Q: Side Payment Requested In Negotiation

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

Q: We have been in customer discovery for a few months and have a situation in a negotiation that I am not sure how to deal with. A decision maker at a potential customer says he believes that our product can help but it’s not addressing a burning problem. The wrinkle that I have not encountered before: he says he would like to pursue this idea on his own so he wants us to compensate him for the ideas he is bringing. Any advice on how to look at the situation or how best to handle it?

Some Questions to Consider:

  • Who owns the ideas that he gave you?
  • Has he disclosed them to his company?
  • Are they his ideas or the company’s property?
  • Have you signed a non-disclosure either with him personally or with the company?
  • Did he give you the ideas freely or did he ask to be paid before he disclosed them?
  • Are there patents involved or does he plan to patent them?

If he is asking for a personal payment made to him, and not to the company, but it’s something you plan to sell to his company then you are walking into an ethical minefield. If he plans to pursue them himself it’s probably better to let him go on his way and talk to other folks who are not conflicted.

Act As If Everything You Do Will Become Public

As a rule of thumb it’s best to act as if everything that you do will become fully know to all of the parties involved or affected by your actions.  This side payment request does not sound like it would pass that test the way that you have described it.

If his company is not aware of the fact that he has ideas for improving internal processes or workflows and he is trying to sell them to you there are some potential conflicts there.

Normal Negotiation Flow For New Technology

Normally what would happen is that they would disclose to your their needs, specific ideas for functionality and perhaps implementation options, constraints that your solution  has to observe, and other relevant factors. You would either develop a custom product that is their property (work for hire) or you would develop a product you could sell to them and to others. The product might be sold at a discount to them to reflect their contribution, they might ask that you not sell it to named competitors for a a period of time (6,12,24 months).  In the first case you would be developing a custom implementation, in the second case you would be developing a solution that they would like to become an industry standard–perhaps after enjoying a temporary period of advantage over competitors–and they want to spread the cost of development across many players in the industry.

You Normally Don’t Make Side Payments

You don’t normally make side payments to individuals. One exception might be that the other party wants to leave his current job at your prospect company and come to work directly for you. But you want to be very careful about making payments to employees of firms or government agencies that you are trying to do business with. The employer may view it as a bribe or kickback. This is also true for offers of stock or stock options in your firm and payments to relatives or entities controlled by the employee but not part of the prospect company.

Related Blog Posts

  • Honesty In Negotiations
    I always assume that at some point in the future the folks I am negotiating will know the full truth of the situation and that very few secrets remain that way for long.
  • Building a Business Requires Building Trust
    Working with bootstrappers sometimes puts us on teams that are in desperate circumstances. Where they are able to translate time pressure and resource starvation into a bias for action from a change in perspective they often succeed–or at least move beyond the current crisis: success, like the horizon, is an imaginary line you can approach but never seen to cross. But where they use it as an excuse to take shortcuts that abuse prospects trust we sometimes have to part company.
  • The Lucky and the Wise
    It can be hard to assess whose advice to take about your business. One reason for cultivating at least a kitchen cabinet of informal advisors if not a more formal advisory board is that a diversity of perspectives can normally provide more insights into opportunities, risks, and options for managing them. Advice from a lucky entrepreneur tends to be very specific and suggest a “copy exactly” model, a wise entrepreneur will offer principles and several alternatives with one or two approaches recommended as most likely to succeed or least risky.
  • Treat Social Capital With The Same Care as Cash
    Trust Doesn’t Scale, It’s Knit by Aligning Actions With Prior Commitments

Thought Leadership: Rotary Club Four Way Test

Written by Sean Murphy. Posted in Thought Leadership

When I spoke on Thought Leadership at the San Bruno Rotary Club on August 6 this “four way test” was printed on all of the placemats. It was the first time I had encountered it and I found it a useful insight for evaluating a course of action.

Of the things we think, say or do:

  • Is it the TRUTH?
  • Is it FAIR to all concerned?
  • Will it build GOODWILL and BETTER FRIENDSHIPS?
  • Will it be BENEFICIAL to all concerned?

As I have reflected on the event in the interim I realized that this simple test, developed by Herbert J. Taylor in 1932 to turn around his failing company, was a great example of thought leadership. I had defined thought leadership as the ability to

Discern the important events and trends at work in the present, predict their likely effects, and offer perspective and actionable advice in time to have an impact.

This test offers a way to detect whether an organization or community is healthy. If people are not able to tell the truth, are not fair to other stakeholders, are not promoting goodwill and friendship, and are not seeking out comes that are generally beneficial, then the organization or community will not thrive.

References

Few Against Many Requires Focus and Perseverance

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, skmurphy

We Happy Few

The fewer men, the greater share of honour. [...]
We few, we happy few, we band of brothers;
Henry V in Act IV Scene iii 18–67. “St. Crispin’s Day speech”

A college kid in a dorm room starts assembling and selling person computers.. Two college dropouts–or recent graduates–start building hardware in a garage. A woman starts a software consulting business in her second bedroom, then creates a software product. Four men in a pie shop sketch a design for a personal computer. All startups by definition start small and attract founders who welcome the independence. Perhaps they have failed in a larger  firm or they have become disillusioned working in one, perhaps they have never worked a large company and have no idea what’s really involved.

These startups often face competition from established incumbents who have more people, better financial resources, and relationships with customers. Their success in a niche can attract the attention of larger players either intentionally through their messaging or when prospects they have approached turn to existing vendors to provide similar functionality.

Marathon Not a Sprint

First time entrepreneurs often romanticize the speed and power of working in a small team, but experienced entrepreneurs understand that established firms often fight back very effectively: no market of with any value is uncontested and it’s going to be a marathon not a sprint.

“History seems to indicate that breakthroughs are usually the result of a small group of capable people fending off a larger group of equally capable people with a stake in the status quo.”
George Heilmeier in “A Moveable Feast” [PDF] 2005 Kyoto Prize Lecture

The team has to set a sustainable pace from the beginning. This often means not only work/life balance–keeping all of the critical commitments you have made to friends and family in addition to your co-founders–but work/work balance: finding a way to generate revenue, to bootstrap, while you are exploring the market and building the first and sometimes subsequent version of your product. Not every new product is an immediate success.

Startups are incredibly hard work. They require that you maintain good relationships with your family and friends and continue to participate in the communities you are a member of so that you can get support and useful perspective when you need it. Very few real products are built in a (long) weekend or a week or even a month or two. Plan for at least nine to 18 months of hard work where there are a number of “sprints” that are a few days to a week of concentrated work. But the team has to be able to sustain creative problem solving for a period of probably two years before it’s clear you have traction, at which point the game gets much harder as your competitors start to go to school on your success.

Cameron Moll explores the challenges of a team of two or three competing with a team of twenty in “Things Take Time

The team of twenty has quantity on its side — more hands and specialists to execute the work. With that, of course, comes all the red tape, political baggage, and countless meetings that accompany such teams and the organizations that employ them. Quantity suffers at the hand of seemingly endless structure.

The team of two or three has independence on its side — they call the shots, whenever and however they choose. With that, of course, comes all the requisite components for supporting and maintaining the thing they’re creating. Customer support, billing, advertising, blogging, tweeting, client and customer acquisition, and the like. Time suffers at the hand of a seemingly endless to-do list.

The independent team soon realizes that speed isn’t a luxury; its currency is late nights and long weekends. For those who prefer to keep a semi-regular schedule and who have other things to care for outside of work, we eventually learn to accept that things just take longer than we hope they’d take. Problem solving takes time. Details take time. [...]

I’m learning, rather forcibly I suppose, to be okay with things taking time. I’m also learning that often you end up with a better product when you take your time to get all the big and small details just right. It’s time well-spent.

It’s OK to take this time if you are in direct communication with customers who are willing to pay for the product. It’s a mistake to spend all of your time in the workshop if you have not had a number of conversations with prospects and closed some opportunities.

Avoid The Strong Points Of Established Firms

A larger company can work a startup into the ground unless you are careful in your choice of product and niche market: a frontal assault is typically beaten back. Startups have to choose how they will compete very carefully. In the “Bootstraper Manifesto” Seth Godin lists five key leverage points that many established companies enjoy: distribution, access to capital, brand equity, customer relationships, and great employees. Here is a brief explanation of each and some approaches that a startup can use to counter these advantages.

