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The Treachery of Market Research
Posted in Growth
Posted by Oren Harari in May of 2001
Market research is useful if you're interested in getting a quick snapshot of today's market realities: like how consumers feel about an existing product, or how the demographics of a region break down. But as a basis for strategic formulation, it's myopic at best, treacherous at worst.
Two reasons: One, to quote strategy gurus Gary Hamel and C.K. Prahalad, customers are notoriously lacking in foresight. As I've noted in prior works, customers often cannot tell you what they will want, will buy, and will support with any sort of assurance. Initially, market research indicated that customers would never cotton to things like overnight mail (too expensive), answering machines (too impersonal), or customer relations management systems (too mechanical).
Further, by the time customers say they want something, you can be sure that their expectations and desires have been raised by an entrepreneurial vendor who has already staked a standard in the ground -- which means you're playing catchup in both infrastructure and brand.
At a conference last week in
Obviously, companies which capitalize on disruptive technologies (or even better, develop them and then capitalize on them) position themselves for significant competitive advantage. Christensen lauded two companies who he would classify as "serial disruptors": Sony from 1955 to 1979, and Polycom today. Both the Sony and Polycom citations illustrate a very important, and provocative lesson on the merits of market research.
According to Christensen, during the 1955-1979 period, Sony introduced 12 very successful disruptive-technology product lines, from the transistor radio in 1955 to the Walkman in 1979. After 1979, good products continued to be launched, but the genuine technological disruptions dried up. Why?
Not long ago, Christensen received a call from a senior Sony executive who had read the former's analysis and fully agreed with it. He provided Christensen with the solution to the puzzle. Prior to 1979, key decisions about technological investigations and product launches were made by a close-knit group of Chairman Akio Morita and his executive team. Their "M.O." was simple: Carefully watch how people live, get an intuitive sense as to what they might want and then go with it. The flip side of their management philosophy was this: Don't do market research. As the Sony people said: How can you do market research if the market doesn't exist yet?
In the early 1980's two important events occurred: Morita began to disengage himself from the company, and the company hired its first MBA's. The MBA's quickly began to conduct market research studies and base the company's strategic decisions on the results. While this analytical process led to better products in established markets -- Vaio's and Play Stations, for examples -- it did not lead to the kinds of disruptive technological breakthroughs that had catapulted Sony's status into a turbo-growth financial and brand powerhouse.
Bob Hagerty, CEO of Polycom, echoed these sentiments. Remember that Christensen considers Polycom, the purveyor of cutting-edge speakerphones, videoconferencing systems, PC-enabled phones, etc. as a "serial disruptor." Hagerty, speaking at the same conference, noted that "we seek products that have disruptive characteristics", and then added that Polycom does not ask customers whether they will buy products-in-the-pipeline "because often they don't know what they want. We make what we think they need to solve their problems." Sony's Morita would have applauded. Smell what the customer might need, capture a technology to do what nobody specifically asks for, and then lead-educate the customer as to the potentials of what you're doing.
As a coup de grace, the venerable guru Peter Drucker came on the stage later that day and independently stated that "nothing is as treacherous as market research." He went on to explain that too often, market research "misleads you", generally for the reasons I've outlined above.
For some of you, these messages are heretical. But consider: Nobody is saying not to do market research. The advice is simply not to take it too seriously when developing your competitive strategy.