How Can Research Help Investors and Business Owners? 08 May 2014

How Can Research Help Investors and Business Owners?

Research is responsible for some of the greatest accomplishments in science and technology. However, many business owners and investors often have little awareness about how research can help them. Whether research is needed by a rocket scientist or a company entering a new market, a common goal is to gain more understanding about something that is currently unknown. As observed by Neil Armstrong, the astronaut who first stepped onto the moon, “In much of society, research means to investigate something you do not know or understand.”

With this basic definition as a guideline, virtually all investors and business owners should stop and think about some of the important things that they do not currently understand. Both businesses and investments regularly generate a long list of “new” and “unfamiliar” challenges that must be analyzed and confronted. In some cases, needed information about business competitors is missing. Financial managers and investors are repeatedly searching for facts and data that will help them make a fully-informed investment decision. While business research historically focuses on finding answers, Peter Drucker reminds us how important it is to ask the right questions: “The most serious mistakes are not being made as a result of wrong answers. The true dangerous thing is asking the wrong question.” Both investment research and business research can play a critical role in identifying questions as well as answers.

Some Common Roles for Investment Research and Business Research

Here is a random sampling of management and investment challenges that businesses or investors encounter on a daily basis:

  • Marketing managers identifying which companies are their major competitors for business services and products.
  • Investors struggling with choices among several financial alternatives.
  • Small business owners selecting a pricing strategy for a new product line.
  • A new investor searching for unbiased investment data that is not produced by a financial firm trying to sell stocks or bonds.
  • A company that has never used data mining or other business analytics techniques is exploring whether it is feasible to outsource these specialized business research needs.

Expert Opinions About Research

Each of us probably has a different opinion about the value of research in running a business or choosing investments. Before deciding whether research should have a prominent place in your company or investment portfolio, you might find the following perspectives to be helpful:

  • “Research is what I’m doing when I don’t know what I’m doing.” (Werner von Braun)
  • “If we knew what it was we were doing, it would not be called research, would it?” (Albert Einstein)
  • “Research is formalized curiosity. It is poking and prying with a purpose.” (Zora Neale Hurston)
  • “I believe in innovation and that the way you get innovation is you fund research and you learn the basic facts.” (Bill Gates)
  • “When you’re through learning, you’re through.” (John Wooden)
  • “Research is creating new knowledge.” (Neil Armstrong)

Avoiding Conflicts of Interest

Companies and investors needing research have two basic choices: doing it themselves or outsourcing. It is usually feasible to outsource both business research and investment research. However, one serious pitfall to avoid with outsourcing is a potential conflict of interest involving the research company and other services marketed under the same business umbrella. For example, many investment banking firms offer “free” or “low-cost” research because they are also interested in selling securities or other services. Such conflicts of interest rarely result in prudent or cost-effective research for the client. When considering the true value of “free research,” the timeless wisdom of “You get what you pay for” should provide a practical second opinion.

– Research Optimus

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