Analysts need to change to be really useful

I don’t think analysts are delivering sufficient value to their clients on the big stuff. The forecasts and quotes for press releases and so forth are all very useful, but we as an industry should be providing more big and bold suggestions to our clients on things that can make a real difference. There is very little incentive to think laterally, really weighing up what’s important to the organisation and pursuing that. Simply put it’s because the advice tends to be both very specific on a topic as well as generic across the sector, e.g. mobile operators should do X. The reality is that the smartest move is almost always something specific to company Y, or at the very least adapted to their needs, and related to that company’s position and capabilities.

I’ll give you a great example. When I worked at 3UK I’m sure analyst recommendations to a struggling greenfield 3G operator would have revolved around focusing on data products, pricing, the inevitable “don’t get disintermediated in the value chain” (execs just love this one!) and so forth. Not a single one would have guessed (although it should have been guessable because it had low prices) that 3 had substantially higher outgoing call minutes than incoming call minutes making mobile termination cost (then over 5p per minute) a massive headache. So the ‘big and bold’ move was to lobby hard for termination rates, under the slogan ‘Terminate the Rate’, to be cut substantially, specifically to 1p per minute. They’re now below 1p per minute. Genius move by Kevin Russell, the then CEO. Worth noting that this move was good also for BT, which at the time was fixed-line only and joined in the lobbying, but very bad for all the other operators for whom incoming mobile termination was a cash cow.

In the above example, firstly I doubt anyone would have even considered termination rates as a topic of conversation. Too mundane. I doubt many analysts were writing reports on termination rates at the time. Better to look at mobile TV (zero revenue). Also on this topic there’s an inherent conflict between what’s good for some operators versus what’s good for the others. So generic segment recommendations wouldn’t work. It can’t be ‘better’ for MTRs to be both higher and lower. So, no recommendation. But I think the fundamental issue is that the analysts just wouldn’t have thought about it. I’m sure a few will pop up and say they did or would have. There are some exceptional analysts out there.

Back in about 2003/2004 while an analyst at Yankee Group I had a rather complex diagram of how the mobile world worked. So, for instance if you put up handset subsidies you increased subscribers but also raised costs and so on. Lots of moving parts. I wish I could find a copy of that diagram. The idea behind it was to try to get a holistic view, albeit simplified, of the pain points felt by my clients. I don’t think I fully realised the value of what I had there. It allowed me to consider the company as a whole without looking through the prism of a specific topic, which tends to be how analysts work. The more I think about it the more I think I was on to something with that schematic.

My argument is really for three things from analysts. Firstly to make recommendations on a company-by-company basis. Or at the very least class of company. Saying “mobile operators should do x” is useless since they are predominantly looking for ways to compete with their peers. Does it really make sense for them all to do the same thing? Rarely. Secondly look holistically at the organisation and really think about what the pain points, and assets to be exploited, are likely to be. Sometimes the best thing is mundane and doesn’t involve spending billions of dollars. Our tendency is to start from the perspective of a technology and then suggest what organisations should do based on that, which inevitably means we only look at the market through a few limited prisms. Hey presto the solution is always AI, IoT, 5G etc. Thirdly find ‘big and bold’ recommendations for radical actions. If it doesn’t move the needle significantly then why bother? The client can do the watering down themselves.

I’ve focused exclusively on the mobile industry here because the 3UK example comes from my days focusing exclusively on the mobile sector. But this applies equally to just about every sector.