Archive for November, 2007

Think You Have a Great Name, Think Again!

Written by Francis Adanza. Posted in Founder Story

We have all heard of brand names like Google, Cisco, Nike, Starbucks , and Lowe’s. Have you ever wondered how these companies got their names? You probably haven’t heard of Ansearch , N-TRON, InSport International, Caribou Coffee, and Handy Andy. To me Ansearch sounds more like a search engine than Google, N-TRON seems more like a network router than Cisco, InSport is closer to sports apparel than Nike, Caribou Coffee appears more relevant to coffee than Starbucks, and Handy Andy sounds more like home improvement than Lowe’s. We all know there is more involved in marketing than just names, but I wanted to learn how developing the right name can improve my marketing effectiveness. Today, I was able to sit down with Athol Foden, Founder of Brighter Naming, to pick his brain for naming insights. Athol has over 15 years of experience in helping clients name companies, products, services, and taglines. Please visit his website for great articles on name generators, characteristics of good names, and naming biases and influences.

In addition to this blog, Athol will be joining us next Friday, December 7th at the Bootstrappers Breakfast in Palo Alto. Come join us and engage in a round table discussion and ask Athol your own questions.

Q: How does a strong company name influence presence in the marketplace?
It allows you to stand out from the crowd, gain quick and clear customer mindshare, and shorten all your sales and marketing messages.

Q: What do you think is more important, a name or a logo?
In retail, a logo (or even more importantly a color scheme) are the most important when you are selling “off the shelf” via packaged goods. For items where the logo cannot be seen, for example fashion clothing, the name recognition is more important. In high tech, when selling via the internet or phone, the name is more important. In some cases, the icon (mini logo) may be also very important e.g. embedded in a website, cell phone, etc.

Q: In our experience we see startups rollout a product name which is different from the company name. We believe they should put all their weight behind one name instead of confusing people with multiple names. What are your thoughts about this strategy?
Most startups only have so many marketing dollars at their disposable, so it is often easier and cheaper to have one name to initially promote. However, if the company will have a number of product lines in the near future (under 18 months), then you need a naming architecture that plays off the company name, or you need separate product names.

Q: It seems like naming the business is an emotional step that most founders want to own, how do you convince people you can produce a better result?
Many smart founders waste many, many hours before they call for help. Very few have the talent, experience and knowledge to do it themselves (unless they will always be a small Mom and Pop). This is especially important for a business that will go nationwide soon. The legal costs and risks alone are enough to have many ask for help. However, they still own the process and final decisions. All we do is enable the creativity, provide names that are legally clear, and facilitate the decision making process.

Q: Your website says you can help a startup come up with a name in three weeks, how much of the founders time does this require for you to deliver?
For a small business, we only engage the founder in meetings and discussions for about 3-4 hours a week during the project. Of course, they spend time (usually after hours) thinking about the names, discussing with colleagues, etc. We want to make sure they are very comfortable with the final name.

Q: What are the legalities of finding a name?
To register a small sole proprietorship, it only has to be clear at your local county business office. They don’t check with anyone else, or to that matter really care. To incorporate, it only has to be clear in your state. They don’t check with anyone else, not even their own counties! All this is OK, as long as no one else in your same line of business has the same name… and you will never run into them doing business anywhere in the world.

So the real protection is to do a thorough nationwide search, starting with both registered and common law (unregistered) trademarks, which provide Federal protection. A simple Google search is not enough.

Q: Without having to hire an expert, what are three pieces of advice you would share with startups to figure out a good name?

  1. Don’t try to find one name. First list as many as you can… 100+ is a minimum starting point.
  2. Don’t be naive. People have been naming businesses for years… and 1000 trademarks are filed a day. You will probably have to be somehow unique or different. Think outside the dictionary.
  3. Remember, you are naming it, not describing it. First list all the major players in your industry and all competitors. Make sure you don’t end up sounding like them.

The Best Feedback From Your Early Customers Is a Story

Written by Sean Murphy. Posted in Customer Development, skmurphy

Building on yesterday’s post that stressed the importance of serious conversation with your early customers I want to explore the kind of stories you should listen for and how to take advantage of them.

Peter Cohan in “Four Opportunities to Harvest: The Value of Informal Success Stories” outlines the benefits an kinds of stories that are extremely useful to gaining a better understanding of the value and uses your customers have for your product. Peter identifies four kinds of stories that each have their own uses:

Vision of a Solution: The customer gains an understanding of his problem and then builds a Vision of a Solution, often in concert with the sales team. This Solution is what the customer has in mind when he moves through a typical buying process – and is the first opportunity to harvest. This information, along with the sales strategy, is what is occasionally gathered in “win/loss” analysis.

This gives you some idea of the real problem the customer is trying solve and the benefits they are seeking. Make sure to capture their own words, don’t force you phrasing because theirs is much more likely to be compelling to other prospects.

Solution as Initially Implemented: Once the purchase is completed, the customer implements the initial application or applications he has in mind. These deployments may be rough, incomplete (or over-complete), and often only partially address end-user needs. This Initial Implementation is the second harvest and can represent very useful information to share within the sales and marketing organization. Often, these early implementations will be the same or similar to what other customers want to achieve, as well.

Pay a lot of attention to how long it actually takes the customer to get some benefit. Your risk of “putting a dent” in your internal champion’s career goes down dramatically once a basic system is in production use. One of the secrets of Silicon Valley is that it’s not that large (most industries aren’t really that large, and in particular for startups don’t have that many early adopters you can sell to). One thing early adopters and internal change agents have a very long memory for is a product that couldn’t be made to work in a basic way, in a SaaS application the customer may be quite willing to exit the arrangement quickly.

Solution as Consumed: Now things begin to get interesting…! How much of what is initially rolled-out is actually consumed by users? 30% of the capabilities delivered? 40%? While the real number depends on individual situations, as an aggregate we often find that the capabilities actually consumed by users is a fraction of what is deployed. What is most important, however, is that the capabilities actually consumed represent the real success story – and this information needs to be captured as an Informal (or Formal) Success Story by your team to be leveraged by your organization.