  1. Distribution: they are able to get the product in front of the customer.
    Counter: Sell directly, or find partners unwilling to work with larger firms
  2. Access to Capital: they can borrow a lot of money.
    Counter: Frugality, be smart about which problems you tackle, leverage existing team expertise.
  3. Brand Equity: if the prospect already knows about the company and the product it substantially reduces their perception of risk in making a purchase.
    Counter: go to firms who are unattractive to larger firms or not well served by them.
  4. Customer Relationships: especially in B2B with approved vendor lists and existing contracts.
    Counter: chase smaller deals, chase deals where you bring enough advantage someone will fight to put you on the
  5. Great Employees: talented people with low tolerance for risk are delighted to work in established firms. Entrepreneurs greatly overestimate most people’s appetite for risk, especially as passengers in their race car.
    Counter: provide opportunities for folks with appropriate experience who may be less desirable to larger firms. Examples of this might be older engineers, women who want to work part time because they have small children, people with less experience but more enthusiasm for learning.

More generally you need to configure your business model so that you are either pursuing opportunities that are less attractive to larger firms or your product violates one or more key requirements for their business. This may mean:

  • Chasing smaller deals to get traction and establish your brand.
  • Not implementing some functionality that your competitors have that your prospect don’t find valuable, enabling you to get to market faster and at a lower price.
  • Providing additional services that a larger firm either doe not have the expertise for.
  • Providing additional services that won’t necessarily work at scale but allows you to further differentiate your offering for your target nice.
  • Configuring or customizing a version of your product more rapidly or more completely than your competition.

Focus and Perseverance Means Saying No

Fast Company called work/life balance “bunk” a decade ago because “hungry” labor was going to work us into the ground. If you are able to substitute working smarter for working more intimately with customers you can likely avoid this fate. Successful bootstrappers remain open to possibilities, especially the possibility that they are mistaken in one or more of their business hypotheses, but maintain focus: they explore many options but say yes to only a few.

One of the reasons I am excited about Discovery Kanban as a model for not only larger firms but startups is that entrepreneurs, especially bootstrapping entrepreneurs, have to husband their resources but find a way to explore the market. This means being explicit about the amount of effort that will be invested in developing and exploring options, and being very crisp on commitments. Discovery Kanban offers a framework for managing risks, options, probes, and committed projects from a consistent  perspective: we can only focus on a few things at a time, what are they?

Related Posts

David Binetti On The Mind of the Entrepreneur

Written by Sean Murphy. Posted in Customer Development, skmurphy

In the mind of the entrepreneur the future is obvious and imminent. This  “reality distortion field” can be useful for making a better future possible, but it inclines the entrepreneur to minimize adoption risk–people will see the benefits of my product immediately and adopt it–and to be impatient. Customer development techniques allow you to identify expensive false positives for potential markets and to refine your approach.

I have been reviewing the presentations from Startup Lessons Learned 2010 and 2011 again and realized that I had never blogged about 2011 presentation “Lessons Learned Pivoting Votizen” by David Binetti (@dbinetti). His key take-away on the value of a customer development is that is helps the entrepreneur avoid expensive false positives, in particular the kind that can happen when you fall victim to your own reality distortion field and are overoptimistic about market risk.

Clip For The Mind Of the Entrepreneur

This clip starts at the 5 minute 40 second mark in David Binetti’s presentation at Startup Lessons Learned 2011 and gives a little context before “Phrenology of the Entrepreneur” slide shown below.

Slide For Phrenology Of the Entrepreneur

Here is the deck starting at the “Phrenology of the Entrepreneur” slide (19).

Related Posts

Update Aug-21: Source of the Phrenology Image this blog post from July 29 2008 on BzzAgent blog: Phrenology of the Entrepreneur

Having worked with several entrepreneurs throughout my career, I’ve noticed precisely nine common traits that unite them together and distinguish them from the rest of us. But what’s particularly interesting is this: just as these characteristics unify entrepreneurs into a discrete group, so too do they corral those who work for them into a community of their own. You see, entrepreneurs inadvertently create a culture in which the staff that survive bond over the realization that it is not each of them that is crazy.

Enter Exhibit A: This post. I wrote this post because our entrepreneur/leader constantly complains that too few blog posts are being submitted. I decided to write minimal text, and instead let the image speak for itself. After reviewing the post, our entrepreneur/leader informed me that “we” (another baffling entrepreneurial habit is to use plural pronouns when assigning tasks to an individual) need to add more text to make this post more about “the business” (code for “the entrepreneur,” himself?). So that’s what I am doing. And, in doing so, I have found myself reconsidering the image, itself. Perhaps the size of the rearmost lobe (labeled “self-esteem,” which was polite for “ego”), should be, err, adjusted.

 

Direct link to image http://www.bzzagent.com/blog/wp-content/uploads/2008/07/phrenology-of-the-entrepreneur.jpg

Don’t Get Distracted Raising Venture Capital

Written by Sean Murphy. Posted in 1 Idea Stage, skmurphy

It’s not a mistake to accept venture capital if your business merits and requires it for growth. Don’t get distracted seeking it until then.

“The seductive narrative of Silicon Valley stars a genius-hero who goes on a journey, overcomes myriad obstacles, has a flash of insight and is rewarded by wise and benevolent investors with Series A funding. This narrative is bullshit, but it’s everywhere.

Venture capital is not a rags to riches story. It’s the inspiring tale of redeploying resources from a lower- to a higher-performing asset class. There’s nothing wrong with that – I find it kind of magical – but let’s not pretend we’re doing something else. In particular, let’s not pretend that this is an engine for social justice. You need a separate corporate philanthropy branch for that.”

Rachel Chalmers “Five Reasons Not To Raise Venture Capital

Here are her five reasons

  1. You probably won’t get a fair hearing.
  2. Raising venture capital doesn’t make you a good person.
  3. Most companies won’t ever generate venture outcomes.
  4. When you raise venture, you narrow your options.
  5. Venture math is a harsh mistress.

I think she misses the real top five:

  1. It’s not saying no to a real term sheet that is a mistake, it’s wasting time seeking investment instead of learning about the market.
  2. Writing a business plan or business model canvas is not nearly as useful as writing your customer interview questions or a one page sales pitch. Getting feedback on either  from customers will tell you more than feedback from a VC on a business plan.
  3. Asking prospect for money for an MVP tells you much much more about the market than any feedback from a VC.
  4. What can sound like advice on direction from a VC is actually a no. For example:  “this is interesting but we think addressing problem X or Market Y is more promising, think about it and come back and talk to us again.”)
  5. If you think money will solve your problems, you don’t have a good handle on your problems.

Affluenza victims, regardless of their socioeconomic level, falsely believe that money can solve all their problems.
Jon Winokur

Related Posts

 

 

Direct Mail: Letters and Postcards Still Work

Written by Theresa Shafer. Posted in Lead Generation, skmurphy

Direct Mail: A Letter With a Stamp Is Not Spam

In advertising it pays to be different. Letters and postcards with real stamps get through.

With everyone getting some much email SPAM, direct mail can be a way to differentiate yourself.

Postcards Work Too

We have used postcards to announce events where clients will be speaking or exhibiting. They have been very useful for raising awareness, increasing attendance at the event, and triggering a few phone calls. They don’t have to be opened to be read and are an inexpensive way to send a color image.

Getting Started

  • Consider using unique URLs or phone numbers if you really want to track effectiveness.
  • You can rent mailing lists or use your own.
  • Because of the cost of this method you need to be careful to debug the message in advance: consider small targeted mailings, e-mail tests, adwords tests, or feedback from a few customers and prospects if time is short.
  • We have used Overnight Prints and VistaPrint for printing as well as more than one visit to Fedex/Kinkos when time ran short.

Consider direct mail as an option for the target prospects you are trying to reach.

Arun Kumar: 9 Lessons Learned Bootstrapping Kerika

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

I interviewed Arun Kumar in 2012 on his experiences bootstrapping Kerika. It’s a long interview but really gives you a sense of his journey as an entrepreneur, his insights into the future of global teams and how they will collaborate, and a candid list of lessons learned. Here are nine key take-aways that he offered in that interview from bootstrapping Kerika since 2002.

