Spy vs. Spy

Corporate espionage is a fact of life. Here's how to protect yourself.

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Strategies

Michael Levitsky hardly seems the type to be involved in mystery or intrigue. The 55-year-old father of two owns a successful Fastsigns franchise in Wilmington, Del., and makes a comfortable, though hardly extravagant, living producing signage for companies ranging from the local lawn-care company to corporate giants like DuPont and MBNA.

But mysterious things were happening at Levitsky's 18-person shop. Longtime customers had begun calling, reporting to him that a rival signmaker had been in touch, referencing in detail their latest purchases -- and offering to provide the same products for a lower price. One major client was furious, accusing Levitsky of selling his name and business information and threatening to take his business elsewhere.

Levitsky initially suspected one of his employees. He started watching them, but still the calls kept coming. Finally, a customer showed Levitsky a letter from the rival. The correspondence, Levitsky noticed, contained a misspelling that he'd recently seen in his own database. It suddenly dawned on him that he and his sales staff regularly updated their records, tossing the old data in the trash. He began planting false names on the discarded documents, using the addresses of friends and relatives. Sure enough, every plant got a letter within a few days. He immediately phoned his attorney.

Levitsky figures the episode cost him tens of thousands of dollars in lost business -- money he recovered only after an exhausting, three-year legal battle. "Never in my wildest dreams did I think something like this could happen," he says. "It's not like we had a secret formula for a wonder drug or something."

The fact is, it doesn't matter what business you're in: If you're making money, you've got information that somebody else wants -- and often will go to great lengths to get. In a recent survey of fast-growth entrepreneurs by PricewaterhouseCoopers, 84% of respondents said that information about their competitors was an important factor in their own profit growth; one-third said that a shaky economy makes such so-called "competitive intelligence" more important than ever. Yet "most small companies aren't aware that they have information that needs to be protected," says Helen Rothberg, an expert in competitive intelligence at Marist College in Poughkeepsie, N.Y.

You can save yourself a lot of pain in the future by practicing a little counterintelligence now. The word may conjure a world of high-tech surveillance and double-crossing agents. But counterintelligence actually is pretty easy, a series of common-sense, defensive steps that can keep your company's lifeblood -- its proprietary data -- safe from the competition's jealous grasp.

Take an inventory: A simple paper shredder could have saved Levitsky a world of pain. But before you start destroying everything in sight, determine what you need to protect. Obviously, you will want to shield any information that could eventually be protected by a patent or trademark. But even seemingly mundane data -- your address book, your hiring practices -- can be valuable. A good rule of thumb is that if a piece of information gives you a competitive advantage in the marketplace, it's worth protecting. Or, take this simple test: Is the information something you would share with your chief rival over drinks at a cocktail party? If the answer is no, then it's something you need to defend.

Look for leaks: Your single biggest vulnerability is your employees. It's not so much that they'll double-cross you (though they might). It's that they often don't know what constitutes sensitive information -- and that's probably because you haven't told them. Fix that by adding a section on confidentiality in your employee handbook and by holding an annual training session on what's secret. Be sure to stress what can and cannot be discussed in public -- whether at a trade show or on a plane or train.

It's important to include the entire company in the sessions. "People who get targeted are often on the frontlines -- administrative assistants, secretaries," says Rothberg. A common tactic, she says, is for a spy to pose as a reporter or investor and make a simple probing phone call to a receptionist. Be sure all questions about senior management or business plans are directed to a senior-level person. Better yet, get a callback number and use that to determine whether the caller is legit.

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