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In mid-1982, Malec dipped into the venture capital market, with the idea of setting the stage for a public offering. He signed on with Hambrecht & Quist Inc., a leading underwriter of high-tech companies during the blazing market for initial public offerings in 1982 and '83. "The very fact that Malec went with H&Q was all part of the gestalt of the company," says Honomichl. "It implied that the company was on the cutting edge."

IRI sold around 3% of the company's stock to H&Q, which later invited Greylock Investors & Co. into the deal. H&Q senior vice-president George G. Montgomery Jr. and Greylock president Henry F. McCance were named to the board, which began mapping out a strategy to take the compay public in the spring of 1983. Their timing could not have been better: The market was red-hot for technology-based initial public offerings. Malec and Gian Fulgoni, the chief operating officer hired in 1981 to manage the business, set off on a grinding eight-day, 10-city road show to explain their company to investors. "The financial community was numb from the endless presentations on hardware, software, disk drives," says Fulgoni. "And suddenly, in we walked, talking about Cheerios and Corn Flakes. It caught people's attention."

It did indeed. The stock, price at $23 a share, skyrocketed to $43 on the first day of the offering, and in August 1983 split 2 for 1. The offering generated $18 million to pay off IRI's long-term debt and finance its expansion. It also made the four partners overnight millionaires: Malec, for example, controlled 21% of the stock at last report -- holdings that by year-end 1984 would have totaled some $45.5 million. And IRI's employees share in the company's good fortunes: 40% of IRI's full-time personnel hold stock options.

In keeping with Malec's philosophy, investment spending remains high for a company of IRI's size. In 1983, net earnings were $3.7 million, yet the company spent around $8 million for four new BehaviorScan markets, and it has had a five-fold increase in its computer capabilities. It has also added drugstores to the BehaviorScan testing in six of the eight markets, a key step in a growth plan that Malec says will take it to the top of the industry. By the end of 1985, IRI plans to have 35,000 panelists, one of the largest samples in the marketing-research business.

For their part, IRI's rivals say they have finished licking their wounds and are ready to respond. This month, Nielsen, now a unit of Dun & Bradstreet Corp., will launch its own electronic test marketing system, ERIM Information Services, in Springfield, Mo., and Sioux Falls, S. Dak. Patterned after BehaviorScan, Nielsen's technology sidesteps the cable systems by installing antennae on test households that allow over-the-air transmission of the commercial cut-ins. That gives Nielsen greater freedom in choosing a sample. The company says it will spend more than $10 million -- the biggest new product investment in its history -- on the research, development, and start-up of ERIM.

Burke Marketing Services, meanwhile, bought AdTel in September 1979, and, since 1980, has begun to substitute scanner data for diary panel information. It is developing its own targetable television device for commercial substitutions. Burke is reported to be experimenting with an in-home scanner that will measure all UPC-coded products, not just those purchased in a supermarket or drugstore. And AGB Research Ltd., a giant British firm, has announced an ambitious plan to use a new type of metering technology in the United States.

Malec is unruffled. IRI has sought to protect its competitive position through the courts -- the company has a patent infringement suit pending against Burke, among other lawsuits -- as well as through continued technological improvement. "It would be naive of anybody to think that we're standing still while they're catching up to where we used to be," he says. "I don't see anybody having a competitive advantage over IRI in these new technologies."

And for all their interest in technology, Malec and Eskin have always believed that ultimately IRI is a service business -- and in a service business, people are more important than machines. The two are thus decentralizing the company as it grows, in an attempt to provide opportunities for employees. Each new division is treated as a profit center. "John has made a conscious effort in the past year to create an entrepreneurial feeling in the different divisions, much in the same way he and his partners had for the company when it was much smaller," says Greylock's McCance.

Sitting in his office, Malec reflects on where the company was and where it is headed. Ultimately, he acknowledges, his rivals may catch up, invent a better black box. "But the competition will shift from a technological advantage to a people advantage. It's there where the game is going to be won or lost."

Losing is not Malec's idea of a good time. Last summer, he skippered his sailboat to a second-place finish in the 333-mile Chicago-to-Mackinac race. "It was one of the closest finishes in history -- 12 seconds," he says, "and we were on the wrong end of it." Telling that tale exasperates him. But he'll be back in the race next year. Malec doesn't like to finish second.

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