Description
Business Intelligence in Japan and Sweden Lessons for the US
44
BUSINESS INTELLIGENCE
Business Intelligence in
Japan and Sweden:
Lessons for the US
Jan P. Herring
usiness intelligence (BI) activities
have increased significantly in the
US over the past five years-but
mainly at the practitioner's level. For
various reasons, senior managers in US
companies have not adopted intelligence
as a strategic management discipline. As
a direct result, the use and effectiveness
of BI operations in US firms remain
questionable. Until senior executives
become more interested and involved in
the use of BI, the competitiveness of US
companies will be limited by their in-
ability to understand and outthink
global competitors.
In contrast, BI activities in a number
of foreign countries are more developed
and effective, particularly the gathering
of competitor intelligence and its use by
multinational companies. Consider both
Japan and Sweden:
Jan P Herring is rice-
president of business in-
telligence and strateg, at
The Futures Group, Inc.,
an international research
and management consult-
ing firm in Glastonbur),
Connecticut. He is a pro-
fessional intelligence of-
ficer with 20 years of
government service in the
CIA and a pioneer in the
development of business
intelligence systems in the
private sector.
C Japanese BI capabilities are well-
developed within companies, benefiting
both the companies and government
programs, which in turn support their
international competition.
D Sweden's activities are more subtle
but comprehensive, ranging from univer-
sity education to well-developed cor-
porate BI programs that are supported
by a worldwide collection network set
up by the country's international banks
and government efforts at both the na-
tional level and by embassies abroad.
Swedish companies' senior manage-
ment appear to be more like their US
counterparts, in that they have been
reluctant participants in their com-
panies' BI operations; Japanese man-
agers, however, become part of the pro-
cess almost effortlessly, due to the
nature of their companies' consensus-
building process. As a result, Japanese
companies make greater use of intelli-
gence at all levels and in all business
functions throughout the company (e.g.,
sales, product design, strategizing, and
decision making).
This column provides a brief look at
the composition and focus of these two
countries' BI efforts. What follows is an
examination of how the BI effort in
each country has arrived at its current
level and the role played by government
and industry leaders in achieving this
level of implementation. In addition, the
column examines how these countries
have learned to apply intelligence in the
business sector.
Sweden: A World Leader in
Developing BI Capabilities
Contemporary BI activities in Sweden
trace their roots to the Wallenberg bank-
ing enterprise at the beginning of the
century. Marcus Wallenberg hired
22-year-old Rolf Jollin and assigned him
to secretly gather information about the
bank's prospective customers and vari-
ous business enterprises. In 1903,
THE JOL'R4L OF BLSI\ESS STRATE(Ali1arch/April 1992
BUSINESS INTELLIGENCE
Wallenberg sent him to the Cr&dit Lyon-
naise Banque in Paris to learn how the
French bank had developed and used its
BI department.
Cr&dit Lyonnaise had close relation-
ships with French government intelli-
gence, and Wallenberg believed that such
professional underpinnings would be
valuable to the development of an effec-
tive intelligence program for his bank.
Wallenberg's "intelligence officer"
learned from this training and subse-
quently established a very effective pro-
gram for gathering intelligence about
prospective and existing customers and
business activities. Wallenberg was well
aware of the security factors involved in
such an activity and called the operation
the "Statistical Department" so as not
to raise suspicions.
Today, the Swedish banking commu-
nity is still the recognized leader in that
country's development and application
of BI. During the late 1970s, the bank-
ing community took an innovative step
by organizing a BI research company
called Upplysnigs Centralen (UC Re-
search). The firm, which is supported by
all major banks, is the equivalent of a
combined Standard & Poor's and the
TRW credit service. UC Research pro-
vides fee-based BI services for banks
and their major customers, including
data base services consisting of public
and published information on compa-
nies and individuals; proactive intelli-
gence gathering, using the participating
banks' overseas offices to answer
specific and time-urgent requests; and
the use of some 3,000 business agents
around the world who can be tapped
for specific.expertise or information.
Government influence in BI activities
receives strong support; Swedish em-
bassies abroad often provide direct in-
telligence support to Swedish companies.
Government emphasis on intelligence for
business became apparent during the
mid-1970s when government intelligence
operations began to emphasize economic
and technological coverage, representing
some 60%o of the government's overall
intelligence activities. The Swedish State
Police and the Swedish Employees Asso-
ciation both show strong support for BI
activities, providing advice and educa-
tion on related subjects, including com-
pany security practices. A number of
local consulting firms, as well as the
consulting divisions of major firms, of-
fer BI-related services and advice to
Swedish companies.
