My columns at Daily News and Analysis: Customer Research and the Curse of the Rear View Mirror

Daily News and Analysis, November 1, 2007
Customer Research and the Curse of the Rear View Mirror
Alex Gofman

Would you trust a driver to bring you to your destination if 95% of the driving time he spends looking at the rear view mirror? Even if it were the best and most sophisticated mirror in the world, with all possible bells and whistles to detect any obstacles and dangerous places AFTER you passed them?

A few days ago, I was a guest lecturer at the Wharton Business School (University of Pennsylvania), which many consider to be the best business school in the world. The class was in marketing research, and approximately half of the students were from Asia (mostly Chinese and Indian). Coincidently, my presentation was built around a hypothetical group of Asian kids successfully creating new-to-the-world products using advanced marketing research tools. Actually, it was not a coincidence. And here is why.

I work in the marketing research field which, in the West, is a huge and well funded industry. Annually, billions of dollars are spent on research that theoretically should help corporations sell more products with more profit to more consumers. On the surface it seems to work just fine – a lion portion of the US economy is based on consumer spending. A dirty little secret of the market research industry is that a huge majority of the money spent on research is wasted or not used.

The ‘staples’ of market research are tracking studies, consumer satisfaction and the like. Tracking studies are what happened in the past. It is quite easy and straightforward (but not necessarily cheap) to conduct them. In many corporations, it is a must (like a white shirt and tie). If you want to succeed in MR and be promoted or moved up one day into a high paying marketing department, you just have to do them! Tracking studies produce very nice looking pie charts in thick reports and give you a chance to shine during a presentation without being challenged. How could one challenge something that happened in the past? Billions of dollars go into this type of research. People get promoted because of it. And only about 5% (!) of the data is ever used!

On the other hand, if someone at a corporation tries to experiment with getting innovative consumer insights and finds better new products or invents a revolutionary service – this is another story. Expect to be annihilated by others who did not get this idea before! Any future forecast is easy to challenge. Corporate America, Europe and Japan are entrenched in the most ‘important’ war, an all-consuming task of … saving their jobs. Forget about the social or even corporate interests! We need to save our jobs! The truth is, nobody was ever fired for playing it safe by the approved rules even if the rules do not, did not and will not produce results. In marketing research, conducting a tracking study or a customer satisfaction survey is a ‘safe’ and ‘prudent’ way to climb the corporate ladder. It looks nice on the shelf and on a resume. If one tries to step out of the box and does something avant-garde that could bring a fortune to the company, this rebel most likely will be humiliated, attacked and even fired for violating the ‘order’.

Do not take me wrong – it’s very important to know what happened in the past. But much more imperative is what we do in the future trying to find new or improved products or services that people need and like. This decision cannot be based entirely on past experience which as we know it, is not a reliable predictor of the future. Of course, looking in the past could help to define the future. But if you spend most of your resources dwelling on the bygone events, you can not move ahead.

In the 20th century, Americans managed to beat Europe economically because of their risk-taking, ‘could be done’ attitude, inventing and achieving that which had never worked before. Some called them crazy, but the nay-sayers were ignored, and they kept moving ahead. Yet in most cases, this is no longer true. We are not as ‘hungry’ anymore. The initiative has now shifted to Asia, where young and energetic entrepreneurs are eager to get their piece of the world’s riches. They are not afraid to take risks. They are keen to experiment and try the new, ‘risky’ methods and tools available to achieve their goals. There are no ‘approved’ and ‘safe’ approaches (at least, not very many) to bind them to the past.

Many of the innovative methods that help companies create better products and services faster and in a more targeted manner, such as Rule Developing Experimentation (RDE), discussed in my previous column (October 4, 2007), are faster and more enthusiastically embraced in Asia than in the West where they were originally invented. Is it that these methods look forward too much and are thus too risky by Western standards for corporate employees?

And while their American counterparts prepare for self-serving corporate politics, Asian students are looking for everything that they can find to win their place at the world’s table, regardless of how risky from the corporate point of view. They will not be afraid to step out of the box and experiment, once they enter that world. They will continue to press forward, and only use the rear view mirror occasionally, just to avoid possible accidents and accumulate experience. I can see it in them.

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Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Howard Moskowitz and recently republished in India (it is currently translated in twelve countries). He may be contacted at alexgofman@sellingblueelephants.com.