Nine Lessons Learned Bootstrapping Kerika

  1. Don’t spend too much time on market research.  After some point, you are not discovering anything new; you are just hearing the same points being rephrased in different ways.  Move faster into building your first couple of versions.
  2. If the feature is really important, it’s not free. Be very careful about what open-source products or libraries you incorporate into your own product.
  3. Watch users where possible; don’t rely upon them to tell you what they are having difficulties with.  People often don’t articulate problems if they think they will look stupid in doing so, and sometimes people don’t even realize what problems they are having.  With face-to-face contact and conversation you can find out what people want to achieve, which is often different from what they are complaining about.
  4. Users will use your product in ways you never considered.  That’s a good thing. Even if that particular use case wasn’t the one that you envisioned originally, that’s an opportunity not a problem.
  5.  You can’t push on a string: when you are trying to find your product-market fit, you need to find a use case where someone is pulling on the other end.
  6. You will almost never fire someone too soon.
  7. Get all the details right.  Concepts are great, but execution is what matters.
  8. There are no instant successes: every successful company has a revisionist history that makes its founders look unusually brilliant.
  9. You can fail by misfortune, but are unlikely to succeed by chance.

Related Posts

 

Ilya Semin on “Bootstrapping DataNyze to $1M/ARR” Sep-5-2014 in Palo Alto

Written by Sean Murphy. Posted in Events, skmurphy

steaming hot coffee and serious conversation with bootstrapping entrepreneursIlya Semin, founder of Datanyze, joins us at the Palo Alto Bootstrapper Breakfast 7:30am on Fri-Sep-5-2014 at Hobees in Palo Alto. Ilya will share what he learned bootstrapping Datanyze to $1M+ ARR and 9 employees. DataNyze provides competitive intelligence for Web analytics, Widgets, CDN, DNS, and related firms. It can answer questions like “Who are my competitor’s biggest customers?” and “Which customers are evaluating one of my competitors?”

Where: Hobees, 4224 El Camino Real, Palo Alto, CA
When: 7:30am to 9am Friday, September 5, 2014
Cost:  is $5 in advance and $10 at the door plus the cost of your breakfast, tax, and tip.
Register: http://www.meetup.com/Bootstrappers-Breakfast-SV/events/198423522/

Limited Seating please register in advance.

More On Ilya Semin and DataNyze

John Foster McKenna 1990-2014

Written by Sean Murphy. Posted in skmurphy

John Foster McKenna: the tragedy of death at an early ageJohn Foster McKenna: December 4, 1990 – August 8, 2014

“Man that is born of a woman hath but a short time to live, and is full of misery. He cometh up, and is cut down, like a flower; he fleeth as it were a shadow, and never continueth in one stay. In the midst of life we are in death…”
Book of Common Prayer: Order for the Burial of the Dead

Theresa and I met with John Foster McKenna at his father’s request about four  years ago. He was contemplating a career in business after college and  his father asked us to offer our perspective on sales and marketing and give him advice on books, types of courses, and  companies to consider. He was an earnest and direct young man, possessed of an athlete’s grace,  who was clearly willing to work hard and would likely prosper in whatever he set his mind to.

John McKenna was home for the holidays in 2012, relaxing in a touch football game when he suffered a seizure for the first time. I blogged about the events in “Good Fortune: Grandfather Dies, Father Dies, Son Dies” partially as a way to process them. In February 2013, his father  started a blog to keep friends and extended family informed of what was happening with his son’s cancer.  John underwent aggressive chemotherapy which brought a remission that allowed him to finish his education and go through college graduation.

John Foster McKenna passed away on August 8, 2014 after a twenty month battle with brain cancer. John lived his life in San Jose, attending The Harker School, Bellarmine College Preparatory ’09, and Gonzaga University, Bachelors of Business Administration ’13. He is survived by his parents, John William McKenna and Melanie S McKenna, his grandparents John Eugene McKenna and Marilyn McKenna, and numerous aunts, uncles and cousins on both the East and West coasts.
John McKenna Obituary

Visitation and Funeral

If you knew John or are a friend of the family there will be visitation hours at Darling-Fischer Garden Chapel, 471 E. Santa Clara St, San Jose on Wednesday August 13th from 4-9pm, with a Rosary at 7 pm.  On Thursday, August 14th there will be a Mass of Christian Burial at St. Victor’s Catholic Church, 3108 Sierra Road, San Jose at 10 am.  A reception to continue the celebration of John’s life will be held afterwards.

“The present life of man upon earth, O king, seems to me, in comparison with that time which is unknown to us, like to the swift flight of a sparrow through the house wherein you sit at supper in winter, with your ealdormen and thegns, while the fire blazes in the midst, and the hall is warmed, but the wintry storms of rain or snow are raging abroad. The sparrow, flying in at one door and immediately out at another, whilst he is within, is safe from the wintry tempest; but after a short space of fair weather, he immediately vanishes out of your sight, passing from winter into winter again. So this life of man appears for a little while, but of what is to follow or what went before we know nothing at all.”
Venerable Bede’s “Ecclesiastical History of the English People (London: A Revised Translation With Introduction, Life, and Notes By A. M. Sellar, published by George Bell and Sons, 1907) Book 2, Chapter 13


I came across a quote by Thomas Carlyle that crystallized my sense of loss at John’s death.

“The tragedy of life is not so much what men suffer, but what they miss.”
Thomas Carlyle

Remarks from Rosary Service

John W. McKenna has posted his remarks from the Rosary service here is a key passage but the entire eulogy is very moving and worth reading:

I have often remarked how amazed I have been at the manner with which he responded to his disease and its prognosis. That if it had been me, at the same age as John, there is exactly zero chance I would have responded with anything close to his equanimity. And I know that his ability to persevere is truly a credit to his mother.

In the days since his first seizure, when his friends were with him as they prepared to play football and had to respond to that sudden crisis, to the final night when one of his cousins and one of his friends were with him, Melanie and I have had the wonderful opportunity to see just how much love there was in John’s life. His friends, whether from Little League, our Berryessa neighborhood, Harker Academy, Bellarmine, or Gonzaga, and his family of beloved cousins, were constantly by his side; encouraging him, celebrating the good times, sharing stories or sometimes just being with him quietly. Their goodness and kindness showed us that he was truly blessed.

One thing that made the funeral very different was that about half of those in attendance were in their teens in twenties. It was a moving service and the first hour or so of the reception was also sombre, but then someone started to play some music and it took on more of the ambience of a wedding reception. I cannot imagine John Foster McKenna would have objected. We had all seen his death coming or so long we had all had the opportunity to grieve. John’s remarks end with a quote by Bill Clinton on April 19, 2005 at the ten year anniversary of the Oklahoma bombing that I found helpful:

“Yet, by the grace of God, time takes its toll not only on youth and beauty, but also on tragedy. The tomorrows come almost against our will. And they bring healing and hope, new responsibilities and new possibilities.”

 

Janet Iwasa: Animate Your Hypothesis to Explore Its Viability and Implications

Written by Sean Murphy. Posted in Design of Experiments

I found Janet Iwasa‘s Ted Talk on “how animations can help scientists test a hypothesis” to be extremely thought provoking.

Animation enables you to visualize process that are too small to be seen, even with sophisticated instruments, such as the biological phenomena that that Iwasa shares in the talk. But more importantly, it can  allow you to get a hypothesis out of your head in a way that it can be shared with others, reviewed and annotated.

As she observes near the end of her talk (excerpt from transcript of her talk)

Over the years, I found that animations aren’t just useful for communicating an idea, but they’re also really useful for exploring a hypothesis. Biologists for the most part are still using a paper and pencil to visualize the processes they study, and with the data we have now, that’s just not good enough anymore. The process of creating an animation can act as a catalyst that allows researchers to crystalize and refine their own ideas. One researcher I worked with who works on the molecular mechanisms of neurodegenerative diseases came up with experiments that were related directly to the animation that she and I worked on together, and in this way, animation can feed back into the research process.

