Archive for January, 2009
January 31st, 2009
Here’s this month’s roundup
“Access to information doesn’t make you well-informed any more than a library card makes you well-read.” Bernard Robertson
- This is similar to Samuel Johnson’s observation that “Knowledge is of two kinds. We know a subject ourselves, or we know where we can find information on it.” But I think it’s a more appropriate warning for the Age of Google we find ourselves in.
- I came across this originally in Mark Zimmerman’s Zhurnaly entry “Superficial Research” which also points to “If a Tree Doesn’t Fall on the Internet, Does it Exist?“
- Here is the deeper issue for entrepreneurs, early markets aren’t directly discoverable through Google.
“I hope that all of you act on this. If you don’t, fewer of you will be listening to someone else next year at this time.” Irwin Federman
- I like this approach of the CEO putting himself “in the same box” with his employees. It was at the core of two blog posts:
“The Industrial Revolution did not occur when we built steam engines, but when we used steam engines to build steam engines.” Phillip Armour
- I always thought the computing revolution was the first to build on itself but clearly steam, electricity, steel, mass production, and others had the same effect.
“The umpire’s mantra of quick to decide, slow to anger has served me well professionally for many years.” Mike Coop
“Never argue with a fool, onlookers may not be able to tell the difference.” Mark Twain
- Always good advice to bear in mind, especially during a demo or a sales call.
“The purpose of computing is insight, not numbers.” Richard Hamming
“Don’t confuse selling with installing. ” Hal Stern
“History doesn’t repeat itself, but it does rhyme.” Mark Twain
“Fairness is not an attitude. Fairness is a skill.” Brit Hume
“A nexialist is skilled in the science of linking the knowledge of one field of learning with that of other fields.” A. E. Van Vogt
- The full quote from Van Vogt’s “The Voyage of the Space Beagle” is “Nexialist: one skilled in the science of joining together in an orderly fashion the knowledge of one field of learning with that of other fields”
- This quote inspired Ted Nelson from an early age.
“Any technology distinguishable from magic is insufficiently advanced.” Gehm’s Corollary to Clarke’s Third Law
- Arthur C. Clarke’s Three Laws from his essay collection “Profiles of the Future“
- When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
- The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
- Any sufficiently advanced technology is indistinguishable from magic.
“A successful firm’s cash flow provides a good living for owners & employees and the profit necessary for continued growth.” Norm Brodsky
“I’m not afraid…I was born to do this.” Joan of Arc
- My pick for the opening quote of 2009. And an emotion I identify with as an entrepreneur.
January 27th, 2009
I worked at Monolithic Memories from 1984 until 1988, in 1985 Irwin Federman, who was CEO at the time announced that the company was informally banning meetings on Fridays. It seemed reasonable to me and I thought it would probably make us more productive. A few weeks later he announced that the company was going to four day work weeks as a way to prevent layoffs at a time when the semiconductor industry was in a serious recession. Forgive me if you’ve heard this story before, I recounted it in “Two CEO Speeches I still remember” in June of last year. I still remember his closing remarks after a low key talk encouraging us to work together and follow a short list of actions to help cut costs and improve our profitability.
“And I hope that you all act on this, because if you don’t, fewer of you will be listening to someone else next year at this time.”
I have been reflecting on the lack of four day work weeks and other creative responses to the recession. And how few CEO’s seem to be making sacrifices to keep their workers employed. For some background Peter Capelli’s Jan-5-2009 article “Alternatives to Layoffs” makes for useful reading, here are some key excerpts but read the whole thing:
The idea that there are alternative ways of handling the need to cut costs without laying off individual workers is actually a very old story. In fact, up until the mid-1980s, the idea that an employer would dismiss workers permanently — that they were not expected to come back after business picked up — was so rare that the Bureau of Labor Statistics did not even keep track of such cuts. [...]
It was in this period that more creative alternatives to layoffs flourished. The most prominent of these alternative approaches was wage cuts, often negotiated by unions under the guise of concessions to existing union contracts, but the goal was always to reduce permanent job losses.
The range of other alternatives was impressive — reduced hours of work (and pay), job sharing where the same job would be split into two part-time positions, cutting back on outsourced work and the use of vendors to make work for regular employees whose normal tasks were no longer needed, etc. [...]
The best example of a significant company that is pursuing real alternatives to layoffs is FedEx, where they are cutting wages to reduce costs. What is particularly important about the cuts at FedEx is that the cuts are even bigger for executives: 10 percent for executive pay, five percent for everyone else. (Fed Ex also announced for the first time that it will not be advertising in the Super Bowl, another very public effort to save money.)
