We’re Leaking, and Everything’s Fine How & Why Companies Deliberately Leak Secrets.David R. HannahIan P. McCarthyJan KietzmannBeedie School of Business at Simon Fraser University

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Organizations are open systems: they continuously interact with their external environments and share information across their boundaries (Scott, 1981).

One critically important type of information sharing is the sharing of secrets (Hannah et al., 2015).

It appears that some of the most prolific and careful leakers are also among the most profitable companies in the world (Hannah et al., 2015).

The benefits of keeping secretsCoca-Cola Company has preserved the value inherent in being the only manufacturer of Coke and has benefited accordingly.

The benefits of leaking secretsJohn Martellaro, a former senior marketing manager at Apple, acknowledged that the firm has engaged in controlled leaks.

The benefits of leaking secrets“A senior exec will come in and say- We need to release this specific information. John, do you have a trusted friend at a major outlet? If so, call him/her and have a conversation. Idly mention this information and suggest that if it were [to be] published, that would be nice. No e-mails!’”

John Martellaro (2010)

Ultimately, a firm’s choice regarding whether or not to leak secrets involves weighing the risks of a leak against the potential returns (Hannah et al., 2015).

The Two Dimensions of Leaks 2

Truthfulness of the information in the leaked secret

the degree to which it contains factual or concocted secrets.

1

The signaled intentionality of a deliberate leakovert the company freely admits it purposely leaked the secret

covert the company falsely claims the leak was a mistake or pretends not to know it has occurred

2

The Four Types of Leaks

Dissembling

Misdirecting

Informing Provoking

Truthfulness of the

information in the leaked

secret Factual

Conocted

Overt

Covert

The signaled intentionality of a

deliberate leakHannah et al., 2015

Misdirecting

Overt

Covert

Factual

Conocted

Leaking secrets to send others down the wrong path or course of action

Misdirecting

Overt

Covert

Factual

Conocted

In the 1980s, pet food manufacturer Ralston leaked a conocted strategy to bait competitors into engaging in a price war for low margin products, thus allowing Rolston to consolidate market share in the high-margin, premium market.

Dissembling

Overt

Covert

Factual

Conocted

Leaking secrets to misrepresent and deceive

Dissembling

Overt

Covert

Factual

Conocted

Lululemon was forced to recant claims of the health benefits of its seaweed-based clothing. Consequently the company’s stock price and reputation suffered.

Informing

Overt

Covert

Factual

Conocted

Leaking secrets to be transparent, compliant and collaborative

Informing

Overt

Covert

Factual

Conocted

These leaks can have marketing value by getting customers excited about upcoming product offerings, such as the new Star Wars film.

Provoking

Overt

Covert

Factual

Conocted

Leaking secrets to stimulate and test reactions

Provoking

Overt

Covert

Factual

Conocted

Prior to launching the iPad, Apple reportedly was considering a price point of $1000 and leaked the information to gauge public reaction.

A Framework for Decision Making

To leak or not to leak?

Are there transparency requirements or benefits?Do you perceive other value in leaking?

Do you wish to covertly learn from others?

InformY

N

= Do not leak

Y

Y

If found out, will the consequences be prohibitive?

YN

Provoke

N

N

Do you wish to covertly lead others astray?

Do you wish to covertly deceive others?

If found out, will the consequences be prohibitive?

If found out, will the consequences be prohibitive?

N Y

Misdirect

YN

Y

N

Dissemble

Y

N

Hannah et al., 2015

Firms should recognize that deliberate leaks can sometimes create value.

The evidence suggests that firms that leak secrets may be doing very well; it appears that some of the most prolific and careful leakers are also among the most profitable companies in the world(Hannah et al., 2015).

Read the full paper here

We’re Leaking, and Everything’s Fine HOW & WHY COMPANIES DELIBERATELY LEAK SECRETS.David R. Hannah, Ian P. McCarthy & Jan Kietzmann ꘡ 2015Beedie School of Business at Simon Fraser University

Dr. Ian McCart

hy

Media Enquiriesanilp@sfu.ca

@toffeemen68

Professor, Technology and Operations Management

Beedie School of Business Simon Fraser University

Ian McCarthy