Play by the rules

Thursday, March 13, 2008

Corporate Espionage is an expensive & dangerous proposition. But that has not deterred the leaders of Global Inc. to get their hands dirty. They say, all is fair in war, business & politics. But is it?

A strange story leaked into the British press in the 90s about Richard Branson. It said that the garbage man refused to collect trash at a Branson owned nightclub because it included HIV infected needles. The story was baseless. However, it was not some gossip column that came out with this story. It was a well planned strategic move involving senior corporate executives of Virgin’s competitor, British Airways. Lord King, the British Airways Chairman, conducted a smear campaign against Branson – one of Britain’s wealthiest and best known entrepreneurs. BA’s PR Consultant, Brian Basham had been intentionally undermining him and his company’s reputation in the press – why? Well although Virgin was small, yet it posed a potential threat to the huge national carrier, BA, especially on key routes between London and United States and Asia. As a result, BA indulged in all kinds of espionage to destroy Virgin. It even went to the extent of spreading rumours about the unsafe conditions of the flights and how Branson does not allow his wife to fly Virgin due to safety concerns. In the end, in one of the most humiliating, most bitter and protracted libel actions in the aviation history, BA finally apologised to Virgin and even agreed to pay damages to the tune of £3 million.

Last year Oracle accused SAP of a grand scale corporate theft, of downloading and gaining illegal access to its computerised data, thus helping it to undercut its prices.

I Spy with my little eye

BA hacked into Virgin’s reservation system, called up Virgin customers, lied about cancellations and switched them to BA flights. It got caught. Procter & Gamble too indulged in corporate espionage against its competitor, Unilever. It learned all the myriad details of Unilever’s hair care business. If sources are to be believed, then P&G hired corporate spies so that its brands Pantene, Head and Shoulders and Pert could beat Unilever’s Salon Selective, Finesse and Thermasilk! When they feared the lid would blow off, P&G in the most unusual twist of cases, informed Unilever that it had engaged in this activity.

Last year, Mumbai police arrested a Tata-owned VSNL employee when he was suspected of leaking crucial information to a rival telecom company. The man, secretary to the MD, had given away the minutes of the meeting to a rival company. Back in 1997, the engineer, leading the team, which was designing a new razor for Gillette, was sent to jail for leaking the confidential designs to competitors like Warner-Lambert. What’s more, even Oracle Chief, Larry Ellison, had himself ordered professional snoopers to pilfer the garbage of his arch-rival Microsoft’s Bill Gates.

GM found some blueprints of its super-efficient yet-to-be-operational assembly plant with Volkswagen. It was a plant with which GM believed it would topple VW’s dominance in the small car market, especially in emerging markets of Western Europe, China & elsewhere. Jose Arriortua, the head of purchasing for GM, suddenly switched to Volkswagen. It was rumored, he took 20 boxes of documents on research, manufacturing and sales. Though VW admitted no wrong doing, but in one of the largest international corporate espionage cases, VW agreed to settle the civil suit, by paying GM $100 million in cash and $1 billion on GM parts, over a period of seven years. Jose, who was responsible for the turnaround of GM, and had a stunning success record at GM, was also sadly responsible for creating the espionage case of the century. The case had such drastic consequences that it even threatened to spoil diplomatic relations between US and Germany.

These thrilling stories are as gripping and riveting as Bond and spy films. But this is no drama, it’s the real corporate world. Today, just having a good product, a sound marketing strategy and great R&D is probably not enough to succeed. The market place is getting tougher, the rules more complicated. Today, knowing the competitor’s next move is more important and companies many-a-time are forced to indulge in unethical means, just to stay ahead.

Firewalls or Human walls

The business of spying is now a lucrative profession and guess who are the chief players here – the former “three-letter-agency-people.” People who were earlier trained by the CIA, the FBI, et al are now working for companies. Now you know where all the cold war spies have gone! P&G, which spied on Unilever used the services of an agency named The Phoenix Consulting Group of Huntsville, Alabama, which is founded & staffed by former government intelligence officers.

China is one country, which is very high on corporate espionage. Earlier this year, Dongfan Chung, a 72-year-old man was arrested for passing information about the US Space Shuttle to the Chinese. Both the countries have announced intentions of returning humans to the moon by 2020. China’s seeing this “space race” as a confirmation of its superpower status. It’s also using the extra-info on US military to boost its anti-satellite weaponry. Today one-third of all corporate espionage cases in USA involve China. M15 of the UK too has noticed an upsurge in electronic espionage attempts made or launched against a lot of UK companies by Chinese cyber spies.

Hacking into competitors secrets has never been more easy. Technological innovations have made it even easier. Professional investigators and flawless technology are proving to be a lethal weapon. Not surprisingly, many companies are investing in firewalls to protect their precious data.

In December 2005, Dupont informed the FBI of its suspicions that its research chemist had stolen secrets worth more than $400 million and passed it to a UK-based competitor.

An employee of Kodak who was with the company for 30 years established his own consulting firm upon retiring – and mostly consulted Kodak’s competitors.

Avery Dennison, one of the largest US manufacturers of adhesive products discovered that one of its key employees was for eight years supplying highly sensitive information to a company of Taiwan. What I am trying to say is, in all these cases, fail-proof firewalls would not have helped. The best defense against corporate espionage begins with an attitudinal change among employees. You need to give them proper training and have security policies in place.

Indian organisations feel that corporate fraud happens to others, not realising that it could be actually happening right under their nose. It’s industries like financial services, information communication and entertainment, which have a high risk of espionage. Yet, less than 50% people feel that their recruitment procedure have enough checks and balances to prevent fraudsters from joining.

It is high time that we started investing in human walls – those with whom our secrets would be safe, instead of just firewalls.

Competitive Intelligence: A different game of strategy

Corporate espionage costs the world’s 1000 largest companies in excess of $45 billion, according to Pricewaterhouse Coopers. There is a better, smarter way to predict your competitor’s next move called – Competitive Intelligence. It is a game of planning and strategy. Its all about understanding the strengths and weakness of competitors. It helps marketers discover new markets. It helped Japanese automakers analyse the US car market and determine the future trend in car buying habits. They realised high gasoline prices & smaller families meant America was ready for high-quality, small, fuel efficient cars. It is this that helped Wal-Mart realise that distribution was a problem at Sears. It built a state-of the-art distribution system and beat Sears.

If you don’t know what your competitor is up to, you can’t make intelligent decisions. You need to be alert and look around. You will find all vital information. Company Sleuth is a website that does just this. It discovered that Coca Cola had trade marked the name Javalait – that was possible indication of the soft drink company’s intentions to enter the coffee beverage segment… an information useful to coffee houses like Starbucks, among others.

The best part is that 95% of everything you need to know is actually in public domain. You just need to look around, like keeping a tab on your competitor’s recruitment ads, their stores, their balance sheets or just listen to people, to gather who & what is most talked about and then use your sharp analytical skills to predict your competitor’s next step. So there’s no need for cloak and dagger tactics. Remember no one likes cheaters. You want to win both in the short-term and long-term. Competitive intelligence and not corporate espionage gives you that power. To win you need to plan. To plan, information is imperative. Get it through legal and ethical means. It’s a fact that to win consistently, you need to play by the rules.