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Market intelligence for decision makers - ideas on how to make corporate decision making more data driven with minimal efforts and costs

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Ideas on how to make corporate decision making more data-driven at minimal efforts and costs

Ideas on how to make corporate decision making more data-driven at minimal efforts and costs

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  • 1. Market Intelligence for decision makers Ideas on how to make corporate decisions more datadriven with minimal efforts and costs Frederic De Meyer
  • 2. ©Institute for Future Insights (i4fi) 2014 Koning Boudewijnlaan 22 (BE) 9840 De Pinte +32 478 68.13.08 www.i4fi.com www.fredericdemeyer.com @fdemeyer Market Intelligence for decision makers Frederic De Meyer – i4fi 2
  • 3. Content Introduction 1. Debunking myths about market intelligence 1. Myth 1: market intelligence is expensive 2. Myth 2: market intelligence should be 100% accurate 3. Myth 3: market intelligence is complex 4. Myth 4: only external agencies can provide market intelligence 5. Myth 5: market intelligence is cumbersome 6. Myth 6: market intelligence is unambiguous 7. Myth 7: understanding market intelligence is easy 2. Some examples of how to build market insights to support strategic decision taking in specific areas… all by yourself ! 1. understanding your business environment 2. prioritizing investment decisions 3. assessing your competitive situation 4. get value from account planning 5. innovate based on megatrends 3. Ideas on how to implement a market intelligence practice in your company 1. a full time job, or not? 2. Who to report into? 3. Which frequency of reporting? 4. Which communication means to use? Market Intelligence for decision makers Frederic De Meyer – i4fi 3
  • 4. Introduction Market Intelligence for decision makers Frederic De Meyer – i4fi 4
  • 5. A s a corporate decision taker you undoubtedly have to deal with tough decisions. You are most likely to rely on your experience and your gut feel in making these decisions. This makes sense. After all you often don’t have the time, the resources or the budget to look for market insights to support your critical decisions. Market insights, at least reliable ones, might not even be available. But how does this influence the outcome of your decision? Wouldn’t it make you feel more comfortable to have at least some neutral proof points? Wouldn’t it make it easier for you to communicate your decisions, or have them accepted, if they were based on clear and undisputable facts? While this is not always achievable (especially the ‘undisputable’ part), in many cases the most obvious and freely available sources are disregarded. With a little additional effort, more sophisticated insights can be obtained that enrich your decision processes in very profound ways. This book aims to give you some concrete examples on how to do this. For instance, how often do you search your competitors on Youtube? You would be surprised to see how many employees, both senior and junior, post critical business information on this media. From loose interviews with sales managers at trade fairs, to footages from keynote speeches at the yearly sales meetings, you are likely to discover new insights from your competitor more quickly than if you would wait for your competitor’s quarterly analyst calls. Or take another example. Let’s say you are a provider of medical devices, actively looking to expand to new geographical markets. You would be surprised to find out how much freely available information you can retrieve from the databases of the OECD, the IMF, the Worldbank or the World Economic Forum, with which you can prioritize your next expansion investments. Surely, these databases take a little effort to learn how to use them efficiently, but once you do a valuable stream of frequently updated and reliable information is at your service to base a huge amount of critical business decisions on. Market Intelligence for decision makers Frederic De Meyer – i4fi 5
  • 6. This book aims to show you how. Through many examples and practical advice, we will show that building a market intelligence practice should be neither time or budget consuming, nor should it be complicated or cumbersome. At any rate, it should form a valuable contribution to the majority of decisions you have to take. The first chapter of this book will demonstrate that many of the ideas –let us call them preconceptions- we have about market intelligence are flawed. We will, in other words, demystify certain myths some decision takers might still have with regard of using market intelligence for their decisions. In the second chapter, we will use some of the conclusions of the first, and apply them on specific business practices such as competitive analyses, long-range planning, business environment assessments and account planning. The aim of this chapter is to demonstrate that building market insights is well within the capabilities of any decision taker that cares to invest some time in collecting data and translate it into a usable, conclusion-driven form. In the third chapter we will briefly elaborate on setting up a market intelligence practice within a business organization. I am well aware that this is a risky task. There is by no means a ‘one size fits all’ answer to this type of questions. Furthermore, dependent on your industry and company size you might very well already have a performing market intelligence team in place, so you might find the recommendations in this chapter very futile and light. Or, on the other side of the spectrum, you might be a startup with very little budget to spend on market intelligence, let alone build a team for that matter, so the advice in this chapter might come to you as an inaccessible dream. Each situation will require a different approach, for sure. But my hope with this chapter is to at least provide an idea of how a ‘standard’ market intelligence practice might look like, say, in an average sized company with limited resources to spend on market intelligence. We will discuss the structure and responsibilities linked to such a practice, as well as how the people Market Intelligence for decision makers Frederic De Meyer – i4fi 6
  • 7. performing it should be measured, in other words: which Key Performance Indicators should your market intelligence resources aim for. Many of the insights I present in this book are inspired by my own professional experience, more specifically in the ten years I served in a market and business intelligence position for a global American technology company. In these years I have initiated and led a huge and varied number of research missions as a contribution to strategic decision making at EMEA level (Europe, Middle East and Africa). These projects ranged from strategic planning, competitive assessments, strategic account programs, balanced scorecards, investment prioritization and goto-market optimization, to name just a few. The target audience for these projects was extremely diverse, ranging from senior corporate decision takers to local business developers and sales teams. It is this huge and varied number of market intelligence missions that inspired me to write this short book. Due to time or budget constraints I was very often pressured to focus on the most relevant pieces of insight to support a decision, or to make sure the information I spread was useful to as many stakeholders as possible. On the other hand I needed to make sure the insights I produced generated a tangible impact, which was particularly challenging due to the very diverse nature of my stakeholder base. However, these challenges inspired me to break loose from ‘traditional’ ways of obtaining market insights, be creative with finding and utilizing market sources, and build automated processes to turn data into decision improving intelligence. The fact that so many of the insights and ideas in this book originate from my own professional experience, also forms one of its major shortcomings. After all, the majority of my professional experience was situated in a business-to-business environment. I can only hope the thoughts expressed in this book will be of use to professionals in a business-to-consumer environment, but I can offer no guarantee Market Intelligence for decision makers Frederic De Meyer – i4fi 7
  • 8. they will. Also, while I will provide loads of examples of different industries in this book, the variety of business functions I will use for these examples will be limited. After all, there are some business functions I know nothing of, like logistics or supply chain management, so I will not fake any knowledge in these fields. Rather, the examples I will use will mostly align with the marketing, operations, finance and corporate strategy aspect of businesses. Lastly, since the main source of inspiration of this book is my actual professional experience, it has no academic aspirations whatsoever. No academic work has been consulted while writing it, and even in its structure and form this book will come nothing close to an academic paper. But then, neither is it intended to be one. Despite these shortcomings I trust that this book can be of use to any professional dealing with difficult decision making, be it as a source of inspiration, or –if nothing else- as a showcase of how a little creativity and a little time-investment can be sufficient to make decision taking more insight-driven, and hence more successful. A final word to close this introduction: this book contains a fair deal of tables and graphics. I do realize some readers might get a feeling of repulsion at the thought of it. Indeed, some parts of this book will require some attention, even some thinking from its readers, in order for them to comprehend the precise meaning of the ideas and thoughts expressed in it. On the other hand, this book is aimed at professionals that shape the strategy of their business, which is hardly ever done without numbers and graphics, so I expect the majority of the readers will already be comfortable using them. The aim of this ‘pictural’ approach is also to demonstrate how visuals can truly help decision taking, much more than numbers, and hence can contribute tremendously to better decision making. I guess no decision taker will be reluctant to this prospect. Frederic De Meyer January 2014 Market Intelligence for decision makers Frederic De Meyer – i4fi 8
  • 9. Debunking myths about market intelligence Market Intelligence for decision makers Frederic De Meyer – i4fi 9
  • 10. T he fact that relatively few companies have a dedicated market intelligence practice in place is most probably due to a couple of misconceptions about the exact nature of this activity, as well as its consequences. Decision makers might find the outcomes of market insights inevitably unreliable, not worth the expenses, or too cumbersome a process to have resources focused on it. In this chapter we will discuss the most common of these misconceptions or ‘myths’, and along the way we will show how some fair level of market insights could be built easily and at virtually no cost, as a valuable input for the market decisions corporations make. 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 10
  • 11. 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 11
  • 12. 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. Market Intelligence for decision makers Frederic De Meyer – i4fi 12
  • 13. 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 supranational 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 Market Intelligence for decision makers Frederic De Meyer – i4fi 13
  • 14. 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 Market Intelligence for decision makers Frederic De Meyer – i4fi 14
  • 15. 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. Myth 2: market knowledge should be 100% accurate Since in most cases the size of a market cannot be measured with complete accuracy, it means that in most cases we will have to use a model of some sort in order to perform this task. Such models will be more or less accurate according to the specific market we are in, or, to be more precise, on the availability and the nature of the ‘keys’ we will use in the model. If, for instance, we would want to size the potential for private energy consumption in a country, we could make a calculation based on: 1. The number of households in that country (a number we can track and predict with relatively high exactitude); 2. The average number of persons in a household (a number we can track accurately in the past, but for which we will have to make some assumptions to take its future evolution into account); 3. The average energy spending per household, broken down in spending that is household specific, like house-heating, and person-specific, like the energy consumed for personal care (these numbers will already be harder to track or to predict); Market Intelligence for decision makers Frederic De Meyer – i4fi 15