Implications for Startups

I think we need to develop first diagrams and then modeling languages to allow us to visualize and animate some key aspects of the challenge startups face:

  • The product roadmap, especially modeling it as a collection of options to manage a set of potential and likely prospects. Discovery Kanban may provide some useful metaphors here.
  • The new product introduction problem: selection of a niche market and insertion and scale inside of a prospect’s firm.
  • The likely paths a negotiation may take, in particular how to sequence negotiations across players and within a firms’ buying cycle.
    In particular how to we model the different facets: you typically have one more contracts or agreements that are written as legal documents, a system diagram, a list of requirements, and a timeline for implementation/roll-out/proliferation to name just a few of the critical but often disjoint definitions of a deal.
  • The evolution of the incentives and outcomes from a business relationship over time. This would extend the timeline and overlay product or feature roadmaps with the customer’s perspective on the likely (or even a range of) requirements over time.
  • The evolution of a market structure over time: what will be the axes of competition and what will be standardized (and commoditized).

I think we will need to start with pencil and paper or a whiteboard sketch just as the biologists did. Roam’s “Back of the Napkin” certainly offers some very useful visual metaphors, as do decision tree models, tornado diagrams, and traditional spreadsheets to name just a few more. We are talking to several teams that are exploring different ways to combine numbers, words, and diagrams that are integrated into responsive models that can be explored (e.g. parameters changed, relationships varied).

Request for Information, Comment, and Proposals

If you are working on something that will allow a team to sketch and animate one or more critical aspects of a business we are interested in talking and exploring how to incorporate your capabilities into one or more of our offerings. In particular if it would enable hypotheses to be modeled and explored, and experiments defined to test or refine the hypotheses.

We will also be offering some on-line workshops, starting with key aspects of Discovery Kanban. If you would like to take part, in particular if you have real business issues that you are wrestling with that you are interested in seeing modeled in a small group setting, please contact us.

Q: How to Apply Lean Innovation Methods To Regulated Industries

Written by Sean Murphy. Posted in Demos, skmurphy

Q: My research focused on the assessment of atherosclerosis in coronary arteries using  Computed Tomography examinations as the imaging modality. I have looked at various aspects of atherosclerosis such as volume scores, automatic extraction of anatomical structures, plaque detection, dual energy CT and plaque distribution patterns. I am new to the lean innovation methods and am having difficulty applying methods like minimum viable product (MVP) in my industry, medical imaging,  which is heavily regulated. I cannot see how to do incremental updates given the level of regulatory signoff required.

We have worked with a number of medical instrument and “medical workflow” startups who face this challenge in different ways. And our work on the BeamWise team has led to a number of conversations with medical imaging and instrumentation companies developing new products.

Lean Innovation: Established Firms Vs. Startups

An established firm with existing customers should invest effort in instrumenting current offerings to get a better handle on actual use and duty cycle, and allow the technicians/researchers/doctors to provide feedback in context (at point of care or point of use) for shortcomings or issues. More simply, take a hard look at how folks are using your current product before proposing something new.

Startups need to separate the challenges of image collection from the usability. For new modalities of image collection you need to work with research groups to be able to get access to tissue samples or live subjects depending upon your application. Often a veterinary or agricultural application is an easier way in than aiming directly at human subject applications, once you have  established the usefulness finding teams that want to work with you on human subjects becomes easier. If your primary worry (or innovation) is more about usability or image presentation then you can work from “canned” image data sets and pay technicians, researchers, or doctors to take part in feedback sessions where they interact with the images produced (perhaps in the context of your user interface)  and give you feedback.

Net net, even though the final configuration is subject to rigorous review you can find ways to test different critical aspects of your product and iterate without having to get final approval.

Consider Attending Great Demo Workshop

You might also consider our October 15-16 “Great Demo” workshop, a number of medical imaging firms have attended over the years and have found that Peter Cohan offered a number of valuable insights they were able to incorporate into their discovery conversations and demos of new products.

You are also welcome to schedule a no cost office hours session if you want to talk further and have us help you design some experiments to move your MVP forward.

A Conversation With Tristan Kromer on B2B vs. B2C Customer Acquisition Challenges

Written by Sean Murphy. Posted in Audio, Customer Development, skmurphy


Direct download from http://traffic.libsyn.com/skmurphy/Tristan_Sean_6-13-14b.mp3

Here is a rough transcript of the first five minutes or so to give you a flavor, I think you will find it interesting if you are wrestling with customer development or customer validation in an early market:

Sean: I am sitting here today with Tristan Kromer, we are going to talk about the differences between B2B an B2C customer acquisition methods.

Tristan: some consumer startups seem to latch onto a particular technique and apply it regardless of context. I am really interested in the different approaches you can use to find B2B customers and where the differences are between selling to consumer, small business, and enterprise.

Sean: B2B the outreach is tailored / artisinal, where the price point or deal value is above 5-10,000. Consumer startups feel this pressure to move to more scalable methods much earlier due. I know one piece of advice you always offering regardless of whether it’s consumer or business is to have conversations with prospects on an ongoing basis.

Tristan: always start face to face, even for consumer. What the consumer folks may call a “manual process.” Because that’s a much more rapid form of connect. Even if you want to have a highly automated sales process, you believe that consumers will see your hero image and read your FAQ and click on the purchase button, that’s a sales process. Your face to face conversation can be roughly analogous: demonstrate the the value proposition, answer questions and then you have an ask. By doing that face to face, analog vs. digital so to speak, you get a lot more feedback and can see when the prospect smiles, frowns, looks confused, etc.. You can apply that feedback to your digital process. For example, when I use this language consistently  it’s getting a much better response. Let me try that on a landing page.

Sean: there is a desire to create scale, to create the digital process, right away. For me it’s much harder to learn from when you have a lot of unknowns. The odd thing is that B2B stays more personal because above a certain deal size you cannot assume you can avoid a negotiation to be able to get the business. There are going to be several serious conversations and at least one serious negotiating session where the value of the transaction is above $10,000.

Tristan: there is also a bias to a longer term relationship on the large dollar B2B purchase. There is an expectation of support that is often not there in a smaller consumer purchase. There is a sense of “you are going to be guy we deal with when we have problems or renew.”

Sean: yes the salesperson has to be viewed as a point of service and as providing value. Your point about a “bias ot a long term relationship” was a good one: I think the enduring consumer brands pay a lot of attention to that as well. With startup sometimes there is so much focus on the ramp that sometimes unfortunately less attention is paid to reputation, brand, social capitial, whatever you want to call it. It’s not so much “we have cool logo” but “our cool logo represents a promise that people can depend on.”

Tristan: I agree: it’s two different things. It’s esthetics vs. trust. You have repated interactions with the firm and now you can
trust them. I have recently been doing some work with large brands and it’s amazing the impact that a trusted brand has on conversations with customers. There is an automatic assumption that it’s going to be a serious conversation.

Sean: does that work against experimentation? Because they feel that they are carying the brand they don’t want to be “too experimental?”

Tristan: it opens doors and you can have conversations that startups find much more difficult to secure. So there can be a bias towards a false positive. But as least you are having conversations you can learn from instead of trying to have conversations. I think you can be aware of the bias and manage for it. But there is fear of failure, but you can compensate for that with “off brand” tests where you don’t identify the brand.

Sean: we don’t do as much “I am from IBM” as “Charlie recommended that we speak to you” and they can check with Charlie and he will confirm it. Or I am a member of this community, I have presented at this conference, I have taken part in this working group. There is a brand effect for smaller startups, but it’s predicated on prior accomplishments or prior
relationships that can be re-activated or leveraged.


Here are some other interesting interviews with Tristan:

Thought Leadership: A Briefing For San Bruno Rotary

Written by Sean Murphy. Posted in Audio, Events, Silicon Valley, skmurphy, Thought Leadership

I gave a talk on “How to Give a Great Demo” in April at the Co-Founders Club and met Elijah Angote, founder of “The Best Notary” who arranged for me to speak at the Rotary Club of San Bruno today. So I have him to thank and the audience knew who to blame. I really enjoyed the talk and felt very at home with the group. Here is the audio for the core of the talk (I have cut intro and and about ten minutes of Q&A)


Or download from http://traffic.libsyn.com/skmurphy/ThoughtLeadership140806c.mp3

Here is a handout from the talk.


