FEATURE3 April 2013
FEATURE3 April 2013
Recent unflattering results from growth darling BrainJuicer surprised some observers, including Surinder Siama. So he asked BrainJuicer CEO John Kearon about what went wrong.
I’ve always been bullish on BrainJuicer and felt the pain when you issued your profits warning in November. Can you tell us what went wrong?
John Kearon: The short answer is that every year, some clients spend unused budget in November and December, but in 2012 many big companies decided instead to cut back, and given we always invest ahead of the curve, this had a material effect on our profits. The longer version is that changing research buying habits is hard. The heads of research at the world’s biggest companies genuinely seem to want change; ‘Market research as we know it will be dead by 2020,’ says Kim Dedeker, former P&G global head of MR. But traditional research approaches are hard to relinquish, even when there’s an awareness of how bad they are for a company’s long-term health. Our challenge is to encourage changes in habits.
The results statement suggests that BrainJuicer sees this end-of-year binge revenue as decidedly lower quality, however welcome. Did the company anticipate and/or try to manage that risk?
JK: Our end-of-year projects are important but tend to be one-off briefs rather than trials or strategic work towards winning major mandates. Every year we aim to ensure there’s healthy underlying growth prior to the year-end uplift. 2012 was no exception with growth of 13% to the end of October. As an ad hoc business we have limited visibility. Unfortunately, clients holding back budgets at the year-end was a change to the pattern and was difficult to anticipate. We have taken costs out of the business to ensure we deliver healthy profit growth in 2013 without any assumption of year-end uplift.
Reputationally BrainJuicer couldn’t be in a better place and you’re still targeting those global mandates. What progress are you seeing here? What specific challenges are you facing?
JK: We’ve won awards and mandates for every one of our Juicy products which is exciting. “We need more magic and less logic” (Marc Mathieu, Unilever) is typical of the clamour for change from the top of the world’s biggest multinationals. In a world struggling for growth, it can only be a matter of time before something providing significant business advantage gets adopted. But old habits die hard and our job is to speed the process of change and make it as easy as possible for clients to reap the rewards of adopting new research and applying behavioural science.
“We don’t believe there are shortcuts to real growth. Acquisitions are too often used to mask a lack of growth; they detract enormous time and effort from the business and mostly destroy rather than create value”
You’re re-positioning BrainJuicer as “The System 1 research agency”. Can you elaborate on this and explain the rationale?
JK: Traditional market research has offered a plausible but flawed model of human decision-making, over-estimating the importance and measurement of rational, persuasion-based messaging [System 2 ], and under-estimating the degree to which the vast majority of decisions are made intuitively, instinctively and emotionally [System 1 ]. Behavioural economics is providing a truer-to-life model of human behaviour, so to the extent we can help our clients adopt the language, model and methods of System 1, we increase their chances of creating famous marketing and significant commercial success.
BrainJuicer is financially prudent with zero debt and a very healthy cash balance (£3.7m/$5.6m). Would there be any merit in deploying those funds on acquisitions to boost growth?
JK: We don’t believe there are shortcuts to real growth. Acquisitions are too often used to mask a lack of growth; they detract enormous time and effort from the business and mostly destroy rather than create value. We’re open to acquiring exciting IP – and have done – but buying market share has never been our strategy. When you’re challenging the way market research is done, I’m afraid you have to do it the long way; recruiting talented staff that can see there’s a better way of helping clients and arming them with the tools and self-belief to achieve it.
You evangelise taking risks and being ambitious, but do you think BrainJuicer has been ambitious enough? Have these results taken the edge off ambitions?
JK: Our ambition remains a better understanding of human behaviour and demonstrating the business advantage that comes with adopting new models and methods of market research and marketing. If anything, these results have galvanised us to make our challenge clearer and energised us to find more creative and smarter ways to help clients change behaviour. It’s not the smartest, fastest, strongest or even most creative that survive, it’s the most adaptable.
One reason I ask about ambition is that BrainJuicer seems, in some ways, quite conservative compared to SurveyMonkey which hit a $1bn valuation at this stage in its history (BrainJuicer’s market cap is around $50m). I’m wondering whether your ultimate ambition, to be a top-ten player, is too competitor-focused, while SurveyMonkey, like Google, is instead focused on having a major impact in the world – in this case by targeting SMEs which most traditional quantitative agencies shun?
JK: Just as there is always someone with more money than you, there will always be companies growing faster than you at any one time. Obsessing about them is the surest route to madness and long-term failure. As you say in the question, the important thing is to have a clear vision of how you want to have a major impact in the world. For BrainJuicer, we are dedicated to evangelising the enormous commercial benefits to companies of using behavioural science breakthroughs to enhance customer value. Critical to realising your vision is having the inventiveness to achieve it, the playfulness to enjoy the journey, the adaptability to get past barriers and the patience and perseverance to get through tough times and realise you have to be in it for the long-term to make a difference and win big.
Disclosure: Siama owns a small number
of BrainJuicer shares.