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  • Writer's pictureLiam Fahey

How to Validate an Insight

By Dr. Liam Fahey



Without superior marketplace insight any firm’s strategy is destined to fail. I define insight as new marketplace understanding that makes a difference to the firm’s thinking, decision-making, and action. However, the battle does not end with the creation of an insight.  Every marketplace or organization insight has a shelf life.  No matter how extensive the data underpinning it or how sophisticated the analysis method that helped generate it, marketplace change will sooner or later render it invalid. Simply stated, it will no longer be true.  If an insight has a short shelf life, it is less likely to be of strategic importance.


The validity challenge especially afflicts customer and competitor insights. A B2B customer insight, contrary to prior beliefs, that a segment of corporate customers wanted less functionality in a product not more—just enough to “get the job done” lost its relevance when a competitor completely redesigned the processes involved in getting the job done.


What is often not recognized is that an insight cannot be validated today; it can only be validated in the future.  Validation is a function of the insight holding for some period.

 

Case Study:

Let me give you an example to illustrate why the validity question must always be addressed. This is a competitor insight that a team created after extensive analysis:


The competitor is moving to a fundamentally new market strategy with a very innovative value proposition that it plans to roll out to its entire customer market. The insight entailed new understanding, a prerequisite for any insight. The insight was a surprise, indeed counter-intuitive; the rival had historically followed a largely me-too strategy (that is, provides offers to the market that are largely similar to key rivals) and some executives’ comments seemed to suggest they were happy with the prevailing strategy.


The competitor was acquired six months later, and the acquiring firm decided not to go with the team’s projected strategy: it would revert to its market milking strategy (that is, not invest in the strategy) that it had previously executed. In other words, the insight remained valid only for six months.


The competitor example reminds us of four insight-relevant factors: Humans create insights, they always have future consequences, they can prove valid or invalid over time, and they may still prove useful even if they (quickly) become invalid.

So, ask yourself four questions:


·      Is the insight holding up over time.

·      Should the insight be amended? And if so, to what extent?

·      What are the business implications of amending the insight?

·      What if the insight proves invalid?


Insight holding up over time?


Now to the question, how do you validate or invalidate an insight over time?

I will use the competitor example I mentioned earlier. Four steps are typically involved in the process of validating (and invalidating) an insight:


First, identify indicators pertaining to the insight and to the relevant competitive

context.  Every insight gives rise to indicators along which insight validity can be tracked and assessed. Also, insights always exist in some competitive context; thus, it is always necessary to identify indicators specific to change in and around the marketplace. In the competitor case, insight specific indicators included statements by the rival firm’s executive team, product additions and deletions, strategy moves in the marketplace, and marketing changes. Change in the relevant competitive context, for example, the emergence of a new competitor or an upsurge or decline in market or industry sales can greatly impact the longevity of a competitor or customer insight. Competitive context specific indicators included market segment growth and decline, entry and exit of rivals, rivals’ emerging strategy shifts and performance results, and consultants’ statements about potential market change.


Second, monitor change along the indicators. Marketplace change is often missed

or if detected is not appreciated. Indicators provide a focus for monitoring change along identified indicators as well as detecting new indicators.  Change along the insight-specific indicators helps track what strategy moves the competitor is making (and is likely to make).  Monitoring statements by members of the competitor’s executive team as well as statements by the firm’s salesforce to current and prospective customers sheds light on the firm’s recent and emerging strategy moves, for example, the dimensions of value it wants to provide customers.  Change along the competitive context indicators, for example, entry and exit of rivals, evolution of substitute products, changes in rivals’ customer value propositions, growth or decline in industry or market segment sales, reveals how the competitive environment is evolving.


Third, project and assess change across indicator change. Marketplace change never

ceases; thus, monitoring must morph into a future focus. Monitoring indicator change enables projection of change in the competitor’s strategy and in the competitive context.  Projecting the competitor’s strategy change is critical: you will be competing against shifts in the competitor’s future strategy and/or change in how it executes its strategy, not its current strategy.


Projection is enabled by identifying a pattern (and even patterns) across

change reflected in several indicators.  Remember that change across an indicator set is typically not a set of isolated changes. The question to focus on is thus: how does change across the indicators connect to each other?  One overriding pattern was reinforced over the initial months: the competitor was moving toward bringing to market an innovative customer value proposition.  Change in the service options available to customers, a rapid movement to virtual interactions with customers, retraining of the salesforce to move away from “transaction” selling, and an upward movement of price reflecting the intended superior customer value were indicative of the desire to deliver an innovative customer value proposition.


A pattern of change was also evident in the competitive context: it was becoming

increasingly more competitive and likely to continue so. Rivals were announcing commitments to enhance product functionality with the intent to enable customers to achieve greater customer functionality, (e.g. less cost in product applications), small but important changes were occurring in rivals’ customer service (e.g. shortening customer delivery times), and new intensity in salesforce efforts to woo customers from rivals (e.g. offering “favourable” prices on initial purchases).


Forth, assess insight validity. As you are monitoring and projecting competitor and

competitive change, you are constantly asking whether the insight is being validated, should be amended, or needs to be rejected, that is invalidated. In the first few months of the process, the evidence supporting the competitor insight was overwhelming. However, to avoid the well-known sin of confirmation bias, when your analysis is lending credence to the original insight, it is always necessary to ask what change might lead to questioning and perhaps even invalidating the insight.  In other words, are there change indicators we should be monitoring and assessing that could lead us to amending or even refuting the insight?


While it is imperative to search for indicators that may alert you to possible insight

invalidation, sometimes such indicators emerge from unexpected places and cause immediate reflection on the insight’s validity. This is what happened in the case of the competitor insight discussed here. A large corporation announced with great fanfare that it had closed a deal to acquire the competitor!

 

Now the analysis question became how the acquisition would affect the insight, that

is, that the competitor was committed to bringing a new customer value proposition to market. Now the focus shifted to indicators pertaining to the acquiring firm: statements about the rationale for the acquisition, strategies pursued by the firm in other organization units, fit with the rest of the firm’s product and market portfolio, and comments by the firm’s executive team and middle level managers at industry and trade shows about the direction in which they want to take the competitor.


Within a month a pattern emerged across the just noted indicators and others led

to invalidating the original competitor insight; it could no longer be accepted as an input to our decision making. We accepted a new insight: the acquiring firm was principally interested in extending its product portfolio in a broad market section and managing the competitor as a cash cow, consistent with its overall corporate strategy. The competitor would be moving in a new marketing direction, the opposite of our initial insight.


An invalidated insight may still be valuable


It comes as a surprise to many that an invalidated insight may still lead to valuable consequences for the organization’s thinking, decision making, and action. In the competitor case discussed above, the original insight (the competitor is moving to a new customer value proposition) caused the management team to review its assumptions about the marketplace and whether it should modify its current market strategy. If one longstanding assumption that key competitors would not significantly change their current market strategy in the next one or two years proved incorrect, it would suggest the need to develop one or two new assumptions and then assess their strategy implications. The adoption of the new assumption caused the management team to assess whether and how it should change various elements of its market strategy. The team began to ask how it could amend its current customer value proposition to compete directly with the competitor. The result was a sequence of value proposition modifications including adding new product functionality, collaborating more closely with customers to discover product-in-use challenges, adding a new service component, asking some sales force personnel to move toward a more consultative selling approach. The consequence was that the firm was better positioned to win in the marketplace irrespective of whether the original insight was validated or not.

 

 

 

 

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