(2.3) Myth 3: Market Intelligence is complex

Admittedly, this is often the case. But not always. Very often the most obvious, readily available information is omitted from the ultimate decision. Take this extract from Amazon, where the book ‘The price of inequality’ of Nobel prize winner Joseph Stiglitz is offered by Amazon in new condition, as well as by third parties either in new or in used state:

You don’t have to be an experienced market intelligence professional to see what is wrong here. Did the provider of second hand books even bother to check the price at which the book is offered in new condition by their competitors? Most probably not.

This example can seem to be ridiculously simple, but it is set to make a point: do not omit the bleeding obvious!

To take a less obvious example, let’s look at the Nano, the cheapest car on earth, specially designed by Tata car to serve the vast amount of consumers that are joining the middle class in India each year. It sounds like a no brainer: the market consists of millions of people (and growing by millions each year), so even if only a small portion of them would want to exchange their motorbike for a status symbol such as a car, it would still represent a considerable market opportunity. Still, the sales of the Nano car, at least in the first few years after its introduction, was well below expectations. So what went wrong? A couple of things, apparently, and some were very obvious. For instance, even of the Nano was the cheapest car on earth, it still sold for about a full year’s salary of the middle class consumer it was aiming for, and Tata car omitted to offer the possibility to buy the car through leasing! Sure they must have had good reasons to do so, after all leasing is a completely different business compared to making and selling cars. Nevertheless, this omission certainly forms one of the reasons why the Nano car’s sales figures turned out to be rather disappointing. And it is a reason it could have anticipated even before launching the car.

There are other obvious sources that many professionals are underutilizing in their decision making process. Take competitive information as an example: how many of you are checking the websites of your main competitors on a day-to-day basis? Most of you, hopefully. But how many of you have the newsfeeds of your competitors fed into your RSS feeds? Are you following their activities on Twitter, Facebook, Instagram, Pinterest?

More importantly, are you checking your competitor’s activity on LinkedIn? Do you use this source to check which profiles are leaving them, and which ones are joining? Quite a reliable early warning signal of the strategic choices your competitor is making, even before they communicate about them officially. You can also check which discussion forums your competitors are most active on, which is also an early warning for their future strategic direction.

Last but not least, have you checked your competitors’ activity on Youtube? You would be surprised by the amount of information you can find there, from unofficial interviews with sales managers on trade fairs, to complete speeches of the CEO at an annual sales meeting.

These are all simple tools and activities that can be performed by anybody, but that could tremendously increase the insights on which to build decisions on. And, no, they are not complicated at all…

(2.4) Myth 4: You need external agencies to collect Market Intelligence data

Of course, you already realize that this myth is inaccurate. After all, you are likely to collect a huge amount of information by yourself already, through your CRM or Business Intelligence systems, through your contacts on trade shows and conferences, or through your yearly customer satisfaction surveys.

But what about information of a different nature? Where do you find information about the near-term prospects of the retail market in your home country? About the level of digitalization in the education system in each European country? About the investment plans in alternative energy worldwide? The penetration of mobile phones with the youth in Africa? Surely, if this type of information is related to the market you are serving, you would be willing to pay for it, wouldn’t you?

You shouldn’t. At least not after checking the vast amount of freely available –and reliable!- sources at your disposal. A short overview:

1. Supranational organizations

Admittedly, you will have to spend a considerable amount of time getting acquainted with the databases of supranational institutions before you can use them efficiently. But once you do, you will find a wealth of information on virtually any topic, in virtually every industry.

Take the database of the European Commission, Eurostat, as an example. This database contains valuable statistics on topics like transport, energy, health, sustainability investments, to name just a few. It also contains a number of regularly updated indexes that might prove invaluable to assess your market conditions, like the monthly, survey based Economic Sentiment Indicator, broken down into industry, services, construction, retail and consumers. If you are serving one of these markets you might find out that this Indicator provides a fairly accurate early warning signal for where your own business is heading, as we will explain in chapter 2.

While you are at it, you might as well check the databases of the International Monetary Fund (IMF), the Worldbank, the Organisation for Economic Cooperation and Development (OECD), where loads of information are available at no cost at all.

2. Consultants

Consultancy companies, big and small, also provide a wealth of information through industry specific reports. Of course, these reports are meant to showcase their expertise in these markets, and most of the time you will have to leave your contact details behind before accessing these reports. But these reports are well worth the efforts, and would have cost you a couple of thousand dollars if you would have them performed for you.

The best known source for these type of reports is consultancy McKinsey, through its McKinsey Quarterly website, but also through its McKinsey Global Institute. The other big consultancies like Accenture, PWC, Deloitte, Arthur D Little etc also provide valuable industry insights. Not to mention the vast amount of smaller, specialized consultancies.