Thought Leadership

A Briefing for San Bruno Rotary, Aug-6-2014 by Sean Murphy, SKMurphy, Inc.

  1. What is thought leadership?
  2. Why will it bring you more business?
  3. How do you get started?

Thought Leadership: Discern the important events and trends at work in the present, predict their likely effects, and offer perspective and actionable advice in time to have an impact.

Thought Leadership In Action

  • Advise prospects and customers on how to overcome their most pressing problems
  • Customers bring you their hard problems, prospects ask you for insight on options

How Does It Bring You More Business?

  • A reputation for expertise means that you get called first
    • You can compete on more than price:  expertise acts as a differentiator
    • Encourages current customers to bring you new challenges
      • May lead to new opportunities and even new offerings for emerging needs

Key Practices for Thought Leadership

  • Careful observation, questions, networking
  • Writing and speaking to build influence

Build a Communication Strategy

  • Identify audience / Understand their needs  / Position your message / Promote
  • Measure success: website traffic, mailing list size, inquiries, customers

Execute: Your 90-day Plan Should Address:

  1. What other people say about you
  2. What you say
  3. What you write
  4. Getting found when people are looking

Topics You Can Always Talk About

  • Change: what’s waxing and waning
  • Significance of recent events
  • Checklists to identify or resolve problems

“The future is an abstraction, all change is happening now.”
Marcelo Rinesi

You can only take action in the present.

“I have gradually come to appreciate that the really important predictions are about the present. What is happening right now, and what is its significance?”
Robert Lucky

What Is The Current Situation / What Is Significant About it?

  • Before you can make predictions you have to understand what’s happened.
  • The easiest predictions are based on the “acorns” already planted in the present

Checklists:  Develop A Coachable Perspective

  • Teach customers and prospect to diagnose problems from symptoms
  • Teach prevention and self-service so that they call you for high value problems

Thought Leadership Brings Business

  • You get called first
  • Compete on more than price
  • New opportunities
  • New offerings

About SKMurphy, Inc.: We help you find leads and close deals

Bootstrappers Breakfast www.bootstrapperbreakfast.com

If you are looking or a speaker for your Silicon Valley business group please contact us. I enjoy giving highly interactive presentations to groups  of 12 to 40 people.  I am happy to talk to larger groups but I prefer where there are opportunities for real audience participation.  I also do a number of interactive webinars and workshops for groups who are not based in Silicon Valley so if that’s of interest please feel free to contact me as well.

Q: Is the Prisoners Dilemma A Good Model for Doing Business?

Written by Sean Murphy. Posted in Sales

Q: I am currently working on a degree in Computer Science with a focus on Artificial Intelligence, in particular Machine Learning and Natural Language Processing. My goal is to do a startup after college but while I find the technology aspects straightforward, some aspects of business are challenging.

How do you form partnerships with other people and other companies? I studied game theory last year and it would seem from the Prisoners Dilemma that as long as you plan on never working with that person again it is in your best interest to screw them over. But if you plan on working with them for a long time then you should start by being good to them and then treat them as they treat you (“Tit for Tat“). How do you look at forming business partnerships?

In real life, as opposed to thought experiments like the Prisoners Dilemma, it’s hard to tell when, where, and in what circumstances you will meet someone again. I don’t think it’s ever in your best interest to screw anyone over.

We exist in a web of relationships with membership in overlapping but distinct communities. As entrepreneurs we can be seen as agents of chaos by the status quo but our aim is innovation that leaves society on balance better off.

Of course we have to make a profit for our businesses to continue, but there are other gains that come from entrepreneurship beyond the financial that lead us to invest in our employees education, to invest in our communities and to “leave a little money on the table” when dealing with partners and suppliers in the interest of good will and future relationships.

Business is situated in community and a social context: a good reputation as fair dealer committed to the values of the community, as evidenced by actual kindness and charity will create more value in the long run than treating every transaction as the last one you will ever do with the other party.

Customer Development Surveys Always Suck For B2B

Written by Sean Murphy. Posted in Customer Development, skmurphy

A customer development survey always sucks for B2B: have a conversation instead.

If you are selling to business and you tell yourself “my time is so incredibly valuable” I need to automate my interactions with prospects you are missing the point. The key challenge in the early market is to establish and maintain trust by listening, making and meeting commitments, and following up to very that your customers are satisfied. It’s not so much about punching the most important item on your task list as cultivating relationships with key customers, partners, and employees: all of these start with conversations and are built on trust

Once you are trying to validate what you think you have learned, start making good faith offers. Don’t start surveying more prospects, see if the firms you have already talked to are willing to buy. And if not,  learn why not in a conversation.

Practical tips for how to conduct B2B Customer Development Interviews

Planting Trees: Finite and Infinite Entrepreneurship

Written by Sean Murphy. Posted in Community of Practice, skmurphy

“A young farmer was urged to set out some apple-trees. – No, said he, they are too long growing, and I don’t want to plant for other people.  The young farmer’s father was spoken to about it, but he, with better reason, alleged that apple-trees were slow and life was fleeting.  At last some one mentioned it to the old grandfather of the young farmer.  He had nothing else to do, – so he stuck in some trees.  He lived long enough to drink barrels of cider made from the apples that grew on those trees.”
Oliver Wendell Holmes, Sr. from “The Autocrat of the Breakfast Table

“And if you ask a farmer, however old, for whom he is planting, he will unhesitatingly reply, “For the immortal gods, who have willed not only that I should receive these blessings from my ancestors, but also that I should hand them on to posterity.”
Cicero “Cato the Elder on Old Age

There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.
James Carse in “Finite and Infinite Games

Some people are attracted to entrepreneurship out of the desire to make enough money to live the life that they really want to lead, in effect to retire early and enjoy life. For the most part entrepreneurs are driven by a desire for accomplishment and autonomy, money is a necessary resource for building a company and paying for what you need in life.

“Surprise in infinite play is the triumph of the future over the past.

Since infinite players do not regard the past as determining the present/future, they have no way of knowing
what has begun in the past.

With each surprise, the past reveals a new beginning.

Inasmuch as the present/future is always surprising, the past is always changing.”
James Carse in “Finite and Infinite Games

The more we do the more we learn about our past. Rearing children taught me much about my childhood, becoming a father taught me a lot about my father, and now that I am a grandfather I have a deeper appreciation for what my grandparents went through. My hope is to be a better father, and grandfather, and steward in the communities that I am a member of.

“It is the desire of all finite players to be Master Players, to be so perfectly skilled in their play that
nothing can surprise them, so perfectly trained that every move in the game is foreseen at the beginning. A true Master Player plays as though the game is already in the past, according to a script whose every detail is known prior to the play itself.”
James Carse in “Finite and Infinite Games

Some entrepreneurs are hoping to avoid surprise and the nee for improvisation. They want to buy a “treasure map” that they can use to build a business just like another famous success. There are franchise models that work, but all require had work and improvisation to counter the local variations the franchise template cannot account for.

“To be prepared against surprise is to be trained. To be prepared for surprise is to be educated. Education discovers an increasing richness in the past, because it sees what is unfinished there. Training regards the past as finished and the future as to be finished.
Education leads to a continuing self-discovery; training leads toward a final self-definition.
Training repeats a completed past in the future. Education continues an unfinished past into the future.”
James Carse in “Finite and Infinite Games

Whether you want it to or not, life in a startup will give you an education if you will let it.

“Explanations establish islands, even continents, of order and predictability. But these regions were first charted by adventurers whose lives are narratives of exploration and risk. When the less adventuresome settlers arrive later to work out the details and domesticate these spaces, they lose the sense that all this certainty does not erase the myth, but floats in it.”
James Carse in “Finite and Infinite Games

It can be comforting to work for a larger firm, but whether you realize it or not it has much in common with a startup.  Few markets are predictable even in the medium term (e.g. 5 years) and the need for ongoing exploration and discovery at somewhere between  a tenth and a third of your efforts is a constant even in good times. In turbulent times it may be more like half of your effort.

The things that persist–if they are renewed–are friendships and fellowship, communities of stakeholders and communities of practice. What tress are you planting today that will bear fruit in five or shade in  ten  years? To whom much is given much is required: what you are doing to pay back the sacrifices and investments that have made your entrepreneurial efforts possible?