It’s also the case that if most or almost all of your customers aren’t using certain features you should probably delete them. Certain capabilities (e.g. the ability to deliver data in a portable interchange format) may be important in lowering a prospect’s perception of the risk of adopting your product, but may never actually be used in a production case. These you can’t delete without escalating the perceived (or real) barriers to exit, which will make prospects more chary about adopting your solution, no one likes to go through a trap door.

Solution as Evolved: Have you ever visited a customer and noted that they have implemented applications of your software that were never envisioned by you, the vendor? Is this exciting? (Say “Yes!”). How can this information be used? Solutions after they have evolved are often the most valuable of all Success Stories. These are applications of your offering that often represent new market opportunities, increased deployment, and deeper market development. These stories can help you make your numbers!

These are the most useful but sometimes you are tempted to tell your customers “You are using my product incorrectly, it wasn’t meant for what you are doing.” This is OK if it’s really not a good fit, but it’s conceding an opportunity to someone else if this customer is not an outlier but a harbinger of others you haven’t met yet.

There is a real temptation to “be more efficient” and automate your “data collection” but genuine conversation is what drives “story collection” and stories are the real key to understanding how your customers value your product.

Update Dec 3: I just learned that Peter Cohan will be giving a webinar on “Four Opportunities to Harvest Informal Success Stories” on Wednesday December 5 at 12pm EST. Peter is an articulate, insightful, and dynamic speaker. It’s a great topic and should make for a great webinar.

The Best Way To Get Feedback From Early Customers Is a Conversation

Written by Sean Murphy. Posted in Customer Development, skmurphy

One temptation to avoid when trying to get customer feedback on your product is premature automation. There are a number of excellent low cost survey tools out there (we use SurveyMonkey and Zoomerang and have been happy with both) but there is a real risk when you only have a dozen or two dozen early customers that a questionnaire may only give you the answers that you are looking for, not the information that you need.

Direct conversation, either face to face or over the phone works best in our experience. It’s important early on to ask open ended questions and to consider your product more of a hypothesis (See Steve Blank’s “Four Steps to the Epiphany” for more on this framework) than an accomplished fact. Even though your product has been debugged and is ready for rollout, it doesn’t mean you that understand the benefits that customers (much less prospects) perceive that it offers.

You should also consider instrumenting your product if it’s SaaS (or adding a “software flight recorder” if it’s on-premises software or delivered as an appliance) that with the user’s permission can “phone home” some usage patterns. In particular you want to be able to assess how much use (and what commands, command options, service areas, etc.. are being accessed) they are making. It’s not uncommon to start removing commands and command options that are little used. Two companies that offer usage monitoring software are Tealeaf and OC Systems. There are more out there, but these applications are intended to be deployed in production, there are many QA applications th at will monitor execution but they may or may not be suitable for deployment on the customer premises or as a part of your SaaS production infrastructure.

You should pay as much attention to your “dropouts” as much as your “frequent flyers.” With early customers you should be trying to e-mail/IM/Skype/call as much as construct a survey. Even up to a 100 or so early users you want to be as open ended in your data collection as possible. It’s important to discover how your customers are “mis-using” your product in ways that may indicate additional market opportunities (or at least alternative messaging around unanticipated benefits).

It’s easy to become frustrated or wish for “smarter users” when your customers look at the value of your offering differently than you do, or don’t adopt certain features or commands that you thought would be compelling. Sometimes it can help to have a third party interview customers and non-customers as they may have less of a “are you calling my baby ugly?” reaction.

One thing to focus on as you scale up and add more prospects is how your existing customers invite new folks to evaluate your offering. What is the value they promise if someone new adopts: this “language of referral” is extremely important. You should probe for it in your conversations and incorporate it into your messaging. It can help you to identify distinct types or segments of users who get different kinds of value from your offering.

Surveys tend to channel answers along pre-determined paths. This can cause you to overlook real benefits, and real problems, with your product. Surveys don’t let your customer tell you a story about your product.

And it’s stories that are viral because they can combine a real benefit with a dramatic difference and a reason to believe. Data can substantiate a real benefit or a dramatic difference but won’t give you a reason to believe. More on customer stories tomorrow.

Using Web 2.0 Technology to Enable Strategic Selling: A Sales Executive Forum

Written by Francis Adanza. Posted in Consulting Business, Events

I have had two interesting conversations with friends who are frustrated with some of the internal deficiencies within their companies. Both of my friends are accountants, but work for different firms and in different departments. However, they are both part of itinerant work forces and have the same problem. While out of the office, they both do not have access to their local area network. The specific pains within the overall problem were that my friends could not access their email while in the field or obtain information about a customer who was not directly their client. Where there is pain, there is opportunity. Although this problem that has been solved 20 years ago, it was interesting that these 100 million dollar firms were still operating under these business conditions.

Thinking back to last months Sales 2.0 Conference, I thought about one of the breakout sessions that I attended, “Using Web 2.0 Technology to Enable Strategic Selling: A Sales Executive Forum.”

Moderator:
Gerhard Gschwandtner, Publisher, Selling Power

Panelist:
Clarence So, Senior VP Marketing, Salesforce.com
Umberto Milletti, CEO & Founder, InsideView
Lisa Caswell, VP Global Sales & Alliances, Aravo

Below are the questions and answers from the panel discussion that I found relevant to addressing the opportunity to solve my friends’ critical business issues.

Question: Please define Sales 2.0.

Umberto: Sales 2.0 means having a more relevant conversation with your customers. It has always been an information problem. I believe that sales people are ultimately information workers that try to match a customer and their needs to a solution. It used to be very difficult to learn about customers. You would get leads without even knowing who is this company and who is this person. With Sales 2.0 it’s drawing lots of information about companies, their people, and making it relevant to your sales force.

Clarence: As a company grows, it not only becomes challenging to manage the business operationally, but also manage the selling process. Sales 2.0 allows companies to automate operational process, sales processes, offer richer customer support, and an overall better customer experience.

Question: How many technology tools do you use today?

