The Future of the “Industry Analyst” 0

Dilbert.com

Last month Phil Fersht, CEO of HfS Research wrote about the changing (or in need of a change) industry analyst business. Gideon Gartner’s post yesterday brought this to my attention and it is certainly something that I’ve thought a lot about.  IIAR is holding a teleconference on this topic late this month.  Here are a few thoughts on the points Phil makes:

1) research needs to be dished in bite-size chunks: I’ve written frequently about the vast amount of information overrunning us all.  This is a pronounced problem for industry analysts.  One of the core value-adds industry analysts provide is a different view that allows research buyers to look outside of the box at the world in which they live.  Today there are thousands of “voices” coming across blogs, twitter, and other media-rich sources which allow analysts within firms to hear different opinions sans the need to buy a research vendor.  Analysts must add value above and beyond a fresh perspective.

2) There is nothing new in today’s research: Traditional research was/is largely focused on sizing an addressable market.  But companies I work with seem to be less concerned with sizing an addressable market perfectly – meaning they are increasingly comfortable with working in a world with some uncertainty when it comes to unit and revenue volume. The rise of several large research firms who’s estimates are always very similar likely drives this. More, these estimates are distant in the world of instant information.  A five-year horizon is great for large capital investments, but these have become less impactful today.  The analysts to survive (and thrive) will spend increasingly more time teaching their clients what the world will resemble in shape as opposed to in size. This will involve more modeling and tools like scenario planning. The world is demanding a more analytical industry analyst.

3) The Courage (or lack therefore) to be Non-consensus: Related to #2. There is minimal upside for these firms to stray far from consensus – but this ultimately dilutes the value analysts bring to their clients.  I cringe when I hear analysts say, “I’m trying to be conservative in my estimate.” My personal goal as an analyst is to be right – all the time, every time.  When I find myself far from consensus I highlight what is a contrarian view. I’m careful not to take a contrarian view simply to be non-consensus, but I do believe the ROI on non-consensus views will be more pronounced over the next 5 years.

4) Buyers don’t read research: The time of selling thick research reports is over. As point #1 already made clear, buyers want condensed, actionable information.  A thick research report is the opening comment of a long conversation.  While it might help the analyst formalize their thinking on a topic, clients today want open-ended conversation. The value-add of the successful industry analyst of tomorrow will be counted in minutes/hours not pages. The best analysts are morphing into strategic advisors.

5) Research Needs Personality: I completely agree succesful research will be driven by personalities not products.

Here are a few additional thoughts:

6) A Tidewave of Data:  Hard data was once scarce, but that world is changing rapidly. We are increasingly faced with the opposite problem and this problem of data availability (as opposed to the lack of data) will only get more pronounced over the next decade.  Today there are a plethora of “things” analysts can measure and from them create metrics. Many of these metrics are answers in search of a problem. Some analysts will make a living “explaining” these metrics.  To be sure, buyers will need to have much of these new data “interpreted” but many of these new data sources will be little more than noise.  The introduction of noise will lower the value for all metrics and data which in turn will make some of the above points more important.  The successful analyst will use data/metrics to provide a view their clients didn’t see elsewhere. There will be an important subtly in how these data are used.

7) The Macro for the Micro: Analysts have specialized themselves into corners.  The “lack of vision” discussed by Phil and others in comments is fundamentally a lack of understanding about the broader surroundings.  Too many firms show hockey stick forecasts or tout an understanding of the hottest trends, but fail to explain where this growth is coming from or what implications exist for adjacent categories.

In passing, Phil writes, “At the end of the day, research is discretionary spend.”  Too many analysts overlook this simple tenet.

Lighter Shades of Green… 0

Had an interesting conversation with a reporter earlier this week on the topic of “green tech.”  Green tech has always been one of those loosely defined segments of consumer tech.  Many want to box it concretely – but increasingly green is a story of relativism instead of absoluteness. Many (dare I say most) consumer electronics products today have lighter shades of green.  Their singular or primary purpose might not be to lower one’s carbon footprint, but by providing a unique service or offering they might indirectly also provide environmentally beneficial results.

Some Math Behind Electric Vehicles 0

The following was original published in CE Vision Magazine. You can download the full issue here.

The presence of electric vehicles at CES continues to grow with 2011 setting records on multiple fronts. As gas prices rise and show little sign of retreating any time soon, interest in electric vehicles will continue to peak in the years ahead. Here is some math to consider.

First, electric vehicles are good for domestic economic growth. Remember, economic growth in the U.S. is measured by GDP which consists of consumption + investment + government spending + exports – imports. Every dollar we import counts against domestic growth as we measure it under GDP. This includes things like lumber from Canada, consumer electronics from Asia or oil from the Middle East. If we replace vehicles that use traditional combustion engines with electric vehicles we presumably need to import less oil. We replace that oil demand with electricity demand that is created (and consumed) here in the U.S.

Adding an electric vehicle to a household should reduce the gasoline consumption of that household significantly, but it will conversely increase the electricity consumption. A single electric vehicle will increase electricity consumption by a third to one-half and two electric vehicles will consequently increase the electricity use for that household from 60 percent to possibly double the electricity use of that household.

