Archive for February, 2010
February 28th, 2010
“When two men in business always agree, one of them is unnecessary.” William Wrigley Jr.
“Your brand is the promise that you keep.” Kristin Zhivago
“Plans are made, unmade, revised, and recast through action and interaction with others on a daily basis.”
Saras Sarasvathy
“Ask for input only if you plan to do something with it or about it.”
Richard Moran “Nuts, Bolts, and Jolts”
“Simple ain’t easy.” Thelonious Monk
“One competitor to customer development is a co-founder’s belief that product development, in and of itself, creates value.” Sean Murphy
“Sometimes I am blocked by things I can see, other times by things I cannot. Too often, it’s just my fear of the unknown.” Sean Murphy
“At a distance big companies look like aircraft carriers, but close up you see they are really a thousand canoes.” Rick Munden
- “From a distance you look like an aircraft carrier, but as you get closer it becomes clear you are really a thousand canoes. ” Rick Munden recounting a vendor’s description of TI
“Opportunity is missed by most people because it is dressed in overalls and looks like work.” Thomas Edison
“The surest way to be cheated is to think oneself cleverer than other people.” La Rochefoucauld
February 23rd, 2010
- Wikis dissolve voice and authorship. Use them where there are rewards and incentives at a team level, where a team is being held accountable for a result.
- Blogs and forums preserve voice and authorship. Use them where knowing who said what is important.
- Start with frequently updated information that is also frequently accessed:
- Meeting agendas and minutes (avoiding the bottleneck of the designated note taker and/or overlapping amendments in different e-mails that then have to be reconciled),
- Early and still evolving specifications
- Project status in a dynamic environment
- Projects end, products are shipped and end of life, problems get solved. At some point in the business world many wikis must be congealed into a document or document set and either archived, frozen as a static HTML tree, or transferred to a content management system where more formal revision and change control methods are more appropriate. Unlike Internet wikis, older project or product wikis are often better preserved as read only archives.
- Wikipedia anchors a lot of expectations in a use case that is rarely appropriate to a team that is not building an encyclopedia. Hope that useful content will be curated in a general purpose wiki is unlikely to be satisfied.
- Use many small team level wikis, each for a distinct project or purpose, where the team membership is clear and there are shared incentives for cooperation and success.
February 17th, 2010
I can always tell when I am feeling stressed because I dream about being back in school taking an exam I haven’t studied for. Although to be candid some of those dreams are closer to suppressed memories than unrealized anxieties bubbling up from my unconscious.
But a year or two ago I had a dream a while ago about a tiger that I keep turning over in my mind.
A tiger is pacing in a cage, but it’s not a square cage, it’s more of a maze.
It’s not in a zoo, more like a warehouse or strangely configured storage unit. The floors are smooth cold concrete.
The tiger is trapped in a maze of walls of iron bars and plexiglass.
The tiger starts out in a section that’s primarily iron bars with a few walls of plexiglass.
It leaps against the bars and can’t break out.
Then it sees what appears to be an opening and runs into a plexiglass wall, which it can’t break through either.
But running into the the plexiglass a few times makes it more cautious.
So it paces,
alternately sniffing and growling,
confused and angry,
trying to find a way out.
Finally it comes to an opening that just has strip of masking tape on the floor.
And there it sits, convinced that this is some new barrier that’s also uncrossable.
Any resemblance to recent legs of your entrepreneurial journey (or mine) is entirely coincidental.
February 16th, 2010
I think that there are better products, impossible products, and unthinkable products.
Better products follow an established trajectory in an industry. They are “15 minutes ahead” and the easiest to sell…for a while. Examples include:
- Faster computers with larger memory
- Cars with better gas mileage
Impossible products find a way to relax one or two constraints that designers of better products have taken as fixed. They are harder to sell, not so much because they are hard to understand but difficult to believe, prospects will ask you “What’s the catch?” Examples include:
- ATM Machines replacing human tellers to dispense cash
- Ethernet over twisted pair
Unthinkable products are typically developed by someone from outside the target industry or are the result of repurposing a product from another industry. Their developers were not handicapped by the mental roadblocks that come from following established practices and patterns in an industry. They can be extremely difficult to get prospects to understand–much less believe in–as they are almost always incompatible with current practices and infrastructure. But they can create an entirely new category of product. Examples include:
- IDDQ testing in semiconductors
- The Reebok Pump shoe
- Henry Ford realizing that a meat packing plant’s “disassembly line” could be run backward to assemble a car.
What are you working on?
