XBlog

XNet hosts successful first Silicon Prairie Social

There are a lot of tech businesses in the western suburbs, but no real sense of a tech community. Downtown Chicago has its events and associations, but where are these things along the I-88 corridor? That’s why we hosted Silicon Prairie Social last month at Mullen’s in Lisle.

Building a community doesn’t happen within a single event; the relationships that bring professional growth, business deals, and new opportunities are built up over time. The first Silicon Prairie Social was a step in the right direction, and we couldn’t be happier with the results:

• Over 200 attendees – many of them successful entrepreneurs, executives, and high-level technology professionals
• Great feedback on the quality of networking, thanks in part to the innovative “I Need” and “I Know” name badges that encouraged conversations.
• High compliments on the location—I-88 and Naperville Rd. are central to DuPage County, and the location made for an event that was accessible for people who can’t easily make downtown events in the evening.

See some photos of the event here:

To find out when we’re holding the next Silicon Prairie Social, visit the event’s web site and either add the RSS feed to your reader or sign up for the mailing list (right sidebar, below the sponsors).

Is your kid a “Lemonaire?”

I just found a link to a bank in Oregon who is running a cute little promotion–offering a lemonade stand kit and $10 “startup capital” to kids under 13 who want to run a lemonade stand. Their web site comes complete with a cute promotional video, ranging from the “business plan” to “the pitch” and lessons learned. Check it out:

www.lemonaire.com

Learning by doing: An interview with Arthur Zards

Ben Bradley (benbradley@bwmginc.com) interviewed Arthur Zards, our co-founder and President, on his best and worst decisions in business. We’re re-printing the interview with Ben’s permission. Check out Ben’s blog at www.benbradley.net.

Learning by Doing - Five Thoughts
by Ben Bradley

Learn about entrepreneur Arthur Zards’ worst and best decisions. Following the market both up and down.

Arthur Zards, president of XNET, a regional ISP, spent the mid-1990s building a business in one of his partner’s parent’s basement. In 1999, XNET was sold to Winstar Communications. In 2001, when Winstar filed for Chapter 11, XNET’s founders, neither of whom knew aything about bankruptcy, decided to buy XNET’s assets. In the process learned valuable lessons about planning, growth and following the market.

How did you get started?
Arthur Zards: Back in 1985, Brian Clark, one of XNET’s founders, was running a BBS [bulletin board system] out of a parent’s basement. I was in high school and started helping because I was really into computers. In ‘92, we decided to offer Internet access via a dedicated 14.4k connection to UUNet. Our timing was perfect. Customers and growth allowed us to quickly bring on 24 employees by 1999.

What were your worst and best technology decisions?
Zards: My worst decision was following the market. Unfortunately, I don’t think anyone could have anticipated what would happen to the telecom market. In 1999, the market was really moving. The big telecom companies were buying everything in sight to gain market share and capture customers. At the time, conventional thinking for small ISPs told us to get acquired or die. The big companies had the marketing dollars and the power. The market was telling us the time was right. In 1999, we received five offers and finally decided to merge with Winstar Communications. To protect our customers from the rapid merger, we demanded that XNET remain autonomous for at least one year. Winstar gave us two years of complete autonomy. This decision, in hindsight, was a good one. In fact, it saved our business. By holding off on integration, we were able to maintain our identity, infrastructure and customers with virtually no interruption or change in operating procedure.

What was the result of that decision?
Zards: A lot of good things happened as the result of this decision. It was nice to have the comfort of a large corporate parent. Life was easier. Benefits, payroll, employment decisions were all handled. We were able to give our employees great benefits. And, we were no longer personally liable. And like all Internet start-ups, Winstar threw great parties. Everything was first class. We felt like royalty. Plus, it was a cash and stock deal — the future tends to look bright when you have a pocket full of money.

When the market turned, there was a packet of papers from Winstar sitting on my desk. It included my layoff, layoff instructions for the staff and the notice of bankruptcy. Everybody was going to get laid off, myself included, and it appeared as if every customer would be completely ignored. If you start a company in your basement and manage to survive for eight years, you develop great relationships with your customers. You don’t want to see them dropped. The night before the layoffs, on a long shot, we had our attorney contact Winstar and offer to buy everything back. That phone call got the ball rolling. We knew nothing about bankruptcy or buying assets. It took about nine month to close the deal. Now, I know more about bankruptcy than most would ever care to know.

We’re running the business now the way we should have been four years ago. We’re more efficient, using a lot more common sense and, unlike the Internet boom days, we actually know where all our money is coming and going! Plus, we bought the business back for far less than what Winstar paid us for it - so we’ve got that going for us.

Looking back, what could/should you have done differently?
Zards: That’s easy. Next time someone buys my company, I’ll ask for all cash.

How has failure impacted your personal life and what did you learn from the experience?
During that nine months, I went through a tremendous amount of stress and anguish. That was the most difficult period of my life. Nothing against lawyers, but eight hours a day with attorneys will break even the strongest entrepreneur. Another six hours a day went to repairing vendor relationships. There were a dozen key vendors that we had to convince to stick with us. If all 12 vendors weren’t on-board, the entire house of cards would crumble. XNET was owned by Winstar, but since we were autonomous we had our own vendor relationships. We’d get an invoice and pass it to the corporate office for payment. And while XNET might have owed Ameritech $1,000, Winstar might have owed Ameritech $100,000. Ameritech sent us the bill for the entire amount. Negotiating with vendors while trying to convince them that we were going to pull out of this mess was draining. On top of that, another company was trying to buy XNET’s assets. And even worse, even if it all came together flawlessly, someone else could still steal it away through the public bankruptcy bidding process. The stress was unbelievable.

