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The Art of Business: Lessons on Counter-Espionage

By Luke Bencie and Josh Tallis – Security Management International, LLC

The contemporary business tie has a long and unexpected history behind it. Tracing its way back through Victorian fashion and 15th-century Parisian fancies, it seems as if the necktie originated as a cravat worn by Croatian warriors. So, modern businessmen—wear your armour boldly. 

Corporate Espionage: 

“One good spy is worth 10,000 soldiers”
– Sun Tzu, The Art of War 

Spying has been called the world’s second-oldest profession (you can guess the first). Since the dawn of civilised man, only time itself has proven to be a more valuable commodity than information. 

In the cutthroat world of business warfare, this gathering of information vis-à-vis a competitor comes in a variety of forms and takes several names. On the “ethical” end of the spectrum, business professionals may refer to this collection effort as: 

  • ·  Open-source research 
  • ·  Market analysis 
  • ·  Due-diligence 
  • ·  Competitive Intelligence 

These terms represent how a company legally acquires dirt on their
rivals. However, what if a company wanted to know more about their competition than just what a few clicks on Google could tell them? In these particular instances, the information becomes exponentially more valuable – with sometimes millions, if not billions of dollars at stake. Think Pepsi is going after Coke’s secret recipe. Or Mrs Fields is hunting for the Keebler elf cottage. When we transition from dealing with balance sheets that contain a few zeros to ones with seven or eight, the knowledge desired ceases to be called information and becomes what is known as intelligence

According to the U.S. Intelligence Community (IC), the folks who play James Bond for a living, intelligence is defined as: 

A body of evidence and the conclusions drawn therefrom that is acquired and furnished in response to the known or perceived requirements of consumers. It is often derived from information that is concealed or not intended to be available for use by the acquirer. 

Remember, the significant difference between information and intelligence is that intelligence is something you do not want your competition to know. It’s that not yet patented schematic you have stowed under your mattress or that business plan you made your partner swallow. Now, acquiring that intelligence need not be illegal or unethical, but it does require a degree of vigilance and perception above and beyond the gathering of necessary information. 

However, to gain access to this intelligence, many individuals, companies and governments do engage in the more dubiously legal end of the scale, practising what is known as: 

  • ·  Economic Espionage 
  • ·  Industrial Espionage 
  • ·  Corporate Espionage 

Although slightly variable in definition, each can be equally damaging to the person or organisation targeted for attack. 

The Creed of Success: 

The Chinese military philosopher Sun Tzu, author of the manifesto The Art of War (written around 500 B.C.E), continues his prolific resistance to outdating by once again proving relevant to the topic at hand. Sun Tzu’s immediate applicability to the 21st-century businessman may still seem ambiguous to you though. Allow us to clarify. To begin, one must simply note his pragmatic approach to the economics of warfare. In chapter 2, “Waging War,” Sun Tzu opens with a detailed explanation of the cost of raising a host. He is painfully aware that a military is only as fast and as able as its supply line. The same lesson is entirely applicable to business. To quote The Art of War for Managers by Steven and Gerald Michaelson, “all business problems become financial problems.” Taking heed from Sun Tzu is a way to ensure your business problems are resolved before they become money issues. 

Yet while all of this conniving may appear to be a symptom of the modern world, an appealing battle cry for the Occupiers in Central Park, recall how we opened this article; spying is as old as information. The authoritative treatise on warfare and espionage, which has withstood the test of time like no work other than the Bible, is nearly 2,500 years old. 

Whether you know of this famous Chinese general through the history books, or likely the 1980’s movie “Wall Street” (where Gordon Gekko instructs his young protégé, Bud Fox, to read up on Sun Tzu’s strategic principles), the classic Art of War has become a staple of popular American culture. From military leaders, to business people, to athletic coaches, and even a few overzealous divorcees, The Art of War has been required reading for anyone who thinks to gain an advantage over their competition. 

In it, Sun Tzu dictates five constant factors of warfare: moral influence, weather, terrain, commander, doctrine. Through time and place, they have proven true. And in much the same way as armed conflict, those constants can be applied to any competitive environment. In The Art of War for Managers, the authors outline how these constants translate into a modern business world: 

  • Moral Influence—a spirit of mission, the belief in the superiority of your purpose or product 
  • Weather—outside forces, as in competition or unexpected changes in the business environment 
  • Terrain—marketplace, the arena within which your company fights for ground 
  • Commander—leadership, much the same as a good leader in any situation 
  • Doctrine—your guiding principles, the ideology that paves the way for success 

Applying these constants is a guaranteed way of increasing your odds of success in battle. Allowing your business to operate morally gives your employees a sense of purpose. Superior leadership keeps everyone working with a devoted objective. An understanding of market conditions means that aims are targeted to meet the realities of your terrain. Your doctrine makes it simple for new employees to integrate into your operations and old employees to adapt to emerging conditions. Of course, your troops are an integral part of all of this, and it is officers and discipline in the ranks that makes a business work as a coherent unit. 

Spy Game 

So central is the gathering of information to success that Sun Tzu dedicates an entire chapter to the subject. In “The Use of Spies,” Sun Tzu tells us: 

“Thus, what enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknowledge. Now, this foreknowledge cannot be elicited from spirits; it cannot be obtained inductively from experience, nor by any deductive calculation. Knowledge of the enemy’s dispositions can only be obtained from other men…Be subtle, use your spies for every type of business.” 

This idea, that “knowledge of the enemy’s dispositions can only be obtained from other men,” is the underlying fundamental of every intelligence agency on the planet. In fact, The Art of War is probably found on more bookcases of the world’s 100+ foreign intelligence services than any other work out there. And while SIS may not be rifling through your luggage while you wait for your bag at Heathrow (although hey, you never know!), you can be sure that your main overseas business competitor has a bookshelf that looks awfully similar… 

So now that we know what intelligence is and what your competition is after, how can you protect that valuable information? 

