Fuqua Insights Podcast: When Does Corporate Secrecy Work Against You?

Jenny Laurence

Welcome to Duke Fuqua insights, a Podcast where we explore faculty research and the actionable takeaways for business leaders at every level.

Companies go to great lengths to protect their marketing knowledge from customer insights and pricing strategies to launch plans and analytics. The assumption is simple: if competitors get their hands on this information, they'll use it against you or to out compete you. But what if keeping marketing knowledge locked down to prevent its leakage actually hurts firms more than it helps? I'm Jenny Laurence, an MBA student at Fuqua, and I'm thrilled to welcome Professor Christine Moorman to the show. Professor Moorman is a widely cited scholar in marketing and strategy, and directs the annual Chief Marketing Officer Survey. Her latest research explores how measures to prevent the leakage of marketing knowledge outside the company can quietly hurt decision making, slow execution, and even weaken competitive advantage. Professor, thanks for your time today.

Christine Moorman 1:01 

Thank you, Jenny. It's great to be here. 

Jenny Laurence  1:04 

So to start with, I'd really like to just unpack some of that and start right at the beginning. For people who might not be familiar, what do you mean by marketing knowledge?

Christine Moorman 1:11 

It's a good question, and I think in the paper, we try to clarify that there are many different types of marketing knowledge that companies own and may try to protect. So perhaps the most obvious is that the idea of a customer insight, some market knowledge that you have, and it could be a competitor insight, something that you know, that you think is really unique, that you don't want your competitors to get their hands on. You know, Procter & Gamble, for example, has a set of shopper insights that they only share with key retailers, and they guard very, very carefully, because they know that, you know, they're a big part of their competitive advantage. Another thing that companies often seek to protect is marketing know how. Sometimes people use the word tradecraft: it's the capabilities, the skills that the company has developed that, you know, help it enact certain behaviors. You know, go-to-market behaviors, how they price, for example-- the example in the paper that we discuss is Amazon's pricing algorithm. Well, they really don't want others to get their hands on that. And then finally, marketing plans. Maybe the most obvious type of marketing knowledge that the company would want to protect, you know, it's how much it's going to spend on various things when it's going to execute certain decisions. And the idea is that if the competitors get a hold of this information, they could outspend them or out time them in terms of their go-to-market strategy. 

Jenny Laurence  2:42 

So those are the three types, yeah, and so that does not include necessarily marketing professionals, more the ownable assets that a company might have.

Christine Moorman 2:50 

That's right, the professionals are often the ones carrying the knowledge, right. And so some of these leakage prevention strategies that we're going to talk about actually involve restricting the behaviors of the managers that are carrying that marketing knowledge.

Jenny Laurence  3:06 

You've long studied how marketing knowledge creates competitive advantage. What prompted you to step back and ask whether the way firms protect that knowledge actually helps them?

Christine Moorman 3:15 

Well, you know, it's kind of one of these types of conventional wisdom. We walk around saying that, well, you have to have unique knowledge for it to help you achieve competitive advantage. We teach it in our courses here at Fuqua. And companies, I think really do believe that that's one reason. The second is that companies spend a lot of money on these types of protection behaviors. One of the statistics that we report in the paper is that the global data loss prevention market is valued at $1.5 to $2 billion annually, and it's growing, and as you can imagine, with all of the AI things that are going on, so there's a lot of attention and a lot of money spent on this aspect of knowledge that we don't think is understood very well.

Jenny Laurence 4:05 

Right. So it's really asking the question of why there is so much spend behind this, and whether it's helping. And I guess the source of your interest in that, where did that come from?

Christine Moorman 4:15 

Well, you know, I had been looking at things like knowledge and learning in organizations really over my entire career, and this was a gap that stood out, and it's always fun to attack the conventional wisdom and explore it. So we did a series of interviews with managers, talking with them about this topic, and it was pretty clear that they hadn't really thought about some of the aspects, especially the costs of knowledge protection, that we ended up uncovering.

Jenny Laurence 4:45 

So to dive into that a little bit, when you were looking at how firms behave, where did you see the biggest disconnect between the conventional wisdom of keeping everything secret and how marketing organizations really operate?

Christine Moorman 4:58 

Well, part of what we found--it was a very deep over emphasis on what we came to call leakage prevention strategies. These are the kinds of strategies that keep managers in the organization from accessing information in the first place. They get restricted from looking at certain types of information, or if they're given access, they're told who they can share it with, when they can share it--these kinds of things, so they're usually access and sharing restrictions that seek to limit the availability of the firm's marketing knowledge in the marketplace. There's a lot of aspects of this. Sometimes the firm puts restrictions on its managers, sometimes on the partners with whom it shares information with, and sometimes even on just the knowledge itself. We can talk about some of the details if you're interested, but we outline these different types of leakage prevention, and then we dig in and try to see, well, what are some of those costs?

Jenny Laurence 5:57 

So as you say, one of your core findings is that trying to prevent leakage can create hidden costs inside the firm. Which of those costs do you think leaders most underestimate today, and why might that be?