A key to the advanced state of BI in
Sweden is the support it receives from
leading universities such as the Stock-
holm School of Economics and the Uni-
versity of Lund, where full-time courses
in BI are regularly taught. The Stock-
holm School of Economics is soon ex-
pected to graduate the world's first
Ph.D. candidates in the field of BI.
The strong educational base for
Swedish BI can be attributed to a single
individual, Professor Stevan Dedijer,
who found his way to Sweden from
Yugoslavia through the US. He served in
World War II as an OSS officer and
afterwards as a scientific and intelligence
adviser to a number of developing coun-
tries. Having worked with several intelli-
gence services, as well as seeing the need
that developing countries had for eco-
nomic intelligence, Dedijer recognized
the contribution that an organized intel-
ligence effort could make to any eco-
nomic enterprise, whether it was a coun-
try or a company.
Dedijer began teaching (and preach-
ing) BI at the University of Lund during
the early 1970s. He attracted a small
following of ex-Swedish intelligence of-
ficers and business leaders, including
one ex-Wallenberg Bank executive. Over
the past 20 years, Dedijer has created
not only a body of educational knowl-
edge concerning intelligence and its ap-
plication in the business world but has
produced hundreds of well-trained intel-
ligence officers for the Swedish business
community.
Today, more than 500 Swedish firms
in the banking, insurance, electronics,
furniture, automotive, and defense in-
dustries actively engage in BI activities.
313
THE JOURNAL OF BUSINESS STRATEGY March/April 1992
66A key to
the adanced
state of BI in
Sweden is
the support it
receives from
leading
universities,
where full-
time courses
in BI are
regularly
taught. 9
45
BUSINESS INTELLIGENCE
At least 50 of Sweden's major compa-
nies, including L.M. Ericsson, Volvo,
and ABB, have world-class BI organiza-
tions, often headed by one of Dedijer's
graduates. These individuals run well-
integrated intelligence departments with
intelligence collection and analysis
closely linked to corporate planning and
operations. Companies make effective
use of their own employees for intelli-
gence collection and supplement this in-
formation with externally acquired intel-
ligence using consulting firms, Swedish
diplomats, and their banks' overseas
foreign offices.
As well-developed as BI is in Sweden,
Dedijer and a number of the company
BI directors have lamented the fact that
although senior executives appear to ap-
preciate the value of intelligence, they
do not always use it themselves as effec-
tively or aggressively as they should.
Outlook: Over the next several years,
particularly as Sweden becomes an ac-
tive participant of the new Common
Market, more Swedish companies will
establish formal Bl systems. Executive
management education programs will be
developed to overcome older manage-
ment's reluctance to use BI; over time,
more of the younger managers already
trained will fully embrace BI as a con-
temporary management discipline.
Swedish firms can be expected to in-
crease their use of B1 as the means of
gaining competitive advantage in foreign
markets, particularly the US, the Euro-
pean Community, and Japan.
Japan: The World Leader
in Practicing BI
The Japanese have a well-earned reputa-
tion for being world leaders in the busi-
nesses in which they compete. Their
business strengths are equally matched
by the ability to gather and use BI, in-
cluding competitor, customer, market,
and technological intelligence.
From outsmarting their competitors on
international bids to devising superior
competitive strategies to identifying and
sourcing foreign technology for their
next-generation products, Japanese com-
panies effectively use BI as a means of
gaining competitive advantage over their
rivals. Much of this advantage is due to
the ability to collect-but not necessarily
analyze-and use BI in a timely and ef-
fective manner companywide.
bToday, almost all
Japanese companies
involved in
international
business and trade
have their own
intelligence unit. 99
I N
Ironically, as the amount of accessible
international business information has
grown almost exponentially over the
past 30 years, Japanese companies and
their government have continuously
sought new ways to manage the infor-
mation glut to sort out those key pieces
of competitive and business intelligence.
Initially, this took place through
government-sponsored foreign informa-
tion programs and continued with elec-
tronic data bases and information pro-
cessing systems. Currently, however,
many Japanese companies feel they are
losing the battle to manage and use the
ever-increasing amount of publicly avail-
able information generated by almost
every country in the world.
This has led a number of Japanese
business leaders to believe they need to
find a more organized and systematic
way of managing the BI process. This,
in turn, has led Japanese companies to
reach out to the American Society of
Competitive Intelligence Professionals
(SCIP) for both new ideas and as a
stimulant for the development of more
314
THL JOt RNAI OF Bl SILS, STRATEGI March'April 1992
46
BUSINESS INTELLIGENCE
modern and powerful BI systems for
Japanese firms.
