Executive Summary
Executive teams have extensive information about their businesses but often a less complete understanding of how their markets are changing. Financial and operational reporting explains performance, but not necessarily the external developments shaping it. Marketing should help close that gap by bringing together client, competitor and market intelligence, and interpreting its implications for commercial strategy and executive decision-making.
The view from outside
Most executive teams have no shortage of information about their businesses.
Financial performance is reviewed regularly. Sales pipelines are scrutinised, operational measures tracked and progress against strategic objectives reported to management and the board. Considerable effort goes into understanding what is happening inside the organisation, where performance differs from expectations and what needs to be done about it.
But understanding how a business is performing is not quite the same as understanding how the market in which it operates is changing.
An organisation may have excellent internal reporting and still be slow to recognise that client priorities have shifted, competitors have changed their approach or its proposition is becoming less relevant. The distinction matters because internal performance is often a consequence of developments that began outside the business some time earlier.
By the time those developments become apparent in financial results, the opportunity to respond may have narrowed considerably.
What the numbers cannot tell us
There are good reasons why executive attention concentrates on internal performance.
Financial results are measurable. Sales forecasts can be challenged. Operational performance can be compared with agreed standards. Boards and investors rightly expect management to demonstrate control over these areas.
External developments are harder to interpret.
Changes in client behaviour may be gradual. Competitive threats can emerge from organisations that were not previously regarded as competitors. A proposition that once differentiated the business may become less distinctive without any deterioration in its underlying capabilities.
This is particularly relevant in institutional financial services. Perhaps more so in my experience for fledgling fintechs who seek to serve them.
Established client relationships, long procurement cycles, operational dependencies and regulatory requirements can all slow the pace of change. A business may continue to perform reasonably well even when the conditions supporting its competitive position are weakening.
Existing revenues can therefore provide reassurance at precisely the point when the organisation should be examining what is changing in its market.
This does not make internal reporting inadequate. It means that internal and external evidence answer different questions. A decline in sales conversion, for example, is a measurable outcome. But it does not establish whether the underlying problem is pricing, the proposition, the competitive environment, changing client priorities or the effectiveness of the sales approach.
Those explanations have very different implications for the decisions management needs to make.
The information is often already available
Most businesses have access to considerably more external intelligence than they make effective use of.
Sales teams understand the objections raised by prospective clients and the reasons opportunities are lost. Account managers hear about changing priorities and dissatisfaction with existing arrangements. Product teams see which capabilities clients request and where their expectations may be shifting. Marketing monitors competitors, wider market developments, client research and patterns of demand.
The difficulty is that these perspectives are usually considered through the responsibilities of the functions collecting them.
Sales naturally concentrates on the opportunities being pursued. Product interprets client requirements in relation to the capabilities it is developing. Marketing can become absorbed in competitor activity and industry trends without establishing their significance to the business.
Each perspective is valuable, but none is complete.
Consider a business experiencing increasing resistance to a proposition that has previously sold well.
Sales may attribute this to longer procurement processes or greater pricing pressure. Product may conclude that additional functionality is required. Marketing may be observing changes in client priorities or the emergence of a different approach to solving the underlying problem.
The explanations are not necessarily mutually exclusive, but they point towards different commercial responses.
Additional product investment will achieve little if the problem is declining relevance. More sales activity will not necessarily overcome a proposition that clients no longer regard as sufficiently differentiated. The challenge for senior management is to establish what the evidence means collectively, rather than responding to each observation in isolation.
Marketing’s external perspective
Marketing should be particularly well placed to contribute to this process.
Its role is not simply to communicate what the organisation wants the market to know. It should also help the organisation understand what the market is telling it. That requires more than producing competitor reports, commissioning research or monitoring industry developments.
A senior marketing leader needs to understand the business’s commercial model, its proposition, the competitive environment and the factors influencing client decisions. Without that understanding, market intelligence can easily become information that is interesting but has little bearing on the decisions facing management.
The important contribution is interpretation.
Which changes are commercially significant? What do they tell us about client behaviour or competitive advantage? Are they consistent with what sales and product teams are experiencing? Do they challenge the assumptions on which the business is operating?
