Spy vs. CI
By John Allen
There are many things that Chetek, Wisconsin, is not. It's not the Big Apple. It's not the City of Light. It's also not the Emerald City, the Mile-High City, or the Eternal City. With only about 2,000 year-round residents, it isn't even the largest city in Barron County.
But for all it isn't, Chetek does have a few things going for it. It's the home of the Fish-O-Rama. It's the training site for the Hydroflites Water Ski Team.
And until recently, it was the source of countless plans for global domination — created for loyal clients by the Aurora Worldwide Development Company. Though this spring the company sought out larger digs in Chippewa Falls, its road to success began in Chetek.
There are many things that Chetek, Wisconsin, is not. It's not the Big Apple. It's not the City of Light. It's also not the Emerald City, the Mile-High City, or the Eternal City. With only about 2,000 year-round residents, it isn't even the largest city in Barron County.
But for all it isn't, Chetek does have a few things going for it. It's the home of the Fish-O-Rama. It's the training site for the Hydroflites Water Ski Team.
And until recently, it was the source of countless plans for global domination — created for loyal clients by the Aurora Worldwide Development Company. Though this spring the company sought out larger digs in Chippewa Falls, its road to success began in Chetek.
If Chetek is an enigma to most people outside Barron County, then Aurora was the mystery within the enigma. According to founder Arik Johnson '92, Aurora is currently one of the world's top five firms in its field — but with a name like Aurora Worldwide Development, it isn't immediately apparent what that field is. That's part of Aurora's strategy, however. Aurora's business is the creation of competitive intelligence — which is the riddle wrapped in the mystery beside the Fish-O-Rama.
In the broadest terms, competitive intelligence (or CI) is the field of business in which one company gathers and analyzes data about another (or several others) in order to find some advantage. But what that means in practical terms — how such information is properly and legitimately collected and used — is currently a fiercely contested issue.
Johnson tells of a discussion with a Czech colleague for whom the term intelligence brought up dark connotations. "There," he says, "when people hear intelligence, they think of spies — of rubber hoses and naked light bulbs. It's not like that at all." For Johnson, making sure that the industry is indeed legitimate — and not merely an exercise in which executives get to play amateur spy — is both a personal and professional concern.
In the broadest terms, competitive intelligence (or CI) is the field of business in which one company gathers and analyzes data about another (or several others) in order to find some advantage. But what that means in practical terms — how such information is properly and legitimately collected and used — is currently a fiercely contested issue.
Johnson tells of a discussion with a Czech colleague for whom the term intelligence brought up dark connotations. "There," he says, "when people hear intelligence, they think of spies — of rubber hoses and naked light bulbs. It's not like that at all." For Johnson, making sure that the industry is indeed legitimate — and not merely an exercise in which executives get to play amateur spy — is both a personal and professional concern.
"Competitive intelligence," he says, "should be a coordinated and directed effort to understand the competitive forces in the marketplace. It's the legal — and more importantly ethical — collection and analysis of data. It isn't corporate espionage, which is the outright theft of property or information. If you want to make people in this business angry, just use the words spy and espionage to describe their work."
For the last five years, Johnson has been a member of the Society of Competitive Intelligence Professionals (SCIP), an organization devoted to promoting the CI industry as well as improving its image. SCIP maintains a code of ethics that defines how legitimate intelligence should be practiced. Its injunctions include that a CI operative should "comply with all applicable laws, domestic and international" and should "accurately disclose all relevant information, including one's identity and organization" while collecting intelligence.
Recently, however, times have been difficult for the defenders of CI's reputation as a legitimate enterprise. In 2000 and 2001, several major corporations made news for their colorful — but ethically questionable — intelligence operations. The software company Oracle has admitted hiring detectives to dig up embarrassing documents about competitor Microsoft, and Kraft claimed that food producer Schwan's hired away one of its employees with the intention that he deliver Kraft's trade secrets to his new bosses.
