Quotes For Entrepreneurs–July 2014

Written by Sean Murphy. Posted in Quotes, skmurphy

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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

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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 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.

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
  • 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 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).

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.

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.

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.

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

Ten Mistakes Early Stage Bootstrappers Often Make

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage, Rules of Thumb, Silicon Valley, skmurphy

  1. Leaving Your Assumptions Implicit: Not Developing a Customer Development Plan
  2. Believing that Anyone Will Want Your Product: Not Targeting a Specific Buyer
  3. Confusing the User (or the Audience) with the Buyer/Customer
  4. Believing Your Product Will Sell Itself (Looking for Smarter Prospects)
  5. Developing the Full Product: Not Selling the Smallest Piece Possible at First
  6. Not Focusing on Break-even and Profit
  7. Expecting Too Much Too Soon: Not Planning for “Target Practice”, Iteration, and Improvement
  8. Confusing VC with Customer: Going for (2% of) a Really Big Market
  9. Expecting the Same Control Over Prospects and Team Members as Your Code Base (Single Founder “No Compromise” Mindset)
  10. Treating the Business Like a Hobby (Thank God for Significant Others, Recently Deceased Relatives, and Crappy Day Jobs)

Five additional challenges that also need to be navigated

  1. Managing different aspects of your identity at personal, family, and business level.
  2. Understanding the emotional connection required for a successful business transaction: mission, brand promise, and  logo.
  3. The networking etiquette in Silicon Valley: cards, introductions, how to get acquainted.
  4. Making the transition from selling to friends to selling to a strange
  5. Making the commitment to a business footing: licenses, structure, tracking expenses (and acknowledging that now you can fail).

Adapted from a talk I gave in August 2009 at the San Francisco Bootstrapper Breakfast.

Cultivating Mindfulness

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”
Viktor E. Frankl

mindfulness_explanation
Fight, flight, or freeze are reactions we see in both people and organizations. In short, reaction is action without meditation (cognition and awareness).
Bud Caddel in “The Mindful Org

I think this definition of mindfulness, and Caddel’s diagram explaining it, are a very useful way to conceptualize how you start to engage in real learning. If you cannot interrupt your unconscious reaction you have no way to put new approaches into action. It’s inserting the “Orient and Decide” between Observe and Act in the OODA Loop.

Like a mindful person, a Responsive Organization is constantly sensing its environment and itself, yet relying on awareness of both to form a response rather than mindlessly react. In an organization, this is a process that involves both systems thinking and sensemaking – to understand the organization’s environment, to understand the forces behind those conditions, and to estimate the outcome of a response.
Bud Caddel in “The Mindful Org

Extending this to an organization level is key to a startup’s ability to not only take effective action but learn at a team and business level, hopefully faster than competition that may be locked into “autopilot” responses. If you focus on the fastest action possible then you are relying on reflex and reaction, bypassing orientation and conscious deliberation. This does not lead to superior performance but “extinction by instinct.”

It’s not the fastest reaction, it’s the decision that leads to the first  effective response.

Related

 

 

Things I Have Learned From My Children

Written by Sean Murphy. Posted in skmurphy

“Logical consequences are the scarecrows of fools and the beacons of wise men.” Thomas Huxley

‘I hadn’t paid much attention to babies before my first son was born. I knew that they existed but I hadn’t really given a lot of thought to all of the problems that have to be solved for a 8.8 pound (3995 grams: I remember looking at that number on the basket scale when they weighed him right after he was born and being unable to process it; I thought it was some kind of price)  infant to grow up into a 140 pound teenager. Each step in the growth process has to start and end with a living person. As the heart and lungs grow they have to continually function, the brain cannot be without oxygen for more than a few minutes without permanent harm or death. I have worked on very few hardware/software systems that operated continuously for more than a few months to a year and none that were substantially modified in that time while operating continuously.

In August of 1995 we took a vacation in Seattle (I remember because the Windows 1995 launch was in full swing). My older son was 13 months old and just starting to walk. He fell down a lot. There was a glass top coffee table with a metal frame. My son whacked his forehead so many times that he had a row of bruises from ear to ear. It made the Japanese aphorism, “Fall down seven times, stand up eight” very real to me.

I was never much of an athlete. I thought that people were born with athletic ability or they weren’t. When my son was about two and half a neighbor that was moving away gave us a Fisher Price basketball hoop that could adjust from three to six feet in height. We put it on our back patio and my son would go out and shoot baskets pretty much every day. He didn’t make very many at first but he was possessed of the desire to learn. And in a year he got much better even as we adjusted the basket higher. I never thought of athletic ability as the result of a willingness to practice.

My son played soccer on the weekends in different leagues. When he was eleven or twelve the games became more serious and the parents much more intense in their support. I had never thought of myself as “Little League Father” I had no athletic ambitions for my son, nor did I view soccer as a path to a college scholarship. But something about the games could engage a profoundly competitive streak in me. A referee blew a call–in my opinion–and I used some strong language. I was standing near the coach and the ref assumed that the coach had criticized the call and gave him a yellow card. I told the ref it had been me but it did not change his decision. My son was profoundly disappointed in me, as perhaps only a twelve year old can be (teenagers assume that you will be a continual cause for embarrassment and take great care to spend as little time with you as possible.) It’s a terrible thing to feel your son’s disappointment at your behavior.

I went back to work full time at Cisco in 1998 and was invited to lunch by two women whom I had worked with when I was Cisco employee 1990-94, before I knew much about infants. They both remarked how calm I was compared to what I had been like earlier. I thought back over the last four years of  to trying to quiet screaming babies by learning from subtle differences in their cries whether they were hungry, or needed changing, or bored, or sick. I clearly remember my younger son, when he was about 9 months old, giving me this very confused look as I was holding him. Then he threw up all over me. He had been trying to figure out what this new sensation meant. Now we both knew. I told them that the last four years had been an exercise in learning how little was actually under my control, or at least subject to verbal–much less written–persuasion. So yes, I had become more patient.

“In nature there are neither rewards nor punishments; there are consequences.” RobertIngersoll

See also

 

Startup Stages: Survive, Explore, Focus, Refine, Grow

Written by Sean Murphy. Posted in Customer Development, Design of Experiments, skmurphy, Startup Stages

Survive first. Explore second. Build third.

