Competitive intelligence and industrial espionage comparative analysis

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Confidential information about the partners and competitors is of value to the business, regardless of the direction of the company. To obtain valuable information, the owners go to various tricks, not always legal ones. Let's carry out a comparative analysis and figure out how competitive intelligence and industrial espionage differ.

The concept and functions of competitive intelligence

Competitive or commercial intelligence is commonly understood as the collection and analysis of information from separate sources. Competitive intelligence is conducted within the framework of the law and ethical norms and helps to make informed management decisions to enhance the company's competitiveness. Large corporations can afford to maintain dedicated departments that deal with competitive intelligence.

Do not confuse commercial intelligence with company security. Competitive intelligence is aimed at identifying and blocking external threats that can become an obstacle to the company's strategic goals. Risks of interest to business intelligence are of a market nature, affect the company's profits at the moment or may cause losses in the future. The task of the security service is to prevent, identify and block both external and internal threats that can have a negative impact on the productivity of the company. Typically, these risks are of a criminal nature and disrupt the normal functioning of the organization. Another area of work of the commercial intelligence service is to counteract unfair competition aimed at destabilizing the company, to determine the level of loyalty of staff and business partners.

Competitive intelligence functions include:

  • detailed study of competitors' activities;
  • loyalty control of business partners.
  • obtaining information about the market from the media and open Internet sources;
  • marketing analysis of the market in the region;
  • making a forecast of fluctuations in quotations in the financial market;
  • forecasting strategies of the main competitors;
  • identification of potential opponents;
  • implementation of the positive experience of competitors in the company;
  • analysis of business expansion prospects.
  • legal collection of information, learning know-how, innovative technologies that contribute to the growth of the company's productivity;
  • identification of weaknesses in the activities of competing companies.

The author of Competitive Strategy, Michael Porter, proposed the use of the Five Forces model in commercial intelligence. The model serves to achieve strategic goals, gain a competitive advantage, detect probable threats to the company and design a competitive strategy.

The Five Forces model includes analysis of:

  • threats of the emergence of substitute products or services;
  • threats of the appearance of new players;
  • market power of suppliers;
  • market influence of consumers;
  • the level of competition.

The results of competitive intelligence are used to develop tactical actions and strategies for the development of an organization.

The benefits of competitive intelligence

The complex methods and strategic planning that are used in business intelligence are aimed at obtaining a complete picture of the state of the market and the position of the firm. Industrial intelligence methods are similar to marketing ones, when the main task is to monitor supply and demand in certain market segments.

Competitive intelligence is implemented in various ways. Here are just a few examples from global business practice.

Forecasting market fluctuations

The main (strategic) task of competitive intelligence is to ensure a balance between the company's general policy, its implementation in practice and market trends. And if the company's strategy is a constant concept in most cases, then the financial market is endlessly changing, and it can be difficult to keep track of its fluctuations. Therefore, in order to make the right management decisions, the head must always have at hand reliable and up-to-date information about the company's position in the financial market.

Lack of monitoring of market fluctuations can lead to bankruptcy of the company. A classic example of the lack of effective competitive intelligence is the case in the American auto market in the late 1970s. The American "Big Three" from Detroit, which included the "monsters" of the automobile industry General Motors, Chrysler, Ford Motor Co, did not analyze the changes in the pricing policy for automobile fuel in time. The cost of gasoline has risen sharply, in connection with which Americans are interested in small cars with minimal fuel consumption. Automobile corporations from Japan took advantage of the lack of adequate response to changing demand. By focusing on the analysis of the American market and taking advantage of the inaction of competitors, Japanese corporations took over the American subcompact market.

Anticipating the actions of competitors

Cellular operator Bell Atlantic systematically monitors the network coverage area. The company has created a network of mobile laboratories that receive signals from competing operators. This allows Bell Atlantic to track the transition of competitors to a backup channel created to expand its relay coverage. The arrival of data on channel expansion by a rival operator is forcing Bell Atlantic to activate a plan to include redundant channels. When intelligence detects that a competitor is testing new channels, Bell Atlantic manages to turn on new channels so as not to lose customers. Lack of competitive intelligence would have meant Bell Atlantic would have learned of competitors' plans too late. This, in turn, could cause the subscribers to switch to another operator, which offers improved service with a larger relay area.

Monitoring the range of competitors

Close to ideal commercial intelligence can be called the system of the American corporation AT & T, which is based on a database called "Access to AT & T experts." This system conducts monitoring with subsequent comparative analysis of the main competing organizations. The main argument for monitoring one or another competing company is the increased interest in it from AT&T personnel. Thanks to well-established industrial intelligence, AT&T was able to learn in advance about the emergence of a new competitor in the controlled market sector. Moreover, information about a potential competitor was in the hands of AT&T even before its actual entry into the market.

