Agile Self-Ownership: Network Redux’s Growth Story

baroquon_Add_MoneyMany people associate startups with venture capital funding. But, according to a recent Kauffman study, venture capital is the exception, with only 1% of new businesses getting funded by VCs. In addition, many entrepreneurs don’t want to relinquish control and decision-making to investors.

While some entrepreneurs can bootstrap their businesses with their own funds or via bank loans, many startups–especially in the tech industry–need to find alternative ways to fund infrastructure required to build and grow their businesses.

Recently, I had the opportunity to talk to Thomas Brenneke, founder and President of Network Redux about the innovative approach he’s taken to create and grow an “agile self-ownership business” in partnership with Dell.

Network Redux’s Innovator’s Dilemma

nr_logo_300dpiNetwork Redux was founded in 2004. Initially, the Portland, Oregon-based company provided inexpensive, shared web-hosting services for very small businesses. Demand for services was strong, and the business grew. But the market for low-cost services was quickly commoditizing, and according to Brenneke, “becoming a race to the bottom.”

However, as some of Network Redux’s clients grew, they began asking for dedicated hosting services. This offered Brenneke the opportunity to develop new, more profitable business. But it also posed the challenge of funding the much larger capital outlays required to build a dedicated hosting environment for each new client.

Complicating matters further, the timing couldn’t have been worse. It was 2008, and even though Network Redux was profitable and had deals on the table, most banks just weren’t lending to small businesses.

Finally, Brenneke didn’t want to cede control and decision-making to external investors. As he puts it, “We built the business on an outsourcing model from the outset. We didn’t hire a lot of people, we outsourced when possible to avoid debt and interference from investors. I wanted to continue to grow the business, and maintain an “agile self-ownership” model. ” But, Brenneke adds, “I threw my hands up in the air. To execute on these high value contracts, I needed to invest in infrastructure, but I didn’t have a way to fund the investment.

Financing Agile Self-Ownership

Network Redux had been a Dell customer since day one, standardizing on Dell servers and storage. Over the years, Brenneke had formed a strong relationship with his Dell account team. “I looked at Dell more as a partner than a vendor. When I started the company in my twenties, my business experience was limited. I learned so much from Dell about everything I needed to provide strong shared hosting and private cloud services,” notes Brenneke. “I could just pick up the phone and ask, “How do I do this?”, and Dell would teach me. There’s no question that our relationship with Dell helps us provide better service to our customers.”

Brenneke was confident that Dell’s products would continue to provide the cost, reliability, performance and support he would need for competitive, high availability dedicated hosting business. Now, Brenneke decided to share his financing dilemma with Dell. “I explained to my account rep what I needed and why. He connected me to Dell Financial Services (DFS). I had a long conversation with the Dell credit rep, and they looked over my financial statements and business model. For the first time, I had a lender explain to me what they were really looking for when they evaluate loans, and the best way to structure them.”

After due diligence, Dell approved Network Redux for its first, 36-month term loan, tailored to coincide with the lifetime of Network Redux’s client contracts. Four years later, Network Redux has borrowed over $1 million dollars from DFS. “We get the money we need for infrastructure to bring on new clients. As we grow and pay down our loans, Dell raises our loan ceiling, and we keep growing,” explains Brenneke.

Membership Has Its Benefits

dell founders clubIn 2012, the partnership got even deeper. Network Redux’s Dell account manager thought the company would be a good for Dell’s Founder’s Club, a hand-picked group of innovative entrepreneurs. Unlike Network Redux, most Founders Club members are funded by a venture capital or angel firm. However, all Founder’s Club members view technology as critical to future growth, and have significant technology needs. In addition, according to Brenneke, “Founder’s Club members want to be owners, not exiters.”

Members can take advantage of many benefits, such as concierge-level support, expedited shipping, the opportunity to network with other fast-growing startups, and the Dell Innovator’s Credit Fund, a $100M credit financing program. The idea of the fund is to give entrepreneurs access to technology to help fuel growth, while helping them to preserve equity capital for other business needs. Just as important to Brenneke, “We are treated like a global player. We have access to the best and brightest technical and business resources at Dell for advice and guidance.”

The result? This close vendor partnership has helped Network Redux to increase revenues 100 percent year-over-year. As Brenneke puts it, “This is mutually beneficial–Dell wants us to be a healthy business.”

Perspective

There are many ways to fund a startup and one size does not fit all. However, some startups may not even be aware of external funding options beyond traditional venture capital firms and banks. Furthermore, as this case illustrates, non-traditional financing sources may be a better fit for some businesses.