Christine Moorman 6:09 

Well, a big one is what we call decision quality costs, and these are weaknesses that are created in managers’ capacity for gathering, analyzing and utilizing information to make both effective and efficient decisions. And these can take a variety of forms. I mean, maybe the most obvious is what we call learning costs. So if you put up all of these barriers to prevent leakage of information, say out to your managers or out to your partners, then those same barriers are going to prevent information from coming to you, feedback, insights that you might get about your own knowledge, and so that, in turn, means that you're not learning everything you can about a particular topic, because you've created these barriers. Another one is just simply resource allocation costs. So because you don't know everything about you know--say, a market insight is hidden from a manager or a partner, they can't really allocate all of the resources that the company has, whether it's new products or the spending that the company would have. They can't do that as efficiently as they might.

Jenny Laurence 7:23 

So marketing teams today are under enormous pressure to move fast, launching campaigns, testing ideas and responding in real time. So how does heavy knowledge protection collide with this need for speed and agility?

Christine Moorman 7:35 

Well, you know, we identify something called execution, quality, costs. So the idea here is that, again, if you're prevented from knowing everything, if your partners are prevented from knowing everything, your go-to-market plans, your insights, even your capabilities, this is going to slow you down. So we talk about speed to market costs, but also coordination, because you can't hand things off as efficiently to one another, and to your partners, if you're in the in the business of preventing some of your knowledge from moving around. And then finally, this was a bit surprising to us, but it came up in the interviews, what we call ‘esprit de corps’ costs. So, you know, when you restrict knowledge, some people have it, some people don't, and the people that don't have it kind of feel, you know, they're being left out. They're not trusted, and we know that when you know that occurs, that they don't feel that sense of camaraderie, and they might not work as hard, for example, yeah, that esprit de corps can really hurt the execution of the company.

Jenny Laurence 8:38 

So Professor, I'm curious about these barriers between knowledge sharing within companies. Obviously, you've worked with a lot of global organizations. Are you seeing a lot of these barriers between international markets, so say between the US and maybe other international markets, or is it mainly from top down at a global level?

Christine Moorman 8:59 

I think it can be both vertical and horizontal, right? So I think sometimes information can get stuck at the top, the upper echelons of the company, but it can also be the case that, you know, because of the way incentives are designed, groups, for example, groups in the United States might not be willing to share with groups overseas, even though that's absolutely the best they should be doing, it's the best way to get the strategy implemented. But they want credit, and they want to be out in front whatever it happens to be. But the protection is going to slow down any of those types of behaviors.

Jenny Laurence 9:37 

Well, hopefully everyone who's listening is starting to think about their global footprint of knowledge as well. So you point to the fact that even if there aren't any costs of preventing the leakage of marketing knowledge, there may be limited benefits. Could you just explain a little bit about that?

Christine Moorman 9:52 

This is an interesting aspect of the project, because we've been talking about the costs of knowledge protection. But, your question, and what we found in the paper starts to unpack, are there really any benefits of protecting the knowledge? So in order to make that assessment, what we finally came to see was that you need to think about the process that the knowledge needs to travel for it to go from leakage all the way to harming the company. And when you think about that, you realize that there are many, many steps in that process. For example, first, it has to be noticed by your competitor, and then they have to interpret it correctly, and then finally, they have to be able to do something with it, right? Often, it's the case that even if they interpret what you're doing correctly--meaning, for example, they get your insight--they just don't have the resources, the brands, the capabilities to do anything with it. So they know but they're powerless to really affect you negatively, right? So that leakage, what we call the leakage to harm process creates a lot of uncertainty about whether the knowledge will actually work through each of those stages. And then on top of that, what we discovered in the interviews was that there are also additional aspects of the competitors themselves and the industries in which they operate that add to that uncertainty. So for example, if you have a competitor that is very high in what we call action orientation, they will try to do things right, you know. And we all know companies that are like yes versus other companies that are very conservative--They plan forever, sometimes they never act. So if, if one of your competitors has a high action orientation, then that's going to unlock a lot more possibility that they'll do something with the knowledge that they acquire from you. So that's just a little taste of the fact that there's not only this process, but also these additional factors going on with the competitor and also the industry in which you operate

Jenny Laurence 12:01 

Yeah, it's interesting. This conversation is making me think a lot about, you know, companies that are considered leaders, and the case studies where companies have released data on either, you know, product development or on marketing insights that they've uncovered in order to make the industry better as a whole. And it seems like those are kind of one of the benefits of almost reducing your risk or your fear of releasing this kind of information. It might end up that you eventually hold a better position within the market in terms of reputation because you've released that kind of information that would be of importance to customers more broadly

Christine Moorman 12:42 

Absolutely, and we actually talk about those reputation costs that you give up. That's another form of these types of hidden costs that we talk about in the paper. And more broadly, you're right that there are many times when the company really should release its knowledge into the marketplace because they can, for example, set a standard in the industry. Or they can have the reputational benefits. Or sometimes, they can go ahead and sell the knowledge that they have and make money directly from the knowledge. So there are a lot of reasons why companies should do it some of the time. The other is: if you are the market leader and your knowledge is going to unlock a lot more value in the knowledge, then as all of those boats float, you're going to float more, and you're going to gain more.

