In today’s increasingly complex globalized economy, corporate executives often lack critical information on new customers, suppliers, distributors, technologies and emerging markets. Even at midsize and small companies, business leaders now find themselves confronting foreign rivals, game-changing innovations, and other unexpected threats on their own home turf. Experienced investigators are uniquely equipped to develop information in opaque regions and industries, ethically obtaining the facts, figures and actionable intelligence that corporate clients crave.

About Competitive Intelligence (CI)

Competitive Intelligence (CI) represents a significant opportunity for legal investigators seeking to expand their working relationships with corporate counsel and business clients. Specialization in CI can complement existing casework in areas such as trade secret protection, corporate theft, high-level executive background investigations, intellectual property and trademark/patent infringement.

Though the CI field has attracted a number of former officers from federal intelligence agencies, competitive intelligence is not synonymous with corporate espionage. In fact, many practitioners insist that the public record – earnings call transcripts, published interviews, trade shows and conference presentations – is typically the best source of information about competitors’ capabilities and plans. In this respect, legal investigators with extensive experience in due diligence should be well within their comfort zone.

Nevertheless, interviews with primary sources are essential to good intelligence. Published articles and open source materials are an excellent place to begin research, but there’s a reason they’re called secondary sources. Professionals who exclusively rely on the public record are fooling themselves – and probably misleading their clients – if they think they are getting the whole picture.

A large manufacturer recently retained my firm, Beacon Investigative Solutions, to obtain information on the supply chain of its competitor. The competing business had previously handled all fabrication in-house, but was gradually outsourcing more and more of its production to an unknown third party. They hired us to identify that supplier, because they predicted it would eventually outgrow the outsourcing arrangement and launch a competing product line. This was a common pattern in this particular industry. They wanted to identify the upstart before it emerged as an independent threat.

Beginning with a comprehensive review of the business literature, we found what appeared to be a major scoop in an obscure European academic journal on logistics management: an interview with the vice president for global sourcing, who described (in great detail) their unified sourcing strategy, emphasizing low-cost opportunities in countries like China, where the company had over 2,000 employees. However, subsequent conversations with primary sources revealed they were actually using a fabricator in the U.S. Beacon sent an experienced field investigator with a law enforcement background to conduct site surveillance at the assembly plant. He parked on a public road and visually monitored the loading and receiving dock over the course of a week. Because of the prior information we’d developed, we knew exactly what we were looking for – and our investigator recognized the relevant trucks as soon as they arrived. The supplier turned out to be a private company in the Rust Belt. If we’d solely relied on the public record, we would have wasted time and resources searching for a red herring – a Chinese contractor that didn’t exist.

Getting Started: Ground Rules for Competitive Intelligence

Based on our experience leading CI projects over the past decade for a range of clients – from multinational pharmas to tiny tech start-ups – Beacon has developed a few basic ground rules:

Refine the Scope:

When running investigations for attorneys, insurers, or private citizens, PIs tend to assume that all negative information on a subject is relevant. However, executive clients on competitive intelligence cases have very narrow areas of interest. They do not want a deluge of unrelated data; and they are unlikely to care if a colleague at a competing firm has had a DUI or a messy divorce. To streamline the process, the first step should be to clearly articulate the goals of the investigation in a formal brief. Ask the client to review the project outline, and encourage them to make any necessary changes or refinements before you begin the research.

Respect the Rules:

Most CI professionals are diligent researchers and consultants, not cowboys. Yet it’s important to note that failure to exercise proper discretion and good judgment can have severe consequences. The Economic Espionage Act of 1996 criminalized the misappropriation of trade secrets with penalties ranging $5 million fines to 10 years in prison. Other restrictions and penalties are stipulated in the Uniform Trade Secrets Act, as well as state laws pertaining to unfair and deceptive trade practices, and tortious interference.

Learn the Lingo:

One of the biggest challenges in competitive intelligence is quickly coming up-to-speed on an unfamiliar business niche or bleeding-edge innovation. To accelerate the process, begin by reaching out to external consultants, academics, and/or executives at an unaffiliated company in the same industry. You will need to be comfortably conversant on the subject – and ready to ask the right questions – before you approach or interview the target.

Go Far Beyond Google:

When scouring secondary sources, it pays to have extensive access to business journals, consulting reports, and third-party SWOT (strength, weakness, opportunity, threat) analysis. Some sources such as Factiva and LexisNexis require paid subscriptions, and white papers from major consulting firms can cost several thousands of dollars. For intelligence collection on a budget, consider a visit to the library. The business section of public research universities often offer free access to resources, and many private schools provide database access to their alumni.

Focus on the Future:

One of the primary goals of CI is to identify and interpret signals that indicate the future direction of markets, providing first-mover advantage to firms that can capitalize on new opportunities – and accurately assess risks – ahead of their slower-reacting rivals. Accurate facts are still essential; but the quality of analysis is equally important. This may require a change in perspective for legal investigators who are accustomed to presenting information, such as hard evidence in a criminal or civil matter, without any editorializing or extrapolation.

Many corporate clients insist that their contractors do not misrepresent themselves when conducting interviews with direct competitors. Lawsuits and allegations related to corporate espionage have hounded executives at WestJet, SAP, Oracle and Hewlett-Packard in recent years. No executive wants to wind up with an embarrassing headline in The Wall Street Journal and their concerns about reputational risk deserve to be addressed directly. First, potential clients need to know that the information you obtain will be accurate and actionable. Secondly, they should be properly assured that the intelligence collection methods are legal and ethical. Of course, legal investigators are already aware that nearly everything they do during the course of case could eventually come out in court, which puts them in an excellent position to assure corporate clients that their methods are tested, tried and true.

A version of this article was featured in the Spring 2012 issue of The Legal Investigator, published by The National Association of Legal Investigators.