Archive for May, 2012

Quotes For Entrepreneurs–May 2012

Written by Sean Murphy. Posted in Quotes, skmurphy

You can follow @skmurphy to get these hot off the mojo wire or wait until the end of the month when these quotes for entrepreneurs are collected on the blog. Enter your E-mail if you would like Feedburner to deliver new blog posts to your inbox.

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“Details as they settle with imperceptible weight but irrevocable consequences, like snowflakes falling on a baffled demon’s upturned face.”

I did a whole series of these “details as they unfold…” tag lines for my E-Mails when I worked in marketing at Cisco in the 90′s. I am scrubbing the bit rot off of them and will be reposting them here just to mix things up.  This was inspired by Harlan Ellison’s “U is for Uphir” in “A to Z in the Chocolate Alphabet” where

Without volition, Semiazas began to make it snow in Hell. Instantly, hundreds of thousands of foolish promises, idle boasts, dire threats, and contracts Satan had made containing the phrase “It’ll be a cold day in Hell” (on which he never thought he’d have to deliver) came true.

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Since we participate in the fields of advanced and rapidly changing technologies, to remain static is to lose ground.”
David Packard “The HP Way

Ironically this was used by Carly Fiorina to justify merger with Compaq, probably the worst decision HP made, if you don’t count hiring Fiorina or her two successors. More context from page 141 from the “HP Way”

“Over the years Bill Hewlett and I had speculated many times about the optimum size of a company. We did not believe that growth was important for its own sake. However, continuous growth was essential for us to achieve our other objectives and to remain competitive.  Since we participate in fields of advanced and rapidly changing technologies, to remain static is to lose ground. Also, we depended on attracting high-caliber people to the company, people wanting to align their careers only with a company that offered ample opportunities for personal growth and progress.”

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“A pinch of probably is worth a pound of perhaps.”
James Thurber in “Such a Phrase as Drifts Through Dreams”

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“Acquiring capital is easy. Acquiring customers is hard. If you’re experiencing the opposite, call me. I’ll wire the funds today.”
Andrew Razeghi
(@andrewrazegh)

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“Every guy who has done a successful start-up somehow feels he’s therefore become the philosopher-king of business.”
Jim Manzi in “How to Succeed in Business by Really, Really Trying

Context from his opening two paragraphs embeds a strong critique of autobiographies marketed as treasure maps:

First, even though every guy who has done a successful start-up somehow feels he’s therefore become the philosopher-king of business, all experience is bounded. Any observations I make apply to venture-backed enterprise software targeting scale-up. Many of the things you would do for a biotech start-up or a consumer-oriented social media business, as examples, are probably very different. Further, there are companies that exist to sell products at a profit, and companies that exist to sell equity to investors. I only know about the former. The latter tend to flourish in the later stages of a bubble, and rely on a totally different set of skills related to promotions, networking and PR.

Second, even within the universe of relevant companies, all “rules for success” are either obvious or incomplete. Each suggestion in this post will be incomplete, in that it will ignore inevitable exceptions and complications. In other words, there are no rules for success. If there were, lots more people would do successful start-ups.

I used this in “Jim Manzi: Focus on Delivering Value to Customers at a Foreseeable Profit.

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“Strategy is crossing a valley: accepting short-term losses to reach a higher hill in the distance.”
Neal Stephenson

paraphrased from

“Any strategy that involves crossing a valley—accepting short-term losses to reach a higher hill in the distance—will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.”
Neal Stephenson in “Innovation Starvation

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“When you see a good move, look for a better one.”
Emanuel Lasker

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“We’re all connected. Knowing people is worthless. Trusting people is priceless. Choose advisors people trust not those who ‘know people.’”
Andrew Razeghi
(@andrewrazegh)

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“Empathy isn’t dictated to us by a focus group or a statistical analysis. Empathy is the powerful (and rare) ability to imagine what motivates someone else to act. [...] What is required is a persistent effort to understand how other people see the world, and to care about it.”
Seth Godin in “If I Were You…

Used for the opening quote to”Conversations with Prospects: Practice, Review, Share Notes, and Ask for Feedback

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“Focus on delivering value to customers at a foreseeable profit.”
Jim Manzi in “How to Succeed in Business by Really, Really Trying

Used as the title for  “Jim Manzi: Focus on Delivering Value to Customers at a Foreseeable Profit.

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“Our greatest weariness comes from work not done.”
Eric Hoffer

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“Genius is courage in one’s talent.”
Ludwig Wittgenstein

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“The most painful state is remembering the future, particularly one you can never have.”
Soren Kierkegaard

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Are You Using Cognitive Task Analysis for New Market Exploration?

