“Leaner” May Not Mean “Superior” for Market intelligence Functions in the Manufacturing & Industrial Sectors

September 28, 2011. On the surface, Manufacturing and Industrial companies appear to have efficient market intelligence functions. More than 80% of the surveyed companies in the 2011 Global Market Intelligence Survey already have a systematic operation in place. Compared to some other industries, they work closest to their CEOs and prefer small teams. They have about 220 internal clients on average, with over 70 people regularly contributing insights and research in addition to their core market intelligence team.

Indeed, this all looks like good news. Generally, companies with world class market intelligence functions have them work closely with decision-makers, use their budgets and their teams more effectively and use more extensive internal networks.

Our Investments in systematic MI have paid off_Market Intelligence_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)
*Click on image to enlarge
However, some alarm bells are beginning to sound with the recent rumbles in the global economy. Do Manufacturing and Industrial companies truly have the market intelligence functions that will help them emerge as winners in 2012?

Conducted in March, the 2011 Global Market Intelligence Survey surveyed 192 respondents from Manufacturing and Industrial companies, and compared the results with other industries and against a pool of companies with world class market intelligence functions. We ask Peter Davey from M-Brain (formerly GIA)’s Manufacturing and Industrial practice for his thoughts on the results.

Do the smaller intelligence teams reflect world class market intelligence capabilities or just leaner management practices in general?

“It is likely to be related to the latter, due to the shake-out of middle management in most Manufacturing and Industrial industries and the continued outsourcing of perceived non-core functions – of which M-Brain (formerly GIA) is a beneficiary.”

Annual Market Intelligence Budget_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)
*Click on image to enlarge

With average budgets of 1M€, Manufacturing and Industrial companies are small market intelligence spenders compared to other industries. What are some possible reasons?

“Some niche industrial players believe that they have a better handle on their customers’ needs via their sales team and service engineers, and so require less market intelligence. This is particularly true in the control systems and factory automation business, where many bigger manufacturers are happy to sell large volumes with little insight into the end user application that their product eventually goes to. An example would be the electric drives which are as likely to end up in a washing machine as part of a conveyor system in another factory.

Many engineering companies which are “˜engineering led’ spend significantly more on R&D where the main use of market intelligence spend is to identify uses for the resulting developments.”

Functions which Market Intelligence is set up_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)
*Click on image to enlarge

Most Manufacturing and Industrial companies set up their market intelligence operations under sales and marketing or strategic planning/business development. Should they be spending more on supply chain or product development?

“My personal view is that many industrial companies would be well advised to use market intelligence systems and techniques, and apply them equally to supply chain management and product development.

This however, would require a major change in thinking because market intelligence has always been regarded as part of the marketing function, even though it is often linked to strategic planning.”

The survey show that 57% Manufacturing & Industrial companies use market intelligence only on an ad-hoc basis. Should they be doing anything different?

“There is a very strong correlation in all industries, including the Manufacturing and Industrial sectors, between better focused, structured market intelligence function and stronger bottom line returns.

It may be that the long history of some smaller companies mitigates against changing the way things have always been done. The larger manufacturing and industrial companies, such as GE, Siemens and Ingersoll Rand, have significant market intelligence investments.

The industrial gas industry prefers continuous customer satisfaction surveying which is not perceived as an market intelligence function but part of the customer service function.

It could be argued that internal perspectives may erroneously define market intelligence spend and label it as something else.”

What are some of your observations in general? Are Manufacturing & Industrial companies enlightened or lagging behind? Are they using social media intelligence at all?

“I have observed that very few Manufacturing and Industrial companies are using social media intelligence and I think it would be fair to classify some of the bigger and more established players as lagging behind other industries in market intelligence awareness.

Until very recently, the newer manufacturing and industrial companies developing out of China and Asia – in general “˜the new workshop of the world’ – have never perceived a need for any market intelligence function.

I remember an owner telling me that he had no need of market intelligence while he was already running beyond his manufacturing capacity and had full order books stretching years into the future. Of course, the last few years have shown that to be a very short-sighted view.

To quote the JP Morgan Manufacturing Global Purchasing Managers’ Index (PMI) for July, the report highlighted that “dependence on emerging markets also puts manufacturing at risk from a slowdown in these economies. If adverse conditions materialise, investment will be volatile, which could impact strongly on Japan and Germany in particular. Economies connected to Japanese and Chinese supply chains would also suffer”. All this was reported before the downgrading of America’s credit rating, which has since sent capital markets into a tailspin.

Companies with focused and sophisticated market intelligence functions ““ even those in emerging markets ““ will be better positioned to come out stronger from any double dip recession or prolonged market uncertainty the world is bracing itself for.

Efficiency of decision making with world class MI_Market Intelligence_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)
*Click on image to enlarge

For that reason, as the world economy titter on the edge of another downturn or even a second recession, the manufacturing and industrial sector will need to analyse what cost reductions are likely to do least harm to the organisation and still keep the business in a state of readiness for the eventual upturn and recovery. Those companies that have retained and even grown their market intelligence function, perhaps by using them to focus on supply chain savings in the early part of the downturn, will be best poised to reap the results and benefit most from being the early movers as the recovery takes hold.”

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