Tag Archives: market research

Truth is a Believable Story

Advice, Back to Fundamentals, Business Research, , , , ,

I grew up believing that facts, like research, numbers and percentages, told the truth. I believed in objective, verifiable truth, based on fact. I distinguished that from mystical religious truth, based on faith.

http://www.flickr.com/photos/h-k-d/8268159192/

I was a mainstream journalist for almost 10 years in the 1970s. Every professional journalist believed in objective verifiable truth based on fact. That was the goal of reporting. We separated subjective opinion from objective truth. Truth was hard to find, yes. It often had to be dug up and uncovered. But it was there.

Now I know better.

Truth is not research and data. Although my generation grew up believing hard numbers were truth, it just isn’t so.  Nowadays there is data to prove anything, regardless of how absurd. And people routinely hide their opinions as data. Eggs are good? There’s data to prove it. No, eggs are bad? There’s data to prove that too. The same for coffee, sugar, exercise, structure, discipline, whatever.  The truth is not in the data.

Truth is not just a believable lie, either. It’s more like a matter of angles and reflections and angles of light, like a gas, not a solid. It’s something like what William Blake implied about  300 years ago, in Proverbs of Hell:

Every thing possible to be believ’d is an image of truth.

Truth is a believable story. And much of human truth is better told in stories than a facts, and much less numbers.

And in business, Seth Godin says marketing is stories. I say planning is stories. Truth isn’t what the research says, or the focus group, or the latest survey.

Take a step back from it and ask, always: Does this make sense? Is this credible?

Truth as told in stories is still truth. I love how Harvey Cox says truth is in stories. This is from his book When Jesus Came to Harvard:

All human beings have an innate need to hear and tell stories and to have a story to live by…religion, whatever else it has done, has provided one of the main ways of meeting this abiding need.

I don’t mean it as disrespectful to see the “story” to religious doctrine. On the contrary: The right stories, real stories, the best stories communicate truth better than so-called facts. And it’s almost a proof of God how themes and meanings overlaps between the different stories of the different religions. Maybe there is a good gene, in our species DNA. And the stories are an expression of how humans all struggle to understand God, or creation, or whatever that immensity is, in their own way. With their own background and culture.

My summary: truth is a believable story.

(photo credit: h.koppdelaney via photopin cc)

Bad Advice on Data Decisions

Business Research, , ,

Oh dear, there it is again: somebody else pushing data over common sense. Paul B. Brown, on Forbes.com, writes: 

data vs. intuition

data from your customers is always better than your best intuition.

Wait, what? Did he really say that? 

 Not that Steve Jobs was right on everything, but I can’t resist my favorite Jobs quote here:

It’s not the customers’ job to know what they want. 

Paul Brown tells a story of a mouse pad combined with paper that he thought was a great idea, he bought, he used, and he didn’t like. He suggests that asking customers would have been better than guessing.

Talking to customers, sure; great. Data from customers? Not so much. 

My problem is that so-called “data from customers” is rarely truth. Data gathering is plagued with problems of research design, random lists, skewed questions, half truth and innuendo disguised as data. If it were really good data, the real result of actually talking to customers, that would be pretty good. But seriously, how often are customer polls and primary research really valid? Seldom. 

And ironically, his story argues for using the darn thing, not polling potential customers. He says he liked the idea until he actually used it. I think that’s a clue. No? 

My career has been software, and I can tell you this: The best software comes from people who use what they create. Not from customer data. 

The problem with thinking like this is that then data ends discussion and trumps common sense. Which would be okay, most of the time, if so-called data were truth. But it rarely is. 

Not All Business Plans Need Rigorous Market Research

Business Planning, Business Research,

I hate it when people think a business plan requires market research. Especially when they’re talking about expensive professional Market Research.

Yes, you need to know your market. You do. You can’t plan your business without understanding who buys, what those buyers are like, who also might buy, why they would or wouldn’t buy, how many of them are there, what motivates them, what they like about your business, what they don’t, and what other choices they have.

But planning a business doesn’t necessarily require expensive rigorous market research. You have to know the market, not prove that you know it. Not even prove that the market exists.

Sure, there are a small subset of business plans, associated with raising investment, that have to prove potential market to convince investors that the opportunity exists. But most business plans are about running the business, not proving the opportunity to outsiders.