Written by Sean Murphy. Posted in 3 Early Customer Stage, Books, Rules of Thumb

I am interested in talking with anyone who is using Cognitive Task Analysis (CTA) or Naturalistic Decision Making (NDM) methods and paradigms to inform their customer interviews. I have been reading  “Working Minds: A Practitioner’s Guide to Cognitive Task Analysis” by Gary Klein et. al. and I had an epiphany that these techniques would be directly applicable to a startup developing analytics or collaboration software. CTA/NDM techniques appear to be in active use for the analysis of military, health, fire and safety, and other problem domains where experts need to make life and death decisions in ambiguous situations against short deadlines.

Background on Gary Klein

I have been a fan of Gary Klein ever since I read a 1998 Science News article “Seeing Through Expert Eyes” that described his “naturalistic decision making” model:

…one of many examples of decision-making expertise collected over the past 20 years by psychologist Gary Klein. [...] Klein is helping to develop a research perspective—known as naturalistic decision making, or NDM—for unraveling how people become bona fide experts in performing complex, real-life tasks.

“In many dynamic, uncertain, and fast-paced environments, there is no single right way to make decisions,” Klein says. “Experts learn to perceive things that are invisible to novices, such as the characteristics of a typical situation. They make high-quality decisions under extreme time pressure. When difficulties arise, experts find opportunities for improvising solutions.”

Klein has written several excellent books on decision making and expertise

In “Sources of Power” he outlines a “recognition primed decision making” model for how experts manage uncertainty against tight time and resource constraints–situations analogous to many challenges bootstrapping entrepreneurs face. I quoted him in my “Limits of I’ll Know It When I See It” talk on  expertise driven companies.

Key Elements of Cognitive Task Analysis

Klein divides his time between MacroCognition and ARA, the latter firm has a page on cognitive task analysis at  that breaks it into three phases (Working Minds goes into much more detail in 300+ pages):

  • Knowledge Elicitation is the process of extracting information, through in- depth interviews and observations, about cognitive events, structures, or models. Often the people who provide this information are subject matter experts (SMEs) People who have demonstrated high levels of skill and knowledge in the domain of interest.
  • Analysis is a process of structuring data inspecting, selecting, simplifying, abstracting, and transforming information, developing explanations, and extracting meaning. CTA practitioners use a range of quantitative and qualitative analyses in handling data.
  • Knowledge Representation is the process of displaying data and depicting relationships, explanations, and the meaning derived from data analysis. This step is integral for enabling other people sponsors, customers, system designers who understand the results of the CTA.

Applying Cognitive Task Analysis to Market Exploration

Working Minds highlights “Concept Maps” (see for example http://cmap.ihmc.us/publications/researchpapers/theorycmaps/theoryunderlyingconceptmaps.htm ) as a powerful way to summarize interviews with experts and allow multiple experts to compare notes. I would welcome any insights on using either Cognitive Task Analysis or Concept Maps as of part of the customer interview process. My current approach also involves two people taking notes but using a wiki for hyperlinking connections instead of a graphical representation and collecting verbatim quotes instead of trying to code interview answers.

For More On Gary Klein’s Insights

Your Prospects and Your Customers are Real People

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

I’m hardly the first person to complain about the word “user” to describe people who do stuff with software…People don’t think of themselves as “users” and in all other contexts the word “user” is not generally positive and certainly not evocative of the kind of intimate, day-to-day relationship we’d like our work to have with the people who interact with it.

[...]

Perhaps if we all thought of it more as the Minimum Human Experience (hereafter referred to as MHX) we’d be less likely to release products that aren’t ready just to get them rushed out the door and instead focus our thinking on what the smallest coherent and valuable experience for a real person would be.

Nathan Dintenfass in “Human Experience

Your prospects and your customers are real people.

Give careful thought to the impact of your offering not only on their ability to finish a task or do their job or to grow their business but also on their mental state and emotions.

Exercise care in your sales and marketing efforts to avoid treating them with any less respect than you would a relative.

Assume that they want to perform meaningful work and improve their skills: give them tools and environments that enable them not only to contribute but to succeed and to flourish.

Memorial Day 2012

Written by Sean Murphy. Posted in skmurphy

Memorial Day is when we commemorate those who died in the service of our country. I offer some excerpts from Lt. Col. Michael Strobl’s account of escorting the remains of a Marine killed in combat in 2004 for you to meditate on.

