October 11, 2020 | internet | No Comments
The world has come full circle for Richard Tang over the course of 25 years. The 54-year-old founder and executive chairman of Britain’s oldest internet service provider argues that two very different types of crisis have determined his company’s trajectory.
Zen Internet was founded in 1995 after Mr Tang and his brother came up with the idea over a few pints of beer in a pub in their home town of Rochdale, an old mill town a few miles north of Manchester, and gambled that internet access was destined for the mainstream. Having launched the business, Mr Tang lived in fear that a large group such as BT would spot an opportunity to dominate the nascent market for internet access and he was right.
Yet it was UK electronics retailer Dixons that pounced. It launched Freeserve in 1998 and scuppered the business model of dozens of internet pioneers by giving away their product for free. “It was my worst nightmare come true,” recalls Mr Tang.
Yet Zen turned heel on the consumer market to focus on a small group of business customers who needed more than just a basic free dial-up connection. The switch paid off as Zen recorded its best year to date, and its first ever profit, having found its niche.
“With threat comes opportunity,” says Mr Tang, citing Confucius, as he reflects on the three main crisis points — the Freeserve launch, the financial crisis and this year’s coronavirus lockdown — that have proved broadband is a resilient business.
Zen has expanded its network over the past year to reach 80 per cent of the country’s population and Mr Tang also brought in a new management team to expand the longstanding niche broadband player into a true challenger brand.
A quarter of a century after it abandoned the consumer market, the coronavirus lockdown has pushed Zen back towards delivering its original strategy. New orders from its traditional heartland of business customers have dried up but there has been a boom in the number of housebound workers looking to switch to Zen, which has higher customer satisfaction than its much larger peers. “There has been a flight to quality,” says Mr Tang.
The coronavirus lockdown has forced Zen, which provides business continuity services to its corporate customers, to face up to the fact that it “was not eating its own dog food”. It had run dozens of crisis simulations but was still not ready for a world where almost all of its staff would work from home. It has had to adapt as a result but has completed the tough task with a Zen-like calm, according to Mr Tang.
Most chief executives will claim to keep staff happy and Mr Tang is no different. For Zen, that involves challenging staff to motivate themselves but also instilling a sense that they should be thinking about the long-term impact of their work, whether in the broadband company or in their own ventures, rather than short-term gains.
He says that ethos has been proven at the start of the lockdown when his workers were forced to adapt not only to work from home but also to change their roles in the company as new installations were no longer possible and customer service jobs changed as the business market ground to a standstill but the consumer market boomed. “That culture is paying off in a crisis like this,” he says. “People will work hard and do their best.”
He cites the company’s values as key to its resilience. Those values — “happy staff, happy customers, happy suppliers” — sound like they would trip off the tongue of any hyperbolic chief executive. For Zen, it is an underlying philosophy that repudiates short-term profit and growth targets, and was adopted from an unlikely source — the King of Bhutan, after Mr Tang visited the Himalayan country in 2008.
Mr Tang, who owns 100 per cent of Zen, says the mantra has provided a “rock solid foundation” for the business through the Covid-19 crisis.
It was also in 2008 that Zen moved into new headquarters in Rochdale that had been vacated by a division of the Co-operative Group, the town’s most famous company. Zen took a “leap of faith” moving into the space — it housed four times as many people as Zen employed when it moved in — but the broadband company has since grown to become the town’s largest private sector employer.
Zen, with its patient growth plan, now hopes to broaden the broadband market from a Big Four — BT, Virgin Media, Sky and TalkTalk — into a “Big Five” by increasing its market share to 5 per cent from a meagre 0.5 per cent.
That confidence in its newfound growth ambitions belies the fate of Zen’s peers in the ISP market. Other pioneers in the internet world — Demon, Nildram, CompuServe, Eclipse — were all burnt up or bought out 20 years ago. The next generation of midsized players including Pipex, Bulldog, Plusnet, easynet, BE, AOL and Tiscali were all absorbed by the large broadband companies as the maturing market became a scale game.
Mr Tang was adamant that he would not follow suit. Ten years ago, he instructed his secretary to stop putting through calls from investment bankers and he says he would not float the company in “a million years”. Banker calls have perked up again in recent months as a rush to buy UK telecoms companies has gathered pace but to no avail. “I will never sell,” he says vehemently.
That even applies in a post-Tang world. He has arranged to transfer the company into a trust when he dies but even that is not long term enough to secure his legacy. He now wants to transfer his Zen shares into his charitable foundation but has struggled to put the profitable company, which generated £76m of revenue last year, into such a structure. “If you want to save cats with broken legs then you can do that but if you want to make the world a better place, you can’t,” he says.
Zen was accredited last month as a “B Corps” company — the certificate for for-profit companies that balance environmental and societal goals with business objectives — which is rare in the telecoms sector.
Mr Tang maintains however that he is not anti-capitalist. He happily takes dividends out of Zen and believes it is “survival of the fittest” in the business market. He also insists he is no soft touch. “Committing to having happy staff (could) be misunderstood and abused. But if anyone thinks they can come in when they want and ‘Richard will bring me a cake and I’ll do some online shopping’, they won’t last a minute,” he says.
Mr Tang’s lofty ambition to reform capitalism from the launch pad of a Rochdale broadband provider may appear fanciful. But he argues that Zen can lead by example. It has set up a scheme to invest in companies founded by his employees if, like him, they agree to never sell out and to devote a portion of profit back into the Zen charitable foundation.
He met with some business angels to promote the initial three start-ups this year and told them: “If your goal is to make short-term money then don’t give your money to me.”
Three questions for Richard Tang
Who is your leadership hero?
The king of Bhutan. I went paragliding in Bhutan in 2008 and heard about his ‘gross national happiness’ philosophy, which really struck a chord with me. A lot of people there live simple lives but they were healthy and happy. It was a lightbulb moment for me in running Zen. My executives weren’t surprised though — they knew what I was like.
If you were not a CEO/leader then what would you be?
I’d go back to writing software, probably AI software. Before founding Zen, I worked on software and hardware systems including IBM laser printers and military radar. I wrote the Zen billing system now used by tens of thousands of customers. The next decade will be more disruptive than the past 25, driven by AI.
What was the first leadership lesson you learnt?
Right at the beginning I made a mistake that almost broke the company. I needed an operations manager and ended up liking two candidates so much that I appointed both. Within two weeks they were not talking and were blaming each other for everything. Six weeks later I had to fire both and go back and appoint the third guy on the list. I learnt that you have to have a clear chain of command otherwise you get stalemate.