Canadian Business
July 1, 1997

They snoop to conquer

The fancy name is competitive intelligence. In plain English:
snooping on your competition means making or losing millions.

When Carmen Leibel strode off the University of Regina campus in 1991 with a degree in business, she never imagined she would spend the next six years helping her employers snoop on their competition. But today she is doing just that-and what's more, looking forward to a long career in the same profession. Her current employer is TELUS Corp., an Edmonton telecommunications company that is facing a tidal wave of competition from rivals in long-distance, data communication, cellular phone and paging services. To help management plot its business strategy, TELUS has built its own in-house, competitive intelligence group. The mission of the CI team? To get the dirt on TELUS's adversaries by any legal means possible.

For Leibel, that means spending long days poring over competitors' product literature, scanning databases and chatting up executives at rival firms. In one case, she pulled together enough financial information to construct a complete profit-and-loss statement on a firm that thought its financial results were private. In another instance, she pieced together an extensive executive biography to see if a rival CEO's past behavior marked him as a risk-taker. "I like the challenge of finding information that people think is impossible to get," says Leibel, with obvious enthusiasm. "It's fun going out and finding the information, putting the pieces together, analyzing it and giving it to someone in the company who can act on it."

Even as you read this, a CI researcher such as Leibel could be probing your own darkest secrets. In fact, CI is emerging as one of the boom industries of the 1990s. During the past three years, membership in the 11-year-old Society of Competitive Intelligence Professionals (SCIP) has doubled to more than 5,000 members. The Alexandria, Va.-based society had no Canadian chapters before 1994; now it has eight.


Those growing armies of CI professionals are employed by a who's who of corporate North America: Bell Canada, Motorola Inc., Northern Telecom Ltd., NOVA Corp., NutraSweet Co., Stentor and Xerox Corp. are just some of the firms compiling data on their competitors. Executives at those companies claim the payback from snooping can be spectacular. Robert Flynn, former chair and CEO of NutraSweet, estimates that CI is worth US$50 million a year to the Deerfield, Ill., manufacturer of artificial sweetener. "There are a number of acquisitions that I made because of competitive intelligence," he told one industry roundtable, "and there are a couple of what would have been tragic errors that I didn't make because of competitive intelligence."

Of course, there's nothing particularly new about the idea of keeping tabs on your competition. (Name the restaurateur who hasn't skimmed a rival's menu.) But CI tries to turn what could be a haphazard scramble for information into a formalized process, complete with benchmarking, computer searches and specialized interview techniques. "The thing about CI is that it's always been done," says David Gibson of consultants Gibson Kennedy & Co. in Toronto. "The question is how formally and how successfully."

In many parts of the world, advanced CI techniques are already old hat. According to Jonathan Calof, an associate professor at the University of Ottawa and chair of the Canadian arm of SCIP, most major Japanese corporations have their own intelligence experts. In Sweden, too, many of the country's top 500 firms boast world-class CI departments, while universities offer courses and degrees in CI. The French government, with the help of the country's national intelligence agency, also runs an ambitious commercial intelligence program, although some of its methods have been questionable. In the early 1990s, Air France reportedly bugged first-class seats and employed state intelligence operatives as first-class crew.

On this side of the Atlantic, CI practitioners insist they operate on the right side of the law: no telephone taps, no bugs in the chandelier, no shakedowns in the executive parking garage. That's industrial espionage-and not only is it illegal, CI experts say it's largely unnecessary. Instead, they prefer to begin their quest for information by navigating down the great long river of documentation that pours out of corporate offices and into the world at large. Advertising messages, annual reports, securities filings, speeches, patent applications, Web sites, small-town newspaper clippings-the list of public information sources goes on and on. CI professionals net a surprising amount of news from those largely ignored reservoirs of data.

