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Insights, Marketing & Data: Secrets of Success from Industry Leaders
Insights, Marketing & Data: Secrets of Success from Industry Leaders
STRAT 7 - Barry Brien, CEO. Can you really integrate data, insights and paid consultancy? Building a new type of agency group; a primer on how PE works; acquiring and on-boarding companies; the impact of AI on marketing vs insights.
STRAT 7 is a new type of insights, analytics and data group, specialising in customer centric growth. Since Barrie Brien took over as Group CEO in 2019 the group has grown rapidly, both through organic growth and acquistion. At the time of recording STRAT 7 incorporates Bonamy Finch, Research Bods, Jigsaw, Incite, Rainmakers and Crowd DNA.
For anyone intrigued by the financial and strategic aspects of growing an analytics-oriented enterprise, this episode lays out the blueprint for success, as well as leaning on Barrie's fantastic perspective across the world of advertising, insights, analytics and management consulting.
Among other areas we cover:
- Perspective from the advertising world, from CFO at Lowe to CEO at Creston
- The importance of the creative idea...and backing it up
- Building STRAT 7
- Integrating a paid advisory practice
- The difference agencies and specialisations within the group
- Incentivising and pulling agencies together
- Working with PE and how PE works
- What STRAT 7 is looking for next
- The role of AI in advertising & consumer insights
All episodes available at https://www.insightplatforms.com/podcasts/
Suggestions, thoughts etc to futureviewpod@gmail.com
I get a bit frustrated. I think the insight industry should be doing so much more. It's a huge industry and has such an impact on successful businesses. I think it's become a bit more obsessed over the last few years on about how quick and cheap we can collect and buy data. So what? What are you going to do with it? How are you going to interrupt it? How are you going to put it at the heart of business growth? And I think there's much more we can as an industry working with clients in that space Again, building our advisory business strategy, getting into that white space of management, that sort of gap between insight agencies and management consultancies.
Speaker 2:Welcome to Futureview. Now. If you're part of an insights or data analytics team and you've ever been told, just stick to the data, leave the analysis to the client, or even the management consultancies who are better qualified, then I think you should listen to this interview. The reality is that a lot of analysts and researchers have been trained with exactly that mindset Stick to the data, but almost a know your place type thing, even if they have amazing context from their broader work and experience. However, I'm afraid that with the acceleration of technology, both in gathering and analyzing insights, that just isn't going to cut it anymore. In fact, in some ways, it never really has, unless you're pure measurement business. But that's a different story.
Speaker 2:Anyway, barry Brian is the CEO of Strang7, one of the most interesting insight driven groups in the space and, yes, they seem to crap the code on how to break down the barrier between insights and data businesses and paid management consultancy services. Paid is clearly an important word here. Rather than just being bundled into a cost per interview, software license or something similar, strang7 incorporates well known names in the industry, such as research boards, bonomi, finch, jigsaw Rainmakers, crowddna and Insight. Barry's absolutely fascinating to talk to. We covered diverse areas around how to successfully integrate companies, how the advertising insight world has changed since he was in senior management, at the likes of Creston Low, and he also gives a very good overview summary on how PE works.
Speaker 2:That question was a little bit unfair of me, but there you go. He's a great sport as well as a great interviewee. So onto the interview. So to get straight into it, traditional first question I ask all guests now a bit of an icebreaker what's one thing that most people wouldn't know about you? I mean, there's quite a lot on the web and I've done a bit of LinkedIn stalking, but beyond that, what's a bit of a surprise that most listeners wouldn't know?
Speaker 1:I think I'm a frustrated musician. Oh really, I used to play a little bit of piano when I was younger, and then obviously nothing for decades, and I've sort of been trying to teach myself guitar and piano, and I'm not sure how well I'm doing at that.
Speaker 1:It seems to be I play Pink Panther on about three different instruments, but I've ended up living vicariously through my son, who's actually a pretty good piano player and then was teaching himself guitar as well, and then he ended up teaching himself drums and trumpet, so I was very pleased when he went off to university last year. So it's trying to teach myself one tune every other month on piano or guitar, but not doing as well as I've hoped.
Speaker 2:It's funny because also Tony Wolford I don't know if you listened to the interview with Tony, and Tony introduced us is also something of a frustrated musician as well. Did you know that?
Speaker 1:Yes, well, I didn't know that. I know his son's a good musician, so yeah, he's probably living vicariously through his son as well.
Speaker 2:Yeah, well, I think Tony was saying that people can go back and listen to that interview, but I think he was signed by Warner Music when he was 17 or something, yeah, and then it didn't work out. I think they tried to make it. I think he said they tried to make them too commercial or something, and he threw all his toys out of the pram and said, oh, I'm not doing that.
