Conversation with Chairman of Rackspace

23 Oct

Posted by mcooch as Managing, Marketing, Sales

I had a great conversation today with the Executive Chairman of Rackspace, Graham Weston. If you aren’t familiar with their story, you should be. Rackspace has done an incredible job at growing very quickly - and apparently very profitably - in an industry that has largely been commoditized - hosting/co-location.

I approached him to get his opinion on Everon’s marketplace - managed IT services. I believe that our marketplaces are very similar, but Everon has been challenged to find a sales and marketing model that will create explosive growth. I wanted Graham’s thoughts on how Rackspace has been able to grow so quickly and if the same could be applied to Everon.

His thoughts on why Rackspace has been able to grow so quickly are enlightening:

They were fortunate in their timing in that the hosting industry really took off during their early years. A rising tide lifts all boats.
They were fortunate to attract a group of very passionate early customers within a very viral community - Linux developers. They quickly spread the word of Rackspace’s great service.
They have been smart enough to focus very clearly on providing what they call Fanatical Support in an industry that is known for terrible support and “burned” customers.

We discussed the challenges of Everon’s industry, which are good for any entrepreneur to understand and compare to their own industry:

Everon’s industry has not yet had a tidal wave shift of customers to our services - it’s happening, but hasn’t yet happened.
Everon’s service, no matter how well delivered, probably results in just as many negative experiences for a customer each month as it does positive experiences. If you have to call for computer support, you are likely irritated no matter how well the technician handles the call.
Small business IT support isn’t a hot topic of conversation for business owners. We don’t have a viral community.

All of these factors lead to an industry that is more difficult to grow in very quickly. I’m not saying it’s impossible or that it is a bad industry, but it will take longer and it is something to be aware of when we do our planning.

Have you analyzed these factors in your industry?

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One Response

Graham Weston

October 25th, 2007 at 9:13 pm
1

Mike
Your blog summary of our discussion was right on. Good work.

Note: If your business is in a category that is new, companies often have to spend a lot of time explaining what they do…long before they sell the virtues of their company. A book that speaks to this situation is “Crossing the Chasm.” It explains how there is a chasm that many new products and services fall into as their category develops and suggests strategies to cross the “chasm” from a niche to being a mainstream category. The Apple Newton fell into such a chasm. It was loved by techies but not by the mainstream market.

One of the keys in any new category is a simple name that is descriptive and becomes broadly used. Apple called the Newton a PDA (what’s that?) If they had called it an electronic organizer more people would have understood what it was. Also, the Newton had no competitors to validate the category…so it was a flash-in-the-pan. Emergence of strong, credible competitors in a category also speed maturity of the category. The best thinker on categories is Jack Trout, author of many marketing and strategy books as well as a columnist on Forbes.com