When everything fell into place, our earlier demand to remain autonomous proved to be a lifesaver. Our autonomy enabled us get back on our feet extremely quickly, if we had been integrated with Winstar, our re-purchase of XNET would have been impossible.

I learned that no matter how easy a decision, always have a back-up plan - if we didn’t have that, we would have been unemployed and on the street like everyone else. Even today, for any big decision, we always go through the “what if” scenarios. That single call to make an offer to buy the company back from Winstar saved our jobs, our customers and the jobs of most of the people who built this company.

Do your prospects say this phrase to you, or your competition?

“It’s almost like [your competitors] don’t even care.” -XNet Prospect

This summer, a potential customer walked in to meet with us and tour our facilities. They commented on how other data centers they had visited had boxes strewn throughout and machines in disarray … and that evidence of personal service was sparse. While these comments were a huge compliment to us and validated our efforts, they were also a sad commentary on our industry.

Does your industry resemble this picture? Do you take pains to partner with your customers and give service because you care and you take pride in delivering value … only to see others in your industry coasting and resting on their laurels? Maybe they rely on empty buzzwords. Whatever they do, it leaves you wondering “Where’s the beef?”

Wherever you are in the marketplace, people and companies like this exist.

Our industry has become a commodity in many ways. Data center marketing focuses on hyping baseline requirements such as redundant Internet connectivity, power, cooling, etc. Those things are all very necessary for mission-critical systems, but features alone don’t define the customer experience. It’s reducing data center marketing to a playground call, “My data center is redundanter than your data center!” In the process of chicken-chesting, they leave off all of the value they could bring to customers by getting to know them and their business and servicing them personally.

Why did that prospect say that?

Our guest walked in and saw that we were accessible and friendly, unlike many larger facilities. They also saw the care we put into our Critical Computing Facility firsthand by how clean and orderly we keep it. Contrasted to others they visited, they concluded that we “actually care,” where the others didn’t. Our facility is completely redundant like the others they saw, but it was the details that put them over the top.

How do you get your prospects to say the same?

Maybe you take pride in delivering an excellent product. Or, perhaps you set yourself apart by pricing your services fairly in an over-inflated industry. Being honest.

Here are some of our suggestions to gain this compliment:

• Pick up the phone. Be accessible and be responsive, even when you don’t feel you have to.
• Tell the truth. If your service isn’t a fit for them, be up front about it. People will appreciate the honestly and remember you. They’ll be back when they need you, or they’ll become a great referral source.
• Be proactive. When a customer T1 line goes down, we often call them first, before they notice and call us. Line outages are mostly outside of our control as the phone companies maintain the physical line. Part of the service we provide is dealing with phone company headaches and service issues so they don’t have to. We show the customer we care by being on top of it.
• Be about the details. If you’re in a commodity industry or margins are tight, this goes even more to your benefit. Customers know they can shop elsewhere, so give them a reason to buy from you.

What are you doing right now to set yourself apart and show clients and prospects you care?

Please tell us below. We’d like to know, so we can grow from your experiences too.

Do your customers trust you?

While going through the inbox on my desk, where mostly trade pubs and “things to read later” collect, I uncovered this gem of an article from Forbes.com published in late May–the title reads simply “Do your customers trust you?” Even though the article is written towards financial advisers, we can generalize this to all service providers. The most poignant bit is where the author discusses vendor and customer perceptions of the services provided:

The State Street/Wharton survey found that while trust was clearly important to both advisers and their clients, each side had a different take on the building blocks of that trust. Nearly three quarters of both groups cited trust as the most important characteristic of a financial adviser, but the big discrepancies were in performance and cost-per-service. Just 4% of the advisers thought performance was the most important selection criteria, compared with 10% of the clients; only 5% of the advisers voted for cost, versus 12% for clients.

Those differences may have had something to do with the two sides’ perceptions of overall satisfaction. Advisers clearly have a higher opinion of their services than customers do. A whopping 56% of the advisers felt that their clients were “very satisfied,” while only 24% of clients concurred; meanwhile, 6% of advisers felt that clients were “somewhat satisfied,” a far cry from the 28% of clients who felt that way.

Obviously we skew perceptions to favor our position (it’s called Confirmation Bias). We, whatever our role–vendor, client, spouse, friend, student, etc–want to confirm what we believe, or want to believe, about our relationships. What vendor doesn’t want to believe customers love their product or service?

At XNet, though we’ve enjoyed tremendous customer goodwill over our company history, we haven’t been as conscientious as we could be in soliciting customer feedback. So, for all of the XNet customers reading this–do you trust us? Why, or why not? Let us know. And if you aren’t an XNet customer, try asking this of your customer base; if you don’t hear what you want to hear, take it as valuable feedback to help grow your business and an opportunity to deepen client relationships.