New Economy, New Culture
1:58 PM EDT Fri. Jul. 07, 2000
From the July 07, 2000 issue of VARBusiness
The New York-based Internet professional services organization, which competes with iXL, Proxicom Inc., Scient Corp., Viant Corp. and scores of other leading Web integrators, has a bit of a reputation for being different. What it really has, however, is a distinct culture that permeates nearly everything the company does, from the projects it chooses to the people it hires and, yes, to the size of its business cards, which measure 1.5 inches across by 3.5 inches down.
We took an inside look at the Razorfish culture, which CEO and co-founder Jeff Dachis says is "the most important thing in our business." How Razorfish uses its culture to distinguish itself in the market is noteworthy. Whether it makes long-term sense for a market leader to put so much stock into something that it alone can truly understand remains to be seen. Other companies,GE, Nike and Wal-Mart, among them,have all made gains on rivals thanks in no small part to their unique corporate cultures. Now, Razorfish is betting that investors and customers alike will reward it for doing the same.
The Razor's Edge
If you're not familiar with Razorfish, you may wonder what makes the company's culture distinctive. Certainly, the company's background differs from most. Founded in 1995 in a tiny apartment in Manhattan, Razorfish is the brainchild of a dance and dramatic literature major from the State University of New York, Purchase,Dachis,and a philosophy and computer science major from the University of Pennsylvania, co-founder Craig Kanarick. In the salad days of the Web, Dachis and Kanarick saw the need for a new type of professional services organization, one that could combine the best of consulting, technology integration and end-user branding.
Like other Internet success stories, Razorfish grew quickly. Leveraging early notoriety as a design innovator, Razorfish added technologists and strategists to fuel its growth. Last year, sales jumped an astounding 1,129 percent over reported 1998 sales to $170 million. Headcount at Razorfish, which went public in April 1999, rose to 1,355 during that same period.
Today, Razorfish is one of several dozen global players that competes in the U.S. e-commerce services market, which is expected to swell to $64.8 billion by 2003, up from $10.6 billion last year, according to Cambridge, Mass.-based consultancy Forrester Research Inc. With so many companies competing for mindshare, Razorfish president Michael Pehl says he's glad he's got a distinction that resonates. "Our culture is our secret sauce," he says.
Admittedly, that sauce is an acquired taste. Razorfish, for example, routinely ignores RFPs. Too busy, it says. It also turns down as much as half of the prospective customers that approach it. Wrong fit, it says. Razorfish also turns away 80 percent of job applicants that come its way, even though the labor shortage is at an all-time high.
More than anything, speed defines the Razorfish culture. For example, the company rarely waits to send people to certification training before unleashing them on new technology projects. And it isn't shy about exploring new markets, either. It now has eight European offices and more employees there than in the United States. Razorfish also was among the first to jump into wireless technology, despite the scarcity of canned applications or established standards.
Speed alone, however, doesn't explain the culture. The company is big on fun and adventure, too. Last year, managers shut down their operations for a weekend so 1,200 employees could jet to Las Vegas for a three-day party known as FishFry. They had so much fun that management decided to retire to Oregon for three days of bonding and whitewater rafting. This year, company mavericks selected by fellow employees will "Catapult" to Stockholm for a week of management training and career exploration.
Then there are the little things, like the business cards. Employees are also encouraged to bring their dogs to work. When in New York, they can stop by The Slipper Room, a restaurant and bar in lower Manhattan that Kanarick bought into with newfound IPO wealth. Those and other distinctions have made Razorfish more than just a place to work.
"We've been accused of creating a cult-like atmosphere here, but to us there's Razorfish and not-Razorfish," says Len Sellers, managing director of Razorfish's San Francisco office. "We don't care if you're from Scient, Viant, iXL, etc. To us, it's just not Razorfish."
Youthful puffery? Guess again. At 55, Sellers is one of Razorfish's oldest employees. A long-time Bay area resident familiar with the rise and fall of many celebrated technology cultures, Sellers taught journalism for two decades and helped San Francisco State University build its famed multimedia journalism lab.
Currently on an extended leave from the school, Sellers firmly believes Razorfish's culture is unique. Recently, it sprang into action when the San Francisco office celebrated the birth of the first "baby Fish." The creative department started designing clothes, while the IT department spec'd out baby cam for the crib. Even accounting got into the act by outlining a college investment plan.
The only downside to the Fish lifestyle: It's all-consuming, Sellers says. "I used to be an avid sailor, but haven't been on a boat in a year. I used to have girlfriends, but they left out of boredom and frustration," he says. "I used to have a cat, but it moved in with a neighbor. It's one thing when a girlfriend leaves, but it's another when a cat goes."