  1. Survive: It’s good to fail small and fail fast. But also make sure to survive the failure. It’s no good to fail if you can’t get up again.
  2. Explore: True exploration feels like zero progress. Everyone around you will tell you to focus. To stop messing around. To get on with it. The problem is, you need to find it first. This takes time and mistakes. In theory, this is all about fail fast, fail small. In reality, this is slow and painful.
  3. Build: Find a great solution to a small pain point. Then use that to grow bigger.

Tyler Michalski in “The Basic Basics

This reminds me of Rob Saric’s “Solvency First, Consistency Second, Growth Third”

2. Solvency First, Consistency Second, Growth Third
If you don’t have enough money to survive you die. [...] focus on ‘Minimum Viable Cash flow (MVC)’. Once you determine what the MVC is for both you and your team, work towards achieving that by whatever means you can. Consistency allows for predictability and the more predictable your business (‘X inputs results in Y outputs’) the faster you’ll grow.
Rob Saric in “Startups Are Hard

I think they are both right, I have tried to put integrate these two insights into our startup stages mode:

  1. Survive / Stay Solvent: This can involve the work/work balance of services and product development, the important thing is to generate enough cash flow to give your team the time to explore the market to find the right opportunity. This spans the “open for business” and “early customers” stages.
  2. Explore: I think you are looking for a fit with your talents, interest, and experience. Any opportunity has to pass the “why you, why now?” test. What is it that your team brings to the problem that will allow you to differentiate your offering? The fastest iteration cycle is to build as little as possible and simply measure (observe) and learn. Always start from measurement and observation so that you understand the problem and the customer before you worry about your solution. This also involves asking the right questions, talking with many people, and taking time to integrate all that you have learned. This spans the”idea and team formation” and early customer stages.
  3. Focus:  This is the first part of the “finding your niche” stage; selecting a candidate niche to focus on.
  4. Refine (Make Consistent and Predictable):  This is the critical step in finding your niche that allows you to leave exploration mode, or at least substantially reduce your exploration efforts. You have enough knowledge of your teams capabilities to build predictable processes and of the customer’s needs to predict their reactions and identify prospects you should focus sales efforts on early in the engagement process.
  5. Grow: now you enter the scaling up stage because you have useful diagnostics and predictable processes.

More from Rob Saric’s (@RobSaric) blog, his core beliefs linked to relevant articles on his site:

Here are some other blog posts on distilling rules of thumb from entrepreneurial experience:

 

Matt Wensing On Making the Transition to Growth

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

Stormpulse has gone from an idea bootstrapped on founder savings and credit cards, to a project funded by friends and family rounds, to a small business strengthened by angel money, to a company that’s raised “meaningful” capital (our last round was just over $2 million). Here’s what I’ve learned since I’ve been able to leave the ‘drowning and can’t work on the important things’ mode.
Matt Wensing in “What I’ve Learned Since Raising Capital

Matt Wensing has been bootstrapping Stormpulse since Sept-2004 (“What Have I Been Doing?!“) He offers some short thoughts on what he has learned since raising capital and I wanted to highlight four:

Small for the sake of small is as bad as big for the sake of big.

Small for the sake of small is letting the desire for control or other perfectionist tendencies trump everything else.

The question isn’t “Stay small or go big?”
It’s: “Is the vision scalable & worth scaling?”

This is a key insight that most entrepreneurs overlook in their calculations of whether to seek funding. It’s not about whether you need it, it’s whether the plan merits and requires it.

Existential: Walking around the office, hearing other people having conversations that used to only be in my head.

If you want to scale up your business you have to share information and context and allow other members of your team to be able to have an informed discussion with you about risks and issues. And ultimately to have some of those discussions without your participation. As Hugh MacLeod observed,  “scaling your business is all about having more people solve more problems for you.”

Define a great box by defining where to play and how to win; encourage in-the-box innovation.

To harness the team’s creativity define the business model and key objectives and let them experiment and explore strategies and tactics to accomplish them.

See also Matt Wensing’s “Bootstrapping Stormpulse” posts : Part 1 and Part 2 and his Mixergy interview “Free to Fee


I think the key breakthrough he made was the realization that his clients didn’t want a weather map they wanted actionable suggestions predicated on an analysis of what they could do to mitigate risks against an identified asset base. He was selling against “the hapless weatherman outside in the hurricane” but it wasn’t his real competition.  In December 2013 he rebranded it “Riskpulse” with the following goal:

Stormpulse Inc. becomes Riskpulse in response to customer requests for deeper risk management solutions. Because Stormpulse had a history of integrating disparate data sources and tracking rapidly-shifting factors in weather for business continuity professionals, it was uniquely positioned to develop a broader system for the whole supply chain.

Brad Pierce: Preserve Context in Writing to Manage Interruptions

Written by Sean Murphy. Posted in skmurphy

On longer time scales, when you must drop something for a while, it’s important, before doing so, to leave behind enough context for yourself to swap it back in. Write down some organized notes about where you were, what still needed to be done, etc. Keeping a log can be a big help, too, but it’s not a substitute for a high-level summary before suspending the task.

A good mental model for suspending a task is to leave behind the sort of information that you would need to hand it off to another person to finish.

Pretend that you are handing off the task to another person and you will be going away on a long vacation and unavailable to answer further questions, because when you come back to the task you will effectively be that other person.

Swapping in a new context is very expensive. Saving your state well when you suspend is actually much, much cheaper overall, assuming that you’ll need to come back to the task eventually.

Brad Pierce in Making the best of a bad interruption

I really like Brad’s advice and think it’s particularly useful for entrepreneurs in a couple of different situations:

The end of a meeting: be clear on issues, risks, and action items before you adjourn. Don’t defer on getting agreement on critical risks, key concerns, and key tasks assignments. Rough notes that everyone agrees to means that the team is more likely to make forward progress instead of rehashing the key points of the last conversation (“I thought we agreed to…”) or arguing about things in email.

