Category: Entrepreneurship

Here is a truly horrifying thought: there is actually a specialist graduate degree of Master of Marketing Research, with the post-nominal letters MMR.
Nor is this a gimmick or a cash-cow for one of those otherwise unknown “universities” that offer to send you a degree in return for your “lifetime experience” and a large fee.
No, this is a proper degree offered by over a dozen serious universities, mainly in the USA.
You wonder what sort of eager young scholar, with all the mind-broadening opportunities of a university education spread before them, would choose to dedicate one or two of the most fertile years of their life to such a narrow subject.
Of course, if anyone developed a scientific system that enabled them to predict market responses with a high degree of accuracy, it would be worth the effort. It would open the doors to success not only in business but almost every other aspect of life. The world would belong to the market researchers. Not only a year or two but a decade or two would be well spent in its study.
Indeed, some of the finest minds in academia have been attracted, both by the cross-disciplinary intellectual challenges and by the potential rewards, to the study of customer behaviour.
It is a favourite subject at the Royal Swedish Academy of Sciences, who dole out the Nobel Prizes for Economics. Several Laureates, like Professor Daniel McFadden of UC Berkeley, who won the Prize for his theories on “choice modelling”, have specialised in aspects of econometrics which, whether or not they liked to put it this way, provided a theoretical basis for market research.
There is only one drawback to all this formidable academic output: it is useless.
The test of the validity of any scientific theory is not only how well it explains the past but how well it predicts the future.
If these academic theories of consumer choice were of any use, they should be able to provide models to predict future consumer choice.
We cannot help noticing the absence of such a model in the business world.
If such a model existed, Professor McFadden and his ilk would be very wealthy. While some do indeed make a tidy sum from consultancy, it is difficult to see how their clients are better off for their services.
For the bottom line on market research is that all the greatest failures in marketing history have been preceded by intensive market research using the most advanced specialist techniques available.
This is because big failures can only come from big product launches, and big product launches can only come from big corporations, because only they can afford big products and big launches. The big corporations usually spend lavishly on market research before the launch. This is not because they really believe the market research but so that the junior executives can cover themselves with the senior executives, the marketing managers with the general managers, the management with the directors, and the board with their shareholders.
Then, if something goes wrong, everyone can say, “Well, it is not my fault – I employed the most respected market researchers, who used the very latest methods, and they told me everything was going to be fine, so how was I to know?”
This means that every big product launch has been approved by advanced market research – and since a lot of big product launches end in failure, all these failures have been endorsed by market research.
Perhaps the great problem with market research is conceptual. It puts a great deal of thought and analysis into studying consumer decisions, but consumers put very little thought or analysis into their decisions.
This is why the focus group is a bad idea: it gets potential customers to spend an hour talking about decisions they would usually make in a second. This is artificial as a method and so any conclusions it reaches will be equally artificial.
As ever, wisdom is found not in academia but in The Simpsons. When Homer’s millionaire brother asks him to design the car that average Americans like him would want to buy, Homer puts in every fantasy element he can imagine and ends up designing a monstrosity that no one would want to buy.
In fact, Homer’s car is curiously reminiscent of one that was designed in response to a great deal of market research into what the public “really wanted”… the Ford Edsel.
About the Author:
Guy Kingston produces and presents the Mind Your Own Business podcast, offering free business advice to entrepreneurs and business owners. As well as audio podcasts there are more articles like this, compelling videos and a must-read blog. All at www.myobpod.com or you can network and join in discussions on the MYOB Facebook group.

The expression “irrational exuberance” has taken on a new significance in recent days. It was used in a 1996 lecture by the then Chairman of the Federal Reserve, Alan Greenspan, and was widely interpreted as a diplomatic hint that he considered the markets overvalued.
The hint was not diplomatic enough to prevent falls in the markets at the time – or perhaps that was the plan – but they were small falls by the standards of 2007-09, and the irrational exuberance soon returned. The opportunity for a less irrational revaluation was lost and the day of reckoning was postponed. It was therefore far more catastrophic when it finally arrived.
Yet Mr Greenspan probably got the expression from a surprising source – one who used it in a very different context.
The economist John Maynard Keynes spoke of an “irrational exuberance” that is necessary for success.
There are indeed many cases of entrepreneurs who were too young and inexperienced to know that something could not be done – so they just went out and did it!
Indeed, the defining feature of the successful entrepreneur is a willingness to do what no one else does – perhaps because everyone else assumed it was impossible.
So “irrational exuberance” has both negative and positive meanings. The same is true of youth in an entrepreneur.
Youth is by definition inexperienced, and therefore relatively ignorant – and therefore also irrational.
However, youth is also energetic, self-confident, willing to take risks, unbound by convention, and devoid of the caution that comes only with bad experiences over the years. These are the factors which make up the exuberance that enables the young entrepreneur to charge in to places where battle-scarred veterans fear to tread – sometimes successfully but often not.
To seek a happy medium which has the exuberance without the irrationality is to miss the point, which is that the irrationality is a necessary part of the exuberance.
The great historical example of this is a man who retained much of the exuberance of youth throughout his long life, Winston Churchill.
Had Churchill made a “rational” decision in 1940, he would have calculated that there was no way that Britain alone could beat the rest of Europe, then united under Nazi rule – he had no right to assume that Hitler would be so insane as to declare war on both Russia and the United States.
Still the irrational exuberant Churchill fought on, and so saved Western civilisation.
Faith is defined as the “assurance of what is unseen”, and every new enterprise is a leap of faith. We cannot yet see the successful business we want but we are confident enough that we will see it to take the risk.
That leap of faith is greater for some businesses that for others: those great leaps often lead to the greatest successes – but also, it must be said, to the greatest failures.
Irrational exuberance has been at the root of Mankind’s most disastrous errors, from the Tower of Babel, through the Charge of the Light Brigade and Custer’s Last Stand, to the over-heated markets that doomed themselves to a spectacular crash.
Yet the same irrational exuberance is a necessary part of all human progress – including all successful new and expanding enterprises.
After the mini-slump triggered by Greenspan’s remark, bumper stickers were produced reading, “I want to be irrationally exuberant again.”
Perhaps there is a gap in the market for such stickers again.
After all, such irrational exuberance will be necessary to get us out of this recession.
So if you have it, and combine it with a business idea in which you have faith, do not let anyone – least of all two middle-aged men who secretly wish they had more of it themselves – talk you out of it.
About the Author:
Guy Kingston produces and presents the Mind Your Own Business podcast, offering free business advice to entrepreneurs and business owners. As well as audio podcasts there are more articles like this, compelling videos and a must-read blog. All at www.myobpod.com or you can network and join in discussions on the MYOB Facebook group.