A STUDY ON THE EFFECTS OF ECONOMIC WAR ON ORGANIZATIONS FROM A LEADERSHIP AND ORGANIZATIONAL BEHAVIOUR PERSPECTIVE.

Individual Term Paper

Table of Contents
I. A. 1. 2. B. 1. 2. II. A. 1. 2. B. 1. 2. C. 1. 2. III. A. B. Background of the topic ............................................................................................................... 3 What is Economic War and what are its practices? .............................................................. 3 Pre-technological Era ........................................................................................................... 3 Technological Era ................................................................................................................. 3 How Competitive Intelligence translates into companies’ life? ............................................ 6 As a tool of Corporate Strategy ........................................................................................... 6 As a part of the Corporate Culture ..................................................................................... 6 Economic War and Corporate Culture .................................................................................. 7 Organizational Leadership....................................................................................................... 7 Where Economic War becomes a problem: advocating ethical behaviour ..................... 7 Where Economic War benefits: crisis leadership .............................................................. 8 Team Leadership ...................................................................................................................... 8 Communication and Economic War ................................................................................... 8 Dealing with teams without compromising the company .................................................. 9 Impact on individuals ............................................................................................................. 10 Impact on the Leader-Follower link .................................................................................. 10 Influencing: when Economic War can be used by individuals within the company ..... 11 Conclusion ............................................................................................................................... 12 Analytical Summary ............................................................................................................... 12 Recommendations ................................................................................................................... 13

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I.

Background of the topic

A. What is Economic War and what are its practices? 1. Pre-technological Era The origins of the concept of Economic War are difficult to determine. Primarily, The Art of War written by Sun Zi1 is the embryo of Economic War though. Sun Zi first stated the importance of non-military actions to win a war with the minimum economic impact on the nation. Machiavelli, in his political treatise written in 1514,2 is the first to state the idea of economy as the art of enriching the prince (the State or the Government nowadays) for the purpose of power, i.e. of war at Machiavelli’s time. For this purpose, Machiavelli highlights the importance of developing national economy while weakening that of other nations: not only is it important for a nation to have more wealth but also is it important that competing nations have less. Following this idea, Colbert (1619-1683, Minister of Finances of France under the rule of King Louis XIV) stated: “Commercial companies are the armies of the King, manufactures are his reserves”. Building-on this idea of economy for the purpose of power, some economists started to talk about power for the sake of economy. This concept gave birth to colonialism: to reduce its dependence on foreign products, a nation should annex the territories that will provide the wealth that the mainland itself cannot. 2. Technological Era This idea prevailed up until the mid-20th century, when colonial empires collapsed. After this collapse, nations had to find new ways to enrich themselves through their economy. This gave birth to a new concept first defined by an American organizational psychologist,

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孙子, 孙子兵法 (circa. 500 BC) Niccolò Machiavelli, The Prince (Antonio Blado d'Asola, 1532)

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Wilensky.3 He defines organizational intelligence as the activity of producing knowledge to meet the economic and strategic goals of the organization, knowledge gathered and produced in a legal context using open sources. This first definition will evolve to the actual practice of what English and Chinese speakers call Competitive Intelligence (竞争情报) and French speakers Economic Intelligence (Intelligence Economique). Competitive Intelligence is the mean to lead the Economic War for a nation, a company or both. “A broad definition of Competitive Intelligence is the action of defining, gathering, analysing, and distributing intelligence about products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization.” 4 In addition, Competitive Intelligence can be included as a subset of the bigger Business Intelligence (BI) if we understand the concept of BI broadly. This modern concept of Competitive Intelligence as the tool to lead Economic War is the topic of many books that define, explore and research the application of Competitive Intelligence and its effects on markets, nations and companies. In a book published right after the economic crisis, Delbecque and Pardini
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discuss the link between nations and

organizations in the on-going economic war. Furthermore, Delbecque and Harbulot explore the concept of Competitive Intelligence in a generalized “hyper-competition” due to globalization and the increasing power of BRICs countries.6 Most of the Competitive Intelligence practices discussed in those books are inherited from the military. Many authors wrote about this military heritage that Competitive Intelligence has and that proves that we are talking about an on-going Economic War instead of simple competition between businesses. To see this heritage in the context of modern
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Harold Wilensky, Organizational Intelligence: Knowledge and Policy in Government and Industry (Basic Books, 1967, 1969) 4 http://en.wikipedia.org/wiki/Competitive_intelligence 5 Éric Delbecque & Gérard Pardini, Les politiques d’intelligence économiqe (PUF, 2008) 6 Éric Delbecque & Christian Harbulot, La guerre économique (PUF, 2011)

