Cold War, Revisited
And here's a real secret: Until recently, most corporate gumshoeing was being outsourced to spy companies with 007-sounding names like WarRoom Research Inc., many of which were founded by ex-CIA, National Security Agency and Mossad operatives seeking work after the Cold War. Now, though, corporate snooping is increasingly being conducted in-houseand for the first time, CIOs are being forced to the front lines. "More and more CIOs are getting responsibility for the intelligence function," says John Nolan, a former U.S. Defense Department intelligence officer and president of Phoenix Consulting Group Inc., a security consultancy in Huntsville. Ala. "And why not? Information is about technology, and information is increasingly a company's competitive edge."
To be sure, companies without the ability to pluck the juiciest scoops from a growing quagmire of data will increasingly lose market share to those companies that can. "This is now a double-edged game," says Nolan, also the president of the Alexandria, Va.-based Society of Competitive Intelli-gence Professionals, whose membership has nearly tripled, to more than 6,900, since 1994. "Those who get spied on are now also spying," he says.
Case in point: The CIO of 3COM Corp., makers of Internet switches and hubs, now supplies employees with two toll-free numbers: one to report any intrusions into corporate secrets; the other to report what 3COM's rivals are up to. Says 3COM CIO Jerry Kenan: "You've got to take the offensive these days, or you're creamed in the marketplace." And the spy-vs.-spy mentality is only being exacerbated by the stiffening competitive pressures of the current economy. Consider the title of one of dozens of new CI seminars and conferences on the CIO conference circuit this fall: "The CI Practitioner's Paradox: What They Ask You to Do, What You Want to Do, What You Should Do."
What is competitive intelligence? Everything from illegal spying and theft of trade secrets to classic intelligence-gatheringwhatever it takes to provide executives with a systematic way to collect and analyze public information about rivals and use it to guide strategy. At its best, it borrows tools and methods from strategic planning, which takes a broad view of the market and how a company hopes to position itself, and from market research, which pinpoints customers' desires. Its goal: to anticipate, with razor-sharp accuracy and speed, a rival's next move, plot new opportunities and help avert disasters.
CI is hottest in the pharmaceuticals, telecom, petrochemicals and consumer products industries, where consumers are the most fickle and where speed and flexibility are especially critical for success. Indeed, some companies, from Burger King to Lucent Technologies Inc., are getting so good at using the new digital tools to sniff out what rivals' customers are eating this week or paying for long-distance that it's enough to rattle even the most rival-savvy marketersand to push a lot of data once commonly available underground.
In July, for example, Wal-Mart Stores Inc. ended a years-long practice of sharing data about its sales of food, beverages, toys, clothing and over-the-counter medications. Gathered by electronic scanners in checkout aisles, the data had been closely monitored by various partiesfrom the companies that make products sold in Wal-Mart's more than 2,600 stores to Wall Street analysts. Explains spokesman Bill Wertz: "It made no business sense for us to continue. We weren't getting as much out of this practice as our competitors were."
Competing at the speed of information can pay off handsomely. NutraSweet estimates its intelligence unit is worth at least $50 million a year in sales gained or revenues not lost. SmithKline Beecham estimates saving more than $100 million and gaining untold protection of market share for any number of products. "All information is being thrown into the digital hopper now, and sliced and diced for clues and leaks," says Susan Steinhardt, former chief of CI at Procter & Gamble Co. "It's a CIO's goldmine."
But the real bottom line? The new business-led push to get better competitive datafasteris also defining new opportunities for CIO leadership at most firms. Says Nolan: "The CIO who is just responsible for wires and equipment and software knows about hacking and penetration. But those responsible for business intelligence activities will really be clued in, and companies who have CIOs like that will have the competitive edge in the years ahead."