Chance Phelps was wearing his St. Christopher medal when he was killed on Good Friday. Eight days later, on April 17, I handed the medallion to his mother. I didn’t know Chance before he died. Today I miss him.

Over a year ago, I volunteered to escort the remains of Marines killed in Iraq should the need arise. The military provides a uniformed escort for all casualties to ensure they are delivered safely to the next of kin and are treated with dignity and respect along the way.

[...]

From Dover to Philadelphia, Philadelphia to Minneapolis, Minneapolis to Billings, Billings to Riverton, and Riverton to Dubois we had been together. Now, as I watched them carry him the final 15 yards, I was choking up. I felt that as long as he was still moving, he was somehow still alive. Then they put him down above his grave. He had stopped moving.

Strobl’s account details the simple acts of support and respect that he witnessed on his journey. It’s available at

His account was also the basis for an HBO feature “Taking Chance” that I found very moving when I watched it for the first time about two weeks ago.

Related Posts

David Foster Wallace: The Only Choice We Get is What to Worship

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

What follows are excerpts from a commencement speech given by David Foster Wallace to the 2005 graduating class at Kenyon College. I thought they were an appropriate antidote to a model for entrepreneurial motivation that aspires to make enough money to do whatever you want. Wallace outlines some of the risks in failing to align your life with a higher spiritual purpose. On-line links to the full address are provided a the bottom, it’s also available in book form in “The Best American Nonrequired Reading (2006)” and stand-alone as “This is Water.”

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?”

If at this moment, you’re worried that I plan to present myself here as the wise old fish explaining what water is to you younger fish, please don’t be. I am not the wise old fish. The immediate point of the fish story is that the most obvious, ubiquitous, important realities are often the ones that are the hardest to see and talk about.

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In the day-to-day trenches of adult life, there is actually no such thing as atheism. There is no such thing as not worshipping. Everybody worships. The only choice we get is what to worship. And an outstanding reason for choosing some sort of God or spiritual-type thing to worship — be it J.C. or Allah, be it Yahweh or the Wiccan mother-goddess or the Four Noble Truths or some infrangible set of ethical principles — is that pretty much anything else you worship will eat you alive.

If you worship money and things — if they are where you tap real meaning in life — then you will never have enough. Never feel you have enough. It’s the truth.

Worship your own body and beauty and sexual allure and you will always feel ugly, and when time and age start showing, you will die a million deaths before they finally plant you.

On one level, we all know this stuff already — it’s been codified as myths, proverbs, clichés, bromides, epigrams, parables: the skeleton of every great story. The trick is keeping the truth up-front in daily consciousness.

Worship power — you will feel weak and afraid, and you will need ever more power over others to keep the fear at bay. Worship your intellect, being seen as smart — you will end up feeling stupid, a fraud, always on the verge of being found out. And so on.

Look, the insidious thing about these forms of worship is not that they’re evil or sinful; it is that they are unconscious. They are default-settings. They’re the kind of worship you just gradually slip into, day after day, getting more and more selective about what you see and how you measure value without ever being fully aware that that’s what you’re doing.

And the world will not discourage you from operating on your default-settings, because the world of men and money and power hums along quite nicely on the fuel of fear and contempt and frustration and craving and the worship of self. Our own present culture has harnessed these forces in ways that have yielded extraordinary wealth and comfort and personal freedom.

[...]

But of course there are all different kinds of freedom, and the kind that is most precious you will not hear much talked about in the great outside world of winning and achieving and displaying. The really important kind of freedom involves attention, and awareness, and discipline, and effort, and being able truly to care about other people and to sacrifice for them, over and over, in myriad petty little unsexy ways, every day. That is real freedom. The alternative is unconsciousness, the default-setting, the “rat race” — the constant gnawing sense of having had and lost some infinite thing.

[...]

The capital-T Truth is about life before death. It is about making it to 30, or maybe 50, without wanting to shoot yourself in the head. It is about simple awareness — awareness of what is so real and essential, so hidden in plain sight all around us, that we have to keep reminding ourselves, over and over: “This is water, this is water.”

It is unimaginably hard to do this, to stay conscious and alive, day in and day out.