See also
February 15th, 2010
Join us tomorrow, Tuesday, February 16, in Sunnyvale where George Grellas will present a short legal guide for entrepreneurs. George is a veteran Silicon Valley startup business lawyer who heads a boutique firm that specializes in early-stage technology startups. Since 1984, as a founders’ lawyer, George has worked with thousands of entrepreneurs in helping them with their strategic planning, entity formation, IP protection, funding, acquisitions–the range of their startup legal needs for both deals and disputes.
George’s style is practical, direct, and down-to-earth, emphasizing a strong working knowledge of technical issues (including tax) explained in a manner that is made understandable and helpful for those new to startups as well as for seasoned entrepreneurs. He is the author of the Startup Law 101 series of tutorials for founders and entrepreneurs.
Bring your questions for George and the other entrepreneurs around the table. As always, there will also be time for your general questions and concerns.
Update Feb-17-2010: George made some thought provoking opening remarks on his visit, in particular:
Startups are interesting. It’s a rather grim time in a macro-economic sense but for early stage startups it’s a pretty amazing time because the infrastructure has been built out. There is a lot of opportunity to launch companies creatively without the capital intensive needs that were there a decade or two ago.
Of course there are many situations where you have capital intensive needs and that occupies the traditional VC realm. But there is a huge and expanding area in the last decade, and the last few years in particular, where with creativity and innovative focus on areas like enterprise people can leverage very interesting business models in ways that used to be unthinkable without a lot of money.
Related Links:
February 13th, 2010
Colin Cherry in “The Telephone System: Creator of Mobility and Social Change” makes the point that the full impact of an invention is very difficult to predict (emphasis added).
Inventions themselves are not revolutions; neither are they the cause of revolutions. Their powers for change lie in the hands of those who have the imagination and insight to see that the new invention has offered them new liberties of action, that old constraints have been removed, that their political will, or their sheer greed, are no longer frustrated, and that they can act in new ways. New social behavior patterns and new social institutions are created which in turn become the commonplace experience of future generations.
Such realization does not come easily, quickly, or even “naturally,” for the new invention can first be seen by society only in terms of the liberties of action it currently possesses. We say society is “not ready,” meaning that it is bound by its present customs and habits to think only in terms of its existing institutions. Realization of new liberties, and creation of new institutions means social change, new thought, and new feelings. The invention alters the society, and eventually is used in ways that were at first quite unthinkable.
I think that we are now at a transition point in our use of web applications: the larger challenge for software entrepreneurs is not inventing a new technology, but determining how to apply the last two decades (Tim Berners-Lee had the first webserver working in 1990, SLAC had one in 1991) of invention to business problems in new ways, many that would have been unthinkable earlier.
This is what customer development helps entrepreneurs to understand: how to apply inventions to problems that customers will pay them to solve.
February 10th, 2010
Companies names have sure changed in the last year or so. I was noticing today how many signs outside of office buildings seem to be branch offices for these firms:
- Move In Now
- First Month Free
- Your Name Here
- Available for Lease
- Space for Rent
Here are two directories that list available office space for Silicon Valley:
We use Pacific Business Centers and have been happy with them.
February 9th, 2010
Three true stories:
We were driving back from a sales call and the CTO said “I don’t understand. We won the argument. Why didn’t we win the sale?” He was very disappointed at their stupidity and stubbornness.
Different startup, I had been recruited by a new CEO as a part of a turnaround. A team had gone off to meet with a new prospect and I asked the sales rep how the meeting had gone. He said “It was one of those meetings where the actual purpose of the meeting became figuring out who the smartest person in the room was: one of our guys or one of theirs. After a while it was time to leave.”
About a decade ago while I was still at Cisco I got invited to a large meeting with an outside vendor. Cisco had two software vendors providing similar but incompatible tools that solved the same problem in different ways. Times were tight: folks were being laid off and projects were getting canceled. Our inability to be able to share scripts and models between these two tools meant that management had decided we needed to standardize on one. This was a meeting for all of the supporters of tool A to compare notes and develop a common set of reasons why it should be the standard. The vendor sent a large contingent and there were perhaps two dozen engineers from different groups who were concerned. What a disaster. The vendor essentially started off by implying that the users had done a poor job of educating management as to the value of the tool and listed a number of improvements and techniques that they had “taught” us. After perhaps ten or fifteen minutes, someone spoke up and said, “Hey, wait a minute, that was an idea that we gave you! You incorporated into version 7, but we had that first.” The meeting degenerated into an angry shouting match and the default plan became engineers would refuse to switch to the other tool. Not a winning strategy in a downturn as it turned out.