Japanese companies' current BI prac-
tices have largely been developed since
World War II, when the government
recognized that Western technology
would be needed to modernize its badly
damaged industrial base. During the late
1950s, the government established two
principal organizations to support the
development of Japanese BI. In 1957, it
created a joint venture, identified as the
Scientific Information Center (SIC), to
gather and disseminate information
about Western industrial technology to
Japan's private sector. Subsequently, the
Ministry of International Trade and In-
dustry (MITI) established the Japan Ex-
ternal Trade Organization (JETRO) for
the purpose of promoting Japanese ex-
ports. JETRO was given the added re-
sponsibility of collecting and dissemi-
nating foreign business information to
Japanese firms. That mission included
the responsibility for providing world-
wide intelligence on how other nations
run their businesses and economies.
Initially, because the firms had no
foreign presence and little hard currency,
much of the foreign business information
was gathered by the government, with
organizations such as the SIC providing
the means for broadly disseminating
that information throughout various
Japanese industries. The dissemination
of foreign business and technical infor-
mation by the government caused many
Japanese companies to set up their own
intelligence departments to fully exploit
this data.
By the early 1960s, essentially all large
Japanese multinational companies had
created their own dedicated intelligence
units. A survey conducted in 1963 by
MITI identified the most effective for-
eign intelligence collection mechanisms,
ranging from the stationing of employ-
ees abroad as "listening" posts to the
use of both domestic and foreign con-
sulting services, including the use of
their related trading firms for proactive
intelligence collection.
It was during this period that a
school, The Institute for Industrial Pro-
tection, was established by Tokyo to
train intelligence agents and security of-
ficers for Japanese corporations. The
school was headed by a former Japanese
ambassador; it included a nine-person
staff and a number of experienced intel-
ligence officers. Among the first 50
students at the school were some prom-
ising executives in their late 20s, who,
over the four-month course, were taught
a wide range of intelligence collection,
analysis, and security techniques.
Today, almost all Japanese companies
involved in international business and
trade have their own intelligence unit.
Typically, it is located in the planning or
research departments. Some 10 to 20
employees are assigned these respon-
sibilities within company headquarters,
but the responsibility for intelligence
gathering is companywide, with almost
every employee participating (from the
president to the sales force). Intelligence
collection and dissemination is a well-
developed process at most Japanese
firms. However, it is the ability-almost
culturally inherent-for sharing intelli-
gence that makes the use of BI in Japa-
nese companies so effective.
Some of the larger companies, such
as Mitsubishi Corporation and Nomura
Securities, have established more com-
prehensive intelligence' activities in the
form of think tanks, whose primary
purpose is to study the total business
environment in which the companies
operate. These think tanks also sell their
services to other companies, in addition
to producing intelligence for themselves
and, sometimes, for the Japanese
government.
Most Japanese firms are part of a
larger group called the Keiretsu, a fam-
ily of mainly noncompeting companies
whose various business functions cover
The Japanese vord for intelligence, joho, has a broad
meaning. including the collection and use of information for
specific purposes. It is used b) the Ministr) of Foreign Affairs
lo identify its Intelligence Bureau and b) trading companies to
denote their international research departments
31THE JO AL STRATEG Mrch/Apl 1992
THE JOURNAL OF BUSINESS STRATEGI March/April 1992
47
BUSINESS INTELLIGENCE
banking, insurance, manufacturing,
transportation, and sales and trading.
Intelligence gathered by the various
members is traditionally shared with the
trading company for broader use by all;
the member bank often provides some
of the more valuable intelligence.
Japanese trading companies' reputa-
tion for operating worldwide intelligence
networks is well deserved. Mitsui Cor-
poration's trading company is reputed to
have had such an excellent global intelli-
gence network before World War II that
it was used by the government for mili-
tary purposes. These trading companies
have hundreds of offices abroad, often
with thousands of employees. Their
basic mission is to gather competitive
and market intelligence on an ongoing
basis and send it back to the Tokyo
headquarter's intelligence clearinghouse.
Today, Japanese trading companies
are more sensitive than ever to the im-
portance of global information, and
some have stated that their goal for the
21st century is to become "globally inte-
grated information corporations." This
future vision does not diverge much
from their past: Mitsui Corporation's
motto is "Information is the lifeblood
of the company."
6Mitsui's motto is
'Information is the
l(feblood of the
company.' 99
The collection and use of BI by Japa-
nese firms is world-class. However, the
analysis of the intelligence has been less
developed and effective. Their ability to
often collect the answer to an intelli-
gence problem, such as their competi-
tor's strategy or a description of the
competitor's future product, has resulted
in less emphasis being placed on the
development of more creative intelli-
gence assessment skills and techniques.
