What death of newspapers says of software development

September 9th, 2009

Much has been said of the impending demise of newspapers. The chief force behind this change is the dramatic shift in the economies of distributing information brought on by the Internet. It enables nearly-zero distribution of information and thereby obviates the newspaper system which organized itself around the economic amortization of a large expensive printing press.

Though just as real and fundamental of a phenomenon, much less fuss has been made of the effect of near-zero publishing on the software industry. Previously, publishing software dragged along a complex logistics ball and chain which was necessary to support its distribution. This included a round shiny CD, manual, box, special offers and so on. These logistics and their associated economies ensured that once-per-year publishing intervals prevailed.

The high overhead cost of delivering through and supporting this software publishing pipeline limited the number of publishers who could operate profitably. Changes in how news is delivered presage the changes we see in software publishing. Just as news is no longer a daily thing, no longer is software released yearly, or monthly, but typically daily if not hourly and in extreme cases 50 times per day. Similarly, just as the Internet spawned the micro-publisher / blogger phenomenon, near-zero publishing costs has made it possible for a Long Tail of software publishers to reach users interested in an ever-broadening array of software functions and services.

The radically more frequent release of software by quite literally 1000s of times more publishers results in an exciting new landscape for those providing hosted service and infrastructure that makes the job of boutique software publishers easier and more cost effective. Traditional publishers of software development infrastructure, who grew large built upon the backs of sales forces who earn mid-six-figure compensation packages, will find it difficult to adapt to the near-zero cost of selling services to the growing legions of boutique software publishers.

Series A Readiness

June 30th, 2008

Investors contemplate five categories of risk as they evaluate candidate investments.  Typically when they decide to “pass” they cite one or more of these as their justification, sometimes encouraging you to circle back when it’s been addressed.  

 

Risk

Description

Series A Readiness

Technology

Can you actually make the dog food?  Does the product development require an advance in sub-atomic physics?

Savvy professional investors will want to see at a minimum, a working prototype.  In its absence, they’ll take a meeting with you, profess their interest and then conclude “it’s too early” for them to invest.

Market

Is there a big enough market to grow a significant company?

Company can show with reasonable assumptions  and supporting data that there exists least a $1B market opportunity.

Product

Will the dogs eat the dog food?  Will users try the product / service?  Will they adopt it (keep using it after trying it)? 

Some customers—representative of the market sizing exercise above—have tried the product and adopted it into their daily routine and are willing to speak with investors about their experience.   Note, if only ECAD customers use your product, but your market sizing assumes ECAD, Software Development and Pharm/Chem, be prepared to revisit your market sizing or defer funding until you get more diverse customers.

Team

Can the company attract a talented, experienced executive team and will they play nicely in the sandbox together?

Ideally, the prospective Series A-ready company has a CEO plus VPs of Engineering and Marketing.  Practically, investors view part of their value add as including team building and would rather fill an empty slot than invest in one weakly filled.  That means two out of three will usually carry the day, so long as those two are credible and competent in those roles.

Finance

Will the company succeed in raising further rounds, if necessary?  Will the capital markets reward investors if the company reaches its target

As the “VC checkbooks locked” period at the start of the decade underscores, this one rests largely outside of entrepreneur control.  That said, the well-prepared company will show investors a five-year pro forma financial plan which includes:

  • monthly (at least for the first two years, then quarterly) P&L, balance sheet & cash flow with
  • a bottoms up projections of sales
  • hiring plans by specific job function
  • a summary of key assumptions, and
  • convenient adjustment of those assumptions so their effect on cash needs can be easily observed.

 

Bear in mind that even though they portray themselves as consummately rational players, investors—just like car buyers—can fall in love.  And if so, may overlook a deficiency in one or more of the above.  But more likely, they may have felt the burn of falling in love in the past and may therefore place the bar in one or more of these categories unrealistically high to avoid reliving that pain, even if it means missing some sweet investment opportunities.  So be prepared for that reality, and as a result, plenty of dating.

