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Feature – Harris Interactive

November 17 2004

Harris Interactive Inc., the fifteenth largest and fastest-growing market research firm in the world, is well-known for The Harris Poll and pioneering Internet-based research methods. The organization includes wholly owned subsidiaries (London-based HI Europe, Paris-based Novatris, Tokyo-based Harris Interactive Japan and newly acquired US-based WirthlinWorldwide) and an independent global network of affiliate market research companies.

At the end of October, MrWeb's Michael Kenyon, Director of US Operations, had a chance to sit down for a candid conversation with Gregory Novak, President and COO of Harris Interactive. While Novak describes himself as a non-researcher, his comments make it clear that he thoroughly understands the business of marketing research.


MK:   Having spent my entire career in marketing research with my own agency, companies like Gartner and others that are now Synovate and Research International, sampling stands out as a key current issue with Internet research. This comes from the methodological perspective of the professional researcher who considers accurately sampling the audience of interest as the starting point to meet client needs.

It is a given that approaches to contacting respondents are increasingly compromised. Door-to-door research in the US is virtually extinct. And cooperation with phone contact has been reduced by a multitude of factors. There are many attractive aspects of online research, including cost; design flexibility; in-home comfort; and approaches which appeal to respondents.

What are some of the ways that Harris Interactive answers questions about online research in general, and more specifically representing people that don't go online for research or don't go online at all?

 
GN:   First, Harris Interactive is often represented only as an Internet research company. It just happens to be what we've branded and in fact we're competitive beyond that. We are a research and consulting organization first. The Internet and telephone are a means to an end. We view the issue of data collection not solely as an Internet phenomenon. We regularly bid in mixed mode. We really know Internet research and grow faster on the Internet because we're better at it. Our visibility is very high in this subject matter area. I just got back from the UK where everything we propose is mixed mode. In the UK, we're really moving people from the face-to-face environment over to the Internet. People often say, "All you think about is the Internet" When in reality it is our ability to understand these differences that make us competitively advantaged at "The Internet".
 
MK:   Although you propose mixed mode, are these kinds of implementations atypical?

 
GN:   No. We did $146 million in revenue last year. At $59.5 million, telephone was more than a third of our volume. But our marketing is about Internet and our face to the analyst community is about Internet. We market first from the Internet because that's where our growth has come from.

If you look at us and you say, "What do we have that's the same as our competitors, what do we have that's different and how do we tie the differences up to performance metrics?" the answers are, we have researchers and methodologist that are very, very talented just like our competitors. We have programmers, we have sales people and management guys who are very talented. The industry grew basically at 2% if you were a small firm last year but fell 2% if you were a big firm. Harris Interactive grew organically at 11%. So we do what I call simple strategy - the 'Sesame Street' version of strategy. What's different? The real difference is that the Internet capability is like an extra weapon. Our researchers might pull that weapon out and use it to uniquely solve a customer problem. It's a very powerful weapon. It's another tool in the box that Harris Interactive uses to grow faster than the competition.

 
MK:   Jumping ahead to another issue. When you think about mergers and acquisitions, do you believe that your recent acquisition of Wirthlin, for example, is going to provide you with access to their clients who aren't Internet savvy yet and bring them into that or is it to access approaches that Wirthlin uses and integrate them with Harris Interactive?

 
GN:   The short answer is yes to both. We're now moving past the rapid growth stage where we're losing tons and tons of money. When we merged with Total (Research) it was a very positive thing to do. Then, as we began to cut costs our growth slowed and investment in future growth really slowed down. We were about to cost save ourselves into stagnation. It was time for a change again. We decided to rekindle the growth engine and build new products and services. We have the best Internet research capability in the world, bar none. We wanted to merge the technology with the science of research and convert a 30-year tracking study to the Internet with faith and know that it works. The competitive advantage that we seek is to combine technology, databases and research science in a way where we understand how to do it better than anyone else. I believe in my heart of hearts that there's nobody out there that can do this like we can and knows as much about the methodology of making the answers come out, 'right'. You can't have spent this much money and done this many interviews and not. We do a million interviews every single month on the Internet. You can't even show up and do that many poorly and not eventually get good at it. We've never lost our commitment to the science part of this, to bias management and issues about the differences between the online and offline populations to get the right answers.