Lisa: Technology gives us different ways to collaborate. Sales models have shifted from pushing or pulling to co-creation. Technology allows us to co-create the sale with the customer. Internally, we use several technology tools, but only two for our sales team: Salesforce.com and InsideView. With these tools, we can track the customer relationships, account relationships, and history. Historically, getting everyone on the same page has been a problem. Now, we have common dashboards, reports, and a place to access data to align everybody objectively. This helps us get rid of the anecdotes and use data to drive decisions.

Question: Is a sales more an art or a science?

Lisa: I think the ratio is 85% science and 15% art. If you track the number of phone calls to the leads, to the close rates, and measure what you learn, you take more of a systematic approach than feeling your way through it.

Clarence: I think the ration is 70% science, 30% art. I believe sales is more science because you need metrics to measure your effectiveness. For example, measuring our web presence. We live and die by our website traffic. We drive everyone to the website and measure how many people are bouncing, who is downloading the white papers, how much time people are spending on our site.

In our business model, everybody comes to the website at some point. I know down to the decimal point how many percentage of leads I get inbound through the website. We model how everybody comes in and then try to automate as many as possible. It’s a very substantial operational modeling process that we run. Once you get in through the website we use Salesforce.com and assign the leads.

Gschwandtner: With all the technology that’s out there, we should not forget that the purpose of business is what, to create a customer. How do we create a customer, by helping the customer win. How do we help a customer win? We need to understand. A lot of companies are still arrogant and say I know what our customers need and want. This is height of arrogance and ignorance. We need to know what is on the customer’s dashboard, what metrics they are looking for. If we don’t know what is important to the customer, we have no leverage point for having a conversation.

My thoughts: If everything above is true, then why do my friends have this problem? With all the tools, customer information and resources available, how come someone has not closed a deal with these accounting firms and upgraded their IT infrastructure? How come these firms do not have any team collaboration technologies? Is it because most financial firms have IT departments that assume employees should have access to company applications and data stores only while they are on company premises and connected to an internal local area network? Maybe the partners have not re-thought their business processes in light of what’s now available? Perhaps when the partners were paying their dues on detailed project work many of these technologies were not widely available, and their concept of the work has been shaped by that. These all seem like opportunities for selling. It seems obvious that if you have people in the field, they need access to the firms resources.

Planning Will Save a Software Startup Money

Written by Sean Murphy. Posted in skmurphy

One of the best ways to save money is to plan ahead: as simply as possible while being explicit about assumptions, defining what constitutes minimum acceptable forward progress, and identifying what results would justify external investment. For an example see Guy Kawasaki’s blog for

Also bear in mind Kawasaki’s reason for the post

Glenn’s point isn’t to make a statement one way or the other about Redfin’s business or to even give you a crystal ball for seeing whether you’ll succeed. A model, after all, doesn’t drive demand or serve customers; it only helps you count up the beans if you do. We’re posting this model because its basic structure might help other entrepreneurs who don’t know where to start.

My net net is that it’s vital when you are bootstrapping to have a simple written plan, that way you know what you are changing to either take advantage of opportunities or update your assumptions based on operating experience. A couple of other observations and suggestions.

  1. Headcount is the significant cost driver in a software startup
  2. Run three sets of numbers:
    • minimum that you expect to achieve; if you don’t hit these then think about folding your tent.
    • nominal case, such that you are as likely to underperform as outperform (break-even cash flow would be a good target here).
    • results that would merit additional investment to exploit the opportunity that you’ve uncovered.
  3. The structure of the model is as important as the particular numbers, document your assumptions about values and the key relationships between unknowns.
  4. Planning for your team’s time and the estimating the cost in man hours of key transactions or accomplishments (delivering a new version of software, closing a sale) is as important for a small startup as tracking the dollars: the time spent precedes the product and the revenue.
  5. Kelman has a few items that are driven by the fact that he has itinerant sales people, most software startups will delay a large sales force build out until they have a repeatable scalable sales model (VC’s can drive you to build a sales force sooner than your knowledge of the market would warrant).

It may be a stretch to think of planning as a cost saving measure, but if you’ve ever hired someone and didn’t have everything else aligned to make them productive, or leased space that you soon wanted out of, it gets easier. At least for me the “measure twice, cut once” approach is mandatory for employees/contractors and office space.

Planning in a Bootstrapped Startup: a Model from Will Kamishlian

Written by Sean Murphy. Posted in skmurphy, Startups

Will Kamishlian responded to Pelle Braendgaard‘s 2005 blog post “Bootstrap Anti-Pattern #3: The Evils of Business Plan” with the the following comment:

Planning is a means. Yes, if it becomes an end, then there is a problem.

Without planning, everything encountered is completely new.

Eisenhower observed that “plans are useless but planning is indispensable,” and will continues in a second comment with a very interesting proposal for continual planning in a bootstrapped startup. I have bolded some key phrases for emphasis that were in normal weight in the original.

I do think bootstrappers might benefit from a custom method for planning. It would seem to make sense for them to plan faster and more frequently albeit with much, much less depth than one finds in plan for investors. Think of it as a journaling exercise that looks forward to set key dates, continually reshape key estimates and tag newly identified opportunities for quick investigation or prototyping. It might also provide an easy way to consciously prioritize competing opportunities, etc.

Such a plan could be something knocked out in no more than an hour on a weekly basis, and it might actually benefit from a dedicated template, provided, of course, that the entrepreneur is thoughtful in preparation. It would also serve as a journal of where the startup has been and what ground has been covered.

Adapting von Moltke‘s observation that “No battle plan ever survives contact with the enemy” for a startup you might say that no startup’s product or operating plan survives contact with the market, either in the form of customers or competition. But prior preparation enables quick response and will likely allow you to avoid unnecessary expense and some mistakes. His suggestion for a journal format is also a good one, and one of the reasons why we believe that a wiki page makes a nice medium for your operating plan.

I like Mr. Kamishlian’s comments a lot–although I have never met or corresponded with him–they contain a succinct problem statement and guidance that corresponds to our prescription for an appropriate level of planning in a software startup.