In fact, because so much intelligence
can be collected directly, it has led to
problems where Japanese companies
have been tempted-as in the Hitachi-
IBM industrial espionage case-to col-
lect a competitor's proprietary informa-
tion. This situation, however, is much
more prevalent in Japan, as the recent
Komatsu industrial spy scandal has
revealed.
As competitor intelligence becomes
more difficult to collect and as the
amount of information that is publicly
available grows through electronic data
bases and public disclosure, the weak-
nesses in Japanese firms' intelligence
analysis techniques are becoming more
evident. The types of analysis that
Japanese companies have concentrated
on in the past have been mainly the ex-
amination and organization of large
amounts of data to discern competitor
trends and business strategies. However,
in view of the increasing amounts of in-
formation and the complexity of avail-
able data, Japanese firms will have to
place greater emphasis on more sophis-
ticated intelligence analysis to reduce the
large amounts of collected information
and derive useful insights.
Japanese firms believe that although
they have had an intelligence advantage
over their foreign competitors in the
past, they are currently falling behind,
particularly in the areas of organized B1
systems. They perceive that the US ef-
fort to organize competitive intelligence
professionals (i.e., SCIP) is providing
American companies with enhanced in-
telligence collection and analysis capa-
bilities. This, in turn, has resulted in a
major effort on the part of a number of
Japanese business leaders and company
officials, led by a major Japanese
trading firm, to enlist the assistance of
SCIP in organizing and developing the
competitive intelligence profession in
Japan.
Outlook: The Japanese are very good
at acquiring, assimilating, and improv-
ing upon foreign business practices, as
316
THE JOURNAL OF BUSINESS STRATEGI March/April 1992
48
BUSINESS INTELLIGENCE
their successful adaptation of American
quality control theory proves. They will
effectively adopt US BI methods and
techniques to enhance their companies'
overall competitiveness-probably
sooner than most American companies.
Lessons for US Management
The Swedish and Japanese efforts to
create modern BI capabilities for their
companies evolved through two entirely
different processes. However, in both
cases, the results have generally been the
same: Transnational companies system-
atically gathering BI on a global basis,
using both employees and external
sources of intelligence to create the
knowledge-based advantage needed by
their companies to outthink and out-
perform the competition.
US business leaders and government
officials should learn three basic lessons
from these best-in-class country
examples:
1. American companies, particularly
their senior managers, need to examine
their contemporary need for BI and
their current capabilities to produce it
themselves. Unfortunately, few com-
panies have dedicated the resources or
created the necessary organizational
capability to produce the kind of BI
needed to compete in today's global
business environment. Company execu-
tives will have to take the lead to see
that their firms develop the appropriate
capabilities and skills.
2. US companies and government
agencies need to work together to create
the BI capabilities that firms need to
compete in today's global marketplace.
The government can provide timely and
cogent business information on foreign
developments that affect industrial
structures and markets; scientific and
technical intelligence that have both
government and business interest; and
developments in foreign government
policies and regulatory processes that af-
fect US corporations' ability to compete.
All this can be done legally and ethi-
cally. With some organized effort on the
part of the federal government, it can
be provided equitably to all interested
US firms. Government is capable of
providing support, but the private sector
will have to ask for it-otherwise the
administration and Congress will not
address the issue directly, fearing that
each would accuse the other of interfer-
ing in the free market.
3. Finally, from the Swedish experi-
ence, professional education is necessary
for both managers and practitioners.
Unfortunately, US universities and busi-
ness schools currently are unprepared to
provide it. Lester Thurow, Dean of the
Massachusetts Institute of Technology's
Sloan School of Management, has la-
mented, "It should be noted that there
are virtually no courses in business in-
telligence at American business schools.
Sadly, that includes MIT." At present,
there are only two or three full-time
courses on the subject of competitive in-
telligence being offered at American
universities.
Finally, US companies will probably
have to carry the brunt of the effort
themselves. The federal government has
been hesitant to take the lead. And uni-
versities, particularly business schools,
are not known for being leaders in new
business practices.