We will conduct research any way that is most appropriate. In almost all of our proposals we present alternatives. We win more Internet business because we're better at it. We understand how to leverage it. We understand how the science works. In this industry you won't be very successful in changing existing client relationships unless the advantages of the alternative delivery system are compelling, and the advantages for us on the Internet are compelling.

 
MK:   There's a lot of integrity to offering clients a choice and letting them decide which choice is best for them.

 
GN:   Clients are challenged by the notion of moving a project online, particularly with tracking studies. They would say things like, "I don't have Internet addresses for my B2B customers. I can't do that in this country. I don't think it can be effectively done because we used to do over the telephone." We tell these kinds of customers. "Don't do it all on the Internet" not at first not today, but we have created a solution to address and transition that research on-line in the most effective and swiftest manner possible..
 
MK:   In some instances I have more confidence in B2B on the Internet than with consumer work. Let me throw out some things that you probably hear a lot of and see what your take is.

A consumer decides that they want to create 20 different identities. They want to be a child; they want to be an adult; they want to be male, they want to be female; they want to be wealthy, poor; any demographic or psychographic. What's your response to prospective client who asks, "How can you factor that into the results that you are getting and how can you tell me that you have any clue about what the sample is really like?"

 
GN:   One is that we run a pretty complex system that to make sure that the last time you signed on as Michael Kenyon and gave your age that the next time you sign your age will be in line with the previous visit.
 
MK:   I'm thinking about somebody who goes past changing background information within what's connected to a single e-mail address by creating multiple e-mail addresses and each one houses a different profile.
 
GN:   That's pretty complex. The answer given by one of our chief scientists in that particular instance is that the outlier study on the back end of data collection would identify someone whose behavior appears to be so aberrant that it would get struck.

His second answer would be that within the large sample sizes that we generally use a few individual interviews along the lines of what you described do not mean a whole lot.

 
MK:   When you think about the outlier population or the proportion of situations that you come across the kinds of situations we talked about, what do you actually do about it?
 
GN:   We'll toss the person out.
 
MK:   Is there a big loss of respondents?
 
GN:   We voluntarily attrit more respondents because of a bad survey experience than any other single cause and that is not a large number. The number of forced expulsions from the Harris Poll due to this type of behavior is rather small.
 
MK:   Harris Interactive is fairly unique as a research business in that you cater to both research agencies and consultants as well as direct clients. How do you address either the client population or the agency population in terms of appealing to both audiences and at the same time stimulating a sense competing with research agencies for the same clients?
 
GN:   It's a challenge. The challenge that I'm exposed to is more the internal strife than the external market strife. It's a big industry. If a major competitor chooses not to use our service bureau because they compete with the custom side of our business on a regular basis, that's certainly lost revenue to our service bureau. If our top ten competitors choose not to use our service bureau, our service bureau would be unaffected. The people who really use our service bureau are the boutique firms who have yet to develop their own access to panels. This year we'll be a $210-$215 million dollar company. Our service bureau will finish at about $10-$12 million - or less than five percent.
 
MK:   Does Harris Interactive often pitch in with companies that are fairly large competitors in many areas - including having their own panels - when they find that their panels are not substantial enough to get the job done?
 
GN:   We used to do a lot of that in the early days. We were partnered with one leading organization and actually helped them build their panel. But typically, the big companies didn't want to be beholden to some other folks and most of them really never used us.
 
MK:   There are companies whose panels are large but not nearly as large as yours. Do you run into situations where they're having shortfall in a study and they ask to buy sample.
 
GN:   Generally speaking, if they're a large firm, they'll go to a company that provides panel access only. There are plenty of sample suppliers out there. Our strategy in the early days was to consider the Microsoft vs. MacIntosh example. You could choose to build this and say I'm going to be the only one and dominate the world or you're going to license it to everyone and make it ubiquitous. We chose to license it and give it away to everybody. I happen to believe that this decision accelerated Internet research in this country by maybe five years because at the end of one year our service bureau had 60 companies in this country who were using Internet data collection.
 
MK:   And that's the same service bureau that's now a small proportion of your total revenue?
 
GN:   Absolutely. And in fact they have more customers than that today. But the other part of our company has grown so dramatically that the service bureau is now dwarfed. It's become relatively smaller, not because it hasn't been growing but because the other part has grown so fast.
 