The answer is that knowledge of the motivations, intentions, and capabilities of an opponent are the most effective and efficient means of successfully protecting your organization. By recognizing that your knowledge is potentially lucrative for a competitor, i.e. Coke’s secret recipe or how McDonalds cooks those amazing french- fries, you can make small adjustments that pay tremendous dividends. Never leave your laptop in your luggage or hotel room, for example; do not access non-secure Wi-Fi connections; do not volunteer information to your overly friendly taxi driver, and look over your shoulder before stuffing secret documents into your pillow. 

Of course, that is all defensive in nature. Yet Sun Tzu did not survive 2,500 years because he played it safe. His advice is clear: the best defence is a good offence. Essentially, through spying, a coach, general, CEO or angry spouse can protect his or her own organization’s resources by taking advantage of their competitor’s concealed weaknesses. As true today as it was centuries ago, Sun Tzu continues: 

“Raising a host of a hundred thousand men and marching them great distances entails heavy loss on the people and a drain on the resources of the State. The daily expenditure will amount to a thousand ounces of silver…One good spy is worth a thousand soldiers.” 

Sun Tzu recognized that although one military (business) may outmatch its opponent in terms of size and strength (market penetration and revenue), knowledge of the opponent’s intentions is oftentimes much more valuable than brute force. To parlay that into business terms, one company may possess more capital and resources than its nearest competitor, but if that competitor is developing a new product that will change the landscape of the marketplace, the larger company may be doomed to irrelevance in just a short amount of time. Think of how different Apple’s meteoric rise from near-bankruptcy to the most valuable company in the world would have been had Microsoft understood the appeal of the products Steve Jobs was to unleash. 

Deception: 

“It is owing to his information, again, that we can cause the doomed spy to carry false tidings to the enemy.” Chapter 13, Line 23 

Sun Tzu’s emphasis on knowledge and deception leads him so far as to assert that subduing the enemy without fighting is the supreme objective. By engaging in a conflict of price slashing, expensive media attacks, product duplication or angry yelling outside at 3 A.M., you are fighting a war. If you can sidestep those traps and address the market’s needs better than any other competitor, you will have won without the need to fight. 

Winning without fighting is not easy of course, and not always possible. But learning how to deceive your competition is a fundamental way of maximizing your chances of a clean victory. By watching what they are doing, what they are not doing, testing their responses and involving your entire operation, you can know your rivals well enough to employ deceit effectively. 

There is no better weapon for the out-gunned than deception. Consider these examples from history: 

  • Operations in World War II implemented deception to create everything from fictitious artillery divisions to entire cities. One instance has allied forces building fake villages across the Nile Valley by simply using flashlights to confuse German bombers on night runs! 
  • In the 1990s U.S. intelligence officials permitted Libyan nuclear ambitions to go unchecked when they were tricked into believing a plant had sustained serious structural damages. The sophisticated operation was designed by East German intelligence officials working for Colonel Muammar Gadhafi, a testament to the universality of deceptive measures. It could have given the Libyans enough time to successfully enrich weapons-grade material. 
  • Earlier still, Japanese diplomatic deception left Roosevelt’s administration entirely unprepared on the early morning of December 7, 1941. Pearl Harbor’s terrible success crippled the United States’ Pacific Navy in a nearly successful attempt by a lesser power to overcome traditional odds. 
  • Today, deception by companies, governments and politicians clouds our ability to accurately predict the power and wealth they may or may not possess. Again Apple is a good example. The proliferation of fake trial devices and compartmentalized information they employ before product launches, in the development stage, keeps competitors and reporters in the dark until they are available en-masse. This gives Apple a tremendous advantage in creating and predicting markets. No one knew what the iPad could do before it was unveiled, or even what it would look like. After all, you cannot out- design a product you haven’t seen! 

What does deception mean for you? We are certainly not implying you hire a host of corporate spies! Though far be it from us to stop you… Rather, encourage an intelligent business atmosphere that thrives on observation and reward. Do not be afraid to invest time and money into the collection of information. And above all recall Sun Tzu’s prologue to chapter two; an endless campaign is far more costly over time than the devotion of resources to a quick and battle-less victory. 

By practising deception, you gain control over what your competition knows. This means you can control how they will react and consequently how you can capitalize on that misdirection. Perhaps Sun Tzu’s single most important quote in the Art of War is that “all warfare is based on deception.” Whether you are operating offensively or defensively, your most reliable weapon and ally is hiding your true intent from the competition. 

Conclusion: 

Individuals, organizations and nations rise and fall but the basic principles of survival and success remain unchanged. Gathering knowledge about the competition is synonymous with achieving economic, political and personal
gain. This will always hold true. The only option you have is which side of the fence you will end up on. To return to Gordon Gekko: according to Sun Tzu, every battle is won before it is fought. Intelligence provides you with the context to know where victory lies. Business is not throwing darts at a dartboard. Bet on a sure thing and you will always win. 

Lists are a good way of consolidating your collection of wisdom into easy to implement steps. Sun Tzu favours them extensively in his writings, so it seems fitting to end with one final list. These principles will help guide you and your business through establishing your own identity: 

  • Know when to fight and when not to; sometimes inaction is an action 
  • Know your competition; do not address a fortune 500 as you would a mom-and-pop 
  • Stay united in purpose and action
  • Always be prepared; taking advantage of a rival’s temporary mistake requires vigilance 
  • Empower your employees, especially your managers; if you have a well- understood set of principles you can grant greater independence to your teams without worrying toward what end they are working 

So go on, don those suits of armour and Croatian battle tassels. If you know yourself and your enemy, you should never have cause to fret.