How Rackspace’s Founder Graham Weston Grew A Meeting At A Local Restaurant Into A Multi-Billion Dollar Company
In 1999, Graham Weston first sat down with his investing partner at Chester’s Hamburgers to hear three Trinity University students’ business proposal. Their idea was to rent servers to businesses as office space is rented. Graham had no clue that this simple idea would one day grow into a company with annual revenues of more than $2 billion.
What Graham did know was that the internet was spreading like wildfire, and more internet users would mean an increasing demand for web hosting by businesses looking to serve those users. So he invested his money and time into what would soon become one of San Antonio’s greatest business success stories. Rackspace was born.
As hoped, the team experienced rapid growth, which meant they had hiring challenges early on; in the burgeoning field of internet servers it wasn’t all that easy to find experienced candidates. This meant that Graham had to find employees, primarily youngsters 22 years or less, who understood the internet, and who mostly didn’t wear shoes to the office and often slept there. These digital natives understood the new world of online, but they didn’t yet understand how to make customers happy.
“I would say in the early years, we did a terrible job of serving our customers,” Graham says, “but it actually was a good thing because a lot of those angry customers would call (us) and complain.” These complaints galvanized Graham and his team to make customer service a focal point of their business.
Rackspace understood if they could offer their clients quality customer service that other companies couldn’t, they would be able to keep those customers happy and grow sustainably. But they didn’t want their service to be merely acceptable. They wanted it to be truly great — so great in fact that they coined the term “fanatical support” for the phenomenal service they envisioned.
With the idea of fanatical support at the helm, they created support teams of 12 to 15 employees for every customer. As Graham explains, this structure “created a sense of ownership and accountability to serve the customer well.” It also allowed the teams’ efficacy to be measurable, which soon made their mission of providing fanatical support a reality.”
Graham believed that if Rackspace could become the most trusted company in the industry, they would really set themselves apart — and it worked. “Companies have to find a way to stand out, a way to differentiate their offering”, says Graham.
“In an increasingly crowded marketplace…standing out from your competitors is the answer.”
Instead of generalizing the offering in order to gain more business, Graham believes that the best strategy is to remain true to your specialty, expanding your niche business geographically. Grow organically, by offering your specialist services to other cities, other states, and even other countries.
To grow in this way, a business needs to understand the correct combination of marketing and sales. Graham says that “the difference between the two is that conceptually marketing works by getting the customer from 1,000 feet to 3 feet, and sales works in the last 3 feet”. Rackspace figured out early on how important marketing is, and their online advertising was so successful in the early 2000s that even Google created ads about Rackspace’s marketing success using Google advertising.
By the time Graham ended his tenure as CEO in 2006 to become executive chairman, he had grown Rackspace from 15 employees to over 1200, a testament to his vision and entrepreneurial prowess. Looking back, Graham says, “my proudest accomplishment is that we ultimately seized the moment and actually differentiated ourselves… growing the company into something of which we could all be proud.”
To build a successful company the way that Graham has done with Rackspace, it appears that a business needs to find the answer to his favorite question: “What is going to differentiate your business?”
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