[GRIT COMMENTARY] Does Innovation in Market Research Matter?

In this wave of the GRIT report, respondents were asked, unaided, which companies they thought were most innovative. The answer to the question, “Does innovation matter?” can be measured, at least at a cursory level. The results provide compelling motivation for researchers to continue innovating.

Method

We took the top 25 most innovative companies, as determined by GRIT report respondents, and compared their 2016 growth relative to their industry’s two-year compound annual growth rate (CAGR). Making comparisons to industry performance is important, because performance is relative to trends within an industry. For instance, media companies face significant secular challenges that pharmaceutical companies don’t face.

Financial data comes from publicly available financial reports such as annual filings and other investor reports. 

There are limitations to this approach, including the fact that industry growth rates are based solely on Fortune 500 companies. Revenue growth isn’t the only way to measure value, and some companies, like Uber, are growing rapidly independent of their innovative insights practices. However, the results should lead us to consider the value of innovation in research methods.

Results

In six of eight industries represented, companies in the Top 25 Most Innovative Suppliers outperformed Fortune 500 companies in their sector (see table below). Noted outliers include the transportation industry, whose sole presence in the Top 25 is Uber.

Industry	# Companies in GRIT Most Innovative	GRIT Innovative Companies Avg. Growth Rate (2016)	Industry CAGR 2014-16	GRIT Company performance vs. Industry Performance
CPG	6	0%	1.40%	Underperform
Food & Beverage	4	-1%	-1.40%	Outperform
Auto	2	37%	0.20%	Outperform
Transport	1	200%	1.80%	Outperform
Tech	8	15%	6.30%	Outperform
Media	1	6%	0%	Outperform
Pharma	3	3%	4.90%	Underperform
Apparel	1	6%	0.30%	Outperform

So What? Innovate Toward Customer Intimacy

At Fuel Cycle, we are major proponents of the Strategic Values Discipline model developed by Michael Treacy and Fred Wieserma in the mid-1990s. The Value Discipline model states that for companies to thrive, they need to excel in one of three areas: operational excellence, product leadership and customer intimacy. The market research role is to help organizations deepen customer intimacy, which is defined by Treacy and Wieserma as “segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches.”

Innovation towards customer intimacy presents itself in different ways. For instance, one of the more common reasons companies were rated as innovative was because of their desire to understand customers at a deep level, perhaps by understanding emotions or non-rational behavior. Or in other cases, market research is becoming more real-time, completely integrated into business decision making and dictating outcomes within minutes, rather than months.

Innovation in research, at least at a surface level, appears to be correlated with competitive performance and should be pursued by organizations new and mature. But, innovating for innovation’s sake is not enough. To be successful, innovation should always be tied to improving customer intimacy.