Speaker 1:Okay, I'll quiz him on that. He's a temp rental mercurial artist.
Speaker 2:Yeah, exactly. But anyway, I'll drag us back onto the main subject of the podcast, which is actually you, and you've had an amazing career across the marketing world both, I guess. In more conventional marketing they go into market research, and I was wondering if you could just run through it a little bit. You know from your time CFO at low and then CEO at Creston, and then we'll get on to Strat 7 as well.
Speaker 1:Yeah, okay, well, I started my career in the advertising agencies, qualified accountant originally, but then went to GTT, after that Sachi and Sachi and then after that in the late 90s to what was then low-howed spink and we merged with Lin-Taz as part of the public group. So, yeah, it's already cut my teeth, I suppose, in the original advertising world where the big idea, creative idea, was the core theme that everything else fell behind. And so I learned a lot. I learned a lot around the MLA side of how to grow a group, but into public, but also sort of the marketing mix, how that was changing over those years. But so after those years and I did I spent nearly seven years into public.
Speaker 1:A final role there was as CEO at CFO of EMEA Europe East Africa and it was a pretty big job for low and draft. We had a full mix of media to direct digital advertising, vr, some research. But then I joined Crestom, which was on the London Stock Exchange on the main list, not on EMEA as CFO COO and that had a stated behind-build strategy to build an insight-led communications group. And yeah, after I don't know how many years probably eight years I then moved into the CEO role and then transitioned it to what is today the Unlimited Group. So that was quite a journey being on the stock market and I had a lot of learnings from that. And it's interesting comparing that sort of and I know we'll get into it so the ownership of a growth group on the stock market versus strike seven, which is now private XC back. So definitely being a few learnings between those two ownership structures as well.
Speaker 2:Yeah, it'd be good to get into that in due course. Going back to one of the first comments you made, though, as well, it sounds like when you started it was almost like the Madman type of heroes. You said the creative idea was everything, and then different data sources and maybe a greater focus on effectiveness, and ROI started to become a bigger factor in the ad industry, would you say. That's the case.
Speaker 1:Yeah, I don't think I'm old enough to know that. Remember the Madman era, but yeah, at that time, remembering back to sort of low days, it was the idea. The idea was the be all and end all and it worked. It was a very different era. Remember, we worked on Heineken, stellar, orange, tesco you think about Tesco. Every little held. That was the sort of key brand message, brand positioning, and everything fell from that.
Speaker 1:Whether it's your radio, whether it's your TV out of home On the sideline, you saw what Tesco were doing or Dunhumbi were doing Tesco and understanding the data and the results from that. But in the 90s it was still very much the advertising idea. You had directed digital or growing and yeah, I was getting frustrated by that and I was very keen to join Kreston at the time, whereas more of the insight led communications and I thought it has actually transpired in that way. That's where the whole industry has moved and it's become even more complicated today. And so we'll get onto why launch strat seven, about how data and analytics and insight can drive strategy rather than just the creative idea, which is still incredibly important. If you haven't got a good creative idea and a cut through idea, then you won't capture the imagination of your customer and your consumer. But there's so much more to the marketing mix now than ever before.
Speaker 2:Yeah, and that's very much what I was guessing, where I was going to go with the question in terms of. So I imagine, starting at low, it was heavy focus on the creative idea which, as you say, is really, really important, but probably not much validation in terms of whether that was a good creative idea. Is that fair, or were there just some simple focus groups happening and that type of thing?
Speaker 1:Yeah, I think Frank Low was very much in the early days against focus groups, so it was the agency's job to come up the idea and the client to buy and Exit music. But yeah, he definitely had a personal view of market research and focus groups and ad testing. You know, for example, the original stellar R2R ads 90 second ads would you know they failed. They bombed in the focus groups back then and they were some of the most successful advertising campaigns, absolutely driving sales and building that brand. So, but today is a very different world. You know there's so many more key messages, you've got to get across so many more channels and you've got to understand what is more effective. Is it influence of campaign? Is it a radio campaign? Is it an app? There's just is much more complex.
Speaker 2:While and then moving on to strat 7, or strat 7, bonnemy Finch as it was, I think you got evolved in the first place. So what's the story then?
Speaker 1:So the tooth-bounding agencies of strat 7. So research boards and bonnemy Finch. I had tried to convince them to join me when I was running Creston and there were still quite young companies and they were like no, you know, we we want to make sure we achieve what we want to is an independent agency before we join a join a larger group. But after we sold Creston and delisted it off the stock market, I then took on for a couple of years of a portfolio of non-exec roles and I was non-exec chair of Bonnemy Finch and advising research boards. Because I got back in contact with them. I always thought they were great business leaders. I like that, the founders and the leadership team.
