The Analyst Halo Effect: Challenging Size Bias in Analyst Relations Awards
Duncan Chapple
Analyst Relations lead for Elisa Industriq & Elisa Polystar @ SageCircle | Analyst Observatory co-director @ Edinburgh University
The decades-only "Analyst Halo Effect" - where industry analysts consistently perceive larger technology vendors more favourably than market metrics would suggest - extends deeply into how we recognize excellence in analyst relations. A great example is the awards for analyst relations teams from the IIAR>, the analyst relations association, which SageCircle discussed last week. More than 20 years ago, research at 法国EDHEC高等商学院 revealed this effect influences everything from daily analyst perceptions onwards, raising important questions about how we measure AR success.
Quantifying the Perception Gap
EDHEC's research showed that vendors with larger market capitalizations receive more favourable analyst ratings and recommendations. Specifically, vendors rated above the median in analyst recommendations represented approximately 70% of the total market capitalization in the sample studied.
Since then, similar research at Kea Company | Analyst Relations and SageCircle has shown a striking disconnect between analyst perceptions and market reality. While companies with large market capitalizations get more than their fair share of positive analyst recommendations, their actual market performance often doesn't justify this confidence. For instance, when EDHEC analyzed industry analysts' perceptions of companies' stability against their actual volatility (beta), larger vendors consistently received more favourable stability ratings than their market metrics warranted.
The Scale Advantage in Awards
This perception gap manifests clearly in industry recognition like the IIAR> awards, which have favoured large enterprises with substantial market momentum for over a decade. While Microsoft's AR team undoubtedly delivers excellent work, the persistent dominance of $30bn+ technology giants in these awards reflects deeper structural advantages beyond pure AR excellence.
Understanding the Drivers
Three key factors create this bias toward larger organizations:
1. Communication Resources
Larger vendors can maintain more frequent analyst contact - the SageAnalysts research shows vendors averaging 2-3 meaningful interactions monthly receive significantly better perceptions. While smaller organizations often achieve similar quality in their interactions, they typically can't match the frequency.
2. Information Access
Major vendors provide analysts with deeper access to subject matter experts and executives. Our studies show this comprehensive information sharing correlates strongly with lower perceived risk, regardless of actual market metrics.
3. Relationship Development
Larger AR teams can build and maintain relationships across a broader analyst ecosystem. The research demonstrates that relationship quality significantly influences overall vendor perceptions and recommendation likelihood.
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The Mid-Market Reality
In a LinkedIn thread about the IIAR's awards, Susan Tonkin of Wrike observes, mid-sized vendors often must work harder to achieve impact with limited resources [Disclosure: I contract for Elisa , which is a Wrike client]. Mid-sized vendors can't treat analyst content licensing as a routine expense but must carefully orchestrate campaigns to demonstrate value. This reality extends across all aspects of AR programming - smaller teams must consistently do more with less.
Measuring True Excellence
Industry analyst Merv Adrian at BARC captures the core challenge: "Market impact measured by revenues and customer numbers is what vendors will pay for. 'Punching well above your weight' is only visible if you adjust for size." This suggests the need for new evaluation frameworks that account for organizational scale.
A Framework for Change
To combat the Analyst Halo Effect in industry recognition, we need new approaches that:
To do this, SageCircle has developed an analyst relations diagnostic test, SageScore, and. more extensive audit tools.
Moving Forward
The Analyst Halo Effect reminds us that the appearance of superior performance often reflects structural advantages rather than superior execution. As the SageAnalysts research shows, smaller organizations frequently match or exceed larger competitors in the quality of their AR programming, even if they can't match them in scope.
This doesn't diminish the achievements of large AR teams but suggests we need more nuanced ways to recognize excellence across the industry. True AR innovation often emerges from teams that must maximize limited resources through strategic focus and creative approaches.
Industry awards and recognition systems should evolve to identify and celebrate these achievements, ensuring we measure what matters rather than simply reinforcing existing market advantages. Only then can we foster an AR community that truly celebrates excellence in all its forms.
For deeper insights into measuring AR effectiveness or strategies for optimizing programs at any scale, get in touch. SageCircle will shortly publish a follow-up post about SageScore, which is online at https://analyst.scoreapp.com/
During my time at Gartner, I was frustrated by this effect in my own research and thought about it a lot. There are two important factors (at least) playing a role here: - Analysts like to have and management increasingly demands "objective" criteria in formal evaluations. Big vendors are likely to post better answers for things like geographies served, languages supported, number of support personnel, partner network... The larger organization has a natural advantage with this kind of criteria. - Formal evaluations like MQs, Waves, Funnels or Spirals naturally focus on lagging indicators. They rate established markets in well-defined product areas. Smaller vendors often innovate by crossing these market boundaries and forging new product areas. That means they will necessarily score lower in these ratings even though that is exactly what they should be doing. I don't have a way to fix this bias, but it is important to understand that it is there.
Marketing Director - Dialog Network Associates (DNA)
3 个月Very helpful
Duncan - My big aha in the last few years - and some of it comes out in the fiction mystery I am about to release - The AI Analyst - is that analyst market categories are too slow to evolve and therefore tend to favor established vendors with older maintenance revenues. There are so many new vertical edge applications and global nuances which deserve their own categories but most analyst firms cling to much coarser definitions from the 90s or even earlier - ERP, CRM etc.
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3 个月I suspect that laying in the many cognitive biases will reinforce your conclusions. Have you looked at that?
Helping CIOs & CFOs create the ROI and strategic business cases for better AI and IT FinOps
3 个月Larger analyst firms are more likely to have revenue and market size as an explicitly defined metric to define the favorability of a vendor, even beyond the point where revenue defines market viability. One thing I rarely hear from mid market vendors is a simple question: in your inquiries, how do I get recommended over larger market leaders? Also, smaller vendors tend to treat analyst briefings more perfunctorily than larger vendors. The pitches I get from less mature vendors often would have gotten them tossed out of any RfP I would have run as an enterprise buyer. There just isn’t much focus on the firm’s key categories or interests.