Razorfish: A Pure Play Offering Digital Strategy
Razorfish, Inc. is a Digital Business Service Provider (DBSP) founded
in 1995 by Jeffrey Dachis and Craig Kanarick. Its motto of "everything
that can be digital, will be digital" has carried it forward into many
digital technologies, acquired largely through acquisition and organic
growth, spread over two main geographic domains - North America and Europe.
this vendor note, we examine how Razorfish goes about the process of taking
on an engagement. We will review in particular its capabilities to perform
strategy management consulting, and what exactly it is that the company
delivers under this umbrella. In a previous article, "Razorfish
Wants to Get its Name Out on Broadband" we discussed Razorfish and
its ability to deliver its services, and at the time did not find Razorfish
offered true Strategy consulting. In this article, we revisit Razorfish,
and clarify the situation, particularly as Razorfish has developed its
practices and gone through a number of acquisitions to strengthen its
capabilities, particularly in Europe.
more information on how pure play DBSPs are adding Consulting Strategy
to their offering see Strategy:
What Digital Business Service Providers Mean When They Say It. There
are three phases to the DBSP Consulting Strategy:
I Operational Implementation
II Pre-Release Validation and Testing
III Post Release
Strategy and Trajectory
Razorfish has developed what it calls User Intelligence . User Intelligence
provides Razorfish with the three phases of the Strategy development,
composed into four parts, which are:
and Value proposition development
Usability and value proposition testing
and Functional Usability Testing
validation and review
two items above correspond with Phase I strategy components, the third
and fourth with Phases II and III respectively. In connection with these
phases are four functional consulting units consisting of, respectively:
- including value needs analysis for users of the business and branding
Experience group which develops the user experience of the website ranging
from sounds to other multimedia and image
- hardcore architects, systems analysts, and programmers
- as with a movie set, these are the people who coordinate web designers
and marketing, and orchestrate the creation of the e-business
Razorfish has 35 people dedicated to its User Intelligence team, with
regional centers in London and New York. The expertise of these associates
are linked through Razorfish's internal network. When necessary, these
core personnel will travel to bolster local teams. Each office generally
has at least one proponent familiar with User Intelligence tools and methodologies.
Differences in Services
The user may find that there are regional differences in services largely
due to the environment and the way in which the service provider has grown
up. In Europe, Razorfish has acquired talent in the areas of strategy
through its acquisition of Qb (focused in IT). In the US, i-Cube had acquired
Conduit prior to itself being absorbed by Razorfish, which provided Razorfish
with digital management consulting expertise. As Razorfish (US) grew up
as a creative web designer, it still has that image for many. End-to-end
services, however, according to Richard Sparks (Razorfish, London) is
more in demand in the US at this time than in Europe. The exchange of
skill sets benefits both partners, but the message probably still has
to permeate the user community. This is part of Razorfish's challenge,
and also makes clear its position.
example of a regional difference is in systems integration. Much of the
heavy lifting in Europe to integrate customer systems to web-enabled products
may be outsourced to other vendors, partly because this may not always
be what Razorfish finds value in doing. In the US, Razorfish, since its
acquisition of i-Cube, has had a larger capacity to deliver systems integration
solutions. Razorfish and other pure plays are keen to ensure their market
niche, and will not (or should not) try to be everything for everyone,
though this message can get somewhat confused because of regional capabilities
theory at least, the internal capabilities of the 'Razorfish global' should
appear as one seamless whole. In practice it is not always practical because
of cost, time and talent availability. The strategy component is one of
the most financially leveragable components of the service offerings,
and therefore it can make sense for a vendor to fly in a strategist specialist
from another part of the globe for a particular engagement. Technical
expertise, on the other hand, may not be worth the added cost, and could
also provide service remotely if necessary. Scient, for example, has been
known to fly specialist strategists from as far away as Singapore and
Japan to the US on major engagements.
attempt to ameliorate the problems across offices takes on familiar tones.
Most service providers have instituted knowledge management and control
systems to ensure that they even the skill set playing field across their
organizations. Setting up core teams to distribute skills among the organization,
or encouraging interest / self-learning groups are methods that have been
employed. Razorfish has an internal knowledge management system, and claims
to integrate acquired companies within 90 days of a signed deal.
Razorfish's approach qualifies it for the status of digital strategy.
We regard a DBSP as having digital strategy by the following characteristics:
and documented methodologies An internal practice group consisting
of an adequate number of personnel in the region being considered.
applications of the methodologies which have made a difference to at
least two clients
- At least
two out of the three above strategy phases are covered
points are given if there are measures of the effectiveness of the digital
to strengthen its hand in the strategy realm, Razorfish has taken the
route of acquisition and integration. This has positives and negatives.
