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Built to Scale

The leaders of Netigy are wrestling with a make-or-break question that’s been the downfall of many promising startups: How do you get big in a big hurry? The answer: act like you already are.

It’s a familiar saga in dotcomland. Startup gets funding. Startup grows fast. Startup grows really fast. Startup’s founders, lacking experience, can’t fathom the complexities of a bigger business. Systems that had been slapped together creak, then crash. The sheer volume of work far outweighs the inflow of new talent.

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Chaos reigns. Startup implodes.

Now consider the approach taken by Netigy Corp., a little-known e-commerce-services provider that wants to become a big company. Very, very big. Very, very fast. Of course, aspirations are cheap. What’s compelling about Netigy is how its leaders think about hypergrowth: If you want to be a big company, they say, act like one from the start.

Based in San Jose, California, Netigy may have fewer than 650 employees now, but it invests and hires as if it has 30 times that many. Netigy CEO Gary Moore, formerly a top executive at EDS, doesn’t merely hope to have 20,000 employees in five years — his strategy depends on it. And every big decision that’s made at Netigy supports his vision. The way he’s building the company, jokes Moore, 50, is “either very gutsy or very stupid.”

Originally called Enterprise Networking Systems Inc. (ENS), the company began as a network integrator but has reinvented itself as an e-infrastructure architect. In essence, Netigy aims to design solutions to the kinds of problems that plague Web sites with inadequate infrastructure. Such sites, overwhelmed by traffic, slow down or crash. They can’t perform glitch-free transactions. “It’s like buying a bullet train and running it on an old track,” says Chris Williams, 40, Netigy’s chief marketing officer.

Netigy wants to dominate its market — to become the next great global service provider. And that has meant moving faster than anyone else. Moore arrived as CEO in August 1999, when the company was still known as ENS. By January of this year, he had assembled an executive team. By March, ENS had changed its name to Netigy. By June, the company was scheduled to launch systems to manage accounting, knowledge, and sales — systems that are sophisticated enough to be the envy of any blue-chip company. A fast start, indeed.

But more than fast, the company was smart. Moore didn’t hire just any executives to run the show. He recruited a management team that knows how to build a powerhouse fast, because its members have done it before — at EDS as well as at Arthur Andersen, Charles Schwab, Sun Microsystems, and Western Digital Corp.

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These top executives understand that scaling up an organization doesn’t just magically happen. Scale happens because a staff has abundant talent and drive, because infrastructure is robust, and because there is enough money to be able to get things accomplished. It happens because a company does an extraordinary amount of planning up front. “Companies hit a growth ceiling because they haven’t thought things through,” says Will Clark, 46, president and COO of Netigy. “We have.”

Consider Netigy’s org chart, designed primarily by Jeff Rushton, 38, senior VP of operations and devoted “process junkie.” Its chart outlines in specific detail who does what, who reports to whom, and which metrics affect what compensation — for Netigy’s current employees as well as for those who are expected to join the company in months or years ahead. Compared with a standard skeletal org chart, Netigy’s chart reads like an encyclopedia. “I came from a big company, and we didn’t have this level of thought or detail,” says Duston Williams, 42, the former finance chief at Western Digital and the current CFO at Netigy. The chart ensures that each employee is contributing to the kinds of company-wide goals that drive growth: gross revenue, profit margin, work backlog, customer satisfaction, and market leadership.

The next step is to make sure that everyone in the organization understands the company’s big-picture strategy as well as its more immediate particulars — and how these two ideas are connected. Rushton, who has worked at large multinational companies and on his own as a consultant, has seen plenty of organizations stumble from a lack of clarity in executing a business model. “Growth problems almost always go back to employees not understanding fundamental things about a company’s strategy or about how their role fits into that strategy,” he says. “You have to spend time getting those parts right.” For Netigy, that means incorporating its methodology into an intranet site — and conducting an extensive road show to educate its staff in the field.

It’s still early, but so far Moore’s build-to-scale strategy has the markings of success. The privately held company doesn’t release revenue figures, but executives boast that quarterly revenue has doubled for two consecutive periods. Fifteen of its deals with customers have amounted to more than $200,000 each — more than any previous deal — with four of those topping $1 million. An even more tangible measure of growth was the rise in the number of Netigy’s employees: 500 new people over a six-month period. In addition to its London office, it plans to open offices in Asia, Australia, and Europe later this year.

Gutsy or stupid? For Netigy, hypergrowth is simply the only viable path. “We could have accepted being a nice little 500-person operation, but I certainly didn’t sign up for that future,” says Clark, another eds alumnus. “We’re trying to become the market leader. This is a race.”