Update Dec 1: Will Kamishlian and I were able to exchange e-mail, his e-mail read in part (emphasis added (to another great insight)):

My comments were more offhand than anything else; however, I would welcome an opportunity to discuss your post. I appreciate your use of quotations from Eisenhower and Von Moltke. As a student of history and military history, I feel that military quotations are often used without context; however, I could not agree more with the ones you chose.

We might also look to Patton, the consummate planner. Patton had his staff planning nonstop, often for contingencies that would never occur. Nevertheless, his staff planned and tossed out so many plans that by the time Patton needed to turn on a dime — as he did toward Bastogne — his planners could kick out plans in their sleep. Patton used their ability to plan to make Third Army the most agile force in the European Theater.

I responded to Pelle’s post because I strongly believe that the fundamentals remain, regardless of their current incarnations. Planning is still important; however, the nature of planning is changing. A wiki or blog makes good sense for operational planning for Web businesses. Either have the added bonus of allowing others to view and respond.

I think a single page strategic plan would work well if it has the right discipline and information. I think first of what is termed the “elevator test.” An entrepreneur may well be in trouble if he or she cannot explain the business concept in the time it takes to make a trip up the elevator. Secondly, I would include an exit strategy and timetable. Failing that, the plan should describe the means by which cash is to be reaped in addition to estimates of time and amounts.

A strategy for generating cash follows Von Moltke’s observation. Nevertheless, plans for cash flow could remain fresh via a brief weekly blog or wiki entry. Cash generation strategies may well be overlooked by many entrepreneurs. There seems to be some consensus that moving faster is more important than identifying the target. A weekly blog might also have an additional benefit of documenting changes in financial assumptions as the business adapts.

I learned much of what I know about entrepreneurship from one of the founders of Jiffy Lube. One of his simplest pieces of advice is, “Sometimes you need to be on the dance floor dancing. Sometimes you need to be up in the balcony watching the dance.” A weekly planning review provides “time in the balcony,” and such a discipline creates the ability to log new opportunities and threats.

The prolific Shawn Hessinger also responded in “Five tips for bootstrap business planning,” noting comments in an earlier post “Are Business Plans Really Evil” and offering perspectives from Fred Wilson and the comedy team of Rex and Eddie as well his own tips. I found his number four worth repeating here

Focus on sales first. Plans that involve lots of investment and work before achieving any kind of reasonable cash flow are problematic. Instead use your plan to figure out how to start making money immediately then reinvest to grow your venture.

Success for a Bootstrapper

Written by Sean Murphy. Posted in Quotes, skmurphy, Startups

Brent Lamphier was wrestling with a good definition for success in a web startup

I’ve had bunches of conversations with entrepreneurs all over the success scale, from concept level to recently acquired, and all have different definitions of what ‘success’ is.

One founder I know regularly uses the world success, ‘we’ve built three successful web apps’ or ‘I’ve successfully launched my first company.’ Other people don’t even really consider acquisition a success, just a stepping stone for further growth.

So what is success in the web? 20,000 unique visitors? 10,000 active users? 1,000,000 page views? 1,000 page views? Revenue? [...] Successfully exited 3 companies certainly makes sense, but ‘successfully launched’ is just simply too hard to define.

Make your own definition of success, but most entrepreneurs I know never consider themselves successful anyways…they’re too busy thinking through their next great idea.

I like Christopher Morley‘s definition of success: “There is only one success–to be able to spend life in your own way.”

But putting my green eyeshades on for a minute, success in a bootstrapping startup is positive cash flow, ideally enough your you and your business partner to live on and continue to develop your firm. As Dave Stubenvoll observed at a Bootstrappers Breakfast earlier this year: “positive cash flow means infinite runway for a bootstrapping startup; it’s doesn’t mean that you are going to succeed, but it’s much less likely that you will fail.”

Instead of “exits” think about great product or services that are created that continue to serve customers. VC’s talk of exits because it’s how they pay off their investors (limited partners). It’s not the same as value created. Craigslist is certainly a case in point, SAS another.

“I think the purpose of life is to be useful, responsible, honorable, compassionate. It is, above all, to matter: to count, to stand for something, to have some difference that you have lived at all.” Leo Rosten

Not everything is meant to be monetized. Seth Godin, author of the Bootstrapper’s Bible, had a great post yesterday on “Thanks” He was asked by someone why he wasn’t running ads and trying to make a nickel off of each visitor

Every time you read something I write here, you’re giving me a gift… attention. It’s getting more precious all the time, you have more choices every day, and it’s harder and harder to find the time. I know. I’m grateful. I’m doing my best to make your attention worth it.

So, have a great Thanksgiving. And thanks.

I think there’s a danger in the last sentence that Brent wrote about “they’re too busy thinking through their next great idea.” When you start something you get early customers to invest their time in helping you make it better. You want to honor that by at least trying to find a “good home” for an application if you are bored with it, or cannot figure out how to get to break even. Persist a while, especially if you have happy customers. Consider charging them instead of trying to add advertising to your site. A niche product may be better supported by a subscription model than advertising. And Athleon, Brent’s startup, looks like an interesting application targeted at the high school and college coaches and players. Sometimes it takes a while to figure out how to succeed.

“Learning too soon our limitations, we never learn our full powers.” Mignon McLaughlin

“Nothing ventured, something lost.” Neale Clapp

“Even cowards can endure hardship; only the brave can endure suspense.” Mignon McLaughlin

I also worry that success has to be public in our “social media” culture, and either financial or buzzworthy. I don’t mean to imply that those are Brent’s values, but it’s certainly swimming against the current of popular culture not to equate money with success.

“The work of an unknown good man is like a vein of water flowing hidden in the underground, secretly making the ground greener.” Thomas Carlyle

“The mature man lives quietly, does good privately,
assumes personal responsibility for his actions,
treats others with friendliness and courtesy,
finds mischief boring and keeps out of it.
Without this hidden conspiracy of good will,
society would not endure an hour.”
Kenneth Rexroth in his 1961 Introduction to Tolstoy’s “The Kingdom of God Is Within You

Giving Thanks

Written by Sean Murphy. Posted in skmurphy

It’s appropriate on Thanksgiving to think of the things we have to be grateful for. My short list:

  • Health
  • Family
  • Friends
  • Opportunity

As an entrepreneur I am interested in getting something new done. But life is what happens while you are making other plans. I can sometimes get so focused on trying to make a venture “a success” that I forget what success truly is: having my health, a loving family, good friends, and the availability of opportunities to exercise my talents.