Speaker 1:So it was then working with those companies and Seeing what their future needs were. For example, research boards. They were doing a lot of customer consumer data collection. They needed the analytics capabilities. I introduced them to Bonnemy Finch. Bonnemy Finch Could provide that and what Bonnemy Finch needed was more that advisory, advisory brand strategy, because a lot of clients like Thank you very much, that's a great segmentation, but what do I do with it? How do I put it at the heart of my customer engagement strategy, for example? So they had needs as well, and the and so to really good agencies. They needed associated sort of complimentary skill sets right around them.
Speaker 1:The market as a whole is changing in terms of the customer data. Platforms like portraits, ultras and dahlia Were grown and clients like, okay, well, now another dashboard, what do I do there? How do I interpret it? How do I put that at the heart of my business growth strategy? So, as a team, we thought it's a real opportunity to grow a group that has three core areas that data collection and that enrichment and analytics, the strategic insight and the advisory services as well. And and that's where I said, okay, well, if we're going to do this, we need to, you know, create a new group. They were already competing against even McKinsey, but the Ipsos, the Cantars of the world brand strategy units. I said, if we're gonna grow a new group, we've got to go and raise money. And that's when we raised money from private embassy, from Horizon, cacti or who'd been a really good investor, and we launched in 2019. So it's yeah, we're coming up to five years old now. It's been a hell of a journey and yeah, please, what we've achieved so far.
Speaker 2:One of the things I would double click on, though, is you. You raised advisory. Now I know that's been an area that is some ways has been quite controversial within the market research sector, in that a lot of good Agencies are providing advisory services but, to your point, around business model, haven't been able to charge for it in the way in which a McKinsey or a Bain would be. Not necessarily because a brand name, even though that comes into play but just because that's not the way it it's set up. But you pay a cost per interview, or you know, a thousand person survey is has a certain cost associated with it, and the advisory work is basically seen to be bundled in. Have you managed to break away from that without giving away anything that's confidential around how the businesses operate?
Speaker 1:I think it's a very fair observation. I think there's a lot of very, very smart, very strategic insight agencies, but they are insight agencies and they start with that and then they try and extend into the advisory services. You know, brian, strategy, and You're right that their fee structure is very often about okay, almost in its simplest term, okay, we're gonna ask a thousand people and we'll take that cost and double it, and it's an insight project. Where is the brand strategy? What advice comes in a very different direction. You know what is the business challenge, you know what. You know what are the objectives that we want to create and what tools are we then going to use?
Speaker 1:Are we gonna we may not use An insight. We may go and use something completely different way, may use the Insight or data that the client was already got. So we run going to our own primary research. So it's a very different perspective, and how we're gonna work with my and therefore the how we charge, is almost on a FTE, on a fee basis. So you know how team is made up of ex consultants from the likes of the PWC's and Mackenzie's Ex clients as well, so not so much made up from people who have been in the insight agency. So there is a different, there is a nuance, and so we do treat it as a difference of the structure to our normal market research insight agencies.
Speaker 2:Gotcha, and is that more of a strat seven positioning, as in you will go in and say you'll pitch our strat seven, say, for a new client, and then you'll try to discern the business issue led by the consultants, and then within the strat seven group You've got a range of tools. Is that how you'd approach it?
Speaker 1:We do. We do it both ways. So, for example, on research boards, are very strong on insight communities. Now they are more solution focus. You know, if the client wants an insight community, then research boards that's what they do, that's what they deliver.
Speaker 1:We've had One client, very large financial institution. They're like we have we want to become more customer centric. How do we do that? How do we put customer insight at the heart of our organization? And that type of brief, which is a bit more Nebulas in the way, is a bigger business change. That would then go into our advisory team and they will start to work with the client and it could be a Internal organizational recommendation.
Speaker 1:You know you've got to change how you are structured internally. We've had some clients, again, a very large retailer that has always been product led, you know, led by their designers here's a new paper and chairs and then the self you know the retail like what, where did this come from? Who we selling this to? And they went through from a very large Development being product led to customer led. And we help them in their internal real organization, putting inside the heart of their organization rather than the designer of the heart of their organization. So big business challenges like that would go into our advisory team. When it's much more of a solution-focused brief like a Insight community or an analytics capability or an unstructured data, social media analysis, that will then go into one of the more specialist agencies within the group. So it really explains what the business, the client, challenges.