For the last five years, Johnson has been a member of the Society of Competitive Intelligence Professionals (SCIP), an organization devoted to promoting the CI industry as well as improving its image. SCIP maintains a code of ethics that defines how legitimate intelligence should be practiced. Its injunctions include that a CI operative should "comply with all applicable laws, domestic and international" and should "accurately disclose all relevant information, including one's identity and organization" while collecting intelligence.
Recently, however, times have been difficult for the defenders of CI's reputation as a legitimate enterprise. In 2000 and 2001, several major corporations made news for their colorful — but ethically questionable — intelligence operations. The software company Oracle has admitted hiring detectives to dig up embarrassing documents about competitor Microsoft, and Kraft claimed that food producer Schwan's hired away one of its employees with the intention that he deliver Kraft's trade secrets to his new bosses.
Then came the hardest blow. In September 2001, Procter & Gamble and rival shampoo maker Unilever settled a lawsuit over P&G's shady intelligence-gathering tactics. Although the terms of the settlement were not released, the Times of London reported that P&G had hired the Phoenix Consulting Group, whose operatives went digging through Unilever's garbage to find useful trade information — a practice that, according to Johnson, wouldn't meet SCIP's code of ethics. Phoenix is chaired by John Nolan III, who, at the time, was the president of SCIP.
"Dumpster diving — that's private investigator stuff," Johnson says. "It's not what we do, and it really indicates a failure of CI, not common practice."
The image of competitive intelligence has gotten so bad, according to Johnson, that some in the field are desperate to distance the legitimate workers from the amateur spies. "At a conference not long ago, I met with a colleague, and he said some of his co-workers wanted to change the profession's name to 'competitive affairs,' " he says. "I don't think that'll catch on, though."
"Dumpster diving — that's private investigator stuff," Johnson says. "It's not what we do, and it really indicates a failure of CI, not common practice."
The image of competitive intelligence has gotten so bad, according to Johnson, that some in the field are desperate to distance the legitimate workers from the amateur spies. "At a conference not long ago, I met with a colleague, and he said some of his co-workers wanted to change the profession's name to 'competitive affairs,' " he says. "I don't think that'll catch on, though."
Part of the problem is that the romance of spy associations is more attractive to the public and potential CI clients than are the dry facts of market analysis. Thus, even Johnson speaks of his work using terms that might seem more appropriate, if not to James Bond, at least to Tom Clancy. CI is a tool to "inflict maximum pain on the competition." Among its practices is "war-gaming," and when such a war game is under way, the operation's nerve center is a "war room." And then, of course, there's that thing about global domination — the goal of a good CI firm, Johnson says, is to help its client achieve hegemony.
"It's the ultimate deliverable," he says. "We want to give a company the chance to completely dominate its own market and then move its products into any market of its choosing."
"It's the ultimate deliverable," he says. "We want to give a company the chance to completely dominate its own market and then move its products into any market of its choosing."
Despite the Machiavellian language, Johnson isn't a product of the FBI or CIA, but rather of L&S — UW-Madison's College of Letters and Science. By his own admission, he has no formal training in intelligence. Instead, he studied history and political science, and he left the university not knowing exactly what to do with his life. He took a job as a business analyst with a major international consulting firm. After a year and a half, he felt he'd learned enough to start his own consulting business, so in January 1995, he left his job. In February he moved to Chetek, which lies about forty miles north of Eau Claire, and launched Aurora.
"My mother was a hairdresser in Chetek," he says. "She said the twelve feet of space on the east side of her salon were mine. So I set up shop." Initially, Aurora offered general strategic consulting, but Johnson soon learned that businesses in Chetek — and even in the greater Chetek metropolitan area — lacked the kind of revenues that would enable them to hire consultants on a regular basis. He knew he needed to break into a bigger market, which meant finding a way to specialize his services.
"I decided on intelligence because there just weren't many people doing it then," he says. "I'd done some intelligence work for my former employer, and I figured I could act as a subcontractor, selling my services back to them."