Why are so few companies pursuing any alternatives to layoffs? Why has the interest in these alternatives declined so much over time? It isn’t because the alternatives don’t save money: A five-percent salary cut saves much more money than a five-percent layoff because there are no severance payments; the legal liability and associated costs are much less; and the savings come instantly without the agonizing administrative process of figuring out who has to go and getting them out in a dignified manner, etc.
Morale might actually improve through a collective effort to save jobs, certainly as opposed to the morale-killing effects of layoffs and, of course, the ability to ramp up when business improves is dramatically accelerated.
It comes down to how long you think this recession will last and what you want your startup to be known for.
I am not advocating holding on to poor performers: I have had to fire many people over the years as a manager, it’s never easy and it’s never pleasant. But having to lay people off is much much worse. When I look back on places where I enjoyed the work and learned the most, it was when times were tough but we got creative and persevered.
As entrepreneurs we have to hold ourselves accountable for keeping the our team intact now so that we are better prepared when the economy comes back. And remember these times as you start to hire again, because that’s when you will plant the seeds for future troubles if you are not careful.
Update Jan-29: Venture Hacks juxtaposes this quote from Barry Diller with their link to this post.
“The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”
Update Jan-30: I just read Ron Wilson’s “Why the Layoffs If We’re Still Profitable?” from Tue-Jan-27, he makes some interesting suggestions:
The most important thing is to understand your company’s cash-flow scenarios and its alternatives. [...] Sufficient bridge funding to keep cash flow above zero may be an insurmountable obstacle for a little fabless semi company, but a small risk for the huge system OEMs to whom the company is important. In fact from the system OEM’s point of view, ensuring survival for the supplier of a key component in a promising new product may be a very good short-term investment in their own cash flow. And in some cases, you can build a similar scenario for key suppliers: they may be richer, and have an interest in your survival much larger than the cost of ensuring it.
Now is the time for lateral thinking, not for reflexive conservatism. But lateral thinking means unprecedented sharing of information between engineering, financial, and corporate management. And it means resisting that reflex to pull back when the unknown yawns before us.
January 25th, 2009
Another excerpt from William Feather’s “Business of Life”
Dead Business
A neighboring grocery store went bankrupt, and a bookkeeper who was called in by the lawyers to help inventory the bankrupt stock says he never before realized the difference between a dead business and a going concern.
Here were cheese and vegetables and meat, he found, which would have been salable the next day if the store had kept open. Here were accounts with nearby customers which might have been paid by the next payday, but now would have to be turned over to a collection agency. Here were canned goods which could have gone to make up the weekday meals of a hundred families, but now would have to be sacrificed as “bankrupt stock.” No one who has not helped to salvage a disordered store and turn odds and ends into cash at a quick sale can realize how much it shrinks in value.
Every business accumulates a friendliness on the part of the customers which becomes part of its stock in trade. The habit of stopping at a certain store to buy, or the familiarity which leads one to ask for an advertised brand of anything, forms an asset as important as building and fixtures. It is this fact which enables companies about to issue stock for public sale to place a large value on their good will and to issue stock for its full amount. The money which has been invested in years of careful advertising builds up a fund of good will solid enough so that bankers lend money on it–when they lend money on anything.
My copy of “Thoughts on the Business of Life” is copyright 1949 with individual articles copyrighted between 1927 and 1949, so I can only limit the date of this article to between 1927 and 1949. It’s certainly still applicable today, and applicable to knowledge businesses a much as retail firms.
Entrepreneurs who are facing the challenges of closing a deal with their first few customers can be surprised how hard it is to get on prospect’s calendars and get them to return calls. Problems that will be an order of magnitude easier to manage once the prospects become customers. Established credit relationships with suppliers, partners, and customers can also take a long time to establish and are equally valuable.
As you consider how to get through the recession of 2009 (or what I hope will be called the recession of 2009, instead of the recession of 2009-2010) Feather’s observations from perhaps 80 years ago are well worth bearing in mind. Find a way to continue to operate, even if in a reduced fashion, as a set of ongoing customer and supplier relationships have considerable value and act as a force multiplier on your other assets.
I close with two related quotes on reciprocal obligations from Margaret Atwood’s essay “A Matter of Life and Debt”
Debt–who owes what to whom, or to what, and how that debt gets paid–is a subject much larger than money. It has to do with our basic sense of fairness, a sense that is embedded in all of our exchanges with our fellow human beings.