Speaker 2:Gotcha, and that makes a lot of sense too. So do you actually have a centralized advisory group? Do you that just does that, or is that drawn from? Well, how does that work? Is that drawn from the agencies, or is it an independent group that floats?
Speaker 1:It is well not independent, but it is a separate team that we've. That has been more of an organic growth over the life of Strat7. So that wasn't through an acquisition. That is a team that was started by an ex-client guy called Martin Hornqvist in Stockholm who had been at Electrolux, been at Ikea and Brio, so he brought that client perspective, so he launched things no longer with us now, but he launched it and so over the years it's been growing and so yet they have a different perspective and a different outlook than our insight agencies. They work very, very closely because for them, going to a client, so okay, you want to become more customer centric, this is our audit tool and if a client says okay, we'll have it and then make it happen. We have from the insight communities they're brand tracking, the segmentation, the hyper segmentation. You know conjoin. We've got all the capabilities, all the tools in the tool set to then deliver against that overall business strategy. Chris.
Speaker 2:Got you, and I assume that's also helped you start to move away from the traditional agency charging model that we discussed in the past, because you have a group of consultants who are recognized as consultants and they're charging structure and their value is detached from kind of like the old cost plus model almost that you were describing before.
Speaker 1:Yeah, we parts of our business still have that old traditional cost plus. But you know we're doing. We're just pitching for a very large innovation program for a consumer healthcare brand and that is a mixture between our advisory team and insight you know strategic insight agency, because in that case, okay, well, this is how you do that sort of life space demand space analysis, but then this is how you actually turn that into you know innovation program as well. So you've got both sides of the insight and then the advisory. That is a straightforward, people-based being project project. So it's almost on a time time only because there won't be any materials as a as a consultancy project. We have other parts of the group, like research policy and their community insight, but that is a mixture of software license, community management license and then ad hoc project fees on top. Again, that's more on a time basis, those ad hoc. So we're pretty variable, if you like, in terms of how we charge you for our time to the clients, depending upon the project.
Speaker 2:Yeah, I mean it's great to hear that you've managed to do it. So, Barry, I should properly dive in and we've touched on the likes of research boards but get a better understanding of the group as well, in terms of which agencies you have as part of the group and how they specialize.
Speaker 1:Yeah, okay. Well, within the group we've got, we've got strat-semin advisory, the book we've been talking about. We have two insight agencies, one called Jigsaw and one called Insight. Jigsaw is much more on human understanding, behavioral science, area of the market, research, world, and then Insight with a C, much more on the strategic insight. You know what's the business challenge and responding to that. So those two agencies are a bit more the generalist, trusted advisor. For example, jigsaw been working with American Express for almost 25 years, so long, long, deep relationships. And now other agencies are more specialist agencies, so, like research boards, very specialist on the community insight. That is their focus. Bonnie Finch, specialist in analytics, ai, so that's what they do. And then crowd DNA, specialist in cultural and trend insight. So each agency has a very unique skill set and they all work very complementary together.
Speaker 1:I've mentioned the financial services clients of ours. We just want another big project across Europe for them. It's a hybrid segmentation. We've got the data collection beam done by research boards and the community. We've got the analytics being worked on by Bonnie Finch. We've got the advisory team making sure the segmentation has been has a whole activation strategy behind it. They confront it as well and insight working on it. So for the client will just work with strat7 advisory. But they know we've got these specialists and they're all connected and work well together to the benefit of the client. So those are the agencies and skill sets within the group. We've got teams from Sydney all the way through to San Fran, so we're currently about 400 people. We've got good global coverage and the teams work well together because they recognize the complementary skill sets that they all have with each other To what extent do you have shared services across the group?
Speaker 2:So, for instance, is marketing or possibly more controversial, even business development of those types of areas shared?
Speaker 1:So we've got a central marketing team and they support the agencies and the agencies have got some marketing support in their own units as well. On the business support, we have been investing in our advisory offer because then that will, when they win a piece of work, typically that will then involve another agency within the groups and in some way that's our central business development team, because they will always then end up working with the rest of the group, so it's almost two to one. Whatever one pound for the advisory team, there'll be one pound of work for somewhere else in the group. So that's been working well. Other than that, the business development will be in the agencies itself. But then we have, like, probably every fortnight, the individuals from each agency is coming together.
Speaker 1:So they know, right, what are you pitching for? Actually, I've got this opportunity on this client. Can you come with me to that client? And then also Peter Neal, who was managing director of Insight, is now taking on a group strategy role and he's looking across our top 20 clients and where we can help grow the number of services we're selling into those clients as well. So, spending time with clients, what are your needs? What else can we be doing for you as well. So it's pretty multifaceted. So agencies responsible for their new business, we have the advisory team winning business across the whole group and then that central resource and piece are looking at our key clients and how we grow those as well.