Therefore, unless business leaders take
the initiative, in 2000 we will be talking
about how, during the early 1990s,
American corporations missed the op-
portunity to adapt modern BI practices
to their international business activities,
just like they missed Deming's message
on statistical quality control during the
early 1960s. Of greater concern, it is all
too likely that the result will be the
same: US companies being outsmarted
in the marketplace as a result of foreign
competition using an American-devel-
oped business discipline more effectively
than they have. t
317
49
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Business Intelligence in Japan and Sweden Lessons for the US
44
BUSINESS INTELLIGENCE
Business Intelligence in
Japan and Sweden:
Lessons for the US
Jan P. Herring
usiness intelligence (BI) activities
have increased significantly in the
US over the past five years-but
mainly at the practitioner's level. For
various reasons, senior managers in US
companies have not adopted intelligence
as a strategic management discipline. As
a direct result, the use and effectiveness
of BI operations in US firms remain
questionable. Until senior executives
become more interested and involved in
the use of BI, the competitiveness of US
companies will be limited by their in-
ability to understand and outthink
global competitors.
In contrast, BI activities in a number
of foreign countries are more developed
and effective, particularly the gathering
of competitor intelligence and its use by
multinational companies. Consider both
Japan and Sweden:
Jan P Herring is rice-
president of business in-
telligence and strateg, at
The Futures Group, Inc.,
an international research
and management consult-
ing firm in Glastonbur),
Connecticut. He is a pro-
fessional intelligence of-
ficer with 20 years of
government service in the
CIA and a pioneer in the
development of business
intelligence systems in the
private sector.
C Japanese BI capabilities are well-
developed within companies, benefiting
both the companies and government
programs, which in turn support their
international competition.
D Sweden's activities are more subtle
but comprehensive, ranging from univer-
sity education to well-developed cor-
porate BI programs that are supported
by a worldwide collection network set
up by the country's international banks
and government efforts at both the na-
tional level and by embassies abroad.
Swedish companies' senior manage-
ment appear to be more like their US
counterparts, in that they have been
reluctant participants in their com-
panies' BI operations; Japanese man-
agers, however, become part of the pro-
cess almost effortlessly, due to the
nature of their companies' consensus-
building process. As a result, Japanese
companies make greater use of intelli-
gence at all levels and in all business
functions throughout the company (e.g.,
sales, product design, strategizing, and
decision making).
This column provides a brief look at
the composition and focus of these two
countries' BI efforts. What follows is an
examination of how the BI effort in
each country has arrived at its current
level and the role played by government
and industry leaders in achieving this
level of implementation. In addition, the
column examines how these countries
have learned to apply intelligence in the
business sector.
Sweden: A World Leader in
Developing BI Capabilities
Contemporary BI activities in Sweden
trace their roots to the Wallenberg bank-
ing enterprise at the beginning of the
century. Marcus Wallenberg hired
22-year-old Rolf Jollin and assigned him
to secretly gather information about the
bank's prospective customers and vari-
ous business enterprises. In 1903,
THE JOL'R4L OF BLSI\ESS STRATE(Ali1arch/April 1992
BUSINESS INTELLIGENCE
Wallenberg sent him to the Cr&dit Lyon-
naise Banque in Paris to learn how the
French bank had developed and used its
BI department.
Cr&dit Lyonnaise had close relation-
ships with French government intelli-
gence, and Wallenberg believed that such
professional underpinnings would be
valuable to the development of an effec-
tive intelligence program for his bank.
Wallenberg's "intelligence officer"
learned from this training and subse-
quently established a very effective pro-
gram for gathering intelligence about
prospective and existing customers and
business activities. Wallenberg was well
aware of the security factors involved in
such an activity and called the operation
the "Statistical Department" so as not
to raise suspicions.
Today, the Swedish banking commu-
nity is still the recognized leader in that
country's development and application
of BI. During the late 1970s, the bank-
ing community took an innovative step
by organizing a BI research company
called Upplysnigs Centralen (UC Re-
search). The firm, which is supported by
all major banks, is the equivalent of a
combined Standard & Poor's and the
TRW credit service. UC Research pro-
vides fee-based BI services for banks
and their major customers, including
data base services consisting of public
and published information on compa-
nies and individuals; proactive intelli-
gence gathering, using the participating
banks' overseas offices to answer
specific and time-urgent requests; and
the use of some 3,000 business agents
around the world who can be tapped
for specific.expertise or information.
Government influence in BI activities
receives strong support; Swedish em-
bassies abroad often provide direct in-
telligence support to Swedish companies.
Government emphasis on intelligence for
business became apparent during the
mid-1970s when government intelligence
operations began to emphasize economic
and technological coverage, representing
some 60%o of the government's overall
intelligence activities. The Swedish State
Police and the Swedish Employees Asso-
ciation both show strong support for BI
activities, providing advice and educa-
tion on related subjects, including com-
pany security practices. A number of
local consulting firms, as well as the
consulting divisions of major firms, of-
fer BI-related services and advice to
Swedish companies.