I wouldn’t be where I am without the help of many people. That’s as true for me as it is for you and even for all of the “self-made men” and overnight successes. No small amount of hard work also contributed but there is still an enormous amount of luck and much help from many others.

In college I attended a graduate program in Engineering-Economic Systems at Stanford run by William Linvill. Linvill was a brilliant and energetic visionary who taught me a lot about technology policy analysis. Stanford has since blended Industrial Engineering, Operations Research, and EES into a single Management Science and Engineering department.

I try to make it to a prayer breakfast Wednesday mornings (6:45 comes so early some mornings). I am the youngest there by perhaps 15-20 years many mornings. I noticed when my older boy started sixth grade at a new school last year that he matured just by being around the older kids. I find Wednesday mornings I am in a better frame of mind (and better behaved) for listening to all of the challenges other folks bring: it makes me realize my problems are really not so bad at all. Kind of like my boy hanging around the older boys.

Ben Stein has written several essays on giving thanks–I profiled his “Just for Today” in December of last year–and I thought I would close with excerpts from two more. The first is from “Thanksgiving 2005

Thank you for the glory of the free society where I can say anything I want and not fear any more than an angry letter. Thank you for more than adequate food of virtually infinite variety. Thank you that I still have the vitality to walk these same hilly paths that I originally walked thirty-three years ago as a teacher here. Thank you for my parents who are up there with you now, I hope, and for my sister, who teaches me every time I talk to her.

Thank you for my glorious wife, the kindest, most forgiving woman on the planet. Thank you for my teenage son, who keeps me humble. Thank you for the incredible gift of my dogs for the last sixty years, who have been my best friends. Thank you for our four cats, too.

Thank you, above all, for the brave, selfless men and women who wear the uniform of this country and offer up their lives to save us from terror, for the families of those men and women, for the children who have to grow up without a father or mother, for the wives and husbands who have to sleep alone, for a year or maybe forever, for the police and firefighters and emergency workers and teachers who make our lives work, and for the Constitution.

and the second is from “My Father’s Estate” from October 1999

My father lived his life, especially in the latter years of it, in a haze of appreciation. Whatever small faults he could and did find with America, he endlessly reminded anyone who listened that the best achievement of mankind was America, whose current failings were trivial by historic standards, which was in a constant process of amelioration, and which offered its citizens the best chance in history for a good life.

Find a Problem so Bad That People Pay You To Solve It and Let You Keep the Software

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

I came across a neat synthesis of how to approach bootstrapping a software company by consulting, courtesy of Bill Paseman’s LinkedIn profile for his work from 1989-94 at Paseman & Associates (emphasis added):

At Paseman and Associates, I looked for a business model that was self funding, market focused, and let me develop a software product that I would own. I found that Berkeley’s Teknekron had a process I could adapt for my own use.

I then spent 4 years “Looking for an enterprise problem that was so bad, people would pay me to solve it and let me keep the software“.

During that time I consulted on next generation spreadsheets (Objective Software), multimedia databases (Mediashare), Object Oriented chemical structures databases, Tool Integration (Northrop) and a myriad of other things before hitting on product sales configuration (NET and Make Systems).

Peter Drucker on Why Entrepreneurs Reject Unexpected Success

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

When Peter Drucker passed away in November of 2005, Inc. Magazine assembled collection of articles, book reviews, and interviews from their archives entitled “Peter Drucker: an Intellectual Compass” to honor his legacy. The first one listed is longtime editor-in-chief George Gendron‘s interview “Flashes of Genius” for the May 1996.

Gendron’s introduction has a great analogy for what it was like to interview Drucker:

A friend who is a lifelong Drucker devotee and I were fishing the San Juan River in New Mexico recently when a violent thunderstorm hit. We stayed on the river until we could feel static electricity building in our fishing poles. Finally we ran for cover. “Remember you were asking what it was like interviewing Peter Drucker?” I asked. “Well, it’s a lot like holding a fiberglass fishing pole during a violent storm.” If you enjoy a bit of electricity in your life, the interview that follows offers an alternative to standing in a large body of water in the middle of a thunderstorm.

I have excerpted the sections related to the first of the four pitfalls for entrepreneurs that Drucker details: the rejection of unexpected success (note: in the original interview italics were used for emphasis, in this excerpt they have been replaced by bold text):

Drucker: 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.

Drucker: There are actually four points — I call them entrepreneurial pitfalls — where the new and growing business typically gets into trouble. All four are foreseeable and avoidable.

The first comes when the entrepreneur has to face the fact that the new product or service is not successful where he or she thought it would be but is successful in a totally different market. Many businesses disappear because the founder-entrepreneur insists that he or she knows better than the market.

Inc.: So, often the entrepreneur is actually succeeding but doesn’t realize it?

Drucker: No, it’s worse than that. He or she rejects success. You want examples? There are thousands of them, but one of the best is over 100 years old.

A man by the name of John Wesley Hyatt had invented the roller bearing. He made up his mind that it was just right for the axles of railroad freight cars. Railroads traditionally stuffed the wheels of their cars with rags soaked in oil to handle the friction. The railroads, however, were not ready for radical change; they liked their rags. And Mr. Hyatt went bankrupt trying to persuade them otherwise.

When Alfred Sloan, the man who later built GM, graduated from MIT at the head of his class in the mid-1890s, he asked his father to buy him Hyatt’s small bankrupt business. Unlike Hyatt, Sloan was willing to broaden his vision of the product. It turned out that the roller bearing was ideal for the automobile, which was just coming to market. In two years Sloan had a flourishing business; for 20 years Henry Ford was his biggest customer.

Inc.: Good story, but is the rejection of success really all that common?