Burn the Boats

May 18th, 2008

Twice in recent weeks, I have spoken with pre-funding entrepreneurs with excellent plans and prospects who failed to embrace an essential rule of entrepreneurship: “burn the boats.” Famed conquistador Hernán Cortés literally burned his boats to make success an imperative as he arrived at Vera Cruz in 1519 CE. I first learned of this expression in the context of the attitude required for a US tech company to successfully enter the Japanese market. It applies dramatically more so to would-be entrepreneurs. Being an entrepreneur is about not fitting in—at least not by mainstream societal standards. It’s about challenging the norm; daring to be different; aspiring to greatness. And so the entrepreneur faces myriad, “keep out,” “danger” and “turn back” signs along the road to success. Most of these come in the form of well-intentioned (typically from family and friends) advising caution, taking safer routes. Some represent insidious attempts by people who—for whatever selfish reasons—wish mediocrity upon us rather than success.


To succeed, hopeful entrepreneurs must “burn the boats.” Create the reality that here is no turning back. As Jedi Master Yoda coaches young Luke Skywalker, “Do, or do not. There is no try.” Commit. Cut off escape. Create the imperative of success. Tell as many people as possible that the boats are burned. By communicating that to your sphere, the social fabric around you switches from timidity and caution to offering unflagging support to you in your venture because you’ve made it clear you’re basically effed if you don’t succeed.


Many a would-be entrepreneur naturally gravitate toward a “safe” approach of a hedged bet, or a built-in “plan b.” I maintain that doing so, while “prudent” and “responsible” by most people’s standards, naturally compromises prospects for entrepreneurial success. That’s because “most people” aren’t entrepreneurs. It’s not easy; if it was, everyone would do it.


Failing to burn the boats reverberates not only in your social network, but in your business context as well. Customers, without knowing so consciously, will detect and respond in a way appropriate to tentative commitment. Candidate investors doubly so. Advisors—who contribute their valuable time more out of love of the game than rational expectation of remuneration—will hold back from giving as much as they might, again responding in kind to a perceived less-than-100-percent committed entrepreneur.


So, if you really want to be an entrepreneur, go burn your boats. Make it life or death. Make every day real. Go for it!

Who Needs Plans?

September 3rd, 2007

Actually, we all do.  Two recent posts, the original by Dushan Wegner and a seconding one by 37signals suggest that planning is not so important–instead, just focus on your skills and a problem.  I applaud identifying both skills and problem definition as being crucially important.  Probably the single biggest failing in Silicon Valley, is poor problem identification.  Achieving clarity of just exactly what problem we’re solving and why it’s valuable to do so, has a powerful focusing effect on the initiating organization, forsaking all other unessential activities.  And once that problem is identified, focusing on the skills necessary to solve that problem, creates a multiplying effect.  But I humbly suggest that this does not let us off the hook on planning.  Among other examples, Wegner’s supports the no planning required thesis with “Steve Jobs didn’t plan to invent the iPod.”  Maybe in 1980 he didn’t, but I guaranty you in 2000 he did.  You can bet Steve had a clear problem statement, he looked outside the company for some of the skills necessary, and yes, he had a plan.

Now, do you need a professionally typeset, printed and bound business plan to succeed as an entrepreneur?   No, of course not.  But you’d better have spent some energy thinking about how you get from here to making money.  You need to think about how many people in which department you need at each stage of the game to have a balanced work flow within the organization.  Think about how many support people are reasonably need to support a given level of product sales.  How many home office people needed to support a given staffing of field sales folk?  What does my revenue profile look like as we add sales people?  And so on.  Doing this in your favorite spreadsheet is a good idea.  Ten slides in your favorite presentation program, shared regularly with the whole company works wonders to keeping everyone on the same page and identifying assumptions or beliefs that may no longer hold.

But Wegner is correct to be suspicious of plans.  And taken for the hyperbole that it may be, his post stimulates good thought.  But should you obsess about the plan?  Do you do nothing except plan until the plan is perfect?  Do you stick to the plan dogmatically?  No, of course not.  A plan is always a work in progress; a way of communicating to the organization about resources, relationships between those resources, and goals.  I respectfully suggest that perhaps the biggest danger of plans lies in organizations that fail to follow two key principles:

  • It’s okay to be wrong; not okay to stay wrong
  • Be present to what is, not what should be or what could be, but what actually is

See my next post on these two.  In the nutshell, as long as you have the courage to admit when you’re wrong, or that something in the plan is wrong, and fix it, you’ll be fine.  As long as you remain conscious to events and context around you, like the market that’s no longer there, then you’re much better poised for success than if you didn’t plan in the first place.  So plan away!