Yes, you have to know your market. Knowing your market enough to make good decisions is different from proving your market to outsiders. Lots of entrepreneurs trust their market knowledge, take risks, and move forward. If you’re one of those, plan, and don’t let anyone tell you you’re not planning unless you have market research.

The Real Cause of Business Failure…

Business Research, Starting a Business, ,

… doesn’t turn up in research. At least, not any research I’ve ever seen or heard of.  Consider these problems with the research studies:

  1. To get valid data, you have to start with a random list. And where do you get a random list of businesses that failed? There’s no source I know of. You might be able to find businesses that were registered as legal entities, then disappeared … but if they disappeared, then what good is the contact information? And how do you know whether they disappeared because they changed names, or got bought by a larger company, or simple lapsed because the owners decided to do something else? You don’t.
  2. Businesses rarely fail for single causes. What looks to one analyst like lack of working capital will look to another like failure to collect outstanding bills, and to a third like weak marketing, and to a fourth like failing to offer value to customers.
  3. Business owners rarely know the real causes. We business owners don’t always see the real causes. We focus on one thing instead of another. If we were looking at the business and seeing the causes of failure accurately, then we might have been able to avoid the failure.
  4. And if they do, they might not share it with a survey. Survey respondents don’t always tell the truth. You can ask owners of failed businesses why they failed, and most are going to say what feels good to them when they say it.

So what? So don’t worry about research results that make conclusions of business failure. Run your own business carefully. Plan, set goals, find ways to track and measure progress against goals, and revise the plan frequently.

What I Hate About Market Research…

Business Planning, Business Research, , , ,

… is when the research stifles common sense and kills discussion. And I think that happens a lot. For example:analysis

  • Say you did a focus group on packaging colors. The focus group liked the green package, but what you don’t know is that the group was overly influenced by one charismatic person who liked green that day. It didn’t reflect the whole population. But now you’re stuck with green, regardless of what’s really right. And nobody in your group is going to be comfortable suggesting red or blue. After all, the research is done, and the answer is green.
  • You did a customer survey, asking people whether they liked your idea and what they would pay for a subscription. The truth behind the scenes is that the survey went out wrong to a list of people already biased in favor, and since they knew about you and liked you, they overestimated their willingness to pay. So you build the business and launch, and discover, way too late, that people in the real world, spending real money, won’t pay what the people in the survey said they would. And nobody on your team can question the advisability or the pricing “because we did the research.”

So it isn’t that I don’t want information. It’s a matter of information that takes on more certainty than warranted. I like research to be there, used, considered, but taken with healthy skepticism. If it doesn’t seem right, it might not be. Whether you call it research or not.

Does that make sense?

(Image: Adam Radosavljevic/Shutterstock)

Why I Hate Those Huge Market Numbers

Business Planning, Rants, , ,

It happens way too often: entrepreneurs proud of some huge completely unattainable market numbers. They show us billions of dollars. They think that’s a good thing, like it’s important. I hate it.

As an investor, as a business plan contest judge, or as a teacher, I don’t really care how many billions of dollars are spent on this or that or the next thing when I’m reading a business plan. That number is too big. It tells me nothing. Startups don’t reach multi-billion dollar markets.

If it makes you feel better to give me that number in passing, okay, go ahead, but don’t put any emphasis on it. Instead, give me the details on how you’re going to make your sales, and to whom, on the first day, the first quarter, and the first year. Give me granularity.

If you’re a Web-based startup, for example, show me how many unique visitors you think you can get in the beginning, and what you’re using for an estimated conversion rate (buyers to browsers). Show me how much each unique visitor is going to cost you in search engine optimization and pay-per-click search engine expense.

If you’re a restaurant, for example, show me how many chairs and tables lead to what assumptions for first-day, first-month, and first-year meals served, drinks served, and at what average price. Show me how you’re going to bring those people in the door.

I guess what this means is that I like forecasts that build from the details up to the larger numbers.

And I know that I’m in the majority, among people who read business plans, in really disliking the top-down, billions and billions kind of forecasts. When they start talking about getting only a very small percentage of an enormous market, they lose me. Those huge markets don’t split down into millions of pieces.