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 June 2002
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Written by
Kris B. Mamula

Illustration by
Michael Knapp






Getting the inside scoop on a business adversary can make or break a deal. Uncovering that information, ethically, through competitive intelligence is a burgeoning field pioneered by Pitt Business Administration Professor John E. Prescott. Graduates with this expertise have become valuable additions to their companies’ executive management teams.

Corporate Sleuths

Tucked into the e-mail message, right after “hope you’re doing well,” is a plea for help. The sender is George White, senior manager at Deloitte Consulting. Right now, he’s somewhere in Missouri working up a major proposal for a government-consulting contract. Reading his message in Deloitte’s Pittsburgh office is Jan L. Bamford.

Here’s the deal: White has gotten wind that Deloitte may be up against a tough competitor for the contract. The competitor’s proposal will be hard to beat: unlike with Deloitte, the client would pay the competitor virtually no consulting fees up front.

“Do we have any information on the states that they are currently working in, and whether those states are pleased with their work?” White asks.

Bamford’s research will shape White’s proposal, which could tip the contract to Deloitte—making for a nice payday. A win may also boost Deloitte’s profile in wooing new government clients.

In Bamford’s reply to White, she writes, “I will research whether the company has received negative press relating to their performance in any state. A quick initial look at sources indicates that I probably won’t have much luck with this, but I will look.”

Time is short. She frowns. Arrgh! Gathering information about the enemy has been around since the barter system. But it wasn’t until 1984 that a university offered a course in competitive intelligence. That university was Pitt. John E. Prescott—professor of business administration at the Katz Graduate School of Business—taught the course. Prescott, who defines competitive intelligence as “sophisticated gossip that has economic consequences,” was just warming up. Two years after teaching his first competitive intelligence class, he founded the Society of Competitive Intelligence Professionals[*] (SCIP), a trade group based in Alexandria, Virginia. SCIP now has more than 70 chapters in 45 countries and 6,000 members today. And in 1996, Prescott designed the first Web-based competitive intelligence course.

The idea is catching on. Universities worldwide now offer competitive intelligence courses and programs similar to those introduced by Prescott. “John is considered the granddaddy of the field,” says Conor Vibert, a consultant to a number of major clients in the telecommunications, oil and gas, and biotechnology industries, and associate professor of business strategy at Acadia University in Nova Scotia. Blushing and looking at the floor, the 47-year-old Prescott pooh-poohs the “granddaddy” title.

Jan Bamford (Ric Evans photo)
Deloitte’s Bamford—who earned her MBA at Katz in 1994—serves as the coordinator of SCIP’s Pittsburgh chapter. At Deloitte’s Pittsburgh office, she is a competitive analyst, a position that didn’t exist four years ago. Her branch of the international consulting firm uses computer technology and the Internet to help make government work better. Helping state and local governments provide point-and-click service is part of what Deloitte does. Better informed, more sophisticated voters want government at their fingertips.

Oh yeah, some deer hunters like the idea, too. Last season, the first time the service was available, the Pennsylvania Game Commission sold 2,672 hunting licenses online. By January of this year, some 32,000 hunters bought licenses using the Web—four months before the season ended.

Online car registration renewals, downloadable study guides for driver’s license exams, and online business tax filing are other services available in many states. In fact, Uncle Sam has emerged as the world’s biggest customer for information technology. Federal spending on computers, software, and related equipment is expected to reach $49 billion this year, according to the Arlington, Virginia-based Government Electronics and Information Technology Association.[*]

Federal Sources Inc., a marketing and research firm in McLean, Virginia, says the state and local government technology market will grow 5.3 percent annually to $45.3 billion by 2004.

Deloitte and its competitors have taken notice. Two national giants in the field of making government work better are Electronic Data Systems and IBM. These two companies have government spending to thank for more than $1 billion in revenue in 2000, according to Federal Sources. Deloitte’s piece of the pie for fiscal year 2001 was $314.1 million. What’s more, Deloitte estimates that fiscal year 2002 will see sector spending balloon 20 percent. Understandably, Deloitte wants an even bigger piece of the governmental pie. That’s where competitive intelligence may help.

Just don’t call Bamford a spy. Rifling through trash and cloak-and-dagger intrigue are not her style. The trim, polished 38-year-old executive uses only publicly available information—newsletters, trade publications, earnings reports, magazines, and newspapers. Poring over these publications is exactly what she will be doing for the next hour or so as she tries to get the information White needs. Despite the urgency for competitive intelligence, Bamford won’t break any rules in her search.

Following the law is part of the ethics code that Prescott helped write for SCIP. “We splash it on everything we do,” he says, adding that many companies have adopted the code.

Fuld
Leonard M. Fuld—founder and president of Fuld & Co.[*], a Cambridge, Massachusetts competitive intelligence consulting firm—also points out, “Every job has its rules, things you can and can not do. We have to live within certain boundaries, just like every business.”

Although Prescott’s competitive intelligence gospel has flashed around the globe, not everyone plays by the rules. Last year, for example, three people, including two engineers at a major telecom equipment maker, were arrested after allegedly stealing commercial secrets and handing them over to a foreign company. Such cases are not unusual. Stung by US companies’ billion-dollar losses in proprietary and intellectual property, Congress in 1996 passed the Economic Espionage Act. The law is intended to discourage theft of trade secrets. Despite the law, corporate skullduggery persists.

All of which offends Prescott. He despises the bad name corporate spies give what he believes can—and should—be done openly, without all the wink-wink, nod-nod stuff. Believers include Motorola, Merck, and IBM, which have thoroughly integrated competitive intelligence programs and boosted earnings as a result.