When you are launching a probe or experiment that may fail: plan your “time out” points and best alternatives in advance.  Some examples:

  • You are sending an e-mail request for a meeting or asking for action. Decide before you send it what you will do if you get no response: e.g. leave a voicemail, escalate, try alternatives, etc.. This is a variation on a premortem where you anticipate failure and what you will do to address it. But your state of information won’t substantially change with silence. While you still have the full context, plan out you next two or three steps so that you can also put them on the calendar without having to revisit the situation.
  • You are trying to fix a problem or defect. Decide on two or three options you can try that may fix the problem so that you can either shift to the next one or start two or three efforts in parallel. Obviously if the failure of your first attempt provides new information you may change your follow up, but it’s worth trying to anticipate now what are the most likely failure modes and writing that into your plan so that you don’t have to recover your full context to continue to take action.

Schedule time for documenting context in advance of predictable interruptions: allocate time to write down the key aspects of where you are before anything that will trigger a context shift such as scheduled conversations with other people, the end of the day, end of the week, the start of a parallel or overlapping project commitment etc…

Group Low Context Activities Into Clusters: I am borrowing this from Dan Sulivan’s “The Great Crossover.”

  • Focus Days:  you work with undivided concentration on key business activities.
  • Free Days: time you spend to relax and recharge with family and friends, no business activity.
  • Buffer Days: time you spend cleaning up, preparing, running errands, and otherwise make your focus days more effective.

Buffer days and free days are filled with tasks that don’t require you to store context. See also

Tools for Buzzword Compliant Business Models

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

First there was Dack Ragus‘ (@dack)Web Economy Bullshit Generator.” He started with sketches (“Kinda like Da Vinci’s sketchbook, except for bullshit”): “I made this massive list of potential bullshit terms while sitting on Miami Beach in January, 2000. Add a little JavaScript and it turned into the Bullshit Generator.” The archives of dack.com are also worth a peek.

At about the same time 37Signals launched with a manifesto and the e-NORMICOM parody site of the dotcom branding process for naming, logos, and taglines.

Then Stavros the WonderChicken (@wonderchicken)–no I cannot find his real name–did the “Web 2.0 Bullshit Generator™” noting that ”Profits for your Web 2.0 company are not guaranteed.” It’s funny how that has not changed with firms like Box and Dropbox competing in some oddly configured on-line potlatch designed to provided services at a loss in exchange for new investment at ever increasing valuations.

Andrew Wooldridge launched Web Two Point Oh! to help with naming as well.

Stavros later lamented in “Lomans not Shamans” at what the Web had become: “My god, it’s full of ads!” Here I think his anxiety was misplaced: most new media is advertising supported; the original newspapers were simply classified ads that gradually added news items to differentiate themselves.  Stavros references “What Puts the ’2′ in Web 2.0” by Brandon Schauer who was inspired by “Design Patterns and Business Models for the Next Generation of Software(2005)” by Tim O’Reilly and John Batelle. They followed up in 2009 at the Web 2.0 Summit with  ”Web Squared: Web 2.0 Five Years On” (see also the white paper: “Web Squared: Web 2.0 Five Years On” [PDF]).

Next in 2010 the Lunatech Ventures team launches  PlanCruncher as an attempt to compress a business plan into a single page using a couple icons. From their About Page:

“Plan Cruncher creates a standard one-page summary of a business plan for a start-up company that is looking for external investment. You do this by choosing icons that represent some of the standard answers that a business plan must provide.

Why investors want entrepreneurs to use Plan Cruncher:  Plan Cruncher saves investors’ time. To investors, business plans all look more or less the same, which is not necessarily a bad thing, and they are always too long, which is. Before an investor decides to wade into your ten or twenty-page document, he wants straight answers to a few basic questions about your plan.

Plan Cruncher generates a standard one-page summary that investors can use to screen business plans and compare them to each other.”

I don’t believe Plan Cruncher is a parody site, I listed in in my roundup of Business Model Canvas tools.

And in 2012 Norman Clarke (@compay) has launched Bullshit 3.0: Bleeding Edge Bullshit Generation in the Cloud which embeds the ability to launch a Google search for your tagline to see if it’s already real.

I still find the 1999 Clue Train Manifesto a useful guide to marketing: it’s argument for real conversation between individuals is as compelling now as it was 15 years ago. Business models have changed with the advent of new technologies and many of these sites are parodying two real needs that every entrepreneur must satisfy: a succinct and comprehensible explanation of their product benefits to customers and a compelling description of their business model to investors.

 

 

 

We Help Teams of Experts Find Leads and Close Deals

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

To get acquainted join us at a Bootstrappers Breakfast in Silicon Valley or sign up for Office Hours. We offer public and private workshops and Mastermind groups in addition to consulting support.  If they can identify a budget we can find a way to work with them.

The model we follow is here our “Startup Stages“  which spans from the pre-incorporation idea stage to scaling. We have helped  a number of teams come together and assisted them from idea stage to open for business stage to finding and focusing on a niche.

We are very comfortable helping teams refine their product concept with discovery conversations, probes, and experiments. We help them make sense of the information they have, build models, and craft a plan of action for next steps. In particular we help with lead generation and negotiation to close of early reference accounts for new products. A typical client has a goal is to sell to businesses in a subscription or long term relationship model where the three year value of a new customer is at least $25K. Initial deal sizes may be less but their goal is that value or higher.

We look for teams that have demonstrated domain knowledge and expertise and at least a plan for having a significant impact on a customer problem, even if the solution they plan to offer is discontinuous with current practice. We often see a progression from service to system integration to stand-alone product: this allows them to explore the market with MVP’s earlier in the development process in a way that allows for rapid iteration on features.

Tristan Kromer: You Can Tell a Good Advisor by Their Questions

Written by Sean Murphy. Posted in Customer Development, Lean Startup, skmurphy

Three interesting answers from Tristan Kromer’s interview with the folks at Startup Commons

Startup Commons: What’s the best way to get started?
Tristan Kromer:  Find someone you really want to help. Someone in pain. That’s your vision. Helping someone and solving a real problem. Find team members with complementary skill sets who are able to challenge your perspective and add their own. Go talk to customers.

I think this is the best anchor for starting a new firm: focus on a need or  a pain experienced by a particular  customer. Pick a problem you are willing to work on for a while because nothing new ever works and it’s going to take a while to figure out all of the elements of a successful business. A few firms with a serious problem are a better start than many firms with a small problem, although the latter may be easier to find, the former are far more likely to take action.

