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Transform into value

Turning data into market insight

Goethe, writing 200 years ago, said that there was nothing so terrible as activity without insight. His observation is pertinent to the pharma industry, where any sort of activity - from product development to sales and marketing - is simply too expensive not to be based on an insightful understanding of the market.

What insight is and how, exactly, some firms manage to create it while others drown in seas of data has been the topic of our work at two of Europe's leading business schools - the Open University and Cranfield, both in the UK. Some of our findings have practical value for those who have to create insight in the real world.

Two problems, not one
Like many pressing business issues, creating market insight turns out to be two problems, not one. The first is how to gather data selectively and the second is how to turn that data into value. The first, we uncovered, is a behavioural issue, the second an organisational one.

In our work, we interviewed dozens of companies and then surveyed hundreds more in an effort to understand how executives' data-gathering behaviour varied in both style and effectiveness. There were differences in how systematic about 'environmental scanning' people are, how many sources they use and how well they analyse and synthesise. We found that environmental scanning was a very personal activity, deeply embedded in an individual's personality. We did find a pattern, however, and four main types of 'scanner' emerged as summarised in box 1.

Counter to our expectations, we did not find that the more rigorous scanners always out-performed the ad hoc viewers. It turns out that, to be effective, a team approach is needed that incorporates some of each behaviour. Further, the ideal mix of the four types in a team varies with the nature of the market.

Broadly speaking, 'analysts' and 'categorists' cope best with complexity but struggle with market turbulence and 'monitors' and 'viewers' show opposite, and therefore complementary, performance. To make sense of the market, good companies build teams of people with complementary skills that match their market.

We saw poor performance in companies that apply a standardised approach to scanning the market whatever the conditions. There was more than one example where applying standard approaches across several differing therapy areas resulted in critical insights into prescriber behaviour being missed.

Data into value
Applying the right blend of scanning behaviour to the market is necessary to create insight, but not sufficient. The second part of the problem lies in turning data into value, a process that often failed in companies who became preoccupied with data at the expense of insight. In exemplary companies, however, success depended on four critical transformations:

1. Turning data into value
Data of all kinds - quantitative and qualitative, tacit and explicit - is organised in a way that is consistent with the company's strategy, rather than in a way that suits the habits of the market researchers or information systems people. Prescribing information may be organised around market segment, rather than product. In this way, raw data is transformed into useful information.

2. Turning information into knowledge
By process of contextualisation new information is fitted around existing information and the goals and strategies of the company. An example of this might be the weaving together of information about prescribing patterns, prescriber motivations and the prescribing process to create knowledge to explain market shares.

3. Turning knowledge into insight
In essence, this is a filtering process in which the huge amounts of knowledge a firm has is separated into that which is necessary for operational activity and that market insight which is critical to development of the firm's strategy.

4. Creating value from market insight
In practice, this means changing elements of the marketing mix, such as pricing, channels to market and product claims. In our work, we saw insight driving brand positioning, sales force allocation and other aspects of the marketing communications strategy.

Each of these transformations is difficult and few companies succeed in managing all four in order to create true market insight. From those that did, however, we uncovered two further critical lessons about the nature of market insight and the best practice of firms that manage to create it.

Box 1. The four types of scanner
  • Analysts: Systematic and confident, they seek out new data and absorb large amounts of information. Their weakness is that they can be slow and sometimes incomplete in their scanning.
  • Categorists: Even more systematic than analysts, they are more sceptical about their ability to absorb it all and conservative about the claims they make. Their weakness is that they often provide data rather than insight.
  • Monitors: Moderately systematic, but less formal, they often depend heavily on a few carefully chosen sources of information. They are good at identifying major changes but not as strong at creating insight.
  • Viewers: The least systematic of all scanners, they adopt an ad hoc approach that varies from one case to the next and tend to focus more on internal, rather than external, information. However, they are flexible and adaptive and can be good at identifying novel ideas in the market.

  • Defining market insight
    The term 'market insight' is often applied to information or knowledge to make it seem more important. In practice, however, the vast amounts of market knowledge a pharma company uses can be divided into two kinds - the operationally necessary and the strategically important. Among the most useful and practical findings from our research was to uncover how firms spotted true insight among the masses of knowledge they accumulated. Market insight, it transpires, is a very special form of market knowledge which must meet four criteria:

  • It must be valuable to the firm
  • It must be known only to the firm and not to its competitors
  • It must be hard or expensive for competitors to copy
  • The firm must be capable of acting on the insight.

    Knowledge which meets these four criteria is very rare, but is vitally important to a firmsí success. Examples of market insight we observed included knowledge of how some therapy areas are segmented by motivation, or of how tacit decision-making processes work within some healthcare providers.
  • Best practice
    Most firms do not get past the market-research and data-crunching, some may gain information and knowledge but rarely insight. The few that do succeed usually fail to translate insight into value. By observation of those companies that did create and act on insights, we were able to catalogue detailed processes and some key rules of best practice. These are complex but a few critical success factors are worth mentioning here.

    In the data-to-information transformation, good practice was careful to use data that indicated unsatisfied customer needs. This sounds obvious, but in practice most firms focus on quantifiable data about met needs, such as prescribing behaviour. The best cases we saw augmented this with data about complaints and use of alternative treatment regimens, which indicated unsatisfied needs. Importantly, such data was not simply about the functional needs of the customer but also about their higher and non-rational needs.

    In the information-to-knowledge transformation, weak practice focused heavily on the analysis of one type of data, usually quantitative data. In contrast, better firms emphasised the synthesis of this data with qualitative market research and even anecdotal evidence from sales teams and other customer contact people. We also saw that firms sometimes make this transition in stages via the creation of meta-knowledge, which is partly contextualised information.

    In the knowledge-to-insight transformation, the filtering process was important but so was how companies used their knowledge. In many firms, knowledge is used politically to justify decisions and support existing beliefs about the market. This seemed to hinder insight creation. Instead, effective firms made their existing beliefs into hypotheses and used their knowledge to test them. When they did, they inevitably improved their knowledge and often created insight.

    In the insight-to-value transformation, weak practice was to try to apply the insight across the whole market. This often meant, for example, making a new value proposition to customers who were indifferent to it. Good practice usually involved targeting the new, insight-driven, strategy at a segment of the market that was likely to respond to it by changing prescribing behaviour. Another key characteristic of good practice was to act quickly, before insight could be copied or overtaken by events.

    Science not art
    Our research helped us to understand what market insight is and how firms gather and use data to create it and then use it to create value. All of these are practical lessons for pharma companies that, nowadays, compete on the strength of their knowledge about markets as well as about pharmacology.

    If our research taught us one overriding lesson, however, it was that creating market insight is not a magic trick or the result of divine inspiration. Like most competitive advantage itís the result of good process.

    The Authors
    Dr Brian D Smith is a research fellow at the Open University Business School, and runs PragMedic, a specialist strategy consultancy -  brian.smith@pragmedic.com.
    Dr Paul Raspin is a director of Stratevolve - www.stratevolve.com and consults widely on developing competitive advantage.

    29th May 2008

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