Become an intelligence agent!
Commercial or competitive intelligence, i.e. gathering and analyzing information about market rivals, is a routine procedure for most companies. In small firms, it is usually an additional task of marketing department employees, while in large corporations, entire divisions are engaged in intelligence. The information collected by them is considered very valuable, because it often becomes the basis for strategic decisions that determine the future of the organization.
That’s why even after the 2008 crisis, which forced many companies to cut their costs, spending on competitive intelligence continued to grow. A Fuld & Company survey found that during the first post-crisis five-year period, the number of companies spending more than $1.1 million a year on it increased from 5% to 10%. Big pharma was no exception: its representatives accounted for almost a third of the total number of firms spending more than $2 million a year on exploration.
Despite such impressive budgets, most “intelligence activities” require only Internet access and some research skills. Intelligence is gathered by analyzing newspaper articles, corporate publications, websites, court documents, patent applications, specialized databases, reports and so on. In other words, competitive intelligence uses only open sources and legally clean ways of obtaining information. This is its main difference from industrial espionage, which by definition lies outside the law and ethics.
Intelligence and espionage: a subtle difference
In practice, it is not always possible to grasp this difference. Companies often use legitimate, but not entirely honest and also very aggressive ways of gathering information. For example, one of the simplest and at the same time effective techniques can be an ordinary phone call to the marketing service of a competing company. The caller provides deliberately false information and forces managers to refute it, hoping that they will spill some trade secrets.
There are many such examples in modern business practice. The line between legal and illegal methods of gathering information is difficult to draw, and when it comes to the ethical side of the issue, the definitions of “intelligence” and “espionage” become even more similar. In 2001, for example, the Rostere & Gamble Company was caught collecting the contents of trash cans in the Chicago office of its competitor, Unilever, for six months in hopes of gleaning valuable information about its products. It was a corporate intelligence department initiative that just got out of hand. Although legally no law was broken, Procter & Gamble officially declared that it had not used the information obtained against internal rules, fired the three employees involved in the scandal, returned some 80 documents found in the trash to Unilever, and, according to unconfirmed reports, paid it $10 million to keep the case out of court.
Blackmail, surveillance and cyberattacks
The toolkit of a true industrial spy is much richer and more colorful than that of the average commercial intelligence agent. One of the most common techniques is the gathering of insider information. Even the most security-savvy companies, which devote huge resources to protecting themselves from external threats, easily overlook the risk of internal information leakage. In addition, there are simply no reliable ways to protect yourself from insider threats.
Using social networks, forums and blogs, spies seek out disgruntled employees and recruit them through bribery. As we know, they can also find the most common talkers. At first, such an employee (in English spy lingo, he is called patsy, which means patsy or simpleton) by his stupidity spills information that is of little value. But the spy clings to them, inflates their importance, intimidates and begins to blackmail the owner of a long tongue, forcing him to give out more and more important secrets under threat of exposure.
But perhaps the most valuable sources of information are “moles” who can work for years in the company, leaking information to competitors. They don’t necessarily have to be in high positions. A spy can be any employee (manager, engineer, fitter, janitor) who has legal access to company premises.
To penetrate corporate computer systems, phishing is most often used (phishing from fishing), a type of fraud aimed at gaining access to user logins and passwords. For example, under the guise of a corporate newsletter or a letter from a bank, provider or telephone operator, attackers send out e-mail messages containing a link to a fake website that looks indistinguishable from the real one. By clicking on the link and trying to access the site, the user enters a login and password into the necessary forms, which immediately fall prey to hackers, allowing them to gain access to corporate networks, email accounts, or bank accounts.
The true extent of cyber espionage is difficult to assess. The fact is that laws in Europe and the United States, for example, do not require manufacturing and research companies (unlike trading and financial companies) to report cybercrimes committed against them. Therefore, many market players, fearing for their reputation, prefer to keep intrusions into their computer system secret. However, according to the Verizon Data Breach report published in 2017, they are by far the most common target of attacks. And more than 90% of the data stolen from manufacturers is related to intellectual property, the main lifeblood of companies.
A tidbit for industrial espionage
Industrial espionage is most often associated with high-tech industries where a significant amount of money is spent on research and development (R&D). The most attractive industries are IT, automotive, energy, biotechnology and, of course, pharmaceuticals. In this industry, spy targets include clinical development programs, drug registration applications, molecular formulas, patient records, manufacturing records, quality information, etc.
The situation is exacerbated by the fact that the pharmaceutical sector is increasingly dependent on outsourcing. While working on a drug, key data about the drug may be scattered across multiple contractors, partners, regulators, law firms, marketing organizations, and treatment facilities, making it easier to access.
Since the commercial success of pharmaceutical companies depends largely on protecting their intellectual property and corporate secrets, the industrial espionage problems they face are becoming more serious every year. This is evidenced at least by the fact that global insurance companies such as Lloyds of London and Heath Lambert and Samian have set up entire divisions to protect their pharmaceutical clients from corporate espionage.
Theft as a major vector of the economy
Espionage can affect the future of any company and, in some cases, the economy of an entire country. For example, the annual loss from theft of technology, inventions and intellectual property in the United States, according to FBI estimates, reaches 400 billion dollars.
Some countries have made industrial or economic espionage an integral part of their national policy. During the Cold War, East Germany, with the Soviet Union at its back, chose such a strategy. Erik Meyersson, an associate professor at the Stockholm School of Economics, and Albrecht Glitz, an associate professor at Pompeu Fabra University, analyzed 189725 informant reports from the East German State Security Ministry (known as the Stasi) from 1969 to 1989 and compared them to the economic performance of the GDR’s industrial sector. The researchers concluded that, in light of the cost-benefit ratio, state espionage was more profitable for the country than its own R&D efforts.
However, this strategy played a cruel trick on the GDR. After the fall of the Berlin Wall, when espionage became irrelevant, its enterprises fell hopelessly behind their Western neighbors because the country had neither the manpower nor the technical resources for scientific research.
Today, Iran, the Russian Federation, North Korea and some South American countries have repeatedly tried to gain an economic advantage over more developed countries through various illegal and unethical methods. More successful powers have also engaged in espionage. For example, in May 2001, the United States accused Takashi Okamoto and Hiroaki Serizawa of stealing intellectual property belonging to the Lerner Research Institute at the Cleveland Clinic in favor of a Japanese government research institution.
But the biggest and most dangerous spy today is China. This country has been involved in hundreds, if not thousands, of scandals related to the theft of technology and intellectual property in various industries, including pharmaceuticals. Thus, according to Bloomberg News, in 2010 the victims of Chinese hackers were medical equipment manufacturer Boston Scientific, pharmaceutical companies Abbott Laboratories and Wyeth, as well as the Parkland computer center in Rockville, Maryland, used by the U.S. Food and Drug Administration. This Chinese attention to new developments in medicine and pharmaceuticals is not surprising. The country needs to treat its huge population of 1.4 billion people, of which 167 million are elderly. Naturally, solving this task requires effective and relatively inexpensive drugs, which can either be imported, developed and started producing themselves, or their formulas and production technologies can be stolen. And China clearly prefers the third way.
