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Competitive Intelligence Article

Will More Firms Begin To Offer This Service To Clients?
By  Donna Fryer and Steven A. Meyerowitz
New York Law Journal
Volume 228, Aug 20, 2002

Law firms typically offer clients many of the same services. Litigation. Tax. Estate planning. Corporate. Bankruptcy. On the horizon is something that at first blush seems quite different, yet it relies on some of the same analytical skills attorneys have developed over the years: competitive intelligence. With law firms competing for business, offering competitive intelligence services to clients will open another revenue stream for attorneys.

According to the Society of Competitive Intelligence Professionals, competitive intelligence, or CI, is a "systematic and ethical program for gathering, analyzing, and managing external information" that can affect a company's plans, decisions, and operations. After gathering and analyzing this research, one should be able to understand a competitor and its environment, strategies, capabilities and operations, and long-term goals.

Business Week reported last year that 90 percent of large companies have CI staff, and that many large American businesses spend more than a $1 million annually on CI. Also, according to Business Week, corporations find it most necessary and beneficial to do competitive intelligence during recessionary times. This function can be outsourced to law firms who are knowledgeable about all levels of a corporation's business. Thomas Waters, a CI consultant based in Tampa, Florida, said that, in fact, a growing number of law firms are offering these services to clients that do not have those resources. The firms either have their own in-house CI staff or they retain outside consultants to handle the job.

CI is not (or should not be) James Bond-type spying or unlawful corporate espionage. It does not involve the use of phone taps or computer hacking, and the payment of bribes is verboten. Instead, Mr. Waters stated, "80 percent of what you want to find is public information."

Mr. Waters pointed out, for example, that satellite photographs are available -- at minimal cost -- from various federal, state, and county agencies, such as the Environmental Protection Agency, drug enforcement bureaus, and agricultural departments. A photo of a manufacturing plant can be used to count the number of cars in a parking lot, which can yield an estimate of the plant's labor costs. Moreover, a detailed report from the Occupational Safety and Health Administration -- available under the Freedom of Information Act -- can provide extraordinary amounts of information about the inside of a plant, including the numbers of people working on the production line, the products coming through, and the actual tools or machinery being used.

Additionally, answering the following questions about each competitor can provide important data for a client:

  • Does the competitor have a Web site? What is the content? How is it organized? Where is the company in the search engine rankings?
  • What alliances does it have, and with whom?
  • Who are its customers? What are their perceptions of the company?
  • What advertising or marketing literature is it producing?
  • What articles have been written on the company and company leaders? What philosophy do they have?
  • What does its organization chart look like and has it changed recently?
  • What intellectual property does it have?
  • Where does it do business? Is it national or international?
  • What is its volume of imports or exports?
  • How many locations does it have?
  • What legislation or regulations affect its business?
  • Who is saying what on relevant listserves?
  • What SEC documents or company financials are there?
  • What other public documents are there?
The Law Firm's Role

Law firms may not be in the business -- at least not yet -- of discussing satellite pictures with structural engineers. But they are consultants and advisers, they know the legal system, and research is key to their principal functions. These attributes help explain why lawyers are able to offer a variety of CI services to clients.

Suppose a law firm's client is involved in the early stages of a merger or an acquisition of a target company. "CI can work to support the M&A," Mr. Waters observed, by helping to determine a negotiating strategy and approach. For example, CI professionals can perform psychological profiling of the target's decision makers using the Myers-Briggs Personality Type Indicator or the Minnesota Multiphasic Personality Inventory -- and they can do these tests "remotely." To do so, they may speak with each decision maker's "employees, ex-employees, neighbors, and friends" to find out how they "make decisions, their job history, the buttons to push -- and in what order -- and the issues to avoid." At the conclusion of the process, the client will have a 12-15 page report, with the test results contained in an appendix. The total cost for this report, according to Mr. Waters, should be between $10,000 and $15,000 -- a relatively insignificant sum when millions of dollars may be at risk.

Trade Shows

Consider the situation of a law firm representing a client that competes with companies that have trade secrets. Within the limitations of the U.S. Economic Espionage Act, "law firms can hire CI people to go to trade shows and listen to people to talk about their secrets," Mr. Waters said. It is amazing what people will say to those willing to listen. "Sales and marketing people talk about costs, and research and development people talk about schematics," he declared. Taking that information, combined with a touch of reverse engineering, can lead to invaluable competitive intelligence, according to Mr. Waters.

Additionally, he observed, lawyers should use this scenario to advise their clients as to the measures they should take to protect their own trade secrets (a form of "counterintelligence"). In particular, he emphasized, they can tell their clients what they should not say at trade shows or elsewhere.
Patent Analysis

Another example occurs in the patent arena. Suppose a law firm is representing a technology company and a competitor with numerous patents has a product coming to market. The law firm can "look at the patents, link them together, and see what kind of technology they are steering towards," Mr. Waters believes. Simply put, the firm can figure out "the products they will be selling in five years."

CI in the patent area also can be helpful in recruiting key employees. By analyzing patent information, CI investigators can determine who the leaders are in a competitor's company, contact a recruiter and see if any of these people are interested in changing positions and working for the client. "The legal department can help human resources recruit the top people in the industry," Mr. Waters stated. "Instead of spending $15 million to buy a company, the client may be able to spend $150,000 to hire an engineer," he concluded.
Marketing And Competition

There are numerous opportunities for law firms to help their clients comply with the new Corporate Responsibility law signed by President Bush recently, including in connection with the form of proper due diligence on an “Oversight Board.” Other examples include assisting the Oversight Board with CI. There are other uses of CI as well. Firms can investigate prospective clients, competitive law firms, and possible lateral hires. They can use CI when preparing responses to requests for proposals or setting fees. The information is available and, as CI consultants will attest, is being used by someone. Whether law firms will use it to the extent possible, for their clients and then, ultimately, for themselves, remains to be seen.

-end-

BIOs:
Donna Fryer, a competitive intelligence consultant based in Greensboro, NC, who teaches clients how to do competitive intelligence research and actively does research for corporations and law firms. She may be reached at info@searchitright.com,  www.SearchitRight.com.  SearchitRight's competitive intelligence CDs and other training material can be found at our shopping cart.

Steven A. Meyerowitz, a lawyer, is the president of Meyerowitz Communications Inc., a marketing communications consulting company based in Northport, NY.