Sidney Brenner: The Trouble with American Science

Written by Sean Murphy. Posted in skmurphy

Elizabeth Denzig published an interview with Sidney Brenner in February or 2014 in “King’s Review” entitled
How Academia and Publishing are Destroying Scientific Innovation: A Conversation with Sydney Brenner

Here are two excerpts:

Today the Americans have developed a new culture in science based on the slavery of graduate students. Now graduate students of American institutions are afraid. He just performs. He’s got to perform. The post-doc is an indentured labourer. We now have labs that don’t work in the same way as the early labs where people were independent, where they could have their own ideas and could pursue them.

The most important thing today is for young people to take responsibility, to actually know how to formulate an idea and how to work on it. Not to buy into the so-called apprenticeship. I think you can only foster that by having sort of deviant studies. That is, you go on and do something really different. Then I think you will be able to foster it

But today there is no way to do this without money. That’s the difficulty. In order to do science you have to have it supported. The supporters now, the bureaucrats of science, do not wish to take any risks. So in order to get it supported, they want to know from the start that it will work. This means you have to have preliminary information, which means that you are bound to follow the straight and narrow.

There’s no exploration any more except in a very few places. You know like someone going off to study Neanderthal bones. Can you see this happening anywhere else? No, you see, because he would need to do something that’s important to advance the aims of the people who fund science.

I think something similar has happened in medicine with the slavery of interns but neither may be a new problem. The places to look are where progress has stalled and where someone else might be wiling to fund efforts that promise the possibility of a better result.

I think peer review is hindering science. In fact, I think it has become a completely corrupt system. It’s corrupt in many ways, in that scientists and academics have handed over to the editors of these journals the ability to make judgment on science and scientists. There are universities in America, and I’ve heard from many committees, that we won’t consider people’s publications in low impact factor journals.

Now I mean, people are trying to do something, but I think it’s not publish or perish, it’s publish in the okay places [or perish]. And this has assembled a most ridiculous group of people. I wrote a column for many years in the nineties, in a journal called Current Biology. In one article, “Hard Cases”, I campaigned against this [culture] because I think it is not only bad, it’s corrupt. In other words it puts the judgment in the hands of people who really have no reason to exercise judgment at all. And that’s all been done in the aid of commerce, because they are now giant organisations making money out of it.

Anonymous review can mask unqualified or biased answers, risks exacerbated by editors who are not scientifically qualified. The current journal system has much to recommend it but a number of perverse incentives  may be marginalizing the quality of review and feedback.

The entire interview is worth reading, I am not sure what the right answers are to some of his concerns, but as we do more to work with and sell to research scientists I have come to a deeper understanding of Brenner’s concerns.

Start With a List of Customers and Problems That Build on Your Experience and Relationships

Written by Sean Murphy. Posted in 1 Idea Stage, Community of Practice

“Start building network, blog, educating 1 year before you make the leap.
Build community.
The first sales will always be to friends. Make those friends.”
Conor Neill in “Entrepreneur: Start a year before you Start

I think Conor Neill offers this is a great framing for the need to identify the things about your plan that are not likely to change–a problem area, a category of customer–and join communities that are already focused on these. Build on experience and relationships.

He advises “build community” and not “build new community” and I agree, I would build new only where you cannot find existing communities.  If it’s a real customer category or a real problem there is almost always one or more communities formed that are addressing it at least partially. There may be several each using different terminology and focused on a different aspect of the same set of problems, but this is a search you can start well advance in crafting a product.

I don’t know if your first sales come from “friends” but certainly from people that trust you, if you can start the trust building process in advance of the sales process by becoming a member in good standing of communities they are already a member of or by writing or speaking about topics that they are interested in, then you effectively start in advance of the direct sales process.

Build on Experience

Another way to look at this is to “always start in phase two of a five phase plan.” Look into your past experiences and projects for examples of problems solved and relationships that you can build on as you start your new venture. If you are going in to a new area and cannot identify aspects of prior experience or expertise that will have an impact then be careful: you may be attracted to the new new thing without a way to differentiate your offering.

It’s OK to start over from scratch but if you are effectively setting fire to ten or twenty years of experience you may want to look instead at problems and fields that are adjacent or can take advantage of your experience in preference to one where you don’t bring relevant experience. Green fields are seductive because you know the problems of the areas you are more familiar with and can fall victim to the “grass is greener” when speculating about how easy a new field may be.

“An early start beats fast running.”
Michael Bowen (@mdcbowen) “Cobb’s Rules

Quotes For Entrepreneurs–July 2014

Written by Sean Murphy. Posted in Quotes, skmurphy

You can follow @skmurphy to get these quotes for entrepreneurs hot off the mojo wire or wait until they are collected in a blog post at the end of each month. Enter your E-mail address if you would like have new blog posts sent to you.

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“It is not the employer who pays wages. He only handles the money. It is the product that pays the wages and it is the management that arranges production so that the product may pay the wages.”
Henry Ford in “My Life and Work” [Kindle]

h/t Mark Graban

More context from Chapter 5 “Getting Into Production” from “My Life and Work” by Henry Ford

“If every job in our place required skill the place would never have existed. Sufficiently skilled men to the number needed could not have been trained in a hundred years. A million men working by hand could not even approximate our present daily output. No one could manage a million men. But more important than that, the product of the unaided hands of those million men could not be sold at a price in consonance with buying power. And even if it were possible to imagine such an aggregation and imagine its management and correlation, just think of the area that it would have to occupy! How many of the men would be engaged, not in producing, but in merely carrying from place to place what the other men had produced? I cannot see how under such conditions the men could possibly be paid more than ten or twenty cents a day—for of course it is not the employer who pays wages. He only handles the money. It is the product that pays the wages and it is the management that arranges the production so that the product may pay the wages.

The more economical methods of production did not begin all at once. They began gradually—just as we began gradually to make our own parts. “Model T” was the first motor that we made ourselves. The great economies began in assembling and then extended to other sections so that, while to-day we have skilled mechanics in plenty, they do not produce automobiles—they make it easy for others to produce them. Our skilled men are the tool makers, the experimental workmen, the machinists, and the pattern makers. They are as good as any men in the world—so good, indeed, that they should not be wasted in doing that which the machines they contrive can do better. The rank and file of men come to us unskilled; they learn their jobs within a few hours or a few days.

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“You have to roll up your sleeves and be a stonecutter before you can become a sculptor–command of craft always precedes art: apprentice, journeyman, master.”
Philip Gerard

h/t Quotes on Design

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“There will always be a shortage of talented, self-motivated creative professionals who will unquestioningly follow orders.”
James Halliday (@substack)

h/t  Jeff Kingyens

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“A myth about innovation is that it is about big ideas. Of course, in the end you want an idea with the power to transform your core business. No idea ever started out as a billion-dollar one, yet large companies often start out asking for $100 million ideas. But imagine if somebody asked, in month six of e-Bay, “Do you have a $100 million idea here?” Nobody could have told you that. So instead we have to create a lot of low cost experimentation. We need lots of $25,000 and $100,000 experiments.”
Gary Hamel, in an interview with David Kirkpatrick in Fortune Sep-6-2004

Used in “A Viable Business Model Embraces Ebb and Flow as a coda to the section “You Need A Bushel of Acorns, Not a Diamond.”

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“Civilization is a movement and not a condition, a voyage not a harbor.”
Arnold Toynbee

Used as closing quote for “Happy 4th of July

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“Progress begins with the belief that what is necessary is possible.”
Norman Cousins

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“The single rule for building your company culture: your actions are all that matter.”
Heidi Roizen (@HeidiRoizen) in “The Single Rule for Building Your Company Culture

Heidi Roizen  has always had a talent for self-promotion, but she offers practical advice on her blog about looking at a negotiation from the other party’s perspective–in this case Steve Jobs–and the value of planning. See also this profile by First Round “8 Rare Gems from Heidi Roizen on Building a Fulfilling Life and Career.”

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“Values always decay over time. Societies that keep values alive do so not by escaping the process of decay but by powerful processes of regeneration.”
John W. Gardner in On Leadership

I believe that this also applies to startup teams.