3. Professional federations

Each industry is likely to have a professional federation of some kind, itself a member of a larger international federation. These federations gather loads of information about your industry, even if they not always share all of it through official communications. You should not hesitate to check the information available (also with industry federations outside of your home country), or try to obtain specific information you need from the employees of these federations.

4. Social media

This will sound like the most obvious statement in history: in recent years social media became an invaluable source of information about markets and competitors. But do you use it to its full potential? Facebook and Twitter are quite obvious sources, and I mentioned earlier about the possibilities to use Youtube or LinkedIn as a competitive information source. But you could use these sources –especially LinkedIn- as a mean to detect market trends, sizes and shifts as well, through its discussion forums for instance. Some bright people even use LinkedIn as a kind of qualitative (but non commercial) survey tool !

5. Internal sources

Of course, you retrieve a lot of business information from your CRM or Business Intelligence tools already. However, these will mostly be internally-driven, and very data-focused. But how do you collect the anecdotal information, the insights your employees (all of them) obtain through discussions with external contacts and that might be of tremendous value to your market insights efforts? Organizing some form of bottom-up market discussions, as we will advocate in the second chapter, might prove to be more accurate than any external view you would obtain, provided that you find way to collect them structurally in order to scale them to a level where valuable insights emerge.

What these short examples attempt to demonstrate is that you don’t necessarily have to invest any money to collect and digest a sufficient amount of relevant market data to build your insights on. However, dependent on the amount of information you will be using, you might go through a steep learning curve in order to use these sources efficiently, or you  might need some internal resources to collect the information and translate it into a usable format. We will get back to this point in the third chapter.

(2.5) Myth 5: Market Intelligence reporting is cumbersome and extensive

Do you get annoyed whenever you ask for specific market data and you receive a deck of hundred slides where every single datapoint is twisted in fifteen different ways, accompanied by a two hour long debriefing en unfruitful discussions about the figures?

Well, stop asking for it.

Fact is, whether you rely on external market research companies or an internal team, they will naturally be inclined to provide you with as much details as possible. How else could they justify their cost?

Forgive me my cynical tone. It is far from my intention to laugh with market research companies or teams. In a way this behavior is perfectly logical: how would you react if you ask a market research question, a team works for a complete month and with several thousands of dollars budget on producing an answer, but all you get at the end is a single chart? I bet you would start to doubt the soundness of this investment or –even worse- the professionalism of the market intelligence team who worked on your question.

But what is wrong with that single chart, if it allows you to make a well grounded decision? Or, better: if it leads to valuable discussions based on an unambiguous market view?

As the philosopher Blaise Pascal once wrote in a letter to a friend (before you ask: it has been used by Lincoln, Mark Twain and Bernard Shaw after him, albeit in slightly different forms):

‘Forgive me to write you a long letter, I did not have enough time to write a short one’

Conciseness, even in market intelligence issues, can be a blessing, and is indeed very hard work.

(2.6) Myth 6: Market Intelligence insights are unambiguous

Throughout my career as a market intelligence professional I have always found it hilarious to watch people discuss market numbers. Even four simple datapoints could often lead to fervent –and lengthy- discussions about their exact meaning. I stopped laughing, however, when I started to realize that the length –and the fever- of these discussions was my own fault.

Why is this? Well, say you have to make an investment to grow a product or service, and you have to make a choice between two countries in which to make this investment (don’t worry, the same logic would apply on other strategic decisions as well, I use this simplified example just for the sake of argument).

In its most basic form, this choice would be made based on the size of both market (the ‘Addressable Market’, which is the total spending on products and services similar to yours; or, put more simply: this would be your revenue if you had no competitors). This would look like this, for instance:

Quite obviously, you should invest in Market 1, since its potential is so much bigger than Market 2. Right? Wait a moment. What exactly is our starting position in these markets… Would it be easier to benefit from the additional  opportunity in a market where we have a high market share already? Or rather the opposite?

With this extra dimension, two different scenarios emerge:

Which market is the most promising now?

Say the lighter bars represent your turnover, and the darker bars represent the untapped market potential (so the proportion of the light orange to the overall orange bar represents your market share). Both these scenarios will now lead to completely different conclusions about the market to develop and where to get additional growth from. In the second scenario for instance, the portion of the market that you don’t cover yet is much tinier in Market 1 compared to Market 2.

Okay, so dependent on which scenario turns out to be true, we now have our answer. Right? Not so quickly. We need to take a third dimension into account. The market sizes might be different, our starting position (our market share) will probably be different, but the overall market growth is likely to be different as well.

See the example beneath, where just one of the possible scenarios is highlighted for our original question to know in which market to invest in order to maximize the overall growth potential:

This provides a more subtle view of our market potential already, and certainly a better insight to know in which market to invest. Our Market 1 now finds itself in a quadrant with low growth (horizontal axis), high market share (vertical axis) and a big size (bubble size). Our market 2 finds itself in quite an opposite situation: high growth, low market share, and relatively small market size.

