Razorfish Wants to Get its Name Out on Broadband

Razorfish Wants to Get its Name Out on Broadband

Razorfish, Inc. (NASDAQ: RAZF) was founded by Jeffrey Dachis and Craig Kanarick in 1994, and has evolved into a Digital Business Service Provider (DBSP). It was Dachis's second creation following "In Your Face Inc.", a self-described 'guerilla marketing events firm'.

Razorfish describes itself as is an international digital communications solutions provider, and goes under the maxim "Everything that can be digital, will be digital'. The company cut its teeth on animated web design in server-push / client-pull in 1995, working for the likes of IBM Personal Computers, AT&T, and CMP Publications. From its beginnings, Dachis saw digital technology as a means to change the way business works, though at the time most online services were largely no more than web catalogs.

Razorfish's intentions were - and are - to lead the digital revolution rather than be led. Its early success gave it the cash and share value to acquire the strategic building blocks it needed to follow its vision. Recently it acquired I-Cube to give it respectability as a systems integrator, and TSDesign (Boston) whose main function is to provide quality assurance to the user web experience.

In Europe, it extended its reach into wireless by acquiring Spray Ventures and recently opened up a wireless laboratory in Helsinki. Its acquisitions in the U.K. of CHBi for broadband and Sunbather for web design in Europe, and Fuel and Tonga for web design capabilities in the media industry have enhanced its capabilities and strengthened its strategic positioning as a complete service provider.

Razorfish has also grown partly organically, but this is the lesser process, and must pull together the many strands it has built through internal organizational processes and infrastructures, something it is presently busily doing. Razorfish management has recognized that in this game, you must aim for the Holy Service Grail - providing end-to-end solutions (EES) to its clients. To do this it has developed procedures and internal infrastructures to share knowledge and integrate its diverse acquisitions.

In April 1999, Razorfish went public with a share offering, raising about $45M to provide fuel for its expansion.
Coming from the creative side of web design, Razorfish holds no particular allegiance to a specific technology vendor - in other words, it is a technology agnostic, which is not an uncommon characteristic of vendors of this genre. The advantages of this approach are that it can in theory better serve its clients by providing the best and most appropriate technologies to specific problems. The downside is that the company must have adequate resources to cover all the technologies it will need. To achieve this, however, means that internal resources - management, corporate knowledge and project management, personnel training, and cross-office fertilization of skill sets - must be efficiently utilized. Razorfish has adopted a number of strategies and developing infrastructures to meet this challenge.

Internal Structure and Culture

In general, as a technology agnostic, Razorfish personnel are divided into functional groups rather than technology areas. This means that the personnel focus on architecture, or design, or technology implementations. People move up in these functions, though often the line between function groups is blurred, enabling at least some to cross between the function groups. In this way, at least some personnel can climb to be Client Partner managers from a variety of backgrounds. A Client Partner is the senior client management interface.

Geographically, Razorfish is divided into two zones: North America and Europe, each with its own managing VP. The two zones are linked through a basic knowledge management and project information system called MOM. MOM allows users on either side of the Atlantic to review current projects and project skill requirements, to plan their agendas and interact with others on the network. MOM is the beginnings of a comprehensive inter-office knowledge management system.

A dedicated high-level executive position currently manned by Bob Lapides (EVP of Global Process, Methodology and Market Transformation.) provides the means to sew management systems together and create a unified international presence. Such issues as technology transfer across offices and efficient utilization of skills for project planning and execution are addressed with office group leaders who create skills communities among the offices. MOM and the skills communities reduce travel and traveling costs.

Razorfish's philosophy is that good technical people are able to deal with many different technologies, learn them quickly, and apply them. Within the organization, mentor programs have been established, often across function lines. The mentor can accept or refuse a request, but generally can take on four or five 'interns'. Apprenticeship style learning means skills are learned through osmosis and on-the-job practice more than by any formal training program. However, Razorfish insists the quality of its people is high, and formal training programs are not necessary.

Culturally, Razorfish is a work-hard / play-hard organization. It is expected that their people deliver quality work, since this is what keeps the customers coming back.

From a personnel point of view, with a growing population currently at about 1360 employees, Razorfish has a billable force of over 900. Of these, roughly 20% (about 180) are strategists ( usually Client Partners), 40% technologists (about 360), and the remaining 40% (another 360 or so) are designers, spread amongst its offices. Some 45% of its skill base - mostly in Europe - are devoted to broadband and wireless solutions such as interactive and enhanced TV, and the skill set includes the physical design (including board level design) and branding of hand held devices. Roughly 25% of the payroll is in support and executive management roles.

Sales & Marketing

Razorfish has a no sales group per se, largely because they are in the happy position of having more incoming work than they can handle. The demand provides Razorfish with the ability to be selective about its clientele as it tries to direct the company into strategic directions. Some of the work is created through responding to RFP's as well as from word-of-mouth references, but most is generated from incoming requests. Business development experts screen new business opportunities as they arrive. When appropriate, these are passed on to a Client Partner.