Startup Commons: How to find a good mentor for your startup?
Tristan Kromer: Look for someone who doesn’t give you their opinion but instead challenges you with questions that makes you think.

I agree with Tristan it’s in the questions but like Conor Neill’s formulation: it’s “80% Diagnosis and 20% Prescription.” A good mentor will suggest some courses of action to consider after they have helped you to explore the constraints and implications of the situation–or insurmountable opportunity–you are wrestling with.

Startup Commons: Who are your mentors?
Tristan Kromer: My team is my mentor. The customer is my mentor. My friends are my mentors. I rely on other people to challenge my perspective. People like Sean Murphy, Spike Morelli, Laura Klein, Nick Noreña, Zac Halbert, Janice Fraser. People who are willing to question me or tell me I’m wrong.

I think this is the next step in the evolution of the Lean Startup movement, it has to become a community of practice where entrepreneurs at differing skill levels can compare notes , challenge each other and hold each other account.  It’s a mistake to look at the early writing by Eric Ries and Steve Blank as scripture, it’s a good start that we will be refining and extending for decades. There is also earlier work by Peter Drucker, Edward McQuarrie, Rita McGrath, Saras Sarasvathy, Mark Leslie, Clayton Christensen, Russell Ackoff, Dave Snowden, and Gary Klein–just to name a few–that for the most part is not as well appreciated by entrepreneurs as it should be.

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

Related Posts:

Here are four checklists we often take entrepreneurs through

Neal Stephenson on Christianity, Grace, Sincerity, and Seeing Things as They Are

Written by Sean Murphy. Posted in skmurphy

I have started to reserve Sundays to write on spirituality, charity, and a higher moral purpose to our life as entrepreneurs. I was struck by the quote that Stephenson puts in Juanita’s mouth in Snow Crash and have concluded that he is performing a similar ministry in his science fiction writing. There is a sense of wonder and meditation on “some power like grace, like the Force, or Providence, or what-have-you, that had been at work in the world today” (Zula’s reflection on events in Reamde).

Juanita has been using her excess money to start her own branch of the Catholic church–she considers herself a missionary to the intelligent atheists of the world. [...]

“Don’t be condescending,” she says. “That’s exactly the attitude I’m fighting. Religion is not for simpletons.”

“Hey, I went to church every week in high school. I sang in the choir.”

“I know. That’s exactly the problem. 99% of everything that goes on in most Christian churches has nothing whatsoever to do with the actual religion. Intelligent people all notice this sooner or later, and they conclude that the entire one hundred percent is bullshit, which is why atheism is connected with being intelligent in people’s minds.”
Neal Stephenson, Snow Crash

I think a lot of folks see people’s flaws very clearly in their teens and early 20′s and turn off to religious beliefs. I think is far more complex and if you can maintain a sense of wonder then you cannot mistake your umwelt, the limits of your perception, as the limits of reality ( or as Arthur Schopenhauer observed in “Studies in Pessimism“, “Every man takes the limits of his own field of vision for the limits of the world”).

“The ministry of Jesus Christ was … an attempt to take religion out of the temple, out of the hands of the priesthood, and bring the Kingdom of God to everyone. That is the message explicitly spelled out by his sermons, and it is the message symbolically embodied in the empty tomb. After the crucifixion, the apostles went to his tomb hoping to find his body and instead found nothing. The message was clear enough; We are not to idolize Jesus, because his ideas stand alone, his church is no longer centralized in one person but dispersed among all the people”
Neal Stephenson, Snow Crash

I think this also imposes a tremendous responsibility for action: free will implies everyone can and must make a difference.

“That we occasionally violate our own stated moral code does not imply that we are insincere in espousing that code.”
Neal Stephenson, The Diamond Age

We all fall short of our intentions to act correctly. That doesn’t mean we lack integrity. There can be different motives for what appears to be hypocrisy.

This was probably rooted in a belief that had been inculcated to him from the get-go: that there was an objective reality, which all people worth talking to could observe and understand, and that there was no point in arguing about anything that could be so observed and so understood. As long as you made a point of hanging out exclusively with people who had the wit to see and to understand that objective reality, you didn’t have to waste a lot of time talking. When a thunderstorm was headed your way across the prairie, you took the washing down from the line and closed the windows. It wasn’t necessary to have a meeting about it. The sales force didn’t need to get involved.”
Neal Stephenson, Reamde

Again, free will requires us to observe and act on what we see.

“Or maybe none of it had been that rational…maybe this was all down to some supernatural effect, such as grace, that flowed through people’s lives even if they didn’t understand why.”
Neal Stephenson, Reamde

I think miracles occur around us frequently.  They may not be what we hoped for or what we were expecting. But they are there.


More on “umwelt” from the concluding paragraphs to ”What Scientific Concept Would Improve Everybody’s Cognitive Toolkit?” by David M. Eagleman

 Our unawareness of the limits of our umwelt can be seen with color blind people: until they learn that others can see hues they cannot, the thought of extra colors does not hit their radar screen. And the same goes for the congenitally blind: being sightless is not like experiencing “blackness” or “a dark hole” where vision should be. As a human is to a bloodhound dog, a blind person does not miss vision. They do not conceive of it. Electromagnetic radiation is simply not part of their umwelt.

The more science taps into these hidden channels, the more it becomes clear that our brains are tuned to detect a shockingly small fraction of the surrounding reality. Our sensorium is enough to get by in our ecosystem, but is does not approximate the larger picture.

I think it would be useful if the concept of the umwelt were embedded in the public lexicon. It neatly captures the idea of limited knowledge, of unobtainable information, and of unimagined possibilities. Consider the criticisms of policy, the assertions of dogma, the declarations of fact that you hear every day — and just imagine if all of these could be infused with the proper intellectual humility that comes from appreciating the amount unseen.

Q: We Already Have a Prototype, Can We Still Do Customer Development?

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Design of Experiments, skmurphy

Q:  We have already implemented the first prototype of our product, but we need to know that we are either on a good course or need to change.