Technology diffusion has a geographic component. A neighbor buys a new technology— be it a computer or an electric vehicle—and some of the first to notice are those most intimately associated with that individual. These are frequently neighbors, family, coworkers or other individuals in overlapping social circles. They likely live in relatively close proximity to one another, creating a geographic factor as technology diffuses from one party to the next. In the case of electric vehicles, this geographic component might be exacerbated in the earlier years because some of the vehicle manufacturers are restricting the markets where the vehicles can initially be purchased. Driving Demand Where might we see high electric vehicle adoption in the future? Basic accounting suggests electric vehicles are most financially lucrative in areas with the lowest electricity prices. The average retail price for electricity in the U.S. is roughly 12 cents per kilowatt/hour. Many of the states with the lowest electricity rates are in the western U.S. Another factor likely to influence electric vehicle demand is average miles driven. The fewer daily miles driven, the more cost advantageous an electric vehicle becomes. According to somewhat dated information from the U.S. Energy Information Agency (EIA) that has presumably not changed in relative terms, individuals in the western U.S. travel the least during the year. While we don’t have daily miles driven, these figures likely provide a good proxy and highlight another positive attribute to western states when it comes to identifying future electric vehicle demand.

Because electric vehicles can be expensive, household income also will play a role in diffusion. As you might surmise, above average household incomes are typically correlated with higher electricity costs. Only nine states have above average household incomes and below average electricity prices. Many of these states are in the West where miles traveled are relatively low. These include Colorado, Nebraska, Oregon, Utah, Washington and Wyoming. The other states not in the western U.S. are Iowa, Minnesota and Virginia. There are a variety of intangible characteristics that will influence electric vehicle demand and the subsequent impact and timing they have on the U.S. economy. If I was making the call today, I’d watch the nine states listed above.

Organizing Information 0

The most successful companies – especially in the digital world – will be built around organizing dispersed information (something I said I would expound upon).  Name a successful company in the digital space, and you will see data organization at its core.  AOL for example – while best known for its ISP business in the 1980s – was centered around a destination page that organized information (including email).  AOL was one of the first sites to organize dispersed information in the form of rudimentary news, weather, and other information relevant to the user.

Yahoo in turn expanded this by building its dynasty around organizing information and increased user time on their site.  Search – in the purest sense – is based on organizing dispersed information. Because the ability to toggle between sites is minimal, sites are becoming centralized around carefully culled genres like technology, politics, weather, or news. In many instances, once a topic reaches some minimal threshold where it can support a following it splintering into sub categories.  You see this in areas like technology (ie wireless, automotive, computer, television) or politics (ie right wing, left wing, moderate). Sites like Groupon and LivingSocial are successful because they have organized around a specific genre (local daily deals).

Today apps and other sites are creating “skins” that allow individuals to highly personalize what information is relevant to them.  These “skins” allow individuals to unorganize aggregated and organized information in order to reorganize it by creating a highly personalized flow of information. The future of the web will be a series of organizing, “unorganzing,” and again reorganizing bundles of information.

Decision Curbs: How the Miracle on the Hudson will Impact You 0

Over the weekend I read William Langewiesche’s recent book Fly by Wire: The Geese, the Glide, the Miracle on the Hudsonwhich chronicles the role electronic control systems play in avionic safety generally and US AIR flight 1549’s miraculous landing on the Hudson river specifically. A fly-by-wire approach is something we will begin to see with more frequency.

In avionic application, the fly-by-wire approach establishes certain parameters that guide the actions of pilots – for example making it impossible to stall the airplane, or obtain more than 2.5Gs which could impact the integrity of the aircraft. Creating bounded ranges and cementing curbs allows for quick, decisive decision-making in times of distress.  Bernand Ziegler – the former head of Airbus, and champion of the fly-by-wire approach explains, “we give you guarantees so you can react as fast as you want without having to worry about breaking the plane.”

The Future of Data (and the Death of Surveys) 0

The demand for “metrics” is increasing. At the same time, data availability is accelerating. More, the availability of survey software like SurveyMonkey has driven down both the cost and accessibility to survey tools. In economic parlance, we’ve seen both supply and demand shift out. As the chart shows, the end result is a lower price and a much higher quantity.  

This is in everywhere evident. Political and social issue polling has increased with a 24 hour news cycle, cable news channels, more independent research institutions, and think tanks. Surveys have become commonplace. I receive a survey invite each time I stay in a hotel, attend an event, close an account or any number of a host of activities. These invites enter my inbox with subject lines like “your opinion counts,” “please share your feedback with us,” “your recent stay at Renaissance,” or “would you recommend Hertz?”

The Future of Postal Service 2020 0

Last week I had an extended conversation on the future of postal service and wanted to share some of my thoughts on potential scenarios 10 years from today. These are clearly quick sketches. The future – as is often the case – will likely be an amalgamation of these scenarios.  

Scenario 1: Traditional Mail Ceases to Exist, Small Parcel the Only Thing Delivered

Small parcel post is escalating.  I seem to recall a statistic recently from Fred Smith of FedEx, suggesting small parcels represent some 15% of their total shipment volume. This category of mail is driven by online retail sales and consumer-to-consumer transactions – both of which continue to increase.  Consumer-to-consumer transactions are on the rise as sites like eBay continue to gain in popular and are used more frequently for a wider assortment of goods. Online sales represent only about 5% of retail sales today, but this is clearly growing as well. It won’t be surprising to find online sales representing a quarter of all retail sales within five or six years. As these transactions increase, small parcel post naturally follows.

There are a few trends playing out in the technology sector which will also impact the rate at which small parcel post increases. First, as the retail sector has become more challenging, manufacturers are increasingly looking at selling directly to consumers.  This isn’t unique to technology companies, but is playing out across a host of categories. A second element I see evident in technology is the rapid acceleration of product launches, the speed at which companies are attempting to bring these products to market, and the swiftness at which information about new products is disseminated to potential consumers.  Manufacturers are building less inventory over a shorter period time before bringing a given product to market. Seeking to fill a broad supply chain in a shorter window will force manufacturers to increasingly rely on expedited, small parcel post – regardless if they are going directly to consumers or through more traditional retail channels.

Scenario 2: The Death of Direct Mail

Today, direct mail represents roughly half of all mail sent. According to a report from advertising and marketing consulting firm Winterberry