Strategic Thought Transformation - The IIPM Think Tank
Strategic Thought Transformation - The IIPM Think Tank
Strategic Thought Transformation - The IIPM Think Tank
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I N D U S T R I A L E S P I O N A G E<br />
Operational Structures of<br />
Industrial Espionage<br />
How it works, who does it and why it is a threat for<br />
multinational companies across the world!<br />
Edward M. Roche<br />
India is a country on the move. It is<br />
fast becoming one of the world’s great<br />
centers for high technology innovation.<br />
Gone forever are the “copy cat” days. In<br />
virtually every advanced scientific field<br />
– atomic energy, information technology,<br />
bioinformatics, pharmaceutical research,<br />
wireless Internet, sophisticated service<br />
delivery, integrated steel production, and<br />
more – India is not importing technology<br />
but is exporting it.<br />
But with high tech innovation,<br />
comes the need for<br />
protection against high tech<br />
thieves. <strong>The</strong>ft of trade secrets is<br />
no joke. Yearly, billions of dollars<br />
are lost from not only U.S. Enterprises,<br />
but from multinational corporations everywhere<br />
due to economic espionage, e.g.,<br />
the theft of secrets. According to Ehrlich<br />
[6], the American Society of Industrial<br />
Security has reported losses in 1992 for<br />
the 32 largest companies [in the U.S. market]<br />
as being $1.8 billion, but he quotes<br />
the Director of the U.S. Federal Bureau of<br />
Investigation [the U.S. Equivalent of India’s<br />
Central Bureau of Intelligence CBI]<br />
as saying: “Neither the U.S. Intelligence<br />
Community as a whole, nor the FBI, specifically<br />
has systematically evaluated the<br />
costs of economic espionage.”<br />
In 1999 more than $45 billion was lost<br />
from Fortune 1000 companies. 1 Other estimates<br />
put the figure much higher at more<br />
than $100 billion. 2 In the year 2000, U.S.<br />
businesses claim to have lost $100—$200<br />
billion in sales due to trade secret theft. 3<br />
Many believe that the reported losses<br />
are only a fraction of the real loss. Why<br />
Companies are reluctant publicly to announce<br />
a theft; not only is it embarrassing,<br />
but in many cases the share price will go<br />
down, or even worse, there may be shareholder<br />
lawsuits claiming incompetent man-<br />
1<br />
<strong>The</strong>se estimates, based on survey, evidently do not take into consideration the large number of small and medium-sized companies that in many cases are first the sources of much<br />
innovation and second may be easier targets for determined espionage operations. Note: <strong>The</strong>se estimates are quoted in Chan [2].<br />
2<br />
Although such large figures indicate the existence of a serious problem, it should be realized that they are based on an estimate derived from survey responses. <strong>The</strong>re are two problems<br />
with this type of estimate: (1) it fails to detect industrial espionage that is not discovered, (2) it is difficult to place a reliable estimate on the value of future revenues that<br />
might come from any technology or process that is compromised.<br />
3<br />
Quoted by Effron [5].<br />
An <strong>IIPM</strong> Intelligence Unit Publication STRATEGIC INNOVATORS<br />
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