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Mastering Competition in Ethical Way

The Seattle Times

by Paul Andrews, Special to the Seattle Times

In the Darwinistic tar pit of global capitalism, companies go to great lengths to gain an edge on competitors. The information explosion has given renewed impetus to time-immemorial intelligence gathering, with a twist:

The Internet has become a powerful tool for assembling, organizing and disseminating competitive and timely information within an organization.

Given post-Enron ethical sensitivity, businesses are careful about intelligence-gathering techniques. Most understand they must "know thy enemy" better than ever. But they say they want nothing to do with espionage or dirty tricks.

For an example of why, turn to last week's suit by Canal Plus Group, a unit of Vivendi Universal, against NDS Group of News Corp. Canal Plus sued for more than $1 billion, claiming NDS cracked its digital TV "smart card" and distributed the information over the Net.

NDS denied the charge, but its shares fell $6.05, or more than 26 percent, on the news.

With intellectual property an increasingly valuable and guarded resource, concerns will intensify. A small 6-year-old Kirkland company, Strategy Software, is at the vanguard of defining a new approach.

First, said marketing manager Diane Giese, "we avoid even using the word intelligence." Instead, the company emphasizes "competitive affairs."

Then again, Strategy focuses more on leveraging a company's existing knowledge base than on advising information-gathering techniques. It estimates a company already possesses 80 percent of what it needs to know about a competitor in the many reports, files, tips, clippings and over-the-transom information it gathers routinely.

The trick is to make the information useful throughout the organization, from the often-detached chief executive to the frontline salesperson who can sum up the competition better in two words than a pile of consultant studies.

Where formerly a tip might be whispered in a supervisor's ear, an intranet (internal Internet-enabled network) makes it instantly available to all staff. E-mail, a "hot tips" Web page or even something as mundane as a voice-mail box can be used to spread the word. The Web's search capabilities add power; salespeople often need only three or four data points to negotiate a new account.

The New Economy pursuits of knowledge management and customer-relationship management had a similar aim but blew up in the face of a lot of clients. Training was onerous and time-consuming, sapping precious resources.

"Employees have jobs to do," said Matt Kelly, Strategy's business development manager. With competitive-affairs software, "if they can use a Web site, they can access all the information they need."

Competitive analysis does not come cheap: Strategy's package can run from $7,200 to $500,000 for large companies.

But returns can be impressive. A $7.8 million investment by Siemens in 1999 netted a $122 million sales boost within two years. In one case, Siemens won a contract with a bid 30 percent higher than a rival's simply by demonstrating its product was superior.

Smarter advertising, better head-to-head comparisons and more efficient use of in-house resources contribute to the return.

In one widely followed case study, Palm and its chief competitive officer mobilized a campaign to undercut Microsoft's introduction of the Pocket PC. One particularly strategic move: Palm placed sales aces in strategic retail stores to pitch its devices to shoppers on Pocket PC rollout day.

Corporations have huge incentives to do everything possible to gain an advantage, and the line between ethical and unsavory techniques requires constant monitoring.

For an April gathering of the Society of Competitive Intelligence Professionals (SCIP) in Cincinnati, Strategy has been asked to present its perspective.

"We're not shy at all about getting up there and saying, 'Don't use the word intelligence,' " Giese said.

Paul Andrews is a free-lance technology writer and co-author of "Gates," a biography of the Microsoft chairman. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .