Ethics in Competitive Intelligence
From CI-wiki
Contents
1 Introduction
2 Ethical Challenges in Competitive Intelligence[1]
2.1 Misrepresentation
2.1.1 Omitting some details about ones identity
2.1.2 Not revealing ones identity in a public venue after overhearing classified information
2.1.3 Not disclosing true intent on how information will be used
2.2 Client Conflict
3 Ethical Guidelines in Competitive Intelligence
3.1 Law and Ethics
3.2 Formal Codes of Ethics
3.2.1 Industry Guidelines
3.2.1.1 SCIP
3.2.1.2 Fuld & Company
3.2.1.3 The Wade System
3.2.1.4 "The Bible of BI Ethics"
3.2.2 Corporate Codes of Ethics
3.3 Personal Ethical Considerations
3.3.1 Three Tests
3.3.2 Ethical Frameworks
4 Cases of Organizations accused of Unethical CI Practices
4.1 Oracle
4.2 WestJet
4.3 SAP
4.4 Hewlett-Packard
4.5 Common Misconceptions about CI revealed by these Cases
5 Conclusion
6 References
7 Authors
Introduction
Competitive intelligence (CI) is receiving more notoriety in every industry sector. This discipline can aid companies
to make better strategic decisions by gathering information about their industry. CI is a young discipline compared
to professional areas such as accounting and medicine that have established guidelines in areas such as ethics.
Albeit there are general CI ethical guidelines communicated by the Society for Competitive Intelligence
Professionals (SCIP), there are many litigious situations that CI practitioners encounter whereby their decisions can
be either construed as ethical or non-ethical depending on the persons point of view. This is a challenge for many
CI practitioners because there is no distinct code of conduct for these situations.
We will discuss these ambiguous situations in more detail and provide some helpful hints in handling these
challenging situations. We will also discuss cases of organizations accused of unethical CI practices and highlight
the existence of misconceptions about CI that these cases reveal.
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Ethical Challenges in Competitive Intelligence[1]
Misrepresentation
Misrepresentation is the most common issue that subdivides many CI practitioners in many ambiguous ethical
issues. Misrepresentation is falsely identifying oneself in order to receive or access information that would not have
been provided if ones identity was used. There are three common cases of misrepresentation where there is some
ambiguity:
1. Omitting some details about ones identity
2. Not revealing ones identity in a public venue after overhearing classified information
3. Not disclosing true intent on how information will be used
Omitting some details about ones identity
CI practitioners agree that lying about ones true identity to obtain information that would not have been provided if
someone had given their true identity is unethical. However some practitioners believe that it is acceptable to omit
details about ones true identity to get information. For instance if someone has two identities, a part-time student
and a director for a major company, and this person has a school assignment to collect information about a company
that happens to be a competitor of the persons employer, some CI practitioners believe it is fine to not reveal that
they work for a competitor in order to receive the information they need to complete the school assignment.
Although this raise some concerns because the competitor may have not provided any information to the person if
the competitor found out that this person worked for a direct competitor.
Not revealing ones identity in a public venue after overhearing classified information
Another issue where some CI practitioners felt it was not necessary to reveal their identity is when they overhear
classified information about a competitor at a public place. CI practitioners argue that the person who disclosed the
classified information is at fault because they should have been aware of their surroundings. At the same time some
people argue that CI practitioners could have planned to be in the vicinity in hopes to hear any unravelling
information about a competitor.
Not disclosing true intent on how information will be used
Another misrepresentation issue is not disclosing the true intent on how the information will be used. Many CI
practitioners are consultants who are paid by their clients to get information about their competitors. Some CI
practitioners would get the information required by surveying the competitors and suggesting to the competitor that
they are collecting industry information although not revealing the true intent on how information will be used.
Similar to the other two misrepresentation examples, the common theme they all have is what is the intent of the
CI practitioner? The persons intent is the source of whether the situation is ethical or non-ethical.
Client Conflict
Client conflict arises mostly with CI practitioners who are consultants. CI consultants agree that there should never
service competing clients at the same time because the practitioner may act in favour of one of the clients and share
classified information about a competitor. On the other hand many CI consultants are industry experts and there
going to be instances where their experience and knowledge they gained from the industry over the years may bring
them to face an ethical stance on which information he or she can share with a client because it could be classified
information about a competitor.
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Another conflicting issue is the client and CI consultant relationship. Usually clients often seek CI consultants to
gather information about their competitors. The ethical issue is at what cost or length does the clients expect the CI
consultants to get the information. CI consultants are a midst of a lot of pressures to provide the information that the
clients are seeking and they tend to encounter ethical issues when getting the information. One of the reasons the
clients hire a CI consultant is to try to distance themselves from facing those ethical situations.
Ethical Guidelines in Competitive Intelligence
CI practitioners who aim at conducting their activities in a completely ethical manner can consider several elements
for guidance: the law, industry guidelines; corporate ethics policies - if they exist - and personal moral codes.
Law and Ethics
In general and in competitive intelligence in particular, what is legal can be ethically questionable. There are many
gray areas.
This is exacerbated by the fact that there is no specific Canadian legislation dealing with industrial espionage, as
there is in the US, with the Economic Espionage Act or the Uniform Trade Secrets Act. Currently, Canadian
businesses have to rely on common law and criminal provisions to protect confidential business information.
But these provisions are not appropriate. For instance, no statutory definition exists for confidential information.[2]
A list of factors make up for the definition, which includes whether the owner of the information has clearly
communicated that it was confidential in nature and took measures to ensure the information remained secret, []
whether only a few people knew of the information, whether it is unique, and whether time, effort, and money were
expended in compiling the information.[2] When firms claim that there was a breach of confidential information,
they have to rely on this set of factors.
When a trade secret has been stolen, businesses also have to rely on the Criminal Code. However, the jurisdiction
says that information cannot be defined as property, since theft of information does not deprive the owner of its use.[2]
Yet, a few companies such as Air Canada were successful in using the theft and fraud provisions of the Criminal
Code. Air Canada argued that, because its competitor WestJet had stolen confidential information from its Intranet,
it was deprived of passengers and of the ability to compete effectively in the marketplace, and won the case.[2]
The fact remains that, in particular in Canada, the law does not provide much guidance for CI professionals. Thus,
we have to take a closer look at formal codes.
Formal Codes of Ethics
Industry Guidelines
SCIP
The Society of Competitive Intelligence Professionals (SCIP), whose motto is Economic espionage is the failure of
competitive intelligence, has published the following ethical guidelines for CI professionals. [3] When joining, its
members voluntarily agree to abide by the SCIP Code of Ethics.
To continually strive to increase the recognition and respect of the profession.
To comply with all applicable laws, domestic and international.
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To accurately disclose all relevant information, including ones identity and organization, prior to all
interviews.
To avoid conflicts of interest in fulfilling ones duties.
To provide honest and realistic recommendations and conclusions in the execution of ones duties.
To promote this code of ethics within ones company, with third-party contractors and within the entire
profession.
To faithfully adhere to and abide by ones company policies, objectives, and guidelines.
However, the Code does not address specific CI activities, apart from disclosure of information and confidentiality
requests.[4]
Fuld & Company
Fuld & Company has also published its own guidelines, known as the Ten Commandments of Legal and Ethical
Intelligence Gathering:[5]
1. Thou shalt not lie when representing thyself.
2. Thou shalt observe thy companys legal guidelines as set forth by the legal department.
3. Thou shalt not tape-record a conversation.
4. Thou shalt not bribe.
5. Thou shalt not plant eavesdropping devices.
6. Thou shalt not deliberately mislead anyone in an interview.
7. Thou shalt neither obtain from nor give price information to thy competitor.
8. Thou shalt not swap misinformation.
9. Thou shalt not steal a trade secret (or steal employees away in hopes of learning a trade secret).
10. Thou shalt not knowingly press someone for information if it may jeopardize that persons job or reputation.
The Wade System
Another guidance for CI professionals is the Wade System of Graduation of Sources of Information. In 1966, Dr.
Worth Wade published a list of tactics and sources in descending order of ethicality.[6]
1. Published material, and public documents such as court records.
2. Disclosures made by competitors employees, and obtained without subterfuge.
3. Market surveys and consultants reports.
4. Financial reports and brokers research surveys.
5. Trade fairs, exhibits, and competitors brochures.
6. Analysis of competitors products.
7. Reports of salesmen and purchasing agents.
8. Legitimate employment interviews with people who worked for competitor.
9. Camouflaged questioning and drawing out of competitors employees at technical meetings.
10. Direct observation under secret conditions.
11. False job interviews with competitors employees (i.e. where there is no real intent to hire).
12. False negotiations with competitor for license.
13. Hiring professional investigators to obtain a specific piece of information.
14. Hiring an employee away from the competitor, to get specific know-how.
15. Trespassing on competitors property.
16. Bribing competitors supplier or employee.
17. Planting your agent on competitors payroll.
18. Eavesdropping on competitors (e.g. via wire-tapping).
19. Theft of drawings, samples, documents and similar property.
20. Blackmail and extortion.
According to Dr. Wade the first seven methods are usually ethical and legal business intelligence and the remaining
thirteen are in a descending order of ethics or legality and are regarded as industrial espionage.
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"The Bible of BI Ethics"
Egideria, a CI consultancy based in Paris, abides by the code of professional conduct of the SCIP, and has also
developed a bible of BI ethics, which gives an indication of what to do and not to do in 12 contentious situations:[7]
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Corporate Codes of Ethics
Companies should always have their own code of ethics to give guidance to their employees and avoid unethical
behaviours. Unfortunately, corporate policies addressing CI are sparse and often woefully inadequate.[4] And yet,
these play an important role, since they can lead to a powerful personnel and cultural control within the company.
The organizational culture can influence the way the practitioner conducts themselves when faced with ethical
decisions. Research has shown that an organization that has a strong ethical environment where there is support
from management, and there is training and guidance on good and bad practices help CI practitioners to refuse not
to engage in any unethical practices because they feel they have support from top management and that they will not
get punished for their actions. Conversely this would not be the case in an organization with a weak ethical
environment.[1]
A good example of a corporate code of ethics is the one developed by Fuld & Company[8]:
Just the Facts - Ethical Policies for Fuld & Company - Employees and Contractors
Begin telephone calls by (1) asking your questions. (2) When asked to identify yourself, give your full name, and (3)
if also asked where you are calling from, state Fuld & Company, or the Fuld subsidiary you may be calling from,
(4) and the company phone number or direct dial phone number as well, when asked or when you need to receive a
call back. Never misrepresent yourself. Do not make a false statement.
It is not necessary to be specific regarding identification of the client or the purpose of the project with a
source about the project, but it is our policy to gather information in a truthful, professional and ethical
manner.
You can identify Fuld & Company or a Fuld subsidiary as a firm that does industry analysis. If you are asked
at some point in the conversation to identify the nature of your business, state that you work for a research, a
consulting firm, strategic or business analysis firm, or another phrase that accurately describes the various
services we offer. If appropriate refer the source to the Fuld or subsidiary Web site.
Never induce or pressure a source to disclose information they have specifically categorized as proprietary,
confidential or a trade secret. Making use of information you know to be confidential is illegal and unethical,
regardless of the manner in which you obtained the information.
If you believe information has come into your hands illegally, or through someone who was breaking a
confidentiality agreement when disclosing the information, bring the information to the attention of your
Project Manager.
Never disclose a clients name to a source or to anyone outside the firm. Unless you are told otherwise,
consider client confidential, and do not discuss projects, clients or project information with anyone outside
the company or in public places.
Do not pay a contact for information, unless a Project Manager at Fuld & Company has approved that
payment in advance. (Small honoraria, when paid, are usually limited to doctors or other professionals. You
are never to pay a competitors employee).
Never talk directly to a client without first receiving permission from the Project Manager.
Never remove project information from Fuld & Company offices, including papers, data disks or other
project-related information, unless you have first received permission to do so from the Project Manager.
Most importantly, conduct yourself in a professional and ethical manner. Use common sense. If you believe
your actions in gathering information are questionable, it is likely that they are. Ask your Project Manager
for guidance and support.
Remember, the manner in which you conduct yourself is not only a reflection on you as a professional, it also
reflects how Fuld & Company is viewed by potential clients and others in the marketplace. Our reputation is
important, so please act accordingly.
Personal Ethical Considerations
Handling ethical situations can be difficult for many CI practitioners especially when there is no specific conduct
that states what to do for a given situation. There are several methods that can help confront the ethical situation:
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Three Tests
The Harm Rule
According to Leonard Fuld[5], the quickest way to find [whether you are stepping over the ethical line] is through
the Harm Rule: I will not do anything that may now or in the future harm or embarrass the corporation.
The "Gut Check"
The Gut Check is ones instincts. If the decision does not feel right, or makes your stomach uneasy (hence the
term Gut Check) then the decision may be the wrong one. Often instincts should lead someone to their ultimate
decision, but remember not everyone who uses their instincts to make decisions will end up choosing the same
decision. This is a result of people having different educational, cultural, and professional backgrounds. The gut
check does not reveal the right or wrong decision it provides CI practitioners a way to make decisions based on their
comfort level.[1]
The Public Disclosure Test
The public disclosure test is a test the can help a CI practitioner assess the decision they would make in an ethical
situation. The CI practitioner would pose the following question to themselves: Would I feel comfortable with the
decision if it became public?. This is a good litmus test to decide whether the practitioner can live with the decision
knowing that other people would be aware of what he or she did.[1]
Variants of this test include questions such as: Would I like my family to know about it? Herring, a 20-year
veteran of the C.I.A., uses what he calls the mommy test: If I do this, will my mommy be happy with me?[9]
Ethical Frameworks
Personal ethics is dependent on ones own personal history codes. The following ethical frameworks can help
structure ones thinking.[4]
Utilitarian Ethics
When assessing the ethics of an action, utilitarianism only considers its result. To be ethical, the action must yield
more overall benefits than it causes harm. The evaluation should consider harms and benefits that accrue to the
community at large, i.e. all impacted stakeholders. However, one limit of utilitarianism is that it can be very difficult
or even impossible to forecast the total benefits and harms that may be caused by an action.
Kantian Ethics
For Kant, an action is ethical if it meets certain fundamental imperatives, regardless of its results. First, all actions
must respect human rationality. Kant also defines the following categorical imperative: all humanity should be
treated as an end and never as a means only.
Virtue Ethics
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Virtue ethics can be considered on two different levels.
The first is the individual perspective. This theory is the most frequently used perspective. Virtue ethics focuses on
the question: what kind of question should I be? rather than what actions are right?. It assumes that people
pursue an ideal end and that they pursue and maintain virtues that they have identified as promoting the ideal end.
Whether one defines wealth creation or personal fulfilment as the ideal end of business activity will lead to the
definition of different virtues.
The second perspective is based on the community. A good implementation of this theory would be to ask yourself
whether you would be comfortable explaining your action to the general public. This is a good framework since it
involves taking into account the different virtues of all the individuals that make up the community.
The CHIP Model
Darren Charters[4] suggests a framework that integrates these three theories into one model: the CHIP model:
The CHIP model applied to the question of misrepresentation by omission
Harm
Very difficult to assess the potential harm resulting from misrepresentation by omission
Individual as end
An act of omission appears unethical: the individual rationality is not respected
Personal virtues
Honestly is considered as a noble virtue by many. Thus, misrepresentation by omission should be regarded as
unethical.
Community virtues
If the community at large is considered, wealth creation cannot be seen as the end of business activities. It is also
regarded as a means of building community and promoting self-development. Honesty will also considered as a
virtue. Consequently, misrepresentation by omission is unethical.
The use of the CHIP framework leads us to conclude that CI professionals should not misrepresent themselves, even
by omission, since this practice is considered as unethical by more than one theory.
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These different sources of guidance can provide good indications to CI practitioners that their activities are ethical
or unethical. However, using several sources could lead to conflict. To protect themselves, CI professionals should
always consider the more stringent standard should prevail, be it dictated by the CHIP model or a corporate policy.
Cases of Organizations accused of Unethical CI Practices
The paradox of competitive intelligence is that people tend to hear about it only when operatives decide to play
secret agent. Cases of organizations sued for corporate espionage are numerous.
Oracle
The most extreme example probably dates from 2000, when Oracle wanted to investigate two research groups that
supported Microsoft during the antitrust trial. The detective agency hired by Oracle attempted to buy garbage.
Oracle discovered that the two organizations were misrepresenting themselves as independent advocacy groups
when they were in fact funded by Microsoft. Larry Ellison, Oracle chairman, seemed to think that the end justifies
the means, as he declared: I feel very good about what we did. [] Maybe our investigation organization may have
done things unsavoury, but it's not illegal. We got the truth out.[10]
WestJet
A Canadian example of unethical CI practice is WestJet.[11] In April 2004, Air Canada filed a $5-million lawsuit
against rival WestJet, claiming that some WestJets officials logged on to Air Canadas internal employee-only
website 243,630 times over a 10-month period, and used that information to make decisions on flight load
schedules. Based on this confidential information, WestJet decided to drastically slash service out of the Hamilton
airport and move it to Toronto. It also adjusted other routes, including some to the US. WestJet later settled with Air
Canada, issuing an apology to its rival and paying the airline $5.5 million in legal fees and donating $10 million to
charity. Further to the lawsuit, Hill, one of the founders of WestJet, resigned from his position as vice-president of
strategic planning in July 2004.[12]
SAP
A very recent example is Oracle filing new charges against SAP in June 2007 in the corporate espionage case
between the rival enterprise software vendors, which started in March 2007.[13] Oracle claims that SAPs
TomorrowNow subsidiary had downloaded large amounts of support material and software from an Oracle website
intended only for paying customers, and that SAP has distributed one of Oracles patches as its own.
Hewlett-Packard
One of the scandals that have received the greatest media coverage in recent years is the HP lawsuit, which is still
unfolding. In 2005, Hewlett-Packard sued his former VP, Karl Kamb, for $100 million. HP claimed that Kamb had
betrayed the company and appropriated its trade secrets to launch his own TV company. Kamb filed a countersuit in
January 2007. He not only denied stealing trade secrets but also claimed that he was asked by HP to gather
confidential information on Dell, whose entry into printers had threatened HPs most lucrative line of business. In
2002, the CI unit hired Katsumi Iizuka, who was a president of Dell Japan until 1995, and still had a lot of
relationships inside Dell. Iizuka allegedly sold HP information on Dells plans to enter the printer business. The CI
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unit was able to get information about printer models, specifications and prices, several months before their launch.
Kamb also accused HP of using pretexting, the practice of obtaining information by masquerading as someone else,
to get his private phone records.[14]
Common Misconceptions about CI revealed by these Cases
The HP story highlights a number of misconceptions about competitive intelligence, that generally relate to the
myth that competitive intelligence is about spying.[15]
Distrust your employees first
Wherever money is exchanged, so is information. Whenever a business transaction takes place, information is
made available to competitors. Employees can give out information, but it is very likely that it is already available
anyway.
Everyone needs a deep throat
You dont need to have a deep throat informing you on competitors. There is enough information publicly available.
CI is about putting together and analyzing fragments of information.
Dumpster dive first, think second
Even if rifling through a competitors garbage might be legal (provided it is on public property), it is not the right
place to find good information. Legal and ethical ways, such as attending trade shows and conferences, are likely to
be far more informative
Intelligence at arms length is good for business
The CI department should report directly to the decision-maker. If requests from the Board or CEO are filtered
through many hierarchical levels, the message is likely to be distorted and misunderstood. In HPs case, it seems
that the message that was conveyed was that the ends justify the means.
Cowboys, cowboys everywhere!
Companies need to establish guidelines for their employees. They have to communicate these guidelines through a
comprehensive training and make sure the limits are understood.
Conclusion
CI has yet to establish clear-cut ethical guidelines for ambiguous situations. This is a challenge for CI practitioners,
companies, and governing CI bodies like SCIP to try to resolve. It is up to them to work together to reach
agreements on how to handle and manage misrepresentation, client conflict, and an organizations ethical culture to
help improve the state of ethics in CI. It is an important issue to collectively work towards to clear any ethical
ambiguities and to avoid negative publicities that can damage the image of CI. In the meantime, ethical issues can
be confronted using such methods as the CHIP model.
The argument has been made that companies that employ unethical practices will have a competitive advantage
over those who limit themselves to ethical activities. However, the competitive advantage of CI does not consist in
the information collected and the way it is collected, but in the synthesis and analysis of the collected information.
Consequently, and as shown from the cases presented above, unethical CI practices are not worth the risk.
References
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1. 1.0 1.1 1.2 1.3 Trevino, Linda; Weaver, Gary: Ethical Issues in Competitive Intelligence Practice: Consensus,
Conflicts, and Challenges; Competitive Intelligence Review, Vol. 8, No. 1, Spring 1997
2. 2.0 2.1 2.2 2.3 Fraser, Nathalie: Canadian law on industrial espionage needed; Law Times, 6 March 2006,
http://www.lawtimesnews.com/index.php?option=com_content&task=view&id=431&Itemid=82
3. SCIP, http://www.scip.org/2_code.php
4. 4.0 4.1 4.2 4.3 Charters, Darren: The Challenge of Completely Ethical CI and the CHIP Model; Competitive
Intelligence Review, Vol. 12, No. 3, 3rd quarter 2001
5. 5.0 5.1 Fuld, Leonard: The New Competitor Intelligence, Chapter 1: Understanding Intelligence
http://www.fuld.com/Tindex/CIbook/chap01.html
6. http://twoscenarios.typepad.com/maneuver_marketing_commun/2006/03/dr_worth_wade_l.html
7. Egideria, http://www.egideria.com/ethique.html
8. Fuld & Company: http://www.fuld.com/Company/ethicalpolicies.html
9. Smith, Sasha: Spying: How far is too far?; Fortune Small Business, Vol. 11, Issue 5, June 2001
10. Wong, Wylie: Oracle chief defends Microsoft snooping; CNET News.com, 28 June 2000
11. Morrison, Jennifer; Perkins, Tara: Espionage in business causes public to lose trust; The Hamilton
Spectator, 10 April 2004
12. Teel, Gina: Founding member to depart from WestJet; Executive VP retiring after 12 years; Calgary
Herald, 31 May 2007
13. Sanders, Tom: Oracle extends SAP espionage charges; VNUNet UK, 4 June 2007
14. Varchaver, Nicholas: The Trail of HP, A Pretext For Revenge; Fortune, Vol. 155, Issue 11, 11 June 2007
15. Fuld & Company: http://www.fuld.com/News/HP_CI_Limits_Sept-06.html#5
Authors
Maz Barbir
Jay Concepcion
Ccile Lecoq
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