Market Ignorance Isn’t Bliss
Market Ignorance Isn’t Bliss
I am again reminded through my business growth coaching work, of the huge value of having up to date high quality market intelligence. I am equally reminded just how difficult market ignorance makes it for companies to establish viable business growth plans.
Sitting around a table with company Directors trying to help them set long term business growth objectives and identifying viable strategies for achieving them, is little more than guesswork if the relevant market intelligence isn’t available.
So many businesses lack the vital knowledge about what is currently happening within their industry and with competitors and customers, in other words their market place. They have no real idea of the size of the markets they are targeting or the key trends that may be influencing them let alone detailed information about their target customers. Every day important business decisions are being made on everything from new product development and investment in plant and equipment to business growth strategies and plans without adequate market intelligence to base them on. But why is this?
Why Some Companies Choose To Remain Ignorant About Their Market?
There are six common underlying reasons why some companies choose market ignorance over market intelligence:
1 – Don’t See Any Benefit In It – it is hard to know what to say about these companies. Indeed it is hard to imagine they are managing to stay in business at all. If a business cannot see the value in knowing more about the business environment in which it operates, then clearly there is little or no hope for it.
2 – Complacency – these are those businesses who are resting well back on their laurels. They assume (usually incorrectly) that they know all they need to know about their market simply because they are an active player in it and have been for many years. That is a bit like saying because you live on a particular street that you will know what goes on in every house. Most people do not even know what goes on at their next door neighbour’s house do they! The same is exactly true in business, simply being in a market, regardless for how long, does not mean you necessarily have any real idea of what is happening. Believe me I have worked with large companies established in the 1800’s who know very little.
3 – Never Got Around To It – this is the group of businesses who are well aware they should be keeping much more in touch with their markets and therefore theoretically know they suffer accordingly. Yet they simply have not got around to doing it. This of course suggests a business that is not really thinking its future through and planning for it very well. Usually they are finding plenty of time and resource to do all sorts of other market related activities on a daily basis like sales, marketing and product development. However, they seem unable to schedule time and resource to do the market research and investigations that would enable them to do these activities so much better. A lame excuse at best.
4 – Can’t Afford It – there are occasions when this almost seems a valid excuse. But then we see these same companies investing in all sorts of costly business activities that simply should not be being undertaken when ignorant of the prevailing market conditions. Market knowledge is almost always cheaper than the comparative cost of making wrong decisions due to not having checked out the market place first. Stories abound of companies investing in markets that simply did not exist or proved to be radically different to what the company thought. Finding this out after you have spent time and money creating new products, developing new marketing and sales initiatives, investing in new plant and machinery and setting business goals and objectives is a nonsense.
5 – Don’t Have The Time – please read the above reason number 4 – it is the same type of excuse. It is about choosing where best to spend your time and not wasting time on activities that would be much better done after you have the right market intelligence.
6 – Don’t Know How To Do It – a pretty common excuse, but one that does not really hold much water these days. As the law says, ignorance is no excuse. The world abounds with access to free information and even training on just about every subject. Market research, market intelligence gathering, market investigations, competitor research, customer surveys etc. Just type these and other keywords into Google and see what comes up. There are also of course a wide range of government and ERDF supported business support programmes that can support either training or coaching or both.
Mini Case Studies
Here are just two genuine examples of B2B companies where their market ignorance made them make costly mistakes and where better intelligence helped them resolve things.
Case 1 – a well established business where a multi-million pound venture capital backed investment in new technology machinery took off like a shot. Within just one year the new machinery was working 24/7 to cope with demand. The growth strategy was simple – invest the same again, open a second factory, double capacity and double turnover and profits. Simples! The additional deal with the venture capital investors was quickly done and a second new factory set up and opened. Fast forward 12 months. The total business was doing no more than it was a year ago, but its overheads had doubled and profit had turned to loss. But why?
A detailed market investigation showed two key things 1) Competitors had also invested in the new technology about the same time as they had added their second factory 2) The demand for the product that the new machinery made was finite and demand was now 100%+ satisfied. There was no easy solution to this situation, bridges had been burnt. However, given this new market intelligence the venture capital company removed their short term pressure on management for results as the now realised this would now be a long term difficult investment. The new machinery was eventually put up for sale (sold overseas so as not to further damage the UK market) and substantial loses on the investment were made. A huge multi-million pound mistake made through a lack of right up to date market intelligence. This new technology had changed this market place very quickly and failure to keep track of those changes (of which they were themselves a big part) was the downfall of this company.
Case 2 – new product development costs were running at £500k p.a. – about 15% of company revenues. Only 1 in 5 new products ever recovered their development costs, and only 1 in 10 went on to make a profit. New product development (NPD) was centred around implementation of the latest technologies into new products on the assumption that customers would always want the latest. An in-depth survey of existing customers found many older products still in use and considered more than adequate in many cases for the applications they were used for. The customers actually wanted simpler human/machine interaction not newer technology and additional less technical functions in the products to make their work easier. The company changed its NPD approach. It started to review products from a user perspective not just a technology one and it started to run customer pilots and obtain user feedback on all new development ideas and at all stages. It also designed more user friendly versions of existing products. This new approach transformed NPD success rates and all subsequent new products made money. The moral of this story is so blindly obvious, its real wonder why so many companies still make the rudimentary mistake of not engaging customers with their NPD and business development plans.
So if market research, customer intelligence, competitor analysis and keeping on top of market trends in general is not currently high on your business agenda you might like to have a re-think. The fact alone that so few companies invest in this valuable work is in itself a source of gaining strategic advantage over competitors.
Martin L. Ellis MBA, DipM, FInstSMM
Martin is a registered and approved GrowthAccelerator Coach and Leadership & Management Provider. He also works with companies on the government’s Growth Voucher Scheme and under the Rural Growth Network in Warwickshire.