Speaker 2:And then, without getting too much into the week, how do you incentivize the different agencies financially and that obviously, everyone is gonna be paid a salary? I imagine there's some form of bonus structure. We can get onto equity at a moment in terms of how you pull together a group, but is the incentive structure based on the performance of your agency and the group as a whole? Is it some form of combination?
Speaker 1:For the senior management team it would be well. We're all share, most of us are pretty well all of us share holders in the group. So there's that incentive and for the annual incentives it's on the group performance and then below that then it will be into each agency for their own individual performance. But we probably for some of the agencies they're actually combined together so to encourage that movement of people and movement of clients across the different services as well. And then it's obviously it's not just the financial side, it's the culture and the training programs that go across the group and they very often they'll know they'll have more chance of winning in the business a piece of work if they take one of the other agency skillsets as well. So people are working well together from that space. It's not just the financial incentives driving that behavior.
Speaker 2:Well, that's exactly what I was about to get onto, because we talked a lot about the structure but almost the softer, people-based elements of it. So, Barry, I was going to tip you to get a bit of advice, because I'm not going to name them, but I am aware of a few, let's say, unhappy integrations within the space where a bigger company is bought another company or, as you say, it's a P-Bax buy and build. Generally, from my experience, you've got some very talented but also strong-willed founders around these agencies. So how do you pull everybody together and make sure everybody's playing nicely and kind of co-hearing to the whole?
Speaker 1:I mean the size we are, it's definitely manageable. But I don't know. I've learned a lot how not to do things in the larger groups. I mean, I remember the early days in the larger groups. It was financial engineering in a way. You know, look at the WPPs of the world. It was just buy a company, your earnings go up, your share. If your P is the same, your share price goes up. It was just driven by that. No one really focused on the balance sheet. They felt it was being built up and so, yeah, I think a lot of the strategy was wrong for many of the bigger buy and build groups.
Speaker 1:I'm not saying we've got it right, but I think the steps we go through is it a complementary fit? We're looking at a company, is it a capability that we need and want? Is it a gap in our offer? I think the second step is the chemistry and the culture, because at the end of the day, people don't like each other or trust each other and they're not going to share their client and they're not going to work that. So chemistry and culture is really, really key. And then we start to go through again the financials of that business. But we are getting much better in terms of when we talk to a company to join us. You know, being very upfront, almost right, even before they joined the group, ie as part of the commercial negotiation.
Speaker 1:This will be the integration plan. So we were delighted to have RainMakers join us last April, but it was always very open and we put it in the announcement that they will be integrating into Insight and that will be happening in the next three months. So years of standalone unit, but they moved into our building after three months, so getting to know each other, and it was a very clear plan of how they were going to integrate into Insight, into the HR system, into the tech system, the IT system In the very early days. How we're going to go to clients, like one of their largest clients, metlife. We went into talk to clients as Strike7 to talk about our capabilities and culture and trends in Insight, in analytics, in AI and so rapidly more services around that client. So the integration plan needs to be decided in the green up front very, very early as well.
Speaker 2:So it sounds like you do have a template in terms of how you'd evaluate a business you go. Do we need the capability? Is it going to be a cultural fit? What's the integration plan going to be? And then, is there something of a playbook you'd look at for the first 12 to 18 months?
Speaker 1:I'll answer that in a moment. I mean, one of the things we've been going through as a group is our own integration, our own transformation from getting to one operating model to support the agency offers. And what I mean by that is that rolling out one accounting system which we're using Business Central, microsoft. Rolling out one CRM system on HubSpot. Rolling out one payroll HR system as well we're doing that as well and then also doing what you call the legal high above. So we don't have multiple legal entities in each country. So in each country we strike 7 limited is the legal entity. In the UK strikes an ink the one legal entity. So then that gets away from these multiple P&Ls as well. And then we've got for the agency heads what they're responsible for is their offer, their clients and their team, and then behind the scenes one finance team, one IT team, one tech development team, sales marks team, et cetera, and we have like one strike 7 services and solutions supporting those agencies, agency offers. So if to your question, if a agency joined us, we would go through right.
Speaker 1:This is the 12, maybe even 18 month program of how we're going to integrate you into that model, how we will fold your limited company in how we're going to go to clients with a wraparound or the whole, explaining strike 7, from the advisory to the specialist agencies such as Bonny Bench or Crowd DNA, what we're doing in cultural trend insight for Microsoft, for MetLife, for all the multiple clients that they work on.
