Would Starbucks exist if they'd talked to Analysts?

Summer 2002 Patrick Lannigan

Would you get up in front of your CEO and present a business plan to invest in a market that was shrinking? That would be stupid right? It's good thing no analysts talked to Starbucks when they opened their first store in 1971. You see, analysts had tracked coffee drinking to be in a severe decline. In 1962 75% of the American population drank coffee. By 1986 that was down to 51%. If Starbucks had consulted with these analysts would they have even bothered to open a store?

Industry analysts, like Gartner or Forester, can be a good thing for a technology company, but some caution is necessary. I've seen some companies absolutely crippled by them. Afraid to make a mistake until they speak to the "Gartner Gods" as one person I used to work with called them. This is where they're wrong. Plenty of companies go bankrupt listening to these people. Just like Enron and Worldcom went bankrupt despite using the world's most prestigious consulting firm, McKinsey. Just like hundreds, perhaps thousands, of Gartner clients failed to thrive.

Reliance on the quantitative analysts, like IDC, can be just as bad. These analysts can only track markets that have already formed. They can't forecast a market that isn't in place already.

Robert Lutz, when he was at Chrysler, questioned our reliance on analysts, focus groups, and surveys. As an example, when Chrysler did a survey on a new Dodge Ram pickup they were making, 80% of people said they would not be interested in it. Results like this would be sure death to any project, right? Not so quick. Those 20% of the people who said they liked it, really liked it. The truck went on to become one of the most successful product line introductions ever.

What no analyst can account for is a market maker. Starbucks is a market maker, along with Siebel, RIM, SAP, Oracle, Cognos, and hundreds of others. These companies break new ground, usually not tracked by any analyst until there are significant sales. Some of these companies may, in fact, be in decline today but each of them forged a new market where none existed before.

So, don't let yourself be crippled by the Gartners, Forresters or IDCs of the world. Talk to real customers and try to sell them something. That is the true test. 

As the high tech meltdown of 2002 suggests. Gartner, IDC,  and Forrester have no better visibility (or any better connection to a higher power) than anybody else. Don't think for a minute that Keynote, I2, Iona, CMGI, Broadvision, Akamai, Inktomi, and dozens of other former high flyers didn't pay for top dollar consulting services from analysts. Look where it got them.

Very few vendors I've worked for have the courage to say no to Gartner. Good for Gartner. What a great business to be in!

©Patrick Lannigan

patrick at lannigan dot org

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