More Firms See ‘Competitive Intelligence’ as Smart Move : Strategy: Despite ethical pitfalls, the practice of gathering data on rival companies is increasingly viewed as a business necessity.
Nutrasweet’s patent on the artificial sweetener aspartame was due to expire in 1982, and the company faced possible disaster as chemical and sugar companies planned moves on the market.
So Nutrasweet began analyzing competitors’ prices, customer relations, expansion plans and advertising campaigns. The company used the information--called competitive intelligence--to cut costs, improve service and preserve most of its market.
“We maintained over 80% of our market,” Nutrasweet Co. Chairman Robert E. Flynn said.
With increasingly tough global competition and helter-skelter advances in information technology, many companies are forming their own competitive-intelligence units. They’re also turning to consultants and “information vendors” for help.
“There’s much less room for mistakes than there was in the past,” said John E. Prescott, a professor of business administration at the University of Pittsburgh.
Flynn said competitive-intelligence practices are worth $50 million a year to his company.
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Competitive intelligence combines strategic planning and marketing studies. Much of the raw material is “open-source,” readily available from press clippings, government records, trade shows and industry experts, Prescott said.
Other sources of information can be touchier. Observation of competitors’ activities and interviews with suppliers, customers and former employees are used, but they raise ethical questions.
The field is growing. The Society of Competitive Intelligence Professionals, which Prescott helped found in 1986, now has about 2,800 members, compared with 1,800 only a year ago, spokesman Charles Eaton said. The members include professionals at companies as large as AT&T; and General Motors and as small as two-person consulting firms.
David Harkleroad of the Connecticut-based Futures Group, a business forecaster, said the battlefield of the marketplace has become so tough that competitive intelligence is a necessity. “The smart companies are realizing they can’t afford not to do competitor intelligence,” Harkleroad said.
It’s more than just knowing the enemy. Good intelligence can help pinpoint narrow markets and keep a company from moving into overcrowded areas and wasting research and development money on projects competitors have abandoned, Prescott said.
He said an intelligence unit also can find strong and weak points in a company’s own operations.
The Internet global computer network has made available thousands of databases for intelligence researchers. Prescott--one of only a handful of people teaching business-school courses on competitive intelligence--plans to offer a course through the Internet this fall.
Although competitive-intelligence professionals take pains to play down the James Bond image, many companies are as tight-lipped about their work as any espionage agent.
“Sure, we have an activity, and it’s important, and it has value, but it’s something we really don’t get into,” said John Ruch, spokesman for PPG Industries Inc. in Pittsburgh. “We don’t talk about competitive intelligence for a variety of competitive reasons.”
According to a survey by Prescott, companies frequently craft profiles of managers in other companies, assess their technology, and analyze strengths and weaknesses.
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Reverse engineering is a common competitive-intelligence method. The Ford Taurus, for example, came about after Ford engineers examined competitors’ cars and incorporated the best features into one auto, Prescott said.
One of SCIP’s main contributions is an ethical code that requires members to comply with the law, to identify themselves when seeking information about competitors and to respect requests for confidentiality, Harkleroad said.
The society’s president, Faye Brill, conceded that some competitive-intelligence firms outside the society operate at the edge of the law and beyond. Some companies resort to document theft, electronic eavesdropping and deception, but the unethical practices often backfire.
Another ethical problem crops up in competitive intelligence abroad. In other countries, centuries-old business practices often include gifts and “finder’s fees” to informants, brokers, government officials, customers and suppliers. In the United States, these might be called bribes.
Reliable standards for cross-cultural business ethics are still evolving, Eaton said.
And some governments--notably France, the former Soviet republics and developing nations--are increasingly using their national intelligence services to aid their industries, Prescott said.
“Britain and the U.S. try to keep hands off,” he said. “The smaller countries are the most active in this.”