A: If you long for certainty you should not be doing a startup, pick a regulated utility or government bureaucracy as a career. Lean Startup and Customer Development techniques can help you to reduce risks by identifying them and developing mitigation strategies but it’s not a guarantee. Any real market attracts competitors and you don’t get to write their plans so it’s not just a question of understanding the prospect’s status quo but being able to identify and react to competitive threats. The view that product-market fit is a ratchet that you cannot fall back from neglects the impact of competitive response, new entrants, and continued changes in technology and customer preference.

Q:  Perhaps I overemphasized our desire for certainty; we understand a startup is uncertain. Should we use our current prototype as an MVP?

Yes. I would  start with what you have and use it as a probe to refine your understanding of the market and customer needs.

Make a distinction between the product, your message, and your target customer. You can talk about your product in different ways, adjusting your message to highlight and test key hypotheses. You do not have to make any changes to your product to this. Any product by definition–or at least any short enough for a prospect for prospect to listen to willingly–of necessity highlights some aspects omits others. You can also use different messages on different target customers or present different message to different prospects of the same type as a way of refining your understanding of what they view as important.

It’s critical that you have conversations with prospects and not simply present messages and see what they react to. It’s only in conversation that you can truly be surprised (you have to be listening, it’s not a monolog) and often the most surprising and useful thing a prospect can do in a conversation is to ask you a question you have not considered before (that’s why it’s called a conversation not an interrogation). When you are looking for early customers the value hypothesis is critical. You may reach them using non-scalable methods that don’t address your first real growth hypothesis.

My take on the distinction between hypothesis and assumption, your mileage may vary: A hypothesis is what is being tested explicitly by an experiment. An assumption is tested implicitly. By making your assumptions as well as your hypotheses explicit you increase the clarity of your approach and the chance for learning. The two things that can trip you up most often is an unconscious assumption that masks a problem with your hypothesis or an unconscious bias in whom you are testing the value hypothesis on. In particular you may have defined your target customer by certain selection criteria but your actual choices for whom to speak to (or who will speak with you) are not sampling from the full spectrum of possibilities.

Q: Or should we build another or several other smaller MVPs to  test only the most important  assumptions? Should we build various tests in parallel to test the needs of different types of customers?

I have come around to the approach of testing several hypotheses in parallel, I think you learn faster and are more likely to identify a good opportunity more quickly. After you take your current prototype and use it to have conversations,  I would explore a few different potential customer types in parallel. One good article on this is by David Aycan, “Don’t Let the Minimum Win Over the Viable,” where he offers a comparison between three approaches:

Traditional linear approach:

linear
Standard sequential pivot approach:
pivot
His recommended approach:
recommended

I am also a huge fan of Discovery Kanban  as a way to manage a set of options and experiments in parallel with managing commitments to customers and other execution targets. It actually gets harder as you start to gain some early customers and need to continue to explore the market and refine your understanding in parallel with keeping your current customers satisfied.

John Gardner: Leaders Detect and Act on the Weak Signals of the Future

Written by Sean Murphy. Posted in 1 Idea Stage, 5 Scaling Up Stage, skmurphy

Some excerpts with commentary from “On Leadership“  by John W. Gardner.

There is such a thing as the “visible future.” The seedlings of [future] life are sprouting all around us if we ahve the site to identify them. Most significant changes are preceded by a long train of premonitory events. Sometimes the events are readily observable.”
John W. Gardner “On Leadership”

Marcelo Rinesi advised “the future is an illusion, all change is happening now” and Peter Drucker told us to “systematically identify changes that have already occurred.” From an entrepreneurial perspective you can often transplant a solution from one industry to attack a similar problem in another: as William Gibson suggests, “the future is already here, it’s just unevenly distributed.” This model for innovation brokerage requires that you be open to new solutions to old but pressing problems and that you scan more broadly to find them. Gardner offers his own explanation for why opportunities are overlooked:

“…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.”
John W. Gardner “On Leadership”

There is always a value in closing the deals that are in front of you and making this month’s payroll. But there is a risk in getting caught in the treadmill of the urgent. Gardner offers a prescription for leaders and leader/managers to differentiate themselves from managers trapped in the immediate crisis.

  1. They think longer term—beyond the day’s crises, beyond the quarterly report, beyond the horizon.
  2. In thinking about the unit they are heading, they grasp its relationship to larger realities—the larger organization of which they are a part, conditions external to the organization, global trends.
  3. They reach and influence constituents beyond their jurisdictions, beyond boundaries. In an organization, leaders extend their reach across bureaucratic boundaries—often a distinct advantage in a world too complex and tumultuous to be handled “through channels.” Leaders’ capacity to rise above jurisdictions may enable them to bind together the fragmented constituencies that must work together to solve a problem
  4. They put heavy emphasis on the intangibles of vision, values, and motivation and understand intuitively the non-rational and unconscious elements in leader-constituent interaction.
  5. They have the political skill to cope with the conflicting requirements of multiple constituencies.
  6. They think in terms of renewal.

John W. Gardner “On Leadership”

I think this is a good list, even for bootstrappers who are worried about keeping the lights on this month. You have to devote 10-20% of your time to problems in the longer term, and connections and initiatives that may not bear fruit next week but perhaps in three months or a year or two. The last suggestion, to consider how to renew skills, relationships, and shared values, is also a critical one for the long term.


More on Drucker’s suggestion for sources for innovation:

“Innovation requires us to systematically identify changes that have already occurred in a business — in demographics, in values, in technology or science — and then to look at them as opportunities. It also requires something that is most difficult for existing companies to do: to abandon rather than defend yesterday. ”
Peter Drucker in “Flashes of Genius

Tony Schwartz: Notice the Good, Cultivate Good Habits, Slow Down, and Do the Right Thing

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

Tony Schwartz wrote a  great post on “Turning 60: The Twelve Most Important Lessons I’ve Learned So Far.” Here are my top four from his list (original numbering preserved).

2. Notice the good. We each carry an evolutionary predisposition to dwell on what’s wrong in our lives. The antidote is to deliberately take time out each day to notice what’s going right, and to feel grateful for what you’ve got. It’s probably a lot.

I think this is a clever way of saying count your blessings, but a good habit to cultivate however you phrase it.

7. The more behaviors you intentionally make automatic in your life, the more you’ll get done. If you have to think about doing something each time you do it, you probably won’t do it for very long. The trick is to get more things done using less energy and conscious self-control. How often do you forget to brush your teeth?