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China, Guillermaz’s 7 and Faligot’s 8 books give insights on the tight bound between companies and the military when it comes to intelligence capable of providing competitive advantages, closing gaps and knocking competitors out. Outside these sources, we could also look at official and governmental reports on Competitive Intelligence. For example, in France, officials started to publicly show interest for the topic in the early 1990s. 9 However, it will not be until the early 2000s that the government addresses the issue seriously: in 2000 two American companies, supposedly found by the CIA, tried to buy Gemplus, a French company and worldwide leader of chips encryption for sensitive uses. The tender offer will eventually fail and a French politician, Carayon, will grab the government’s attention on issues linked to Competitive Intelligence.10 In between, in 1997, Harbulot founded the first school in Europe to be dedicated to the topic: School of Economic War, Paris. In China, the process that led to an accrued interest in Competitive Intelligence was different. It started from two assessments: copy does not work (official assessment) and developed countries will not provide anything better than previous generation technologies because of the copy risk. Following these assessments and impelled by Professor Miao (缪其 浩), the Chinese practice of Competitive Intelligence will start and be stated in various reports. The 863 Program, State High-Tech Development Plan (863 计划, 国家高技术研究 发展计划)11 gave the base on which this practice could be built as it focused on developing technologies in 7+2 key fields. The TORCH Program (国家火炬计划项目)12 launched in

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Jacques Guillermaz, Une vie pour la Chine. Mémoires (1937-1993) (Robert Laffont, 1989, 1993) Roger Faligot, Les services secrets chinois, de Mao aux JO (Nouveau Monde Éditions, 2010) 9 Henri Martre, Intelligence économique et stratégie des entreprises (Commissariat Général du Plan, 1993) 10 Bernard Carayon, Intelligence économique, compétitivité et cohésion sociale (La Documentation française, 2003) 11 http://www.most.gov.cn/eng/programmes1/200610/t20061009_36225.htm 12 http://www.chinahightech.com/hj20nn11/ and http://baike.baidu.com/view/145637.htm

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1988 will increase this focus. On May 6, 1995, the Chinese Communist Party’s Central Committee and State Council “issued a decision to accelerate scientific and technological progress, proposing a strategy to rejuvenate China through science and education.” 13 The context created by these reports and decisions will provide a fertile soil for the practice of Competitive Intelligence in China. B. How Competitive Intelligence translates into companies’ life? 1. As a tool of Corporate Strategy Competitive Intelligence, in practice, stresses the importance of gathering and analysing data to turn them into information. That information might or not be useful to the management and might or not result into actions. Because of this nature, competitive intelligence is a tool to alert management of opportunities and threats on and from the external business environment. It is important to notice that this impact on corporate strategy is both short- and long-term. Thus, in a company, people who make direct use of Competitive Intelligence are most likely to be top managers, from the CEO to department directors. 2. As a part of the Corporate Culture However, Competitive Intelligence also is about being aware of the company’s environment. That is to say, to be aware of threats and opportunities from the outside of the company on a daily basis. On the threats side, it means that employees should be suspicious of any unusual behaviour, presence, fact, etc. As on the opportunities side, employees should maintain a good level of curiosity and interest for their area of business and their environment to be able to perceive the very first weak signals that announce an incoming opportunity. Hence, it is easy to understand that both behaviours, suspicion and curiosity, will affect the life of the company.
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http://www.chinadaily.com.cn/china/cpc2011/2011-05/10/content_12481667.htm

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II.

Economic War and Corporate Culture

A. Organizational Leadership 1. Where Economic War becomes a problem: advocating ethical behaviour Achua and Lussier define ethics as the standards of right and wrong that influence behaviour. 14 It “provides guidelines for judging conduct and decision making.” Most of leaders nowadays set high ethical standards for their organizations, thus for diverse reasons. Sometimes, it is just a matter of principle for the leader, especially when he or she has high ethical standards. In other cases, it purely is a communication strategy that the leader might follow or not in the actual life of the company. This situation is an issue within an organization: when the leader requires a given behaviour that he or she does not even follow, subordinates might start to feel uncomfortable within the company and performances of the company might suffer from this situation. They also might use this situation as an excuse to behave unethically themselves through diverse justifications explained in Chapter 2: 15 displacement of responsibility, diffusion of responsibility, advantageous comparison, etc. Competitive Intelligence is supposed to be ethical as opposed to industrial or commercial espionage. Yet, Competitive Intelligence is all about exploiting the grey matter of business to provide decisive information to the leaders of a company. Thus, crossing the line between that grey field and the black area of espionage and illegality is a small step. Competitive Intelligence practitioners have been discussing the topic of ethics for a long time. Major works on this issue were published through the Strategic and Competitive Intelligence Professionals. 16 The debate is still open but the bottom-line is to advocate law-abiding practices within the company in order to limit unethical behaviours.

