Is what we currently think of as the market research industry building the future of its business, or is innovation more likely to come from outside the traditional players?

I’m inclined to believe that major innovation will not come from the large players and will come mostly from outside what we think of today as “the market research industry.”

As Jack Honomichl noted in his 2008 report on the industry:

“Of special note regarding list turnover is the growth of startups, many in recent years rooted in online data collection. They demonstrate how the US research industry revitalizes itself via innovation…Then when a newer firm grows to an appetizing size, it usually goes public or is acquired by a larger, well-established research conglomerate. So the industry evolves, picks up energy and adapts to technological changes.”

This suggests to me that the larger players will struggle to innovate, holding on to their size through their control of large, institutional tracking programs and strategic purchases. In his 2009 report, Honomichl referred to this as “their long-time strategy of buying revenue growth, even in a slumping market.”

But why is this the case?

Perhaps the best answer I have found is in Richard Watson’s intriguing book, “Future Files.” In this book Watson states that:

“According to McKinsey only 0.5% of all companies perform well over several decades, so there is every reason to believe that the majority of companies around today won’t exist in the future. The primary reason seems to be the need for them to perform two seemingly contradictory tasks to survive. First, they must execute flawlessly in the present. This requires strict control and tight hierarchies that reward individuals with extensive skills and experience. However, this experience and expertise can create barriers that prevent an organization from adapting to changed circumstances in the future. Organizations are disabled by their own experience and success. In addition, senior executives develop mental models about what is and what works based on historical experience. Moreover, successful organizations tend to evolve into large networks that become gridlocked; innovation and change are resisted because they inevitably have a negative effect on someone, somewhere. This in-built corporate immune system partly explains why most radical innovations don’t come from industry incumbents…”

This seems to describe the industry fairly well.

But where is all this innovation going to come from?

The ready answer seems to be that much of it will come from outside the traditional industry leaders. For a more granular look, see my interview with Simon Chadwick.