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“You will turn over many a futile new leaf until you learn we must all write on the scratched-out pages.”
Mignon McLaughlin in “The Complete Neurotic’s Notebook”

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“Power is not revealed by striking hard or often, but by striking true. ”
Honore de Balzac in The Physiology of Marriage, Meditation V: Of the Predestined

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“Many of us are impersonations of what we know we ought to be.”
Henry S. Haskins

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“When the going gets weird, the weird turn pro.”
Hunter S. Thompson in “Fear and Loathing at the Super Bowl” (Rolling Stone #155, (28 February 1974))

Used as a closing quote for “A Picture is Worth a Thousand CPU Hours.

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“There are two kinds of writer: those that make you think, and those  that make you wonder.”
Brian Aldiss

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“Nothing contributes so much to tranquilize the mind as a steady purpose–a point on which the soul may fix its intellectual eye.”
Mary Wollstonecraft Shelley

Adapted from Robert Walton’s “Letter 1″ in Frankenstein

“I feel my heart glow with an enthusiasm which elevates me to heaven, for nothing contributes so much to tranquillize the mind as a steady purpose — a point on which the soul may fix its intellectual eye.”

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“I make all my decisions on intuition. I throw a spear into the darkness. That is intuition.
Then I must send an army into the darkness to find the spear. That is intellect.”
Ingmar Bergman from “Ingmar Bergman Confides in Students” New York Times, May 7, 1981

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“If you want people to think of you for opportunities, help them connect the dots about you.”
Heidi Roizen (@HeidiRoizen) in “Everything is Relationship Driven

She elaborates with an example that is very applicable to both finding co-founders and asking customers for referrals.

Do not believe, just because you’ve been around a long time and everyone knows who you are, that you don’t still have to do the homework to let your network know about you.

Several years ago, when I was at a point that I wanted to be considered for board of director positions, I sat down and, over the course of eight hours, wrote 150-something individual e-mails to everyone I knew well enough who was on a board, in service of a board, or a C-level executive: “Here I am; here are my board qualifications; here’s a link to my website that explains more about my board service. If you think I would be an appropriate candidate for a board that you work with, please let me know.” That night at a party I ran into someone on the TiVo board, and he said, “I’m so glad you reached out, because I’ve got an opportunity for you.” Even though he already knew me, my request and refresher helped him think of me for this board, which I ended up joining.

Heidi Roizen in “Everything is Relationship Driven

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“The young do not know enough to be prudent, and therefore they attempt the impossible–and achieve it, generation after generation.”
Pearl S. Buck

Used as closing quote in “Three Advantages of Younger Entrepreneurs in B2B Startups

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“The first hour of the morning is the rudder of the day.”
Henry Ward Beecher

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“I believe the major risk of early stage startups is getting customers to buy, and showing that you can sell.”
Conor Neill in “If You Can’t Explain what You do in a Paragraph, You’ve Got a Problem

Used as closing quote for “Successful Bootstrappers Are Trustworthy Salespeople Committed to Customer Satisfaction” Brad Feld originally wrote a blog post entitled “If You Can’t Explain what You do in a Paragraph, You’ve Got a Problem” which is a great rule of thumb all by itself.

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“The eye sees only what the mind is prepared to comprehend.”
Henri Bergson

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“I found I could say things with color and shapes that I couldn’t say any other way–things I had no words for.”
Georgia O’Keeffe

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“Learning requires unlearning.”
L. E. Modesitt, Jr.

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“It was a small boldness, but they count, too. In the cellars of the night, when the mind starts moving around old trunks of bad times, the pain of this and the shame of that, the memory of a small boldness is a hand to hold. We weren’t always cowards. There have been moments for which we needn’t apologize.”
John Leonard in “Private Lives” column Feb-2-77 New York Times

h/t Gwen Branwen (shorter version in Fred O’Bryant’s Quote Collection Volume 6)

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“In my experience, most people don’t schedule their work.
They schedule the interruptions that prevent their work from happening.”
Mike Monteiro in “The Chokehold of Calendars

h/t Neil Perkin  in”Weekly Fish Food, July 18, 2014” See also his “Cycle of Time Suck

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The future announces itself from afar, a tentative sound of things to come drowned in the clatter of the present.”
John Gardner in “On Leadership”

This is the “twitter version” of

“…the future announces itself from afar. But most people are not listening. The noisy clatter of the present drowns out the tentative sound of things to come. The sound of the new does not fit old perceptual patterns and goes unnoticed by most people. And of the few who do perceive something coming, most lack the energy, initiative, courage or will to do anything about it. Leaders who have the wit to perceive and the courage to act will be credited with a gift of prophecy that they do not necessarily have.”
from “On Leadership”  by John W. Gardner.

The long version is quoted in “John Gardner: Leaders Detect and Act on Weak Signals of the Future

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“There’s dangerous temptation in the nostalgic dream, in the expertise of yesteryear. We cannot
live in places that no longer exist.”
Frank HerbertListening to the Left Hand” [subscription required] Harpers Dec 1973

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“Sedate ignorance is the last stage of deterioration.”
Henry S. Haskins

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“Information is cheap, meaning is expensive.”
George Dyson in an interview with Martin Eiermann

h/t @OurCreativeRise.  More context from European Magazine’s “Information is Cheap, Meaning is Expensive” (links added)

Martin Eiermann (@beingandthyme): The challenge is not to gather information, but to make sense of the information we have?
Dyson: Right. We now live in a world where information is potentially unlimited. Information is cheap, but meaning is expensive. Where is the meaning? Only human beings can tell you where it is. We’re extracting meaning from our minds and our own lives.

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“Success is 80% Diagnosis and 20% Prescription.”
Conor Neill title of a blog post

More context from Success is 80% Diagnosis and 20% Prescription

Don’t rush to the solution. You need to go through a good diagnosis process before the listener is ready to hear the solution. If you rush to solution, the listener is not ready to trust you. Do you take time in your meetings to really ensure that everyone shares the view of what the problem is? I have been to many meetings where the conflict is really due to the fact that each person is trying to solve a different problem.

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Nature didn’t tell me “Don’t be poor”; and certainly didn’t say: “Get rich”; but she did shout: “Always be independent!”
Nicolas Chamfort

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“Life in the movie business is like the beginning of a new love affair:
it’s full of surprises and you’re constantly getting fucked.”
David Mamet

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“One of the great disadvantages of hurry is that it takes such a long time.”
G. K. Chesterton

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“It ain’t all coding, selling, and raising money, people.”
Charlie O’Donnell in “Founders Run Amok

More context:

“I hate to break it to anyone, but the creation of a board, the building of a strong legal base, and, to take it a step further, tedious little things like values statements and human resource policies, are all the work of building a real company. Terms that hold founders accountable make them better founders and company builders. It ain’t all coding, selling, and raising money, people.”
Charlie O’Donnell in “Founders Run Amok

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“If someone is making an effort to ignore you, he is not ignoring you.”
Nassim Nicholas Taleb (@nntaleb)

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“A prudent question is one-half of wisdom.”
Francis Bacon

Used as a closing quote for “Tristan Kromer: You Can Tell a Good Advisor by Their Questions.”

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“Coming together is a beginning;
keeping together is progress;
working together is success.”
Henry Ford

h/t 2004 Annual Report for “The Henry Ford

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“Throughout most of my education, I was taught that collaboration was cheating.”
Kristen DeMaria in “Schools Don’t Teach Collaboration

h/t Harold Jarche (@hjarche)

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Hugh MacLeod: How To Scale Successfully

“Scaling your business is all about having more people solve more problems for you.”
Hugh MacLeod

More context from “Six Ways to get People to Solve Problems

Scaling your business is all about having more people solve more problems for you.

Small enterprises can get lost in an awkward teenager phase where they expand a little too fast for comfort. Growing pains aren’t pleasant, but are reduced when employees are given the autonomy to fix problems themselves.

Your main job as a leader is to make sure everyone has what they needs. That they work together well. That collaboration is rewarded naturally in your day to day ops. That feedback loops keep everything running smoothly. And that the folks only out for themselves don’t muck up the works and hold everyone back.