"My mother was a hairdresser in Chetek," he says. "She said the twelve feet of space on the east side of her salon were mine. So I set up shop." Initially, Aurora offered general strategic consulting, but Johnson soon learned that businesses in Chetek — and even in the greater Chetek metropolitan area — lacked the kind of revenues that would enable them to hire consultants on a regular basis. He knew he needed to break into a bigger market, which meant finding a way to specialize his services.
"I decided on intelligence because there just weren't many people doing it then," he says. "I'd done some intelligence work for my former employer, and I figured I could act as a subcontractor, selling my services back to them."
For the next two years, he continued to act as a one-man operation, hiring freelancers when necessary and learning more about the trade. Then he discovered SCIP, and became the coordinator for the organization's Wisconsin chapter.
"Things really took off once I became involved in SCIP," he says. "In 1997, Aurora had just one employee: me. Now I've got a full-time staff of intelligence liaisons and analysts, and about 200 contract specialists who work on freelance projects."
To put their clients on the road to market hegemony, Johnson and his team offer a series of services, most of which center around collecting raw information and then transforming it into intelligence. This requires examining the client's business strategies and looking through all data about competitors, customers, and suppliers to find out where threats and opportunities exist.
"Things really took off once I became involved in SCIP," he says. "In 1997, Aurora had just one employee: me. Now I've got a full-time staff of intelligence liaisons and analysts, and about 200 contract specialists who work on freelance projects."
To put their clients on the road to market hegemony, Johnson and his team offer a series of services, most of which center around collecting raw information and then transforming it into intelligence. This requires examining the client's business strategies and looking through all data about competitors, customers, and suppliers to find out where threats and opportunities exist.
"Analysis is the real key," Johnson says. "You can collect 200 pages worth of information for a client, covering markets, specific competitors, technology advances, and so on. But no CEO wants to read 200 pages. They want to see a report that's about a half-page long, telling them what to do or giving them a playbook of options."
Still, few CEOs would follow Aurora's recommendations unless they knew that the 200 pages of data existed to back up those plans. Collecting that information is the work of Johnson's team of salaried and freelance analysts.
There are two ways to go about collecting intelligence, Johnson says: primary and secondary research. Secondary research comes from explicit, publicly available documents. It means reading newspaper and magazine articles, conducting Web searches, examining credit reports, and searching through patent applications. "Basically," says Johnson, "a five-year-old could get this stuff."
Still, few CEOs would follow Aurora's recommendations unless they knew that the 200 pages of data existed to back up those plans. Collecting that information is the work of Johnson's team of salaried and freelance analysts.
There are two ways to go about collecting intelligence, Johnson says: primary and secondary research. Secondary research comes from explicit, publicly available documents. It means reading newspaper and magazine articles, conducting Web searches, examining credit reports, and searching through patent applications. "Basically," says Johnson, "a five-year-old could get this stuff."
But though secondary research may be relatively easy to obtain, such data has its advantages. First, it runs no risk of violating trade secrecy laws or even codes of ethics. Second, as it's been published in one form or another, a CI operative can assume it's likely to be accurate and can use it to confirm information found in other sources. And third, secondary intelligence tends to highlight the people who should be targeted in primary research efforts.
Primary research is where the questions of legitimacy and ethics enter the process. This is the collection of information that isn't in the public domain. It requires talking to actual people and trying to cajole them into giving you an inside scoop while you give up virtually nothing in return. In order to get the data they're looking for, CI operatives have to seem open and friendly. But in order to protect their clients, they can't reveal any of the reasons why they're collecting information or to whom it will go.
"It's called telephone elicitation, which I admit sounds kind of shady," says Johnson. "But the golden rule is never tell a lie to an interview subject — which isn't exactly the same as telling the whole truth."
Primary research is where the questions of legitimacy and ethics enter the process. This is the collection of information that isn't in the public domain. It requires talking to actual people and trying to cajole them into giving you an inside scoop while you give up virtually nothing in return. In order to get the data they're looking for, CI operatives have to seem open and friendly. But in order to protect their clients, they can't reveal any of the reasons why they're collecting information or to whom it will go.
