What...we should try tarot cards?

Oct. 1, 2001

This month marks the debut of a new column in Lightwave: "Analyst Corner" will feature a rotating series of columnists from well-known market-research firms who will provide analysis of the various technological and market trends afoot in the optical communications industry. Our inaugural column, by ElectroniCast's Jeff Montgomery, provides a historical look at how the fiber-optic industry reached its current position. Next month, Neil Dunay of KMI will discuss (among other things) how market-research firms come up with their forecasts.

Our first two topics couldn't be more appropriate, given the fact that the lumps the optical communications industry has taken on Wall Street are surpassed only by those being doled out to analysts for not predicting the downturn. Depending on how much money one lost in the stock market or in investments in new production facilities that currently sit idle, many in the community now view market prognosticators with either heightened skepticism or with the venom usually reserved for snake oil salesmen.

Just as in any business, certainly some analysts deserve scorn for being incompetent, unethical, or both. (No, I'm not naming names.) But while an entire industry shouldn't be stained by its worst elements, I do believe that the unforeseen nature of the current decline provides an opportunity for the industry to reexamine how it uses market research.

At the heart of such an investigation is the origin of the data on which most analysis is based. Contrary to what the more cynical among you may think, reputable market analysts do not pull numbers out

of the air or take last year's figures and add 10%. As Dunay will point out next month, good market-research firms generally poll both sides of the market, buyers and sellers, to determine how many components, subsystems, or systems are likely to be produced and how many are likely to be purchased.

That means the data comes from people like you, gentle reader (or your bosses). Is that a scary thought? Let's hope not, because if we assume that you (or your aforementioned superiors) are typical of the industry, then you know first-hand how accurate your favorite analyst's next market-research report is likely to be. And if you're the kind of person who uses your status as a client to force a market-research firm to doctor its numbers in your favor, you can bet other people are doing the same thing. If you're successful at such browbeating, you deserve whatever disaster befalls you for using the resulting report to justify your business decisions. And the market-research firm deserves whatever mud may be slung in its direction.

Of course, experienced market-research firms know that not everyone will talk to them-and that not all those who do speak are telling the truth. What separates the great firms from the good ones is their ability to interpret the accuracy of the information they gather.

And that's the lesson the industry should take from the "surprise" drop off in the market. Market analysis is interpretation-not a direct pipeline to divine omniscience. It's meant to be used as an aid in decision-making, not a replacement for it. The responsibility for how such analysis is used-like the data on which many reports are based-lies with the industry members who solicit it.

Stephen M. Hardy
Editorial Director and
Associate Publisher
[email protected]