The full talk is available at

Conversations With Prospects: Practice, Review, Share Notes, Ask for Feedback

Written by Sean Murphy. Posted in 3 Early Customer Stage, skmurphy

“Empathy isn’t dictated to us by a focus group or a statistical analysis. Empathy is the powerful (and rare) ability to imagine what motivates someone else to act. [...] What is required is a persistent effort to understand how other people see the world, and to care about it.”
Seth Godin in “If I Were You

Engineers and scientists tend to have more  of an affinity for technology than people and can find the conversations with prospects and early customers particularly challenging. Face to face conversations and phone conversations unfold in real time and require that you manage a number of things in parallel:

  • actively listening to not just what’s said but the tone and emphasis
  • considering the implications (especially for what is not said)
  • developing and prioritizing follow on questions
  • considering what additional informational from your own perspective to provide, in particular to establish a common context
  • managing your own emotions so that your tone is consistent and allows your words to be heard (for example when a prospect calls your baby ugly).

In  a face to face conversation you also must manage:

  • paying attention to the other participants facial expressions and body language
  • managing your own facial expressions and body language

All of the subtleties of tone and body language mean that an audio recording captures perhaps 30-50% of what’s being said and a transcript perhaps 10-20%. This means that a webinar filters a lot of what you can learn from a prospect and reading a transcript is less useful than reading a participant’s written summary of their impressions and key statements from the conversation.

The goal of these conversations is not only to learn more about a particular prospect’s needs (and therefore more about what niche market requirements are) but also to establish trust so that you can have additional conversations spanning e-mail, phone, and face to face interactions. And in some cases the goal evolves to a financial transaction where they pay for a product or service. So it’s not only exchanging information and perspectives but establishing trust and credibility that can support an ongoing business relationship.

At a deeper level the ability to have a serious conversation looks like a lot like riding a bike, you have to integrate several simultaneous activities into a mindful whole. Sustaining a serious conversation requires not only self-awareness and the ability to manage your own transient emotional reactions to their statements or reactions, but empathy for nuances of the other person’s responses (verbal and non-verbal).

“Between stimulus and response, there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”
Viktor E. Frankl in “Man’s Search for Meaning”

We help entrepreneurs anticipate, mitigate, and recover from communication mismatches with prospects, customers, and partners. These communication challenges are common, especially in the early part of a new relationship. The good news is that there are a number of things you can do to get better and minimize the chances for a problem:

  • Practice an opening statement or an answer to a commonly asked question so that it flows naturally. Record and listen to yourself. Video tape yourself to gain insights into when you body language and facial language may be working against a point you are trying to make or may discourage the other person from elaborating.
  • Review e-mails and presentations with others who are a reasonable proxy for your audience. Read e-mails aloud so that you make sure you have captured a conversational style. Record live talks and presentations in audio or video to be able to assess where you need to improve.
  • Take notes in public: type key comments a prospect or customer says into the chat window in a webinar to let them know that you are listening. Do the same in a skype call. Provide an e-mail summary of a conversation or phone call to communicate what you heard, also include what you felt were the key points you made but start with the other person’s key points first. They will often amend or extend their remarks and minimize the risk of a misunderstanding.
  • Ask for feedback: ask a prospect in a follow up communication what was the most useful thing they heard, the least useful, the most surprising, and anything that you failed to do that they expected you to do.

Many sales opportunities fail to progress because there is a mismatch between the communication style and content that a prospect needs or prefers, not just to understand your offering but23 to believe that you can deliver and to act on particular proposal. Please contact us if you find it difficult to get conversations started or sustained with prospects or you feel that your current approach could be more effective. We can assist in several ways:

  • de-brief on existing calls or presentations
  • help you to rehearse. provide specific actionable suggestions for how to improve
  • review current e-mails, forum postings,  and other communication with an eye toward improving and creating a common set of templates so that  a consistent tone can be maintained
  • interview current customers and former prospects to determine areas for improvement and opportunities for case studies and testimonials, additional content that can make it easier to initiate or sustain a conversation as well as shorten the time a prospect needs to make a decision about your offering.

See also http://www.skmurphy.com/blog/2009/02/14/the-limits-of-customer-relationship-management-systems/

Jim Manzi: Focus on Delivering Value to Customers at a Foreseeable Profit.

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

Jim Manzi, founder of Lotus and Applied Predictive Technologies has a great blog post “How to Succeed in Business by Really, Really Trying “on the limits of advice to entrepreneurs, in particular autobiographies sold as “treasure maps” Here are his opening two paragraphs

First, even though every guy who has done a successful start-up somehow feels he’s therefore become the philosopher-king of business, all experience is bounded. Any observations I make apply to venture-backed enterprise software targeting scale-up. Many of the things you would do for a biotech start-up or a consumer-oriented social media business, as examples, are probably very different. Further, there are companies that exist to sell products at a profit, and companies that exist to sell equity to investors. I only know about the former. The latter tend to flourish in the later stages of a bubble, and rely on a totally different set of skills
related to promotions, networking and PR.

