5 Shady Ways Competitors Acquire Intelligence - dummies

5 Shady Ways Competitors Acquire Intelligence

By James D. Underwood

Some organizations are willing to engage in shady schemes to access the intellectual capital of their competitors and any other firms that may be able to give them a competitive advantage. Developing an awareness of these practices enables you to become more vigilant and protect your organization against them.


Many global competitors work through domestic equity capital firms — former Wall Street financial firms with extensive backgrounds in acquisitions — to buy the intellectual capital they need to beat their competitors, many of which are U.S. companies. These financial firms engage in the following acts to help their international clients:

  • Searching for suppliers, competitors, and other entities that may have unique information about how to manufacture your product

  • Searching for individuals and organizations that can plug the gaps in the international competitor’s technology portfolio

  • Assisting in the acquisition of companies that have the technology needed by the international competitor in a way that evades government oversight

As you can probably guess from this list, such acts can often be compared to treason.

Keep an eye on your competitors’ acquisitions. By knowing which companies a competitor works with and the type of companies and technologies it’s acquiring, you can usually figure out what your competitor is up to and what its true motivations and goals are.

Research thievery

Tapping the intellectual power of university research labs for help in developing new products is a savvy and legitimate way to gain a competitive advantage. Some companies, however, take it a little too far by paying big bucks for the right to set up an office in the lab that essentially serves as a spy center.

You end up paying for the research, which is likely to reach your competitor long before it’s delivered to you. International companies are particularly adept at using their laboratory presence as a key intelligence-gathering base.

Here are three precautions you can take to protect your company from such tactics:

  • Before agreeing to pay a university team to do research, make sure no competitor companies or countries have access to the lab premises or to any ongoing research.

  • Ask for a written contract that ensures that no researcher from a competitor country or company is allowed access to your research.

  • Make sure your organization has the ability to visit the lab periodically and review the lab’s access and security situation.

Organization penetration

Some organizations prefer a direct approach to stealing information. They get inside their competitor’s operation and extract information in a variety of ways. They may bribe someone on the inside, get one of their own people hired on, plant listening devices in conference rooms or executive offices, infect computers with spyware, and so on.

Following are some ways to defend against these and other similar tactics:

  • Routinely assess key executive personnel or others who have access to critical information. Watch for any unusual activity or access to sensitive information that may indicate potential problems.

  • Allow no one, including delivery drivers and cleaning crews, access to company premises without an escort.

  • Be especially alert to any electronic gadgets that appear anywhere on your company premises. Some competitors have been known to put radio transmitters on fax machines or plant audio bugs in competitor premises.

  • Work with IT to scan computers regularly for spyware and to prevent unauthorized access to the company network.

Hire and fire key people

One way companies get the goods is to hire a competitor’s key employees and ask them to share their insider knowledge. If an employee left your organization bitter, she’s even more likely to share what she knows. No foolproof method can protect you from rogue ex-employees, but you may be able to mitigate some of the damage caused by such leaks if you follow these suggestions:

  • If you’re hiring or promoting a person to a position in which the individual has access to sensitive information, require that the person sign a nondisclosure agreement prior to taking the job.

  • Track people who leave your company to find out where they land. Is the company that hired the person a competitor? Does anything make you suspect that the person is sharing confidential information?

    Social media, including LinkedIn and Facebook, are great tools for tracking former employees and finding out where they’re employed.

  • Ask the person’s friends who are still employed at your company how things are going with their friend. Often, former employees maintain relationships with current employees, who may be willing to share what their friend is up to.

  • If an employee is hired by a competitor and then leaves, consider asking him what his former employee asked about your organization when he was first hired. This may give you some insight into the way your competitor conducts CI and the type of information it looks for.

Trade shows and conventions

If you think you’re the only company gathering intelligence at a convention or trade show, think again. Trade shows are like CI conventions; everyone’s gathering information and listening in on conversations, which is fine as long as nobody in your organization shares confidential information.

Here’s how to avoid falling victim to unscrupulous intelligence gatherers while at trade shows and conventions:

  • Provide your employees with training to help them recognize and deal with competitors who try to get intelligence about your company.

  • Give your sales team extensive training to make sure they avoid getting drawn into a “who’s got the best product” discussion that could end up leading to the sales person’s revelation of your next big product release.

  • Always enforce a two-drink rule for all your trade-show attendees. Liquor loosens lips . . . and if you can’t say that without tripping over your tongue, you’ve probably had too much already.