A key to the advanced state of BI in
Sweden is the support it receives from
leading universities such as the Stock-
holm School of Economics and the Uni-
versity of Lund, where full-time courses
in BI are regularly taught. The Stock-
holm School of Economics is soon ex-
pected to graduate the world's first
Ph.D. candidates in the field of BI.
The strong educational base for
Swedish BI can be attributed to a single
individual, Professor Stevan Dedijer,
who found his way to Sweden from
Yugoslavia through the US. He served in
World War II as an OSS officer and
afterwards as a scientific and intelligence
adviser to a number of developing coun-
tries. Having worked with several intelli-
gence services, as well as seeing the need
that developing countries had for eco-
nomic intelligence, Dedijer recognized
the contribution that an organized intel-
ligence effort could make to any eco-
nomic enterprise, whether it was a coun-
try or a company.
Dedijer began teaching (and preach-
ing) BI at the University of Lund during
the early 1970s. He attracted a small
following of ex-Swedish intelligence of-
ficers and business leaders, including
one ex-Wallenberg Bank executive. Over
the past 20 years, Dedijer has created
not only a body of educational knowl-
edge concerning intelligence and its ap-
plication in the business world but has
produced hundreds of well-trained intel-
ligence officers for the Swedish business
community.
Today, more than 500 Swedish firms
in the banking, insurance, electronics,
furniture, automotive, and defense in-
dustries actively engage in BI activities.
313
THE JOURNAL OF BUSINESS STRATEGY March/April 1992
66A key to
the adanced
state of BI in
Sweden is
the support it
receives from
leading
universities,
where full-
time courses
in BI are
regularly
taught. 9
45
BUSINESS INTELLIGENCE
At least 50 of Sweden's major compa-
nies, including L.M. Ericsson, Volvo,
and ABB, have world-class BI organiza-
tions, often headed by one of Dedijer's
graduates. These individuals run well-
integrated intelligence departments with
intelligence collection and analysis
closely linked to corporate planning and
operations. Companies make effective
use of their own employees for intelli-
gence collection and supplement this in-
formation with externally acquired intel-
ligence using consulting firms, Swedish
diplomats, and their banks' overseas
foreign offices.
As well-developed as BI is in Sweden,
Dedijer and a number of the company
BI directors have lamented the fact that
although senior executives appear to ap-
preciate the value of intelligence, they
do not always use it themselves as effec-
tively or aggressively as they should.
Outlook: Over the next several years,
particularly as Sweden becomes an ac-
tive participant of the new Common
Market, more Swedish companies will
establish formal Bl systems. Executive
management education programs will be
developed to overcome older manage-
ment's reluctance to use BI; over time,
more of the younger managers already
trained will fully embrace BI as a con-
temporary management discipline.
Swedish firms can be expected to in-
crease their use of B1 as the means of
gaining competitive advantage in foreign
markets, particularly the US, the Euro-
pean Community, and Japan.
Japan: The World Leader
in Practicing BI
The Japanese have a well-earned reputa-
tion for being world leaders in the busi-
nesses in which they compete. Their
business strengths are equally matched
by the ability to gather and use BI, in-
cluding competitor, customer, market,
and technological intelligence.
From outsmarting their competitors on
international bids to devising superior
competitive strategies to identifying and
sourcing foreign technology for their
next-generation products, Japanese com-
panies effectively use BI as a means of
gaining competitive advantage over their
rivals. Much of this advantage is due to
the ability to collect-but not necessarily
analyze-and use BI in a timely and ef-
fective manner companywide.
bToday, almost all
Japanese companies
involved in
international
business and trade
have their own
intelligence unit. 99
I N
Ironically, as the amount of accessible
international business information has
grown almost exponentially over the
past 30 years, Japanese companies and
their government have continuously
sought new ways to manage the infor-
mation glut to sort out those key pieces
of competitive and business intelligence.
Initially, this took place through
government-sponsored foreign informa-
tion programs and continued with elec-
tronic data bases and information pro-
cessing systems. Currently, however,
many Japanese companies feel they are
losing the battle to manage and use the
ever-increasing amount of publicly avail-
able information generated by almost
every country in the world.
This has led a number of Japanese
business leaders to believe they need to
find a more organized and systematic
way of managing the BI process. This,
in turn, has led Japanese companies to
reach out to the American Society of
Competitive Intelligence Professionals
(SCIP) for both new ideas and as a
stimulant for the development of more
314
THL JOt RNAI OF Bl SILS, STRATEGI March'April 1992
46
BUSINESS INTELLIGENCE
modern and powerful BI systems for
Japanese firms.