We are social creatures who must interact for mutual benefit, and–the negative version–who harbor grudges when we feel we’ve been treated unfairly. Without a sense of fairness and also a level of trust, without a system of reciprocal altruism and tit-for-tat–one good turn deserves another, and so does one bad turn–no one would ever lend anything, as there would be no expectation of being paid back. And people would lie, cheat and steal with abandon, as there would be no punishments for such behavior.
Here are some earlier blog posts that include excerpts from William Feather’s “The Business of Life.”
January 24th, 2009
We have a little over 400 posts up on the blog since we started with “Welcome Entrepreneurs” on October 1, 2006. I thought I would offer some guidance to newer readers on which have been the most popular. I have looked at popularity through three lenses: feed clickthroughs, unique page views, and total page views.
Based on feed clickthroughs (in theory selected by regular readers, perhaps influenced by the title):
- Nov-26-2007: Planning Will Save a Software Startup Money
- Aug-25-2008: Three Tests for Negotiating a Software Deal
- Sep-10-2008: Good Blogging is Good Linking
Based on Unique Page Views (in theory the most popular among all readers)
- Dec-4-2008 We Don’t Encourage Individuals to Form a Startup
- May-28-2008 Bloggers Covering Electronic Design Automation
- Oct-4-2007 Benefits of SaaS Model
And one more based on total Page Views (some folks must have read this more than once).
January 23rd, 2009
One of the things I like to do is re-work and improve comments I have left in forums or on other blogs into posts on this blog. I have been using Backtype for a few weeks now and have found it useful for keeping track of other places I have commented. You need to register and claim comments under various aliases that comment systems require you to use (e.g. my skmurphy e-mail, my Gmail account, Hacker News ID, etc..).
For a list of my recovered comments see http://www.backtype.com/skmurphy
January 22nd, 2009
I attended a great Douglas Partner’s workshop this week. I have always been a believer in the power of a good LinkedIn profile. Our experience is that your website and your LinkedIn profile will be used for reference checks by people you meet. I use LinkedIn as a combination on-line bio and self-updating Rolodex.
In Silicon Valley I think that your LinkedIn profile is as important as your website to make the right impression on potential clients, partners, and future team members. A great LinkedIn profile can increase your visibility.
The workshop was chock full of tips: in addition to good feedback from the instructor and other attendees, I appreciated the time to work on my profile. Here are three improvements I made::
- I changed my “headline” from my current title (default) to a catchy tag line: “Customer Development for Software Startups Focusing on Early Customer and Early Revenue”
- With input from other attendees, I strengthened my experience section. I really liked MB Dean’s Problem, Action, Result format and am working on using it throughout my experience summary. I came up with the following three sentence overview: “I offer business development services for software entrepreneurs. I give practical advice that cuts through the bull to help you build a business. I am a hardware engineer and a mom, so I like action lists with a do-it/done methodology.”
- I added the SKMurphy blog to my profile.
The workshop is aimed at people looking for a job, but it applies to entrepreneurs looking for consulting work and customers. It is a great hands-on workshop. Check the event schedule on Douglas Partners website to see where others are scheduled.
January 21st, 2009
Bootstrappers Breakfast(TM) announces Pete Tormey “the Patent Guy” (http://www.actionpatents.com) as invited guest to discuss when you need a patent and tips for getting one. Patents provide an important competitive advantage, and young companies need to develop an understanding of patents to maintain this competitive advantage.Bootstrappers Breakfast will meet at Omega Restaurant in Milpitas, Feb. 13, 2009 at 7:30-9am. Mr. Tormey will give a short 5-10 introduction to set the table for a roundtable discussion on protecting inventions. Bootstrappers Breakfast brings together leading entrepreneurs who eat problems for breakfast and are serious about growing their business.
“Pete Tormey is a registered patent agent who specializes in providing patents for Software, Electronics, Life Science Instrumentation and Business Methods. Action Patents is a great website with a lot of practical advice. He has a number of excellent podcasts — take a listen to Patent Basics for a great example — where he speaks in very clear and practical language about patent related legal and invention issues,” said Sean Murphy, CEO of SKMurphy.
About Action Patents
Action Patents provides fast affordable patent protection to young companies and entrepreneurs. As an experienced entrepreneur, Mr. Tormey is rare among patent agents and attorneys because he provides solid financial analysis on the value of patents before recommending patent protection. Mr. Tormey has an MBA in Marketing from St. Mary’s College in California, and a BS Electronic Engineering from San Francisco State University. He practices exclusively before the US Patent Office.
