Competition Drives Industrial Spying

Executives beware: Corporate supersleuths aren’t going to stop picking through your garbage any time soon.

Trying to stay a step ahead of the competition, companies are increasingly toeing a fine line between market intelligence and corporate espionage.

Witness the revelation last week that Procter & Gamble Co. used covert means to gather intelligence about the hair care products of its main consumer products rival Unilever.

This isn’t the first recent case of corporate snooping by top tier American companies either. Oracle Corp. last year disclosed its detectives paid janitors to sift through Microsoft Corp.’s garbage in hopes of finding dirt to use against the software giant in court.

But looking for information goes beyond picking through garbage. Sometimes it can cross legal and ethical lines.

Alden Taylor, head of corporate intelligence at investigation firm Kroll Inc., tells of a student who continuously clicked his pen while touring an unnamed European company.

Executives thought the student was just hyperactive, but his pen was actually a sophisticated camera. Three years later, the company the student worked for released a product based on information from photos he took.

Knowing what the competition is up to is a vital part of doing business.

“A company would be stupid if they didn’t try to know as much as they could about the products and activities of their competitors, as long as it is sort of public information, as long as it is out there for all to see,” said Michael Hoffman, a philosophy professor and executive director of the Center for Business Ethics at Boston’s Bentley College.

Some 60% of companies have an organized system for collecting information on rivals, according to researchers at The Futures Group.

Sniffing for information can be big business as a result. The market for business intelligence is worth about $2 billion a year worldwide, including services ranging from detective work to clipping news articles, Kroll’s Taylor estimates.

But the ethics of corporate intelligence can be fuzzy.

“If you’re selling Toyotas, I think it’s appropriate to go buy a Honda and take it to your factory and find out if they’re doing something better than you’re doing,” professor Hoffman said.

“But to go rifle around in Honda’s garbage can, or to put surveillance equipment illegally in their offices, or to sit up in a building across from their factory with high-powered binoculars and spy on them, if not illegal that is certainly ethically questionable.”

Stephen Miller, a spokesman for the Society of Competitive Intelligence Professionals, puts it another way.

“Competitive intelligence is the legal and ethical collection and analysis of information about the competitive environment,” Miller said. “Corporate espionage implies the theft of trade secrets, which is both illegal and unethical.”

Companies may shoot themselves in the foot if they engage in practices that are publicly revealed to be illegal or unethical. That alone can be the biggest incentive for companies to play by the rules.

“Most companies act in a way that is not offensive because they do not want to be associated with activities that consumers find offensive,” said Peggy Daley, vice president for corporate investigative firm Pinkerton, America’s oldest private investigation company.

Companies that participate in corporate investigation have another take on the matter altogether.

“In most cases if the trash is out, it’s fair game, as long as there is no law,” said Richard McCormick, head of Pinkerton’s business risk division.