It is interesting to note that Razorfish claims it responds to few RFP's. This complies with other vendors who have also experienced that demand is high, particularly in the past year or two. DBSPs are becoming more selective with their clients: in a recent survey all DBSPs reported the same phenomenon. The results of this survey will be published at a later date.

Part of the marketing issue Razorfish faces is a branding issue. I-Cube clients, for example, have to re-adapt to the new order since the sales approach is quite different. Razorfish has switched from I-Cube Solution Managers to Client Partners; the difference is that the Client Partners are more business oriented than technical, often with MBA's in their background rather than MS's, a move designed to drive Razorfish in the direction of selling front-end strategic services, particularly in selected vertical markets.

Engagement Process

It is the Client Partners who provide the technical marketing skills needed at client presentations and to close deals. The presentations to clients are tailored to the client, and are not canned presentations. Razorfish believes this gives it the edge over its competitors, as evidenced by its high hit rate (85%). This is well above average for the industry. Other personnel who will actually be doing the work on the project may also make an appropriate appearance.

The Client Partner oversees the engagement with the client. Under the Client Partner is the project manager who is in charge of delivering the goods. Deeper down, account developers keep track of internal resource time keeping and internal workbooks to update the project progress.

The stated long term aim of the Client Partners is to focus their efforts in the development of strategic business consulting in the given digital environment, and not be narrowed by either a vertical industry focus or technical capabilities: in a sense they view the Client's business given the context of the digital medium. The Client Partner oversees client relations throughout the engagement. Hence if Razorfish can better get in early in the game, it stands a chance at providing full End-to-End Services (EES).

Pricing Policy

Razorfish does both T&M (time and materials) and fixed price contracts. In the latter, Razorfish prefers very discrete chunks of work, well planned, before it is willing to risk fixed price.

A limited sweat equity position in dot-com's may be a possibility in exchange for services.

Vendor Strategy

Razorfish's strategic directions are based on three basic drives:

1. First is to have adequate technological ability to cover the emerging digital technologies

2. Second is to have vertical market expertise where it can leverage work done on one project into that of another

3. Third is to cover all four functional areas of the digital business service provider space in an integrated manner

To satisfy the first of these strategic directions, Razorfish early on recognized the importance of the broadband and wireless market. This market is exploding in Europe faster than in the U.S., and will no doubt (probability 98%) be the same in Asia, though economic development has been slower there in general, ignoring pockets like Hong Kong and Singapore. It further recognized that the U.S. was well ahead in another area - that of business-to-business and business-to-consumer (B2B and B2C).

Hence it became clear that having a presence in these two market places would provide it with the skill sets necessary to address expected demand on both sides of the Atlantic. To link all these together, however, meant rapid growth, and the fastest means was through acquisition and rapid integration of acquired companies.

In this respect, Razorfish appears to have been very successful, having established a history of successful mergers in the U.S. This success is marred only by a lawsuit in Sweden over its use of the name Razorfish from a company that has the name Razor: in Sweden, it seems, Razorfish's name may yet be blunted.

In addition, Razorfish is investing heavily in infrastructure, one example of which is the building of a wireless laboratory in Helsinki. It remains to be seen if this geographic diversity works, and how it will be utilized.

The second objective to achieve verticall market recognition is, in our opinion, much more difficult as this is a branding and experience issue. Though Razorfish has probably a number of successful implementations in the target industries, these implementations do not go deep enough into the industry and in each individual engagement to have a major brand recognition effect. This is not a problem that Razorfish is unaware of and is trying hard to rectify the situation. To enforce this strategic direction, Razorfish recently created internal vertical market focus groups under the leadership of Barry Wolfield, VP of Startups, for which it is aggressively hiring. Hence a future client might find an Industry Specialist showing up at the presentation with the Client Partner. The vertical industries focus is discussed later in this article.
As an example of implementation depth issues,, building the site for Schwab may have only partly assisted in making it known as a full service provider in the financial industry. However, its work for Schwab was largely limited to building the website - the creative and backend integration - not necessarily providing them with recognition as financial industry web strategists. Again, we think it is a little misleading to think that building websites provides this kind of experience. Currently, Schwab retains Razorfish to maintain the website, which is a far cry from full partnering in the digital business strategic planning sense.

Razorfish is currently upgrading some features such as online training for bank employees - essentially enriching the site. BankOne is another example where Razorfish beat the competition to the punch in web design and execution, but BankOne's strategy had already been formulated prior to Razorfish's engagement. What BankOne wanted was a new look to the website and a focus to integrate its financial services with First Chicago. The web development provided the catalyst, and allowed the two banks to merge their offerings far more efficiently than otherwise. Razorfish's consultants were brought in early (along with KPMG) to assist in the strategic planning of the site, not in the digital business strategy (i.e., answering the question "what are we and what do we do in this new media?") itself.

To add to its downside, Razorfish's involvement was ended after the website went up and the creative work done, and it was made clear on day one that maintenance was to be done by internal BankOne staff. However, the attraction of doing 'one site after another' in a vertical industry where code re-use can be as high as 60%-70%, is a highly attractive and very leveragable model.

The industries Razorfish is interested in include Healthcare, InfoCom which includes Wireless Communications, Media and the Internet, Financial, Consumer and Retail, and Manufacturing.