Business is war.  And in war, it is a matter of survival of the fittest.  In order to survive in today’s cutthroat business environment, we must be properly armed.  And one of the most important arrows in the executive’s quiver is accurate knowledge of competitors and their business environment.  In other words, detailed knowledge of the enemy and the terrain of the battlefield.  

   Every major country on earth recognizes the importance of intelligence and employs and intelligence agency to collect it for them.  Over 2,500 years ago, the Chinese general Sun Tzu wrote: “If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy nor yourself, you will succumb in every battle.”  Frederick The Great also expressed his opinion on the importance of intelligence when he said: “It is pardonable to be defeated, but never surprised.”  In today’s highly competitive business world it is becoming more and more important to know your competition—know your enemy—and, particularly in the international arena, to know your battlefield.  There are minefields out there, and it is imperative to be able to identify and avoid them.  You can still lose, even when armed with superior forces, if the terrain is against you.  Possessing accurate intelligence is like having a flashlight in the dark.  It won’t remove any of the obstacles in your path, but it will illuminate them so you will not stumble.

   Realizing the importance of good, solid intelligence is the first step toward being prepared.  The second step is employing experts to collect that intelligence.  Some companies (W.R. Grace, AT&T, for example) have special competitive intelligence units within their organization structure.  Others hire professional consultants from outside of the organization to handle their intelligence collection requirements or augment their efforts.  Either way, the craft of intelligence gathering and analysis is sufficiently arcane that it should be left to the experts.  CIA case officers, for example, spend about a year attending formal intelligence training courses before being released to employ their skills abroad.  Part of what they learn is how to collect information discreetly through the use of clandestine tradecraft methods, how to evaluate the sources of that information, and how to report that information accurately, objectively and dispassionately.  The FBI and some police departments  also run intelligence collection courses for their officers.  The main difference between the CIA training and the FBI/police training is that the latter places more emphasis on techniques that utilize the power of the badge, while the CIA employs a more covert approach, relying more heavily on the use of cover and deniability to assure a greater degree of discretion in its collection efforts.

   Companies employing in-house resources often have difficulty in obtaining objective information because of problems with training, resources and vested interests.  Company personnel are usually not trained in intelligence collection techniques, the companies usually do not have the requisite resources (computer databases, personal contacts, etc.) to collect the information they need, and, finally, employees with a stake in the company’s output will almost certainly lack the objectivity to report information accurately, without bias.  The tendency is to paint pictures that support company policy or please superiors.  This is precisely why professional intelligence consultants from outside the organization should be called in to handle the most sensitive intelligence gathering missions.

   Generally, business intelligence can be broken down into three main categories:

   (1)  Risk Analysis.  This is general background information that a company needs to know to operate securely and effectively in an unfamiliar environment (usually international) where economic, political, criminal, insurgent, labor or other forces could adversely affect a company’s operations.  This is usually multi-source, analytical-type information.  It is designed to prepare a company for all eventualities, and to allow it to operate with “no surprises."

   (2)   Targeted Collection.  This is specific information the company can use to increase its productivity or market share.  Market analysis, due diligence, background investigations on potential partners, employees and others, and competitor intelligence all fall into this category.

   (3)   Counterintelligence.  When proprietary information on a company’s process, patent, copyright, product, etc. is leaked, pirated, copied or outright stolen by a competitor, there is a compelling need to plug the leak and prosecute the offending parties.  The purpose of counterintelligence is to collect information that will identify the spies within the company and the organization behind them and to provide enough evidence to obtain convictions or press suits in a court of law.  It is interesting to note that  the White House estimates the US economy loses $100 billion a year due to the theft of proprietary information.  

   Within the US government, intelligence collection requirements are generated by the White House, Pentagon, State, Justice and other departments.  In the business world they are generated by company CEO’s and other senior managers.  These individuals usually know exactly what information they ought to have to insure the trouble-free efficient running of their businesses.  They may also know where to look for unique business information that would give them the competitive edge they desire; they just do not know how to go about collecting it.

   Intelligence collection is a systematic process that requires excellent analytical skills and employing proven methods that assure, to the extent possible, the accuracy of the information obtained.  The process begins with the requirement.  What is the question?  Exactly what does the CEO want to know?  This is an important step in the process.  It forces the CEO to analyze the problem and refine it from “I want to know everything there is to know about my competitor” to “What is my competitor’s strategy to obtain the XYZ contract in Jakarta?” or “What plans does my competitor have to enter the widget market in Latin America?”  Once the requirement is defined, the next step is to do a target analysis.  In other words, to examine the competitor organization with an eye toward identifying where within the organization would the information be normally held (marketing department, research and development staff, legal department, etc.).  Once this is established, the scope is narrowed further down to the individuals within the target department.  They are investigated and assessed to determine who would be the most knowledgeable and accessible source.  Finally, when the target individual is selected, an operation is designed to extract the information from him or her.  This usually requires the use of covert collection techniques including elicitation, debriefing, the use of a suitable cover for the inquiries, and other overt methods including database searches, interviews of other knowledgeable sources, and the like.

