Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Welcome, dear listeners, to this episode of the IP Fieldwork podcast. Today, we will discuss how to structure and submit project requests to primary research service providers. This episode is part of our primary research method series. Let's dive right in. To start, could you talk about the different kinds of projects one can conduct, as this sets the stage for how to interact with a service provider?

There are many types of executive calls you can conduct, depending on where you are in the research process or what you're looking to study. For instance, learning about a new business or a relatively new company that you haven't conducted calls on before, and don't already own, is very different from maintenance work on a current position that you've owned for years or even decades.

There are different flavors of calls. For example, you may want to do references on a management team. Some investors even conduct channel checks if they're looking to understand more about where a business may be trading within a quarter. We do less of that, but much of the industry still focuses on those types of things. It really depends on what type of calls and research you're looking to conduct. Each has slightly different requirements.

For the focus of this podcast and our work more broadly, it falls into the first two categories; learning about a new business or ramping up on a new company and/or doing maintenance work on a current business that someone may own or have covered before. And those two dominate at least the majority of our work. And for each of those projects, there's still a huge amount of upfront research required.

We don't train our analysts to find one company and automatically submit a research project to their team to speak to an executive. There is a substantial amount of upfront independent research, or desktop research, required. This includes reading filings, financials, earnings calls, capital markets days, and whatever else is necessary to understand what matters for the business.

We have an internal process where they document all this work and record their independent research, which we review together. Then, you reach a point where you have hypotheses or questions you'd like to explore with a potential executive. That's when you get to the point of actually submitting a research project, either internally or, if you're an analyst at a fund, to your primary research provider.

Over the years, we've seen patterns that can creep into the way a project request is formulated. A significant risk is structuring an investigation in a way that confirms prior assumptions. Let's delve into that.

This is the biggest risk in this whole piece of research. The risk lies in confirming your prior beliefs, which ties back to the research philosophy of an organization or company. For instance, if you're exploring a new business, you conduct initial research and decide to speak with former executives to understand their market approach and sales process.

What should you include in the brief to an expert network or your primary research provider? How should you convey what you're studying and how they should find someone for you? Let's consider the example of wanting to speak with former executives. There are many other scenarios, such as speaking with competitors, customers, or distributors. But for now, let's focus on speaking with a former salesperson. What should be included in the brief? Obviously, the basics like the target company and possibly some competitors.

You should also outline the hypotheses or questions you're exploring. This can be challenging if you're secretive or believe these questions are your edge. You might rely heavily on the expert network provider, which could result in not finding the right person. So, include the target company, competitors, and ideally, what you're looking to explore. For example, if it's a salesperson, you might want to explore sales strategy or pricing versus competitors and how it has changed over the last 12 months.

Now, who are you looking to speak to? Most people just say a salesperson, but that's a broad term, especially in large software companies. There are inbound salespeople, outbound salespeople, SDRs, account executives, and various roles with different responsibilities. These determine whether they can answer your questions or help you learn about a business.

One challenge I've faced is requesting just any salesperson. Instead, I should specify a salesperson in a particular region who sells to specific customers or deals with a certain dollar amount of a product per year. For instance, if a salesperson is responsible for a new product that accounts for less than 1% of revenue, is that relevant to you?

It's crucial to understand who you're looking for and what you want to learn. For an outbound sales executive, I would submit a different profile, directing the team on the type of products and minimum account value or sales volume I'm interested in. Consider an enterprise software company with 100 customers that signs 20 per year. A sales exec might only deal with one or two customers.

The biggest challenge in this industry is the asymmetry of information between the customer and the network. How do you close that gap? Part of closing it is explaining to our team how the company is organized and who I'm looking for within that organization.

Laying out the sale can be annoying because it requires a lot more work from the analyst. You have to know the organizational structure. For example, I'll be working on Fever-Tree, as we discussed last week. Fever-Tree is a global business with different competitors in various regions, even in different states. They have different go-to-market strategies across states in the US due to different liquor laws. So asking for specific executives in different states is crucial.

The competitive landscape in California is very different from Florida or Texas. Explaining the organizational structure of the company you're examining and directing the primary research provider clearly is essential. Otherwise, you'll get a standard list of people already in the network. The primary research provider won't spend time understanding whether they're outbound or inbound salespeople, how much they've sold, or what products they focus on. You'll receive a generalized response that's not effective.

I focus on understanding what I'm looking to learn and how to explain to the primary research provider and our team internally how the business is organized, where they should look, and why. We can discuss intro call and qualifying questions later. Sending a brief with target company competitors, hypotheses you're testing, or questions you're exploring is crucial. The most important part is identifying who you want to speak to and helping them navigate LinkedIn. That's what the network does—they search LinkedIn and their internal network.

How do you help them navigate the thousands of people they might be searching through to find the person you want to speak to?

What stands out for me is the amount of work that goes into the preparation stage for the project. In our operations, it's helpful to share how much time is spent understanding a business's structure, how it fits into a value chain, and how the industry works. There's typically a huge asymmetry to bridge between what an investor might know, who's done some work, and what the service provider understands.

We touched on this briefly, and I want to return to the risk of structuring. We've discussed how to help the service provider bridge this asymmetry. Then there are the actual research questions you share. I want to bring us back to the question of confirming priors and the risk of that process being tainted. Let's discuss that quickly.