About Bootstrappers Breakfasts
Bootstrappers Breakfasts are for founders of early-stage startups. It is a chance to compare notes on operational, development, and business issues with peers. These breakfasts were designed for entrepreneurs to share ideas and leverage thoughts with other folks who are serious about growing their business. With a promise of serious conversations with other entrepreneurs who eat problems for breakfast, they meet in the back room at several Silicon Valley restaurants. The first breakfast was held at Coco’s in the heart of Silicon Valley in 2005. Since that time, they have grown to multiple locations throughout the Bay Area. The newest one is now at Red Rock Coffee in Mountain View. For the full schedule of breakfasts, please visit http://www.bootstrappersbreakfast.com
January 20th, 2009
I took part in the Marketing Consultant’s forum at CNSV tonight as a panelist, joining Ahmet Alpdemir, Brian Berg, and Peter Salmon. The slides are on the CNSV site at www.californiaconsultants.org/download.cfm/attachment/CNSV-0901-Berg-Murphy-Alpdemir-Salmon.zip
My focus was on “Cultivating Communities to Get More Customers.” I addressed joining a community with the objective of becoming a member in good standing. Broadly there are two kinds of communities for a consultant: prospects and peers (who are both potential partners and competitors). In either case you want to learn and follow unwritten rules and local customs, finding ways to contribute to the core purpose of the community.
In a peer community you want to think about joining and fostering a “stag hunt.” Here is a non-technical definition from the Game Theory Dictionary
The French philosopher, Jean Jacques Rousseau, presented the following situation. Two hunters can either jointly hunt a stag (an adult deer and rather large meal) or individually hunt a rabbit (tasty, but substantially less filling). Hunting stags is quite challenging and requires mutual cooperation. If either hunts a stag alone, the chance of success is minimal. Hunting stags is most beneficial for society but requires a lot of trust among its members.
What this means as a practical matter is that you are looking for other consultants who will be reliable and have complementary expertise. This will allow you to take on larger projects. You may also carry other consultant’s business cards so that you can refer work to them that’s appropriate if it’s not a match with your skills and expertise.
In a community that’s primarily prospects, you have to create more value than you harvest or you will be viewed as a parasite instead of a contributor. The challenge is to err on the side of caution in marketing your services. A side benefit, if you listen carefully, is to learn about emerging topics and issues before they become common knowledge.
It was a very well attended meeting. Brian Berg noted the organization has doubled in size in the last year and the downturn/recession has seen a lot of first time consultants join. There were a number of questions from folks who were considering consulting (or possibly anticipating an involuntary career change to consultant) as well as those who were new to consulting in the last year or so.
The challenge with learning how to market yourself as a consultant is that it’s typically a mid-career change that your earlier work as an engineer doesn’t prepare you well for. The technical challenges of consulting are for the most part straightforward compared to the new challenges in marketing oneself in a way that is authentic and effective. I think all of us on the panel were sensitive to those issues.
I would also encourage newer technical consultants to attend the CNSV marketing meetings that occur before the main meeting. Very experienced consultants like Carl Angotti and Walt Maclay donate their time to share a number of effective techniques for marketing a technical practice. They include a how to section where attendees can critique each other’s work (e.g. Craigslist profiles) and walk you through the process of posting on-line in appropriate forums.
Update Jan-24: I see that Mike Coop has also blogged about the meeting in “Recap: IEEE CNSV Meeting.“
January 18th, 2009
After thinking some more about yesterday’s post on entrepreneurial motivation I thought I would re-read some Peter Drucker, his clarity and prescience continue to impress me. All of these quotes are from Chapter 6 “What is a Business” in “Management: Tasks, Responsibilities, and Practices”
There is only one definition of business purpose: to create a customer.
It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods.
The typical engineering definition of quality is something that is hard to do, is complicated, and costs a lot But of money!that isn’t quality; it’s incompetence.
What the customer thinks he is buying, what he considers value, is decisive–it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him.
Profit is not the explanation, cause, or rationale of business behavior and business decisions, but rather the test of their validity. If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interest in making profits.
A company can make a social contribution only if it is highly profitable.
Managers must convert society’s needs into opportunities for profitable business. That, too, is a definition of innovation.