Speaker 1:So we'll have a and we're getting better at this. So Q1 will be doing this, q2 will be doing this, q3 will be doing this, and it doesn't need to start at the end of the now. It should be starting quite quickly in order to maximize the value for those companies themselves, because we want them to grow, we want them to be a success, because then the group is a success. So delighted that research boards have probably almost tripled in size for our DNA. It's almost tripled in size since they've been part of Q3. So how can we help support that capability to grow? It's probably, and people within it is probably, the most important part of the program.
Speaker 2:Yeah, and, as you say, having created the structure around finance, legal entities and so on and so on, to some extent, that predicates the integration program it gives you. It's almost non-negotiable. In a good way, you'd be able to go this is the way it works. This is what will happen in terms of a lot of the nitty-gritty.
Speaker 1:It's interesting now, after leading a PLC, a public company and our private equity company. It's funny that with the private equity people always think private equity is actually short-term, squeezing margin and actually we've had a much longer term view of when we want Strike 7 to be in four, five years. How are we growing the, the buy and the build, or buy bits, almost the easy bits, the build bits the really difficult part. How are we building one company, one service offer, sharing clients, sharing talent across the team, building out that culture of the group culture of the agencies? Many PLCs it's been 20 years on public company boards.
Speaker 1:Now very few analysts ask about have you hived up your legal entities? Have you rolled up one accounting system? Have you got one operating system? It's more about what's your cash flow? How are you driving your earnings? What's organic in your criticism growth? But you end up and I was with a large company just recently and we've got so many systems, so many legal entities it's a nightmare to manage and we are trying to get rid of that now. That's been interesting being part of a private entity ownership. They're all about how we grow a business for the future.
Speaker 2:And Baron, that's a very nice segue, because I was going to ask about private equity and, if you wouldn't mind giving just a little bit of a primer, it doesn't have to be the details of Strat7, but about how that works. I mean, it occurred to me. I've had a couple of people have described the venture capital process as part of this, and also M&A and how that works, but nobody's explained how PE works.
Speaker 1:You should be asking the PE man, not me. But anyway, my simplistic view of it is that they are an investor and their money comes from the same source, the pension fund. So if you invest in a stock market, quite often maybe I had a call with a literature countries I won't say which one. They're sovereign funds and they'll be investing in pension funds like Artimus that invest in public companies, or they'll be investing in private entity as well, and from private entity they'll raise the funds and they want to deploy that money. So they'll invest in something like Strat7, I'll go to them. So I want to create a new insight analytics group. I want to get it.
Speaker 1:I'm just using round numbers 10 million EBITDA that would be driven half by organic growth and half by acquisition. So I need to raise to build this, say, 20 million pounds. So they'll say, okay, well, we can put in 10 million pounds and we're going to raise 10 million pounds from bank. So you've got bank debt in as well as private entity money. But it is about them. How do you make? If you're doing acquisitions? How are you getting synergies from them in terms of top line and in the cost? So how are you getting a return on that original 20 million that's been invested. So they're like any other investor, like a pension fund. They need a two and a half time return on their money. So if they put 10 million in they want to get 25 million, 25 million back. So that's why they're very focused on how we're growing a business that someone else will be interested in in five, six, seven years time Not sure I've explained that very well, but it's quite new and sort of conversation.
Speaker 2:I think you explained it really well. Actually, that was an almost perfect description. I guess the part that I might add into it is that because they borrowed some of the money from the bank. There does tend to be correct me if I'm wrong there's also a focus on businesses that have good cash flow and so hence can service the debt from the bank. Is that fair as well?
Speaker 1:Absolutely they like recurring, repeat type businesses. With Stratsetter, as I said before, in the insight communities you've got software licensing come and it's typically in the works of two to three year contract. You know brand tractors, they are ongoing programs. You know 25 years working in American Express. You know the level of income that, even though a lot of its ad hoc project work, you know the strength of the relationship and that repeat nature of the businesses coming through. So absolutely they prefer that type of business.
Speaker 1:But to be honest, there's no difference from when I was running a PLC and we were doing acquisitions. I would have to go and do a fundraise. I would go to Barclay so our bank and I would borrow three times EBITDA from Barclays. Then I'll go to our investors who are like Fidelity, artemis, all the usual names, and I'll do a fundraise from there. So I'll take half the money from shareholders, issue new shares to get those, to get the money from a Fidelity and get money from Barclays. Now I go to Horizon Capital and I go to HSBC. So it's not that much different. I've just got one investor here rather than multiple pension funds that I would need to go and see if I was on the public.