  • 16. 4. Last but not least, we will have to take into account the probability and the impact of exceptional circumstances, like extreme weather conditions (we might be able to track the historic impact of these, which, in combination with the likeliness of extreme weather, could provide us with a probability range of private energy consumption). This –simplified- example shows that we will almost always have to cope with both reliable data and uncertain figures. Things can quickly become complicated though. Just compare the previous example –sizing the market for private energy consumption- with sizing the market for sun protection products or Chinese readymade meals, you will quickly find yourself dealing with many more uncertain factors to take into account. Obviously, the more uncertain elements you put in your model, the less accurate the ultimate outcome will be. But should you really matter? I know this will make a lot of corporate decision takers feel uncomfortable, but the answer to this question is: no! Fact is, virtually all decisions will be taken somewhere in the middle of the costaccuracy curve we showed earlier: To demonstrate this: let’s say your company is active throughout Europe and you are soon to launch a brand new product peripheral to your current product portfolio. Market Intelligence for decision makers Frederic De Meyer – i4fi 16
  • 17. Your resources are limited however: you only have one business developer and two sales managers to support the launch of this product, and your marketing budget is rather limited as well. Ultimately you will have to answer this critical question: which markets should I focus my resources on in order to maximize my return? We will develop this case in more details in the second chapter. The point we want to make here is that your choice to focus on country A rather than on any other country, will in most cases be made surprisingly early in the intelligence gathering process: 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 17
  • 18. 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. Market Intelligence for decision makers Frederic De Meyer – i4fi 18
  • 19. 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… Myth 4: only external agencies can provide you with the necessary information 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. Market Intelligence for decision makers Frederic De Meyer – i4fi 19
  • 20. 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. At the end of this book you will find a list of these sources. 2. Consultants Market Intelligence for decision makers Frederic De Meyer – i4fi 20
  • 21. 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 ! Market Intelligence for decision makers Frederic De Meyer – i4fi 21
  • 22. 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. Myth 5: market analysis 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. Market Intelligence for decision makers Frederic De Meyer – i4fi 22
  • 23. 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, but 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. Myth 6: market figures 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 Market Intelligence for decision makers Frederic De Meyer – i4fi 23
  • 24. stopped laughing, however, when I started to realize that the length –and the feverof 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: Addressable Market Size 120 100 80 60 40 20 0 Market 1 Market 2 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 24
  • 25. Addressable Market Size and share Addressable Market Size and share (scenario 2) (scenario1) 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Market 1 Market 2 Market 1 Market 2 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 25
  • 26. Strategic market positioning Market share 100% 50% 0% 0% 25% 50% Market growth Bubble size = market size 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 Market Intelligence for decision makers Frederic De Meyer – i4fi 26
  • 27. 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. Myth 7: the interpretation of market intelligence 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: Market Intelligence for decision makers Frederic De Meyer – i4fi 27
  • 28. “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: Market Intelligence for decision makers Frederic De Meyer – i4fi 28
  • 29. Market size Market size CY00 CY01 Market growth CY00-01 CY00 Market share CY00 Product 1 Product 2 Product 3 Product 4 Product 5 80 60 30 20 10 82 63 40 35 20 3% 5% 33% 75% 100% 56.0 36.0 7.5 4.0 1.0 70% 60% 25% 20% 10% Total: 200 240 20% 104.5 52% Revenues 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): Scenario 1: keep same market shares Scenario 2: 2%market share increase Market share CY00 Product 1 Product 2 Product 3 Product 4 Product 5 Total: Revenue s CY01 Revenue growth CY00-01 Market share CY00 70% 60% 25% 20% 10% 57.4 37.8 10.0 7.0 2.0 3% 5% 33% 75% 100% 72% 62% 27% 22% 12% 59.0 39.1 10.8 7.7 2.4 5% 9% 44% 93% 140% - 114.2 9% - 119.0 14% CY01 Market share: 48% Revenue Revenue s growth CY01 CY00-01 CY01 Market share: 50% 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-, Market Intelligence for decision makers Frederic De Meyer – i4fi 29
  • 30. 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’ve just done with our market share scenarios. The examples in the next chapter will demonstrate this even more clearly. For each of the examples we will provide, we will also score our ideas and recommendations on how well our advice in this chapter has served them, in other words: how our ‘myths’ from this chapter are being demystified by the examples. This will clearly be a subjective exercise. After all I sometimes use my gut feel as well. But if you disagree with it, you are invited to give feedback through my blog about the subject of this book (at the time of writing: corporatemi.blogspot.be), through e-mail (Frederic@i4fi.com) or any other channel you can reach me on. Market Intelligence for decision makers Frederic De Meyer – i4fi 30
  • 31. Examples of how to build market insights for strategic decisions Market Intelligence for decision makers Frederic De Meyer – i4fi 31
  • 32. Chapter 2: some examples of how to build market insights to support strategic decision taking in specific areas… all by yourself ! I n this chapter we will apply the advice from previous chapter on a number of very specific corporate strategy tasks. The aim here is certainly not to cover all aspects of market intelligence, nor is it to discuss every strategic decisions that could be based on these. As said in the introduction to this book, this is not a scientific work. Rather, it is our intention to show concretely how with relatively few efforts and budget, but with a solid dose of creativity, a corporate decision taker can arm himself with a sufficient load of market insights to enrich, and even improve his decision making process. 1. Monitoring your business environment A great number of industries –although not all of them- are highly dependent on the economic climate for the growth of their business. A decline of economic activity will make consumer spend less, due to increased joblessness or a wide-spread feeling of uncertainty about the future prospects of people. Since people will consume less, overall trade will decline as well. The decline in trade will then affect transport and logistics, as well as the manufacturing of consumption goods. This will then impact the manufacturers of machines and resources that are designed to manufacture consumption goods, etcetera. Our global economy –even our local one, this is not necessarily a phenomena that is only due to globalization- is so mingled that virtually any company will experience the impact of a negative evolution on its business. Market Intelligence for decision makers Frederic De Meyer – i4fi 32
  • 33. Hence the importance of monitoring this business environment. To be prepared, and eventually act on changing factors in your business environment that might impact your very own business. However, not every corporate decision taker is necessarily an economic expert, neither does he necessarily find the time to go through a vast number opaque economic reports. Nor should he. There are easier ways to assess one’s business environment. If your business is located in Europe, for instance, you could benefit from checking the official statistics database of the European Commission, Eurostat, on a regular basis. In its database you will find a vast array of data about the economic condition of the European Union member states and, for some metrics, even of other countries, in all possible forms and timeframes. The example hereafter aims at showing how this information could be relevant for your business. One of the indexes you can find in the Eurostat database is the socalled ‘Economic Sentiment Indicator’. This index is based on a monthly survey conducted with the main economic actors, both companies and consumers, and reflects the confidence these actors have in their short-term economic prospects. Any number above 100 indicates that there are more economic actors that are confident about their prospects in comparison to those that are negative about it. The importance of this index is that it is published at the end of each month and, as shown in the graphic below, there is a strong correlation between this Economic Sentiment Indicator and the overall European economy (shown here as the % quarter on quarter change of the Gross Domestic Product): Market Intelligence for decision makers Frederic De Meyer – i4fi 33
  • 34. Economic Sentiment 120 1,5 1,0 0,5 0,0 -0,5 -1,0 -1,5 -2,0 -2,5 -3,0 110 100 90 80 70 Economic Sentiment EU(26) nov/12 jun/12 jan/12 aug/11 mrt/11 okt/10 mei/10 dec/09 jul/09 feb/09 sep/08 apr/08 nov/07 jun/07 jan/07 aug/06 mrt/06 60 Economic growth (%) Correlation Economic Sentiment vs economic growth Quarterly GDP growth One does not have to be an economic genius to observe a strong similarity between both parameters, they grossly behave the same way. But the importance here is that the Economic Sentiment is a figure that is released at the end of each month, while the official GDP changes are released one or two months after each quarter! In other words: the Economic Sentiment becomes a leading indicator for the overall economy, since its patterns are likely to predict the patterns of the overall economic evolution. Hence, if your business is closely impacted by economic growth, you might get early signals of how you will fare in the near future by looking at the Economic Sentiment Indicator on a monthly basis, instead of waiting for the official GDP figures to be published. But how can you know for sure if –and to what extend- your business is dependent on the economic evolution? Here again you don’t have to be a mathematician to uncover this relationship. If in the chart above you would replace the quarterly GDP evolution with, say, the turnover growth of your company or business unit, you would virtually see whether there is a correlation or not. Market Intelligence for decision makers Frederic De Meyer – i4fi 34
  • 35. Admittedly, in many cases you would need some statistical skills to uncover the exact nature of this correlation, but mapping it on a chart is something you can do yourself, and it provides you at least with a first hint of the existence of such a correlation. Furthermore, the overall economic growth and the Economic Sentiment Index might be metrics that are too general to look for correlations with your business. You might have to drill down into the components of the Economic Sentiment (as a reminder: manufacturing; retail; services; construction and consumers), or you might need to look for a completely different metric altogether, like the Baltic Dry Index of you are in the shipping business, the Purchasing Managers’ Index if you are in manufacturing, the Industrial Orders Index if you are in the business-to-business industry or services. If the public sector constitutes an important part of your sales, you might want to monitor public sector spending metrics more closely. So, you might spend some time finding out which metrics you should use to monitor your business environment. But once you found them, they will prove an invaluable management decision tool. It is important however to notice that the type of correlations to look for are not necessarily direct, one-to-one correlations (where the patterns of two metrics follow each other in the same time lapse and to the same extend). For instance, in many cases the impact of a change in index (say, the economy of a specific country, or GDP) will have a delayed impact on one’s business, like in this hypothetical example, where it takes one quarter before the economic shifts impacts our turnover: Market Intelligence for decision makers Frederic De Meyer – i4fi 35
