The following conference paper on the Japanese experience with commercial intelligence is presented on behalf of John F. Quinn, whose in-depth presentation is scheduled for the May, 1994 OPSEC Conference in McLean Virginia, U.S.A.


COMMERCIAL INTELLIGENCE GATHERING
Jetro and the Japanese Experience

Presented by:
John F. Quinn
For
Fifth National OPSEC Conference
"Managing Risk in the Information Age"



McLean Hilton
7920 Jones Branch Drive
McLean, VA 22102
May 2 - 5 , 1994



The Commercial Intelligence Controversy



For the past few years the U.S. Intelligence Community has been debating a truly controversial subject - Should the CIA and other Intelligence agencies assist American corporations by collecting economic secrets from foreign competitors?

At his confirmation hearings, current CIA Director James Woolsey called this "the hottest topic in intelligence policy."

The issue first surfaced during the Bush administration. As the Cold War began to wind down, American Intelligence agencies found themselves facing some entirely new challenges Traditional Cold War opponents have been replaced with aggressive economic competitors. More often than not these same competitors are allies and trading partners of the United States.

In addition to being controversial the subject has generated significant opposition from opponents within the U.S. Intelligence community as well as the private sector.

Former CIA Director Robert M. Gates has stated "the U.S. Intelligence communityh does not and will not engage in industrial espionage." (1)

In a recent speech in Chicago before the Executive Club, a group of industrial leaders, incumbent CIA Director James Woolsey echoed a similar opinion "Let me be quite clear about this. The CIA is not going to be in the business that a number of our friends' and allies' intelligence services are in - spying on foreign corporations for the benefit of domestic business."(2)

The Issue and Objections


There are a number of well founded objections to U.S. government involvement in economic espionage. For example:

* What kind of information does U.S. industry need and who defines the requirements?

* How specifically can U.S. government spying help private industry?

* To whom should the information be given?

* How can covert information be handed out without disclosing sensitive intelligence sources and methods?

* In an age of multinational corporations, what defines an "American" corporation?

* By providing Intelligence to the private sector, the U.S. government could find itself in a position of dictating industrial policy.

* Intelligence cannot protect American industry from it's own decisions.

* "What would you do with this information if you had it?"

American business has been quick to reject the suggestion. Some of the objections voiced by the private sector include:

* Government sponsored commercial espionage activities could alienate our allies and trading partners and intimidate customers and suppliers overseas.

* Few American industries would be willing to reveal their status on specific technologies.

* Analysis provided by the CIA has been questionable in the past. How can this possibly assist U.S. business?

* "The best intelligence source is the industry itself."(3)

* "..the idea that the U.S. Government would engage in espionage against foreign companies to improve American competitiveness is grotesque. In an era of free trade and economic interdependence it is unthinkable." (4)

All of these objections are valid. However, each is based on the assumption that clandestine collection methods are necessary to produce effective commercial intelligence. This misses one important point - there is a tremendous difference between Business Intelligence (BI) and Industrial Espionage.

Business Intelligence can be defined as collection of business and competitive information through legal and ethical methods. It has been estimated that as much as 80% to 90% of this information may be obtained through Open Source collection methods. Business Intelligence might be collected through newspaper articles, trade journals, Security & Exchange Commission (SEC) filings, specialized databases and trade show material.

Industrial Espionage (or Economic Espionage) is the clandestine collection of sensitive, restricted or classified information. This information by its very nature is not openly accessible and can only be obtained through covert collection means. Industrial Espionage might include the theft of sensitive or restricted competitor information (such as financial data, restricted manufacturing processes, customer accounts, etc.) covert recruitment of sources within a competitors firm, and other such methods.

The bottom line? Business Intelligence is legal. Industrial Espionage is not.

Many American firms in fact already monitor their competitors. Some companies like Motorola(5) have very effective and advanced Business Intelligence systems. There is even a national organization, the Society of Competitive Intelligence Professionals (SCIP).(6)

Business Intelligence is probably one of the hottest topics in the American business community today. This past decade has seen foreign competition grow increasingly stronger. This increase in strength has also presented new challenges to American firms who must engage these competitors in an increasingly complex global arena.