Japanese companies' current BI prac-
tices have largely been developed since
World War II, when the government
recognized that Western technology
would be needed to modernize its badly
damaged industrial base. During the late
1950s, the government established two
principal organizations to support the
development of Japanese BI. In 1957, it
created a joint venture, identified as the
Scientific Information Center (SIC), to
gather and disseminate information
about Western industrial technology to
Japan's private sector. Subsequently, the
Ministry of International Trade and In-
dustry (MITI) established the Japan Ex-
ternal Trade Organization (JETRO) for
the purpose of promoting Japanese ex-
ports. JETRO was given the added re-
sponsibility of collecting and dissemi-
nating foreign business information to
Japanese firms. That mission included
the responsibility for providing world-
wide intelligence on how other nations
run their businesses and economies.
Initially, because the firms had no
foreign presence and little hard currency,
much of the foreign business information
was gathered by the government, with
organizations such as the SIC providing
the means for broadly disseminating
that information throughout various
Japanese industries. The dissemination
of foreign business and technical infor-
mation by the government caused many
Japanese companies to set up their own
intelligence departments to fully exploit
this data.
By the early 1960s, essentially all large
Japanese multinational companies had
created their own dedicated intelligence
units. A survey conducted in 1963 by
MITI identified the most effective for-
eign intelligence collection mechanisms,
ranging from the stationing of employ-
ees abroad as "listening" posts to the
use of both domestic and foreign con-
sulting services, including the use of
their related trading firms for proactive
intelligence collection.
It was during this period that a
school, The Institute for Industrial Pro-
tection, was established by Tokyo to
train intelligence agents and security of-
ficers for Japanese corporations. The
school was headed by a former Japanese
ambassador; it included a nine-person
staff and a number of experienced intel-
ligence officers. Among the first 50
students at the school were some prom-
ising executives in their late 20s, who,
over the four-month course, were taught
a wide range of intelligence collection,
analysis, and security techniques.
Today, almost all Japanese companies
involved in international business and
trade have their own intelligence unit.
Typically, it is located in the planning or
research departments. Some 10 to 20
employees are assigned these respon-
sibilities within company headquarters,
but the responsibility for intelligence
gathering is companywide, with almost
every employee participating (from the
president to the sales force). Intelligence
collection and dissemination is a well-
developed process at most Japanese
firms. However, it is the ability-almost
culturally inherent-for sharing intelli-
gence that makes the use of BI in Japa-
nese companies so effective.
Some of the larger companies, such
as Mitsubishi Corporation and Nomura
Securities, have established more com-
prehensive intelligence' activities in the
form of think tanks, whose primary
purpose is to study the total business
environment in which the companies
operate. These think tanks also sell their
services to other companies, in addition
to producing intelligence for themselves
and, sometimes, for the Japanese
government.
Most Japanese firms are part of a
larger group called the Keiretsu, a fam-
ily of mainly noncompeting companies
whose various business functions cover
The Japanese vord for intelligence, joho, has a broad
meaning. including the collection and use of information for
specific purposes. It is used b) the Ministr) of Foreign Affairs
lo identify its Intelligence Bureau and b) trading companies to
denote their international research departments
31THE JO AL STRATEG Mrch/Apl 1992
THE JOURNAL OF BUSINESS STRATEGI March/April 1992
47
BUSINESS INTELLIGENCE
banking, insurance, manufacturing,
transportation, and sales and trading.
Intelligence gathered by the various
members is traditionally shared with the
trading company for broader use by all;
the member bank often provides some
of the more valuable intelligence.
Japanese trading companies' reputa-
tion for operating worldwide intelligence
networks is well deserved. Mitsui Cor-
poration's trading company is reputed to
have had such an excellent global intelli-
gence network before World War II that
it was used by the government for mili-
tary purposes. These trading companies
have hundreds of offices abroad, often
with thousands of employees. Their
basic mission is to gather competitive
and market intelligence on an ongoing
basis and send it back to the Tokyo
headquarter's intelligence clearinghouse.
Today, Japanese trading companies
are more sensitive than ever to the im-
portance of global information, and
some have stated that their goal for the
21st century is to become "globally inte-
grated information corporations." This
future vision does not diverge much
from their past: Mitsui Corporation's
motto is "Information is the lifeblood
of the company."
6Mitsui's motto is
'Information is the
l(feblood of the
company.' 99
The collection and use of BI by Japa-
nese firms is world-class. However, the
analysis of the intelligence has been less
developed and effective. Their ability to
often collect the answer to an intelli-
gence problem, such as their competi-
tor's strategy or a description of the
competitor's future product, has resulted
in less emphasis being placed on the
development of more creative intelli-
gence assessment skills and techniques.