January 17th, 2009
Tim O’Reilly had a thought provoking post “Work on Stuff that Matters” on January 11. He starts with a clarification of what he means by “the social value of business done right”
First off, though, I want to make clear that “work on stuff that matters” does not mean focusing on non-profit work, “causes, or any other form of “do-goodism.” Non-profit projects often do matter a great deal, and people with tech skills can make important contributions, but it’s essential to get beyond that narrow box. I’m a strong believer in the social value of business done right. We need to build an economy in which the important things are paid for in self-sustaining ways rather than as charities to be funded out of the goodness of our hearts.
and then offers three guidelines
1. Work on Something That Matters to You More Than Money.
The entrepreneurs who first made the market often had much less expectation of easy success, and were instead wrestling, like Jacob with the angel, with a hard problem that they thought they could solve, or at the very least make a dent on. [...] The most successful companies treat success as a byproduct of achieving their real goal, which is always something bigger and more important than they are.
By picking the right mission you also enable others to collaborate more effectively with you. Michael Schrage, who has studied collaboration in a variety of settings, has said that one clear rule of thumb has emerged. If you want talented people to collaborate, you have to pick a problem that they care about, and it is so hard that they realize they need to work together to make meaningful progress (for more on this see Shared Minds, No More Teams, or Serious Play)
2. Create More Value Than You Capture.
Most businesses do in fact create value for their community and their customers as well as themselves, and the most successful businesses do so in part by creating a self-reinforcing value loop with their customers.[...] How many people do you employ in fulfilling jobs? How many customers use your products to make their own living?
I think this good advice but very challenging to master. It’s easy to be clear on your own needs, harder to see how to co-evolve with a system of suppliers, partners, and customers in a community. Peter Drucker called “the worship of premium pricing” as first deadly sin of business: “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover. Maximum profit is thus obtained by the profit margin that yields the largest total profit flow, and that is usually the profit margin that produces optimum market standing.”
3. Take the Long View
It’s hard to see beyond the “small here” and the “short now,” especially if you live in a favored place and time.
Peter Drucker has observed that the second deadly sin of business is “mispricing a new product by charging ‘what the market will bear.’ This, too, creates risk-free opportunity for the competition.” Beyond any entrepreneur’s concerns for successfully establishing their company in a market are the obligations that we all have to our family and our community.
On January 13, Po Bronson’s “What Should I Do With My Life, Now?” was posted on the Fast Company website. He offers a perspective that acknowledges the need to work on stuff that matters but also admits of more practical motivations. He tells a version of the story of the three brick layers (I first heard it as three stone masons) with a different emphasis.
There’s an old parable about the three bricklayers. They’re laying bricks all morning, and when they finally get a break, one guy asks the other two, “Why are you doing this job?”
The first guy says, “I’m doing it for the wages.”
The second guy says, “I’m doing it for my wife and kids.”
The third guy looks up at what they’ve been constructing all morning, which is a church — a place to get in touch with one’s highest self — and says, “I’m helping to build a cathedral.”
Now, most people hear this parable, and they think the third guy has the right answer, and the first two guys have the wrong answer. That’s the simplistic lesson that most people jump to, led their by their mythic notions of calling.
But that is not the lesson of the parable. In fact, all three men have a sense of purpose — have a “cathedral,” if you will. The third guy has the Cathedral of Spirituality. Good for him. But the second guy has his too. The Cathedral of Family. And the third guy has the Cathedral of Self-sufficiency. Those are all good purposes. Those are all right answers.
The real lesson of the parable is, notice what no man answered. Not one of the three said, “I just love laying bricks.” Doing something for the sheer love of it is not what real people mean when they say their work provides a sense of purpose. That is not how the construct a sense of meaning and rightness. Looking for it, in that form, is incredibly illusory.
I think many entrepreneurs are motivated as much by self-sufficiency, either at a personal or family level, as a higher calling. I think you elevate your goals, similar to Maslow’s “Hierarchy of Needs,” as more basic motivations are satisfied. Bronson seems to be rejecting Joseph Campbell’s “follow your bliss” but I think what he is really saying is that pure doing is not enough–whether it’s writing code, writing books, sculpting, painting, etc.. I have to balance my obligations to myself, my family, and my community. This is at the heart of Tim O’Reilly’s three rules as well.
“If you do not have the capacity for happiness with a little money, great wealth will not bring it to you.” William Feather
“Life is too short to work at a job you hate, but everyone has to do something someone else is willing to pay them for.” Sid Emmert
Update Jan-18: Scott Shane, author of Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By has an inaugural blog post on the US News website, it’s “Why Do People Become Entrepreneurs”
Researchers have identified myriad reasons why people start their own businesses, but across all of the surveys, interviews, and other efforts to understand entrepreneurial motivation, one reason stands out above all others: People start businesses because they don’t want to work for someone else.
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