For three generations – four if you count the convenience store James Harriett opened to start it all –
Harriett’s Energy Solutions has been serving its customers in the Medford, N.J. area. The quality and reliability of that service have remained constant during that time. Not so the product and service offerings, which have been added and maintained to promote diversification.
In 1929 George W. Harriett, after returning from his service in World War I, took over the family convenience store and expanded it into Harriett's Oil Service. At the time it included a garage to repair trucks and cars, and a gas station. He added kerosene delivery with a truck fitted with a 550-gallon tank and 5-gallon buckets to fill customers’ tanks. This readily expanded into heating oil deliveries as the shift began around that time for those that could afford it away from coal heat.
The business moved into the next generation when G. Robert “Bob” Harriett and his brother-in-law Leonard Dickson took over in 1952. Dickson had served in the Navy in World War II and Harriett served in the Air Force during the Korean War. Dickson would retire in 1966 and Harriett drove the operations until his unexpected death in 1989. His tenure marked a dynamic phase for the enterprise.
“The company had delivered oil since the 1930s, but that side of the business really took off in the 1960s when my father really began to grow the business,” said Bob Harriett, Jr., the company’s current president. “He was fresh and new and the area was growing and he had a lot of ambition.”
Part of that expansion involved moving from using outside contractors for the heating appliance installation and service to taking that in-house.
The First Push for Diversification
Bob Harriett Sr. also began the push for diversification, though as the company history to this point shows the previous generations had been more than open to new opportunities as they became apparent such as moving into heating oil sales.
“With the oil embargo, the 1970s were tough and my father was looking for ways to diversify for revenue purposes,” said Harriett. “We got into air-conditioning in the early 1970s, and natural gas service and installation and water conditioning equipment sales and installations in the late 1970s. We were selling woodstoves and kerosene heaters for a short period, though, they never really took off. Everybody during those days was trying whatever they could.”
The first less traditional expansion still worked hand in hand with the company’s core competency. “My father was pretty progressive for his day,” said Harriett. “He recognized that air-conditioning was moving from the luxury into the more mainstream. He hired a subcontractor consultant to help get us started with air-conditioning who came in and trained our personnel and got us going.”
The move into natural gas equipment sales and service also worked well with the existing HVAC operations. “We've been doing natural gas conversions and service since the 1970s,” Harriett said. “You can be at a conference today and hear guys just now talking about starting to get into it, which is amazing to me because they are so late. But it's still a good idea for them. It's been very profitable for us as another product line.”
The business has developed to the point where Harriett’s has been on the local gas utilities’ preferred contractor lists for many years. “We just hope to get an opportunity to talk to people about their options before they make up their mind,” said Harriett. “We don't always get that opportunity, and we don't always get the opportunity to do the job, but if they are going to do something, we would like to do it for them.”
Harriett noted that from a capital standpoint little was required other than a manometer, the existing technicians and the specific knowledge base, which did not represent a major hurdle. Nor does Harriett see any form of ethical hurdle for a heating oil dealer with that side of the business.
“It's not just about natural gas or oil – they are not good guys and bad guys – and there are advantages and disadvantages with each,” he said. “Obviously, oil is close to our heart, but if people didn't realize it before now, they are scrambling to figure out what they can do. And I'll be straight; we're not knocking it dead here because our business model is still too dependent upon the oil gallons, which is why we've been so active with our diversifications.”
The move into providing household water treatment solutions (water softening, filtration, etc.) was more involved than air conditioning or natural gas, though even with that great use was made of existing resources. Bob Harriett Sr. thoroughly researched the industry and became aligned with a manufacturer Hague Quality Water International based out of Ohio that helped the company overcome the initial hurdles. “They really supported our whole effort with the product line and the training,” said Harriett Jr. “We utilized our existing techs and office staff and we hired a new sales person.”
The Third Generation Takes Over
Bob Harriett Sr. passed away unexpectedly in 1989, which ushered in the third generation with Robert J. Harriett Jr. as president; his sister Ann Harriett as treasurer, and sister Bonnie Harriett-Crosby as human relations manager. Her husband Jack Crosby serves as vice-president. With some struggles during the 1990s, the new team decided to conduct a full operational reevaluation using Telos, the University of Pennsylvania’s Wharton School of Business’ small business consultancy. From that, in 2000 they established a board of directors that included the current family management team; Wharton consultant William Alexander whose family operated a large construction company but is now retired; and Bob Hedden, president of Vermont-based Oilheat Associates. Harriett credits that with much of the company’s later success. “It's easy to tell your brother-in-law or sister that you didn't get something done, but if you have a board of directors it gets harder,” he said. “There is not a doubt in my mind that we wouldn't still be in business if we had not done that because it did create accountability.”
They also began a more aggressive approach to the company’s business model with diversification figuring prominently.