Big Companies Need Big Brains

Why don’t more startups build to scale? For one thing, infrastructure isn’t a priority at first. Frazzled leaders are too consumed with signing up customers to stop and define job titles in a meaningful way or to spell out sales-and-delivery methodologies. Those particulars may not sound urgent, but Netigy officials believe that they are pivotal in accelerating a company’s growth. Attention to details keeps employees “aligned,” so that everyone knows how to get their work done.

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Another reason why startups don’t build sophisticated systems is that they lack the bucks. Infrastructure isn’t cheap, and Netigy has spent several million dollars on it. Few companies have that sort of cash on hand, or have the freedom to spend the cash that they do have. And once companies go public, they become saddled with meeting quarterly projections. Netigy, which expects to go public later this year, doesn’t have that problem. Last year, after being courted by several VC outfits, it received $104 million in funding from Benchmark Capital, Cisco Systems, and Trinity Ventures. That was the third-largest funding total in Silicon Valley in 1999.

Armed with such riches, Julie Mickelson, Netigy’s chief knowledge officer, didn’t design a knowledge-management system for a few hundred employees — she designed one for 20,000, because that’s how big she pictures Netigy will be. Mickelson, 39, came from Arthur Andersen, where she’d built a knowledge system for 15,000 consultants. Shortly after Mickelson joined Netigy, Moore dropped by her office and scribbled his vision on a whiteboard: 20,000 people. Global now. The company won’t succeed, he says, if there are “islands of information or expertise.”

For now, Mickelson’s system enables nearly 650 employees in 30 offices throughout the United States and Europe to work smarter, faster, and more focused. That’s no easy feat when 80 percent or more of a staff is new. Netigy’s system offers ready-made solutions and preconfigured templates in order to streamline the way that work gets done — links to helpful tools, presentations, contacts, customer references, and, in some cases, a list of questions to ask clients.

The point is to provide more than content, says Mickelson — it’s to provide “content with context.” That leads to consistency. “If you’re a client with multiple locations, you can be 100% certain that Netigy’s implementation will be the same whether it takes place in Cape Town or in San Francisco,” says Mickelson.

Speed is another benefit of knowledge management. People find whatever they need, whenever they need it — whether it’s a specific solution or a technical expert. In early April, Netigy caught wind of a big financial-services company that was looking for help with its wide-area network. By the time Netigy learned of the opportunity, though, the work-proposal deadline was only four days away. Working into the night and over the weekend, a team of consultants, account executives, and managers amassed documentation and best practices from similar projects and pieced together a 50-page proposal. Netigy was named one of two finalists, beating out rivals that had upward of a month to prepare. Regardless of whether Netigy is selected for that project later this year, says Brendan Keegan, 31, senior VP of global sales, their teamwork demonstrated what a fast company is capable of.

There are other ways in which Netigy speeds up. When an account executive scores a client engagement, consulting managers waste no time calling around to find out who’s qualified and who’s available for the job. Managers consult the knowledge-management system, which tells them everything that they need to know: consultants’ technical certifications, prior experience, current status, and travel preferences. Based on consultants’ qualifications, the system rates them, assigning between 1,000 and 10,000 points, so that managers can easily differentiate among candidates. With that information, managers might decide to substitute a consultant on an existing job in order to free up an expert. So, Netigy not only reduces downtime between sales and delivery by quickly identifying an available team, it assembles the most qualified team available. “We believe that if we staff the right people with the right knowledge to the right job, and if we ensure that they deliver consistently, then our customers will be happy,” says Mickelson.

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To keep growing, Netigy must keep improving its solutions and services. That doesn’t happen unless employees are getting smarter and learning faster. It’s not enough for them to share what they already know with their colleagues — they need to come up with new ideas. But where does innovation happen? Not only in the research lab, says Mickelson, but in the field and in group discussions. Netigy’s knowledge managers mine online discussion areas, where employees post questions about specific technologies. They also work alongside consultants in the field to identify new ideas or best practices, and then they disseminate that information in emails or by adding it to the training curriculum. New knowledge translates into higher billing rates, higher margins, and more revenue. “We can’t charge more unless our people know more, and the way to help them know more is to train them and to provide them with access to a world of ever-changing information,” says Mickelson. “Knowledge management is the glue.”

