Chapter 1 Research in Business

CHAPTER LEARNING OBJECTIVES After reading this chapter, students should understand 1. What business research is and how it differs from decision support systems and business intelligence systems. 2. The trends affecting business research and the emerging hierarchy of research-based decision makers. 3. The value of learning business research process skills. 4. The different categories of firms and their functions in the industry. 5. The distinction between good business research and research that falls short of professional quality.

Chapter 1, Research in Business

CHAPTER LECTURE NOTES BRINGING RESEARCH TO LIFE y Overview

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Myrna Wines, director of consumer affairs for MindWriter, Inc., must assess MindWriters CompleteCare program for servicing laptops. She sent several well-respected research firms a request for proposal (RFP). She and her team are interviewing the last of those firms, Henry & Associates.

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Myrna wants to find a research supplier from whom she can learn, as well as one she can trust to do high-quality research. The last interviewee is Jason Henry, a partner in Henry & Associates who comes highly recommended. After viewing his presentation and conferring with her team, Henry & Associates is chosen to conduct the required research. They schedule a date to meet with CompleteCare personnel. Jason Henrys tasks during the meeting:
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Asking probing questions Listening to the facts that have been gathered Determining what the problem is from managements point of view Identifying what the problem is at various levels of abstraction Listening Discussing Looking at things from different viewpoints Measuring Scaling Project design Sample Finding elusive insights Collaborating with Myrna in order to produce a report of results

Myrna Wines tasks:

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Jason Henrys tasks after the meeting:

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Chapter 1, Research in Business

WHY STUDY BUSINESS RESEARCH? y Business research is a systematic inquiry that provides information.
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More specifically, it is a process of planning, acquiring, analyzing, and disseminating relevant date, information, and insights to decision makers in ways that mobilize the organization to act in ways that maximize business performance.

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Managers use this information to guide business decisions and reduce risk. Multiple types of projects can be labeled business research. Decision scenarios and decision makers can be found in every type of organization, whether for profit, non-profit, or public.
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Decision makers rely on information to make more efficient and effective use of their budgets.

At no other time in history has so much attention been placed on measuring and enhancing return on investment (ROI).
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At a basic level, measuring ROI means calculating the financial return for all expenditures. Over the past dozen years, technology has improved our measuring and tracking capabilities, while managers simultaneously realized their need for a better understanding of employee, stockholder, and customer behavior in order to meet goals. Although business research helps managers choose better strategies, the cost of such research is being scrutinized for its contribution to ROI.

A management dilemma is a problem or opportunity that requires a management decision.

Chapter 1, Research in Business

Factors that should stimulate your interest in studying research methods:

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Explosive growth and influence of the Internet. Stakeholders demanding greater influence. More vigorous competition. More government intervention. More complex decisions. Maturing of management as a group of disciplines. Greater computing power and speed.

Lower-cost data collection Better visualization tools Powerful computations More integration of data (data warehouse) More and faster access to information Advanced analytical tools for enhanced insights (data mining) Customized reporting

New perspectives on established research methodologies.

Chapter 1, Research in Business

PLANNING DRIVES BUSINESS RESEARCH y Understanding the relationship between business research and information generated by other information sources is critical for understanding how information drives decisions relating to organizational mission, goals, strategies, and tactics.

Goals y Even very different types of businesses have similar types of goals, which are related to such things as:
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Sales (membership) Market share Return on investment Profitability Customer acquisition Customer satisfaction Employee productivity Machine efficiency Maximization of stock price or owners equity

Decision Support y The need to complete exchanges with prospective customers drives every organization.
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An exchange can be a purchase, a vote, attendance at a function, or a donation to a cause. Each exchange, along with the activities required to complete it, generates data. If organized for retrieval, these data constitute a decision support system (DSS). During the last 25 years, advances in computer technology made it possible to share this collected data among an organizations decision makers, over an intranet or an extranet.

An intranet is a private network that is contained within an enterprise (not available to the public at large).
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It typically includes connections to the outside Internet, but its primary purpose is to share company information and resources among internal audiences.

An extranet is a private network that uses Internet protocols and the public telecommunication system to share an organizations information, data, or operations with external suppliers, vendors, or customers.

Chapter 1, Research in Business

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Both intranets and extranets can allow access to proprietary relational databases. Sophisticated managers have developed DSSs where data can be accessed in real time.
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These managers have a distinct advantage in strategic and tactical planning

Business Intelligence y A business intelligence system (BIS) provides managers with ongoing information about events and trends in the business environment.
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In our restaurant scenario, it might be collecting customer comments. In the MindWriter example, it might be data about laptops needing repair.