Drucker: I’d say that the majority of successful new inventions or products don’t succeed in the market for which they were originally designed. I’ve seen it again and again. Novocaine was invented in 1905 by German chemist Alfred Einhorn for use in major surgery, but it wasn’t suitable. Dentists immediately wanted the product, but the inventor actually tried to stop them from using it for the “mundane purpose” of drilling teeth. To the end of his days, Einhorn traveled all over the world preaching the merits of novocaine as a general anesthetic.

More recently, I know of a company whose founder created a software program that he was absolutely sure was what every hospital needed to operate smoothly. Well, the hospitals told him they weren’t organized the way he assumed. He didn’t make a single sale to a hospital. By pure accident, though, a small city stumbled over the program and found it was just what it needed. Orders began to come in from medium-size cities around the country. And he refused to fill them.

Inc.: Why do entrepreneurs reject unexpected success?

Drucker: Because it’s not what they had planned. Entrepreneurs believe that they are in control.

The entire interview is definitely worth reading. It borrows from Drucker’s Innovation and Entrepreneurship, also worth reading despite its 1985 publication date. The four pitfalls that he identifies in the interview are:

  1. The new product or service is not successful where the entrepreneur thought it would be but is successful in a totally
    different market.
  2. Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.
  3. A successful firm outgrows its initial management base, typically by the fourth year of operation.
  4. It’s when the business is a success, and the entrepreneur begins to put himself before the business.

Drucker closes with a pithy definition of an entrepreneur: someone who gets something new done.

Looking for Innovation at a Trade Show

Written by Theresa Shafer. Posted in Events, Rules of Thumb, Startups

Three tips for attending a trade show and scoping out breakthrough innovations:

  1. Start on the perimeter and work you way in to the main floor. All the innovation is in the startups booths on the outside.
  2. Before the show spend some time checking out exhibitors’ websites. Especially if you are not familiar with the company and believe it may be a new entrant. We build a spreadsheet with product, headquarters, funding etc.
  3. Watch for interesting birds of the feather meetings. Often they will have the most interesting discussions of the whole show!

Understanding vs. Mastery

Written by Sean Murphy. Posted in Quotes, skmurphy

“People tend to mistake understanding for mastery. Mastery is the ability to execute under pressure.” Ford Harding

“The secret for discovering the ability to focus all of our mental and physical energy on a single task is no secret at all: recall the concentration of a child at play.” Edward Niam

“Necessity may be the mother of invention, but play is certainly the father.” Roger von Oech

“Innovation isn’t what innovators do….it’s what customers and clients adopt.” Michael Schrage

“Most managements tend to define ‘market’ too narrowly. They tend to see it as ‘the market for what we make’ rather than as ‘the value the customer pays for.’ But many managements tend to define ‘technology’ much too broadly. They think it means ‘what we can can intellectually grasp.’ What is really means is ‘what we can do with great skill and high distinction.’”
Peter Drucker from Management: Tasks, Responsibilities, and Practices

A Good Idea is No Match for a Bad Habit

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

Frank Hayes, a columnist for Computerworld, jotted down some “conventional IT wisdom” in 2000 in his “Frankly Speaking” column that they re-ran this month. Here were the best three nuggets:

Data isn’t information.
Information isn’t knowledge.
Knowledge isn’t manageable.

For me the first one concerns “tacit knowledge” (Michael Polyani‘s shorthand phrase for the fact that we can know more than we can tell, and not all know how is available to introspection), the knowledge that individuals or teams possess that can’t be separated from the person or group. As your startup grows your team is going to become individually and collectively more knowledgeable about the problems you are solving for your customers–at least, paraphrasing Edison, you will learn a lot of things that don’t work. It’s probably useful to focus as much on developing the people and teamwork by developing checklists and simple score keeping mechanisms as asking them to document everything.

Functionality is not the same as usefulness.

There are many many things that can be developed that won’t get adopted, some may be purchased that are not adopted but that’s not a sustainable business model. Much of the risk in our startups has to do with your prospects perception of the usefulness of what you’ve developed (do they want to become paying customers), this can get ignored in the very early days when the team is more obsessed about being able to get a new technology or application working. It’s a very good idea to develop the demo before you finish the product (even if its’ just a one page illustration or prop) so you can assess if there is interest, does someone believe it will be useful.

A good idea is no match for a bad habit.

Large companies have recipes for a business that work and many roles you can fill as part of a successful team. As long as you are good at something they can balance your weaknesses with others who have complementary strengths. Startup founders have to periodically evaluate what they may be doing or failing to do that is holding the business back. They have to get rid of their bad habits because their business cannot afford them, and the strength of their ideas cannot overcome poor execution.

A World Built by Scientists and Engineers But Run by Salespeople

Written by Sean Murphy. Posted in Blogging, Quotes, skmurphy

It’s not often that I get to quote entries from the FunMurphys blog, principally written by Kevin Murphy, my brother the rocket scientist, with a few entries by Carl Drews and myself. But he had a great short post today with a pithy quote I wanted to tie to some observations by Bob Metcalfe.

From “The World We Live In

Our interpreter (OK, we called them guides) at Northern Tier was in college studying to be an engineer. So naturally I gave him enough wisdom and advice on the subject to last a lifetime. During the conversation, my son piped up with “scientist and engineers run things, right?” I had to correct him.

“We live in a world built by scientists and engineers, but salespeople run it.”

From “The Legend of Bob Metcalfe” a November 1998 profile in Wired (emphasis in original, links added).

“Flocks of MIT engineers come over here,” Metcalfe tells me, leading me up the back staircase at Beacon Street. “I love them, so I invite them. They look at this and say, ‘Wow! What a great house! I want to invent something like Ethernet.’” The walls of the narrow stairway are lined with photos and framed documents, like the first stock certificate issued at 3Com, four Ethernet patents, a photo of Metcalfe and Boggs, and articles Metcalfe has written for The New York Times and The Wall Street Journal.

“I have to sit ‘em down for an hour and say, ‘No, I don’t have this house because I invented Ethernet. I have this house because I went to Cleveland and Schenectady and places like that. I sold Ethernet for a decade. That’s why I have this house. It had nothing to do with that brainstorm in 1973.’” He pauses for effect, as we arrive at his top-floor office. “And they don’t like that story.”