Network Redux’s technology and financing partnership with Dell illustrates that a synergistic financing partner can provide a startup with more than money. The right partner can also provide services and guidance to help young companies better capitalize on market opportunities.

How Zoos and Museums Use Big Data to Refresh and Reset Visitor Experience

3-kids_mFor most of us, a trip to the zoo, museum or an aquarium is a fun and interesting way to learn about animals, history, art and other cultural experiences first hand. Behind the scenes, however, these organizations must work hard to create the engaging, interactive experiences that today’s visitors want, and successfully market that experience to the public.

This is especially true today, when these typically not-for-profit venues must compete with an expanding array of theme and amusement parks, live and digital entertainment events and sports attractions. To remain viable and vibrant, zoos and museums must continually fine-tune their vision and exhibits to grow visitor traffic and membership. They need to be creative with concessions, and optimize use of their meeting rooms and cafes.

In this post, I discuss how Point Defiance Zoo & Aquarium and History Colorado Museum are using analytics and big data to better understand what visitors want and to deliver it.

Point Defiance Zoo & Aquarium Refreshes Visitor Engagement and Conservation Initiatives

polar-bear-003_sAt the 100-year old Point Defiance Zoo & Aquarium (PDZA) in the Pacific Northwest, Manager Donna Powell oversees all business, budget and visitor services. The 29-acre combined zoo and aquarium promotes and practices wildlife and ecosystem conservation initiatives, and attracts more than 600,000 visitors a year.

PDZA generates millions of data records daily on attendance, exhibit and event preferences and participation in conservation initiatives—but didn’t have a good way to pull information out of it. As Powell explained, “Staff generated a SQL sales report from our point-of-sale (POS) system each morning but it only gave us turnstile sales and didn’t include online and reseller sales. So staff had to pull this all together manually, which took days.”

“It also couldn’t tell us what customers do while they visit, or what they’re saying about us on social media” adds Powell. “We need to know things like, which exhibits visitors prefer, and what conservation initiatives they’re participating in, what they liked and what they didn’t like.”

Powell knew that PDZA needed to better understand visitor trends and feedback, but had concerns that an analytics solution might be too difficult and/or expensive for an 80-person organization with 2 IT staff to deploy and use. Then she attended a presentation from the Cincinnati Zoo, and learned about the analytics system that they had deployed. “They were using the same POS as we use. They introduced us to BrightStar Partners an analytics solution provider that did their implementation that really understands zoos. The light bulb went on—if they could do it, so could we.”

PDZA went live withIBM Big Data Analytics in 2012. “Everyone immediately made the connection of how they could use this to help. We can strip things out, and see how things relate. Now we can pinpoint how different weather patterns will affect attendance and exhibits, and change scheduling as required. We can also use it for marketing. For example, after analyzing sales data and open rates, we sent a promotion to members whose membership was about expire and offered them a discount if they renewed before the end of the day. We had a 6% buy in on that campaign compared to the typical mail renewal rate of 3%.”

Other benefits Powell points to include:

  • A 700% rise in online ticket sales over the past year, with an expectation that online sales will go up another 25% by the end of this year.
  • The membership team can pull the data they need in minutes instead of waiting days for IT to extract data from the POS system to create a mailing list for campaigns.
  • PDZA also uses social media and analytics to more effectively engage millennial visitors in its conservation initiatives.

Zoo employees now use iPads to access financial, attendance, membership and retail information so they can make decisions anywhere anytime. Looking ahead, PDZA plans to introduce a mobile ticketing solution. In the future, visitors will be able to “check in” at different areas within the zoo, providing zoo managers with more data to better understand which exhibits are most popular and how much time visitors spend at them.

History Colorado Center Resets To Attract a New Target Audience

HistColorado_FrankOomsHistory Colorado Center likes to think of itself as a brand new 134 year-old museum. Founded in 1879, the museum had shared the same block with Colorado’s State Justice Center for more than 40 years. “The location wasn’t ideal, and the museum wasn’t as interactive or engaging as we would have liked,” as COO Kathryn Hill explained. “Most of our visitors were senior citizens and children on obligatory school field trips.”

In 2008, History Colorado had the opportunity to build new, state-of-the art museum–and to bring Colorado’s history alive through storytelling and interpretative exhibits. According to Hill, “We wanted to understand how we could bring history alive, attract more families, and best sustain our mission over time.”

In conjunction with planning and construction of the new building, History Colorado conducted extensive audience research to test design ideas and stories. During this process, Hill “stumbled on the story of how the Cincinnati Zoo was using analytics to drill down into all aspects of visitor behavior so they could continually improve the visitor experience.”