Snoops insist that they operate on the right side of the law-no telephone taps, no bugs in the chandelier

Then they go out and talk to the richest information source of all-the employees of the companies they're targeting. Deborah Sawyer, who owns one of the oldest Canadian CI consultancies, Information Plus of Toronto and Buffalo, NY, says just about anybody will talk when approached in the right way. Often that means a bit of skillful misdirection: only rarely, for instance, does Sawyer simply request a sensitive piece of information. Instead, she and her researchers extract small but revealing bits of detail, then use them to paint a much broader picture. "It's no different from when a detective goes to the scene of the murder," she says. "The goal is to find that bit of hair or clothing that leads to the murderer."

Consider the pharmaceutical company that hired Sawyer to find out if a rival firm was planning to produce a generic equivalent to a patent drug. She knew that if she called up the target company and popped the question directly, she would get nothing. So instead, she focused on one of the drug's necessary ingredients, reasoning that employees would be less guarded in discussing it than the drug itself. She also took pains to identify departments that would have to handle the ingredient but wouldn't be aware of its strategic significance. Several phone calls later, she had her answer.

Other assignments have been more wide-ranging. In one instance, Sawyer was approached by a brand-name soft-drink bottler that had lost a substantial part of its business to a lower-priced private-label competitor. To make matters worse, the brand-name bottler couldn't understand how its rival was undercutting its prices by such large margins. "The company's executives really felt that to understand their competitive disadvantage, they had to know the cost structure of the competitor," Sawyer says. So her firm went to work, building a complete picture of the private-label operation: bottling equipment, throughput, number of workers per shift, shifts per day, days per week, as well as raw-material costs.

What emerged was a simple but surprising lesson in economics: unlike its brand-name rival, the private-label bottler required customers to pick up their own orders. Customers didn't mind, since most had trucks on the road anyway. But without the need to maintain its own transportation fleet, the private-label bottler enjoyed a big cost advantage over its brand-name rival. Until Sawyer's report, that is. Newly armed with a complete financial picture of its competitor's cost structure, Sawyer's client used the information to become more competitive.

Increasingly, clients are paying CI consultants a retainer to monitor ongoing developments in their industry. Hourly rates can run to $150

So how much does such painstaking research cost? Sawyer's firm handles few projects for less than $10,000. Other CI consultants charge an hourly rate, typically $100 to $150. Increasingly, clients are paying CI consultants a retainer to monitor ongoing developments in their industry. "It's not the kind of work that lends itself to being put down and picked up again," says Sawyer.

Cheap, general sources of CI are available if you know where to look. In 1994 Quebec threw its support behind Competitive Intelligence Networks, the most ambitious government-sponsored CI project in North America. At the heart of the five-year, $7.7-million program are 13 "networks," or information services, each covering a specific sector, from chemicals to lumber. Expert researchers in each of those industries scour patents, international conference proceedings, specialized magazines and databases. They then winnow all that information down to nuggets they think will interest their readers-everything from intriguing new inventions to products that need North American distributors.

The goal of this CI project is to encourage Quebec companies to keep abreast of the latest technology. Subscribers (who don't have to be based in Quebec, but do have to be able to read French) pay a surprisingly modest fee for access to the service: chemical industry information, for instance, goes for $20 a month. If subscribers want more in-depth information, they can either turn to their own staff or engage one of the many watchers who collected the information in the first place. The project's founders hope that when the government funding for the project expires in 1999, private industry will be so enthusiastic about CI that the intelligence networks can become self-supporting.

Companies across Canada certainly seem interested in exploring what CI has to offer. One sign of CI's growing profile came in mid-May of this year, when more than 300 executives from Ottawa's high-tech community turned up to hear the University of Ottawa's Calof speak on the subject. "CI is taking off," says Calof, who reports his phone has been ringing off the hook with calls from companies that want to make up for lost time.

For TELUS's Leibel, CI's growing clout adds up to good news. She is now one of six CI professionals at TELUS, and she reports the company plans to bulk up its CI team by two or three more people in the near future. With growing recognition of CI's contribution, more and more executives are coming to the team for help. Meanwhile, an increasing number of coworkers are feeding the CI group with information. As the intelligence net widens, Leibel and her colleagues have more to offer. That, at least, is one secret they're happy to share.

Copyright Hugh McBride, 1997. All rights reserved.