There is a lot to be said for breaking out of the routine and “thinking outside of the box” but the more useful default activities you can turn into habit the more you can concentrate on what’s really important. Three useful business habits for you to consider:

  • Carry a pen and paper or 3×5 cards to capture thoughts, insights, and suggestions from others.
  • Make a list and work it. Less useful for exploring but essential for finishing. This is a habit I learned from my first business partner, David Woodruff, at Woodruff & Murphy, Decision Systems Associates. He always carried a clipboard and pen everywhere so that he could plan the day and work the plan. It was a habit he had picked up managing  small construction projects but it has broad applicability.
  • Always debrief at the end of a project. Ask for feedback and volunteer self-criticism before offering your suggestions to others. Especially when things have not gone well and you would rather sweep the wreckage under the rug.

8. Slow down. Speed is the enemy of nearly everything in life that really matters. It’s addictive and it undermines quality, compassion, depth, creativity, appreciation and real relationship.

I find this to be very hard by the middle of the day. Forcing myself to measure twice and cut once is easier in the morning than in the afternoon when I often I feel behind.  The right decision, especially where people are concerned, is critical. I try to meditate twice a day and take at least a short walk  to clear my head in the late afternoon. This is very counter-cultural for Silicon Valley and startups, it’s an overlooked source of effectiveness as a result.

10. Do the right thing because it’s the right thing to do, and don’t expect anything in return. Your values are one of the only possessions you have that no one can take away from you. Doing the right thing may not always get you what you think you want in the moment, but it will almost always leave you feeling better about yourself in the long run. When in doubt, default to calm and kind.

We always try to put clients first and make sure our partners get paid when we do. Bootstrapping a startup is a very difficult way to make a living and may of our clients find it to be very stressful from time to time. I try to remain empathetic since i have made most of the mistakes that I see them making or hear them recount. But I also try and be as honest and direct as they can tolerate, explaining what I see as the key facts in  a situation, and courses of action that they should consider.

 

Founder Story: Steve DiBartolomeo of Artwork Conversion Software

Written by Theresa Shafer. Posted in EDA, First Office, Founder Story, skmurphy

Steve DiBartolomeo is co-founder of Artwork Conversion Software, Inc., an EDA software firm headquartered  in Santa Cruz CA with a development office in Manhattan Beach, CA. Founded in 1989, the company develops CAD translation programs, CAD viewers, plotting software and IC packaging software.  Artwork has over 5000 customers worldwide including Alcatel, AMD, Applied Materials, Agere, Bosch, KLA Tencor, Motorola, Ericsson, General Electric, Hewlett Packard, Hitachi, Lockheed Martin, Photronics, Siemens, Seagate, Sony, TRW..

Q: Can you talk a little about your background and how you came to found Artwork Conversion Services?

I have a BS/MS in Electrical Engineering from UCLA (1978). My founding partner, Antonio Morawski, has a BS from Loyola and a MS from UCLA from around the same time period. I cut my teeth at TRW Semiconductor in Southern Calif starting in 1976 as a student. When I graduated I continued on there until 1980 as an RF design engineer, as did Antonio–we met at TRW.

I took a year and a half off of work and went back to college (UCSB) until I ran out of money and then in 1982 joined Avantek in Santa Clara as an international sales engineer. In 1984 my boss asked me to join a startup, Step Electronics, that would specialize in high tech import/export selling microwave and RF components and subassemblies. One of our first clients was a small software start up, EEsof, which pioneered microwave EDA on PCs. (Prior to that microwave design software ran on a $250K VAX and cost $50K – EEsof’s ran on a $5K PC and cost $7500.) I spent much of the next years selling EEsof tools in Europe (where I lived for a year in 1986) and then later in Asia.

In 1986 I needed a translator for a pattern generator in order to close a large EEsof sale in Germany. EEsof could not do it. I mentioned this to Antonio and he said he knew how to write such a translator. We took the order and delivered it 6 months later.

In 1987 I returned back to the US and tried to sell more pattern generator translators in Silicon Valley. The companies that I contacted were not interested in our translator but had lots of suggestions as to what they did need — so we slowly developed new products (on a part time basis) based on their feedback. At that time (between 87 and 89) Antonio was employed as a consultant at TRW and as a professor at Loyola. He did the programming out of a corner of his small garage.

Finally in 1989 we decided to do this full time. I left Step (which had really been an excellent apprenticeship for learning how to run a small, lean operation) and Antonio left Loyola after completing his teaching contract.

Our primary reason for starting the company was to be “masters of our own destiny” and to work on stuff that was interesting. We really only wanted to make enough money to cover our mortgages and live a reasonably comfortable life.

Q: So what were the early days like?

Between us we put up $10K each and started with that (and two years of experience and a few customers and orders in the pipeline). As mentioned, our largest initial purchase was two fax machines (at $1500 each) and a copy machine ($3000). I worked out of a 500 sq foot office in Santa Cruz and Antonio continued to work out of his garage in Manhattan Beach. We broke even from day one even if the monthly salary was small. Eventually we added a secretary and a programmer and Antonio moved from his one car garage to his father’s two car garage.

I handled all the sales which were almost 100% from Silicon Valley. I basically drove into the valley several times a week and installed and demonstrated the software. I also did tech support, marketing, technical writing … basically everything except programming.

We added employees one at a time and grew slowly but surely.

At the time we started (end of 89), the business we knew best — RF and Microwave components and design — was taking a tremendous hit; the giant build up of the early and mid 80′s (due to Reagan’s military budget) was over and an enormous consolidation was occurring. I’d call an engineer on a Monday to make an appointment and by Friday he’d be gone.

There was not yet any Internet and even cell phones were a tiny market. Things looked especially grim because no one could envision what was going to drive new designs. But somehow we ground through the first couple of years — not making much money but not losing any either and slowly adding a few products every year.

By 1995 we grew to a peak of 14 people – 8 programmers, 1 sales guy, 1 boss (me) and 3 office people. Our maximum revenues peaked at about $3 million dollars in the late 90′s.

