Market research or user research? (part II)

As I promised in the last posting, today I will give you an example of how market research and user research can get along and complement each other. To illustrate my point, I would like to refer to an article titled "The Customer Connection: The Global Innovation 1000." This article appeared in the Autumn 2008 special issue of strategy+business magazine, which is published by Booz and Company Inc. The opening paragraph of this article reads:

"How do companies innovate successfully? They can spend the most money, hire the best engineers, develop the best technology, and conduct the best market research. But unless their research and development efforts are driven by a thorough understanding of what their customers want, their performance may well fall short."

The article goes on to explain this hypothesis using traditional market research arguments. Here are some examples:

* Global Innovation 1000 companies spent $447 billion in Research and Development in 2006, more than double the GDP or Ireland, and 84% of worldwide Research and Development spending.

* 2006 expenditures in Research and Development of the Global Innovation 1000 are 10% greater than 2005 expenditures. Overall sales also grew 10% during this period, reaching $11.8 trillion.

* Statistical analysis of the data identified three distinct innovation strategies amongst these companies: Need Seekers, Market Readers and Technology Drivers...

... The first two points show some huge numbers, enough to attract the attention of any investor. However, the third point is quite interesting as well. Need Seekers are defined as companies that "actively engage current and potential customers to shape new products, services, and processes; they strive to be first to market with those products."

How do Need Seekers accomplish this? Their research is not exclusively focused on opening new markets or trying to sell more of their existing products. Simply put, their product developers spend a lot of time with the users of their products and services, and through these interactions they gather insights to improve existing products or come up with new ones. The key here is not numbers. Because of the methods used, product developers can only spend a limited amount of time with individual users in their environment. The key is the quality of the insights, the search for exceptions and pain points, and a strong belief in the opportunities found... even if they are only evidenced by a handful of people.

Market research or user research? (part I)

Happy 2009! I am back in Sydney after a couple of weeks off, ready to start blogging once again. For this post I will step away from the subject of economics, and instead I will share some personal thoughts about market research.

When I first joined the MBA program at Loyola University Chicago my objective was to specialize in Marketing. Back then I figured that a combined education in Marketing and User-centered design would give me the ability to leverage both the breadth of market research and the depth of user research in my professional development.

I had a great Marketing professor at Loyola, and I quite enjoyed taking my introduction to "Marketing Management" course. However, soon thereafter I felt that market research and user research were mutually exclusive practices in nature. My MBA experience with market research is reminiscent of a conversation I had with a friend of my sister back in 1999.

I talked to my sister's friend about an article which highlighted the fact that a large percentage of elderly people in America did not have enough money in their savings accounts to support themselves during retirement. He pointed out that the article failed to mention that many elderly people have their money invested in real estate, stocks, bonds, and retirement funds which may explain why they do not keep much cash in their savings accounts. This is a simple example of a familiar flaw: statistical data is open to interpretation by the person(s) analyzing it, and often it is used to fit the agenda of the analyst or the client.

Over my years as a corporate employee I had to change my perspective on market research. I have come to accept market research as necessary to create a case for change. Business people are taught to accept research only if it talks about thousands of people being surveyed and billions of dollars in revenue opportunities. However, the methods for the collection and analysis of this type of data are inadequate when it comes to innovation. This is the design space, where a deep understanding of the world of a few users is more meaningful. Today I believe that market research and user-centered research are complimentary, the former to be used to wet the appetite of investors and executives, and the latter to understand users and develop products and services that truly fit their needs.

In the next posting I will illustrate the symbiosis between market research and user research with more specific examples from an article that I read recently.