Recently, Mike Harmon, director of a business management firm in Marin County, California, was hired by an affiliate to analyze the risk of a proposed acquisition of an import company. Mr. Harmon immediately sought the help of Sacramento-based investigator Olivia Robinson, founder and owner of Background Intelligence Inc., to check out the import company. Two days later, Ms. Robinson gave Mr. Harmon a written report with some startling news. The target company had been involved in the largest fraud case involving imports in U.S. history.
"The investigation kept us from making a huge mistake," Mr. Harmon says. "We immediately backed out of the deal. It would have been a disaster. It saved our reputation. You can't put a price tag on something like that." In the past, when business meetings got underway, the agenda usually started with a smidgen of chitchat about family, friends, and other personal topics. "It was the company's way of trying to get to know you," says Armando Castro, partner in the law firm of Morgan, Lewis & Bockius in Palo Alto, California. Today, there is a new high-tech wrinkle in that old custom. Companies, including most of the Fortune 1000, are hiring outside services, oft en headed by former FBI and law enforcement investigators, to do deep background checks. They compile information on everything from competitors and future acquisitions to customers and even their own board members -- any data that may help them grab a greater market share and improve business.
Venturing far beyond the realm of market research, formal competitive intelligence has become a valuable tool as the business arena grows fiercer across the globe, while at the same time in the United States, corporate governance comes under harsher scrutiny. Competitive intelligence firms typically employ not only former law enforcement officials, but also prosecutors and investigative journalists, as well as an alphabet soup of MBAs and PhDs, to dig up all types of information companies aren't eager to advertise. Although it is not the norm, Ms. Robinson says her investigations, which she has conducted for companies worldwide, have turned up cases of fraud, smuggling and even murder.
"You never know," says Ms. Robinson, who is licensed as a private investigator. "About 85 percent of executives we've had to look into have had some kind of issue. It usually results in a renegotiation of the deal." Most of the time the results of the investigations aren't quite that dramatic, but they are oft en vitally important to the companies they serve. Competitive intelligence reports are typically used to help company executives map out future scenarios. For example, if you are about to release a major new product, a competitive intelligence report can tell you how your competitors and your customers will react to it. They can also predict your competitors' probable future strategies; reveal whether your customers are satisfied with your services or products; what they may want from you in the future; and how much they are willing to pay for it. You can also find out how well and how loyal your distributors are selling your line. These investigations can even provide deep background on your own board members and top management. Competitive intelligence is especially critical for companies looking to invest, merge, or acquire another company. Such investigations have become a staple for large pension funds looking to invest large sums in solid companies.
Competitive intelligence is still not widely used by Hispanic-owned companies in the United States because many of them are not yet large enough to warrant a full-scale effort, which can be expensive. Ms. Robinson, for example, charges $2,500 per day, about average for the investigative firms. Some, however, charge twice that and occasionally an investigation can run into six figures.
