These Guys Aren't Spooks. They're `Competitive Analysts'

Not long ago, Gary B. Roush got a call in his office at Corning Inc. from someone professing to be an "MBA student." The caller politely explained that he was researching Corning for his thesis and that a professor had offered Roush's name. But Roush grew suspicious, and later he did some probing. The student was indeed getting an MBA--at night. During the day, he happened to be a manufacturing manager for a competitor. "Something didn't feel right," says Roush, a marketing manager. "He knew too much."

Put aside visions of dumpster-diving and electronic bugs. That goes on, of course. But increasingly, snooping among rivals takes place in less sensational settings--on the phone, at trade shows, or before glaring computer screens. Briefcase snoops call their work not spying but "competitive intelligence" or "competitive analysis." And it is booming. "More people are doing competitive intelligence and doing it better," says intelligence-consultant Jan P. Herring, a former CIA officer.

FRIENDLY FAVOR. As the CIA mulls whether to go into the corporate spying business, U. S. industry is plunging in. With product cycles shortening, profit margins thinning, and foreign companies gaining muscle, U. S. companies are finding the competition ever tougher. At the same time, some experts say, companies and intelligence agencies in Japan, France, and other places are collecting vital data on U. S. companies--via acquisitions, alliances, and espionage. U. S. companies are turning to intelligence-gathering just to stay afloat, let alone get ahead.

Take supercomputer maker Convex Computer Corp. Recently, David P. Settle, competitive-analysis manager, obtained a copy of a rival's sales presentation for a soon-to-be announced product. A prospective customer had slipped the copy to a favored Convex sales rep. It showed the product's price and the same disk drives as one of Convex' upcoming products. So the Richardson (Tex.) company is using the tip to offer customers a lower price and better features.

Until a few years ago, managers shunned formal intelligence-gathering. Now, companies from Corning to Helene Curtis devote staffs to it (table). The five-year-old Society of Competitive Intelligence Professionals has swelled from a handful to 1,800 members. And it's opening affiliates in Europe and the Pacific Rim.

The drug industry, for one, views competitive intelligence as critical. Merck CEO P. Roy Vagelos insists that his researchers be No. 1 or 2 in cutting-edge advances. If not, they have to know what rivals are doing so that Merck & Co. can grab licenses. Researchers pore over scientific journals, picking up what Vagelos calls "clues" to crucial developments.

But the drug companies hardly stop there. To elicit key information on rivals from the Food & Drug Administration, they make heavy use of the Freedom of Information Act. They file requests--often anonymously through FOI Services Inc.--to get such data as FDA inspection reports on competitors' plants. The drug houses also use prescription-tracking services. From their surveys of doctors and pharmacies, the companies can deduce whose drugs the physicians are prescribing--and then cater to heavy prescribers of their own drugs and woo the others.

FUZZY LINE. Companies seeking more controversial data often turn to private investigators like Kroll Associates, famed for uncovering hidden Iraqi assets. One U. S. drugmaker recently asked Kroll to find out whether a rival had stolen proprietary processes, says Thomas Helsby, managing director of the London office. The firm agreed to help but only after stipulating that it wouldn't probe the rival's secrets. Kroll found an industry insider to tour the factory as a potential buyer, and he found the client wasn't being ripped off. Another time, a Japanese executive eyeing an acquisition in the U. S. asked Helsby to find out his rivals' potential bids. He refused.

His qualms were justified. Trade-secret laws bar acquiring data through "improper means" such as theft. But the line between what companies legally may do and what they ethically should avoid is fuzzy. Questionable tactics include posing as a reporter to get into a rival's boardroom or hiring a plane to look over its plant, says intellectual-property lawyer Michael A. Epstein.

Fears of espionage or just plain employee leaks are forcing companies that collect data on others to step up their own security or conduct counterintelligence. American Telephone & Telegraph Co. just held an information-protection awareness week to remind workers through signs and a video that information is a bottom-line issue. With the rise of intelligence as a competitive weapon, it's a warning that both briefcase snoops and their victims can heed.