On the positive side acquisitions mean that Razorfish has quickly gained
expertise and has been delivering services. The negative side is the need
to quickly integrate and disseminate skills throughout the company, and
ensure there is one 'face' to the company's offerings - this is particularly
difficult across continental distances and consequent markets environments.
This can be particularly daunting if two similar organizations are acquired
with dissimilar processes. It may take some time to sort out and integrate
processes into the 'Razorfish' set of methodologies. However, this is
not expected to be a major technical issue for Razorfish given its past
history. More importantly are the cultural divides that must be bridged.
To date, Razorfish seems to have accomplished this well.
has recognized further that to deliver services in particular industries
it must gain and/or import the experience. Its latest endeavor is in the
Travel & Tourism industry where it completed an engagement with Thomas
Cooke. With a few more engagements under its belt in this area, Razorfish
will undoubtedly have the competency for this vertical industry. In Thomas
Cooke's case, part of the User Intelligence gathered was how people buy
tourist packages and travel plans. The information becomes part of the
expertise available to the client for future relationship development,
and to the industry vertical expertise. Eventually, with a few more engagements
of this nature under its belt, Razorfish will be able to lay claim to
expertise in the travel booking industry, and will create a Travel Industry
group. Once the latter is formed, Razorfish can truly present a compelling
competitive case as having digital Travel Industry vertical expertise.
and other pure plays develop, we predict they will find their niches and
reputations just as the legacy management consultants formulated their
capabilities and brands 20-30 years ago. We only hope they keep their
will continue to develop along well planned lines into a number of vertical
industries, notably healthcare and travel, and will build up its strengths,
rapidly expanding in Europe and Asia. In order to achieve this however,
it must continue to generate high revenues, and to acquire its way to
new markets and talent.
acquisition path is expensive, with a direct effect on net earnings, and
potential share dilution. Hence we expect expansion to slow as a need
will be apparent to show better earnings to shareholders. It is still
relatively weak, with a 4% to 7% net return on revenue. The variation
is in large part due to Razorfish's continuing reliance on a few clients
contributing significantly to its income (ranging from 10% to over 20%
in any given quarter). Further, internal adjustments must be made to ensure
smooth operations as the company continues to absorb its acquisitions
and unify its offerings throughout the company. This is something Razorfish
is effective at, claiming it can integrate an acquisition within 4-6 weeks,
though we think this is not quite true. Training alone in the 'Razorfish
way' must take longer than this, and there is the need for cultural integration.
time, Razorfish may find itself facing a stiffer market as other organizations
ramp up services (such as Andersen, Cap Gemini Ernst & Young, Deloitte,
KPMG, and so forth). However, we believe it will hold its own, partly
because the legacy consultants have in the past soured their reputation
in this area with many of their users. Also the reputation of pure plays
as specialized digital business developers has a better track record.
This is based on a limited TEC survey of 18 experienced and senior executives
who were (and are) clients of one or more DBSPs, including clients of
the legacy consultants. Most of these senior executives have had multiple
engagement experiences with legacy as well as pure play companies. In
some cases, they have used both legacy and pure play companies on one
engagement, generally utilizing the legacy companies for either the strategic
goal setting or the heavy legacy lifting work.
believe there is a trend to the specialized pure plays, however, when
it comes to digital strategy. As digital strategy increases its role in
the business development of a company, so should the tendency toward the
pure play involvement increase. Further, the pure plays, as illustrated
by Razorfish, are moving to more comprehensive coverage of the strategy
realm, depending on the market niche and brand they want to develop.
many vendors of its genre, Razorfish suffered the indignities of the Internet
stock crash in March/April, but if it continues its current course, it
will gain in value. Currently, Razorfish is trading at about $15-$16 on
NASDAQ. In February/early March, the figure was in the $45-$55 range.
In selecting your vendor for an engagement that is to include strategic
elements as defined in this article the user should ensure:
the vendor has well defined and documented processes
the data the vendor gathers is utilized for your benefit, at least within
a fixed grace period
you can continue to benefit from the feedback from the vendor. Sometimes,
sharing data in the industry is a means of collecting intelligence to
understand where you sit. Your service provider can never grant exclusivity
to you in your industry, of course.
the service provider supplies the strategic elements you want covered
in entirety. Make a checklist of your requirements. If the service provider
cannot cover all elements, seek a second source, or ask the service
provider who they recommend. If the service provider is used to outsourcing
in this area, it means they are also are familiar with their own holes,
but at least should be able to resolve the issue prior to an engagement
start. It also generally means you are dealing with an honest provider
with outsource associations, and further, that you need not single source
everything. However, check out the suggested outsource company.