  • 36. Correlations business environment vs turnover (ex 1) Economic Sentiment Turnover growth (%) mrt/12 nov/11 jul/11 mrt/11 nov/10 jul/10 mrt/10 nov/09 0,0 jul/09 0,2 mrt/09 70 jul/08 0,4 nov/08 80 mrt/08 0,6 jul/07 90 nov/07 0,8 mrt/07 100 jul/06 1,0 nov/06 110 mrt/06 1,2 60 Economic Sentiment 120 Turnover growth Another situation arises when the index is impacting your business only in the direction it takes, and not in the intensity of this impact. In the hypothetical example beneath, the evolution of the economy has an impact on our business only when it changes direction: Correlations business environment vs turnover (ex 2) Economic Sentiment Turnover growth (%) jun/12 jan/12 aug/11 0,000 mrt/11 60 okt/10 0,200 mei/10 70 dec/09 0,400 jul/09 80 feb/09 0,600 sep/08 90 apr/08 0,800 nov/07 100 jun/07 1,000 jan/07 110 aug/06 1,200 mrt/06 Economic Sentiment 120 Turnover growth Market Intelligence for decision makers Frederic De Meyer – i4fi 36
  • 37. Chances are that there will be no single metric that unambiguously predicts where your business is heading in the near future. Most likely you will have to combine a number of metrics with some impact (of some kind) on your business. But this combination will provide you with a solid early warning signal of times to come. Furthermore, as the example above tries to demonstrate, you could do it with relatively few efforts and at virtually no cost at all. Now, let us look at how well this example scores on our ‘myth debusting’ dashboard. Did these examples debunked the myths about market intelligence? MI is expensive MI has to be accurate MI is complex MI requires an external agency MI is cumbersome MI is unambiguous MI is easy to enterprete For the examples in this chapter we only used freely available source, both externally and internally In this chapter we worked with indicators and estimations of correlations, none of which are 'exact' figures. We tried to demonstrate that anyone with some knowledge of spreadsheets can build the type of correlation charts, which in most cases will be sufficient to draw relevant conclusions. All the information in these examples can be collected by anyone without intervention of an external agency. Finding the relevant information and trying out different correlations to determine which ones to use can be time consuming, but whenever the metrics are chosen updating them will be easy. The results of this exercise might be prone for discussion and interpretation, for instance about the causality of the correlations. In this type of work we frequently use macro-economic data which is not necessarily easy to comprehend for everyone. 2. Prioritizing investments Corporate decision makers often have to deal with making choices based on priorities. In which country or segment will we invest? Where do we put our sales people and our marketing budget for a maximal return? In which markets will we introduce our new product or service first? These are often tough choices since they need to take into account many parameters, while not all of them are necessarily known or available. While I was working as a Market and Business Intelligence manager at an American multinational, I received plenty of such type of questions. I remember one of them very clearly, since it posed some very particular challenges. It was on a Friday late Market Intelligence for decision makers Frederic De Meyer – i4fi 37
  • 38. afternoon when a colleague called me for an urgent question –I found out most of the urgent questions tend to be asked on a Friday afternoon, strangely enough. My colleague has just been appointed to head a team that would introduce a new product on the European market. Nice challenge, except that he was given only two sales people and a very limited marketing budget. You can probably guess what his question to me was: which countries should he focus on to maximize the success of this introduction. Oh, I forgot to mention: he needed to take the decision the next Tuesday, and he had no particular budget to spend on getting data to support this decision. The technology being too new, we could obviously not rely on any existing market research to help us out. So what could we base our decision on? Actually, there were a couple of things we did know, and could use to build our market insights on. For instance, the new technology was specifically relevant for only a number of industries, and we did have some good insights in the IT budgets of these industries. Based on our previous experience, we also knew in which countries our sales channels were best prepared to introduce new technologies to their clients. Based on the same experience from past introductions of new technologies, we had a good knowledge of which countries were fastest in adopting new technologies. Very soon we came to the conclusion that the information we did have available could be categorized in three types. The first category, let’s call it ‘Business Context’, contained information about the business environment of the European countries, like economic growth projections, addressable market growth for our existing technologies and IT budget spending. The second category, let’s call it the ‘Internal Readiness’, contained internal information that provided indications of how successful the introduction of a new technology could be in the European countries, like the pace at which previous technologies were adopted by the countries, or how many sales channels we could leverage to introduce the new technology. The third category, let’s call it the ‘Industry Relevance’ contained information about the potential of the industries for which the new technology was designed for. Market Intelligence for decision makers Frederic De Meyer – i4fi 38
  • 39. We ended up with following list of metrics we could use: Business context Economic size OECD Composit Leading Indicator Economic Sentiment Addressable Market size e-Readines factor (WEF) ICT Development index (WEF) Internal Readiness Tech A 3 year growth Tech B 3 year growth Tech X total bookings to-date Tech X as % of total bookings Tech X number of potential channels Tech X bookings vs. # partners Industry relevance Retail (IT spending as % of total) Media (Digital TV penetration) Finance (Weight of Top 10 banks per country) Education (internet in schools WEF ranking) Government (IT adoption in governmental offices) (‘Technology X’ in the list designs the technology we needed to introduce. The technology was already available in the US and, while there was no special emphasis on it, already sold in the European markets. So we had some insights in the early adoption of the technology) These three categories answered three crucial questions we had to answer to make our prioritization question: - Which markets have the most favorable business environment in which the introduction of our new technology would be successful? - Which markets have shown in the past to be the quickest adopters of new technologies? - In which markets are the industries we focus on the biggest and most promising? But how could we use all the metrics above in order to answer these three questions? It is important to keep in mind here that our single aim was to prioritize the countries in which to introduce our new technology. In other words: we were trying to measure their relative attractiveness for this technology. Hence, in the initial stage at least, we could rank the countries for each of these metrics. For the first category for instance, this provided us with following view: Market Intelligence for decision makers Frederic De Meyer – i4fi 39
  • 40. This table compared countries to one another based on how well they scored on the business environment metrics. It is a ranking, so a ‘1’ indicates the best performing country. For instance: Germany is the biggest European economy and hence had the score of 1. The composite Leading Indicator of the OECD (an indication of how well the economies will perform in the near future) indicated that Greece had the best economic growth prospects, hence Greece was given a score of 1. Before you ask: this analysis was performed well before the 2008 financial crisis and its subsequent economic troubles. By taking the averages of the scores for the three categories, we obtained a solid view of the different countries’ attractiveness for the new technology, and where our investments would have the highest return. At this point, each country had three scores, which we could then map on a single chart, for instance a bubble chart (ideal when working with three dimensions). For instance, we could map the scores for the business environment in the X-axis, the scores related to the internal readiness on the Y axis, and the bubble size could represent the industry relevance metric. This would provide us with a view in which we can recognize four country segments, each with their specific conclusion for how to go-to-market with our new technology: Market Intelligence for decision makers Frederic De Meyer – i4fi 40
  • 41. “Ideal world” Countries in this segment are ideally suited to introduce the new technology in. They have a promising economic climate and have proven in the past to be eager adopters of new technologies. To realize their full potential these markets need to be addressed with sufficient focus and, eventually, budget. In our case, this would mean putting our sales resources on these markets. “Seed” The countries in the top –left segment need a different approach. These are countries that benefit from a favorable business environment, but have proven to be slow adopters of new technologies (at least ours). Sales activities in these countries are not likely to succeed quickly, at least not in comparison to the countries in the “ideal world” segment. We should rather sell the bigger picture in these markets, trying to evangelize the need for and the benefits of new technologies, and investigate which arguments might make them more favorable to these new Market Intelligence for decision makers Frederic De Meyer – i4fi 41
  • 42. technologies. One could argue this is a challenge for the marketing department, so perhaps we should reserve some of the marketing budgets for these countries. “Harvest” The countries in the bottom-right segment have shown to be smooth adopters of new technologies in the past, but the current unfavorable business environment might hinder them to be early adopters of the new technologies, at least for the time being. Though we need to prepare these markets for when the market conditions turn favorable, we should not seek to invest too much efforts in sales right now, at least not by dedicated sales people. Perhaps we need to single out top potential customers in each of these markets, and have them covered by a business development resource, or by internal sales. “Wait” Countries in the top-right segment endure difficult market circumstances and have proven to be slow or lagging new technology adopters. Given the limited resources at hand, we would not put any particular emphasis on these markets. We now obtained some insights to base our decision on: Market Intelligence for decision makers Frederic De Meyer – i4fi 42
  • 43. In our specific case we might conclude to put the two sales resources on the German and British market, if at all possible in conjunction with the Italian market. We should use our marketing budget to increase the adoption rate of Sweden, France, Netherlands and Switzerland , and invest in informing the Danish, Spanish, Belgian and Greek customers about the introduction of our new technology, perhaps through the existing sales force (which would require some additional training). Of course you will argue that the lines we have drawn to define the segmentation are completely subjective. And, indeed, if we would have had access to four sales people instead of two, we could have drawn the vertical line somewhat more to the right. The separation line is subjective, and should adapt to the resources at hand. Do not forget this exercise was aiming at comparing countries in terms of the success with which we could introduce a new technology. The chart above provides an unambiguous answer (although the metrics themselves might lead to ambiguity, dependent on which ones you chose to include). Market Intelligence for decision makers Frederic De Meyer – i4fi 43
