Academic journal article Advances in Competitiveness Research

Competitive Intelligence, Corporate Security and the Virtual Organization

Academic journal article Advances in Competitiveness Research

Competitive Intelligence, Corporate Security and the Virtual Organization

Article excerpt

ABSTRACT

This paper seeks to document a variety of competitive intelligence (CI) vulnerabilities which (1) are common to most organizations; and (2) have a unique and adverse effect on virtual firms due to their reliance on subcontracting and information technologies. A 7 stage competitive counterintelligence program (identified by the FOG-PACT acronym) is developed in order to remedy many of these CI problems.

INTRODUCTION

Competitive Intelligence (CI) represents a systematic process initiated by organizations in order to gather and analyze information about competitors, suppliers, customers and the general socio-political/economic environment of the firm (Kahaner, 1996; Wright and Roy, 1999; Fitzpatrick, 2000). The purpose of CI programs is to harness disparate information resources in order to enhance the competitiveness of the firm while eroding the competitive advantage of its rivals (Helms, Ettkin and Morris, 2000). This information is often acquired through legitimate/ethical means and covert methodologies involving economic espionage [e.g., theft and/or unauthorized duplication/possesstion of trade secrets, proprietary technologies, etc.] (Fuld, 1985; Winkler, 1997; Wright and Roy, 1999; Gallagher, 1998). Organizations in a variety of industries (i.e.: aerospace, biotechnology, electronic, petrochemicals, and information technologies) or those possessing significant intellectual properties have been identified as having an increased risk for becoming the target of CI activities (Wright and Roy, 1999). The lure of enhancing competitiveness through the appropriation of proprietary technologies, business plans or intellectual properties, has driven many organizations and at least 23 nations to initiate hostile CI penetrations of American firms (Freeh, 1998). Financial losses from these CI intrusions have steadily increased. In 1996, the American Society for Industrial Security (ASIS) reported that CI losses among American firms were valued at approximately $63 billion (Gallagher, 1998). More recently, the FBI has estimated that the financial consequences of competitive intelligence leakages to U.S. firms may amount to $250 billion annually (Shanley and Crabb, 1998). A survey of Fortune 1000 firms by ASIS indicated that the four most significant outcomes of CI leakages include losses in competitive advantage, lost market share, increased R&D costs and higher insurance premiums (ASIS/PricewaterhouseCoopers, 1999).

Given the financial and adverse competitive consequences which may derive from CI and economic espionage activities, this paper seeks to: (1) identify CI vulnerabilities/threats common to many organizations; (2) discuss some of the unique CI vulnerabilities experienced by virtual organizations because of their extensive reliance on outsourcing and information technologies; and (3) outline a 7-stage competitive counterintelligence program that can assist virtual organizations in enhancing their corporate security and minimizing the competitive/financial losses attributable to the CI activities of other firms/governments.

COMPETITIVE INTELLIGENCE VULNERABILITIES OF TRADITIONAL AND VIRTUAL ORGANIZATIONS

Characteristics of Virtual Organizations

Virtual organizations constitute the antithesis of traditional vertical integration strategies. Rather than seeking to control value chain activities through direct ownership of businesses, virtual organizations acquire resources or strategic capabilities by creating "a temporary network of independent companies, suppliers, customers, even erstwhile rivals--linked by information technology to share skills, cost and access to one another's markets" (Byrne, 1993: 99). A common feature associated with virtual firms is an organizational artifact known as a HUB. Dickerson (1998) proposes that the HUB is the irreducible core of the virtual firm. This core contains all the basic organizational functions or infrastructure needed to supervise the allocation, management and coordination of subcontractors or strategic partners as work progresses through the value chain (Dickerson, 1998). …

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