Jenny Laurence 13:35 

It's the first mover advantage, isn't it, really?

Christine Moorman

It could be. It could be.

Jenny Laurence

So to move on a little bit, AI and advanced analytics are changing how marketing knowledge is created, stored and shared. I know we very briefly talked about it at the beginning of this conversation, but can you just talk a bit about how this affects the risks and rewards of protecting marketing knowledge?

Christine Moorman 13:55 

It's a very good point that we discuss in the paper, and I think in general it means that companies are probably more vulnerable, that their knowledge is likely to become more available in the marketplace for all kinds of reasons. You know, it could be accidental, but it could also be intentional, as we know. And both forms of leakage are things that companies often try to prevent, and I think AI kind of multiplies those risks. It's also, though, as a result of that multiplication, it's going to be more expensive to protect, because it's sort of like you're holding all of the holes, you know, these kinds of windows out to the world where your knowledge could leak. It's hard to think about doing that successfully. So what I think our paper will help managers do is ask the question, ‘should we be worrying about this?’ Is it likely that our knowledge will go through that whole process, or are we going to suffer these other costs, these hidden costs?

Jenny Laurence 14:55 

I mean, it makes me think you know, coming from the brand world, very much about the importance that we're starting to see about storytelling in companies and their marketing departments--how to create a story of a brand that exists across all elements of the marketing stack and all elements of marketing activities, in order to offset the risks of that knowledge coming out and either it being detrimental to the company or it, I don't know, providing some extra benefit. Because ultimately, a brand will only ever be the company's brand. You can't replicate that, which I think has been a really interesting development as a result of AI and LLMs, you know, kind of developing opinions on what brands stand for. So for business leaders today, how do you suggest they decide what marketing knowledge really needs protection?

Christine Moorman 15:45 

In order to make that judgment, companies need to think about whether their knowledge is likely to move easily or even at all through those different steps that we identify. If it's out there, will companies understand it, or their competitors understand it, or will their competitors be able to use it? Because often competitors don't really have the same resources and capabilities, and we say that they kind of get locked out of doing anything with it. Yes, they know, but so what? Because they're locked out. So we say, look at your toughest competitor, and think about each of these steps in the process. How likely are they to progress through these steps? The other thing is to weigh against those, the potential benefits of knowledge protection--any of these costs, knowing your culture, knowing the people within your company. How will these leakage prevention measures to restrict access, to restrict sharing, how are those going to be perceived within your company? Are there going to be greater costs? Is it going to slow you down? Are you going to learn less, innovate less? These are all things that we talk about in the paper.

Jenny Laurence 17:04 

I'm sure the team will be very excited to hear that we're going to be asking for more risk assessments. Love those. I'm curious for just for the listeners’ benefit in your research, do you provide specific case studies or examples of, you know, specific situations where this has been the case, you know, both in terms of the leakage being a good thing or a bad thing. Could you talk a bit more about the content of the research itself?

Christine Moorman 17:31 

So in these interviews that we did, which were with chief marketing officers at financial services, consumer packaged goods, tech, you name it, we sort of ran the gamut and we had them talk about these different costs and benefits. And so I think the listeners will probably want to look at the paper and look at their quotes, which we have in the paper, as well as some of the stories that they told us.

Jenny Laurence 18:00 

Oh, fantastic. Well, that's a sign for everyone to go and read the paper. I'm going to end on one final question, professor. Looking ahead as markets become more transparent and information flows faster, what capabilities will matter most for staying ahead competitively?

Christine Moorman 18:17 

It's a very good question, because if you acknowledge the fact that leakage prevention has these costs, then you might ask yourself, ‘what other alternative marketing knowledge protection strategies could the company use?’ And what we talk about are a set of what we call “harm prevention strategies.” So these are strategies that are, you know, not at the front end of that leakage process, that leakage to harm process, but they're very deep into the process. And what we tried to do was outline a set of things that companies could do. For example, one is that we talk about reducing knowledge cycle time, which means that you're just faster at producing new knowledge. So even as your knowledge is spilling over to the competitors, you're already on to the next cycle of coming up with new insights, for example. So it doesn't really matter that they know what you know, because you're so good at developing new knowledge. Another is that you're very fast, so you have invested in accelerating your execution speed, so you just get really good at doing things fast. So again, it doesn't matter if your competitors know, because you are able to out execute them. And then finally, we talk about, we don't talk about this very much in marketing, but I think it's worth noting that companies can, what we call “climb the marketing learning curve.” In other words, you can gain experience with performance because you know you've just done it for longer, or you've had more scale, and so you're able to do things a lot more efficiently than your competitors. So even if they know the same things that you know, you have many more years, or many more units of experience where you can drive down your costs. More importantly, you can drive up the ROI on any action that you do take. 

Jenny Laurence 20:12 

So for listeners, of those with a marketing knowledge leakage strategy in your back pocket, hopefully you'll give the professor's paper a read, think about your costs and benefits of potentially opening up some of that marketing knowledge and in order to create a faster, more competitive environment. Professor, thank you so much for this conversation. It was really enlightening and looking forward to seeing more on the topic. 

Christine Moorman 

Thank you. Jenny

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