Crucial Marketing Concepts for Technology Introduction at SF Bay ACM Wrap-up

Written by Sean Murphy. Posted in Events, skmurphy

So last night’s talk at the SF Bay ACM on “Crucial Marketing Concepts for Technology Introduction” was a blast. If you missed it we didn’t hand out slides but we did hand out copies of the short form of the Crucial Marketing Concepts article. It was a very technical audience, almost entirely software engineers and software engineering managers (at least by show of hands). They made made it a very interactive session, which I truly enjoy. About half of the audience we regular attendees and half were first timers.

I got to meet Greg Weinstein, who was a great emcee, and Liz Fraley, who keep things in order at the front door. We gave away two copies of our “Mapping the Path from Idea to Revenue” workbook and a copy of Steve Pressfield‘s “The War of Art: Break Through Block and Win Your Inner Creative Battles” offering both a nuts and bolts and an “inner game” perspective on finding customers in a startup.

3 Tips for Entrepreneurs Planning a Startup

Written by Theresa Shafer. Posted in Consulting Business, Startup CEO: Question of the Day, Startups

How do you plan when you are in a small software startup? Big company planning models are not just overkill, they are not appropriate for small firms. Startups need a lightweight planning and development model to thread the narrows between “just do it” and “let’s study the problem a little longer.”

We use an one-page planning model. The one-page business plan is different from traditional models. It’s an ACTION plan. Traditional models are out of date by the time they are finished! That’s one reason why they don’t work. They are also very general, trying to fit everyone, as a result are never really useful.

But a one-page model is not a vehicle for raising money or soliciting investment – that requires a different approach. This is an operating plan. The important thing here is the process of planning, developing a better understanding of the business and the options available.

  • Define and understand yourself, your competencies, your product, and your customer.
  • Identify your immediate, mid-term, and long term goals as well as an action plan to reach them
  • Clarify and clearly state your business model and path to revenue

Here’s 3 tips to make it usable.

  1. Keep it simple and usable.
  2. Stick to one page.
  3. Use bullets to jot down ideas. It is not about writing volumes.

Our Idea to Revenue workbook has individual worksheets. Each key concept is presented in a tight, one-page question-and-answer format. We also guide you through the process in the Idea to Revenue Workshop.

Your Pre-Viral Marketing Plan

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

Google’s acquisition of YouTube seems to have captured the imagination of a lot of entrepreneurs that we meet at various events, in particular everyone wants to start a consumer Internet or media oriented businesses based on “viral marketing.”

Here are a couple of key questions to answer for your “pre-viral” marketing plan, or what you are going to do before the customer acquisition cost goes to zero (note: this doesn’t always happen–alas it’s more the exception than the rule–which can lead to a situation where you are “buying Google Adwords to sell Google AdSense“).

  1. What is the cost ($, your time, calendar time) to acquire a customer?
  2. Revenue from a new customer in first 30 days, 90 days, 180 days (how long to cover your acquisition cost and increase in marginal operating cost?)
  3. Expected lifetime (and therefore lifetime value of a customer)

I would answer this set of questions before I spent any money incorporating or buying any more domains. Your largest risks are usually market risks, not development risks. Also, for item 2, the revenue driver in a media business is the ability to deliver a well characterized audience to your advertisers. If your audience is composed of “folks at random” your advertising rates are much less than for an audience of CEO’s or private aircraft owners.

Update Nov-29: Josh Kopelman blogged about this in “Let’s Just Add In a Little Virality

It happens all the time.  I’m meeting with an entrepreneur, who is telling me about a really innovative product idea for a consumer website.  And I’m liking it.  We’re going back and forth on product ideas.  And before I know it, we’re approaching the end of our meeting.  I then ask them, “So, how are you going to acquire customers.” And that’s when it happens.  That’s when I realize that they’ve spent all their time focusing on the product/site, and aren’t nearly as innovative when it comes to their customer acquisition plans.  They view marketing as something they can “bolt on” afterwards.

The most disappointing answer is when they say “Oh, we’ll just make it viral.”  As if virality is something you can choose to add in after the product is baked – like a spell checker.  [...]

That’s why First Round Capital’s website has always said: “Too many companies treat marketing and sales as a tactical afterthought. We believe marketing is strategic and seek companies that are marketing focused – with marketing requirements driving product development.”

Join the ACM & Improve Your Peripheral Vision

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

I have been a member of the ACM since 1994. I enjoy reading Communications of the ACM and Queue. I find that they help my peripheral vision–as Steven Wright once joked, “I am a peripheral visionary, I can see the future but it’s way off to one side–for technical developments that, although they arise in technical domains that I am not actively following, may have applicability to the technology areas that our firm focuses on. The QueueNews and TechNews article roundups in my inbox: they do a good job of scanning the horizon and pointing out a number of interesting developments. It’s a kind of Science News (another good publication) that’s focused on software and computing.

I think cultivating peripheral vision is increasingly important for startups. A serious competitor is more likely to blindside you if they don’t come directly from the same technology sources and cultures that you are drawing from, but can solve the same problem. They may offer slightly different benefits, but you are more likely to be surprised by a competitor who “cuts their teeth” on a distant but related problem. The flip side is also true. You may be more successful if you can offer a novel application of a proven technology, provided you can find some early customers to help get you oriented to the new problem area. This is one of the rules of thumb for innovation–this one is taken from the “Innovator’s Dilemma“–that I will be cover in my “Crucial Marketing Concepts for Technology Introduction” this Wednesday, November 14 at the SF BAY ACM meeting (there is no charge for the event and it’s only $10 to join SF Bay ACM for a year).

Dutch Business Breakfast at US Market Access Center

Written by Sean Murphy. Posted in Events, skmurphy

I had the opportunity to attend a “Dutch Business Breakfast” that morning. It was organized by the Netherlands Foreign Investment Agency and held at the US Market Access Center.

There were three speakers who addressed the challenges of European firms coming to Silicon Valley, followed by individual presentations by about a dozen Dutch startups.