Infrastructure also steers strategy. Because consultants in the field can update the system with the latest billing information, the company avoids the kinds of financial surprises that turn CFOs into insomniacs. Incoming revenue becomes predictable, which will be critical for Netigy after its IPO, says Duston Williams. Because its sales managers know how many proposals and client projects are in the works, they can compare that information with a company’s revenue and profit targets and then adjust accordingly. They can tell which services or sectors are likely to be more profitable than others. Such information transparency helps Netigy avoid staffing problems too. For example, if an account executive is in the final stages of negotiating for 1,000 hours of security work that requires certain skills that are in short supply, recruiters can focus on hiring the people necessary for the job or on moving existing people into that job.

Netigy views its infrastructure as a competitive advantage, which reminds Williams of something that he recalls Warren Buffett saying about successful companies: They build a moat around their market. “I view every dollar that we spend on ‘scalability’ as us building a bigger and bigger moat,” Williams says. “It’s a bigger and bigger barrier to entry by our competition.”

Employees Wanted: 19,350 or More

Netigy can’t scale up with infrastructure alone. It needs people — specifically, more than 19,350 — to meet Moore’s target. Jack Van Berkel, vice president of human resources, has the unenviable task of finding those people. “The hard part is that we’re looking for people who don’t exist,” says Van Berkel, 40. “That is, consultants who have 10 years of experience in e-infrastructure.” So Netigy does the next best thing: It hires the right types of people and trains them.

Keegan, who recently made 36 hires in just 100 days, goes after experienced account executives who can scale the business right away. They have PalmPilots full of prospective clients, and they know how to make a quota. “I look for people who have relationships with chief officers at well-known companies,” he says. “Our focus is to be a trust adviser to clients, and that’s an ongoing relationship.”

The company’s aggressive growth strategy, in turn, attracts the very individuals whom Netigy needs in order to execute its plans — a virtuous circle. Keegan was able to sign top performers from such companies as Hewlett-Packard and Lucent Technologies because Netigy’s senior management is high-caliber, because the company’s pockets are deep, and because the market opportunity — not to mention Netigy’s upcoming IPO — is compelling. “I’ve had people accept less money or stock to come here because they feel as if this will be the place to be seven years from now,” Keegan says.

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Netigy doesn’t have its fast growth figured out completely. Concern about the influx of new employees has led Mickelson, Rushton, and Van Berkel to develop a rich orientation program. They want to create a strong sense of community and of personal connection, even as their number of employees skyrockets into the thousands. They’re determined to maintain a hard-charging culture, yet they want to avoid employee burnout. “Anybody who thinks that you can avoid growing pains is crazy,” says Clark. “Is everything in place? Not yet. But the materials are there.”

Why do Netigy’s executives have a fixation with 20,000 employees? “I wanted people to think about being a first-class global leader in service,” says Moore. “Think of McKinsey. Think of Bain. Think of companies that demand respect at the boardroom level.” The idea, adds Rushton, is to have ambitious goals that employees can rally around. And rally they have.

But Moore is already rethinking his arithmetic. What if Netigy continues to grow? What if his vision comes to pass? What then? “To be honest,” he says, “Twenty thousand will probably be low.”

Chuck Salter (salter@fastcompany.com) is a Fast Company senior writer. Visit Netigy Corp. on the Web (www.netigy.com).

Sidebar: Fuel for Growth

Netigy poured millions of dollars and several months into the systems that define its infrastructure. Here’s what other startups can learn from Netigy.

By the people, for the people. Before Julie Mickelson, Netigy’s chief knowledge officer, could customize the knowledge-management system, she had to find out what its users wanted. She sent out an eight-page questionnaire to 76 employees to learn how they would use it. The questionnaire asked which features would be helpful and which wouldn’t be. One big surprise: the importance of offline access. So Mickelson made sure that the field employees can access the system on the hard drive of their laptops. Then, when they log back on to the system later, it automatically updates the files.

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Make learning a habit. Almost daily, Mickelson sends out “Knowledge in a Minute,” a company-wide email. It contains Netigy news, plus information that’s tailored to users’ interests.

The difference is in the details. The Netigy sales methodology is highly structured, because the relationships that Netigy tries to build with its clients require discipline and attention to detail. For instance, the sales-call plan reminds employees to bring a gift to a client meeting — not a coffee mug with the Netigy logo but rather a gift that has some value, such as a white paper or a top consultant. “No one likes to meet just to meet,” says Brendan Keegan, senior VP of global sales. “If you don’t bring something of value, you probably won’t be invited back a second time.”

About the author

Chuck Salter is a senior editor at Fast Company and a longtime award-winning feature writer for the magazine. In addition to his print, online and video stories, he performs live reported narratives at various conferences, and he edited the Fast Company anthologies Breakthrough Leadership, Hacking Hollywood, and #Unplug.

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