by Tim McLean, Director of Content, BCC Research
Mr. McLean’s background is in science and medical journalism, and clinical education for practicing doctors and nurses.
Market research is vital to any business in any sector. While certainly
no crystal ball, quality market research helps mitigate the magnified
risks inherent to manufacturers.
Manufacturing is a game of momentum, less so of agility. If you’re going to make something, you almost always want to make a lot of it, and that is a commitment akin to a freight train—fast and powerful but difficult to stop or change direction. Informed market research represents reliable data—in market sizing, market landscape, identification of who makes buying decisions in potential customer companies, and streamlining and optimizing supply chains.
As part of a supply chain, any manufacturer would agree that vision along that chain dims in either direction as distance increases. Market research provides a telescope (not so much a microscope as it does in some sectors) to grasp trends far out along both directions of the chain. From understanding shifts happening way up toward the raw materials direction, to anticipating buyers’ changing attitudes down at the retail end (well past most of your direct customers, but nonetheless ultimately steering the ship), this market intelligence is a powerful, and always customizable, tool in your box.
That tool is personified in the market analyst. She has her attention fixed at a position along the chain where yours is not. She lives and breathes, say, rare earths production—so you don’t have to. On the opposite end, another analyst cares only about (and watches like a hawk) customer preferences in consumer electronics.
Value to Electrical Manufacturing
A level deeper in specificity is market research’s value to the electrical manufacturer, and that is distinguished simply by an increase in sensitivity. The building or building infrastructure, lighting systems, industrial or utility products, transportation, and medical imaging industries are not going anywhere. They are among the “essential workers” of our modern machine, and they can’t take a sick day. But that apparent sense of security is dwarfed here by the specter of innovation—someone might do it better than you, and it becomes a game of inches (and ideas).
Market research can assist less with the ideas, unfortunately (with exceptions, obviously). That’s on you. But the game of inches is precisely why this research is so vital. The most accurate and up-to-date market intelligence, up and down the supply chain, at any given moment, is often the difference between thriving and struggling. You need company profiling to know your competitors and what they are working on next. You need patent reviews and what’s coming out of academia, so you know who your next competitors will be.
Seeing the Forest and the Trees
The COVID-19 pandemic has changed everything, and we are nowhere near the end of it. But successful companies are changing the way they use market research to survive, and even thrive.
Traditional market research is generated like this: Analysts step back from their subject to paint the whole thing, just like an artist executing a monarch’s portrait. Current markets are sized by performing bottom-up (from unit price to gross revenue) and then top-down analyses, and then the two data sets are compared and triangulated. Past years are analyzed the same way to detect patterns.
Analysts factor current market landscape forces and make a forecast usually going four or five years into the future, and communicated via the lingua franca—the compound annual growth rate (CAGR). This is all called secondary research, and, ironically, the analyst then performs primary research—she picks up the phone and talks to companies.
Traditional market research is consumed like this: Decision-making entities in organizations purchase and read (or, far more often, have a staff read, interpret, and deliver a consumable summary of) these reports, which are hundreds of pages long. They typically do this once a year. The decisions they make are broad ones, carefully weighed, with an eye on the future... about four or five years into it.
This is as it should be, like a good driver whose eyes are focused four to five car lengths ahead. Any closer or more distant and driving becomes poor and dangerous. So, looking at CAGRs and other figures, a small pharmaceutical company will decide to change from traditional manufacturing to continuous manufacturing, even though the initial investment is immense. Or, a capital venture firm will decide not to invest in an esports virtual venue, because it will all be on mainstream TV within five years anyway. Thus spoketh the CAGRs.
Traditional research and the traditional way of consuming it are not going away. But that doesn’t mean manufacturers don’t need more help and more tools. That was true before COVID-19 hit. During COVID, BCC Research did some healthy omphaloskepsis and asked our Members (a mix of corporate and academic entities of all sizes, all over the world but including many manufacturers), “In this strange time, what else could you use from your market research? What is the research NOT giving you that you need?”
They spoke with a remarkable level of unity, and the major theme was that they want ultra-specific operational-level data delivered regularly in a monthly or quarterly heartbeat, in a simple form. This is very different data than is normally found in traditional reports. These are things like number of units shipped, weights, number of trucks carrying them, and actual retail prices at stores.
Beyond Traditional Research
I recently helped a Member company obtain information on the manufacturing of PPE masks for civilian use. BCC has been covering this area for years with regular full-length reports featuring five-year CAGR forecasts. Our latest version was written well into the pandemic, so justifiably showed dramatic growth rates for these items. I assumed this was exactly what the Member needed, and I proudly gave the report to my contact at the company.
“No,” she said. “I have this already—and it helps, thanks. We are already committed to going into manufacturing these masks. That decision has been made. I’m just a project manager—I need to know whether to make them out of cotton or synthetics. And I need to decide that by learning which material type stores better and longer, and which ships at a lower rate. As time goes by, I need to watch those rates.”
So COVID has not toppled the five-year CAGR in market research, but it has diminished the centrality of the tool and made skeptics of us all. While an infectious disease outbreak had been predicted for some years by experts, it’s fair to say no one saw the magnitude of this disaster coming, especially its effects on the United States economy. We can no longer use traditional research alone—that view of four to five car lengths simply cannot anticipate global catastrophes like COVID.
Granular, specific, regularly updated operational-level research is vital to augment it, as it allows a company to maneuver in the new world a disaster like this creates. ei