Spokespeople lose analysts’ trust if they cannot discuss business models

Over the last few weeks, my colleagues and I have been interviewing industry analysts about business models. After reviewing the results from the summer Analyst Attitude Survey, we found that business models are about 25% more relevant to analysts than to the spokespeople that vendors delegate to meet them. My colleague Esther Boyer developed a questionnaire for a series of short discussions to understand why this exists and to get feedback on what vendors can do better. As a term, “business model” means different things to different people. We have been using a very comprehensive model which shows all the elements which can be included in the scope of the business model. Few analysts have such a detailed model. Most analysts see the business model as an outline of how firms go to market with their products and services.

One group of attributes is called antecedents: pre-existing issues like the external competitive environment, including the demands of stakeholders, or internal factors like changes in strategy. That echoes modern notions of strategy, like value chains and competitive forces. Our discussions also covered ‘moderators’: factors like changing regulations, corporate culture and values, and managers’ open-mindedness and risk aversion. Analysts told us that start-ups and mid-sized firms were more open-minded about their moderators, while large firms find it harder to change. The ‘moderators’ don’t always make success more moderate. However, the antecedents are like the roots of the plant, says Boyer, as the moderators are like the rain and the sun which condition how the plant grows. The fruits are encouraged or discouraged accordingly.

The difference between Europe and North America was immense. Firms in the US market tend to explain goals in terms of profits, rather than how they make profits. The goal is profit. Europe’s higher regulatory complexity and its more adverse approach to risk mean that firms have to have multiple goals.

Our interviewees almost all agreed with the survey finding that there is a real gap between analysts and spokespeople around the business model. The analysts say that their analyst relations partners are not specialized enough. I think that is partly because analysts are focussed on the whole market generally, yet also are often very technical. AR people are very focused on their company and its strategy, but that means they start from their message rather than from the market. Analysts say that is also complicated by AR agencies, which can be somewhat marketing-led, and by briefings that are tied to specific events, where the spokespeople are focussed on a message that has been planned, reviewed by legal, rehearsed with PR and so on. When the spokesperson comes to meet the analyst, they might not want to speak about anything else than the topic they have prepared for.

Of course, it could be the case that an agency that works across many sectors could have more of a market view. However, analysts told us that an agency might be less integrated into the company than an in-house AR team, and might be speaking to analysts after just reviewing a few documents rather than living inside the corporate reality. That brought back my memories working at Brodeur Worldwide, a PR agency that is now part of Ketchum, where sometimes clients would have materials ready only shortly before the briefing. It is very challenging for AR people in that position, says Boyer. Even harder, AR people are often asked by analysts for the impossible: perhaps a spokesperson who either doesn’t exist or the available spokesperson does not have the right insight. Many analysts spoke about spokespeople having polished scripts (something that also came up in our project with Christian Hampel, a graduate research from the Institute of Psychology in Mainz). The spokespeople might not feel comfortable speaking off-topic and, in fact, might come across as being less well informed than they are. Spokespeople might not feel empowered to improvise or talk off-script, especially if PR or AR people have given analysts a highly-structured plan of what to say. While preparation aims to support spokespeople, it could have the opposite effect of confining them and making them seem scripted, controlled and less than candid. The 25% gap in interest between analysts and spokespeople also reflects inhibition, says Boyer. Unless there’s an official stance on a topic, many spokespeople will avoid an issue where they do not have a message. In turn, that creates a credibility gap. Analysts will not believe that spokespeople cannot really answer these questions, and instead assume that they are concealing something. I can appreciate that very much, having experienced it when I was an analyst myself. Only an external advisor like an analyst can tell you unwelcome truths, and spokespeople need to be prepared to listen openly. Boyer recommends less formal interactions between vendors and spokespeople. More channels for sending information can be used, and the conversation should be more regular and ‘bite-sized’.

We are very grateful for the generosity that analysts gave us, and we hope these findings will make spokespeople more able to speak openly and, in particular, to discuss business models.

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