Business took a major downturn in 2001 what with the dot-com crash which killed a whole bunch of network and chip startups that were buying our tools as well as hurting just about everybody in the tech business. I recall our shipments dropped 40% one month and stayed down for 18 months before slowly building back up again. By 2004 business was excellent again. Things stayed pretty buoyant until 2007; from that point on it seemed to drift down gradually and, of course, at the end of 2008 the downward drift became disturbingly steep. Most of 2009 was pretty awful and it was not until early 2010 that we saw the green shoots of a recovery.

Q:  Where are you today?

Today we are 10 people (7 programmers, 1 sales guy, 1 boss and 1 office person – the internet nature of business no longer requires production of software other than a click).  Our goals are not high growth but rather a good profit margin. As a software company we have zero cost-of-goods and the great majority of our expenses is salary. So once you are past “break even” everything after that is profit.

Q: When you look back over the last two decades or so what are the accomplishments that you are most proud of ?

We are very proud of having kept the company going for over 20 years completely on our own. We didn’t borrow a penny and every quarter we showed an operating profit.

We  made several major market and technology shifts during those 20 years that kept us going:

  • We started by building software for RF and Microwave designers.
  • We branched into software directed at PCB designers.
  • We branched into software directed at IC designers (back end).
  • We moved from translators to display software (viewers).
  • We moved from direct sales to end users to OEM sales to other EDA companies.

We have seen many other EDA and technology firms try to change direction, usually in response to major changes in technology or the market that either died or were badly injured in the process.

We were early Internet and web adopters and this enabled us to expand our market from just Silicon Valley to worldwide without a large sales force.

Q: What’s been the biggest surprise?

I think it was more of a gradual realization: most EDA entrepreneurs start as EDA users, run into problems doing their job, come up with a clever solution and are suddenly find themselves an EDA supplier. The surprise comes some years after you are an EDA supplier–you have stopped designing stuff and find that you no longer really understand the “problem” side of the equation and have to pester people to tell you about what problems they need solving. However this reliance on others for your critical input is never as reliable as your own (past) understanding of the problems that need solving.

Q: What were the significant changes in the environment you have had to respond to?

The internet changed everything. We jumped on it early and have benefited from our ability to be everywhere in the world from our desks in Santa Cruz. Nowadays I think WEBEX (and the other screen sharing apps) is one of the seven wonders of the modern world.

We realized that we needed to change from direct sales to OEM partnerships in the late 90′s because the big kahunas–Cadence, Mentor and Synopsys–started sucking the air out of the EDA markets. They each wanted to be all things to the customer and cut the kind of deals (we call them all-you-can-eat) that would cut off any other vendor.  So we changed our focus to selling into the big EDA companies with small modules that enhanced their products.

Q: What’s the current challenge you are wrestling with?
Design is following manufacturing offshore. We’ve seen this accelerate since after the dot-com crash. It’s a lot harder for a small  US based company to cover Taiwan, China, India and Singapore. The big guys set up design and application center’s in these countries.

Q: Any suggestions for other entrepreneurs who want to bootstrap a software business?

If you want to run a company you can make a living from–in other words you are not writing a business plan where the exit strategy is on the first page–then I think I can make a couple of suggestions.

  • Start with a small team with common values and complementing skills – in our case Antonio was the programming guy and I was the sales/applications guy.
  • Don’t take any more money–none if possible–from outsiders than absolutely required.
  • Create something small and simple and quickly get it out there. You’ll get much better and faster feedback than if you try to go around asking people what they want.
  • Refine it based on feedback. Document it. Do it again.
  • Grow slowly. Fast growth is very inefficient since you will then have a lot of people on board that have not figured out their job.
  • Staff or employee turnover has a high hidden cost since the replacements have to start over.
  • Cash is king. Save some of your profits as a cushion against a rainy day.
  • Spend a lot of time listening to your customer’s problems. Not every problem is one you can or should solve, but the aggregation of their issues gives you a solid base for making seat-of-the-pants decisions. You’ll never have enough information to make a MBA-style decision on new products or directions. But if you’ve listened to enough customers you’ll have a good “feel” and make better decisions.
  • Beware of business plans. Have a look at some business plans that are 3-5 years old of both successful and unsuccessful companies. You’ll have a good laugh at both. The main difference between the successful companies and the dead/dying ones is how they reacted when their assumptions blew up.

Finally and most importantly: people can say one thing and do another. Only act on what people tell you if you see that their behavior is consistent with their talk. People are much better at telling you what they don’t like than at what they want. When we are developing a new product we try to get something into their hands quickly and then listen to them criticize it. The criticisms are usually much more specific and useful to defining a product.

Q: Steve thanks very much for your time.

Q: Pricing Professional Services

Written by Sean Murphy. Posted in skmurphy

Q: I am starting a service business that will help clients with advertising and search engine marketing but I am not sure how to price my services. Do you have any suggestions for how to look at this?

Services and service pricing has a very different physics from product pricing: service hours cannot be stockpiled, they arrive one hour every hour, and they have to be delivered synchronously. Even if you are pricing your services based on value and not on time it’s a very different equation from product pricing.  You might look at

All have good models for managing, pricing, and marketing professional services.  Weinberg ‘s Secrets of Consulting is probably the best book to start with for a solo practice, but all of them are worth reading for useful perspectives on consulting. In chapter 12 Weinberg addresses ”Putting a Price On Your Head” directly and offers ten rules of pricing:

  1. Pricing has many functions, only one of which is the exchange of money.
  2. The more they pay you, the more they love you. The less they pay you, the less they respect you.
  3. The money is usually the smallest part of the price.
  4. Pricing is not a zero-sum game.
  5. If you need the money, don’t take the job.
  6. If they don’t like your work, don’t take their money.
  7. Money is more than price.
  8. Price is not a thing; it’s a negotiated relationship.
  9. Follow the principle of least regret: set the price so you won’t regret it either way.
  10. All prices are ultimately based on feelings, both yours and theirs.

All of these rules also apply to early software sales, which often embed a significant service project or deliver a result as a service to lay the groundwork for a subsequent product sale. The other books are useful reading for the same reason for software entrepreneurs who are trying to navigate the early sales process or who are bootstrapping by offering services as well as a product.

For a straight up analysis of product pricing The Strategy and Tactics of Pricing” by Thomas Nagle is the best book that I have read.