Eight Kinds of Smart

July 9th, 2007

I’ve long observed people to possess many kinds of intelligence and everyone comes to the table with their own unique blend. This fact bears heavily on my recruiting strategy for start ups–both at the company level and at the department level. Namely, I actively strive to identify and recruit a diversity of intelligence, culture and style to staff the start up. I believe this conscious attempt at diversity maximizes the organizational intelligence of the firm and therefore the potential for the start up to succeed.

The business plan presented to the Series A VCs usually shows bold strokes on canvas at best. As the company moves toward achieving market fit, having the broadest possible organizational intelligence, maximizes potential to achieve that all important signpost. By the very nature of entrepreneurship, the firm navigates previously uncharted waters. The path to market fit presents many cues and hints to the start up–some blunt, some subtle–along the way. Intellectual diversity maximizes the odds the organization will actually hear those messages. The key question and challenge for the leadership is to balance being tuned to these voices while maintaining a steady hand on the rudder. The leader needs to embrace something I often refer to as the “it’s okay to be wrong; not okay to stay wrong” principle (which will be the subject of a future post).

Embracing this diversity of intelligence, culture and style carries its own burden. It can be harder to achieve consensus as the organization processes and integrates a broader array of perspective. What’s the best glue to hold all of this diversity together? Values. Put the values up front. Get everyone to salute them at the get go, and revisit them in times of stress. And use them to navigate those troubled waters when the market feedback cuts across the lines of the business plan.

I believe an organization of homogeneous intelligence is more likely to fall prey to saluting “the king’s new clothes” and failing to integrate market feedback.

Let’s examine this principle at the department level for Sales. In the early going, stalking market fit, a sales force full of diversity casts the broadest possible net. And not just “eight kinds of smart” diversity, but diversity of experience in industry, price point and sales model because despite an outward appearance of confidence, we really cannot know for sure what will work best. Despite Marketing doing a terrific job crafting our product strategy and go-to-market plan, until we actually get some sales, it’s just a plan. And with a diverse sales team, we naturally and organically try a much broader mix of ingredients in the sales process with far greater odds of identifying a formula that catches fire. And once we see that happen, if we analyze what it is about that combination of experience and approach that’s creating the success, we can then aggressively go hire more folks with that mix.

This highlights the natural drawback of hiring a rockstar VP of Sales who brings his entourage. It’s a high stakes gambit that’s not a sure bet. Assuming this entrepreneurship delivers something truly new, what worked in the old company may not work in this one. I prefer hiring an initial sales force that’s more of a mixed bag.

Values Myth No. 1: Articulating Values Creates a False Sense of Superiority

May 20th, 2007

Some people worry that the process of articulating a set of core values risks creating a kind of “holier than thou” mentality. I think this concern originates from a subtle but significant misunderstanding of how to go about discovering core values. The task of identifying core values is not about stating those values you would like to be known for. And perhaps an intended outcome of ithat approach could be a false sense of importance or superiority. Rather, in my experience, the most effective values articulation process centers on digging deep to identify those values and beliefs about work life the individuals in that organization do truly and authentically hold dear to their heart. Some people experience difficulty with this approach; finding it easier or more comfortable talking about those things they wish they were. But the persistent and recursive effort to zero in on those values we authentically hold and follow can be one of the most rewarding experiences achievable in work life.

Doing so from a place of confidence that these authentically-derived values will become a publicly respected and expected code of conduct, unleashes peoples’ power to act. It clears the cloud found in so many organizations of just exactly what operating principles are expected whether explicitly or implicitly. “It’s not personal, it’s business.” “Business is war” and other commonly repeated conventional wisdom leave ordinary good people confused about what is expected of them by their leadership and therefore can result in hesitation to act, constricting what could otherwise be a natural flow of results.

The truth about identifying an authentic set of core values through honest introspection is that they do not make either the individual or the organization doing so any better than anyone else. They may result in the organization enjoying a clearer sense of self-identity, but not an increased sense of importance. The key point is that these are our values and they are important to us. Properly integrated into the organizational fabric, in times of stress or ambiguity about what is right or how to proceed, core values can serve as a much-needed and strength-giving guiding light.