Diagnosis: in each case the startup didn’t view the customer as a partner, and somehow believed that they would succeed by convincing them that they were smarter. This is called the “bringing fire to the savages” sales and marketing model. Variants include viewing your product as a luxury good “not everyone can own our product” or an IQ test (“not everyone is smart enough to be able to use our product”). None of them are particularly effective in generating revenue or reference customers but they do preserve the world view of the founders that they are all a bunch of really smart people.
Three specific antidotes:
- Focus on understanding the customer’s problem. Make sure you can describe their problem before you start to describe your solution. Test for other symptoms that they have not mentioned that you have heard from other customers. Do all of this before you mention any features or benefits of your offering.
- Understand specifically what steps they have already taken to address the problem and what constitutes their perception of the status quo.
- When you propose your solution, make it as compatible with their current work process and practices as you can, and incorporate any of their ideas into your product roadmap that you believe may benefit other customers or prospects. This minimizes their transition cost and their sense of loss.
We help software firms explain their new product to the right prospects in ways that convince them to become reference customers. If you have a new product and are having difficulty getting people to understand what it can do, please give us a call: we can help.
Related posts:
February 8th, 2010
I was pleased to see that Verdafero, a firm we have been advising for about a year, was selected last Friday by the San Jose Business Journal for their “The Pitch” column. The article, “Palo Alto’s Verdafero Offers Sustainability Planning Over the Web,” ran in the February 5th print edition:
THE BUSINESS: Verdafero has developed a software-as-a-service platform that can be used for sustainability planning, energy efficiency and carbon management services for small and medium enterprise businesses. Customers use the tool to develop a sustainability plan by analyzing best practices and specific savings potential in their energy and material use as well as the environmental impact of their products and associated waste byproducts. Verdafero says it helps its customers stay ahead of supplier approval requirements, increase competitive advantage and improve profitability through cost reductions across their business operations.
MANAGEMENT TEAM: CEO Merc Martinelli is a certified sustainability consultant and previously worked at Cisco Systems Inc. where he led the new product introduction department within the enterprise line of business. Chief Operating Officer Alastair Hood is a business, technology and energy efficiency consultant, and he has worked with emerging companies in the U.K., Ireland and Australia. Previously he worked at Agilent Technologies Inc. and was a founding team member and development director of Nanosight Ltd., a U.K. nanotechnology startup, where he helped raise in excess of $10 million in startup funding.
A note on the name Verdafero: In the global language Esperanto: Verda = Green and Afero = Business. Verdafero™ – We Green Business.
Related posts
- Visualizing Sustainability a list of 138 different visualizations of sustainability. Hat tip to David Sibbet who notes “a full panorama from simple to complex, mapping onto every conceivable base map. I’ve contended for a long time that a sustainability mindset requires systems thinking, and that systems thinking requires visual thinking—even if the display is just between your ears.
- Green Software Unconference
February 7th, 2010
Recapping ideas, papers, and books that had changed my life yesterday reminded me of Saras Sarasvathy’s Effectual Reasoning Model from her 2001 paper “What Makes Entrepreneur’s Entrepreneurial” (There is an annotated version on the Khosla Ventures site at http://www.khoslaventures.com/presentations/What_makes_entrepreneurs_entrepreneurial.pdf )
What follows are some quotes from “What Makes Entrepreneurs Entrepreneurial.”
Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.
Effectual thinkers are like explorers setting out on voyages into uncharted waters.
All entrepreneurs begin with three categories of means
- Who they are–their traits, tastes,and abilities;
- What they know–their education, training, expertise, and experience
- Whom they know–their social and professional networks.
In our “Idea to Revenue” Workshop we talk about three kinds of capital that startups begin with: intellectual, social, and financial. We don’t call out what she refers to as “human capital” or “who they are–their traits, tastes, and abilities” as a resource but instead encourage teams to “begin in phase two.” That is, to build on prior accomplishments and long term interests so that early customers view the startup as a continuation of earlier efforts and focus.
But I like this model of bootstrapping entrepreneurs as foragers: living off the land as hunter-gatherers until they can find a market to homestead. Bootstrappers have to start from where they are and search for opportunities. Pasteur advised that “Chance only favors the prepared mind” so you have to open yourself up to possibilities and be prepared to be surprised (which is another way of saying you have learned something new). Some more quotes from her paper:
Using these means, the entrepreneurs being to imagine and implement possible effects that can be created with them. Most often they start very small with the means that are closest at hand and move almost directly into action without elaborate planning.
Plans are made and unmade and revised and recast through action and interaction with others on a daily basis. Yet at any given moment, there is always a meaningful picture that keeps the team together, a compelling story that brings in more stakeholders and a continuing journey that maps uncharted territories.