“As a non-profit, we don’t have a lot of money for marketing, so we needed to find a strategic way to keep a close pulse on how we can best engage families. We hadn’t budgeted for analytics, but once we learned about IBM’s BIg Data Analytics, it was a no-brainer for us,” according to Hill.

In collaboration with IBM Business partner BrightStar, History Colorado deployed IBM Big Data analytics simultaneously with their new POS system. “I’m not a tech person, but I can go in and look at admissions, programs, merchandise, food, and membership data in real-time,” notes Hill. “We have a single view of the data, and can see patterns now, such as when retail sales peak and what exhibits attract the most traffic.” This helps the Center’s 125 employees fine-tune exhibit and marketing strategies.

The museum is also developing more personalized experiences for its visitors by analyzing social media commentary, and expects that this will boost engagement and repeat visits.

“We have a unique mission to help visitors understand the present in the context of the past so Coloradans are better informed in making decisions for the future,” explains Hill. “To make this happen, we need to bring people in and provide a compelling experience. Analytics helps us do this.”

Perspective

Chances are that your organization isn’t a zoo or museum. But these stories underscore the fact that big data analytics solutions are within reach for organizations of all shapes and sizes.

However, these experiences also reveal some important pointers for getting successful outcomes from an analytics investment that other SMBs should keep in mind. First and foremost, PDZA and History Colorado had clearly articulated what information they needed, and how they would use it. In addition, both organizations:

  • Selected a solutions designed for SMB requirements and for limited IT and budgets.
  • Worked with a partner that had experience in your industry, and could tailor the solution to best meet their specific needs.
  • Had input and guidance from organizations with similar requirements.

Whether you need to know more about visitors or customers, exhibits or products, with a clear vision, solid planning, big data analytics can provide the insights your organization needs to thrive in an increasingly complex and competitive world.

This is a fourth, additional post in the blog series by SMB Group and sponsored by IBM that examines big data and its implications for SMBs. You can find the first three posts at these links:

Getting Results: How SMBs are Using Data and Insights to Get Ahead

In the first two posts in this series, Seeing the Light: How SMBs are Using Data and Insights to Get Ahead, I shared the motivations that prompted three SMBs to replace spreadsheets and intuition with a more sophisticated, analytics-driven approach to run their businesses.

In the second, I discussed the factors that decision-makers in these three companies viewed as make or break considerations in the analytics selection process.

In this third and final post, I look at how these SMBs are putting the SAS analytics solutions that they selected to work for their businesses, and the results that they’re getting.

An Early Warning System to Prevent Issues from Becoming Problems

EWS Control Chart Mock-upBGF Industries had millions of lab testing records, but lacked an effective way to extract insights from them to improve quality control. BGF wanted a system that could sort through this data, generate control charts, and proactively flag potential quality issues. The company also wanted a knowledge repository to make key findings readily available in case an issue came up again.

Working with SAS partner Lucid Analytics, BGF implemented SAS Enterprise BI for Midsize Businesses, giving BGF the “early warning system” it needs to constantly monitor production processes. “Every night this system pours through millions of lab testing records, generates control charts for each and every thing we test for, and creates a report that flags any charts where something may be out of control,” explains Bobby Hull, Corporate Quality Assurance Manager at BGF.

According to Hull,”The flexibility of the SAS solution is like Legos. You can take a little piece of this and stick it to that and get what you need.” This enabled Lucid Analytics to create a commentary field in the control charts for BGF to capture information about how to resolve quality issues. “Now we also have this guru repository so information can easily be passed on to different people,” adds Hull.

When it comes to return on investment (ROI), Hull puts it this way: “People were asking me about ROI when we started the project. I told them that I couldn’t quote them a dollar figure because how can you predict when you will avert a costly disaster? I couldn’t predict that negative, but I could tell them that the investment would pay them back because it would help us spot trends, improve quality in our products and better serve our customers–all of which it has done.” In addition, notes Hull, “It makes our auditor smile because the solution reflects our attitude toward quality and that helps enormously with ISO compliance.”

Delivering What Customers Want

Style: "Color tone - warm"Oberweis Dairy needed to better understand customer buying behavior across its three distribution channels--home delivery, ice cream and dairy stores, and distribution partners. It wanted to get its flagship home delivery service growing again, increase revenue per transaction, improve customer retention, and increase market penetration across all of its channels.