The Values Vacuum

February 24th, 2007

A technology company CEO acquaintance recently told me he didn’t consider it that important to articulate core values for his start up team. It struck me speechless as I could not imagine how articulating values don’t matter. Nor did I have a ready made rationale for why it should. Shame on me. Today it hit me. Nature hates a vacuum. In the absence of an authentically stated and published set of core values, the organization–being a culture of people–will publish its own un-written values. They may or may not be what leadership had in mind. My experience in business tells me that people in general want and deserve better. Most people want to be–and appreciate being–held to a higher standard. In the absence of a code of beliefs to define the organization, the organization defines itself along the path of least resistance, losing soul and purpose along the way.

Only Positive Values Work

September 29th, 2006

A golfer poised at the tee who mentally admonishes herself to “don’t hit it in the water” will invariably see a splash in short order. Some contend that the human mind-body system does not comprehend negative constructions and therefore coach players to structure their self talk in positive frames as in “hit the green!”

And so it is with corporate values. They too should be set in positive terms. We believe in X. Treat people like Y. Honor agreements as Z. As much of an avid fan of Eric Schmidt and Google as I am, I nonetheless fear their choice of a negatively phrased corporate value (“Don’t be evil”) may ultimately do them–and their community–great harm.

Macolm Gladwell in The Tipping Point holds that people are neither inherently good or bad, but that context plays a huge role in how an individual behaves (eliminating graffiti in NY City subways dramatically cut crime). Well-articulated core values can set a powerful enabling context within an organization to achieve results well beyond the norm.

Ask people about their experience interviewing at Google and you will be treated to stories of “we’re at Google and you’re not” attitude. Probably pretty low on the “evil” scale, but because the intent of the founders was not framed in the positive, otherwise fine respectful individuals drift to this kind of behavior which will integrate over time into corporate postures which carry far more serious consequences.

One can easily understand how “don’t be evil” could have been earnestly, honestly adopted as a righteous battle cry in the early going at Google. They must have sensed that they were on to something big and perhaps been apalled at some the heavy-handedness exhibited by Microsoft. But with the benefit of time and experience and in the spirit of “it’s okay to be wrong; not okay to stay wrong” I call upon Eric, Larry and Sergey to recant their negative value and replace it with positive, easy-to-visualize targets. They will do their company, their investors and their community a world of good if they chose to do so.

The Art of Delegation

August 18th, 2006

I’ll share with you one of my top five most valuable lessons from grad school. Whenever you delegate a task [to anyone--be it a peer, subordinate or superior] the transaction should consist of the following structure: how much, of what, by when and follow up. Those four things–properly and consistently followed–will make you an effective executive. It’s amazing how simple it is, but I’m here to tell you how powerful it is, and how surprisingly few follow it. A little more detail:

  • How much: provide expected quantity or depth of the completed task. do you want detailed or summary review? Two pages of written comments? Five minutes of review? An hour of their time? You get the idea.
  • Of what: clearly specify the object of the delegation. what is the output or the outcome of the delegation? Equally important in some cases is to specify what’s *not* included.
  • By when: perhaps the most often overlooked component of a delegation is specifying when you need it completed. Specifying a due date is what converts a positive intention into a committed agreement. Successful executive create very clear agreements and they focus on keeping them as well.
  • Follow up: by accepting the obligation to follow up, we remind ourselves that delegating does *not* change the responsible party. The person who *gives* the delegation remains responsible, not the person who’s received it. In my experience, this point is lost on many managers and they adopt the fallacy of blaming the delegated-to party for not performing. This pattern is probably responsible for more ineffective organizations than any other. So if the delegator retains responsibility, they need to “follow up” meaning, at some reasonable interval prior to the agreed due date, they touch base with the delegatee to ask “how’s it going?” So that any snags can be discussed / resolved or if the delegatee is struggling to meet the due date, etc. By accepting this step as an integral part of delegation, it makes the delegator more conscious of the relationship and its dynamics [as in I'm still responsible for getting this done, so I better follow up] which all by itself makes delegation more effective.

So to review, the essential four steps of effective delegation are “how much, of what, by when, and follow up.”

SteelToe Creative

August 16th, 2006

Later this month, my little sister plans to launch her new boutique graphic design studio, SteelToe Creative in Manhattan. She’s insanely humble about it, but as you can see from her website itself, and the example work shown, she’s incredibly talented. Early clients are in for a treat and great work at great prices from an emerging force in the graphics world. Those are her boots BTW. She’s worn them for longer than, well, let’s just say she’d not forgive me for saying even approximately how long :) . Another entrepreneur in the family–yea!!