other 50 percent, he says, will ask for more information, including the name of the client. When the caller says he is bound by a confidentially agreement, 15 percent will end the call, while the other 35 percent will commiserate about what a pain confidentiality agreements are and then spill their guts, says Nolan.

Growing sophistication

Despite such standard tricks of the trade, CI professionals argue that most of the information they need is readily available - it just needs to be drawn out and analyzed. They might study a competitor's online job postings, for instance, to determine its strategic direction.

Techniques are increasingly sophisticated. Mr. Fuld tells of a European aerospace firm that, seeing the possibility of a merger between Boeing and McDonnell-Douglas, set up an early warning system based on publicly available information.

Six months later, tripwires began triggering alerts. A small mention in an industry publication here. A line in a speech there. More Boeing-MD meetings. The result, in this case, was a public-relations plan for media and stockholders that the firm was ready to roll out the moment the "surprise" merger went public.

(c) Copyright 2001. The Christian Science Monitor

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