Thursday, 8 October 2015

We’re leaking, and everything’s fine: How and why companies deliberately leak secrets

“The evidence suggests that firms that leak secrets may be doing very well; it appears that some of the most prolific and careful leakers are also among the most profitable companies in the world” (Hannah et al. 2015)

A secret is something that is kept or meant to be kept unknown or unseen by others. We all have secrets and we have many different reasons for keeping them, but ultimately we do not want to face the consequences of having them exposed.

It’s not just individuals who have secrets. Companies also have and hold on to secrets. Competitors often seek to acquire secret information on recipes, formulas, production processes, pricing and marketing plans and anything else that provides a competitive advantage.

Why then would companies deliberately leak secrets? This question is the subject of a new paper, I have published in Business Horizons with Beedie School of Business colleagues Dave Hannah and Jan Kietzmann. Using reported examples of deliberate leaks from companies such as Apple, Enron, Toyota and Cadbury, we explore how and why companies deliberately leak their secrets. Our answer is it depends! Ultimately, a firm’s choice regarding whether or not to leak secrets involves weighing the risks of a leak against the potential returns.

To clarify the risks and returns of leaking we produce a classification (Figure 1) of four kinds of deliberate leaks (Dissembling, Misdirecting, Informing, and Provoking), based on the following two dimensions of leaks:

  1. the truthfulness of the information in the leak i.e., does the secret contain factual or concocted information 
  2. the signaled intentionality of the leak i.e., is it an overt leak where the company admits it leaked the secret, or is it a covert leak where the company falsely claims the leak was a mistake or pretends not to know it has occurred.

Figure 1. A classification of deliberate leaks

Each type of leak is suited to different circumstances and brings both benefits and consequences. Our paper offers examples for each type and a decision making framework (Figure 2) to help managers determine when, whether or even how they should set about deliberately leaking information

Figure 2. A decision framework for why and how organizations should deliberately leak secrets

Although the framework does not eliminate the consequences of secrets leaking out, knowing what to expect can be helpful for companies. As we explain in the paper, our typology and framework offer managers a way to arrive at more informed decisions about whether or not to leak secrets. It also provides scholars with a descriptive and predictive basis to study the important organizational function of “having a leak”

This posting is based on the research in the following slides and article:

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