  Thus, the intelligence process, whether in government or industry, involves four major steps:

   (1)   defining the requirement;

   (2)   collecting information on the requirement from all available overt sources (databases, library research, etc.);

   (3)   analyzing the overtly available information and organizing it into a cogent preliminary report on the subject; and

   (4)   identifying the gaps in the information and filling them through the use of more targeted covert collection techniques, and writing the final, comprehensive report.

   This is the most efficient and efficacious approach to intelligence gathering and analysis.  It is the technique used by the CIA and other government intelligence agencies, and it is the proper way for industry to collect business intelligence.

   But all of this begs the question: If the collection of business intelligence is sufficiently arcane as to be left to the experts, and if the government is expert in the field, why then won’t the government collect it for US industry?  After all, other countries, friends and foes alike, have been aggressively involved in intelligence gathering activities targeted against US industry for many years.  Some of these activities have even crossed the line into illegal, state sponsored, industrial espionage.  (The main difference between industrial espionage and competitive intelligence gathering is that the former uses illegal collection methods like electronic monitoring, trespass, theft, etc., while the latter does not.)

   In fact, there has been considerable debate, for instance, within the government, and the CIA in particular, on this very issue.  It began in earnest in 1990 when the Soviet Union collapsed and it was thought that the CIA could be retooled away from Soviet collection activities to helping the failing US economy with needed business intelligence.  Debate continues to this day.  Unfortunately, however, there is very little chance that the US government (particularly the CIA and NSA) will ever get involved in the routine collection of business intelligence for US industry.  The problem is that the very nature of clandestinely acquired information makes it classified—not for dissemination to the general public—because sensitive sources and collection methods must be protected.  So if the decision were made to collect business information and disseminate it to companies outside the intelligence community, to whom would the information be entrusted?  Certainly not to all of the companies.  But then which ones?  And to whom within each company?  Only the CEO’s?  Could they be trusted not to disseminate the information down to the rank and file?  Probably not.  There is also a strong argument against the idea of diverting scarce government intelligence gathering resources away from the national defense to the private sector, and the ethical conundrum of asking CIA case officers to spy for IBM rather than the White House.

   This is not to say that the CIA and other law enforcement agencies will not fight to prevent illegal industrial espionage in this country, or that they would fail to alert major companies if they learned, inter alia, that some very unfair business practices (payment of bribes, etc.) were hurting US companies’ chances to compete fairly in a particular country.  It only means that the government will not develop and fund programs to collect business intelligence for US companies.  Thus, if a US company wants to collect information that will help it level the playing field and perhaps give it a competitive edge over a foreign company, it must use its own resources.

  Sadly, the proliferation of charlatans, crooks and, scam artists has become a fact of life in the 1990s.  Outside US borders, this danger is even more profound.  Executives in countries lacking the laws, regulations, safeguards, and reporting requirements in place in the US know that their American counterparts all too often rely solely on limited information and luck when dealing with foreigners.  Consequently, they are far more inclined to engage in misrepresentation and deception in their business dealings with Americans.

   Managers who choose not to do their homework before they embark on a course of action are doomed to failure.  Successful people always do their homework.  Years ago, when I was teaching the craft of intelligence to new CIA officers down on “The Farm” I discussed the concept of thorough preparation as the single most important key to success in the intelligence business.  I explained that although all good operations officers certainly have the ability to wing it when necessary, the best officers never go into a situation with that intention.  They try to prepare for every possible eventuality in advance, and then only have to improvise when a real unexpected curve is thrown at them.  That is good advice for any business. 

   To quote Sun Tzu once again, he said: “To remain in ignorance of the enemy’s condition simply because one grudges the outlay of a hundred ounces of silver…is the height of inhumanity.”  Perhaps it would be more accurate if the word stupidity were substituted for inhumanity.  The military advice that Sun Tzu espoused so long ago applies equally to today’s business.  Know your own and your competitor’s capabilities, and know your battlefield.  Armed with this knowledge, you cannot lose—the worst thing that can happen is that you decide not to engage.