Where Did Competitive Intelligence Come From? (Part 1)

October 9, 2012

That is an interesting question.  There are at least two answers.

First, and widely accepted, answer is that competitive intelligence originates with Harvard Professor Michael E Porter’s seminal[1] 1980 work, Competitive Strategy – Techniques for Analyzing Industries and Competitors.  More specifically, intellectually, it grew out of chapter 3, “A Framework for Competitor Analysis” and Appendix B, “How to Conduct an Industry Analysis”. 

From there, it was fed by the presence of a large number of former US government intelligence officers who were look to business for second careers, after retiring from the US Government.  Prime among them was Jan Herring, a former CIA professional intelligence officer, who is often credited with setting up the first corporate competitive intelligence unit at Motorola.  Now, whether the former intelligence officers picked up Porter’s concept or their corporate mentors merely adopted it is not clear and probably not relevant.

From there it was but a short step to the creation of an association (don’t we have an association or group for everything?) by people interested in the subject, the Society for Competitive Intelligence Professionals (SCIP), now Strategic and Competitive Intelligence Professionals.  The founders and early members of SCIP came from a wide variety of backgrounds, including marketing, market research, academia, corporate strategy, advertising, the law, government intelligence, medicine and accounting.  Since then they have, individually and collectively, worked to promote competitive intelligence and to develop it into a cohesive subject to the point where it is being taught in a large number of undergraduate and graduate business level curricula.

Now for the second version, a long story, or more correctly a story that goes back further.  One can argue, and I’m not the first to make that argument, that Professor Porter’s description of how to conduct an industry analysis is merely a description of how good secondary research should always be done in a business context.  The key element is Porter’s focus on competitors and advocacy that companies should be regularly checking on what their competitors are doing and are capable of doing, and acting on that.  But that element was not new.

This version holds that the roots of competitive intelligence go back as far in business as we would like them to go.  We can look at the great European banking family, the Rothschilds, whose agents collected information on the progress of European wars so that they could make market trading decisions before the rest of the market.  That was intelligence, but not directly on competitors.  Or we can take a look at the industrial revolution, with its efforts by French companies to steal technology from English companies in the exploding textiles industry.  Not intelligence, but certainly focused on competitors.

Given all that, competitive intelligence should have existed for a very long time, but has not.  My view is that as companies became more and more focused on their own metrics, particularly since once computers have them that option, over time they lost strategic and tactical focus on anything external except their customers and the market space they were in.

Competitive intelligence and its emphasis on collecting and synthesizing raw data to help companies compete better predates the Internet information revolution, which is still going on. It has exploited it, and may even be enhancing it, but that is a subject for a future post.

 


[1] Seminal comes from the Latin seminalis, meaning influential, and evidently including the concept of being quoted more often than actually read, as in “Karl Marx’s seminal Das Kapital”


Politics versus Analysis

July 9, 2012

A current article in Vanity Fair deals harshly with Republican Candidate Mitt Romney. At the very beginning, it notes:

A person who worked for Mitt Romney at the consulting firm Bain and Co. in 1977 remembers him with mixed feelings. “Mitt was … a really wonderful boss,” the former employee says. “He was nice, he was fair, he was logical, he said what he wanted … he was really encouraging.” But Bain and Co., the person recalls, pushed employees to find out secret revenue and sales data on its clients’ competitors. Romney, the person says, suggested “falsifying” who they were to get such information, by pretending to be a graduate student working on a project at Harvard. (The person, in fact, was a Harvard student, at Bain for the summer, but not working on any such projects.) “Mitt said to me something like ‘We won’t ask you to lie. I am not going to tell you to do this, but [it is] a really good way to get the information.’ … I would not have had anything in my analysis if I had not pretended.”

Pretty damning, no? No. Now, read it again, this time like an analyst – slowly and closely, and in context.

The person who worked for Romney was still in school. Romney graduated Harvard Law & Business Schools in 1975, so Romney was just 2 years out. That means he was not a senior manager.  Note it was Bain (that actually that means someone higher up at Bain, right?), not Romney, that pushed a student to find out “secret” sales and revenue data.

Of course, sales and revenue data from a private company are not always secret. Hum…but no one said that the competitors were even all private companies, did they? A lot of people may know these figures, including subscription services like D&B, as well as trade associations, local chambers of commerce (shameless plug – for more ideas, buy our new book Proactive Intelligence: The Successful Executive’s Guide to Intelligence ). And, if a company employee gives them out over the phone to someone who calls and asks for them, then they are not really trade secrets, are they?

The request to the student was, well actually, well, was there actually a request? Let’s move on.

And what exactly did the student then do: “pretended” to be a student.  And is that illegal? No. As Attorney Richard Horowitz’s insightful recent interview on CI law and ethics notes

If you tell me things that you would have told anyone, the fact that I misrepresented my name or who I am [such as being a student] alone doesn’t make it an illegal act.

Well, this was unethical anyway, right? This happened in 1977, and the only ethical standards barring this, from SCIP (Strategic & Competitive Intelligence Professionals), would not even exist for more than 10 years. So it is a bit of a stretch to call it unethical, too.