Frequently, these foreign competitors enjoy the tacit support of their respective governments in their intelligence collection efforts.

The Japanese Experience


There have been numerous books and articles published on the subject of Japanese economic competition, and the U.S. - Japan trade imbalance seems to be a topic of perennial interest. Japanese firms have successfully gained large segments of U.S. industries, particularly in the automotive and consumer electronics areas.

This competition has also generated significant interest in Japanese Business Intelligence methods. In the past year, I have seen quite a few articles devoted to Japan.

Apart from some basic generalizations such as "The Japanese are voracious collectors of information" or "Japanese firms excel at business intelligence (or are way ahead of U.S. firms) there has been little discussion of the actual function of Japanese Business Intelligence, the main players, collection methods, and most important the manner in which Japanese BI methods differ from those practiced in the West.

The following points provide a brief summary of the more important features of Japanese Business Intelligence. let's call this an introduction.

Japanese Business Intelligence 101


* Japanese Intelligence organizations may be divided into Government of Japan (GOJ) and private sector.

* GOJ Intelligence Agencies are normally quite small in scale. Japan does not have a large centralized Intelligence organization such as the CIA.

* Japan's Intelligence needs are essentially economic in nature and most intelligence collection, analysis and processing is handled by the private sector.

* There is a significant interaction between the Government of Japan (GOJ) and the private sector.

* Japanese Business Intelligence efforts concentrate on market, economic and technological intelligence. Unique, innovative or critical technology receives particular attention.

In Japan, there is a much stronger relationship between the government and the private sector. In order to understand the success of Japanese corporations it is essential to also understand their relationships with GOJ agencies such as the Ministry of International Trade & Industry (MITI) and it's trade promotion agency, the Japan External Trade Organization (JETRO). JETRO is also one of the best examples of a true Japanese commercial intelligence organization.

The Japan External Trade Organization (JETRO)


After the end of the Second World War, most Japanese corporations were operating without detailed information regarding what they should produce and export to foreign markets. They had no information regarding changes in various tariffs nor a means of effectively marketing their products. In brief - Japanese firms lacked essential Business Intelligence information to allow them to effectively compete in overseas markets.

To cope with this situation, a group from the Osaka Chamber of Commerce and major Japanese businesses in the Kansai area formed the Overseas Trade Promotion Association (Kaigai Boeki Shinkokai). The new group unfortunately was not sufficiently powerful to accomplish the mission.

In 1954 MITI took over the organization and with GOJ support expanded its activities. Under the Japan External Trade Organization law of 1958, the new organization was transformed into a special corporation and became known as the Japan External Trade Organization, more commonly called JETRO. Since that time JETRO has functioned as a true commercial intelligence organization, acting as an extended arm of MITI to promote external trade.

Today JETRO has 84 domestic offices composed of 33 trade information centers and 51 economic internationalization centers in Japan. Internationally, JETRO has 48 overseas offices and operates 28 specialized JETRO Centers.

JETRO has a total staff of approximately 1200 people which equally divided between the Japan domestic (600 Japanese staff members) and overseas offices (300 Japanese and 300 local country staff members).

JETRO activities include research of economic trends, domestic and international information and Business Intelligence. JETRO targets include economic, trade, industry, technology, products, market trends, areas studies, etc. JETRO publishes a wide variety of material in both Japanese and English. Some examples are the Tsusho Koho (Japanese) and the JETRO Daily.

A Scenario for the Future


JETRO through it's worldwide network of overseas offices and close interaction with the private sector has given Japanese corporations a powerful competitive edge by providing cost effective access to Business Intelligence information. Despite the recent emphasis on providing assistance to non-Japanese firms seeking to market their goods and services in Japan, the primary role of JETRO has not changed significantly.

The JETRO model has worked quite well for Japan. Is there something to be learned from JETRO and the Japanese Experience? Would a similar model work for the United States? Let me provide my own scenario for what I call......

National Economic Intelligence Research Center


"A private research organization serving the needs of American Business."

