Sleuths In Suits: Mission: Intelligence

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In the modern era, competitive intelligence got a high-profile boost in 1983, when MOTOROLA CEO Robert Galvin hired CIA veteran Jan Herring, who is now a consultant and CI trainer based in Hartford, Conn. Herring built a CI department that set a new standard in two critical ways. First, it was driven by the CEO himself. CI professionals agree that intelligence is only as good as the executives who use it. Unless the CEO understands the importance of intelligence as well as its limitations, the best efforts of an analyst will be worthless. Second, Herring focused on developing internal sources of information: Motorola employees who could accumulate critical data about competitors or the marketplace in the course of their everyday jobs. Herring taught key employees around the world how to casually elicit useful information from unwitting sources and then encouraged them to pass the information to the CI department so it could be analyzed and delivered to Motorola executives in the department's regular reports. In 1985 Motorola employees in Japan learned off-hand--over drinks--from their NEC counterparts that poor communication caused NEC to blow a potential deal for a GENERAL ELECTRIC subsidiary, according to Adam Penenberg and Marc Barry's 2001 book, Spooked.

As high-tech industries boomed, CI grew with them. Biotech and pharmaceutical companies have become especially skilled. "Because of all the patent information that's available, we know well in advance what is in someone else's pipeline," says SCIP president Mark Little. "You can see some of these things coming a long time away."

SmithKline Beecham, now part of GLAXOSMITHKLINE, anticipated BRISTOL-MYERS SQUIBB's acceleration of its anticancer drug Taxol, in part because Bristol-Myers Squibb took a curious interest in amending the Endangered Species Act to enable more harvesting of the yew tree, whose bark produces the active chemical agent in Taxol. SmithKline's suspicions were strengthened in the early '90s when it noticed an increase in the number of oncology positions listed in help-wanted ads run by its competitor in trade papers. Bristol-Myers Squibb had also told financial analysts it was investing more money in its oncology unit. In response, SmithKline sped up its own cancer research to avoid being muscled out of the market.

As sophisticated as U.S. business intelligence is, it lacks the government support that many other nations' multinationals can count on. The Chinese, French, Israeli and Japanese intelligence services are especially noted for gathering and sharing information useful to their country's firms. Last year two Chinese scientists working for LUCENT were arrested on charges of passing information to a state-run Beijing company seeking to become the CISCO of China. The scientists and a third alleged co-conspirator are still awaiting trial. U.S. intelligence has tipped off American businesses when it has learned their competitors have not been playing by the rules--for example, in cases in which bribery threatened to influence the award of a big aerospace contract in Saudi Arabia and a telecom contract in Brazil. But U.S. agencies are reluctant to go much beyond such warnings, out of concern about not favoring one firm over another.