Eventually certain of the emerging effects coalesce into clearly achievable and desirable goals–landmarks that point to a discernible path beginning to emerge from the wilderness
Seasons entrepreneurs, however, know that surprises are not deviations from the path. Instead they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through the jungle. The unexpected is the stuff of entrepreneurial experience and transforming the unpredictable into the utterly mundane is the special domain of the expert entrepreneur.
One of the reasons that we run the Bootstrapper Breakfasts as 90 minute unconferences–where folks introduce themselves and put issues on the table they would like to discuss–is that it keeps everyone in an entrepreneurial frame of mind:
- When you hear someone describe a challenge that they are facing, it gives you much better insight into their thinking and allows you to evaluate what they might be like to work with.
- Often as not they are describing a common problem, or aspects of a common problem. Hearing their perspective just on the problem can give you new insights into how to solve it.
- It’s good practice to learn how to ask for advice and insight. Entrepreneurs need to do a lot of that in the early market especially.
- Explaining how you managed an issue or situation can deepen your understanding of you solution, it forces you to put it into terms others can use and understand. This is good practice for scaling up (e.g. adding your first employee).
Sarasvathy stresses the cooperative nature of entrepreneurship in the paper, a perspective that I share. Often an entrepreneur is attempting to obsolete an aspect of the status quo, but they have much less competition and much more opportunity for collaboration than is appreciated.
Markets are stable configurations of critical masses of stakeholders, who come together to transform the outputs of human imagination into the forging and fulfillment of human aspirations through economic means.
Effectual reasoning may not necessarily to increase the probability of success of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.
Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it–it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.
She highlights three key differences between effectual reasoning and traditional startup management models:
- Risk taking
- Traditional: expected return, work the plan to deliver results to your investors (“Ready Aim Fire” can become “Aim–not big enough–Aim–not big-enough–Aim…”).
- Effectual: affordable loss, make many small mistakes as early and cheaply as possible to speed learning (“Ready Fire Steer“)
- Focus:
- Traditional: competition
- Effectual: strategic partnership (especially with early customers)
- Value Creation
- Traditional: rely on pre-existing knowledge to aim for a known market you can dominate and exploit
- Effectual: leverage contingencies; create opportunities as you map a new market
She goes into some detail on the “affordable loss principle” and offers extracts from an interview with an expert entrepreneur’s approach to a new market:
While managers are taught to analyze the market and choose target segments with the highest potential return, entrepreneurs tend to find ways to reach the market with minimum expenditure of resources such as time, effort, and money. In the extreme case, the affordable loss principle translates into the zero resources to market principle. Several of the expert entrepreneurs I studied insisted that they would not do any traditional market research, but would take the product to the nearest possible potential customer even before it was built. To quote but one of them, “I think I’d start by just… going… instead of asking all the questions I’d go and say.. try and make some sale. I’d make some… just judgments about where I was going — get me and my buddies — or I would go out and start selling. I’d learn a lot you know..which people.. what were the obstacles.. what were the questions.. which prices work better and just DO it. Just try to take it out and sell it. Even before I have the machine. I’d just go try to sell it. Even before I started production. So my market research would actually be hands on actual selling. Hard work, but I think much better than trying to do market research”.
In finding the first customer within their immediate vicinity, whether within their geographic vicinity, within their social network, or within their area of professional expertise, entrepreneurs do not tie themselves to any theorized or pre-conceived “market” or strategic universe for their idea. Instead, they open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.
This is also an approach that favors older entrepreneurs to the extent that they have larger social networks (based on more shared work experience with more people) and deeper professional expertise. The one caveat is that they have to be open to new possibilities and not be blinded by what they “know” to be true in the face of new information.
This 2001 paper offers another perspective on bootstrapping entrepreneurship that is independently derived and predates “Four Steps to the Epiphany (2003)”, “Blue Ocean Strategy(2005)”, and the “Sales Learning Curve (2004).” But all four are clearly addressing different aspects of the same core paradigm that takes a scientific or hypothesis driven approach to new products and new markets.
I will leave with two final quotes from the paper which highlights the value of establishing enduring relationships.
Expert entrepreneurs [...] are actually in the business of creating the future, which entails having to work together with a wide variety of people over long periods of time. [They fill their future] with enduring human relationships that outlive failures and create successes over time
This is largely ignored in our entrepreneurship curricula which tend to focus on market research, business planning, new venture financing and legal issues. As far as I know no entrepreneurship programs offer courses in creating and managing lasting relationships or stable stakeholder networks, nor on failure management.
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