Strategy y It costs less to retain a customer than to capture a new one, so businesses place a high value on keeping customers buying.
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That is why customer satisfaction, customer loyalty, and customer assessment studies represent a significant portion of research studies. Microsoft recently decided to tie its 600 managers compensation to levels of customer satisfaction rather than to sales and profits.

Strategy is defined as the general approach an organization will follow to achieve its goals.
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A firm usually implements more than one strategy at a time. The discovery of opportunities and problems, and the resulting strategies, often result from a combination of business research and BIS.

Tactics y y Business research contributes significantly to the design and selection of tactics.
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Tactics are specific, timed activities that execute a strategy. Identifying and defining opportunities and problems. Defining, monitoring, and refining strategies. Defining, monitoring, and refining tactics. Improving our understanding of the various fields of management.

The purposes of business research include:

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Chapter 1, Research in Business

Emerging Hierarchy of Information-Based Decision Makers y y Not all organizations use business research to help make planning decisions. Increasingly, however, the successful ones do. Exhibit 1-2 shows an emerging hierarchy of organizations in terms of their use of business research.
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In the top tier, organizations see research as the first step in any venture.

They use creative combinations of research techniques to gain insights that will help them make better decisions. They may partner with outside research suppliers. Every decision is guided by business research. There is generally enterprise-wide access to research data and findings.

In the middle tier, decision makers periodically rely on research information.

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Decision makers turn to business research when they perceive the risk of a particular strategy or tactic to be too great to proceed without it. They rely heavily on tried-and-true methodologies, such as surveys and focus groups. They often choose the methodology before fully assessing its appropriateness to the problem at hand. There is limited access to research data and findings.

In the base tier, managers primarily use instinct, experience, and intuition to facilitate their decisions.
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Decisions are supported with secondary data searches. They often rely on informal group discussion, a small number of individual interviews, or feedback from the sales force. Large firms that occupy this tier are often influenced by culture; smaller companies because they think formalized research is too expensive to employ.

Managers who do not prepare to advance up the hierarchy will be at a severe competitive disadvantage.

Chapter 1, Research in Business

HOW THE RESEARCH INDUSTRY WORKS y The research industry is one of extremes. Very large suppliers account for the sales portion of sales in the industry. Smaller firms and one-person shops dominate when you look at the number of research firms.

Exhibit 1-4 provides an overview of the suppliers within the research industry.

Internal Research Suppliers y y y Firms that rely on research to make decisions are likely to have an internal research department or an individual who coordinates research initiatives. The number of firms with internal research departments began to grow in the 1960s. In the 1970s, researchers were often assigned to a functional area, such as marketing, and reported to the executive in charge of that area.
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The researchers influence at the strategic level was constrained by their role order takers who reacted to the demand for research projects and reports. Through the 1990s, the accuracy and actionability of the information provided by research was thought to be low.

In 2001, the Cambridge Group and ARF sought to redefine the research function in order to make it more relevant to senior management.
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Based on executives feedback, research began to expand into such areas as:

Providing actionable insights Reducing risk in marketplace actions Improving return on investment

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This evolution is consistent with Philip Kotlers contention that, as costs rise, CEOs and board members demand greater accountability for decisions and expenditures. However, there is no trend toward staffing large internal research departments. In poor economic times, internal research departments may be eliminated altogether, because firms feel that such services are expendable or available from external suppliers. In some ways, the prominence of the DSS and BIS functions has forced the researcher into an even more subordinate role. While both information technology management and research are critical, in most organizations the two functions have little to do with one another.

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External Research Suppliers y More than 2,000 research firms operate in the United States.

Chapter 1, Research in Business

Research Firms y Full Service Firms

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Full-service researchers include some of the largest research firms, and some of the smallest. Exhibit 1-5 identifies some of the largest firms. These firms are often involved in research planning from the moment of discovery of a dilemma or from the definition of a management question. Such firms often have expertise in both quantitative and qualitative methodologies, as well as multifaceted facilities. Some are capable of working in worldwide venues, while others are limited to one industry or geographic region. These firms are often a combination of research and consulting operations. Often described with phrases like ad hoc research or custom-designed research A custom researcher crafts a research design unique to the decision makers dilemma. In other words, each project starts from ground zero. What is implied is that such firms do not assume that a given methodology is appropriate for each clients research. Although a custom researcher may not always be a full-service research firm, a full-service researcher would always fit into the custom research category. A proprietary methodology is a research program or technique that is owned by a single firm. It may be a new method developed by the firm, or a twist on an established methodology. Firms often brand these methodologies to distinguish themselves from the competition. (ACNielsen did this with its Homescan syndicated panel.) The Gallup Organization reinvented itself using the proprietary research model, moving from public opinion pollster and custom researcher to research-based consulting firm.