Second, even within the universe of relevant companies, all “rules for success” are either obvious or incomplete. Each suggestion in this post will be incomplete, in that it will ignore inevitable exceptions and
complications. In other words, there are no rules for success. If there were, lots more people would do successful start-ups.

He then proceeds to offer some hard earned advice very applicable to bootstrapping a startup, in particular

Have a co-founder. Ideally, you should have high overlap in your view of the world, and only partial overlap in your skill sets.

I think technology startups require so many distinct skills that it’s difficult for one person to have enough critical experience to be able to persevere. Shared values and distinct skills would be my shorter phrasing for his recipe.

Seek blue water. Do something innovative enough that nobody else is even trying. This is the best way to get around scale advantages that others have over you. Since you don’t know what you’re doing yet, it’s better if nobody else does either.

One of the best ways to do this is find two or three people with distinct knowledge or expertise where the combination is novel. I think it’s often less a matter of new inventions or discoveries and more about unique or novel combinations or applications of diverse and seeming unrelated knowledge and technology.

Always assume an average amount of luck in the long-run, and terrible luck in the short-run.

Don’t be too pessimistic or you will end up wearing a belt, suspenders, duct tape, and a wetsuit to hold your pants up. But nothing new ever works so assume it will take a few tries to get a novel combination to a basic level of usefulness.

Focus on delivering value to customers at a foreseeable profit.

I think this is probably the core piece of advice. Understand who is going to pay you, why, and how much.

Treat revenue and (especially) profit are the best possible feedback on your ideas.

Of all the forms of encouragement that an entrepreneur can take advantage of, a customer’s check is irreplaceable.

Cash flow break-even is the most important milestone your company will ever achieve.

I think this  is the watershed event in the life of a startup, not the first order or getting an investment but getting to break-even. Once this happens you have an infinite runway for experiments to scale up, before then it’s only a matter of time until you have to reconsider. Break-even normally requires focus on a niche unless you are very fortunate.

The Wit to See and Understand Objective Reality

Written by Sean Murphy. Posted in skmurphy

Here is a second excerpt from Readme; this one is suggests that a shared situational awareness enables fluid coordinated action at a team level. Stephenson makes explicit reference to the OODA loop earlier, one character describing how the loop collapses to “observe-act” when the rapid action is required: orientation is implicit and decisions are the results of reflexes and prior rehearsal.

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

from Reamde by Neal Stephenson

Finding co-founders and early employees who have “the wit to see and to understand that objective reality” is one of the keys to success in  a startup.

Great Demo! Workshop on October 10 & 11, 2012

Written by Theresa Shafer. Posted in Demos, Events, Sales

Create and Deliver Surprisingly Compelling Software Demonstrations
“Do The Last Thing First” — the recipe for a Great Demo!

This is an interactive workshop with Peter Cohan geared especially for you who demonstrate B-to-B software to your customer and channels. Bring a copy of your demo and be prepared to present it — we’ll help you turn it into a surprisingly compelling demo. More information

Core Seminar & Advanced Topics
October 10 & 11, 2012
Cost: $930 (Before Sep-24: $895)
Register Great Demo
Single Day – Core Seminar Only
October 10, 2012
Cost: $620 (Before Sep-24: $595)

Where: Moorpark Hotel, 4241 Moorpark Ave, San Jose CA 95129
For out of town attendees: The Moorpark is located 400 feet from the Saratoga Ave exit on Hwy 280, about 7 miles from San Jose Airport and 35 miles from San Francisco Airport Hotels Near Great Demo! Workshop

“I am confident that with the insights gained from your workshop we will land more customers in fewer iterations.”
Lav Pachuri, CEO, Xleron Inc.

“Peter Cohan’s Great Demo method really works. It helped us win DEMOgod, and it has allowed us to explain our offering much more clearly to prospects.”
Chaim Indig, CEO, Phreesia
(See “DEMOgod Winner Phreesia Praises Peter Cohan Training“)

More information on the workshop

ABOUT THE SPEAKER: Peter Cohan, Principal at Second Derivative
Community Web Site: www.DemoGurus.com

Peter Cohan is the founder and a principal of The Second Derivative, a consultancy focused on helping software organizations improve their sales and marketing results. In July 2004, he enabled and began moderating DemoGurus®, a community web exchange dedicated to helping sales and marketing teams improve their software demonstrations. In 2003, he authored Great Demo!, a book that provides methods to create and execute compelling demonstrations. The 2nd edition of Great Demo! was published March 2005.

