The Pepperoni Puzzle: Corporate Spies on Rise Competitive Intelligence Is Legal and Needed, Experts Say

Article excerpt

A pepperoni company was in a financial fix: A rival was selling sausages so cheap that it was taking a big bite out of profits.

How to sniff out the problem? The company hired Fuld & Co. of Cambridge, Mass., a consulting firm specializing in competitive intelligence (CI), to find out why the other firm could keep prices low.

Firms like Fuld are part of a fast-growing CI industry, which does its sleuthing using everything from computer searches of news reports to hobnobbing at trade shows, plus lots of analysis.

"We don't live in the age of information. We now live in the age of intelligence," says CI expert Larry Kahaner.

So how did the pepperoni problem get sliced?

"This was one of our favorite cases," says Michael Sandman, senior vice president of Fuld. He toured the plant of his client - call it Company A - "and the powerful, pleasant smell will never leave my brain," he says.

After meats and spices are mixed and stuffed to make pepperoni, the links must hang for 30 days to cure. "It is not cooked. It cures in the way yogurt ferments by a bacterium," Mr. Sandman explains. This plant produces 10 million pounds of the stuff a year, so a space the size of an airplane hanger was needed to cure it.

Sticking it to the competition

Sandman and another analyst then visited the town hall in the home town of the target company, the other pepperoni firm. They got the building inspector to show them the building plans of the structure used by Company B and found it was much smaller than Company A's, though Company B also produced about 60 million pounds of pepperoni a year. They found from the building plans that a certain company, located half way across the United States, supplied unknown equipment for one corner of the plant. A researcher in Fuld's office later found the equipment to be commercial ovens.

Further investigation - a lot of it - turned up a little-known trick (but not a trade secret): Warm the product to a certain temperature early on and you can jump-start the curing process and save two weeks in production time.

That step saved lots of storage space for Company B, accounting for "almost all of the cost difference," Sandman says. Company A changed its curing methods and stayed in business.

"Everything we did here was legal and ethical," Sandman claims.

Fuld is in fact known in the CI world to be a highly ethical as well as effective firm. Its code of ethics is included in a new book by Mr. Kahaner being published this month "Competitive Intelligence" (Simon & Schuster). The guidelines all begin with "Thou shalt not ..." and include no lying, bribing, planting eavesdropping devices, or stealing trade secrets or employees. …


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