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What if You Come Across Juicy Competitor Information?

By: Dave Berkus

 

What if You Come Across Juicy Competitor Information

Many of us belong to industry associations and find ourselves at conferences and trade shows with time to spend with competitors. Some of these are old friends; some even former associates. It is natural to want to associate with these people for many reasons, certainly socially. Most CEOs want to obtain information about their competitors in the most subtle and non-obvious ways. And of course, most are willing to trade information to get information.

In my former industry, I became an informal centralized source for knowledge about the revenues of each of the many competitors, with a special skill for asking just the right questions to obtain the information. How many employees does the firm have today? Are you profitable yet? Can you guess what percentage your revenue comes from recurring sources such as maintenance revenues?

In return for the answers to these several questions, I was usually able to guess a company’s gross revenues within a few percent and would state my guess to the CEO. His reaction would guide me to increase or decrease my estimate appropriately. He’d be a bit amazed with the quick fancy math work, and I would have yet another piece of the puzzle helping me to gauge the total size of the industry in annual revenues and the growth and size of competitors.

All of this was immensely helpful in strategic planning and marketing, even though to this day I do not think those CEOs were aware of the value of the information so easily given. And none of this is especially considered a trade secret, violating the unspoken covenant between competitor CEOs that there is a limit to such exchanges.

On the other hand, often a sales person or marketing manager would show up at my office door with a complete package of a competitor’s materials, including price lists, a proposal with discount percentages clearly shown and a list of feature functionality meant to reinforce the proposal. The source of this information was typically the purchasing decision-maker for a friendly customer or candidate customer. The question is one of ethics, since the competitor certainly did not volunteer any of the information, which would have been the competitor employee’s violation of confidentiality and cause for being fired.

What does a CEO do with this wonderful, rich information dropped at his door at no cost or obligation? Few would destroy it and ask all to forget that it was ever in their hands. Most would absorb the information and then admonish those who had seen it to not repeat to anyone that it was in their hands. If you’ve been in business for long enough, you’ve seen your share of this gray market information. My advice is to be very careful, think of the golden rule, never use this information publicly, and certainly never reproduce it, let alone disseminate it internally.

As to sharing information to get information, CEOs and executives are bound by a duty to their corporations not to share trade secrets with anyone who has not signed a confidentiality agreement, including consultants to the company. For CEOs on the corporate board, it is a large part of the “duty of care,” a legal requirement of board members to protect the assets of the corporation first and foremost, one of those assets being the trade secrets of the corporation.

Published: February 26, 2018
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Source: Berkonomics

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Dave Berkus

Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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