Before The Second Derivative, Peter founded the Discovery Tools® business unit at Symyx Technologies, Inc., where he grew the business from an empty spreadsheet into a $30 million operation. Prior to Symyx, Peter served in marketing, sales, and management positions at MDL Information Systems, a leading provider of scientific information management software. Peter currently serves on the Board of Directors for Collaborative Drug Discovery, Inc. and the board of advisors for Excellin, Inc. He holds a degree in chemistry.

Peter has experience as an individual contributor, manage and senior management in marketing, sales, and business development. He has also been, and continues to be, a customer.

Day 1 Agenda:

  • 8:00 AM Breakfast & Registration
  • 8:15 AM Workshop begins
  • Noon Lunch
  • 1 PM Workshop Continues
  • 5 PM Wrap up

Day 2 Agenda:

  • 8:00 AM Breakfast & Registration
  • 8:15 AM Workshop begins on Advanced Topics
  • 12:30pm Wrap up

Seating is Limited

For more information: Theresa 408-252-9676 events@skmurphy.com

Founder as Change Agent from Reamde

Written by Sean Murphy. Posted in skmurphy

“It had taken him a while to decode it [...] but he’d eventually figured out that this, in the end, was the reason that Corporation 9592 had no choice but to keep him around. Every other thing that he had done for the company [...] could be done better and more cheaply by someone who could be recruited by a state-of-the-art head-hunting firm. His role, in the end, had been reduced to this one thing: sitting in the corner of meeting rooms or lurking on corporate email lists, seeming not to pay attention, growing ever more restless and surly until he blurted something out that offended a lot of people and caused the company to change course. Only later did they see the shoals on which they would have run aground if not for Richard’s startling and grumpy intervention.

This was one of those times.”

from Reamde by Neal Stephenson

I just finished Reamde, it has sat on my shelf for more than a year but once I started it I could not put it down. Neal Stephenson makes a number of thoughtful observations, describing real situation with grace. This passage in particular stood out for me, capturing not only the psychology but the unique value technical entrepreneurs can bring in a larger firm.

Book Club: Chapter 6 The Innovator’s DNA: Experimenting

Written by Theresa Shafer. Posted in Books, Events

Recorded discussion on Jeff Dyer, Hal Gregersen, Clayton M. Christensen’s The Innovator’s DNA chapter 6, recorded on June 20, 2012. Michael Fern and Edith Harbaugh join Steve Hogan and Sean Murphy to discuss lessons learned experimenting to foster innovation.

Chapter 6:

Discovery Skill #5 Experimenting

The Innovator’s DNA

by Jeff Dyer, Hal Gregersen, Clayton M. Christensen

Practical and provocative, The Innovator’s DNA is an essential resource for individuals and teams who want to strengthen their innovative prowess.

The authors outline five discovery skills that distinguish innovative entrepreneurs and executives from ordinary managers: Associating, Questioning, Observing, Networking, and Experimenting.

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Related Resources:

The Innovator’s DNA overview

Discovery Skills

  1. Associating
  2. Questioning
  3. Observing
  4. Networking
  5. Experimenting

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Additional Book Reviews

Managing Oneself Article
Boyd-OODA The Lean Startup
Moore's Darwin and the Demon HRB article
Cohan Great Demo
Origin and Evolution

Tristan Kromer Joins Book Club’s Panel on Networking Skill Development

Written by Sean Murphy. Posted in Books, Events

We continue our review of “The Innovator’s DNA” by Jeff Dyer, Hal Gregersen, Clayton M. Christensen with a focus on networking, which the author’s define as seeking serious conversation with individuals from diverse backgrounds, experiences, and expertise.  Here is a  quote by Ronald Burt on creativity from idea brokerage  (condensed from page 117):

“People connected to groups beyond their own have early access to diverse, often contradictory information and interpretations, which gives them competitive advantage in seeing and developing good ideas. This is creativity as an import-export business. A idea mundane in one group can be a valuable insight in another.”

What: Book Club for Business Impact covers Innovator’s DNA Skill #4 Networking
When : Wednesday May 16 Noon to 1pm PST / 3-4PM EST / 8PM London / 9PM Paris & Berlin / May 17 7AM Sydney
Where : on-line https://vimeo.com/42297558
Cost: No charge for live event

Tristan Kromer, Steve Hogan and I will be discussing the book and specifically Chapter 5 on networking. This is intended to be a roundtable conversation and we will take questions and comments from the audience via the chat interface throughout the event. You can use the GotoMeeting client or dial in from the US, Europe, or Australia.