That also relates to how you approach research, right? If you have the "man with a hammer" syndrome, you'll find reasons why Fever-Tree is growing more than Q if you look for them. It's about confirming your bias instead of approaching it differently. Our research focuses on understanding how things work. For instance, how is Fever-Tree distributed differently, directly versus other companies, both on-premises and off-premises? It depends on how you approach the research process. I've experienced this before, years ago, with projects that framed the research upfront, and it didn't turn out well. Confirming your bias can start with how you approach the research process, submit projects, and ask questions. It's a bias in the mind that can filter through everywhere. We should consider doing a separate episode on structuring research upfront, focusing on the independent part of the process. Much of our work is about understanding how the industry functions. For example, how does a bottle of Fever-Tree tonic get from Somerset or the US into a Kroger in Florida? Let's start with that before delving into more subtle aspects.

There's a question I love that I see reflected in your work and the team's work, is asking yourself the question, am I actually doing this work to learn something new? It gets back to a grounding in the purpose of fieldwork.

But it's not just about learning something new for the sake of it. You need to explore things that matter. Otherwise, it's just an intellectual exercise that doesn't help you achieve your goal, which is to compound the capital.

Exactly. You're naturally heading in that direction. Another relevant element is the importance of preparation to understand how things matter and how an individual call fits within a sequence of calls. This brings us to the point that you've touched on a few things that help service providers. It's about providing information beyond just the organizational structure. Let's explore more pieces of information that can be helpful to a service provider in offering someone relevant or multiple relevant people.

It's important to give them five minutes of your time. Imagine, for example, our team internally works on my projects and also on our partners' projects, such as other investment funds that conduct calls for our platform. If you're working with a big expert network, they might be handling projects for 10, 20, or even 30 clients, along with their requests. They are under immense pressure, mainly driven by the traditional consulting way of working. For instance, if a McKinsey consultant receives a task on Friday afternoon, they won't sleep that night, and the expert network will receive a project Friday night and must respond within half an hour because they compete on speed. This focus on speed and volume has infiltrated the whole industry, for better or worse.

When you submit your project to a big company or expert network, they're also receiving many other projects. Why should they spend more time on your project than someone else's? Call them up, ask them to clarify any points, and give them five minutes of your time. One of the biggest things our team finds helpful is speaking to them for just five to 10 minutes. It might be annoying for an analyst who wants to speak to their primary research provider, but if you're going to spend hours doing interviews on a company, what's five or 10 minutes of your time worth to get better results?

The reality is no one creates the perfect brief. There's always an asymmetry of information. Whatever you send to the provider will have missing information. They don't understand the industry as well as you do. Open the door for a five-minute call. Most people don't do this, but if you do, they're more likely to go above and beyond on your project. That's a simple point.

Additionally, feed them any helpful information. Link them to capital markets days, investor relations, or industry reports. You might have information that could assist them. For example, regarding the Fever-Tree project, we explored last week how they distribute differently. They have on-premise and off-premise channels, such as grocery stores or bars and restaurants. The go-to-market strategy differs for each. They sell directly to grocery stores and use Southern Glazers for the on-premise channel. Explain that in the project brief. If you're looking at Fever-Tree in the US, it wouldn't suffice to just say you want to speak to a Fever-Tree salesperson. You won't find many on-premise salespeople because it all goes through distributors. You might find one person dealing with distributors, but not many exploring distributor relationships because they eliminated them.

Use your knowledge to direct them to the right place. It's critical not to just say you want to speak to a salesperson at a company. Give them five minutes of your time, and it could make a significant difference.

We've seen it do just that. As we approach the conclusion, let's leave our listeners with a checklist of parameters to consider. This will increase the likelihood of receiving a relevant list of experts and options.

Another interesting point is that most companies in the industry, and even some funds, are used to sending qualifying questions to the network. The network typically asks these questions. This practice stems from consulting habits that have permeated the industry. I'm not sure how many of these habits everyone wants to adopt, but part of this involves the network asking the customer for one or two questions, often in bullet points or one-line answers. These are then sent to the executive to qualify them for the interview.

This is crucial because a hedge fund might not consider this deeply. They might ask to speak to a former executive from Fever-Tree in a sales role in the US about recent pricing changes. The response is usually a simple yes or no. The network doesn't have time to elaborate on the questions, so they send them directly to the executive.

Imagine you're a seasoned professional, around 55 or 60 years old, and an account manager from a big expert network contacts you with questions like, "Can you speak about the pricing in Fever-Tree?" or "Can you speak about the sales via this channel?" These yes or no questions can seem disrespectful due to their simplicity.

Instead, you should ask for specific information, like the amount sold per year. For example, "I sold $10 million of Fever-Tree last year." You should also inquire about the biggest customers or channels focused on, and the product lines. As an analyst, I would then receive detailed information, such as this person sold $10 million of Fever-Tree in California to Kroger and Walmart, focusing on ginger ale and grapefruit. This provides all the information needed to determine the value and approach for the interview.

Often, we fill out surveys before engaging with someone diligently. When sent these surveys, people tend to tick boxes and claim they can speak on various topics without much thought.

Not to mention the problematic incentives of offering a fee. Within the traditional expert network context, experts tend to overstate what they can address when asked to self-certify. This is very problematic.

Qualifying questions are important if you receive them, which I believe you do when working with most other networks. Take the time to craft them diligently and look for objective answers.

We handle this differently by not doing qualifying questions. Instead, we conduct 30 to 40-minute introductory calls with the executive. Our team is trained to explore these types of questions and gather this information during those calls. This approach hopefully prevents self-certifying and ineffective information collection about the executives.

Focus on the qualifying questions if you’re sending them to a network. Explain as much as possible about the organizational structure to the network and where they should look within that organization. Be willing to give them five minutes of your time, which will help them exceed expectations for you. Remember, the network is working with 20 to 30 other clients.

And that's a wrap for today.

As always, this is for informational purposes only and should not be relied upon for investment decisions. Please conduct your own research.