Insights vs. Independence: The Business Of Buying Market Research

A few weeks back, Dean Bubley of Disruptive Analysis posted a research note titled, “The rise of the Independent Analysts.” It’s well-written and, like most of what Dean does, meant to be thought-provoking. For those without the time to read through it all, allow me to summarize.

• Many buyers of telecom market research never look beyond the larger research firms, the household names of market research.
• This is a shame because “rarely” do larger firms call out the fallacies prevalent in many instances of industry group-think. Likewise, “few of the bigger houses are adept at spotting or predicting the next big thing.”
• In part, this disconnect stems from a conflation of telecom market research and IT market research where “analyst influence” is a bigger deal. This, too, is misguided because telecom and IT markets are different.
• To “spot opportunities, and painful problems” telecom companies should budget no more than 50% of their spending on larger firms, dedicating the rest to smaller, disruptive thinkers.
• Dean himself travels to visit many companies – big and small – in the telecom sector. [Ed. Note: Yay Dean!]

Again, I’d be hard pressed to argue that it’s not a well-written piece. Personally, I really like the nuance of the title. Naming his own firm “Disruptive Analysis,” it is Dean’s stated mission to get a “rise” out of people. What’s more, the term “Independent” covers both the notion of being free from outside influence and the notion of being a smaller firm. Lots of layers here people!

Unfortunately, the conflation of concepts – how analysts work, the roles they serve, their own interests – is a theme that continues from top to bottom in the opinion piece. Whether this is a function of self-serving disingenuousness, or a fundamental lack of understanding of the market research business, I don’t know. However, as companies across the telecom value chain think about the best way to allocate their market research spend, there’s no denying Dean’s central tenet that we need to look beyond any specific analyst biases…or at least understand where those biases exist. To this end, I’d like to outline a few basic realities of the telecom market research business from the perspective of an analyst who’s worked at a smaller firm, his own firm, and for a firm that’s evolved from small to medium-sized over the last decade or so.

• Independent vs. Independence? The notion that smaller research firms are more likely to be free from bias or influence (aka “independent”) runs completely counter to reality. Empirically, I think we’ve all seen this. We all know the smaller white-paper shops who exist only to parrot the views of their corporate sponsors. Of course, “independent” and “independence” are not mutually exclusive, but being in no way implies that you’re a disruptive thinker. In fact, being small can make “independence” much more difficult. Why? It all comes down to money. As one of MY favorite independent analysts – name redacted to protect the innocent – recently pointed out, you need to consider the role of revenue proportionality. If a Gartner analyst “gets disruptive,” speak the truth, and lose the company a $100,000 customer, that’s probably not going to get the analyst fired much less take down the entire firm. If a smaller shop loses a customer of that size, the impact could be fatal. The potential for influence is that much greater.
• Independent vs. Insular? Back in high school I had a friend who fancied himself an anarchist. When he ran for the student council, he had to explain how his belief in anarchism aligned with the concept of student government. His answer: you need to understand an organization if you hope to overthrow it. It’s wrong to imply that large analyst shops are less controversial for fear of disrupting the vested interests of their customers. It’s just as wrong to imply that you can understand the market’s problems without being closely tied to its players. Would it make sense, for example, for someone who hoped to give guidance on complex wireless telecom issues to skip out of Mobile World Congress? Of course not. That would just be fundamentally foolish or the hallmark of someone who thinks there’s nothing they need to learn. Whether you fundamentally agree or disagree with the views of the industry’s players, you need to understand them: first, as a check against your own views; then, as a tool for helping to get your views across. After all, being disruptive simply for disruption’s sake is no better than mindlessly touting the company line. It’s really the same thing. Just the line is different.
• Why Buy Research – Part 1: There’s No Single Answer. Implicit in any argument that larger market research firms aren’t always adept at predicting the future or lending market insights is a fundamental fallacy: the idea that forecasting, or simply pontificating about, the future is an analyst’s #1 job. Oh, I’m sure that this is what many people think. It is a romantic vision of the analyst’s life – hobnobbing with the C-Suite and lending guidance on strategic directions (while smoking a pipe and wearing a tweed jacket with leather elbow patches). It’s also a vision that ignores all the other roles an analyst shop serves: basic data collection and analysis, market share estimation, message testing, survey and panel-based research, sales force education, external PR support, etc. Even if smaller analyst firms could serve all of these needs at industry scale, any benefit they might (dubiously) claim from “thinking outside the box” is relatively moot across many of these roles. The scale efficiencies, process, and distributed workforces that larger firms can tap (or smaller firms when working in tandem), however, deliver value that is much harder to argue.
• Why Buy Research Part 2: If You Need a Single Answer, Follow The Money. Back in high school, I imagined an adult version of myself keeping two trusted advisors in his constant employ. One would be a yes-man. The other would be more realistic. They’d always be available to tell me when an idea was great, or not so great; I’d make my own decisions, but they’d help me make the right ones, or just help me feel good about decisions I’d already made. Needless to say, I don’t have the income to fulfill this lifelong dream. When I do pay someone for advice, it’s around things like my taxes or investments. That’s right, I expect a real return on the advice-investments I make. Companies who buy telecom market research do too. Why do companies spend so much money on Gartner? I can’t speak for every single one, but I suspect it has something to do with the fact that Gartner’s Magic Quadrant (like it or not) opens doors for sales teams; whether or not you’re well positioned in it, you probably need to understand it. Why do people spend money with Current Analysis? (my employer) We arm sales and marketing teams with insights that help them compete and serve as sounding boards for execs as they form their product positioning messages. It’s nice to suggest that 50% of research spend should focus on smaller firms. It’s much more responsible (and realistic) to suggest that 80% of research spend (if not more) should link directly to a return on dollars invested.

Dean was very careful not to indict every large analyst firm in his initial analysis. In the same vein, I would be dead wrong in implying that small firms add no value to the telecom and IT market research spaces – diverse opinions help to move the market forward and drive discussions that uncover the truths underlying market evolutions. Ultimately, however, anyone procuring market research support needs to understand that the goal isn’t always “uncovering truths,” but that when it is, analysts who are actively engaged with the industry are in a solid position to help. Likewise, it’s important to remember that being contrarian, sometimes for its own sake, isn’t actually the same thing as uncovering the truth. In many cases, this sort of disruption does little more than create additional clutter that makes the truth more difficult to see.