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Christopher Achua & Robert Lussier, Effective Leadership (Fourth edition) (CENGAGE Learning, 2010; chapter 2 and 10) 15 Ibidem, page 52-53 16 Dale Fehringer & Bonnie Hohhof, Competitive Intelligence Ethics: Navigating the Gray Zone (CIF)

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2. Where Economic War benefits: crisis leadership “A crisis can strike any organization without warning. A crisis, by its very nature is an event that could not be predicted or anticipated [entirely] prior its occurrence.”17 “It is a lowprobability, high-impact event that threatens the viability of the organization and is characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be made swiftly.”18 An important aspect of the Competitive Intelligence mind-set and practice is to be aware of one’s environment in order to spot threats and opportunities early on. This practice, for the threats part, implies watchfulness and planning to be able to face threats, to be able to face crisis. Thus, and generally speaking, Competitive Intelligence practitioners perform well when it comes to crisis management. They become an asset for the company in such situations. This is why a company with a strong Competitive Intelligence culture will be more able to face crisis, will be more resilient. B. Team Leadership 1. Communication and Economic War Communication and Competitive Intelligence do not always get along. To Competitive Intelligence practitioners, information is the blood of the company; it is what makes the difference between gaining market shares and losing them. Thus, they generally do not want to share this information, not even within the company itself under certain circumstances. For example, in the CI practice, it is rather common to see practitioners who advocate the necessity for the top management of communicating as little as possible about the corporate strategy to subordinates. At the same time, communication within the company is critical to
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Christopher Achua & Robert Lussier, Effective Leadership (Fourth edition) (CENGAGE Learning, 2010; page 401) 18 Abraham Carmeli & John Schaubroeck, Organizational Crisis-Preparedness: The Importance of Learning from Failures (Long Range Planning, 2008)

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the company’s success. Hence, the question is “how to have good CI practices without damaging the life of the company?” Examples from the military might help to deal with this issue. Indeed, the military often face a very similar issue: protecting national secrets while insuring effective communication within the army for it to be efficient on the field. The key for the marriage of these two opposite goals is clustering and categorising; assign levels of sensitiveness to the information and determine who within the company can view what kind, what level of documents. At the same time, implementing too much of this strategy could be counter-productive for it will create too much inertia: the more the levels of safety the more complicated and long the communication process will be. With a long and complicated communication process will come unclear messages and misunderstandings that could be fatal to the company. Hence, when setting this kind of practices within the company, it is necessary to keep in mind that this should be done only within reasonable limits, limits that will most likely depend on the size and nature of the organization. 2. Dealing with teams without compromising the company Whether it is due to the society a company exists in, a communication strategy or a true corporate strategy, more and more companies advocate diversity within teams. Obstacles to true diversity already are numerous: difficult common heritage between French and Algerians, Caucasian-Americans and African-Americans or Chinese and Japanese; cultural heritage that makes people less open to other nationals; etc. Diversity at the workplace has become a necessity for bringing people from different background and heritage brings people with different mind-set and point of view on issues. Thus, companies that manage diversity properly can enjoy better problem solving and analysis capability from their teams.

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However, Competitive Intelligence, for it stresses the importance of being aware of one’s environment, might strengthen some of the typical obstacles to diversity. Indeed, CI practitioners pay tremendous attention to recent development in industrial and commercial espionage. In the 1950s, American engineering companies would be careful when working with French engineers who were trying to get technologies to rebuild France. In the 1980s, developed economies were scared of Japanese engineers who were following the same goal for their nation. Since the late 1990s, early 2000s, the world now faces the same risk from Chinese engineers and students. At the same time, Chinese engineers and students are a resource that companies are looking for as they have a very different cultural background and heritage, and usually are cheaper to hire than equivalent profiles from developed countries. Therefore, the question nowadays is “how to integrate Chinese profiles in teams where the CI culture is strong without compromising the added-value of diversity?” Probably the best way to avoid suspicion and excess control from team members on other team members would be through technology: built-in security managed by the technology or information department of the company would not only be more efficient and legitimate but also less invasive on a daily basis. At the same time, it would allow team members to focus on their tasks and grasp as much value as possible from their diversity while pursuing minimum watchfulness on a daily basis. C. Impact on individuals 1. Impact on the Leader-Follower link As discussed earlier, Competitive Intelligence practices can have an impact on ethical behaviour, ability to manage crisis, communication or living with diversity. When it comes to ethical behaviour, it seems that the leader has an important role to advocate such ethical behaviour within the team or the company. Nevertheless, as defined earlier, CI practices