Despite the growth of corporate intelligence, Prescott glumly admits that SCIP can’t shake the spy image. Not even shampoo is clean. One of the leading shampoo makers acknowledged it hired an outfit two years ago to get the lowdown on a competitor. Tactics included going through the competitor's trash, and getting inside information by posing as journalists, researchers, and students.

Around the same time two years ago, one of the world’s biggest software makers admitted hiring detectives to spy on a pro-Microsoft trade group. The agency allegedly paid janitors to fork over the group’s trash. (The cash-for-trash days may be numbered: Document shredding has grown into a $1.5 billion enterprise.)

Stories like these make Prescott wince. Corporate dirty deeds are against everything he teaches. He is part of an international team that’s updating SCIP’s code of ethics. A business idea that has taken root globally needs an international focus, he says. He is also executive editor of Competitive Intelligence Review, a trade journal. Craig S. Fleisher—University of New Brunswick professor of management—describes Prescott as a “nice outside conscience” for the field. “He has certainly given it legitimacy,” says Fleisher[*], who earned a PhD at Katz in 1992.

Fleisher
In recent years, Prescott has been invited to bring competitive intelligence to a United Nations agency. The UN’s Industrial Development Organization saw competitive intelligence as a way to jumpstart businesses in developing economies. He also joined corporate executives from drug maker Merck and others to school Chinese businessmen in the practice. Prescott returned from his fourth visit to China last January. He’s also a consultant to corporate titans General Electric, Astra Zeneca, Samsung, Pfizer and others. All embrace more enlightened views of corporate sleuthing as legitimate business.

Nine out of 10 Fortune 1000 companies have employees involved solely in competitive intelligence, according to Fuld. A recent Business Week article noted that the number of competitive intelligence professionals has risen more than 220 percent during the past decade. Fuld estimates that some 10,000 corporate employees now devote most of their time to looking over their shoulder at the other guy.

It’s not just the big guys who benefit from competitive intelligence. Knowing whether you have the cash and talent to make it is a must for start-ups, says Ann M. Dugan, founder and executive director of the Institute for Entrepreneurial Excellence. “They have to do their homework,” she says. The institute, part of Pitt’s Katz Graduate School of Business, devotes at least a quarter of its 50-hour program for would-be entrepreneurs to knowing their competition. “Avoid it at your own peril,” says Dugan, whose program graduates boast a 75 percent business success rate after five years.

Getting to know Deloitte’s competitor for the Missouri contract is exactly what Bamford, a one-time newspaper reporter, does.

I thought I saw something in a magazine two days ago. What can I give him to back up what he wants to say? What can I get to him quickly? Where is that filed?

She scans scores of online publications and databases. Near her computer is a breakfast bagel, untouched.

The birth of the Internet, and the emergence of other information technologies, have made getting competitive information faster and easier. Required corporate filings and disclosure statements that once piled up in dusty government offices are now available online. Two examples of how the Internet has affected competitive intelligence: Savvy Web users knew that Daimlerchrysler.com became a registered domain name the night before the merger of the two carmakers was announced. Amazongreetings.com was registered two months before the book merchant added greeting cards to its line.

Here’s another success story. Healthcare products giant Baxter International Inc. created a department with a simple mandate: Look around for new inventions the company may be able to use, then pass the information along to those most able to use it. Some pretty unusual ideas began trickling through the corporate ranks. In the 1980s, the fledgling department became intrigued by Japanese vending machines. Could the idea be used in hospital pharmacies? Baxter took a chance. The result was a pharmacy machine built by Sanyo and sold by Baxter. It dispensed customized medications, greatly improved inventory control, and has chalked up sales of nearly $1 billion.

But competitive intelligence has been fingered in some spectacular blunders as well. A leading communications equipment maker was cruising along with strong management and a great track record in the spring of 1985, when its vice-chairman came up with a question. He wanted to know if any competitors were thinking about using satellites for mobile communications. Company sleuths studied the question, then came back with the answer “yes.” But it would be at least 10 years before such a system could be developed, they said. Bingo! The company began designing a satellite that would give customers the ability to talk “virtually anywhere in the world.” But things went awry. As the company planned to launch its satellite, the cell phone industry was busy switching to digital signals from analog, challenging satellites as a communications tool. The company only drew 55,000 subscribers to the network. Fifteen years and $5 billion later, the company sold the business for a mere $25 million. Critics say the satellite fiasco spotlights the danger of paying too much attention to competitors while ignoring the marketplace. Still, Prescott is quick to protect his baby: the satellite endeavor represented a management failure—not a failure of competitive intelligence, he says.

Dead-ends crowd Bamford’s early searching. The competitor has not attracted much press—trade or general circulation. Still, she’s able to glean a few nuggets:

“George: Attached are a few documents that may be helpful for your Missouri effort.”

One gem is a report by a noted independent researcher, which was implicitly critical of the competitor’s business approach. In business parlance, the researcher claimed the competitor’s business model is defective. White is elated. While the information doesn’t seal the deal for him, it gives the Deloitte proposal renewed credibility.

“It was exactly what I was looking for,” White says. He knows what to look for, too. Before joining Deloitte, he worked in government for 18 years, regularly evaluating project proposals for the state of Pennsylvania. He declares, “Jan is an invaluable resource.”

His enthusiasm doesn’t surprise the “granddaddy” of competitive intelligence: “It’s slowly, but surely, becoming a way of doing business,” says Prescott.

Kris B. Mamula is senior editor of this magazine.

*—Denotes an external link. Links to external Web sites are offered for informational purposes only and the information there is not guaranteed or endorsed by the University of Pittsburgh or its affiliates.


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