Razorfish Overkill
Over the years, technology companies have enjoyed celebrated, albeit short-lived periods when their corporate cultures inspired such devotion. Apple Computer Inc. IBM Corp. Microsoft Corp. Each has, at one time, defined an era of computing with its products, services and corporate identities. But none has been able to keep the magic alive. Complacency and inflexibility doomed IBM. Infighting and indecision spoiled Apple. Arrogance upended Microsoft. And already, the cult of Razorfish is wearing thin,to some anyway.
A recent Forrester Research study, for example, unearthed some customer frustration with Razorfish, says Christine Overby, associate analyst. But, she adds, Razorfish isn't the only Internet service company that can come across as arrogant. "There are several companies that expect customers to fall at their feet," she says. "Razorfish is just one of them."
Cynics say the Razorfish image is little more than a carefully orchestrated cover scheme. After all, who wouldn't want to be among a select group of clients handpicked to be serviced by one of the companies defining the new economy?
As it turns out, many customers, brick-and-mortar companies included, want that blessing. They especially want a partner that matches their cultural needs as well as their technological ones. When Razorfish pitched Giorgio Armani for his business, for example, Razorfish brought along a custom-made PalmPilot Razorfish designers crafted especially for the fashion icon. Armani took one look at the device,its understated case and muted, chic color scheme,and in an instant recognized that he had found his cultural match. He selected Razorfish on the spot to launch his company into cyberspace. He reportedly had an assistant inform other companies waiting in the lobby that their services were no longer required.
Richard Thornberry, president and CEO at Nexstar Financial Corp., had a similar epiphany when he met the Razorfish team, which was interested in his business. Nexstar, a St. Louis-based financial services company, specializes in home mortgages. Recognizing an immense opportunity to transform the image and reach of his company, Thornberry specifically wanted a Web integration consultant with enough edge and vision to help make the nextstarhome.com Web site, which went live earlier this spring, every bit as cutting-edge as Schwab.com, eBay or any other site on the Web.
"We went through the usual suspects and then came to Razorfish," Thornberry says. "We wanted exposure to a unique, progressive culture, and we got that." As for the project, he says it came in under budget and on time.
That comes as no surprise to Pehl, who oversees the company's technology delivery. "If you look at overall space and think about brand recognition and what people think about Razorfish, we clearly have differentiated ourselves in terms of positioning as people who can take complex business problems and create creative, new-age thinking solutions," Pehl says.
Perhaps, but business experts say culture-minded companies ultimately fail clients unless they become enamored of something more customer-centric than their own cultures. Nine out of 10 sought-after dot-com companies don't have a cultural foundation to weather upheaval, says Terrence Deal, former professor of organizational theory and behavior at Peabody College of Vanderbilt University, Nashville, Tenn., and co-author of the landmark 1982 book Corporate Cultures and the 1999 follow-up,The New Corporate Cultures.
"What survives are [companies] that build enduring frameworks that can weather downturns and changing market conditions," Deal says. Companies with cultures right for these times, he believes, include Southwest Airlines, Starbucks and even Microsoft. Each of those companies started with a core philosophy and culture that adjusted to suit the times. And each has developed a distinct trait that permeates its culture. With Southwest, it's a fanatical emphasis on customer service. At Starbucks, it's an exacting focus on customer experience. And at Microsoft, it's an unrelenting drive to win.
"Jumping into business with a certain philosophy is as easy as having an affair," Deal adds. "Building a truly great company takes more work and is more like a marriage."
Marching To Its Own Beat
Many other thought leaders warn of the dangers of falling in love with a company culture, no matter how unique or compelling. Few companies have ever created a corporate culture as distinct as Apple, for example. But for all its enlightenment, it failed miserably when its products lost their edge. In his 1987 best-seller, Odyssey, former Apple CEO John Sculley cautioned that "culture is a feel-good tool, a set of behavioral blinders; it makes a corporation comfortable with its habits."
Dachis says that won't happen to Razorfish, whose culture is more than creative jargon or philosophies.
"Look at last week, for example," adds Michael Beeston, managing director of Razorfish's London office. "We spent the better part of one day holding a workshop for replicating drum sounds with a computer mouse. It's part of work we're doing to allow users to navigate with sound instead of icons. The previous day, we spent time working out a plan to create an open day when clients could bring in their colleagues and families to see the work we are doing. Quite often, it's tough for our clients to explain to their husbands and wives what they do at work, so we thought we'd help show them. It's these and a thousand other things we do that define our culture, not what we wear or what we say or where we go."
Rivals concede that Razorfish has developed a compelling work environment for employees and an imaginative set of solutions for customers eager to get with the new digital economy. They also give Razorfish credit for drawing attention to the creative digital work being done in New York's Silicon Alley in the mid-'90s.
