(2.1) Myth 1: Market intelligence is expensive

Let me be clear here: a great deal of strategic questions will require a considerable amount of investments to answer. But certainly not all of them! Much depends on the level of accuracy that is needed, as well as the precise moment at which conclusions can be drawn from the available insights.

In general, following relationship can be distinguished between the cost of obtaining strategic insights, and their accuracy:

Simply put: the more accurate the insights need to be, the higher the investment that will be required. A 20-80% rule could be applied here: the efforts to obtain the last 20% of accuracy could very quickly require 80% of the resources. So the question arises: is the 20% incremental accuracy really needed?

Very often, it is not.

Using the chart above, we could make the distinction between four ‘phases’ when collecting market insights:

1. Creative knowledge

Decision takers, and the teams supporting them, tend to forget this simple fact: a lot of information can be obtained with relatively little resources (I will provide a couple of practical examples of this in the next chapter). These insights are ‘creative’ in the sense that they are based on freely available information, but require some manipulation in order to turn them into meaningful insights.

In this phase it is crucial to tap into new sources of information, sources that are frequently forgotten in typical market intelligence efforts like internal data obtained from business intelligence or the knowledge that resides with your employees but is mostly unrecorded.

Strangely enough, many organizations are under-utilizing these two sources.

The business intelligence function is very often separated from the market intelligence function, while combining both can very often help to explain findings from either one of them, for instance when exploring the reasons behind shifts in market shares. In the next chapter I will provide a practical example of how a combination of market and business intelligence can provide some valuable strategic insights.

Another source often forgotten is the knowledge that resides with the employees of an organization. Despite all the efforts in CRM and customer relationship databases, much of the information that employees collect about the market is plainly lost, or –at best- collected in ways that don’t necessarily make the best use of it. I will discuss this more in depth as well in the next chapter.

Apart from business intelligence and employees, plenty of valuable information can be collected from freely available sources. Databases from government or supra-national entities, from industry federations or analysts, can in many cases form an excellent and sometimes sufficient basis to build your market insights on.

These sources sometimes require some time to deal with efficiently, but once you get acquainted with them they will provide a wide range of insights.

The practical examples in chapter 2 aim at showing how you can maximize the value of this phase 1.

2. External endorsement

For the majority of decisions, relying on internal or freely available data will not be sufficient. The insights obtained might not provide a sufficient level of certainty, or some vital information might just not be available.

At that point a need for an external market research bureau will emerge. Virtually all industries have specialized research companies, from Gartner and IDC in the technology sector, to GfK and Nielsen in the consumer business. For competitive assessments one can rely on companies such as Fuld. For more specific queries one might try out some Indian market research companies such as Infinity.

Regardless of which (type of) research company you ultimately work with, what is certain is that it will lead to additional costs. How much precisely will quite obviously depend on the exact nature of your question. The natural inclination of many decision takers is to ask for much more information than what is actually needed, or to phrase the research question in vague and general terms. Having as much information as possible, even if it is not directly relevant to the decision under investigation, seems to increase the level of comfort of decision takers. However, the risk is to be drawn in an overload of information, and to end up spending much more than what is actually needed.

3. Inefficiencies

 If you keep on spending money to obtain additional information, you could rapidly find yourself in the phase of inefficiency. In this phase, you might very well find yourself spending 80% of the efforts to increase the accuracy of the insights with 20%. This sometimes makes sense, but very often does not. The ultimate question you need to ask yourself in this phase is:

Would any additional information alter my decision?

Dependent on the quantity and quality of the information you have collected at this stage, the answer to the question here above will frequently be negative. Your decision is already taken, or your gut feel will have completed the missing information already. The only argument that would justify the collection of additional insights is to give more weight to your decision, for instance to convince stakeholders such as employees or shareholders of the validity of your decision.

It is a thin line to cross, and it is one that is not determined by exact science. There is no way to know when the line is crossed, but it is nevertheless something we need to take into account while gathering and building market insights.

4. Delusion

To put it bluntly: in most markets it is impossible to obtain a 100% accurate view. Take the information technology (IT) industry as an example. Would it be possible to have an accurate view of the IT spending in a given market, say, France? No way. Even if you would ask all IT managers in France for their current and future budgets, it would still not give you an accurate view of the overall IT spending. For one thing, the result would not take into account what is called ‘shadow IT’, spending on technology done by other departments that are not included in the official IT budgets (the so-called ‘shadow IT’). But even if you would ask other departments about their spending on technology and add this to your prior query of the IT budgets, it would still not provide you with an accurate view of future spending, since even IT budgets sometimes are subject to changes.

Point is, in most markets a 100% accurate view of its current and future size is impossible (there are a couple of exceptions to this, as we will see in the next chapter). But should this really matter? Let us investigate this with the next myth.