Speaker 2:Don't you? And what sort of timeline would most P funds be looking at to get their 2.5x hopefully more, but to get their investment back?
Speaker 1:I think they're all different. They're all different. You've got people like LDC that's backed by Lloyd's Bank. They have open-ended funds, so they don't have 10-year funds as I understand it, but then lots of private equity funds. They'll raise money and have a 10-year fund and quite often if you're getting close to the end of that 10-year fund they will want to sell you to get the next and best on board so they can close that fund down. So I think most like to hold anywhere between 5 to 7 years to get the return. To be frank, it's been a pretty lot of turmoil over the last few years between COVID and high inflation and multiple prime ministers we've had. We've got two elections coming up this year, very sadly, a war in Ukraine and our Gaza as well. It's been a quite volatile time. So I think most P investors are holding a bit longer than they may have wanted to.
Speaker 2:Yes, to totally agree in terms of the volatile situation, but that seems a very fair characterization of the duration. I wanted to move on but also just touch on one other thing of the PE world and strat 7. So what is then when you're acquiring companies? How does that work financially? Do you look to buy 100% of the business or do you look to buy? I'm sure you buy controlling interest if you don't buy 100%, but is some scenarios, might you buy I don't know 51%.
Speaker 1:So far for strat 7, we've only acquired 100%. In my last group, plc, we had minority states. We had 51% states. Then we'd option call and put option agreements to buy out 100%. And I know quite a lot of private entity that can happily hold a 40% state or majority state, 60% state. Each PE fund has a different view of things as we for strat 7, I think we're far more focused on owning 100% and that's not just being full control, because you never have full control at all. It's the agency heads in the party control there. But it then just allows the integration quicker. And if we're going to build a group of really integrating that insight, analytics and putting the client at the heart of our offer and really looking after the people, then it's just much easier and it allows us to act as one group rather than imagine if you had two, three agencies that were 20% owned or 51% owned. It just starts to change the dynamic.
Speaker 2:But within the structure of the deals. I mean you mentioned that most of the senior execs or the agency heads are also shareholders in strat 7. So you create that as part of the structure of the deal.
Speaker 1:Yes, yeah, it's the sort of typical structure where it'll be a mixture of predominantly cash, could be 70% cash and then preference shares and ordinary shares in strat 7 as well. So for the remaining 20, 30%, we're fairly flexible and pragmatic, depending on what the shareholders requirements are, what size are, what the second tier management is. But it also allows the seller to have almost two bites of the cherry to have their own earn out, and we will help drive and maximize that earn out as much as possible. But then they will have shares in the group and when we look for our next investor they'll get return on that as well.
Speaker 2:Gotcha. So if you had a wish list, you were able to say this is what I'm looking for. An ideal company would look like this not necessarily in terms of financials, even though you could give some characteristics there if you want. So what are you looking for in terms of types of businesses you'd add into the group?
Speaker 1:Well, we need to be bigger in the US. We've got about 40% of our clients based in the US and we've only got about 10% of our headcount there. We're working very much to sort of the global project level, whereas I think there's so much more in the US domestic budgets we should be going after. So having a very good US almost full service insight agency will be incredibly useful. We've got great teams over there, but we don't have the scale. We're not big enough at the moment.
Speaker 1:There's some category areas, both cool areas like CPG or FMTG. I would like to grow. We've got some really strong relationships like Starbucks and Nestle, but we're doing very little in the Unilever or the PNG or the Mont-Ballet. So I think there's a lot more we can do in that space. Farmer we're growing nicely in Farmer, but we're still a bit too small in that space. We're doing fantastic work with Sinovhy and Gilead and AstraZeneca, but again, I'd like to give us a bit more scale from our acquisition perspective. And there's other areas like UX research. We don't do so much in, so product testing, century testing would be an interesting area. Package testing would be interesting area. So some of the niche financial services areas like to acquire in as well. So there's quite a few categories of capability, skill, sex and geographic sort of gaps in their offer that I want to keep growing.
Speaker 1:And then it comes down to having the chemistry in the culture. I wanted to work with the team. I'm the ambition to build a new exciting group in this industry. I get a bit frustrated. I think the insight industry should be doing so much more. It's a huge industry and has such an impact on successful businesses. I think it's become a bit more obsessed over the last few years on about how quick and cheap we can collect and buy data. Well, so what? What are you going to do with it? How are you going to interpret it? How are you going to put it at the heart of business growth? And I think there's much more we can, as an industry, work with the clients in that space. So again, building our advisory business strategy, getting into that white space of management, concerns that sort of gap between insight agencies and management consultancies. So there's that area as well. So the chemistry, the culture, the ambition and then obviously the financials good, healthy growth, good margin, ebitda are well managed and with good enterprise clients as well.
