by Freddy J. Nager, Founder of Atomic Tango

“There are many methods for predicting the future. For example, you can read horoscopes, tea leaves, tarot cards, or crystal balls. Collectively, these methods are known as ‘nutty methods.’ Or you can put well-researched facts into sophisticated computer models, more commonly referred to as ‘a complete waste of time.’” — Scott Adams, The Dilbert Future

So there I was in a meeting at one of the world’s largest PR agencies. In the midst of a luxurious high-tech conference room featuring an HDTV and a tower of high-quality donuts, the PR agency told their client (and mine),  a Web 2.0 startup, that it needed to conduct more research. The client was visibly shocked…This startup was on the verge of going beta. It had already worked with this PR agency for nearly a year. The additional research would have cost thousands of dollars and set the launch back months. Why was this recommendation coming now?

My typical cynical thought: Just like a giant PR agency to recommend yet more research rather than do any actual work for a small client. (That’s why I prefer small to mid-sized PR firms — ask me for my recommendation.)

I also thought of the value of research: it certainly helps, but too much research can leave you stricken with that deadly disease “paralysis by analysis.” That’s when action is delayed again and again because somebody wants to conduct more studies. By the time the company completes studying, the rapidly evolving business world has changed to the degree that the original findings no longer apply. So the company decides to conduct more studies on these new developments…

Opportunity Cost + Opportunities Lost

Companies will tout their savings from conducting research, without considering the opportunity costs: what business did they miss out on while conducting trivial pursuit?

Example: I know a would-be entrepreneur who talked about starting a business for three years. She jumped through all the official hoops from incorporating to designing a logo. She also visited prospective manufacturers for her low-tech consumer product. But rather than manufacture a single item, she sent out one marketing survey after another to friends and family. Then someone else launched a similar product, so while she was researching, a competitor appeared where there was none before. She finally launched her product, just in time for something called a “recession”… Opportunity lost.

Private sector advocates often criticize the public sector for “paralysis by analysis,” but this viral contagion is spreading to the private sector from business schools (where most professors exist for the sake of doing research) through a vector called “MBA’s.” As a recovering MBA myself who now teaches MBA students, I stress the importance of strategically thinking through decisions, and not just blindly accepting traditional processes or so-called “best practices.” (How I loathe that term.) That’s especially true of research.

Criteria: The Right Amount at the Right Time

Research is absolutely essential before launching any business or major marketing campaign — but only the right amount at the right time. No amount of planning can prepare you for everything. You can’t know exactly what your competitors are planning (unless you’re the New England Patriots). You can’t predict disasters or the stock market. But research and planning are far superior to just working from gut feelings — just look at W’s follies in Iraq as proof of that.

You should also conduct as much research as possible in such categories as warfare, medicine, product safety and potential spouses. But when it comes to marketing, you should moderate your research urges based on 3 criteria:

1. The urgency of your situation. Is there a deadline? Is your competition preparing to launch a similar product? Are your investors breathing down your neck and telling you to get on with it already? Go ahead, do your research, but in times of urgency, you need to earn your paycheck by making a decision. You’re not being paid the big bucks to sit there and say, “But Captain, I need more time…”

2. Your financial resources. Can you afford to hire a professional researcher? I knew a barely competent researcher who charged $10,000 to conduct a simple focus group with 10 people, the results of which were completely ignored by the client. (I don’t blame the client. Focus groups have notoriously rejected everything from telephone answering machines to minivans to the TV series “Seinfeld.”) Are you better off searching the Web for the information you need? The site Marketing Sherpa, for example, offers reasonably priced reports and a free informative newsletter.

3. The size of your investment. How much is at risk? If you’re launching a multi-million-dollar project, by all means, conduct extensive research. If you’re running an ad in a magazine, just run the ad. I once worked with a dotcom “VP of Marketing” (a former computer engineer with a Stanford MBA) who asked me to create a spreadsheet projecting the full range of possible returns on a $3000 print ad. I questioned the value of the research, since not all benefits of advertising can be projected or even measured, but I did as requested. At my rates, the spreadsheet cost $1000. After reading it, she declined to run the ad. So essentially, her risk aversion guaranteed a loss of $1000 and a 0% chance of success. Not surprisingly, a year later, the company still has no growth despite being in a hot sector. The timorous VP has since left the building.

The Alternative: Pull a Nike

If none of these criteria justifies conducting research, just do it and learn by doing. Not exactly a revolutionary concept there. I’m not saying go big from the start. Rather, test your idea on a small basis — small being larger than a focus group, but smaller than a worldwide campaign. For example, you can launch your product in a representative mid-sized city like Portland, Peoria or Pittsburgh before conducting a national rollout. Hollywood often does this with its more experimental films, such as “Juno” and “Paranormal Activity”: limited releases gradually expanded based on reviews and audience reaction.

Learning by doing is what that client of the giant PR agency decided to do. Rather than conduct additional extensive and expensive research, the company decided to go ahead with its beta launch: after all, learning is the point of going beta. Will they make mistakes that could have been prevented by research? Perhaps. But they’ll actually be in business and interacting with customers. And that beats sitting around staring at spreadsheets, even if the donuts are good.

PS: Here’s a brilliant comic on research overzealousness.