  • 44. Working with aggregated indexes, like we have done in this example, has the advantage of including a large and varied array of arguments and parameters into our decision equation. We could refine it further by giving different weights to our parameters, favoring those we are sure to have an impact on our decision over ones that are only vaguely related to our subject. I do realize that many decision takers will not feel too comfortable with these aggregated indexes. Many will rather have the full list of parameters with their scores, eventually put in a ‘heat map’ in which they can quickly judge on the overall attractiveness of a country –and the reasons behind it. Fair enough, both views can coexist since they basically tell the same story, and the overall conclusion will invariably be the same with both views. My preference for the aggregated score originates in the simplicity the ultimate view offers, the fact that so many arguments come together in a limited number of factors. Also, many decision takers might feel uncomfortable with this exercise since it offers no guarantee of accuracy. However, we need to keep in mind the initial request when building this type of insights. The aim of this exercise was to prioritize countries in which to invest, in other words: to compare countries based on specificities that undoubtedly are relevant to our decision. Putting them together does not alter the accuracy of the picture we are building, and certainly does not diminish the degree of confidence with which we take our decision. Quite on the contrary, if we find a sufficient amount of metrics, and if these are sufficiently related to our decision, we will increase our confidence, since mistakes or misjudgments will be countered by the many other metrics that are accurate. In a way this reduces your error margin. And, as was the case with this exercise, sometimes it is the only type of insights one can build for a decision. Did this example debunk the myths about market intelligence? Market Intelligence for decision makers Frederic De Meyer – i4fi 44
  • 45. MI is expensive MI has to be accurate MI is complex MI requires an external agency MI is cumbersome MI is unambiguous MI is easy to enterprete Some factors in the index we have built originated from -expensive- external reports. Though we could have done without, the external reports helped is increase the validity of the findings. Working with multiple factors to build the index has certainly decreased the overall error margin. Though the result will not be 100% accurate, the conclusions will be trustworthy. The overall logic of this type of work can be easily explained, especially if factors are used that have a clear relationship to the decision we have to take. All the information we used in this exercise, as well as the calculations to build the conclusions, were easily performed by ourselves. Building the logic and finding the right information can be time-consuming, but the ultimate insight on which to base our decision can be very succinct. This methodology can lead to some discussions, especially on the choice of metrics to include, but once agreement has been reached it should lead to unambiguous conclusions. The ultimate picture will need some thorough explanation, but once the methodology is accepted the resulting insight should be easy to understand. 3. Assessing your competitive position Needless to say, we live in an era where most markets face an ever increasing competitive threat. Globalization and the liberalization of multiple markets have led to the emergence of new competitors with –for the moment- a significant cost advantage in comparison to companies in the developed world. Furthermore, the digitalization of businesses and the emergence of mobile communication have led to a significant reduction, if not the complete abolition of entry barriers. In many industries the competitive threat does not arise from competitors doing the same thing at a lower price or better quality, but from a completely different business model that simply replaces your value proposition. Newspapers have seen their relevance evaporate with the emergence of blogs and social media, retail companies have seen their business model pressured by the growth of online shopping, the traditional photo shops have lost much of their value to online document sharing tools such as Instagram, Picase and even Facebook. In the future, manufacturers might face the pressure of 3D printing; car manufacturers and transport might see demand for their products and services diminish with the emergence of the ‘sharing economy’; banks might be attacked in their very core business –lending money to people- by the emergence of peer-to-peer lending and crowdfunding. Competitive pressure will rise, undoubtedly. Luckily, there are now more tools available to monitor and assess this competitive threat. The days where one had to Market Intelligence for decision makers Frederic De Meyer – i4fi 45
  • 46. roam through conferences and trade fairs or spend hours analyzing the financial reports of competitors in order to assess his competitive positioning, are long gone. Youtube and Slideshare now offer valuable ways to check what your competitors are planning for the future, or even how they position themselves in comparison to your business. On LinkedIn and jobsites you can check what type of experience your competitors are currently recruiting (or which profiles are leaving the company), an invaluable sign of the strategic direction they are likely to take. Say you are in the fashion business, and you see on LinkedIn that your competitor is hiring a professional with a solid experience in developing outlet stores, it would give you a solid clue about their plans in the near future, wouldn’t it? However, all this information is rather anecdotal. It cannot be put in figures and be aggregated to a point where it would lead to relevant insights and conclusions that would help you design a successful competitive strategy. For that, you need hard facts and figures. This would be fairly easy of your market was dominated by a small amount of companies that all publish their results in full detail. In most markets, however, this will not be the case. You will have to assess your competitive situation indirectly. Provided that you have some budget available you will be inclined to pay for services like Nielsen and GfK in the consumer industry, or IDC and Gartner for the ICT industry, that regularly communicate detailed market share figures in their respective markets. However, it is important to keep in mind that these market share figures in many cases contain a vast amount of assumptions and calculations, which sometimes reduces their accuracy. Just as an example: market research company IDC bases its market share figures mainly on the input of all the vendors within a specific market. However, many of the biggest vendors provide their figures only at worldwide level, and provide some guidance on the split of these figures by region. So IDC has to make a fair number of assumptions in order to report market shares at country level, which they do by Market Intelligence for decision makers Frederic De Meyer – i4fi 46
  • 47. modeling the numbers based on –albeit sophisticated- assumptions. I know from experience that the resulting market shares often make sense in bigger countries, but much less so in smaller markets or segments. Furthermore, the definitions these research companies work with, both in terms of market segments and product or services range, do not always match with the ones used within companies, which sometimes makes it difficult, if not impossible, to use them for planning or (competitive) strategy purposes. Let me be clear here: the observations above are not meant to state that these market research companies are useless in terms of market share reporting. Far from it. If anything, the market shares these companies report do reflect trends and directions that are extremely valuable to understand your competitive position, and hence, even if sometimes inaccurate, they provide a very solid basis for further investigation. What I am saying, however, is that the market share figures from specialized companies should not be taken at face value, and should be discussed and validated internally by the people that are best positioned to assess their accuracy: your sales force. I know, this statement will make a lot of corporate decision takers quite uncomfortable. Asking the opinion of sales people about such things as market sizes and shares? They certainly are bound to minimize the former and maximize the latter, no? After all, their targets will depend on these figures! Well, from my own years of experience organizing such validation discussions, I can tell this is not necessarily the case. For one, sales people seeking extra investments in their market will be inclined to over-estimate its size instead of minimizing it. At any rate, just like data from external agencies should not be taken for granted, the view you build based on feedback from sales people should not be neither. Both are nevertheless very complementary in building a more accurate view of the market. Furthermore, there are other advantages linked to such a validation process: Market Intelligence for decision makers Frederic De Meyer – i4fi 47
  • 48.  Such a validation exercise certainly offers a chance to eliminate the aberrations of the market data you use for planning (sometimes, by comparing external market data with internal sales figures, you might find out you have a market share of more than 100%!). By building a market view with a combination of external and internal views, you will end up with a market view that is agreed on by everyone, and hence forms the best basis for planning purposes;  Dependent on the size of your business and the level of granularity you ask for validation, inaccuracies of the sales view will quickly become visible. If for a specific product or service the sales teams in ten countries tell you the market is growing with, say, 20%, but in just one other country the feedback from sales is that the market is stagnant, you know something is wrong. There might be good reasons for the sales team in this country to think their market is not growing, or they might just miss out on opportunities other sales teams have spotted. In that sense, such a validation exercise forms a very fruitful process to spot and share best practices;  These discussions are an ideal opportunity to collect and aggregate more anecdotal information, such as specific marketing actions or discount behavior of competitors in specific market segments. If such actions are spotted in a majority of countries, you will have a solid basis to draw general conclusions about your competitor;  If the reasons and the outcome of this validation process are communicated effectively, sales people will be grateful for the chance of providing input instead of having unrealistic market figures imposed on them. Many of them will therefore be very candid about their feedback on their market, and this will enrich the ultimate outcome of this exercise. Once you organized this feedback process you are confronted with a small problem: you now have two market views to work with, and they sometimes tell a completely different story. Which one should you use for your planning and competitive strategy Market Intelligence for decision makers Frederic De Meyer – i4fi 48
  • 49. purpose? There are different options at hand: you could chose to use the external market view anyhow (which will obviously frustrate your sales teams), or you could calculate the average of both views (after all the truth must be somewhere in the middle, no?), or you could use the sales view only to eliminate the aberrations of the external view, keeping the external view for all other data points. The ultimate decision should be made taking into account internal sensibilities and fair judgment, but what is certain is that you will end up with a market view that makes more sense –and is more broadly accepted- than when you would have used only one set of data. But how should you organize such a validation process? Or better: how should you make sure you organize this process without putting too much strain on your sales people? The important factor here is to construct a simple and clear overview of the information you need to validate. Using a spreadsheet program (which is to be preferred since it offers numerous possibilities to consolidate the figures in numerous ways), and assuming your sales managers cover specific segments with one or more products and services, a feedback template could look like this: Market Intelligence for decision makers Frederic De Meyer – i4fi 49