The more everyone works together, the easier it is to keep on growing (up).
Hugh MacLeod

h/t Harold Jarche in “Wirearchy To Scale Successfully” where he also offers a mashup between MacLeod’s graphic and Jon Husband’s definition of wirearchy: “a dynamic two-way flow of power and authority, based on knowledge, trust, credibility, and a focus on results, enabled by interconnected people and technology.”

I also used the short version of MacLeod’s observation as an inline quote in  “Matt Wensing On Making the Transition to Growth.

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“Every time I’ve seen someone create a business, with the ultimate intention of getting away from that business and its customers as quickly as possible, instead of moving towards that business and its customers, it fails.”
Bryan Franklin

Quoted by Michael Ellsberg in “Top 4 Reasons Why Passive Income is a Passive Fantasy

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“Let our advance worrying become advance thinking and planning.”
Winston Churchill

Another good practice is transform regret into preparation by substituting “if only…” for “next time…” There was a Unix Fortune I saw once that said “s/if only/next time/g” that captures this neatly. “Two Words” by Arthur Gordon makes the same point but I cannot find the original publication source.

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“Solitary trees, if they grow at all, grow strong.”
Winston Churchill

I think every entrepreneur needs a “fortress of solitude” where they can withdraw, reflect, and then return to the tumult of the marketplace.

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“I’m just preparing my impromptu remarks.”
Winston Churchill

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Michael Ellsberg: Four Reasons Why Passive Income Is a Destructive Fantasy

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, skmurphy

I make a distinction between wanting to move beyond running a services business where you bill by the hour to either selling results or selling a product and entrepreneurs attracted to the passive income fantasies of the “Four Hour Work Week.” When an entrepreneur tells me that the “Four Hour Work Week” has been a strong influence on their thinking I worry that they are unfamiliar with what’s required to build a successful business.

You Can’t Stay Ahead of Competition Passively

I found Michael Ellsberg‘s critique “Four Reasons Why Passive Income is a Dangerous Fantasy” to be on point.

1. You Can’t Stay Ahead of Competition Passively: If your research really does determine that there is some amazing market niche that until now has miraculously gone unnoticed and unserved—dog owners who wish to help their dogs lose weight naturally, for example—sooner or later, word is going to get out that there’s money to be made there, and someone is going to create a better ebook or info course or product that serves that market’s needs better than yours does, and who markets it better to them than you do. You can’t manage this competition while sipping margaritas all day from your paradise restaurant on Fiji. You’ll soon see your market share go down the drain—just like all those Açai cleanses…

I had a conversation with an entrepreneur who had been bootstrapping for three years successfully who said, “I keep waiting for it to get easier. When in your experience does it get easier?” I said that I don’t think it ever does. We brainstormed two lists:

  • Why it stays hard
  • Why it gets easier  (at least in some ways)

Why It Stays Hard

  • Established technical expertise has to be renewed, this takes time away from sales/marketing, product development,
  • Competitors react to your success, either copying it or acting to nullify it if you have been winning business from them.
  • Customer needs change over time, in response to changes in environment and earlier success in satisfying them.
  • Growth requires you to place larger bets; not growing or staying small for the sake of staying small risks stagnation in other ways.
  • The business environment can change rapidly and unpredictably
    • New technologies can obsolete existing products and services, and put categories of expertise at risk
    • New competitors and new business models emerge
    • Markets you operate in become commoditized, sometimes without warning.

Why It Gets Easier (At Least In Some Ways)

  • Soft skills accumulate
  • Paying customers come back and buy again — assuming you have happy customers
    • There is also an opportunity or referrals from happy customers.
  • Partner relationships that are well established allow you take action more quickly
  • Reputation accumulates (this can also work against you).

You Cannot Maintain Customer Relationships Passively

2. You Can’t Maintain a Loyal Tribe of Customers Passively: As soon as your customers realize that you don’t care about them (which you don’t, if you’re trying to get away from them as fast as possible), they will eventually go elsewhere, to someone else who actually does care about them and their needs.

If you don’t engage with your customers, if you want to little to no contact with them, then it’s unlikely you are gong to be able to detect and anticipate emerging requirements, rectify shortcomings with your current offering, or respond to what competitors are telling them.

You Cannot Lead a Great Team Passively

3. You Can’t Lead Great Teams Passively: If you’re going to be building a large, scalable business, sooner or later you’re going to need employees and/or freelancers. You’re not going to attract great talent for the long run by indicating to them that you have no interest in being involved in the business whatsoever. Some people obsessed with “passive income” say, in response, “No problem, I’ll just hire a leader to do all that managing, motivating, and creating stuff!” What you’re essentially saying, then, is that you’re adding zero value to the equation. You’re not coming up with the ideas, you’re not implementing/executing the ideas, and your not leading anyone to implement or execute them.

Buying stock in a company is a great way to create passive income, but that cannot be confused with entrepreneurship.  If you are not going to be able to contribute to one or more of technical insights, product leadership, customer intimacy, operational excellence,  or revenue generation then you are not really adding value to the business. You should be a passive investor.

You Cannot Discover or Pursue Your Life Purpose  Purpose Passively

4. You Can’t Create Meaning, Passion, or Purpose in Your Life Passively: I’ve had several conversations recently with people in their twenties who have built up some semblance of moderate passive income.  These people are (for now) living the dream–they get to travel to Fiji or some other exotic location on a shoestring and hang out on the beach, funded by their little niche ebook or whatever.  Yet none of these people I’ve talked to who have this temporarily successful lifestyle seem very happy. They actually seem kind of restless and lost. I’ve had conversations with several of them to help them determine “what the purpose of their life is” now that they have some amount of money coming in from some little passive venture they don’t even care about that much. It all feels empty to them.

This lines up with Arthur Brooks’ “A Formula for Happiness” where he recounts research that identifies the key drivers for happiness

  1. Genetics
  2. Big life events
  3. Choices

The bad news is that first two account for about 88% of baseline happiness and are not under your control. So, what choices can you make that influence the remaining 12%? Brooks suggests:

  • Faith: thinking about the transcendental, the things that are not of this world, and incorporating them into your life.
  • Family: having solid family relationships; the things that cannot and should not go away.
  • Community: cultivating important friendships and being charitable toward others in your community.
  • Work: marrying our passions to our skills, empowering us to create value in our lives and in the lives of others.

Rewarding Work is Essential

Brooks’ key take-away is that rewarding work is essential:

“I learned that rewarding work is unbelievably important, and this is emphatically not about money. That’s what research suggests as well. Economists find that money makes truly poor people happier insofar as it relieves pressure from everyday life — getting enough to eat, having a place to live, taking your kid to the doctor. But scholars like the Nobel Prize winner Daniel Kahneman have found that once people reach a little beyond the average middle-class income level, even big financial gains don’t yield much, if any, increases in happiness.

So relieving poverty brings big happiness, but income, per se, does not. Even after accounting for government transfers that support personal finances, unemployment proves catastrophic for happiness. Abstracted from money, joblessness seems to increase the rates of divorce and suicide, and the severity of disease.”
Arthur Brooks in  “A Formula for Happiness

Ellsberg concludes with an interview with Bryan Franklin who recommends a focus on leverage in a business you care about:

“Every time I’ve seen someone create a business, with the ultimate intention of getting away from that business and its customers as quickly as possible, instead of moving towards that business and its customers, it fails.”

“What makes business work is creating value. If you’re going into the business with the intention of not creating value, but of having it magically provide money for you, then you often make really bad choices. The business that you’re investing in or creating doesn’t tend to be creating value for its customers or for anyone. So it doesn’t tend to spit off the cash you’re hoping it will.

“If you make your choices based on, not ‘how can I get money for free?’ but on, ‘What challenge can I put in front of my face that’s going to have me step up to be the kind of person I’d rather be?’ you’re going to start to forget about wanting passive income, and you’re going to start to focus on what purpose you truly want to create the world.”
Bryan Franklin

See also


Update Aug 2-2-14: When I selected my “Ten Quotes for Bootstrappers from July 2014” I added this postscript to the Bryan Franklin quote that I thought I would append here as well:

I think the Four Hour Work Week has offered a mirage that has lured more bootstrappers onto the rocks than “build a better mousetrap and the world will beat a path to your door.” The belief that you don’t need to care about your customers and manage your business to succeed is at least as productive as “my product is so good I don’t need to learn how to market and sell it.”

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