In 2006 the company made an acquisition of a competitor that was approximately 35 percent its size. Harriett’s had long maintained a motor fuels supply business utilizing its bulk plant and a tanker truck. The acquired operation had additional motor fuels business, which allowed more critical mass in that area of operations. “We service roughly 60 sites,” said Harriett. “We’re not a big motor fuels dealer, but we take advantage of the bulk plant and the opportunities. We put a lot of money into our bulk plant in the last decade, and that put us into a position to be more competitive because a lot of bulk plants were being shut down at that time. We took care of our compliance issues and can now handle 200,000 gallons of total storage for all products.”
The water treatment operations also went through an evolution. It started out in the 1970s as an integrated unit using two existing technicians. When the business grew, it became a separate department. Then in 2009 it was re-integrated, but with one dedicated and one split-time water technician. Business slowed during the recession as water treatment can be seen as more of a luxury item, but it still serves a valuable niche. “We're smaller than we need to be in the water conditioning and it's something we need to expand,” said Harriett. “It's been accused of being the fair-haired stepchild, but it's always been a complementary product line and it's definitely been a cross-selling opportunity going both ways.”
Next Rounds of Diversification
The acquisition in 2006 consumed considerable time and effort and then came the run up in oil prices followed by the impact of the recession. With flashbacks to the turmoil of the 1970s, Harriet went looking for advice, options and opportunities.
“I went to a Fuel Merchants Association of New Jersey strategic planning conference approximately 4 years ago that focused on diversification,” said Harriett. “The concept was that you have these customers that trust you and you really need to do more services for them that they need and that they can’t do themselves. It can be anything. What I took out of that is that we wanted to strengthen what we were already doing in areas other than direct oil. I can't say that we embarked on anything immediately following that, but it did give us the direction for the future.”
In the 2009-2010 timeframe, the company became involved in four new services: biofuels, geothermal, plumbing and BPI energy audits.
Adding biofuels has primarily supported brand enhancement. “People want to be green if it doesn't cost them any more – it's funny how that goes,” Harriett said. “I can't tell you we've gotten a lot of business out of it, but it has certainly helped and we rebranded around that decision.” While still having a similar logo, the name was changed from Harriett’s Oil Service to Harriett’s Energy Solutions to reflect both the biofuels and natural gas service.
The company has not become involved with propane yet, but it is under consideration. Harriett noted that while it is more capital intensive the margins are good and right now. The company currently partners with another company to fill out that area.
The geothermal service was a natural extension of the company’s HVAC service and a tie-in to the energy audits. The move to plumbing services offered similar opportunities.
“The plumbing has been a very nice integration for us although we started it at a difficult time,” said Harriett. “It's taken a while to get going but it is a natural addition particularly with the water conditioning. So we're definitely getting some synergies there. If people need one then they often need the other so it's worked out well.”
The most challenging has been the Building Performance Institute, Inc. certified energy audits. “The audits have worked out really well, but the frustrating thing has been the funding,” said Harriett. “And it has been inconsistent as well with the program changes and the various requirements. Honestly, the paperwork side of thing can be very onerous. You can't be half in this program half-way because it’s unforgiving. So a lot of contractors that started into this never stayed with it. I'm happy to say we have three people certified – a technician and two salespeople – and we have really tried to dedicate ourselves to the BPI credo of looking at the whole house and not just the heater.”
For efficiency solutions, Harriett’s offers higher efficiency Energy Star appliances and light weatherization such as spray foam insulation. For more advanced weatherization, the company has partnered with BPI certified ceiling and insulation contractors. “They work under our contract for the job and works out great because that's their specialty. And the whole heating and air-conditioning side is ours along with the audit and the test out. Some companies have gone the full route and at some point that can be a diversification for us. But right now, we're just trying to strengthen our core competencies.”
Part of Harriett’s success with diversification – even when launching so many new business ventures in such a short period of time – has been sticking close to core competencies. New business units tie into the existing customer base as earlier identified, start out limited in scope and involve partners outside of core competencies, and have the opportunity to ramp up down the line. Even with the BPI energy audits, which required more dedication, the commitment is not one that would have broke the company had it failed to pan out. That carries over into the company’s current diversification plans.
“We have two new diversifications under consideration for this year,” Harriett said. “We are looking at home monitoring services and we made the decision we want to do bathroom remodeling. For the bathroom remodeling, we have a contractor to do the carpentry side. We are looking at light remodeling without a significant amount of reconstruction centered on the plumbing and any heating and air-conditioning work.”
The home monitoring will be a multi-stage addition. The first stage will be to move into heating equipment, tank and water leak monitoring as a potential package for somewhere around $400 per year. After that stage is up and running, security would follow that could involve cameras. “This market is exploding,” said Harriett. “You have all kinds of companies jumping into it. We have a list of loyal customers that rely on us, it's going to be our service, and we have keys to a lot of our customers’ homes already, so it's a natural fit.”
Harriett’s has truly taken the diversification mantra to heart – and made it work. What is the key to the company’s success? “Many of the diversifications we've done or looked at have been able to be accomplished with virtually no capital,” said Harriett. ”They didn't all take a lot of time individually, but they cumulatively required a lot of effort. But, we've seen the handwriting on the wall and my father – when he went in the water conditioning back in the 1970s – saw that he couldn't just rely on the heating oil and that is true today.”