An Effective Approach to Conducting Data Research

An Effective Approach to Conducting Data Research

If you do data research, you need to read this article!

In my previous life, I was a consultant. I was focused on strategy work and therefore relied heavily on data to come up with fact-based recommendations for my clients. As a consultant, I also had first-hand exposure to the shift of companies run from a « follow the leader » approach to a « show me the facts » culture.

I began looking in detail at how data research was conducted in corporations and consultancies and discovered many options executives were using to get data.

Doing the research themselves was the most common strategy. My estimate is that any executive or consultant spends 20 to 30% of their time looking for data. While this might be beneficial as it allows a « first hand » grasp of the data there are several issues. First, research requires specialized skills such as the mastering of certain databases, Boolean search, or of interview techniques, which most executives lack. Second, research requires a great deal of time and focus, meaning either research is rushed or it is done when no other tasks are more urgent i.e. during the night.

As a consultant, I did a lot of my research myself and was a poor researcher, killing my work-life balance for only average results.

Today most companies still have most or all their research done by the same people who will use the data. I find it quite striking that many companies don’t have any research function or one limited to managing access to databases, as a legacy to a library function. It is also surprising that most of the big four companies, who try to compete for strategy consulting with the likes of McKinsey, BCG, and Bain, believe it is still useful training for their junior consultants to conduct the research entirely on their own, without even properly training them to do so.

Only a few companies have developed proper research organizations. These companies have in most cases transformed their library function into a research function and have created awareness in their teams that the research function could execute research and not only provide access to sources. Their executives and consultants still execute research at 5-15% of their time but focus on time-critical research or on research that directly helps them understand the topic on which they are working. In these companies the research team is usually fairly large and specialized, often offering a combination of localized industry-focused resources and offshore generalist resources.

Through this setup, these companies are able to develop a competitive edge through a stronger access to information and a good ability to disseminate knowledge, and are able to focus their resources on what they do best (procurement people on negotiation, not research, consultants on analysis, not research, salespeople on selling, not on data gathering…). However, developing this competitive edge does not come easy.

I have seen many examples of companies failing to set-up their research organizations. The main reasons were

1. An underestimation of the effort and time needed to set up the function: Writing job description, defining a career plan, hiring, training, subscribing to databases all require a large time investment from senior management, and take time (in our experience a minimum of 1 year is needed until the research team starts delivering)
2. An underestimation of the cost. To the net salaries of the researchers one needs to add team management, support function time, office space and other facilities, and databases (a minimum of 200KUSD is needed for the basic databases), all this in a structurally high-cost structure. When companies assess their costs they generally conclude that the cost to deliver one hour of research is between 90 and 150€ in onshore locations and 50 to 80€ in offshore locations
3. Errors in recruitment. Doing business research requires skills in secondary and primary research, data analysis, project management and a complete skill set in management (finance, marketing etc). I have seen many companies hiring either librarians or specialists of field research who, although a good addition to a research team, generally don’t have the full skill set required

Since I established Infomineo, a company specialized in providing a research service, I have grown even more convinced of the value of outsourcing research services either as a complement to an internal team, which is then able to focus on the most value-added tasks, or as an alternative to setting up a research team from scratch.

In fact, an outsourcing company focuses on one core skill set (in this case, research), benefits from scale effects and is capable of operating in a lean and cost-effective manner eventually addressing the challenges outlined above.

1. It offers a turnkey research solution. A team can usually start in 2 weeks, takes less than 2 months to be fully up to speed (time to align with client) and guarantees a continuity of service through a retainer agreement in which the client subscribes to research capacity, meaning the service is guaranteed even if analysts fall sick, underperform or leave.
2. Since it has scale and operates in a cost-effective way an outsourcer can offer, despite making a margin, a price (around 50€ an hour) which is lower than the full cost of delivering internally
3. By its focus on research, an outsourcer will be able to hire and train their staff from scratch, providing them with the exact skill set needed to be excellent research analysts

As to choosing a partner one needs to make sure that the researcher will adopt a consultative approach, challenging the client at two levels: Understanding the point the client wants to make and proposing alternatives if an easier to get or higher quality set of data could answer the question; Proposing the most effective research approach, including if it goes against the initial thinking of the client.

Martin Tronquit, Managing Partner, Infomineo