  • 50. 3 Se rv ice 2 Se rv ice 1 Se rv ice Pr od uc t3 Pr od uc t2 Pr od uc t1 Market Segment 1 …. Addressable Market (external view): current year 2 year 3 Addressable Market growth % (external view): year 2 year 3 Turnover (internal view) current Resulting Market Share (calculated) current FIELD FEEDBACK: Addressable Market (internal view): current year 2 year 3 Addressable Market growth % internal view): year 2 year 3 Market shares (internal view): current year 2 year 3 These templates should be pre-populated with as much existing information as possible or with automatic calculations. The point obviously is to reduce the amount Market Intelligence for decision makers Frederic De Meyer – i4fi 50
  • 51. of datapoints the sales teams need to validate. Some additional fields could serve to collect anecdotal information as well. We will dig deeper into this subject in the chapter about account planning, which is also a form of field feedback. Despite the value of such a validation exercise, chances are you will experience some reluctance –from either your sales force to provide you feedback, or from decision takers to take the view of your sales force into account. There is no simple way to deal with this. To increase the level of collaboration with the sales force in obtaining their feedback, you need to communicate extensively on how the results will be used exactly. Also, you will not ensure their buy-in if you just send a template like the one above, for them to fill out. Rather -if possible at all- you will need to organize oneon-one meetings with them, and eventually fill out the template yourself while discussing the market figures in the meeting. You will have noticed by now that I am a strong advocate of such a field validation process. However, I do realize that such a process is not fit for all types of corporate cultures. So what do you do when implementing such a process is not feasible in your company? You would still need to validate the market share figures and base your decisions on a market view that makes sense to your employees. One thing you could do to validate and check market share figures is to put them in a system and integrate it with internal data, basically merging market and business intelligence data into one single dashboard. You could then build a ‘logic’ in the system in order to systematically track if and where market share losses or gains make sense or not. Such a logic could for instance look like this: Market Intelligence for decision makers Frederic De Meyer – i4fi 51
  • 52. The exact logic of this validation process will of course depend on the nature of the business you serve, and the structure of your organization. But what the picture above really tries to show is the power of combining external market data with internal data, in this case to track where exactly we have gained or lost business in ‘unnatural’ ways, and whether this justifies the gain or loss in market share such as reported by external agencies. Admittedly, the exact conclusions from this work still requires some qualitative input from your sales teams, but at least it forms a solid basis to conduct these discussions. Market Intelligence for decision makers Frederic De Meyer – i4fi 52
  • 53. As a decision maker you should obviously not be involved in the gritty details of building such a tool, but it is important to stay involved at a high level, or at least to thoroughly understand the logic behind the dashboard, in order to make sure it answers all the potential questions that might arise when assessing your competitive situation. After all, such a dashboard will also serve to produce early warning signals for weaknesses in your business. At this point you have some solid -validated- insights in your competitive situation, to base your planning exercise, your strategic priorities and your competitive actions on. But are there other ways to assess your competitive situation and the potential threats that arise from it? There are plenty of them, and chances are that you already have some form of competitive watch in place. You probably even benchmark your company to that of your competitors on a regular basis. But what I have often observed is that such benchmarks are limited to comparing product features, price points and financial performance. But what about less obvious, perhaps softer aspects of your business? Can you learn something from benchmarking these? You probably would, and the exercise does not have to be difficult at all. Just select a number of metrics that are relevant and easy to check. You obviously would need to base yourself on publicly available information, and much of this benchmark would have to be based on ‘judgment’, rather than facts. Also, you will have to choose your benchmarking metrics carefully, since some might not at all be relevant for such a competitive benchmarking. If you are in the sustainable energy industry, choosing a metric like ‘sustainability image of the company’ would most probably not lead to revealing insights, since most of your competitors would score high on this metric. Finding and selecting such benchmarking metrics is obviously not an exact science, and I am sure you can define the most relevant ones for your business by yourself. But let me just highlight the categories of metrics I most often use myself, and that are resulting from doing this type of work for customers in very different industries: Market Intelligence for decision makers Frederic De Meyer – i4fi 53
  • 54. - Attractiveness as employer: in this category you might include metrics that indicate how well prepared you and your competitors are to attract and retain talented employees. You could refine these metrics based on whether your company is highly dependent on certain types of profiles, like Generation Y employees or scientific profiles. Typical metrics would include: o Focus on diversity on the workplace; o Focus on work-life balance; o Fun working environment. - Brand image attractiveness: this category includes metrics that show your attractiveness to the external world, your stakeholders. For instance: o How do you compare with your competitors in terms of use of social media? o Is the mission and vision statement of the companies future oriented and appealing to stakeholders? o Are you –or your competitors- using gamification to raise your brand awareness? - Sustainability: if you find yourself in an industry that is sensible to sustainability issues (either through regulatory pressure or because of high expectations on this issue from customers, for instance), you could include metrics like these: o Availability and level of detail of publicly available corporate sustainability report; o Publicized hard targets to improve corporate sustainability; o Communication of sustainability efforts on the homepage of the company. - Go-to-market strategy: the metrics in this category could compare your company to competitors in terms of how you go to market, for instance: o The diversity of sales channels for your products or services; o Complexity/ simplicity of the product or services offering; Market Intelligence for decision makers Frederic De Meyer – i4fi 54
  • 55. o Whether the sales channels add value on top of the core products sold through them. - Adaptability: in an increasing number of industries companies need to constantly adapt to the changing environment in order to survive. In this category you could include metrics that indicate the propensity of organizations to change, albeit because they have proven to be able to do so in the past: o Have organizations shift business focus radically and successfully in the past? o Did you or your competitors address a totally new market segment in recent years? o How many (successful) merger and acquisitions did the companies conduct in the recent past? - Strategy: this category contains indications on whether companies have a clear vision and a solid strategy to realize this vision: o Do the companies have a clear and consistently communicated global (and local) strategy? o How much do these companies spend on R&D? o How many different areas do they spend their R&D budget on? Much of the information you will have to base your judgment on can be found through publicly available sources. For instance, for the metrics contained in the ‘Attractiveness as an employer’ category we can easily check the emphasis we or our competitors put on these items on their internal or external jobsite. The strategic metrics can be checked on websites or financial reports. Once you determined the metrics you can start comparing how well you score compared to your competitors. This is easier said than done, however, since in most cases (not all of them) there are no objective measures to compare performance on. This will have to be based on judgment, but one way to make this activity easier to Market Intelligence for decision makers Frederic De Meyer – i4fi 55
  • 56. perform, is to select the undisputable ‘best in class’ for each metric, which by the way might be your own company, and to compare other companies with how well they perform compared to it. By using the heatmap functionality in a spreadsheet, you Co m Yo ur c om pa ny pe tit or Co 1 m pe tit or Co 2 m pe tit or Co 3 m p Co eti m tor pe 4 tit or 5 can start to build a very revealing competitive comparison, for instance: Internal attractiveness Programs for work-life balance Programs to increase Male-Female balance Programs to integrate disabled people Programs to integrate/hold elderly people Focus on training & development Average In this example you would see that for the category of ‘attractiveness as employer’ you score average, especially compared to the best-in-class, Competitor 2. This is mainly due to the lack of specific programs for the integration of disabled and elderly people, so the question might arise whether designing such programs would generate a competitive advantage (at least compared to your other competitors). If you do this for over twenty metrics across multiple categories, you will end up with quite an interesting view of where your strengths and weaknesses are. Sure, the point is not necessarily to copy the ‘best-in-class’ competitor on each metric, but nevertheless it will provide a good view about the areas in which you absolutely need to improve in order to maintain or enhance your competitive position. Sure, I do realize that many decision makers, again, will be uncomfortable about conducting such an exercise. After all, the scores are merely based on personal judgment (although you could ask different people in your organization to make the judgment, which will level out eccentric judgments). Furthermore, the judgment is solely made based on publicly available information, so how can we be sure not to miss out on important strategic information that is not communicated publicly? Market Intelligence for decision makers Frederic De Meyer – i4fi 56
  • 57. These are fair points, but they miss the whole point of this exercise, which is to make a comparison of how stakeholders (who have only publicly available information to base their own judgment about a company on) might view your company and your competitors, and based on this make choice that are important to you, such as where to apply for a job, or which brand to stay loyal to. Of course this is not exact science, and neither is it designed to be. It is an exercise to generate new ideas and inspire fruitful internal discussions. Did these examples debunk the myths about market intelligence? MI is expensive MI has to be accurate MI is complex MI requires an external agency MI is cumbersome MI is unambiguous MI is easy to enterprete Most activities explained in this chapter will not require any investment, except perhaps the business intelligence dashboard to explain the moves in market shares. As explained in this chapter, most market share and competitive information will not be 100% accurate, but the value of the insights resides in qualitative rather than quantitative insights. Most of the insights we have built in these examples are simple, with the exception of designing the logic behind the business intelligence tool. In most cases we will have to rely on market share data from external agencies, at least to have a basis for further investigation. Finding and collecting competitive information will be time consuming in most cases, but the reporting of the insights should not require lengthy documents. The methodology for competitive analysis can be prone to discussions, but once agreement has been reached it should lead to unambiguous conclusions. The insights and the conclusions drawn from competitive positioning should, in most cases, be easy to understand. 4. Innovation based on megatrend assessments Very few companies take into account long-term trends or trends that have no direct impact on their core business in their (strategic) planning. Nevertheless, big political, societal or environmental changes do have a direct or indirect impact on virtually all businesses. Analyzing these trends and their effect on one’s business can reveal innovation opportunities, as well as potential threats to your business. In my previous book “The impact of megatrends on your business” I explained in depth how these type of trends can affect industries and how corporations can use these trends to improve the success of their business. For the ones that haven’t read the book I hereby give a short summary, since this exercise also provides an example Market Intelligence for decision makers Frederic De Meyer – i4fi 57