“Very complicated spreadsheets, macros and pivot tables weren’t providing the answers we needed,” according to Bruce Bedford, VP of Marketing. “Now, we understand customers’ buying behaviors like never before, and we can develop highly effective marketing campaigns across channels.”

In dairy stores, Oberweis has improved transaction-level profitability by 1.2% due to the analytical approach it can take with its menu boards. As Bedford explains, “Now we can now figure out the best configurations. What foods to put on the menu, what goes best with what. We can test ideas like, what if we feature sundaes in a waffle bowl? We can present and test different options, see what customers want. This also cuts down on the time it takes for customers to make their selections, and the time it takes for us to serve them.

In addition, customer retention for Oberweis’ home delivery service has soared by 36%–yielding over $640,000 of incremental revenue in just 6 months. “Our home delivery products are same price as in the store, but there’s a delivery fee,” Bedford notes. “We had been promoting free delivery by waiving our $2.99 weekly delivery fee for six months when customers signed up. But at the 6 month mark, we had a sharp drop in renewals. We figured it had to be tied to how we were structuring the promotion. We needed to decrease attrition, without lowering offer acceptance.”

Oberweis used SAS Business Analytics for Midsize Business to test and analyze different promotions, and learned that “when we offer new customers 99 cent delivery for one year, retention spikes up. Both promotions deliver $100 value to the customer, but the details significantly increased the retention rate, without reducing acceptance.’

The results have been so dramatic that Oberweis documented them in a paper that Bedford presented at the 2012 Midwest SAS User Group 2012 conference.

Improving Guest and Homeowner Experiences

Twiddy & Company Home ER004Twiddy & Co. balances the need to maximize revenue for its individual homeowners with the concurrent need to provide truly exceptional vacation experiences to its guests. But, a myriad of complex spreadsheets were no longer up to the job. For instance, Twiddy needed to create daily reports quickly and provide them to staff to scan so that they could efficiently address any cleaning or safety issues prior to or immediately after guests’ arrival. The company also wanted to provide vacation homeowners with the best possible value for needed property repairs and services. In addition, Twiddy wanted to optimize property bookings and pricing based on data instead of gut instinct.

Clark Twiddy, Director of Operations, recalls that when the company started to look for a solution, “It was a black hole. We didn’t know if we would need to spend $250 or $100,000 but we knew we needed better analysis and decision support. Candidly, we wouldn’t have spent $100,000, but we had to find a way innovate and improve. Our market here in North Carolina is very competitive with 14 smart companies in the same area. We joke that complacency is a great way for us to lose market share.”

According to Twiddy, SAS Business Analytics for Midsize Business and Pinnacle, a SAS partner, helped them do just that. “It used to take 3 or 4 people hours a day to get information together into reports that became obsolete the following morning. Now we can get a report in seconds and see, for example, the median day-to-day cost for a certain type of repair, and compare costs for the 1100 different service providers we contract with–saving homeowners real money. We even have vendors asking us how they’re doing on the SAS list and where they rank, so they can improve and get more business from us.”

Twiddy estimates the solution has also cut error rates by about 20% per year. “More timely, accurate reports make it less likely that we’ll send the wrong vendor to a home, or send a vendor to the wrong home, or that we’ll flat-out miss something that needs to be fixed. Our housekeeping scores have increased, and repeat guests have gone from 47% to almost 60%,” notes Twiddy.

Twiddy has also built a dynamic pricing model that he says “is an enormous help with building credibility and delivering results to homeowners. We’ve been able to deliver better bottom line results to homeowners, better vacation experiences to guests, smarter technology to staff, and sustain a high-end brand image in the mind of our customers.”

Perspective

If you’ve read all three of the posts in this series, you know that none of these companies just waved a magic wand and magically achieved successful outcomes from their analytics investments.

But, the good news is that none of these companies needed a magician–or an IT army–to help make this happen. Instead, they got there by:

  • Facing the fact that their businesses would need to employ a more sophisticated approach to gather, create and use information to make the decisions in order to move ahead.
  • Taking enough time upfront to assess what information they needed to make better decisions, what needs to happen to make this information actionable for the people who need to use it, and how you’ll measure outcomes.
  • Thoroughly evaluating internal capabilities, what they would need from an analytics solution and a solution provider, and getting the information they needed to select best-fit options for their companies.

So, mere mortal SMBs–take heart–and follow the guidance of these and other SMBs that are paving the way.

This is the final post in a three-part blog series by SMB Group sponsored by SAS that examines why and how SMBs are moving from spreadsheets and intuition to a data-driven approach to grow their businesses.

Follow

Get every new post delivered to your Inbox.

Join 10,594 other followers