A key criterion of the IIAR’s Tragic Quadrant (TQ) is that AR people should prioritise analysts, and analyst firms, who are easy to do business with. It’s obvious that we prefer easy to difficult. However, the value of analysts is relatively independent of how easy or hard they are to work with. Putting easy analysts first would disorient analyst relations and make the analyst industry worse, not better.
Despite its tongue in check name, the TQ is a serious attempt by the IIAR to present survey data from AR professionals to show which firms are influential and relevant. The results and their presentation are controversial, and criticism of the TQ has been my most-read writing on this site and LinkedIn from the last three months. Central to the TQ methodology is assessing “how easy is the industry analyst to reach and to interact with” from the perspective of analyst relations managers. Each participant will evaluate this ease subjectively and according to their own preferences, but the key factors are easy to name. This criterion elevates analysts who are easy to contact, easy to schedule reliable, easy-going in their research and (let’s be frank) more pliable.
The central role of that criterion is possible because many analysts are, indeed, not easy to work with. Many analysts are not immediately responsive, have schedules controlled by others, have extensive and critical research methods, and are both independently-minded and challenging. To be frank, a few of them can be brutish rascals. Given this reality, it’s understandable that the IIAR should not only try to track the time and emotional effort taken up by this transactional burden, but also suggest that there should be serious operational implications for analyst relations managers: “they should look at analysts which are less of a pain”. Furthermore “analyst firms should monitor the ‘transactional tax’ they impose on AR people: if they raise the ‘interaction barrier’ too high while not providing sufficient coverage and not showing impact, their vendor information source might soon provide them only a partial view of the market (raising exhaustivity and fairness issues) or their vendor revenues might suffer too.” Explicitly, therefore, the Tragic Quadrant is thus a threat that analyst firms that are less easy to work with should get less insight, and less business, from vendors.
The IIAR’s approach is mistaken in four ways.
- First, effort should to allocated to analysts on the basis of their influence and their stance, and not because of whether or not they are a pain. Influence comes first, because spending more time pleasantly, with a less influential but amiable analyst, is a false economy if that time is taken from a more prominent analyst who is recommending against your firm. Stance also matters: there’s less point in spending time with an analyst who is our advocate than with one who is neutral, or slightly negative, towards us. Analyst relations produces many forms of value, but in every case this value is maximised by focusing on influential analysts who are not consistent advocates. They do tend to be harder to get time with, more critical and less supportive but, indeed, it is exactly that difficulty which is a symptom of their importance. Furthermore, many firms affected by US Fair Disclosure policies aim to ensure that all analysts have access to the core body of material information about a firm. The IIAR’s approach could be taken to mean that critics who are hard to work with could be given access to less than all of this core information.
- Second, being hard to work with is not randomly distributed: the most influential and valuable analysts tend to be harder to work with. This notably the case because of their more highly structured and extensive research methods and their tighter time orientation. For example, Gartner’s Magic Quadrant and the Forrester Wave are the most influential non-financial business research documents. They perform a tremendous service for buyers, producers, investors and regulators in ICT markets by producing authoritative simplifications that chart the vendor landscape. By definition, these maps aggregate many forms of data into two or three easily-shown dimensions and have immense power. It’s a good thing, not a bad thing, that these analysts have rigourous research methods that integrate more data since that improves the quality of research which is widely used.
- Third, the TQ produces a risk that analyst firms would perform differently to do better in future versions of the TQ. This ‘performativity’ is found in many ranking devices, include the Magic Quadrant: some or all of the firms being ranked start to change what they are doing to comply. Certainly itis difficult to see a downside to the non-research functions of analyst firms being easier to work with: the pace at which administrators organise briefings calls, for example, could sometimes be better. However, the focus of the TQ approach is on analysts rather than non-analyst staff at analyst firms. In some cases, less extensive research methodologies, less challenging questioning from analysts and more pliable analysts would eventually reduce the independence and value of analysts, and thus ultimately reduce the value produced by analysts relations.
- Finally, the TQ mistakenly proposes that the commercial power of analyst relations teams should be used to reward easy-to-work-with analysts. AR managers are both directly clients of analysts and can recommend analysts to their colleagues and partners, making them something of a sales channel for analyst firms, and in particular analyst firms which rely on vendor support. Indeed one of the important tactics available to analyst relations is raising the profile of supportive analysts, to diminish the influence of less supportive analysts. There are both operational and ethical objections to focussing spend on easy to work with analysts. Operationally, as the first point above explains, we will have the most impact when AR makes a change in the market. It is easier to shift the opinion of an analyst who is already influential than it is to boost artificially the profile of a less pliable analyst to the level where she or he supplants the initially-influential one. For example, you have to spend a lot of money on Aberdeen to suppress a criticism from Gartner. It also reduces the firm’s access to independent analysts insight, by reallocating spend to those who are easier. Vendors would thus be punishing themselves, by using insight that is based on less demanding and critical research. Ethically, however, the process involves wiring cash to reward firms that are less critical and more pliable, while spending less with those who are not. In most countries there is nothing illegal about such a policy: markets do not oblige firms to spend their money in particular ways. Even so it is, self-evidently, coercive and thus produces a reputational risk for AR internally and the company.
Despite these criticisms, I remain convinced of a point I made in June that the TQ has value for both AR professionals and analyst firms, in drawing attention to the relative ‘burden’ on AR managers of the different interaction styles and research methods of analyst firms. But this should be used to put more effort, not less, into supporting influential critics who are more demanding.