  • 58. of how, with relatively few resources, we can build a market view that enhances our decision making process. There are in fact numerous ways in which companies already prepare for the opportunities linked to long-term trends. We previously discussed the introduction of the Nano, the cheapest car on earth developed by Tata Cars, specially designed to serve the rising middle class in India. A more sophisticated example is technology giant Cisco’s ‘Health Telepresence center’, a small mobile room in which people can consult doctors from a distance, as a response to the challenges linked to the ageing population as well as the increasing ‘war for talent’ (an indication for the fact that there will be less doctors per patient in the future) . There are examples of how companies can be threatened if they do not take longterm trends into account as well. Take Ford, who almost went out of business early in its existence, for sticking to its standard models while consumers were increasingly desiring custom made models. Coca Cola was boycotted for many years throughout India, losing millions of dollars in lost turnover, for its spoilage of water in one of its plants in Kerala, a region that is increasingly challenged by water shortage (this lead Coca Cola to review its manufacturing process in order to more efficient with its usage of water –it since even won sustainability awards with its newly designed practices). Other companies like Siemens reorganized in a way in which each business unit is focusing on resolving challenges linked to megatrends. What these examples demonstrate is that megatrends ultimately affect all businesses, and lead to opportunities to innovate, or to prepare for new threats. But how exactly do you take these megatrends into account in your strategy? There is surely not just one single, optimal way of doing this. But let me just explain the most easy one here. The most easy way to start is to organize internal brainstorm sessions around a number of (mega)trends. Take about ten people in your team or your organization, Market Intelligence for decision makers Frederic De Meyer – i4fi 58
  • 59. preferable with a mix of gender and level of seniority, and have them select a number of trends they believe would have the biggest impact on your business. You could for instance use post-its to let people make this selection: In a second phase you ask the participants to discuss their choices and select three trends that form the biggest opportunity for your company, as well as the three that form the biggest threat: In the last stage you ask the participants to brainstorm on ideas of how the company should react to the opportunity or threat, and make a selection of the best or most impactful idea: Market Intelligence for decision makers Frederic De Meyer – i4fi 59
  • 60. The exercise above is a brainstorm exercise in its most simple form, but it can already lead to some revealing ideas and conclusions. This will particularly be the case if you break down the participants in smaller groups of four to five people and let them do the exercise autonomously. Comparing and discussing the end result is very often an enlightening experience! This exercise can also take more sophisticated forms. For instance, in the second phase of the exercise above you could ask the participants to look for relationships between the trends they selected, and build a true story explaining how these relate to your business environment. Or you could take Alexander Osterwalders’ business model canvas as a starting point, designing the processes of your industry and subsequently map the trends that are affecting the different components of your business model: Market Intelligence for decision makers Frederic De Meyer – i4fi 60
  • 61. To determine which trends to take into account initially, you could organize a survey amongst the participants prior to the brainstorming session, or you could check the list of megatrends that I currently monitor, which you can freely download on my blog (fredericdemeyer.com). Such a megatrend assessment will lead to ideas for innovation, but it can also become a good indication of where your business is heading in the long run. By analyzing and mapping how your client segments would be impacted by megatrend you can have a sound view of how healthy your prospects are –especially if you map the weight of these clients in your overall business as well, like in the example here under: Market Intelligence for decision makers Frederic De Meyer – i4fi 61
  • 62. Trend 1 client segment 1 client segment 2 client segment 3 client segment 4 Trend 2 Trend 3 Trend 4 -5 -5 -3 -2 0 2 -2 -3 2 -1 3 3 4 2 5 5 weight of turnover: 60% 20% 10% 10% In this simplified example one can see that the biggest client segment is threatened by a number of trends. This would naturally lead to a number of questions: how will this affect our business? Is there any way we can help our clients in segment 1 preparing or countering the threats emerging from these trends? Should we try to be less reliant on these clients, and focus on developing clients in segment 4? You see that developing such a view will make you understand your clients even better, which in turn might lead to more meaningful discussions with them, and eventually reposition your sales messages and your products or services to serve them better and increase your future performance. To assess the impact of megatrends on your business and determine how (or if) you should react to them, you can map them according to how impactful they are on your core business –for instance on the X-axis- and the level at which you (or your industry) have some kind of impact on these trends, for instance on the Y axis. The resulting picture will bring the trends in four segments, each leading to different conclusions as to how to react to each trend: Market Intelligence for decision makers Frederic De Meyer – i4fi 62
  • 63. Aware Trends in the bottom left segment have no direct impact on your core business, and you don’t have any type of impact on them. You can afford to neglect them, although it might be worthwhile to keep monitoring their evolution. For instance: a retail chain specialized in local food might not evidently be impacted by the globalization trend. However, it needs to monitor this trend since it might lead to new forms of competition in the future. Monitor Trends in the bottom-right segment will affect your core business, but there is very little you can do to influence them. You should however monitor them closely to prepare your business to their effects. The most obvious examples of trends in this segment are the ones that are likely leading to changes in regulations in your industry, like the ones that will result from climate change. Action Market Intelligence for decision makers Frederic De Meyer – i4fi 63
  • 64. Trends in the top-right segment will affect your core activities and you can actively influence them. These trends require immediate action or preparation (dependent on the timeframe of these trends), but chances are high that you –as well as your competitors- are already doing something with them, since they form obvious opportunities in your industry. A good example is how pharmaceutical companies prepare for the ageing population trend. Influence The trends contained in the upper-left segment undoubtedly offer the biggest opportunities for your company. These are trends that are not directly affecting your core business, but on which you exercise some kind of influence. Since these trends will most probably affect other companies or industries in their core business, the influence you have on them will give you the chance to position your company favorably, or to develop new products and services for these companies. As an example, look at the way the scarcity of natural resources might relate to mobile telecommunication operators. The core business of these operators is to offer connectivity, so even if mobile telephones are full of components made of materials that are getting scarcer, this is not directly affecting their core business (they could still offer connectivity using old phones, for instance). However, they could build a new business for green phones, or phones designed on a cradle-to-cradle principle, hereby countering the threat resource scarcity poses, uncovering and serving a completely new client base, and build a completely new ecosystem of mobile phone providers. There are of course many other ways to map megatrends as a way to draw conclusions from them. One such way would have a timeline of the development of these trends, showing the urgency with which you need to respond (or not) to the effects of these trends. Regardless of how you organize this exercise or the way you map the trends, the most important thing to keep in mind in order to make this exercise successful is to Market Intelligence for decision makers Frederic De Meyer – i4fi 64
  • 65. keep an open mind with regard of the trends you include in it. If you only include the most obvious trends, the ones with a direct impact on your business, you are most probably not going to end up with revolutionary ideas that will dramatically improve your competitive position. It is only by investigating trends that have an indirect impact, on your customers or on markets peripheral to yours, that this exercise will truly unleash fruitful insights for your business. Did this example debunk the myths about market intelligence? MI is expensive MI has to be accurate MI is complex MI requires an external agency MI is cumbersome MI is unambiguous MI is easy to enterprete Most of the reports on which we can base our megatrend assessment can be obtained for free, though some time investment is required in order to digest all the information. With this megatrend assessment we enter the space of 'future guessing', which by nature can not be accurate. But keep in mind the exercise is aimed at finding ideas for innovation today. The use of megatrends is not complex as such, although finding correlations and relationships between them can become complicated. Information used for megatrends assessment does not require external agencies (except to save you time); the workshops to discuss these trends internally could benefit from external advise. Dependent on the level of sophistication and depth required, an in-depth megatrend assessment can turn into a cumbersome process. As shown in these examples, the most interesting trends to take into account in your business are the ones that have an indirect impact on it, and hence will be prone to different interpretations. The end results of the workshops and discussions might be prone for discussions, but should nevertheless be easy to understand for everyone. 5. Account planning and benchmarking It might come as a surprise to find a chapter on account planning in a book about market intelligence. This should not be surprising, since both types of insights are strongly related. If account plans are put in place for a sufficient number of clients or channels, the aggregated figures will provide a solid view of (parts of) the market, which can serve as a crosscheck for external market insights. On the other hand, market intelligence obtained through other means can come handy to enrich the account planning exercise, as a cross check for the account plans, or to complement missing or unknown information. Let us investigate how this works. Market Intelligence for decision makers Frederic De Meyer – i4fi 65