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evolve into the grey field of information and there is only a very little step to the black field or illegality. It can be very tempting for a CI practitioner leader to cross the line in order to get extremely competitive and decisive information. However, such behaviour, if disclosed, could damage the image of the company and would actually damage the leader-follower link before that: a leader who advocates ethical behaviour but then pushes other to cross the line would not be “walking the talk”. Such a situation would weaken his leadership, thus decreasing the effectiveness of his team or organization. The main solution to avoid this situation for the company is to use the law: employment contracts should mention clearly the consequences of crossing the line and severe sanctions should be designed to further demotivate leaders from going illegal. 2. Influencing: when Economic War can be used by individuals within the company Another cluster of the Competitive Intelligence practice is influence and counterinfluence. Influence tactics in CI aims at building positive image for the company whereas counter-influence aims at either countering negative influence from competitors or actually spreading negative influence on competitors. A common example of competing companies making extensive use of these influence and counter-influence tactics is Airbus and Boeing. This is another very sensitive CI practice where the line between legal and illegal can be crossed easily. At the scale of the company, solutions equivalent to those retain in the leaderfollower link case are the best way to limit the eventuality of an incident. However, these corporate influence and counter-influence tactics can be easily transposed to the scale of an individual. The individual would then use these tactics for his own good within the company, i.e. career progress, but also for others bad as he or she could use counter-influence tactics to repudiate subordinates, colleagues or superiors that might
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have become obstacles to his or her career path. If in some situation such tactics would be easily spotted as for certain forms of harassment, it might not always be that easy, especially for the non-CI practitioners. Therefore, rather than trying to monitor humans interactions within teams and the company, which would be expensive, time and resource consuming, and most likely inefficient, a good solution would be to have a real CI culture within the company where every single individual is trained to the tools and tactics of CI. In such a situation, influence and counter-influence tactics would be more difficult to use at an individual level, as it would be spotted by other individuals within the company. III. Conclusion

A. Analytical Summary Competitive Intelligence is an ancient practice that evolve to a set of tool to lead an ongoing economic war between companies and nations. The mind-set necessary for good practice of Competitive Intelligence affects both corporate strategy and culture. Due to its very nature and its impact on the corporate culture, Competitive Intelligence will affect the life of an organization at different levels: teams and individuals. If the CI mind-set can be a strength when dealt properly with, it can also become dangerous for the company that does not pay enough attention to its implementation. At the team level, Competitive Intelligence might affect communication and integration of people from the diversity mix. Indeed, because of its nature and heritage, CI practices may advocate certain secrecy that would be incompatible with the communication need of the team or the company. Because CI stresses the risk of industrial and commercial espionage, and advocates a permanent alert level from the members of an organisation towards recent issue of espionage, this might cause some trouble to integrate people coming from sensitive countries at the time of the practice, i.e. China nowadays.

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At the individual level, Competitive Intelligence, for the tools it gives to its practitioners, might create new issues within the companies. For example, a leader might be willing to cross the line of legality to get sensitive information that will benefit the company and his or her career path. Another individual could use influence and counter-influence tactics for their own benefits as well. All these issues, and many others, are raised by the practice of Competitive Intelligence. However, CI has now become a decisive tool for organisations and they cannot work without it anymore. Thus, leaders need to find solution to implement CI with minimum negative impact to their organisation. B. Recommendations The legal environment is the strongest barrier to illegal Competitive Intelligence practices. Organizations have to use all legal tools to prevent individuals from crossing the line. In addition, severe corporate sanctions towards individuals who cross or try to cross the line should be implemented to further deter members of the organization to go illegal. Nowadays, technology can be more than helpful too. Technology often provide a surveillance that is more efficient and permanent than that of human beings. Furthermore, it transfer the surveillance act from each individual within the team to the technology department of the organization. This limit the risks of individuals watching on each other too much and creating a bad working atmosphere. However, the use of technology will not eliminate the necessity of individual awareness and watchfulness. Last but not least, it is important to have members of the organization equals in front of Competitive Intelligence to avoid rogue practitioners using CI tools for their own benefit and the harm of others.

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