"It's called telephone elicitation, which I admit sounds kind of shady," says Johnson. "But the golden rule is never tell a lie to an interview subject — which isn't exactly the same as telling the whole truth."
This, he says, is one of the best reasons to hire a CI firm to collect intelligence. While an engineer at GM, for instance, might not talk about management structure or new engine designs to someone calling from Ford, there's a better chance that he or she would speak to a researcher from a firm with the innocuous name of Aurora Worldwide Development.
There are those, however, for whom the difference between telephone elicitation and outright spying may seem cloudy, and popular culture doesn't make such distinctions any easier. In March 2002, for instance, TIME ran a pair of articles on CI, one of which, to the dismay of Johnson and his colleagues in SCIP, was titled "Spies Like Us."
"The trouble," explains Michael Sandman, a vice president for the CI firm Fuld and Company, "is that spying is more glamorous [than legitimate CI], and to many people, it seems less reprehensible."
There are those, however, for whom the difference between telephone elicitation and outright spying may seem cloudy, and popular culture doesn't make such distinctions any easier. In March 2002, for instance, TIME ran a pair of articles on CI, one of which, to the dismay of Johnson and his colleagues in SCIP, was titled "Spies Like Us."
"The trouble," explains Michael Sandman, a vice president for the CI firm Fuld and Company, "is that spying is more glamorous [than legitimate CI], and to many people, it seems less reprehensible."
Five years ago, Sandman joined the teaching team for the two-day course on CI run by the UW School of Business's Fluno Center for Executive Education. Linda Gorchels, the center's managing director of executive marketing programs, created the course fourteen years ago as a primer on intelligence concepts, methods, and ethics. Sandman gives instruction on CI tools and techniques. Like Johnson, his information extraction tool kit doesn't include rubber hoses or naked light bulbs. Instead, he advises participants on ways to get the most useful data using computers and the telephone.
"The basic guide for collecting intelligence ethically is this," he says. "Don't do anything you'd be embarrassed to see published in the newspapers."
Few of the class participants seem to desire lessons in devious spy techniques. According to Gorchels, of more than 400 executives who have taken the course, only one has ever asked about the methods for collecting illicit information. "Our participants are a highly ethical group," she says.
"The basic guide for collecting intelligence ethically is this," he says. "Don't do anything you'd be embarrassed to see published in the newspapers."
Few of the class participants seem to desire lessons in devious spy techniques. According to Gorchels, of more than 400 executives who have taken the course, only one has ever asked about the methods for collecting illicit information. "Our participants are a highly ethical group," she says.
And that's a good thing, because U.S. law offers draconian punishment to illegal corporate spies. The Economic Espionage Act, passed in October 1996, protects companies from the theft of trade secrets. Gorchels says she tries to familiarize her students with the basics of the act, including exactly what it considers a trade secret: the legal definition includes "all forms and types of financial, business, scientific, technical, economic, or engineering information ... whether tangible or intangible," provided that information is worth "independent economic value, actual or potential."
"Essentially," says Gorchels, "any information that a company has a reasonable expectation of keeping secret, and makes a reasonable effort to keep secret, falls under the act's definition."
Stealing a trade secret — or even conspiring to compromise one — can lead to penalties of up to ten years in prison and a $5 million fine for U.S. citizens, and fifteen years and $10 million for foreign agents and entities. "Merely the gathering of information about another company's secret information is illegal," says Gorchels. "The law is based on the attempt to commit espionage, not on a spy's success."
"Essentially," says Gorchels, "any information that a company has a reasonable expectation of keeping secret, and makes a reasonable effort to keep secret, falls under the act's definition."
Stealing a trade secret — or even conspiring to compromise one — can lead to penalties of up to ten years in prison and a $5 million fine for U.S. citizens, and fifteen years and $10 million for foreign agents and entities. "Merely the gathering of information about another company's secret information is illegal," says Gorchels. "The law is based on the attempt to commit espionage, not on a spy's success."
