Competitive benchmarking of our products, services and practices is necessary for continuous quality improvement, part of the foundation of our total quality efforts. However, there are associated ethical issues that we must understand and activities that we should avoid.
For TI to be among the outstanding companies which will win through the '90s, we must make customer satisfaction through total quality our primary business principle. An important part of the foundation of that total quality culture is our drive for continuous improvement of our products, services, and practices. One of the tools we employ in this effort is "competitive benchmarking", the continuous process of measuring our products, service and practices against our toughest competitors or against those companies recognized as our industry leaders.
Competitive benchmarking requires that we understand our own strengths and weaknesses as well as those of our competitors and the industry leaders. In other words, we must know the capabilities of our competition and industry leaders and judge ourselves against those standards or benchmarks, incorporating what we determine to be the best practices and procedures.
The ethical issues associated with competitive benchmarking center around how we secure information about the competition. Acceptable practices include
We have the right to all information about our competition that is available to the public, but we must never secure that information through misrepresentation or deceit. In addition, it is vital that we avoid all direct discussions with our competitors about subjects such as costs, prices, and processes except in limited and well defined situations where competitors are acting as our suppliers or customers, or as associates in teaming or other legally permitted business relationships. Although it is acceptable to ask our customers about our competitors' products, it is important to remember that many of our customers are also our competitors in various product lines. So be careful. In these instances, discussions about competitive information may have serious legal implications as well as ethical considerations, so check with TI Legal if any information gathering procedures are in doubt.
For those TI organizations that do business with the U.S. Department of Defense, special rules apply particularly during the procurement process. At times, discussions of any kind regarding certain types of competitive information are prohibited by law, including discussions with customers. Be sure to check with the DSEG Office of Government Liaison before conducting any competitive benchmarking.
Competitive benchmarking of our products, services and practices is necessary for continuous quality improvement, part of the foundation of our Total Quality efforts. For the past two weeks we have looked at acceptable practices involved in benchmarking. This week's article covers associated ethical issues that we must understand and activities that we should avoid.
Although we have the right and responsibility to gather information about our competitors, TI's ethical standards require that it be accomplished overtly, without misrepresentation or deceit. In the past two weeks, we presented some acceptable practices. Competitive benchmarking can be a valuable tool, but the practice is filled with danger. The following unacceptable and unallowable practices in the gathering of information can have serious legal and ethical consequences.
Of these practices, the trickiest are representation and pricing. It is important that you never misrepresent yourself while obtaining information about a competitor. On the other hand, you have a right to any information being offered to the general public. Just being a TIer should not mean that you end up with less information than other people.
For example, it is perfectly acceptable and normal to walk into a dealer's public showroom and ask questions about a product, such as cost and performance. When you do this, you need not identify yourself as a TIer since you are asking for information freely offered to the general public. When you obtain publicly available competitive information from a third party such as a dealer, you should mark the source on the document and the date received so it is clear that you did not receive the material directly from a TI competitor.
Pricing is a particularly sensitive area. Many countries, including the United States, are stringent about preventing collusion. Collusion is an agreement for illegal, deceitful or fraudulent purposes. You should never discuss pricing practices with a competitor. In fact, you should never seek to gain competitive information directly from a competitor. There are companies that provide benchmarking services to clients such as TI, so that communications directly between competitors can be avoided. Before engaging the services of such a company, be sure to check with TI Legal.
In most instances, reverse engineering is an acceptable option for creating new products. However, there are legal and ethical limitations that must be considered. Reverse engineering is a common procedure that typically involves the disassembly, examination, and analysis of a product to reveal its design and function. Normally, this is done for competitive analysis, and sometimes for the purpose of building and selling a similar product. It is legally and ethically acceptable for a company to purchase a commercially available product, to analyze it thoroughly, to design and develop a similar product and a method for its manufacture; provided the new product and method do not violate the patent rights of another company.
A TIer recently asked me the following questions about reverse engineering
The answer to this question depends upon whether we have reason to believe that the product we are buying is, in fact, infringing a patent. Typically, our purchasing contracts protect us against this. Also, when we sell our products, we routinely agree to protect our customers against patent infringement liability.
But, if we strongly believe that a supplier is infringing a patent, then we have an ethical obligation to avoid buying that product from them. Additionally, there are legal reasons to avoid the practice. If we knowingly buy an infringing product, both our supplier and TI could potentially be sued.
Reverse engineering can be accomplished in an acceptable manner... but there are risks. Reverse engineering is generally defined as examining a completed product with the intent of understanding the technology and process used in its design, manufacture, or operation. Quite often, reverse engineering requires disassembly or destruction of the item.
TIers have asked that since reverse engineering is done in an attempt to understand technology that belongs to someone else, is it ethical? Can it pass the Ethics Quick Test?
The first four of our ethics quick tests are
When these four are applied to the concept of reverse engineering, some TIers have felt that it may not pass. First of all, it is perfectly legal to disassemble, examine and even destroy the item. The serious legal issue of patent infringement arises if we choose to adopt protected information or process as our own. Seeking counsel from TI Legal in this situation is absolutely vital.
Reverse engineering is a very common, accepted, and expected practice in our business world today. When we put a product on the market, we assume that it will be reverse engineered by competitors and others. Once it is on the market, there are few secrets left...perhaps some in our manufacturing process. That is one reason we so vigorously defend infringements on our patents. But this philosophy allows reverse engineering to pass the last three quick tests.
If TIers decide that reverse engineering is appropriate for their situation, they should obtain the item in an open manner, either through outright purchase on the open market or with the knowledge and permission of the owner. And, as mentioned before, be very careful in the high risk area of patent infringement.