. . . transforming a former mining community into web consultants

By Tom Foremski for SiliconValleyWatcher

I recently interviewed Champ Mitchell, CEO of Network Solutions, a company that once dominated the domain name registration market.

GoDaddy seems to have pretty much taken over this market, in which domain names now sell for as little as $8 per year, making for a $2 profit before expenses ($6 goes to VeriSign to administer the domain name server infrastructure.) During the bubble, people were paying more than $100 to register a domain name for one year.

So how do you revamp a big brand like Network Solutions when your traditional market of selling domain name registrations has become commoditized, and so have all the associated services such as web hosting?

The classic response is to scramble up the value stack and head for higher-margin territory. And that's what Mr Mitchell has been working on, replacing much of the old management and pursuing a strategy that runs counter to the dominant market trends.

Here are the differences between the old rules — the accepted notions about how business is done - and the potential new rules, the emerging business-model innovations of what I call the "new rules enterprise."

Network Solutions is in a market that is focused on small businesses and their need to leverage the proven value of search-based online marketing. It's a potentially massive market for selling domain names, website hosting, website building services, and third-party products such as security, payment processing, and marketing.

Old Rules: Use a self-service model as much as possible. Let customers fill out all the information, educate themselves on what website services they might need. Cross-sell them at every new page view.

Network Solutions: Use human specialists to guide small-business owners through what they need, do not cross-sell or try to up-sell, only offer best solutions.

Old Rules: Minimize any live contact with a customer, use telephone support as sparingly as possible, reward your telephone staff for keeping all calls as short as possible.

Network Solutions: Use the telephone as much as possible, reward your telephone operators for spending more time talking with customers. It takes about an hour of conversation with a Network Solutions telephone consultant to acquire a customer.

Old Rules: Force customers to learn and find their own remedy to a problem through an online knowledge base, and users-helping-users forums.

Network Solutions: Call us anytime and speak with a live person, or speak with your favorite consultant.

Old Rules: Force customers to learn html and educate themselves about web technologies.

Network Solutions: "I have banned html or any techie terms. Small-business people are very smart, and they don't need to be tech savvy to establish an online storefront," says Mr Mitchell.

Old Rules: Sell mostly third-party products because your expertise is in marketing, not in developing software or web services. Use an affiliate program to get swarms of third party marketers to sell for you.

Network Solutions: Own your key products. About 90 per cent of its revenues come from its own products and 10 per cent from third party products.

"With one hour being an average time spent per first customer, we had to make sure the quality of our products was high, and would remain very high quality. And also very simple to use, which is the hardest part by far," Mr Mitchell explains.

Network Solutions owns and funds the development of its web site building products and services.

Here's another advantage of the human contact strategy: Network Solutions hears directly from its customers about what they need, their problems and their issues. It is collecting a treasure trove of invaluable market research. And that gets fed back into the development cycle.

And customers feel they've been treated like royalty, because they are speaking with a human, and they know how expensive that is and how rare.

From mining to web consulting

So, you are wondering, is the human contact with someone in a foreign land? Nope, the people on the telephones are mostly from a former mining community in Pennsylvania and they survived a tough 6 week initial boot camp which filtered out about half of them. Then they headed into further educational courses.

Network Solutions has very tight controls on affiliate marketing - again, to maintain quality control of the customer experience.

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Does Network Solutions have a winning strategy? Is it wise to challenge the old rules, the proven business models in their market?

Rules are made to be challenged and sometimes broken — revealing new routes to profits.

But old rules usually have become accepted notions and are less visible, and less likely to be challenged.

It'll be interesting to watch if Mr Mitchell can execute this new-rules strategy, and if it results in a more profitable business model.

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Letter from Champ Mitchell on this week's launch of an online storefront.

VeriSign Completes Sale of Network Solutions Unit to Pivotal Private Equity. November 25, 2003