Corporate intelligence gathering and espionage

Citation

Pennington, M.W. (2002), "Corporate intelligence gathering and espionage", Strategy & Leadership, Vol. 30 No. 5. https://doi.org/10.1108/sl.2002.26130eae.001

Corporate intelligence gathering and espionage

Malcolm W. Pennington

SPOOKED: Espionage in Corporate AmericaAdam L. Penenberg and Marc BarryPerseus Publishing Cambridge, MA2000179 pp.$16.00

SPOOKED takes a peek at legitimate corporate intelligence gathering, corporate espionage, and the fuzzy difference between the two. Why be concerned about espionage when veteran managers find out about competitors in such simple ways as reading annual reports and sales brochures, visiting their booths at trade shows, reading industry journals, talking to customers, and the like?

SPOOKED says that companies that do this well usually have departments run by former officers of the CIA, FBI or military intelligence services. Most major consulting firms offer their clients competitive intelligence services (Ernst & Young has 60 people in its CI department). Most of these folks are members of the Society of Competitive Intelligence Professionals (SPIC), which boasts 7,000 members.

The SPIC has strict ethical rules about using only "open source" materials. When members want information about a company's new product, technical process, new marketing initiative, what its executives are up to, and the like, they hire "Kites." These are lesser-known consultants who will do whatever is necessary to get the information when the selected methods do not meet SPIC ethical standards or are illegal. This gives the company that initiated the action "deniability" – "Golly, we never knew this was going on."

Kites will cheerfully tap phones, record email, steal customer lists, put microphones in board rooms, root through trash, pose as potential or actual customers, pose as students working on dissertations about a certain technology, and obtain telephone call records and tax returns. Some of you will be dismayed to know that your tax return is readily available for $2,000. Others, who know how antique the IRS computer system is, will assume that hundreds of hackers are already inside and that $2,000 is an unreasonably high price.

If you are worried about your company secrets at this point, worry more about the foreign intelligence services that are busy ferreting out secrets for the companies in their home countries. The Russians, of course, work hardest at stealing technology. They depended mainly on corrupting insiders to pass them key documents for cash. Others who work diligently at this trade, such as France and Israel, are usually subtler. The book is full of fascinating stories about these capers, most of which are illegal under the Economic Espionage Act, even if they do not involve outright theft.

Of course, if you need to know secrets of your foreign competitors, you may ask the CIA and NSA for help. The Economic Espionage Act does not apply to US companies assailing their foreign competitors.

The core case story is the successful efforts of Four Pillars Enterprises of Taiwan to steal adhesive technology from Avery Dennison, a US company. The principals were eventually caught with Avery technical documents marked "Confidential" in their possession and Four Pillars and its president were prosecuted under the Economic Espionage Act. It cost Four Pillars $40 million and its president a year of home incarceration. Avery is hardly blameless – there is some evidence that, during discussions of potential joint venture in Asia some years earlier, Avery lifted some technology from Four Pillars.

Another major story tells of Dow Chemicals' search for information on potential customers and the progress of possible competitors in developing clay-polymer nanocomposites. This was a strictly ethical project conducted by computer and telephone from one highly skilled person's office. You may not have heard of nanocomposites because the technology has not been commercialized yet. But, as a result of this research, Dow believes it is in the lead and is investing millions in development.

There are dozens of other stories of searches ethical, unethical, and downright illegal. SPOOKED will definitely entertain you.

But it will also keep you up nights worrying about protecting your own company's secrets. Unfortunately, SPOOKED does not provide much advice. You might consider hiring some "Kites" to see what secrets your company is revealing unintentionally. As a first protective step, you should decide what technology and other information is really critical to your business and be very serious about safeguarding it.