But not every CI operative has taken the Fluno Center's course. Some are unfamiliar with the Economic Espionage Act, and others just plain don't care about it. So how can a company protect itself from the unscrupulous spies of the world who would invade them and ferret out their secrets?
To aid in the prevention of espionage, Arik Johnson and others like him are willing to violate their ethical pledge — after a fashion. Though only a small part of Aurora's business, the company does consult with clients on counterintelligence — on protecting information from other CI operations, both legitimate and illegitimate. For those clients who want to find out just how vulnerable they could be to unscrupulous snoops, Aurora's willing to help by snooping, then reporting back what they found and how they found it. And that's where Johnson gets the chance to have a little fun.
"We go after the crown jewels," he says. To determine whether a client needs to be more careful, Johnson and his colleagues might send operatives to dig through garbage. Or they might try to get an employee hired at the client's company, then act as a mole. "We wouldn't do anything that would put one of us in jail," he says. "But we use the same methods we believe that our clients' competitors are capable of using."
To aid in the prevention of espionage, Arik Johnson and others like him are willing to violate their ethical pledge — after a fashion. Though only a small part of Aurora's business, the company does consult with clients on counterintelligence — on protecting information from other CI operations, both legitimate and illegitimate. For those clients who want to find out just how vulnerable they could be to unscrupulous snoops, Aurora's willing to help by snooping, then reporting back what they found and how they found it. And that's where Johnson gets the chance to have a little fun.
"We go after the crown jewels," he says. To determine whether a client needs to be more careful, Johnson and his colleagues might send operatives to dig through garbage. Or they might try to get an employee hired at the client's company, then act as a mole. "We wouldn't do anything that would put one of us in jail," he says. "But we use the same methods we believe that our clients' competitors are capable of using."
And some of those competitors are extremely capable. Johnson says that the governments of several foreign countries — especially China, France, Japan, and Israel — regularly engage in commercial espionage and tend to use methods that would violate the Economic Espionage Act. During one trade show, Johnson said he was providing counterintelligence for a firm and discovered that his client's conference room had been infested with electronic listening devices. Such spy gear, he says, is easy to come by and hard to defend against. "You can buy bugs for twenty dollars."
Even while fighting to improve the image of CI, Johnson is following his own advice and seeking to establish a level of hegemony within the CI industry. In spite of the recession, Aurora found its research revenues tripling in 2001.
Even while fighting to improve the image of CI, Johnson is following his own advice and seeking to establish a level of hegemony within the CI industry. In spite of the recession, Aurora found its research revenues tripling in 2001.
"Many companies that used to have their own CI departments couldn't see where CI was making a direct contribution to their bottom line," he says. "If something isn't contributing to the bottom line, then it looks like overhead. And what do you do with overhead in a recession? You cut it and outsource the function. We picked up a lot of business that way."
And this year, Johnson plans to spread Aurora's intelligence network even more widely. He's currently in discussions with a CI firm in the Far East to create a joint venture, Aurora Worldwide Development Company Asia, which would combine resources to operate a research house out of Manila in the Philippines. With contacts in North America and Asia, Johnson believes this expanded network would not only serve Aurora's needs, but would be able to act as a subcontractor for other CI firms as well.
"I should be able to sell intelligence services to anyone around the world, including to all of my competitors in America," Johnson says. "My goal is to have a little piece of the action in everything that goes on."
And this year, Johnson plans to spread Aurora's intelligence network even more widely. He's currently in discussions with a CI firm in the Far East to create a joint venture, Aurora Worldwide Development Company Asia, which would combine resources to operate a research house out of Manila in the Philippines. With contacts in North America and Asia, Johnson believes this expanded network would not only serve Aurora's needs, but would be able to act as a subcontractor for other CI firms as well.
"I should be able to sell intelligence services to anyone around the world, including to all of my competitors in America," Johnson says. "My goal is to have a little piece of the action in everything that goes on."