Tristan (@TriKro) brings unique background and set of experiences to the panel. He has lived in 12 cities spread across five countries, he worked or ten years in the music industry, five years in IT security, and has becoming actively involved advising a number of startups as well as launching of his own. He blogs at grasshopperherder.com.

The word networking can conjure up a number of obnoxious business practices. For the purposes of the discussion there are a couple of situations that we will take as points of departure:

  • You may very well be looking for new information that’s outside your box, it’s likely inside of someones else’s. Many successful innovative products rely less on the discovery of genuinely new information and more on the combination of knowledge from seemingly unrelated fields or industries.
  • There is a category of information that’s not written down (yet, and perhaps never). You place your startup at a tremendous disadvantage if you focus on learning solely from reading or what you can directly observe. Someone else’s experiences and expertise can often supply missing pieces of the product market fit puzzle.
  • Networking in a mature firm tends to be ends focused: you have a specific destination in mind and are looking for insights and resources to accomplish a pre-existing goal. This leads to interpersonal networking strategies that are more transactional. Networking in a startup is often driven by a search for means and building blocks, it’s as much about gaining multiple perspective on your current situation and weaving a network  that you can continue to collaborate with as it is a single transaction.
  • One of the largest barriers to effective networking is your own experience; like a fish in water it can be hard to understand how to build a common context for a conversation.

Book Club: Chapter 5 – The Innovator’s DNA

Written by Theresa Shafer. Posted in Books, Events

Call-in Book Review recorded on May 16, 2012
Tristan Kromer, Steve Hogan and Sean Murphy discuss the book and specifically Chapter 5 on networking.

Chapter 5:

Discovery Skill #4 Networking

The Innovator’s DNA

by Jeff Dyer, Hal Gregersen, Clayton M. Christensen

Practical and provocative, The Innovator’s DNA is an essential resource for individuals and teams who want to strengthen their innovative prowess.

The authors outline five discovery skills that distinguish innovative entrepreneurs and executives from ordinary managers: Associating, Questioning, Observing, Networking, and Experimenting.

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Related Resources:

The Innovator’s DNA overview

Discovery Skills

  1. Associating
  2. Questioning
  3. Observing
  4. Networking
  5. Experimenting

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Additional Book Reviews

Managing Oneself Article
Boyd-OODA The Lean Startup
Moore's Darwin and the Demon HRB article
Cohan Great Demo
Origin and Evolution

Founders Story: Arun Kumar of Kerika

Written by Sean Murphy. Posted in Founder Story, skmurphy

The following interview is constructed from e-mails and skype calls from February to April 2012 with Arun Kumar of Kerika. See also this video:  https://vimeo.com/24502212 and the Kerika blog for more info on Kerika.

Q: Can you talk a little bit about your background

I started off as a Physics major at IIT Delhi, a little too young to make sensible life decisions.  After three years, I decided to pack it in and move to the US for a variety of reasons.  I ended up at Washington State University where I graduated in Comp. Sci., took some grad courses in Comp. Sci. and business before dropping out of the MBA program to move to NJ to work as a UI developer at AT&T Bell Labs.

After a couple of promotions I found myself a pointy-haired boss at the ripe age of 27, managing a staff of ~40 — all of whom were older than me, which made for an ironic situation since I was supposed to be giving them career advice, so I quit and traveled for a while in India and Europe and then returned to the US to work at a tiny software company in Staten Island that was building state-of-the-art software for handling financial market data in digital form.

I was a manager of all trades: helping to build the business, design products, build teams, etc.  I spent 2.5 years completely rebuilding the back-end and front-end systems a German news agency that required a monthly commute to Frankfurt, but that was one of my best projects ever because I had complete business and technology responsibility for a major account.  I then spent some time managing the installation of the first digital trading floor in Argentina.

The company was sold to a Japanese conglomerate (CSK) which asked me to help them develop their financial markets business in Asia/Pacific. I spent a year living out of hotels in Tokyo, Hong Kong and Singapore before getting tired of that lifestyle and moving back to the US to become a product manager.

I joined Morgan Stanley in New York in 1995, helping to establish product management processes for their IT department.  After a couple of years, I became an E-Business strategist. I moved to London in 1999 to get the European E-business initiatives into a higher gear.  While there, the big achievement was putting together a €100MM joint venture with OMX from Stockholm to launch a new pan-European stock exchange (Jiway) that would lower the costs for cross-border trading by retail investors.