Ideally, this organization would:

* Function essentially as a private sector Business Intelligence "clearinghouse."

* Maintain contacts with U.S. Government organizations, private industry, other research organizations and academia.

* Be accessible to American firms, organizations and private individuals through a membership structure.

* Provide Business Intelligence to members on a cost effective basis.

As a private sector organization the NEIRC would obviously NOT engage in nor support clandestine collection methods.

This area is bound to generate its own share of opposition, but I believe there is sufficient interest among U.S. corporations to merit serious consideration. As Alvin Toffler has noted in POWER SHIFT, there is a growing trend toward the "privatization" of intelligence (7) (witness for example, the growing number of firms providing Intelligence products to both the Government and private sector).

The bottom line of course is will it work for the United States within the context of our culture? I believe it will, and I believe we may see just such an organization within the not to distant future.



NOTES

1. Jack Anderson and Michael Binstein. CIA's Hottest Question. The Washington Post (March 14, 1993). p. C7.

2. Bill Gertz, CIA Chief Rejects Industrial Spying. The Washington Times (November 24, 1993) p. A3

3. John S. McClenahen. A Job For the CIA? Industry Week, May 4, 1992 n9, p53.

4. H.D.S. Greenway. A Bad Business for the CIA. The Boston Globe (February 11, 1993), p. 23.

5. Witness for example Motorola's recent success in penetrating the Japanese cellular market.

6. For additional information contact the Society of Competitive Intelligence Professionals at (703) 739-0696

7. JETRO points the way for exports to Japan (Japan External Trade Organization), Business First-Columbus, April 19, 1993 v9 n33 p24(1).

Recent JETRO Related Articles

The man from JETRO markets Washington to folks back home. (Japan External Trade representative Kunihiro Karashima to Washington State), Puget Sound Business Journal, Jan 29, 1993 v13, n37 p1(2).

JETRO Cash & Carry: specialist grows slightly in '91, on the heels of a whopping pre-recession increase. (Special Section: Distribution's Special Breed), Institutional Distribution, Feb 1992 v28 n2 p79(1)

JETRO to provide training for foreign engineers, Japan Weekly Monitor, December 27, 1993

JETRO warns traders against "Nigerian" scams, Japan Weekly Monitor, November 8, 1993

JETRO launches scheme to lure Hong Kong firms to Japan, Asian Economic News, September 27, 1993.

Exports up, imports slump in first half, JETRO says, Japan Weekly Monitor, September 13, 1993.

World trade recovering despite weak economy, JETRO says, Japan Weekly Monitor, August 2, 1993

JETRO Provides Entry to Japanese Market for Technology Companies, Technology Access Report, May 1993 v6 15.

JETRO opens support center for foreign exporters, Japan Weekly Monitor, March 29, 1993.


James Cook

Professional Profile

John F. Quinn attended Sophia University in Tokyo where he majored in Far Eastern Studies and Japanese History. He has extensive experience both in the government and private sector. As a former career officer with the Central Intelligence Agency (CIA), Mr. Quinn collected, analyzed and reported on business, economic and technological developments in Japan and the Far East.

As a consultant he has assisted numerous firms with market research and business intelligence collection for specific high technology areas and has developed strategic alliances between U.S. and Japanese firms. Mr. Quinn is a frequent lecturer on the subject of Japanese Business Intelligence. He has appeared on NBC Dateline and is quoted in Friendly Spies (by Peter Schweizer - Atlantic Press).

A native of Massachusetts, Mr. Quinn has lived and worked in Tokyo for nearly two decades. He is fluent in the Japanese language.

Contact:

John F. Quinn Managing Director Quinn & Associates 9607 Scotch Haven Drive Vienna, VA 22181 U.S.A. Phone: 703-938-0696 FAX: 703-938-1098 E-Mail: jquinn@netcom.com

Notes:

In addition to major English language online databases, Mr. Quinn has access to specialized Japanese language databases. His partner is Senior Director of the Japan Investigative Services Association, a 2,000 member association of private investigators.
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