Financial services tech analysts: innovation makers or expensive journalists?

Recently, I sat through a presentation from a top tier analyst firm where it was suggested that one of the major benefits of buying the research was being able to access their thought-leadership around financial services. This, apparently, would help our company be relevant and insightful for customers.

I don't for one minute deride the value of thought leadership, and indeed, any company in the business needs to have clever thinkers that can create value. When you've got an undifferentiated product in a highly homogenous market, there's little else to do but hire the best thinkers you can afford and hope they come up with the next new spin.

But my problem with analysts firms and thought leadership propositions is that they rarely offer you anything unique they haven't sold to other firms. And that's an issue, because, as a vendor, you can't just regurgitate the latest research from Gartner or Tower and expect to be credible. Many larger tech and consulting firms recognise this and have their own research groups. If you want to play, you have to have your own opinions.

But recently I started to work with a bank that were using analyst research as their primary guide to the future of banking. This, they expected, would provide them with a rich source of ideas from which they could guide their own bank into innovation nirvana. New products! New technologies! Massive market success.

Wrong. Using analyst research in this way at best condemns you to being a fast follower. Why? Because analysts, not being bankers themselves, base their assessments on what banks have told them they are thinking and doing. What is a Gartner Hype Cycle if not a reflection of the current sentiment of the banking community around particular technologies?

It would surprise me if any institution betting on a major innovation step-change would talk about it to analysts before they had it in the market.

So if we look at analyst firms in this context, is their function really that much different to financial services journalists, perhaps with some expert editorial thrown in? I'd argue not, at least in the context of providing strategic insights into the future. An expensive way to get financial services news, no?

Here's another point. How often have you gone to a trade show or other function at which an analyst firm is the keynote speaker, and heard from attendees afterwards that they didn't hear anything they didn't know already? I don't know why this would surprise anyone: at least in part, the opinions of analysts would have been derived from the opinions of bankers, some of whom are probably in the audience.

On the other hand, I'd hate to deride the real value of the analyst community: giving us an insight into what the market is thinking about and doing now. That's exceptionally valuable. Banks are unlikely to talk directly to either vendors or, indeed,  other banks directly about their current state of play. This market aggregation function is a good reason to buy an analyst.

But expecting them to deliver future strategy, especially around innovation, is not. I've given up quoting analysts firm research altogether in my own presentations, since everyone has already heard it from every other vendor if not from the banks that are already implementing. And when an analyst firm publishes trends, my question is not how to make use of those predictions now (too late, everyone is already doing it!), but what consequential next steps might follow where it is possible to make a difference.

In advance, I apologise for the richness of the link-bait in this post.

PostScript: Have you also noticed that the really insightful thinkers in analysts firms, the ones who have true opinions and do the really credible thought leadership, always seem to leave their firms and start out themselves?

Comments

[Rob Rubin]

Okay... I'll take your bait.

Upfront: Prior to starting Facilitas, I was an analyst for 15 years (the first 7 at a firm that was acquired by Gartner, and the last 8 at Forrester Research).

From the top:

"But my problem with analysts firms and thought leadership propositions is that they rarely offer you anything unique they haven't sold to other firms."

Analyst firms make money by creating something once and selling it over and over again. Yes, I published a 16-page report that everyone received. That's pretty transparent. But I've sat in on countless sessions with executives debating the concept, merits, applicability and future implications of my analysis. Those sessions help apply the analysis for clients. Also, many firms augment the syndicated content with custom research. You'll never hear about those results in the media or at conferences.

"But recently I started to work with a bank that were using analyst research as their primary guide to the future of banking. This, they expected, would provide them with a rich source of ideas from which they could guide their own bank into innovation nirvana. New products! New technologies! Massive market success."

Isn't this a problem with your client and not analysts?

"Wrong. Using analyst research in this way at best condemns you to being a fast follower. Why? Because analysts, not being bankers themselves, base their assessments on what banks have told them they are thinking and doing."

Point #1: In my experience, many banks are risk-adverse and actually prefer to take a fast-follower strategy when it comes to new technologies.
Point #2: Many banks buy this type of research for the express purpose of keeping up with what other banks are doing and thinking. A benefit you bring out.
Point #3: In addition to talking to lots of banking executives, Forrester talks to thousands of consumers every year (I can't speak for other firms).

"It would surprise me if any institution betting on a major innovation step-change would talk about it to analysts before they had it in the market."

That's flat-out wrong. I've been privy to many things under NDA.

"So if we look at analyst firms in this context, is their function really that much different to financial services journalists, perhaps with some expert editorial thrown in? I'd argue not, at least in the context of providing strategic insights into the future. An expensive way to get financial services news, no?"

I think you probably know this, but the best way to drive an analyst crazy is to compare them to a journalist. Analysts maintain coversations with clients and help them apply the research. Journalists publish a story and move on to the next. Also, most analysts didn't start out that way. They have deep industry experience or a particular expertise (e.g., market research) that enables them to look at information (i.e., a set of conversations with bankers, or tabulated survey results) and develop reasoned analysis of what could happen in the future. Forrester assembles teams with different disciplines and experiences to address issues from many angles.

"How often have you gone to a trade show or other function at which an analyst firm is the keynote speaker, and heard from attendees afterwards that they didn't hear anything they didn't know already? I don't know why this would surprise anyone: at least in part, the opinions of analysts would have been derived from the opinions of bankers, some of whom are probably in the audience."

Speaking at trade shows is a major marketing opportunity for analyst firms. The purpose (from the analyst's perspective) is to expose more people to the research. It's also a great opportunity to meet with clients. Whenever I've spoken at an event as an analyst, the breaks, lunches, dinners etc. have been booked with clients and prospects for private discussions about the research.

"On the other hand, I'd hate to deride the real value of the analyst community: giving us an insight into what the market is thinking about and doing now. That's exceptionally valuable. Banks are unlikely to talk directly to either vendors or, indeed, other banks directly about their current state of play. This market aggregation function is a good reason to buy an analyst."

Agreed, as mentioned above.

"And when an analyst firm publishes trends, my question is not how to make use of those predictions now (too late, everyone is already doing it!), but what consequential next steps might follow where it is possible to make a difference."

Everyone uses research differently. I like how you think about using research.

To me, your post makes it seem like you have an ax to grind. Has an analyst recently published anything where your company was not mentioned, placed in the wrong bucket on a graphic, or worse, disparaged?

[James Gardner]

Hi Rob,

I don't really have an axe to grind. I have to say that whenever Getronics has been covered by analysts, the critisisms have always been extremely balanced and fair. Rately, if ever, have I had cause to complain about any firm, even when the news is bad.

I guess the point that I was trying to make (perhaps badly) is that it is unreasonable to expect original and new contributions from analysts. As you indicate in your commments, that's not really the business model of the firms who need to write once and sell many.

I wrote this post as a result of one of our incumbent firms suggesting that they had original value to add to our thought leadership work. Perhaps if we'd hired the particular analyst, that would be the case.

You also remark that banks like to be fast followers. In my experience, bankers say that publically whilst railining against a lack of innovation internally. I think that the tide might be changing here, at least for some banks. I am involved in innovation process programmes in 2 major European banks today, and both programmes are about doing things first, and doing them disruptively.

In any event, thank you very much for your detailed response to my post. I appreciate your inights.

[Kermit Williams]

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[Thomas Barker]

In a strange way, I think Kermit's made James's point better than anyone could have...