Analysis of the positive and negative experience of competitors

An example of an entrepreneur who learns from others' mistakes is Wal-Mart founder Sam Walton. Competitive intelligence has shown that customers of Wal-Mart's main competitor, the mega-store Sear, are unhappy with the number of products in specific groups. Sear's limited distribution system was the cause of the failure. Then Sam Walton organized his own supply system and a fleet of vehicles, which made it possible to arrange the supply of goods in the right quantity and improve the level of service.

Internal commercial intelligence revealed that cashiers and salespeople were unhappy with the attitude of management at Wal-Mart. To unite the team, we launched a staff retraining program aimed at raising the level of corporate culture, and the position “salesman” was renamed to “companion”. Plus Sam Walton launched bonus programs and options. Curiously, the founder of Wal-Mart took over the ideas of business development from the founder of another trading empire - JC Penney. Back in 1913, James Cash Penny provided sellers with the opportunity to share in the profits of the company and called them "partners".

Monitoring and implementation of know-how

A characteristic feature of pharmaceutical production is the lengthy process of bringing new products to the market. For certain groups of medicines, it exceeds a decade. This is primarily due to costly and lengthy scientific research.

The long launch period of the drug is pushing pharmaceutical companies to conduct commercial intelligence in order to obtain information about the projects of competing firms and to adopt a development strategy for their own projects. The American corporation Marion Merrell Dow, for example, systematically monitors the activities of competing companies. Such competitive intelligence is based on open access documents and publications in scientific journals. Global exploration manager Marion Merrell Dow notes that ongoing monitoring allows decisions to be made about the rationality of attracting additional resources to accelerate projects.

Launching a new project

With the help of competitive intelligence, you can not only track market changes, but also make a decision to launch a new project. In the process of creating Japan's first cruise ship, the Crystal Harmony, the project leaders decided to send the lead designer and two engineers on a trip around the world on a large British liner. The "scouting tourists" carefully photographed and recorded in their notebooks everything they saw: table setting and food preparation in cruise ship restaurants, the number of visitors to the bar, dance hall and pool. Every evening, engineers filled out an exploration report. Colleagues from the Japanese company carefully processed and analyzed the data obtained.

In total, it took a Japanese company only a few years to launch the new Crystal Harmony liner. The Japanese cruise ship was built on the basis of the studied motor ship Queen Elizabeth 2, where Japanese engineers conducted industrial exploration. The debut of the Japanese liner was successful, and now the company is confidently occupying a niche in the marine tourism business.

Organization of competitive intelligence in the company

In Western Europe and the United States, most corporations regularly conduct competitive intelligence. An Industrial Monitoring and Analysis Division operates at IBM and Texas Instruments. The structure helps corporations keep track of transactions and contracts that competitors enter into. This allows conclusions to be drawn about technological advantages. Citicorp introduced the position of Business Intelligence Manager.

In Russia, many companies seek to obtain information about competitors, realizing that this provides significant advantages in the competitive struggle. In large banks and corporations of the level of Lukoil and Gazprom, there are structural divisions, departments or sectors that are engaged in competitive intelligence and analytical work.

Competitors are monitored mainly by businesses from traditionally highly competitive business areas, such as light industry and pharmaceutical companies. The growing interest in industrial exploration is due to the unwillingness to lose the conquered market segments.

An interesting example of a commercial intelligence technique is the posting of a non-existent vacancy. The method is often used by banks and law firms, which attract applicants with high salaries and additional bonuses. At the interview, the candidate is asked to describe his professional achievements and list the responsibilities in the previous place. In this way, the company collects information about the methods of operation of competitors. Any candidate for a position can distinguish a real vacancy from a market scan. If the vacancy "hangs" for several months in a row, but there is no result, it means that commercial intelligence is working.

Commercial and industrial espionage

If commercial intelligence is the collection and processing of information that is freely available and of interest to the company, then industrial espionage is a "shadow" methods of data collection. Business intelligence consists in openly monitoring the activities of competitors, identifying and, if possible, blocking threats, as well as predicting the vectors of the company's development. Industrial espionage is most often an unfair competition using not entirely legal or outright illegal methods of collecting information.

Industrial espionage techniques for obtaining information include:

  • bribery - offering illegal remuneration to top managers of partner companies;
  • hacker attacks;
  • damage to software;
  • the use of prohibited technical means;
  • the use of physical methods of coercion;
  • obtaining compromising material for subsequent blackmail;
  • insider introduction;
  • illegal cooperation with government agencies, with the support of which the seizure of data is carried out.

Examples of business espionage in Russia

Diverse business “units” from private entrepreneurs to public corporations resort to competitive espionage. In addition to obtaining confidential information, competitive espionage is characterized by activities aimed at destabilizing and ousting competing companies from the financial market.

Despite the relatively recent emergence of concepts such as “competitive intelligence” and “industrial espionage” in Russia, there are already legal precedents for criminal prosecution of industrial spies and insider agents.

The Tverskoy District Court of Moscow ruled to prosecute TNK-BP Management employees for illegal collection of information constituting a commercial secret using bribery and blackmail.

In St. Petersburg, an employee of the training center of Spartak OJSC was found guilty, who tried to sell to Iran the technology for carrying out repair work for Mi-8 helicopters.