"Razorfish blew past Agency.com, which was the early trendsetter," recalls Frank Dudley, vice president and chief innovation officer at Zefer Corp., a Boston-based Web integration services company. "It remains one of the first early-wave Internet service companies that survived and thrived."
Still, Razorfish has not completely distanced itself from its roots. "It's still known primarily as a design-oriented firm and a roll-up," Dudley adds. "That's a liability in an era where solutions are more technically demanding and organically grown companies more valued."
Roll-up or not, several analysts follow Razorfish closely today. Most recommend a "buy" or "accumulate" for the company's stock. New York-based securities firm J.P. Morgan, for example, rates Razorfish a "buy." It initiated coverage of the stock in March, just days before shares began to slide. Over a one-month period they dropped from $40 per share to $26.50 per share. Throughout the drop, J.P. Morgan stood firm with its rating, even though shares have dipped below $16 per share in recent days.
One reason people are down on the stock is because the company is having trouble convincing some that it is more than a design-oriented services company. That's despite the fact it has hired more than 200 wireless specialists or that it paid approximately $1 billion for i-Cube, a solutions integration company, in 1999. The acquisition gave Razorfish much-needed technology integration and management capabilities. So have numerous new hires, many of whom hail from technology or strategy consulting backgrounds.
Stephanie Spong, for one, joined Razorfish after learning the consulting trade at McKinsey & Co. A regional managing director, Spong now runs Razorfish's Los Angeles office. Yes, she says, she's part of the adult supervision that's been hired to give Razorfish discipline and consistency. But she's also there to reinvent herself. "Working here truly is a once-in-a-lifetime opportunity," she says. To convince her fellow Fish of that, she's done some rather revolutionary, un-McKinsey-like things. For starters, she brought her cocker spaniel with her to the office on her first day. Then she outlined plans to rework compensation policies that would allow engineers to bid for projects and move around the company more readily.
Besides hiring strategists and technologists, Razorfish also has borrowed from the media, entertainment and academic worlds. Before joining Razorfish, Richard Titus, vice president of strategic development, worked on records for the Beach Boys, among other things. But such hires have yet to transform the company into a high-end competitor, counters Christopher Lochhead, chief marketing officer at Scient, a Razorfish rival that built its $155 million business without an acquisition. He says the buzz on the street is that Razorfish is "a fun company that designs Web sites and wireless applications."
"Scient builds complete e-businesses, not just applications. From the way [Razorfish] presents itself, it sounds like it is more focused on the front-end design of Web sites and wireless applications," Lochhead says. "While Scient does both of these things a lot, we only do them in connection with building a complete business."
Sign of the Times
A more objective opinion puts Razorfish up with the leading companies, albeit with its own set of challenges. Chief among them: technical expertise, says Stan Lepeak, a market analyst with Meta Group Inc., Stamford, Conn. "Razorfish still has a way to go before it can boast anything beyond tactical, strategy consulting," he says.
On the plus side, Lepeak gives credit to Razorfish for aggressively expanding into Europe. "And then they have that silly name, which, for better or worse, sticks with people, especially those who need a culture fix as much as a technology solution," he adds.
For all its cultural leadership, Razorfish is undergoing many of the same growing pains as other promising technology companies. Wall Street, insiders lament, demands 20 percent or better sales growth per quarter. And it expects bigger profits. Increased scrutiny of the company's business fundamentals ticks off some at the company who, thanks to the IPO, are plenty rich and more concerned about living up to core values and doing right by customers.
To please investors, employees document procedures, draft formalized policies and even address distinctly ordinary things such as retirement plans. To date, no one at the company has retired in the traditional sense. But when the first employee does, there will be a formal plan waiting. To keep its revenue stream flowing smoothly, Razorfish bills more frequently and, in some cases, before the work is finished.
That has led to sober reflection on what makes Razorfish a different place to work. "These are the kind of adjustments we are having to make," Sellers says. "And we have to be damned careful how we do it."
Filet of Fish
Navigates Tough Waters: Razorfish watchers love its exterior, but question its heart. Not all projects turn out, but the Fish survives. Why? Great maneuverability.
Backbone: Critics dis the Fish because of its design roots. But analysts say buying i-Cube gave the firm a spine.
Vision: Among the first with content, strategy and technology, it's going global and wireless before most, too.
Breathes Easy: Razorfish works hard, but takes deep breaths. Everyone attends FishFry in Vegas, some raft in Oregon, while still others "Catapult" to Sweden.
Attractive, Functional Exterior: To get in, Fish job applicants have sent flowers to HR. The company pays well, is dog-friendly and oozes creativity.
Push Power: Profits are modest, but sales growth is soaring. In '99, sales rose 1,129% over '98.
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