MIKE BEESTON is being evangelical. "A lot of companies are goingto have to change their entire business model if they want to survivein the digital era," he says. "The nature of business hasfundamentally changed, and we are here to help our clients get fromwhere they are to where they want to be."
Mr Beeston is on a sofa in what was once a dusty attic abovedozens of rows of animal carcasses at London's Smithfield MeatMarket. The sides of beef and piles of livers are still there, butthe low-ceilinged attic has been converted into a funky office space,a couple of hundred metres long and only a few metres wide, occupiedby Razorfish, one of the world's most prominent "digital solutionscompanies".
Mr Beeston, 42, the joint MD of the company's UK operation, is incharge of some 300 staff at the attic-turned-office, compared to 150a year ago. The company was founded in New York in 1995, and throughits policy of expansion through partnership with and acquisition ofsimilar companies across the world, it has more than 1,600 employeesin 12 offices across eight countries. Its global turnover was $170.2min 1999, from $83.8m the previous year, though pre-tax profits lastyear came in at just $3.5m due to heavy exceptional merger costs.Clients include NatWest, FT.com and Charles Schwab, the onlinebroker.
Even among the Clerkenwell digerati, there has always been anuncertainty about what, exactly, the dynamic company with the funkyname which lives above the meat market actually does. Thosefrequenting the cafes where Razorfish often holds impromptu creativesessions or meetings have had it drilled into them, often withvehemence, that Razorfish was not an "internet design company",despite its reputation lying broadly in this area.
"Our clients have a view on where they want to be, and how theywant to transform themselves, and we are there to help them," says MrBeeston. Or, as Neil Crofts, the company's head of strategy forEurope, puts it: "Many companies have to develop a whole new businessmodel for the digital era. If they don't, they won't survive. We helpthem develop every aspect of that model."
Mr Crofts, 36, claims the reason why it's sometimes difficult tounderstand what Razorfish offers is because it's like no company thatexisted before. It's essentially a consultancy, gaining fees fromproviding services and advice to clients, but its workers come, inalmost equal proportions, from the creative, technological andconsultancy sectors. Wandering the Razorfish office, it is notunusual to come across a former financial director from a large,established company at an open-plan desk alongside a dyed-haired,black T-shirted Clerkenwell artiste.
A fair proportion of the staff is drawn from the ranks ofadvertising agencies, which come closest to resembling Razorfish inemployee profile. Mr Beeston was a senior executive at Saatchi &Saatchi before setting up his own company, CHBi, in 1995 (it wasacquired by Razorfish two years later). Mr Crofts had his ownexhibition company.
"Creative, technical and strategic staff have traditionally notworked in the same environment," says Mr Crofts. But, he adds, thestaff structure of Razorfish is exactly what he believes thestructure of many traditional, bricks-and-mortar companies, will looklike in a few years.
"The transformation from the late industrial era to the digitalera will be just as thorough as that during the IndustrialRevolution," says Mr Crofts. "How many companies survived the startof the industrial era? There is going to be the same wholesale purgeof the market now."
Mr Crofts is not a dot.com fanatic preaching against the odds ofthe stock market. "Of course, most dot.coms are going to go to thewall in the next five years," he says. "Business history teaches that95 per cent of any startups go out of business within four years."The point, he says, is that those businesses, new or established,which can pinpoint a long-term vision may just have a chance ofsurviving.
Not everything has gone right for Razorfish since its IPO in April1999. The Nasdaq-listed share price plunged along with many high-tech stocks, dropping from a February peak of $55 to just $21.4.Razorfish executives are bemused by the fall, believing they haveunjustifiably been dragged down by general dot.com gloom, though theyare not a dot.com company. "It's baffling, but we have such strongperformance figures that we believe it's just a temporary downturn,"says Mr Beeston. At this share price level, there has even been theodd bid rumour
Like everyone who works at Razorfish, Mr Crofts is absolutelyconvinced the onset of the digital era - by which he means wirelesstechnology, multimedia platforms and a lot more than simply a coolwebsite selling your widgets online - will lead to the mostfundamental change to the way businesses work for the past 200 years.
"The digital era has two fundamental effects," he says. "Firstly,the speed of innovation has increased from around 5 to 10 per cent ayear to 30 to 40 per cent. Secondly, business has become transparent.Everyone knows exactly what you are doing and what your rivals aredoing, because of the amount of available information. So brands needto be authentic, accurately reflecting the nature of a company,rather than simply manufactured for a target audience."
He says "late industrial" organisations (as Razorfish labelsexisting companies which haven't yet changed) are "efficient atmanagement and at honing and getting products exactly right. But theyare not good at innovation; they are not geared to innovation. Tokeep up, they have to change from honing to innovation, which meansin many cases rethinking their whole business model."
So what kind of reactions does the upstart "digital solutions"company get from established market leaders when it suggests to theirboards that they have to change their whole way of doing business?
"It varies," says Mr Beeston. "Some of them have thought itthrough at board level and know where they have to go. With others,it's a long process of persuasion and sometimes they won't acceptit."
Mr Crofts adds: "The era of rule of accountants is coming to anend. We are talking about what accountants don't understand, forexample the value of creativity and ideas amongst staff, the value ofclose relationships with clients and suppliers, and the kind ofgoodwill that what they call `brand equity' creates."
In the future, even non-creative companies will be hiring creativestaff to help with innovation and development.
"In the past homogeneity among staff was considered an asset," hesays. "Now it's a drawback."
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