  • 66. How exactly an account plan will look like depends on each specific situation, but in general it will encompass following elements:  Client relationships Contacts within each client, key decision takers and influencers, relationship gaps, …  Client information Turnover, profit, number of employees, organization, strategic priorities, …  Sales for past periods and projected sales Bookings and profits per product or service, bookings per channel, pipeline, …  Competitive positioning Share of spending, main competitors, threats and opportunities, SWOT analysis, …  Go-to-market strategy Current channels versus ideal situation, strengths and weaknesses of current go-to-market model, dependency, …  Big bets Initiatives that might considerably increase our sales with this clients, ‘must win’ deals, …  Key requirements Marketing budgets, sales initiatives, other resources needed and estimation of which parts of the projected sales depend on them, …  Overall strategy Summary of how to develop the client, resources needed and projected sales. As said these elements can vary a lot dependent on the specificities of each industry and company. But with the elements listed above we can already develop very revealing insights. Market Intelligence for decision makers Frederic De Meyer – i4fi 66
  • 67. Let us take a concrete example. Say you are a manufacturer of a component used in private cars. According to an external report, the total market for this component is of 10 million this year, and will grow to 11,5 million next year. The Addressable market grows from 900 million USD this year to 950 million next year (you will notice that the market is subject to some price erosion). Let’s say the target clients consist of ten car manufacturers. You sell your components to every one of them, but they don’t use it in each of their models. So your market share is different with each car manufacturer. You now ask your account managers to produce account plans for the ten car manufacturers. You ask them, among other things, about their projected sales (in terms of units sold) and the current versus future market share. After collecting all the account plans and aggregating all your account managers’ data, you compare the result with what external research companies have predicted. Basically you will end up with one of these three scenarios: 14 Scenario 1 12 # units 10 8 6 4 Market 2 Turnover 0 Total market external report Total market sales judgement 2013 Total market external report Total market sales judgement 2014 Market Intelligence for decision makers Frederic De Meyer – i4fi 67
  • 68. 16 Scenario 2 14 # units 12 10 8 6 Market 4 Turnover 2 0 Total market external report Total market sales judgement 2013 14 Total market external report Total market sales judgement 2014 Scenario 3 12 # units 10 8 6 4 Market 2 Turnover 0 Total market external report Total market sales judgement 2013 Total market external report Total market sales judgement 2014 (Note that the orange bar is the account managers’ projected sales and the grey one is the portion of the market going to competitors. The sum of both represents the total market) Scenario 1 is obviously the ideal one: the consolidated market view of your account managers exactly matches the estimations of the external agency, so you can use these figures for your planning purposes with full confidence. Market Intelligence for decision makers Frederic De Meyer – i4fi 68
  • 69. In scenario 2 your account managers estimate the total market much higher than the external research report. This is not necessarily troublesome: if your account managers assumed a growing market share based on their market assessment, they will gain market share in the market estimations of the external agency as well. Furthermore, this scenario is probably an indication of the fact that your account managers have knowledge of specific plans or trends within their customer base (in this case, for instance, the launch of new models or an expansion of the market), which is sometimes hard for external agencies to know. In this scenario the consolidated view of your account managers will likely be more accurate than the external view –after all they have no specific interest in overestimating the market. However, this scenario could also indicate an overly optimistic sentiment of your account managers and, if their targets are based on this view, this in itself might lead to unrealistic expectations (and subsequent frustration if they are not met). You probably want to have a couple of discussions with them to check the reasons of their optimistic views. The third scenario is a bit more problematic. If the external agency is right and the market is indeed much bigger than the consolidated view of your account managers, it would mean that your market share in reality is much lower than what you estimate and, hence, that your account managers are not aware of the presence of competitors in their accounts. Or, even worse, they might not be aware of specific trends or projects in their accounts. At any rate you will have to investigate this into much more depth and make sure the account managers realize the full potential with their clients. But account plans offer many more ways to provide valuable insights. You can for instance benchmark the account plans in order to detect uncovered potential or underperforming accounts (or account managers). Let us continue with the example of the manufacturer of car components, and let us say that the company offers 5 type of components that are complementary to each other, and each of them have competitive products on the market. By simply putting the spread of Market Intelligence for decision makers Frederic De Meyer – i4fi 69
  • 70. component sales for the top five clients on a chart, you could for instance end up with such a view: Spread of turnover by component 100% 80% 60% Component 5 Component 4 40% Component 3 20% Component 2 0% Component 1 What would be your conclusion from this chart? With most of our clients (the constructors) we have a comparable spread of component sales, except with constructor 4 where we have considerably less (relative) sales of component 1. There could be multiple reasons for this. A competitor might be much stronger in this category, or offer substantial discounts for that specific account and component. Or your account manager or go-to-market channel might be ill prepared to sell component 1 and needs some more training on it. But the situation at Constructor 4 could be a very positive indication as well. Maybe the reason for the underperformance of component 1 in this client is to be found in an over-performance of the other components, hence indicating a potential best practice. It is important to dig deeper into the causes of this discrepancy, since they might be an indication of untapped opportunity that, sometimes, can be easily fixed. Let us continue with our example in order to demonstrate this. We need to know whether component 1’s sales at constructor 4 is due to an underperformance of this component, or an over-performance of the other components. To do this, we need Market Intelligence for decision makers Frederic De Meyer – i4fi 70
  • 71. some kind of objective ‘key’ to measure our success on. In this case the key is relatively easy to determine (in many cases it is not): our components are directly linked to the cars in which they are used. And, luckily, we should have a fairly accurate idea of the number of cars produced by each constructor. With this, we can track our sales of the different components per car that is produced, and for example produce this view: Turnover components per car produced 0,8 0,7 0,6 0,5 Component 5 0,4 Component 4 0,3 Component 3 0,2 0,1 Component 2 0 Component 1 Here we can draw plenty of additional conclusions. We see for instance that our overall level of sales (by car produced) is relatively high at Constructor 4, so the under-performance of Component 1 in this account is most likely not due to an underperforming account manager. On the other hand, we see that at Constructor 4, sales (by car produced) of Component 2 is relatively high, most probably at the expense of Component 1. At least we now have some insights to discuss the situation with our account manager and, if this situation proves to be favorable, to leverage his best practice to other accounts. But we now also have the basis to construct quite a different type of market view. Based on our sales of components by car produced we can determine the best Market Intelligence for decision makers Frederic De Meyer – i4fi 71
  • 72. performing account for each component, and project this to the other accounts. This provides us with a view of how much revenue we could generate if each component was sold with the same level of success in all these accounts. Let’s call it the ideal scenario. In our example, this would result in following view: Money left on the table vs best practice 600,00 500,00 400,00 Component 5 300,00 Component 4 200,00 Component 3 100,00 Component 2 0,00 Component 1 In a way, this view reflects the untapped potential in each account. However, this does not necessarily reflect the additional sales we could realize in the near future. In our case, there might be some solid reasons why we leave so much money on the table with Constructor 5, he might be locked by long-term contracts with one of our competitors, for instance. Nevertheless, this view is useful to determine where we need to put our focus in order to find additional growth. The example above is obviously simplified, and there are many more things you can do with account plans. But the point we tried to make is to organize account planning in such a way that it can be used for numerous purposes. All too often account plans are made in Powerpoint or even Word, which makes it very hard –if not impossible- to consolidate the data in ways that enable the type of analysis we performed in our example. Additionally, very often many of the fields needed for Market Intelligence for decision makers Frederic De Meyer – i4fi 72
  • 73. such type of analysis are left blank. In many cases the reason for this is that account managers are very poorly incentivized to take account planning seriously. Either they don’t understand its purpose, or their management does a poor job in using this document in a meaningful way. Using the information contained in the account plans in ways we have shown in this chapter, and have this as a basis for profound and meaningful discussions with account managers, will ensure that the account managers take this exercise seriously and fill in all the required information. Using account plans in such ways will turn them into a living and highly strategic document. Did this example debunk the myths about market intelligence? MI is expensive MI has to be accurate MI is complex MI requires an external agency MI is cumbersome MI is unambiguous MI is easy to enterprete Since account planning is a purely internal exercise and does not necessarily require sophisticated tools, no specific investment is required. Account planning is far from being an exact science. Neither should it be, since the major ingredient for this type of analysis is the judgment of your sales teams. While the account plans themselves do not have to be complex, the consolidation, analysis and transformation of these plans into valuable insights might quickly become complex. Account planning is a purely internal exercise. However, external agencies could be used to validate certain assumptions and information. The completion of the plans, the consolidation and analysis, as well as ensuring that the plans are actively used and frequently revisited can require an elaborated process. Provided that everybody understands that this is an exercise where judgment of the sales people is the main ingredient, the insights will not be questioned (but the conclusions will). Since in this exercise we have worked with scenario's and (calculated) models, the insights will not easily be comprehended by everybody. Market Intelligence for decision makers Frederic De Meyer – i4fi 73
  • 74. How to establish a market intelligence practice in your company Market Intelligence for decision makers Frederic De Meyer – i4fi 74
