AR measurement: awareness or tonality? Or neither?

I had a fascinating discussion recently with the head of AR for one of the largest and slickest consulting companies (Honestly, it’s great to be in London — everyone in AR comes here eventually). Their analyst relations is very ‘conscious’ – they have a mature and stable idea of the whole process and, in fact, I can’t think of a firm that is as happy and effective with its analyst relations.

Of course, the conversation turned to measurement. Lighthouse’s approach is that, in the same way that most human activities turn from science to art as they become more complex and less certain, the focus of analyst relations evolves from a focus on awareness of the vendor to a focus on tonality about the vendor and, for the top few firms, about favoured client strategies.

  • Awareness is a very powerful measure, and a big rationale for AR measurement. The volume of analyst relations effort needs to be appropriate to the level of resources, and of recommendations, that it wants from the analyst community. The more aware analysts are of a firm, the more it is discussed inside the analyst firms. This awareness is strongly correlated with improved recommendations. Therefore AR managers needs to measure the level of awareness their firm has in the analyst community, and adjust that level of resources until it has the level of awareness it wants. That’s a big part of the rationale for Lighthouse’s large, multi-client, Analyst Attitude Surveys. Depending on the market, we survey from 50 to 150 of the world’s most influential analysts following a particular industry. Lighthouse’s Research Fellow, Professor Efrem Mallach, tabulates and analyzes the results, as he has in similar annual surveys for most of the last 15 years. He is a business school professor at the University of Massachusetts with a thirty year record in the analyst relations profession.
  • These studies do not only focus on awareness, but also on tonality: each shows analysts perception, relationship and propensity to recommend the leading vendors companies. For example, our recent telecoms study compares 3Com, Alcatel, Avaya, Ciena, Cisco, Dell Networking, Ericsson, Extreme Networks, Foundry, Fujitsu, Genesys, Huawei, IBM, Juniper, Lucent, Marconi, Motorola, NetScreen Technologies, Nokia, Nortel, Novell, Qualcomm, Research in Motion, Riverstone, Samsung, and Siemens. That means that the study not only shows the strengths and weaknesses of a client’s competitors, but also where they stand in comparison to its competitors. The study can spotlight the areas where your firm is most at a disadvantage. That will allow the firm to better understand what it needs to do to improve analysts familiarity with the company and make them more favourable towards it.
  • However, what came up in discussion with this consulting firm is that the key metric for them is analysts favoured client strategies. This is a leading firm and it’s consistently seen positively. It’s a firm whose relative standing will tend to be fairly consistent. However, its fortunes rise and fall in line with the analysts views of the generic value of the business solutions it offers. Imagine, for example, that this firm has a strong offer in helping enterprises to develop their IT governance: the separate IT blueprint and business mechanism that can guide and specify corporate IT, as relations and metadata guide the design of a database. The key measure for them isn’t what analysts think of them, but what they think about IT governance. If analysts favour it then they will benefit; if not, they will lose.

My conclusion is this: the key measure differs according to the maturity of the firm: for mid-sized firms awareness is key; for the top 20 firms in a market it’s both tonality and awareness that matter. For market leaders however success is about influencing the research agenda: and that is why the largest firms tier and measure so intensively — that is the only way to become proactive and focussed enough to attempt shifting key analysts.

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