Custom Researchers
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Proprietary Methodology Researchers

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Q12 is a Gallup proprietary methodology that uses 12 questions to measure customer engagement. Gallup uses these same questions with all clients, so Q12 serves as a benchmark diagnostic for its subsequent consulting work. These questions and the survey instrument are copyrighted to guarantee that its intellectual property remains protected.

Chapter 1, Research in Business

Having a proprietary method allows Gallop to charge significant premiums for its research and consulting services.

Specialty Research Firms

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Specialty researchers represent the largest number of research firms. These firms specialize in one or more arenas:

Methodology Process Industry Participant group Geographic region j They may also perform a subset of a methodology specialty, such as: Offering focus group moderators, but not the focus group facilities Offering recruitment of focus group participants, but not the facilities or the moderator j Firms doing observation studies are another subset of specialty researchers.

They often study retail shoppers j Envirosell and Design Forum both offer observation studies

Envirosells research is designed to make retail environments and processes more productive. Design Forum uses research to create internal and external environments that establish and reinforce the retailers image. j Ethnography is a type of study that combines the skills of cultural anthropologists with communication and business experts.
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Firms providing Web page optimization research and Web performance metrics are an emerging group of methodology specialists. (Yahoo!, NetIQ, NetConversions) Other specialty research firms:

MORInsight: employee research Mercer HR Consulting: employee research Survey Sampling, Inc.: suppliers of samples for telephone, mail, and online surveys. Greenfield Online: assists research firms by providing online samples and a large panel of opt-in participants in the online community. Qualtrics Labs: an array of software and service products QuestionPro.com: complex surveys PerfectSurveys.com: online surveys Training Technologies, Inc.: designs, fields, tracks, and posts survey results

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Chapter 1, Research in Business

Specialty researchers often assist other research firms with their projects. A syndicated data provider tracks the change of one or more measures over time, usually in a given industry.

Syndicated Data Providers:

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Product movement may be tracked through retail outlets and wholesale environments. Sales performance may be tracked through coupon drop, distribution of product samples, special events, etc. May also be responsible for tracking price elasticity. j Frequency of data collection and reporting is based on the need of the members in the syndicate.

Nielsen Media Research is well known for its People Meter research that reveals the viewing habits of television watchers. Data is collected four time per year during sweep weeks. Exhibit 1-6 lists some syndicated data providers.

Omnibus Researchers
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Specializes in fast survey research, such as 24- to 48-hour turnaround An omnibus researcher fields research studies, often by survey, at regular, predetermined intervals. An omnibus study combines one (or a few) questions from several decision makers who need information from the same population. Typically bills by the number of questions ($700 to $1,500 per question). Research generally done via phone or internet. Exhibit 1-7 shows samples of Omnibus studies. Advertising, public relations, sales promotion, and direct marketing agencies are heavy users of syndicated research data. It is difficult to develop a creative strategy without research on target audience knowledge, motivations, attitudes, and behavior. Some agencies do extensive basic research on:

Communication Agencies
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Ad recall and wear-out Ad placement effectiveness Effectiveness of creative approaches ROI on media buys Effectiveness of different action stimulants

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Chapter 1, Research in Business

All agencies do extensive testing when building a campaign. Such measures combine custom research with syndicated research to explain why a campaign was a success. Offer a wide range of services at the strategic and tactical levels. All are involved in doing extensive secondary data research for clients. May be major influencers in research design. Are often involved in the interpretation of results. Some conduct both qualitative (focus groups, expert interviews) and quantitative studies (surveys) as they seek new opportunities or solutions to their clients problems. Promote, educate, and lobby for the interests of their members. Not all conduct or supply research services.

Consultants
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Trade Associations
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Chapter 1, Research in Business

WHAT IS GOOD RESEARCH? y y y y Good research generates dependable data that are derived by professionally conducted practices, and that can be used reliably for decision making. It follows the standards of the scientific method: systematic, empirically based procedures. Exhibit 1-8 shows actions that guarantee good business research. Characteristics of the scientific method:

Purpose clearly defined. Research process detailed. Research design thoroughly planned. High ethical standards applied. Limitations frankly revealed. Analysis adequate for decision makers needs. Findings presented unambiguously. Conclusions justified. Researchers experience reflected.

Good business research has an inherent value only to the extent that it helps management make better decisions that help achieve organizational goals.

The value of information is limited if the information cannot be applied to a critical decision.

Business research finds its justification in the contribution it makes to the decision makers task and to the bottom line.

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