  • 75. Chapter 3: establishing a market intelligence practice in your company I n the previous chapters we demonstrated that building market insights is difficult nor costly. In fact, as we have shown, many insights can be obtained with little effort and with virtually no investment. Nevertheless, chances are that you as a decision maker do not have any time to invest in this activity. You will need to rely on your employees to provide you with the insight, and if your need for market insights crosses a certain threshold you should probably consider putting dedicated resources to the task. Easier said than done. Fact is: such a function remains in the category of overhead costs, so this naturally gives rise to a number of questions about its exact nature and the soundness of such an investment. In this chapter we will try to provide an answer to the most pressing questions that arise from this decision. 1. Market intelligence… a full time job or not? I am often asked, by any type of company, whether a strategic market intelligence function requires a full-time employee, or whether it should be part of the responsibilities of an existing function. There is obviously not a clear-cut answer to this question. Much depends on the type of business you are in, the size of your company, the competitiveness of the markets you serve. But, perhaps most of all, much depends on the level of strategic impact you want this function to have. If you want someone who buys reports, read and digest them and present a summary of his findings, you might do with a junior art-time employee. If you want this team to have strategic input, bring ideas for innovation and set the long-term priorities for the Market Intelligence for decision makers Frederic De Meyer – i4fi 75
  • 76. company, you will probably need a slightly more sophisticated professional, perhaps even a bigger team. This chart summarizes the different intelligence practices on their way to strategic relevance: In fact, any combination of the functions in this chart are possible. In a mediumsized retail business in a company with limited geographic scope you might have one single person incorporating all of these functions (if he manages to perform them all thoroughly is a different matter), while in a global consumer electronics company you might find these functions performed by tens of people, sometimes even spread across different business units. The true question you need to answer in order to decide how many resources to put on market intelligence, is how many of the activities and intelligence areas hereunder are genuinely strategic and of vital importance to your business: Market Intelligence for decision makers Frederic De Meyer – i4fi 76
  • 77. ● Market sizing/ strategic positioning → Field validation ● Planning support ● Competitive → Market shares (assessment) → Pricing/specs → Monitoring (incl social media) → Win-loss analysis ● Customer insights → Customer satisfaction → Panel reviews → Account coverage (database) → Account Planning → Strategic Accounts ● Channel planning and assessment ● Strategic Benchmarking ● Trends / innovation ● Economic environment ● Scenario planning ● News digest ● Ad hoc projects This is a –tentative- list of activities that relate to external market views, so it does not take into account Business Intelligence activities, that often fall under the responsibility of the Finance department, although as said my personal conviction is that business intelligence can only fully realize its potential if it is combined with market intelligence. But that is another story. The point here is that dependent on your specific situation the strategic relevance of the activities in the list will vary. If you are a in the online retail business quite obviously the customer insights activity will be of more vital importance than, say, scenario planning. If you are active in many countries globally it is more important to have someone monitoring the economies of these countries than if you were only active in a specific region. Companies in the energy or health care sector will need to put more emphasis on megatrend analysis and scenario planning in comparison to, for instance, an entertainment business. Market Intelligence for decision makers Frederic De Meyer – i4fi 77
  • 78. Another factor to take into consideration is the amount of market intelligence activities currently performed throughout the organization, but not necessarily under a specific market intelligence denomination. Chances are that your sales and marketing teams already perform some extensive competitive assessments, or that your product managers are in fact skilled trendwatchers. In some cases, a centralized market intelligence person or team might take a lot of burden away from people who are performing such tasks next to their core responsibility. While it is difficult to measure, the time-savings a central market intelligence person or team will cause with other teams should certainly be part of the equation. After all, you probably prefer your sales teams to work on their relationships with their accounts rather than spend time reading market reports and mess around with spreadsheets. However difficult it is to put an exact figure on how much market intelligence resources one should have, there is a general rule to be distinguished here: the higher you score on following factors, the more market intelligence resources you would require:  Number of countries in which you are present  Number of competitors (direct or through substitutes)  Number of products and services you bring to market  Diversity of your sales channels  The importance of customer loyalty for your business  The impact of the economic environment on your turnover  Number of clients that generate the majority of you turnover and/or profit  The amount of time other teams are spending on market intelligence activities 2. Who to report to? So who should a market intelligence person or team report into? In many companies you will find such a role in the marketing department. This is perhaps due to the Market Intelligence for decision makers Frederic De Meyer – i4fi 78
  • 79. confusion with the role of marketing intelligence, which has more to do with managing databases for lead generation purposes. Market intelligence, however, covers many more activities and its impact should be much broader than just marketing. In fact in many ways it should assess the impact and direction of the marketing function, so in that sense it is perhaps better to leave it out of the marketing department all together. In other companies the market intelligence role would report in the ‘Operations’ team. This certainly makes sense since the Operations department has a footprint in every activity of a company, so this would ensure that market intelligence stays in touch with every aspect of your business. Furthermore, if ensuring corporate growth is part of the responsibilities of Operations, market intelligence should certainly offer a valuable contribution to this effort. Bigger companies will often have a strategy division responsible for detecting untapped market potential. Its responsibility involves assessing markets en improving the strategic positioning of the company, where market intelligence obviously plays a crucial role. Also, by nature almost, this division needs to develop strong working relationships with each other divisions of a company, which helps to realize the full potential of a market intelligence function. Regardless of where exactly you establish your market intelligence practice, there are some guidelines to keep in mind in order to maximize the effectiveness of this role:  The function needs to be in a position to establish working relations with each and every division within the company;  It needs to be perceived as a neutral function, although intricately it needs to challenge the effectiveness of every other division;  Ideally it should be situated at maximal 2 levels from the CEO. 3. Which frequency of reporting? Market Intelligence for decision makers Frederic De Meyer – i4fi 79
  • 80. Many of the market intelligence tasks mentioned previously will have a ‘natural’ frequency of reporting. Market share figures, for instance, are mostly reported on by quarter, so the work based on these figures will have to be organized by quarter as well. Other tasks, like monitoring the business environment, will need daily attention and should hence be communicated through tools that allow the target audience to pro-actively get the insights, like an internal blog for instance. Ultimately the exact frequency of reporting will depend on your exact situation and priorities, but hereunder is a tentative general overview that worked for me in the past: ● Market sizing/ strategic positioning → Field validation ● Planning support ● Competitive → Market shares (assessment) → Pricing/specs → Monitoring (incl social media) → Win-loss analysis ● Customer insights → Customer satisfaction → Panel reviews → Account coverage (database) → Installed base → Account Planning → Strategic Accounts ● Channel planning and assessment ● Strategic Benchmarking ● Trends / innovation ● Economic environment ● Scenario planning ● News digest ● Ad hoc projects yearly yearly yearly monthly/quarterly continuous continuous continuous quarterly/yearly quarterly/yearly continuous continuous quarterly/yearly quarterly/yearly quarterly/yearly yearly yearly monthly/quarterly yearly continuous - As said this overview is far from a ‘one size fits all’. It only aims at showing that different types of insights require different frequencies of communication. But building such an overview up front will also provide a good sense of how much Market Intelligence for decision makers Frederic De Meyer – i4fi 80
  • 81. resources your company needs in order to build an efficient market intelligence practice. 4. Which communication means? To a big extend the success of a market intelligence role in your company will depend on the way it communicates its findings and insights. Should you choose for written documents sent to a limited number of key persons in the company? Or should you have a constant stream of information on a specific page of your intranet, with the possibility for employees to leave comments and stimulate discussions? Much will in fact depend on your corporate culture, obviously. But it is important to keep in mind that, while some critical information will naturally be communicated with secrecy (and, hence, through confidential reports), other forms of information generated by market intelligence can only maximize their value if shared broadly throughout the organization. Take competitive information as an example. As discussed in this book, virtually everyone in your company has an opinion on your competitors, often based on loose discussions they might have with friends or relatives. Wouldn’t it be worthwhile to collect their opinions and information? Sharing competitive information on an internal, online tool would enable such discussions and information gathering. This can be done through the creation of a ‘blog-like’ forum on which your market intelligence resource can post findings and launch discussions about your competitive situation. But, as said, not all the information generated by market intelligence is meant to be shared broadly. Some insights therefore need to be communicated through more protected means, in reports or in personal meetings for instance. In general, we could draw following picture of the optimal communication means for each of the market intelligence functions: Market Intelligence for decision makers Frederic De Meyer – i4fi 81
  • 82. ● Market sizing/ strategic positioning report → Field validation report ● Planning support meeting & workshop ● Competitive → Market shares (assessment) report → Pricing/specs report → Monitoring (incl social media) report → Win-loss analysis report ● Customer insights → Customer satisfaction report or online → Panel reviews report or online → Account coverage (database) online tool → Installed base online tool → Account Planning spreadsheets → Strategic Accounts report ● Channel planning and assessment report ● Strategic Benchmarking report or online ● Trends / innovation workshop ● Economic environment online tool ● Scenario planning workshop ● News digest online tool ● Ad hoc projects - Market Intelligence for decision makers Frederic De Meyer – i4fi 82
  • 83. Note: this is a living document and will be updated and complemented regularly. Check the Slideshare page or consult the blog corporatemi.blogspot.be for updates Market Intelligence for decision makers Frederic De Meyer – i4fi 83
  • 84. Institute for future insights (i4fi) Frederic De Meyer @fdemeyer frederic@i4fi.com www.fredericdemeyer.com facebook.com/instituteforfutureinsights pinterest.com/fdemeyer Market Intelligence for decision makers Frederic De Meyer – i4fi 84