In fact, because so much intelligence
can be collected directly, it has led to
problems where Japanese companies
have been tempted-as in the Hitachi-
IBM industrial espionage case-to col-
lect a competitor's proprietary informa-
tion. This situation, however, is much
more prevalent in Japan, as the recent
Komatsu industrial spy scandal has
revealed.
As competitor intelligence becomes
more difficult to collect and as the
amount of information that is publicly
available grows through electronic data
bases and public disclosure, the weak-
nesses in Japanese firms' intelligence
analysis techniques are becoming more
evident. The types of analysis that
Japanese companies have concentrated
on in the past have been mainly the ex-
amination and organization of large
amounts of data to discern competitor
trends and business strategies. However,
in view of the increasing amounts of in-
formation and the complexity of avail-
able data, Japanese firms will have to
place greater emphasis on more sophis-
ticated intelligence analysis to reduce the
large amounts of collected information
and derive useful insights.
Japanese firms believe that although
they have had an intelligence advantage
over their foreign competitors in the
past, they are currently falling behind,
particularly in the areas of organized B1
systems. They perceive that the US ef-
fort to organize competitive intelligence
professionals (i.e., SCIP) is providing
American companies with enhanced in-
telligence collection and analysis capa-
bilities. This, in turn, has resulted in a
major effort on the part of a number of
Japanese business leaders and company
officials, led by a major Japanese
trading firm, to enlist the assistance of
SCIP in organizing and developing the
competitive intelligence profession in
Japan.
Outlook: The Japanese are very good
at acquiring, assimilating, and improv-
ing upon foreign business practices, as
316
THE JOURNAL OF BUSINESS STRATEGI March/April 1992
48
BUSINESS INTELLIGENCE
their successful adaptation of American
quality control theory proves. They will
effectively adopt US BI methods and
techniques to enhance their companies'
overall competitiveness-probably
sooner than most American companies.
Lessons for US Management
The Swedish and Japanese efforts to
create modern BI capabilities for their
companies evolved through two entirely
different processes. However, in both
cases, the results have generally been the
same: Transnational companies system-
atically gathering BI on a global basis,
using both employees and external
sources of intelligence to create the
knowledge-based advantage needed by
their companies to outthink and out-
perform the competition.
US business leaders and government
officials should learn three basic lessons
from these best-in-class country
examples:
1. American companies, particularly
their senior managers, need to examine
their contemporary need for BI and
their current capabilities to produce it
themselves. Unfortunately, few com-
panies have dedicated the resources or
created the necessary organizational
capability to produce the kind of BI
needed to compete in today's global
business environment. Company execu-
tives will have to take the lead to see
that their firms develop the appropriate
capabilities and skills.
2. US companies and government
agencies need to work together to create
the BI capabilities that firms need to
compete in today's global marketplace.
The government can provide timely and
cogent business information on foreign
developments that affect industrial
structures and markets; scientific and
technical intelligence that have both
government and business interest; and
developments in foreign government
policies and regulatory processes that af-
fect US corporations' ability to compete.
All this can be done legally and ethi-
cally. With some organized effort on the
part of the federal government, it can
be provided equitably to all interested
US firms. Government is capable of
providing support, but the private sector
will have to ask for it-otherwise the
administration and Congress will not
address the issue directly, fearing that
each would accuse the other of interfer-
ing in the free market.
3. Finally, from the Swedish experi-
ence, professional education is necessary
for both managers and practitioners.
Unfortunately, US universities and busi-
ness schools currently are unprepared to
provide it. Lester Thurow, Dean of the
Massachusetts Institute of Technology's
Sloan School of Management, has la-
mented, "It should be noted that there
are virtually no courses in business in-
telligence at American business schools.
Sadly, that includes MIT." At present,
there are only two or three full-time
courses on the subject of competitive in-
telligence being offered at American
universities.
Finally, US companies will probably
have to carry the brunt of the effort
themselves. The federal government has
been hesitant to take the lead. And uni-
versities, particularly business schools,
are not known for being leaders in new
business practices.
Therefore, unless business leaders take
the initiative, in 2000 we will be talking
about how, during the early 1990s,
American corporations missed the op-
portunity to adapt modern BI practices
to their international business activities,
just like they missed Deming's message
on statistical quality control during the
early 1960s. Of greater concern, it is all
too likely that the result will be the
same: US companies being outsmarted
in the marketplace as a result of foreign
competition using an American-devel-
oped business discipline more effectively
than they have. t
317
49
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