Marketing does not have exclusive ownership of these questions, nor should it. Sales has direct relationships with clients and prospects. Product understands the capabilities being developed and the problems they are intended to solve. Strategy and finance bring their own perspectives on investment priorities and commercial performance.
Marketing’s distinctive contribution should be to connect these perspectives with a broader view of the market, including developments beyond the organisation’s existing clients, opportunities and products.
This last point is important.
A business can become very knowledgeable about the clients it serves and the opportunities it pursues while knowing considerably less about the clients it does not reach, the alternatives it does not compete against and the reasons prospective clients choose to do nothing.
Those gaps can be commercially significant, particularly when assessing growth opportunities or the future relevance of an established proposition.
A credible external perspective should help management recognise them.
Distinguishing change from noise
Of course, not every external development deserves executive attention.
Financial services generates a constant stream of announcements about technology, regulation, new entrants, partnerships and changing market structures. Some will have lasting commercial consequences. Others will prove less significant than initially anticipated.
The availability of information is not the same as the ability to judge its importance.
A competitor’s new product announcement may have little relevance if clients are unlikely to adopt it. Conversely, a relatively modest change in client procurement requirements could materially alter the economics of reaching a particular market.
Understanding the difference requires familiarity with how clients make decisions, what they value and what prevents them from changing established arrangements. It also requires a willingness to challenge the organisation’s prevailing interpretation of events.
That challenge should be evidence-based. There is little value in responding to every market development as though it represents a strategic threat or opportunity.
The purpose is to identify changes that matter to the business and establish what, if anything, management should do about them.
From information to commercial judgement
The real test of market intelligence is whether it influences decisions.
Does it affect how the business assesses its competitive position? Does it change assumptions about future demand? Does it influence investment priorities, product development, pricing or the markets the organisation chooses to pursue? If not, its commercial value is limited.
For marketing, this is an important distinction. Being well informed about the market is useful, but it is not the same as helping the business make better decisions. That contribution requires the ability to interpret evidence, understand its implications and challenge assumptions when necessary.
It also requires senior management to be receptive to conclusions that may not support the prevailing strategy. Neither responsibility can be discharged by marketing alone. Executive teams need to create the conditions in which different perspectives are considered, evidence is challenged and the implications for the business are properly understood.
This does not mean continually reconsidering every strategic decision. Businesses need consistency and commitment to execute effectively. But they also need to recognise when the external evidence no longer supports the assumptions on which those decisions were made.
Looking beyond the business
The first two Executive Insights considered the importance of involving marketing before major commercial decisions are made and examining the assumptions behind growth plans.
There is a continuing responsibility once those decisions have been taken: understanding whether the external conditions supporting them remain valid.
Executive teams devote considerable attention to measuring how their businesses are performing. They should be equally demanding about understanding how the markets in which they operate are changing.
Marketing has an important contribution to make, provided it brings more than information and commentary. Its value lies in helping senior management understand what external developments mean for the decisions they face.
The quality of executive judgement depends not only on understanding the business, but on maintaining an informed and sometimes challenging view of the world outside it.
Executive Takeaways
- Strong internal reporting does not necessarily provide a complete understanding of changes in the market.
- Financial and commercial performance may reflect external developments that began considerably earlier.
- Valuable market intelligence exists across sales, product, marketing and client-facing teams, but its significance needs to be considered collectively.
- Marketing should connect these perspectives with a broader understanding of clients, competitors and markets, including those beyond the organisation’s existing relationships.
- The commercial value of market intelligence lies in the decisions it improves, not the amount of information collected.
- Executive teams need to remain receptive to external evidence that challenges established assumptions.
Questions for Executive Teams
- How confident are we that our understanding of the market reflects what is happening today rather than what we believed when our strategy was agreed?
- What are we learning from prospective clients who choose not to buy from us?
- Are we considering the evidence collected by sales, product and marketing collectively, or largely within individual functions?
- Which developments outside the business could materially affect our competitive position before they appear in financial results?
- Are we distinguishing commercially significant changes from general industry activity?
- When did external market evidence last cause us to reconsider an important commercial decision?