So it’s clear now, no? Invest in Market 2. Any market share point gained in this market, will leverage more in terms of turnover growth (since the market itself is growing faster). Easy, right?

Not quite yet. It appears that we have much more to gain in Market 2 indeed, if –and only if!- we have the means to gain market share in this market. Are our sales people sufficiently trained to chase this market? Are our channels sufficiently loyal to support us in this endeavor? Or are they likely to promote our competitors instead? Do our competitors have special advantages over us in this market, like locked-in, multi-year contracts (which would reduce our available market)?

And, combined with this, we need to ask additional questions about Market 1: can we leverage our solid market position to introduce new products or services with success? Is perhaps our install base in this market due for renewal in the coming year(s), hereby increasing our market potential? What is the risk of losing market share in this market, and how would this affect our overall turnover?

An answer to all these questions would require many more dimensions than those we used up to now, but you will have noticed that the answers to these questions are starting to be much more qualitative than quantitative. So, in a way, the bubble chart with  the three dimensions has provided a –perhaps sufficient- basis on which judgment can be used to come to conclusions.

We will see in chapter 2 how even qualitative judgments can be quantified and put to use to give decisions more factual weight. But the point for now is that market insights are anything but unambiguous. The conclusions we draw from them are subject to interpretation and are dependent on the number and type of elements we take into account when building the insights. These elements can be numerous, but will never be endless. After all, not all of them will be of value for the strategic choices we are facing.

But on the other side, as this chapter aims to demonstrate, we need to be careful to use a sufficient amount of elements or ‘dimensions’ in our insights, to reach the level of granularity with which conclusions become as ‘unambiguous’ as possible. There is a simple rule anyone can use: just as long as people involved in the decision process are still arguing about the interpretation of the data (‘what does it mean?’) instead of the decision at hand, it means that the market insights has not yet reached the ideal level of granularity. Dig deeper.

(2.7) Myth 7: Interpreting Market Intelligence insights is easy

No, it is not. And much has to do with the level of granularity we discussed in previous point. To illustrate this, let us take one conviction that I personally heard brilliant decision takers express over and over again:

“If my market is growing with x%, and we keep the same market share, our turnover will grow with x% as well”

Do you agree? It sounds logical, right? Nevertheless, in virtually every case this conviction is nothing less than untrue. I can even predict that in most cases you will find yourself losing market share overall, even if you gain market share in each segment you serve !

How can this be?

Well, fact is: just as long as you are serving different market segments with different products or services, these markets are likely to behave differently from each other, and your resulting overall turnover evolution will certainly behave differently from the overall market you operate in. Additionally, if your market share is less than 50% in the biggest markets or the markets with the highest growth, your overall market share is likely to decline over time.

Let us look at an example to illustrate this fact. Let’s say your company has a portfolio of 5 products (the same would apply for services or market segments, geography, or a combination of any of those). For the sake of simplification, let us assume you only serve one market segment with these products, in one single geography. The table here under shows the addressable market size for each product, for calendar year CY00 and CY01, as well as the market growth, the revenue of each product and the resulting market share:

In this example, we have a high market share in the biggest but stagnant market, and a low market share in the small but growing markets. Our overall addressable market grows with 20% year-on-year, and our initial overall market share is 52%.

Let us now look at what happens with our turnover in CY01 in two scenarios: if we keep the same market share in each market (scenario 1), and if we gain market share by 2% in each market (scenario 2):

What do we see? Even if our addressable market is growing with 20%, our turnover will only grow with 9% -even if we keep the same market share in each product-, resulting in a decline of 4% in market share. And what if we gain 2% market share in each product? Our turnover would grow by 14%, still resulting in a market share decline of 2%.

This example is extremely simplified, of course, but the fact remains that you will always lose market share on your overall addressable market if you have a lower than 50% market share in the areas with the highest growth.

And in a way this is a good sign ! It does mean that you are present in markets that have growth potential for your business, either by a strategy of taking market (share), or by organic growth. However, to stop the overall market share bleeding, you should aim at a market share of above 50% in these markets.

To get back to your seventh myth: no, the interpretation of market insights is not always that simple, even if you have reached a sufficient level of granularity. All too often simple conclusions are drawn over market data, while they just require some further manipulation in order to draw the right conclusion from them, like we just did with our market share scenarios. 

What this Blog is about...

This Blog is especially design to bring the complete content of my book "Market Intelligence for corporate decision makers" to you, for free. Follow each chapter as it appears daily, and feel free to comment or make suggestions on how to improve its content. After all, this book is meant to stir your imagination, and to launch a valuable discussion, so keep in touch !