Speaker 2:How does the AI of it play into this as well? Is that just central to a lot of what the businesses are doing, or would that be an error where you but an error where you'd want to buy in certain capabilities?
Speaker 1:No, because we've got it in-house. I mean bottom of the fence. We've been using AI algorithms for the last 15 years and they're in our own, let's say, software. I mean we've been doubling down on it again more recently. I think we've got really intriguing skills set coming together on the strike seven AI. So, for example, we built that culture of scale. So it's a bit of a mixture of crowd DNA and bottom of the fence, but also with our central engineering, infrastructure, data data and sort of DP team as well. So we really got a different perspective and it's making money, whereas the amount of unstructured social media, ai driven analytics businesses I've seen that all been heraging cash.
Speaker 1:It's quite often they've been built with a shiny new tool. They don't have the client relationship and they don't know what the client challenge is and AI is yeah, it's important. You can talk about synthetic respondents. We're building large language models where we've got 30,000 as the customers. On our community insight, we've been running that for years now.
Speaker 1:There's so much untact data that needs to be analyzed. How we can build our own track, gbt overlaying, you know, taking that as the data into the LLN and using track. We can do that and we're investing in building in that. So I think it is. You know. It's creating new exciting ways to help clients get more value from the data they already have. It does allow us to understand clients issues a hell of a lot quicker when we can put their data into our own LLNs to analyze it. But the moment I don't. Every AI backed business I've looked at is not doing anything that we're not doing and or it's losing money. So at the end of the day, our valuation comes from EBITDA, so we need to make sure we are still profitable and growing.
Speaker 2:Yeah, it seems very sensible and I agree with me one of the businesses I work with. I mean they've been doing. They're built with machine learning at the outset. It's not a new thing for them and I know one can debate differences between machine learning and AI, whether it's generative or so and so on. But I think chat GBT caught everybody's imagination last year. But a lot of businesses have been down this track for a long time already.
Speaker 1:Yeah, I mean it's super important and it will be here to stay and it will keep reinventing this industry and other industries. I think the creative industry is going to be, you know, when you're starting to add, you know, generative AI onto content into problematic media buying. I mean that's going to sort of change and you've got sort of the big data platforms as well. That's going to be really interesting combination. That's why Strike 7, one of the reasons on the Strike 7, you know, we, when the position of it is around from data to strategy, and that's almost quite enough to be investing in to start to get into brand marketing execution, campaign development, that's a whole nother ball game and it's going to get more and more complicated and I think AI will be impacting the sort of the advertising campaign world, marketing world, more as much, if not more than the insight world.
Speaker 2:Yeah, I mean yeah, and anywhere where you're combining large scale pattern recognition with also the ability to generate content, or, in this case, creative, you can see a major, major impact. Very unconscious of time, so I might just ask you a couple of final questions, of kind of quick-fired type questions, if that's all right, one of which is where you think Strike 7 will be in the future, ideally, where would you be in five years time? And then second one is just any kind of favorite media like books, movies, music, that type of thing.
Speaker 1:Okay, I'll start with that one. I'm actually getting back into buying books. You know, buying hardcover books, and just I listened to the rest of the politics. I just bought Rory's books. I've been reading Rory Stewart's books, I've been reading that. Now I just, I don't know, I don't enjoy reading on Kindles and Fishtalk anymore.
Speaker 2:It's so funny. You should say that because I have a hard copy of it too, which I'm reading at the moment as well.
Speaker 1:So I go back old fashioned reading books on the train. Where do I want Strike 7 to be in five years time? Not stronger in the US, doing great work with great clients with great people. Being a place where great talent wants to come and learn and do interesting and innovative strategic work for our clients.
Speaker 2:Right, that's a fantastic aspiration. I'm sure you'll get there. I thank so much. It's been a pleasure talking to you, as always, and a great interview, thank you very much, Henry.
Speaker 2:Well, I hope you enjoyed listening to the conversation with Barry. As mentioned at the beginning, I think Strike 7 are a really interesting and well thought through group in terms of what they're trying to achieve, how they're going about it in terms of business model and agency integration Any agencies who are listening. I think you'd be a fit. I'm sure you can reach out to Barry on LinkedIn or similar, or I'm happy to facilitate an introduction if you want to reach out to me. Thanks again to Barry for the interview, to Insight Platforms for their continued support and to you for listening. I'll be back in the next few weeks with great interviewees on a couple of the industry's hot topics Exit respondents and automated AI-driven service platforms. See you next time.