MK:   Another thing that I'm curious about - and I'm sure everyone asks you - has to do with your organization's interest in other potential acquisitions. Is it something that continues to be on you mind and are you thinking about tapping resources than can add not to just your client base but add to those blended research designs?
 
GN:   First let me tell you what we saw in Wirthlin. At Harris Interactive, we see our job, our real vision, as solving client business problems in new and innovative ways. In general, Harris Interactive might be characterized as, ' the new and innovative way guys' while Wirthlin is the 'solving client business problem guys'. We tell our employees, "Think about our firm as aspiring to be combination of a big four consulting organization that is, 'high think, high service, solving client business problems' and Amazon that has taken a simple task - retail shopping - moved it online and made it innovative, different and faster. That we do it online isn't the ultimate goal - it's solving client business problems in new and innovative ways.

So now, when you ask me the question, "Who would we acquire", anyone that fits into one of our structural areas that helps us to meet that end. We divide up our business in the United States into a series of horizontal and vertical businesses. We look at the marketplace and see pharmaceuticals over here and financial services and automotive services over there. Then there are some horizontals like customer satisfaction, advertising testing and tracking - methodologies that we believe transcend industries, and in fact we work on the science part of the research in a holistic way.

Our perfect acquisition would be a non-Internet based $100 million research company in only one sector with no channel conflicts anywhere else who is completely ready to move all their clients to the Internet tomorrow and increase the margin. We would buy them because it takes real value added to become a $100 million company to begin with. Let's say they know the financial services sector. We would ask them to take our $10 million in Financial services and add it to their group. And to use our technology to take the business that they've always done on the telephone or face-to-face, and convert as much as they can to the Internet and flow that margin to our shareholders.

As we're getting larger - $150-$165 million in the States - we can only take a couple of potential strategic approaches to how you develop these businesses. One of these is practiced by some of the large competitors in the industry . They buy a company. They bring them into the firm, aim them at the marketplace and allow them to develop and grow the business to the best of their ability. They don't really add a lot of value to those firms except size, they don't spend a whole lot of money with investments, they don't really pool their intellectual resources and in fact when I meet them in the marketplace I meet two companies from the same group. In the early days, I wondered, "How does this work". There is no active market management. Basically, when I talk to those folks, as long as they're profitable, it's a wide open market for them.

That's one approach. It's a great method and I'm sure it's quite successful. Our approach is somewhat different. "How do we become greater as a result of bringing somebody into our firm? How do we take what we have and give them something? What do they bring to the party? How are we better as a result?" So the long way of answering the discussion with Wirthlin is that we aspire to be more strategic with our clients. Wirthlin is a strategic firm. A big part of their revenue is in the space that we didn't have great assets in - brand equity management. They were low Internet users but they were people who were interested in the innovation, the idea, the excitement of what they could do with it.

 
MK:   What wasn't Wirthlin?
 
GN:   Wirthlin wasn't uni-sector, they weren't all in financial services and they weren't $100 million. We have about nine criteria for acquisitions and nobody meets them all. Of last year's $146 million revenue, roughly $100 million has come from organic growth. Our mission, as we go forward, is to grow organically by about 15% a year. And then our intention is to add $50 million a year in acquisitions on top of that. We figure in five years we'll be at $500 million if we do this well.
 

Gregory Novak About Gregory Novak

Gregory T. Novak, President and Chief Operating Officer of Harris Interactive, is responsible for delivery of all worldwide revenue and profit. He joined Harris Interactive in 1999, and was instrumental in the successful development and implementation of the Company's Internet-based research capabilities. Since then, he has held several senior level positions including President of U.S. Operations and Group President, Strategic Marketing Solutions/Business & Consumer Research. From 1996 to 1999, he was Vice President and General Manager of a $150 million unit of General Signal Corporation. Prior to that, he held executive positions at General Electric and FMC Corporation.

Mr. Novak received a M.S. in Management from Purdue University's Krannert Business School and a B.S. in Mechanical Engineering from the University of Pittsburgh. He is also a graduate of General Electric's Nuclear Power Engineering Program and FMC's Corporate Analyst Training and Development Program.



All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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