A Sideways View

New stirrings in business psychology

Business Espionage

How do those in business "spy" on their competitors?

Knowing all about your competitors is good business. Understanding business opponents’ products and processes, sales figure and suppliers, capacity and customers as well as technology and staff training can really give a company competitive edge. Insider knowledge gained at the right moment could be used to destroy, neutralise or fatally wound an enemy organisation… with the ultimate objective of becoming brand leader.

Hence the importance of business secrets and the efforts companies go to in protecting themselves against spies from the opposition. There are, as a result, all sorts of business myths, for instance that only a handful (literally) of chosen people know the secret formula for a certain product. It was once noted that only five (or three or seven… it does not matter) people know the part recipe for Coca-Cola and that they are never able to meet and are strictly forbidden from flying on the same plane. A likely story.

Certainly, the knowledge of ingredients and their amounts in certain unique products are worth protecting, but so is the manufacturing process. Companies also have favoured exclusive suppliers, loyal customers who receive special deals, and technologies that maybe uniquely efficient, low-cost or innovative (knowing how) competitors do things is worth a great deal.

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Lots of people other than market competitors are after company secrets. Financial journalists love a good scoop; pressure groups love a bit of “third-world/environment/animals exploitation” material to help their boycott campaigns; investors, customers and even PhD students stand to gain from close-guarded information. And then there are the tax officials, the police and government departments who occasionally like to know what precisely is going on with certain companies' shady dealings. Hence we have a range of techniques, from the sophisticated to the sleazy, to spy on one’s "enemy." Some are regarded as necessary business practice; others are downright illegal. All make good material for business ethics students to debate.

The methods can be simply divided into people vs. observational strategies and each involves different approaches.

1. People Methods

A. Hiring competitor employees with highly attractive packages. This means carefully targeting individuals “in-the-know,” who can be persuaded both to leave and “spill the beans.” This is a difficult assignment: finding the right people, then knowing and providing what will make them leave. Expensive as a strategy, but potentially very successful. It is said that investment companies target top tax inspectors, thus turning the gamekeeper into the poacher.

B. Conducting phoney job interviews. This is a much cheaper (and dodgier) method. One simply advertises job vacancies, with very attractive specifications and packages, which actually don’t exist. You then interview in depth only those from companies that have the secrets you need, before deciding that a “restructuring lead the client to devote the job to other functions.” Time consuming, and rather naughty.

C. Using trade fairs and conferences to pick the brains of technical people. A couple of glasses of wine in a nice venue mean that one can flatter the knowledgeable “techy” to give up many trade secrets just by being incredibly interested and attractive. A hint of sexual chemistry may help here!

D. Using newspaper reports about company activities of all types, one can target “middle-managers” with interested calls. People who are unused to flattery are very vulnerable and may give up a lot of secrets. If the company has won an award, phone up to congratulate and ask them to speak at a local event to tell the story. If the company has had a lay-off or a drop in shares, do the same, but in commiseration. Powerful emotions lead the guard to drop, particularly in those not used to being in the limelight.

E. Placing your people in their camp. This means trying to get one of your employees to get a job in the opposition. Their primary aim while under your employ (they get paid twice), is to find out and relay the secrets. Very James Bond… important then to get the right chap for this sort of caper, which is a long-term project.

2. Observation Methods

A. Studying aerial photographs of plants to which access is restricted. This can reveal plant layout (which is often a clue to process) inventory stockpiles, a tip-off for a sales drive, etc.

B. Videotape comings and goings to headquarters, plants etc. This can give information about who works, where and when. It can give clues about particular individuals, but also shift patterns, recruitment, downsizing etc.

C. Reverse engineering, which involves taking products apart to study components and manufacturing processes. Equally, one can do a chemical analysis of the product can be performed to try to determine the ingredients and preparation method.

D. Garbology: obtaining the rubbish people throw away, examine everything including shredded papers. This is somewhere between post-modern archaeology and paparazzi low life, but it does reveal a great deal if one is patient, partial to rubber gloves and desperately inquisitive.

Most of us have become used to living in a surveillance culture where cameras are everywhere. There are now specialist shops, that advertising in airline magazines, that effectively sell espionage and counter-espionage equipment; miniature cameras and microphones etc.

Some companies invest a lot of money and effort keeping their secrets. Others are more interested in getting the secrets of others. The reactive and proactive, defensive and offensive. The sector the company works in, its history and the paranoia or entrepreneurship of the CEO seem to dictate its attitude to business espionage rather than business ethics. But successful companies cannot afford to ignore their competitors. The only question is how they prefer to obtain their information.

Adrian Furnham, Ph.D., is a professor of psychology at University College London and the Norwegian Business School.

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