Chris Gill lead off with some practical advice on common mistakes firms make in coming to the US and some better ways to develop opportunities. Chris listed a number of common misconceptions:

  • We just need a partner
  • Our technology sells itself
  • We will send our best engineer
  • We can sell to most verticals
  • We will manage US customers from home
  • Just put a sales person on the ground
  • We only need 5% of the market
  • We will just hire more staff
  • We have no competitors

Chris is a serial entrepreneur and a member of the Sand Hill Angels. His advice came as much from his SVASE experience as it did from his own startups and investments. His key observation was that you should expect it to take 12-24 months to see revenue from a US expansion effort. Such an effort had to be viewed as a strategic initiative. Keys to success for foreign firms coming to the US:

  • Committed local as part of founding/early team
  • Treat as Startup not sales expansion
  • Detailed, hands on market evaluation
  • Identification of key reference customers
  • Localization of product & positioning
  • Investment in time & resources to acquire target reference customers

Susan Lucas-Conwell made some informal remarks and observations and then opened up for Q&A from the audience. She emphasized the need for networking, and stressed that Americans were very approachable but, at least in Silicon Valley, very focused on business.

Prof Hulsink gave a very lively presentation comparing Route 128 to Silicon Valley to the Netherlands. He observed that the MIT/Boston/Route 128 cluster was the first high technology cluster in the US, with Stanford/Silicon Valley a fast follower. Not necessarily the way we like to tell it in Silicon Valley, but amply documented in his recent paper “Clustering in ICT: From Route 128 to Silicon Valley, from DEC to Google, from Hardware to Content

One of the pioneers in academic entrepreneurship and high-tech clustering is MIT and the Route 128/Boston region. Silicon Valley centered around Stanford University was originally a fast follower and only later emerged as a scientific and industrial hotspot. Several technology and innovation waves, have shaped Silicon Valley over all the years. The initial regional success of Silicon Valley started with electro-technical instruments and defense applications in the 1940s and 1950s (represented by companies as Litton Engineering and Hewlett & Packard). In the 1960s and 1970s, the region became a national and international leader in the design and production of integrated circuit and computer chips, and as such became identified as Silicon Valley (e.g. Fairchild Semiconductor, and Intel). In the 1970s and 1980s, Silicon Valley capitalised further on the development, manufacturing and sales of the personal computer and workstations (e.g. Apple, Silicon Graphics and SUN), followed by the proliferation of telecommunications and Internet technologies in the 1990s (e.g. Cisco, 3Com) and Internet-based applications and info-mediation services (e.g. Yahoo, Google) in the late 1990s and early 2000s. When the external and/or internal conditions of its key industries change, Silicon Valley seemed to have an innate capability to restructure itself by a rapid and frequent reshuffling of people, competencies, resources and firms.

The title of his talk was “Silicon Valley in the Polder” and he drew on another recent paper “Silicon Valley in the Polder? Entrepreneurial Dynamics, Virtuous Clusters and Vicious Firms in the Netherlands and Flanders” which opens with

High-technology starters do not operate in a vacuum and innovation is not a solitary activity. The activities of technology-based firms are embedded in socio-economic networks with other companies, investors, universities, vocational institutions, etc. The geographical proximity of those institutions and infrastructural hubs will partly play a role in determine the location of ICT firms decision. Furthermore, many high-tech companies shape clusters around areas where their major customers are located.

The key questions he has researched have been is it possible to emulate the success of Silicon Valley, and if so what are the preconditions for growing another Silicon Valley in the Netherlands. His conclusions were that the important parts of a high-tech cluster are:

  • Universities and the R&D departments of large companies (for the churning out of scientific research findings and knowledge which can be applied commercially);
  • A pool of of competent human resources (highly trained entrepreneurs and professionals);
  • A sophisticated supporting infrastructure (e.g. a variety of financing mechanisms, incubators and investors);
  • Network dynamics (e.g. the recycling of ideas, firms, moneys and human capital: technology transfer, job hopping, subcontracting, spinning out & spinning in).

It was a very thought provoking talk. My new word for the day was polder, which is land that is below the surrounding water table (or sea level) protected by dikes. The first polders are more than a thousand years old in the Netherlands and the need for communal effort to maintain the dikes has shaped Dutch political decision making from feudal times. Prof Hulsink referenced the English aphorism “God created the world, but the Dutch created the Netherlands” as a part of his explanation of the title of his talk.
After Prof Hulsink’s talk about a dozen firms that had been selected by the Fast 50 foundation presented 90 second overviews of their offering. For me, the two most interesting firms who presented were

  • iRex technologies who had a very nice E-book.
  • SkillThing who had the most unconventional presentation–it looked more like a sketch comedy with a fair amount of improv–but they appear to be offering serious games to teach people how to be better managers and to better understand team member roles in large distributed organizations.

Crucial Marketing Concepts for Technology Introduction at SF Bay ACM Wed 11-14-2007

Written by Sean Murphy. Posted in Events, skmurphy

I will be giving a presentation next week at the SF Bay ACM on “Crucial Marketing Concepts for Technology Introduction.

The event starts at 6:30 next Wednesday, November 14. It will be held in the Oak Room of Bldg 48 at Hewlett Packard, which is at the corner of, Pruneridge and Wolfe in Cupertino (or 19447 Pruneridge Ave., Cupertino, CA 95014 for those Googling along at home). There is no charge for the event, it’s optionally $10 to join SF Bay ACM for a year.
The talk will address several key concepts:

  • The S-curve: the yield curve for investment in a new technology.
  • The Technology Adoption Life Cycle: why early adopters have little influence on pragmatic and mainstream users for technology products.
  • Focus: why new technologies typically find early adopters in a niche
  • Whole Product: why technologies typically don’t break out of a niche until they are part of a “Whole Product”
  • Sources of innovation: how to search systematically for opportunities.

If you are in a startup, thinking about doing a startup, or working in a more established firm that’s lost the recipe for new technology introduction, this would be an evening well spent. You will leave with an overview of a number of key concepts and rules of thumb for successful innovation.

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