The Tagansky District Court of Moscow sentenced a specialist in the retail sales department of the insurance company Rosgosstrakh-Stolitsa: the employee used official access and tried to sell a copy of the company's customer database.

Industrial espionage is not always limited to collecting sensitive confidential data about competitors. Sometimes companies use sabotage methods to fight competitors.

Ten years ago, in 2008, the Kuzminsky Court of Moscow considered the case of an installer who tried to steal a cable from a subsidiary of his employer's main competitor. The top management of the holding, which owned the affected company, insisted that the actions of the installers should be qualified not as theft for their own needs, but as a sabotage operation in the interests of a competitor. However, the affected company failed to prove the fact of commercial espionage in the form of sabotage. When making a decision, the court did not take into account the competitive relationship between the two enterprises, and the installer was convicted of theft with penetration into non-residential premises.

If the investigation was able to prove that the attempt to steal the cable was carried out with the aim of damaging the property of a competitor, then it would be possible to bring to justice not only the contractor, but also the customer-employer.

However, despite the failure, the given example is a precedent for Russian practice. For the first time, the cable theft was linked to the actions of a rival company. It is also one of the rare cases of competitive espionage that has gone public. In most cases, affected companies choose not to report espionage. This is due to fears for business reputation and the desire to receive compensation, which is easier to agree on pre-trial.

Meanwhile, law enforcement agencies are helping to track down spies, accomplices and customers. In Ukhta, police officers succeeded in stopping an attempt to steal a package of documents from a local mechanical plant, including drawings that belong to the company's trade secrets. The prosecutor's office opened criminal proceedings under article 183 of part 3 of the Criminal Code of the Russian Federation - illegal collection of data constituting a commercial secret. The amount of losses that the plant could have incurred was estimated at ten million rubles.

Commercial Intelligence and Espionage: A Comparative Analysis

Don't be identified. Despite their common goals, the methods of commercial intelligence and industrial espionage are diametrically opposed.

Of interest to industrial espionage is confidential information protected by law. The basis of industrial espionage is the collection, analysis and use of trade secrets. This is the main difference between espionage and intelligence activities. Commercial intelligence does not go beyond the boundaries of the legal field, while there are no boundaries for agents of industrial espionage.

In real life, distinguishing between commercial espionage and intelligence can be tricky. It all depends on the ability of "intelligence officers" to act in accordance with the norms of the Criminal Code.

Industrial espionage tools: bribery, blackmail, theft, the introduction of an insider agent, wiretapping, hacking of computer networks - go against the norms of the Criminal Code. First of all, the actions of spies fall under the qualification of Article 183, which provides criminal liability for the illegal receipt or use of information related to banking or commercial secrets.

Industrial espionage violates the legal rights of individuals and legal entities, including:

  • the right to safety (threat of physical violence);
  • the right to life, health and personal security (blackmail, use of physical force);
  • intellectual property rights (plagiarism, illegal publications);
  • the right to information protection (illegal obtaining of information - copying, data theft).

To prove that the actions committed are related to industrial espionage, the concept of "commercial secrets" clearly formulated in the company helps. The difficulty lies in the fact that different laws interpret the concept in different ways, although they are based on the basic characteristics of a trade secret:

  • this information is of competitive value;
  • this information is not freely available;
  • this information is marked with a special stamp.

On the basis of the listed characteristics, we can formulate the general concept of a trade secret: “This is information that is valuable and secret for the majority. Thanks to this information, you can make a profit, so the owner of the trade secret takes action to protect it. "

Thus, in industrial espionage, agents are trying to get hold of information that is not in the public domain and that is protected by law. However, industrial intelligence agents are allowed only such methods of obtaining and analyzing data that are not prohibited by law.

In contrast to commercial espionage, business intelligence uses open databases: the media, the Internet, the results of scientific, marketing and other research. Commercial intelligence techniques are constantly evolving to meet the demands of the financial market. The trend of recent years is the inconspicuous extraction of information during personal communication.

The difference also lies in the fact that the specialists of competitive intelligence of companies pay attention to the quality of collection, systematization and analysis of information, while agents of business espionage focus on the amount and speed of obtaining information.

An integral part of business intelligence is data processing and analysis. From all the extracted information "garbage" specialists of the analytics department isolate the "golden grain", which will help to achieve the company's advantage in the market. This requires deep knowledge of effective algorithms for working with large information flows. Often, all competitive intelligence methods are used only to get an answer to a single question.

It is precisely in the integrated approach that commercial intelligence ultimately differs from industrial espionage. Intelligence "analysts" are gradually ousting intelligence "spies" from the information market, as they are "universal soldiers" capable not only of obtaining, but also of applying the necessary information for the benefit of the company.

The information component of the financial market is developing, and therefore competitive intelligence remains in demand in various types of entrepreneurial activity. The financial success of a company directly depends on the ability to anticipate market development, and the activities of competitive intelligence are precisely aimed at predicting financial market fluctuations.