The usually legal business of keeping tabs on the competition. Counting cardboard boxes, watching parking lots to keep up with US and foreign rivals
When the going gets tough, the tough take a long, hard look at the competition. Snooping on the competition is nothing new in business, but it's more in vogue than ever. The gathering of ``competitor intelligence'' has lately evolved into an art form as a m'elange of computer data bases, library information, federal agencies, and other sources are being used to systematically gather and analyze information on rival companies.
Not to be confused with cloak-and-dagger, James Bond antics, large and small companies have developed myriad ways to analyze competitors through legally and ethically obtained information. Top managers want to learn their competitors' product costs, their corporate financial structure, general knowledge of products under development, marketing strategies, labor costs, and principal suppliers and customers.
Intense competition is the main reason United States companies are gathering competitor intelligence. In the global dogfight for a slice of the American market, the companies have been squeezed into a shrinking share of the domestic market. Many have finally felt prodded to find out just how competitors are beating them.
``The US is becoming unbelievably competitive. It has created this need because competition has become much more vicious,'' says Leonard Fuld, president of Information Data Search, a Cambridge, Mass., company that specializes in gathering information on other companies. ``In Japan, information gathering is part of their workday - passing on of information is an important part of running the business.''
Using competitor data, strategic planners can base estimates more on reality and less on educated hunches of what the competition is doing.
Simply counting parking spaces in a competitor's lot, for example, can yield at least a ballpark estimate of its employee strength. Checking the stamped label on the outside of a cardboard shipping container tells who made the box. A call to the box manufacturer might disclose how many boxes he sold to XYZ company and how many widgets are being shipped.
Much rarer is the the executive who gets involved in the microfilm-in-a-cookie, false-bottom-suitcase activities of corporate spying. Still, bribing a key employee to gain trade secrets has become another prevalent form of corporate espionage. Such illegal acts aimed at stealing trade secrets are said by some experts to be on the increase, though only a small part of the overall competitive intelligence effort.
The boundary between merely snooping around the competition and actually spying on it is often slight. Experience shows that competitive intelligence gathering can sometimes move from ethical into unethical and illegal corporate espionage. In the frenzy to get better information on the competition, ethics can apparently degrade until finally something goes awry.
A middle manager with a Midwest company, for example, started out getting information on the competition in a legal manner. Encouraged by favorable reviews from his bosses, he eventually turned to wearing a ski mask while tromping through a competitor's dumpster in the middle of the night. His search for a document gold mine in the garbage ended with a jail sentence when he tried to sell information he had stolen.
But while headlines trumpet the nabbing of corporate spies, these illegal pursuits are thought to be the smallest part of the broadening effort to estimate what the competition is doing.
One indicator of the increase in corporate intelligence gathering is the growth of competitor analysis companies that do the research for you - the hired gun. These firms also offer seminars to teach executives how to do it themselves. In the past few years, more than half a dozen such firms have sprung up.
``Wherever money passes hands, so does information,'' Mr. Fuld says. ``But it takes work to dig it out, because public information is not necessarily published or easily accessible information.''
Following his hunch that competitor intelligence was growing, Fuld conducted surveys in 1985 and '86 of 75 businesses, most of them Fortune 500 companies. The survey found substantial increases in intelligence-gathering budgets over the past five years; departmental budgets ranged from less than $50,000 to more than $1.5 million for a single department.
US companies that have plunged into gathering intelligence include Digital Equipment Corporation, Hewlett-Packard, Kraft, General Foods, Xerox, and the Chicago Tribune, Fuld says. Others reported to be active in this area include Westinghouse Electric, Wang Laboratories, Celanese, Ford Motor Company, and Union Carbide.
But as recently as five years ago, American companies paid little attention to the details of domestic or foreign competitors in their strategy-planning activities.
``Only in the last couple of years have managers really begun to pay anything approaching systematic attention to their competitors and how their competitors' actions are likely to affect what they do,'' says Liam Fahey, a Boston University professor who researches competitive intelligence gathering.
Professor Fahey says companies have finally gotten around to gathering key information in a formalized way on what competitors are doing in terms of their strategy; the products they are putting out; how they compete; where they're building plants.
Consider the case of Xerox Corporation. A thriving company in the 1960s, Xerox's success began with its first fantastically successful product, the 914 office copier. But the company struggled in the '70s as competition at home and abroad shrank its market share.
Xerox has been an active intelligence gatherer for years. For at least the last decade, it has been ``benchmarking'' its competitors to gauge Xerox' achievements against the competition. To do this, it had to find out how its competitors were doing across the spectrum of business activities.
One part of this involves painstaking analysis of what it costs a competitor to build and ship one of its machines. To find out, Xerox engineers tore apart competing machines to estimate the cost of designing and producing each part. To pin down the distribution costs of one competitor - Kodak - Xerox ordered several Kodak copiers, tracing where they were shipped from and paying special attention to how they were packed.
Several events seem to have come together to force the issue of competitor intelligence to surface. One is the recognition that Japan's competitive ability is in part derived from its ability to assess competitors. Two other driving factors are personal computer technology and global competition, says John Ballou, an official with the Society of Competitor Intelligence Professionals in Arlington, Va.
``There's been a tremendous increase in CI, particularly in the past five or six years,'' Mr. Ballou says. ``Evidence of their early work shows the Japanese interest in tapping into the US information load. Now US companies are making efforts to do the same thing.''
Nothing symbolized the Japanese systematic information-gathering effort more than the ubiquitous tours of US manufacturing plants in the 1960s and '70s by teams of camera-wielding Japanese engineers taking snapshots of everything. Proud US plant managers were eager to show off their latest hardware.
``You won't find plant tours like that anymore,'' Ballou says. ``They're much more restrictive now. They've been burned once, so US companies are much more cautious than they used to be.''
First of three parts. Next: How to fish for information on rivals.