Todd Biske: Outside the Box

James McGovern has a few

outstanding questions on becoming an industry analyst. One of his five questions wasn’t directed at becoming an analyst, but interacting with analysts:

I have seen many bloggers comment on how software vendors should interact with industry analysts but have never seen anyone really explain how us folks in corporate America should? Come someone please blog about best practices in this space?

As a corporate America user of research from analysts, here’s my take on this. As with most things in this world, there are companies who are leaders, followers, and laggards. The 80/20 rule applies, with the “follower” category taking up the 80%, and the remaining 20% equally split between the leaders and the laggards. The leaders are taking risks, trying to innovate, and, when they choose wisely, reaping the rewards. The followers sit back and watch, and then try to follow a similar path of the leaders, albeit at less risk. The laggards, well, they’re distracted doing something else and eventually get left behind to wither and die.

The challenge for companies in this follower region is to identify the trends that lead to success, versus the trends that were not successful. SOA is a great example to use here. Virtually every single presentation I’ve seen on SOA begins with a definition. This is because there are so many different ways of applying service-oriented principles, and the right approach is dependent on the company’s strategy. When the CIO simply makes a statement that the company is going to embrace SOA, someone has to go out and figure out what that means. There are two common ways of doing this:

1. Hire someone who has helped other companies embrace SOA, effectively outsourcing the strategy and execution. When the consultants leave, so does the thought leadership. While some of that knowledge will carry over, the ability to analyze and implement primarily stays with the consultants. They go on to the next big thing, while the corporate workers continue to maintain the status quo.
2. Seek out information to build the internal thought leadership. This is done through books, magazines, whitepapers, webinars, and conferences. Of these, the best sources are going to be the ones that involve the widest coverage of case studies. Who has this? Analysts.

If we didn’t have analysts, the source of these items would lack breadth. The only entity with significant coverage would be vendors. Vendors’ bottom line is selling product, period. While they publish whitepapers, host conferences, etc., and these can be at a very high quality, it is all comes down to selling product. Outside of vendors, consulting firms are next in line. They, however, are more interested in sharing resources than they are in sharing information. If they share information, their resources may not be necessary. User groups and conferences that are not vendor sponsored tend to be local, which may constrain the amount of information that can be shared due to local competition for resources. So, there’s a big gap that needs to be filled, and that’s where the analysts can help.

Back to the original question: how should corporate America work with them? Clearly, the communication should be a two-way street. Just as the best service interfaces will probably come about through close communication between consumers and providers, the best analysis will come out through close communication between analysts and customers. The question, then, is how does the funding model reflect this? Do companies that share their information with analysts get discounts? Using the 80/20 rule again, 80% of the companies will likely be consumers of information only. That’s probably enough to sustain a healthy revenue stream. For the 20% that do share information, I would expect that discounting would be involved. If those companies fall into the leadership category, analysts may even need to pay for access to those companies. After all, these are the companies paving the way without support of external analysis, and they are the ones that the followers want to emulate. I’ve never had a research firm offer to pay me for information, so I don’t even know if this occurs.

Fortunately, analysts don’t publish evaluations of their corporate customers, so there isn’t the same conflict of interest that exists in the vendor space. There is potential for conflict of interest when two competing companies work with the same analyst firm, but again, the analyst research typically speaks in generalities, so this risk is mitigated. Additionally, many of the leaders are usually willing to talk about their experience, and are encouraged to do so. James’ should be familiar with this practice at The Hartford. This is further supported by the existence of research companies like the Corporate Executive Board who work to establish networks of companies for direct information sharing.

Ultimately, analyst firms exist to facilitate information sharing. Reading publications, case studies, vendor strategies, etc. is a full time job, and most companies are focused on providing solutions for their customers. Every company will have a different stance on how much “overhead” they want to fund. If the preference is to focus resources on execution rather than analysis, external research analysts will fill the gap. If a company is willing to fund analysis activities, there is a ton of free and low-cost information available. You may have every vendor knocking down your door, but it can be done.

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