Patrick Barwise and Seán Meehan
Insights will not contribute to success unless there is a dramatic change in how evidence is handled.
Market research can have an impact on business performance only if it generates valid, actionable insights; these make their way, unfiltered and unspun, to those with the ability to act on them; and those people then do so. The first stage achieves nothing without the second and third.
Our research on the impact of investment in gathering, analysing and interpreting market data shows that the main determinant of success is the extent to which the company has a market-oriented culture. Much investment in market research is, alas, wasted. Even the best companies could significantly increase their ability to generate long-term organic profit growth if they worked harder to ensure that market insights – especially unwelcome ones – reach senior decision-makers and are acted on.
Thanks to the availability of digital technology and improved research tools, we have the ability to ensure that the ‘voice of the customer’ is heard sooner and more clearly than ever. Observing, in unprecedented granularity, customers’ and consumers’ behaviour creates new ways to energise a company and enables executives to respond quickly to challenges and opportunities. It seems reasonable to expect that these better-informed executives make better decisions. We contend, however, that more data and more insights are not necessarily better. Rather, we’re convinced that more is usually less. The problem is not tools or technology – it is organisational and managerial behaviour.
As we have explored why potentially powerful insights are not consistently translated into enhanced business performance, we have encountered several cases of covering-up and spinning by executives more interested in pursuing their own agendas than in confronting uncomfortable market truths. Our research suggests that senior management must assess their organisational receptiveness to the voice of the customer. When it does so, it will usually discover insufficient openness – a fatal impediment to progress.
In one extreme case, a marketing manager forced a subordinate to remove evidence-based criticism of his strategy from a consultant’s report, threatening repercussions against her career if she disobeyed. The analysis and proposed new strategy never reached top management. Fear is a much bigger problem than is generally believed.
Because senior managers have more to lose, they are often even more cautious about speaking up. In the words of one senior analyst, ‘the options, the pension, everything is hanging on [not causing trouble]. I’m not going to jeopardise that.’ Everyone, even the CEO, reports to someone. No one is completely open.
People often don’t communicate bad news or problems to their bosses because they don’t want to get themselves or their colleagues into trouble. Less obviously, because they are disengaged, don’t believe they will be listened to, don’t want to be seen as the ‘bosses’ pet,’ and anyway realise any input can be interpreted as critical of the status quo, people often don’t even tell their bosses about positive improvement suggestions, even if no one is at fault.
If frontline staff hide insights from their bosses, at least these first-level managers are close to the market, and in a good position to know what’s going on. However, they in turn conceal things from their own bosses, who then do the same to their bosses, and so on up the hierarchy. The danger is that those with the most power to set priorities and allocate resources have a perception of customer experience systematically biased towards the positive. This positive distortion, or ‘spin’ effect, is widespread.
Positive distortion or ‘spin’
In one study, 180 executives from over 100 companies based in 25 countries told us that ‘managing’ information flows relating to market feedback was commonplace and detrimental. We asked them how they thought peers in their own companies would handle three different types of market feedback relating to customer complaints, market research, and business development. In all three scenarios the market feedback was negative.
If your working assumption is that, when the market speaks, your information channels work to ensure that you hear the voice of the customer quickly and accurately, think again. 30% of respondents assumed that their peers would not tell the truth about customer complaints most of the time. When the scenarios involved market research findings and business development status, 20% and 30% respectively assumed that their peers would not tell the truth most of the time. Rather, they would ignore, withhold, obfuscate, delay or simply lie.
Alarmed? We were. So we discussed these findings with more executives, and they in turn confirmed that the grim picture was consistent with their reality. What we call ‘truth telling’ – the accurate and appropriate sharing of market insights – is anything but ubiquitous.
Companies that were more highly rated on truth-telling were indeed more innovative, at least according to these self-reports. Yet, in spite of the compelling logic, openness is just not the norm.
To explore how widespread these patterns are, we analysed data from over 4,000 US managers across multiple industries and functions collected by Personnel Decisions International (PDI), a leader in 360-degree surveys. We found evidence not only that executives are far from open in practice, but also that they are largely unaware of this.
In the eyes of subordinates, most managers have inflated views of their own openness, directness and willingness to listen to unwelcome news and suggestions. In contrast, the managers’ bosses rate them even higher than they rate themselves on ‘Listens to people without interrupting’ – presumably reflecting the tendency of the managers themselves to avoid interrupting their own bosses.
The gap between managers’ and colleagues’ perceptions of the managers’ openness to unwanted messages occurs because, in most manager-subordinate relationships, managers overestimate their openness to such messages and underestimate the extent to which subordinates are discouraged from speaking up. Put simply, even good managers often unwittingly signal that they don’t want to hear bad news and subordinates tend to self-censor, and avoid delivering it.
These misperceptions create a communication barrier, inhibiting the flow of bad, but useful, news, and sometimes even positive ideas for improvement. How can you counter this natural tendency among both bosses and subordinates?
What to do?
First, we suggest you question whether valid insights usually make their way, unspun, to the people who can make something happen. If they do, you work in a privileged and rare environment, and presumably are outperforming industry peers. If not, we recommend four simple steps.
- Reuse your 360° data. Look at it on an organisational level. Explain the significance and the need to improve. Set concrete targets. Simply putting it on the agenda and encouraging colleagues to explore blockages and why they persist will produce results.
- Set up your customer feedback systems to ensure that customer sentiment is fully transparent at the top management level and part of the very cockpit chart is reviewed with management accounts weekly and monthly. Report the objective top-line data, not someone’s interpretation of it.
- Insist that top managers spend some time in the market doing what front liners do every day. While customer exposure doesn’t yield statistically valid insights and is not a substitute for detailed ethnography, it will equip senior executives to be better consumers of expertly produced market research reports, asking better questions, getting to a deeper level of understanding.
- Lastly, lead from the top. Enhancing information flow and capitalising on the opportunities presented implies significant behavioural change. The top team needs to make clear that they understand the problem and mean to change, starting with themselves. They need to consciously look for opportunities to spell out what is desirable. Most companies could learn from Larry Page’s reaction when Sheryl Sandberg made a significant mistake which cost Google a lot of money and time. He said: ‘I’m so glad you made this mistake…I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don’t have any of these mistakes, we’re just not taking enough risk.’
Patrick Barwise is Emeritus Professor of Management and Marketing at London Business School. Seán Meehan is Martin Hilti Professor of Marketing and Change Management at IMD.