In the industrial goods and supplier industries internal market knowledge carriers are a valuable source for information due to often limited quality of externally available market studies. The ideal way to capture and connect internal with external information is the introduction of a corporate market intelligence (MI) function, which supports strategic and market-related decision processes of the entire organization.
In strategic management it is common sense that well-founded and complete market information must be the basis for market related strategic decisions. Reflecting your past strategic decisions, did you consider all relevant externally and internally available market information?
The answers to this question usually reveal limited awareness whether all relevant market information was analyzed at the time a decision was made. Surprisingly this applies to market information available from inside the organization in particular.
Yet, many companies struggle to setup and establish a MI function inside their organizational structure. The presented article describes which steps and success factors apply to build up a MI function that assists corporate decision processes best.
Valuable strategic benefits from a central MI function
Before listing the required steps to setup a central MI function, the prevailing benefits to establish such a function need to be emphasized. Though a well-integrated central MI function has no immediate impact on KPIs, it entails successful long-term market penetration and turnover growth. From a management and organizational perspective a central MI function depicts several strategic benefits:
1. Availability of high quality market information: A MI function creates added value to the organization through timely availability and accessibility of quality market information. By establishing a central competence, requirements for market information are answered with the best information quality available. At the same time the reduction of reporting streams and interfaces implies efficiency gains for the whole organization.
2. Improved strategic decision processes: A central MI function improves strategic decision processes by providing information from internal and external sources to decision makers.
For example, a leading manufacturer of pumps and compressors that achieves 25 percent of its turnover in the U.S., considerably improved the quality of its strategic planning process by consequently integrating market potentials provided by a corporate MI function.
3. Capture of strategic internal market knowledge: Market knowledge of the organization commonly resides within the heads of a few and often-specialized information carriers, which are usually beyond direct reach of headquarter. They are commonly found in local sales and service teams. The exchange and access to this information occurs primarily on a bilateral basis..
Without a central MI function this market information is hardly accessible. A central MI function can ensure that market knowledge is captured and resides with the company in case a carrier of information leaves. This becomes an even bigger issue in times of demographic change, with a large number of knowledgeable baby-boomers going into retirement.
The listed advantages underline the relevance to establish a central market intelligence function.
Organizational integration of a MI function
A central MI function should support market-oriented decision-making effectively, by delivering industry, competitor and customer information for each region and business.
Depending on the internally desired configuration stages, a central MI function can either act as a
- Deliverer of market information (Stage 1)
- Analyzer of market information (Stage 2)
- Interpreter of market information (Stage 3)
We suggest a gradual development along the three stages with the long-term target to become an interpreter of information in order to support strategic decision processes. Only in this final stage the organization and its decision makers will realize all strategic benefits outlined in the previous paragraph.
7 steps to setup central market intelligence function
Step 1 — Evaluation of status quo: Prior to analyzing the needs of the organization it is necessary to evaluate existing activities, functions and departments, which are concerned with market intelligence. It requires close coordination and collaboration with the identified colleagues to define the setup of the future MI function. Moreover, the evaluation has to focus on the identification of market information already available within the organization.
Step 2 — Identification of market information needs: Functions that require market information should be identified and prioritized. At the same time the specific information needs of each function should be determined. With this knowledge, information delivery can be customized to various target groups in the company.
Step 3 — Identification of internal and external sources: In order to fulfill the previously determined information needs, suitable internal and external sources for information have to be determined. External information sources have to be defined and evaluated with regard to a potential investment decision. For internal sources, interfaces and access to internal carriers of information need to be established — especially if the information is hard to obtain from external sources.
Step 4 — Definition of information collection, aggregation and analysis processes: MI management has to decide which information shall be collected by the MI function. Consequently it must be defined how which information is collected, updated, analyzed, aggregated & interpreted.
Step 5 — Definition of information distribution processes: For the distribution of information different use cases should be defined: Information required for the daily business should be provided on-demand and by direct information access (e.g. via a IT solution). In the case of important strategic decisions or the need for individual consultation the degree of individual support (e.g. sparring partner, internal consultant, etc.) has to be determined.
Step 6 — Identification and selection of MI tool solution: In order to support the on-demand provision of information and to manage a great variety of information, IT tool solutions should be implemented. These tools should meet internal data processing and access requirements. Among others, these requirements might address interfaces to prevalent IT solutions, automated web crawling functions for key terms, access to external information databases and structuring of market information.
Step 7 — Integration and establishment of MI function in the organization: Finally, a new MI function has to be promoted inside the organization. On the one hand, that includes the familiarization and involvement of the organization with the new function. On the other hand, responsibility and ownership for the new function — including controlling and reporting structures — have to be assigned.
The 7 steps represent the foundation to conceptualize strategy, vision, value proposition and function description of the future central MI function. The implementation is a mid to long-term process during which contents and processes of the MI function need to be continuously optimized.
Success factors to setup a MI function
1. Setup central market intelligence as a sub division of an executive department: According to our experience a central MI function is allocated best in the executive strategy department. Direct reporting lines to members of the executive board including advice during important strategic decisions, increase the internal impact and relevance of the MI function. In addition, the legitimization of the function by the executive board facilitates the internal acceptance of the MI function and its establishment inside the organization.
2. Gradual & long-term setup of the function: It is crucial to extend the information and service portfolio of a central MI function slowly and in a step-by-step process, in order to accustom the organization with the new function. It is particularly important to learn from initial mistakes and to create MI related success stories inside the organization to raise MI acceptance and awareness.
3. Integration of all involved stakeholders during the setup process: In order to substantiate the internal acceptance of the new function, all relevant and affected stakeholders need to be involved in the conceptualization and establishment of the new MI function.
4. Selection of qualified personnel and external experts: For the success of a future MI function it is essential to entrust highly qualified personnel with the responsibility of the function. In addition, it is highly recommended to involve external MI experts with a track record of consulting during the time-consuming and challenging setup process.
5. Setup continuous quality circles: The last success factor is the establishment of quality processes. These processes are a necessity to adapt the activities and contents of a MI function to changing internal requirements.
Many industrial goods manufacturers and distributors reveal potential for improvement when it comes to systematic integration of market information during decision processes.
A central MI function could mitigate issues like decentralized distribution of market information and drain of internal market knowledge. At the same a well-designed function enhances speed and quality of decision processes. Hence, after the successful implementation of a MI function in your organization the answer to the introductory question — whether your strategic decision is based on all relevant market information available — should be clearly positive.
Markus Pfeifer is responsible for his own competence center in the branch cluster Industrial Goods & Services as Partner at Homburg & Partner. The development of practical concepts that provide customers with sustainable and measurable results is the main objective for Mr. Pfeifer and his team. His focus is on topics such as market, sales and pricing strategies, organizational development and after sales service strategies.
Phillipp Niemann is a Project Manager for Homburg & Partner.