Related blog posts on pricing:

Discovery Kanban Allows Firms to Balance Delivery and Discovery

Written by Sean Murphy. Posted in 5 Scaling Up Stage, Design of Experiments, Video

I believe that Patrick Steyaert’s Discovery Kanban offers critical perspective on how large organizations can foster the proliferation of Lean Startup methods beyond isolated spike efforts or innovation colonies.

I think Patrick Steyaert has come up with an approach that builds on what we have learned from customer development and Lean Startup and offers an orchestration mechanism for fostering innovation and operational excellence. I think  this will prove to be a dynamic approach to managing innovation that will be as significant as Saras Sarasvathy’s Effectuation, Christensen Innovator’s Dilemma and Innovator’s DNA, and Ron Adner’s Wide Lens. I believe it’s going to become part of the canon of accepted principles of innovation because it offers not only a way to frame the challenge of balancing discovery and delivery, but a mechanism for planning and managing them in parallel.

Discovery Kanban is a synthesis of a number of distinct threads of entrepreneurial thinking–Lean Startup, Kanban, OODA, PCDA, and Optionality–into an approach that helps firms address the challenge  of executing and refining proven business models in parallel with exploring options for novel business opportunities. The reality is that you have to manage both current execution and the exploration of future options whether you are in a startup that is gaining traction and needs to develop operational excellence (or an innovation colony that now wants to influence the existing enterprise) or and enterprise that needs to avoid the “Monkey Trap” of escalating investment in a business model that is reaching the end of life instead of parallel exploration of a number of options for new business units.

At the extremes startups are viewed as scout vehicles–suitable for exploration to find sustainable business models–and established enterprises are viewed railroads, very good at moving a lot of cargo or passengers along predetermined paths. The reality is that almost all businesses need to manage both excellence in execution while not only keeping a weather eye on new entrants fueled by emerging technologies and disruptive business models but also exploring for adjacent markets that can leverage their established competencies and new competencies required by current customers.The Lean Startup and Customer Development models have fostered a broad understanding of the need for iteration and hypothesis driven product probes. Kanban models have shown the value of making work visible to enable the shared understanding that makes cultural change possible.

Kurt Vonnegut: Replace the Code of Hammurabi with the Sermon on the Mount

Written by Sean Murphy. Posted in skmurphy

Some excerpts from Kurt Vonnegut‘s commencement speech Agnes Scott College, Decatur, Georgia, May 5, 1999 as recounted in “If this isn’t nice, what is?”  He offers a critical insight for business as well as life.

Everybody asks during and after our wars, and the continuing terrorist attacks all over the globe, “What’s gone wrong?”

What has gone wrong is that too many people, including high school kids and heads of state, are obeying the Code of Hammurabi, a King of Babylonia who lived nearly four thousand years ago. And you can find his code echoed in the Old Testament, too. Are you ready for this?

An eye for an eye and a tooth for a tooth.

A categorical imperative for all who live in obedience to the Code of Hammurabi, which includes heroes of every cowboy show or gangster show you ever sawm is this: every injury, real or imagined, shall be avenged. Somebody’s going to be really sorry.

When Jesus Christ was nailed to a cross, he said, “Forgive them, Father, they know what they do.” Any real man, obeying the Code of Hammurabi, would have said, “Kill them, Dad, and all of their friends
and relatives, and make their deaths slow and painful.”

His greatest legacy to us, in my humble opinion, consists of only twelve words. They are the antidote to the Code of Hammurabi.

“Forgive us our trespasses as we forgive those who trespass against us.”

The full video of Vonnegut’s Anges Scott College commencement is available on CSPAN.  I learned of Vonnegut’s speech from Maria Popova’s ”If This Isn’t Nice, What Is? Kurt Vonnegut’s Advice to the Young on Kindness, Computers, Community, and the Power of Great Teachers” but she doesn’t include the “twelve words” in her summary.

“An eye for an eye and soon the entire world is blind.”
Ghandi [attributed]

Related


Update Sun-Jul-27-2014:  Kevin Williamson makes a great point about the benefits of Hammurabi’s code:

The Hammurabic Code, along with its presumptive predecessors, represented something radical and new in human history. With the law written down — with the law fixed — a man who had committed no transgression no longer had reason to tremble before princes and potentates. If the driver of oxen had been paid his statutory wage, if a man’s contractual obligations had been satisfied, and if his life was unsullied by violations of the law, handily carved upon slabs of igneous rock for all to see and ingest, then that man was, within the limits of his law, free.
Kevin Williamson “Hammurabi’s code

A Simple Checklist for Introducing a Collaboration Application

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage

We work with several teams who have launched or are launching an application that makes a team or group more productive.  Here are a couple of suggestions for things to consider.

Be compatible with the status quo if at all possible

  • Collaboration or workflow applications that require at least two people to adopt in order to realize productivity benefits are very challenging to introduce.
  • It’s certainly been done: fax, email, CRM systems. But the list of failures is much longer.
  • Find a way to provide a single individual with a productivity bonus that is backward compatible with existing workflow (e.g. email, CRM, wiki, website, …).

Use your team as a case study

  • Is your startup using the tool for collaboration? If not, why not?
  • What no longer happens that used to happen before you started relying on the application?
  • What can you now do using your application that you could not do (or only do with great difficulty) before?

Have conversations before putting up a landing page

  • What have you learned from your conversations with prospects?
  • What problems or needs do you probe for?

Use your team as an earlyvangelist

  • What problems or need or recurring situation led your team to develop your application?
  • What alternatives did you try to do before you developed your application?
  • Why were they unsatisfactory? What was missing or still too difficult?

Listen carefully to your early adopters

  • What do your early adopters tell you that they like about using the service?
  • What benefits does it provide them?
  • What do they still see as missing?
  • Ask what three features they would demo either to other similar teams or to others in their company.

Understand why some teams failed to adopt your application

  • Teams that don’t try it may give you reasons, and these are worth listening to.
  • Pay close attention to teams that gave it a fair trial and decided not to go forward. Their rationale is absolutely worth addressing.

If you are working on a collaboration application for business and are having difficulty getting traction, please free to schedule office hours and we can design some experiments to explore your situation, see “We help you design experiments that move your business forward.

 

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