I helped create and launch Jiway from scratch in just 9 months.  Morgan Stanley asked me to join Jiway after it was founded, to help them safeguard their interest in the JV.  Spent most of my time establishing strategic partnerships with the leading banks and brokers in Europe and US to support the new exchange and did a lot of PR (press, radio, TV, conferences, etc. across Western and Eastern Europe).

I decided to move back to the US in 2002 to live in the Seattle area and pursue my own ideas away, from financial services and back in technology.

First attempt to create the Kerika business was 2002-2006.  After failing to gain enough traction, I put the company in hibernation and spent a year as a contractor at Microsoft while deciding what to do next.  I joined Onvia in Seattle as head of their program management in 2007, eventually ended up managing all their IT and setting up offshore teams, but left in 2010 and decided to restart Kerika, re-imagining and rebuilding the original vision as a Web App.

That’s about it.  Side-note: while I was in London, I was asked to join the board of a Swedish company (Polopoly).  I remained on the board after moving back to the US, until I resigned in 2005 after concluding the relationship had become too long-distance.

You can see all this at http://www.linkedin.com/in/forArunKumar

Q: Can you talk a little bit about what led you to found your company, what was the problem that motivated you?

There was a moment of epiphany: when I was at Morgan Stanley in the late 90s, I reserved a conference room (at random) for a meeting.  Walking into the room I found  a large, complex diagram and set of notes on the whiteboard.  In one corner, was a reference to one of the products that I was responsible for.  I was astonished, because this room was in a part of the company that I had never visited before, and I couldn’t work out the reference to my product.  That got me thinking: “what if I could see the world through the eyes of the people who had been in that room before?”

I spent time thinking about this problem, but didn’t do very much.  When I moved to London to build Jiway, the question of effective collaboration within distributed teams became an acute problem for me: I was trying to coordinate the efforts of people in New York, London and Stockholm; people working within Morgan Stanley, OMX and external organizations; people from different departments and backgrounds.

The tools we had were from Microsoft: Project, SharePoint, and Outlook (the lowest-common-denominator way of collaborating).  I became convinced that there was a class of projects/work that was not supported by traditional approaches to collaboration, and this work was characterized by almost continuous changes in strategy and tactics, practically on a daily basis.

Traditional tools didn’t recognize the fluidity of knowledge-intensive work, where you learn about the project as you execute the project.  So, pretty soon you find that instead of MS Project and SharePoint supporting your work, you spend most of your time feeding the beast: trying to keep these “tools” up to date on the shifting reality of your project.

Not handling change gracefully is one flaw, the other is that task management is considered to be the key element of project management, when increasingly it is content management that drives success.  And increasingly, that content is sourced externally from the Web rather than generated internally by the team.

While I was working at Onvia, I realized this problem was getting worse because of some secular trends: teams were becoming increasingly distributed, with more work getting done offshore, and managing content, particularly the combination of Web and Office content, was becoming increasingly difficult.

At Onvia we used Project and SharePoint, again, and it was clear that their basic command-and-control model, which presumes that everything can be predetermined at the start of a project with relatively little discovery taking place during the project, were fundamentally unsuited for all sorts of knowledge-intensive work.

Q: How did you get started?

I started in 2002 doing a ton of market research on the problem: I build mockups and showed them to potential users in all sorts of companies and organizations — commercial, nonprofit, governmental — both in the US and Europe.  That helped me evolve the basic vision quite a bit.  (In retrospect, I did way too much market research and should have started building a usable product sooner).  I built a small team and decided to build Kerika as a p2p Java app that used the JXTA open-source networking technology.

We built several versions and got it in the hands of a broad range of users, with a surprising number of them overseas.

BTW, I used my savings to fund the company and never sought external investors.  Not sure that was the smartest move I made…

Q: Can you give me a brief overview of where the company is today?

I restarted the company in August 2010.  I decided then that the old p2p model was made obsolete by the development of a broad range of Web services, so I decided to build a Web App the second time around.  I hooked up with Jon Cohen who acted as CTO and worked on the back-end; on the front-end we ended up cycling through a number of people locally in the Seattle area before finally hooking up with a very talented group of developers in India that are now the core part of the dev team.

We got a first beta version out in March 2011, and started showing it to a few friendly users that were local.  We got more people using by word-of-mouth, but we focused primarily on getting beta users in the Seattle area who would let us observe their use of the product and give us direct, extensive feedback.  This was enormously helpful: we learned a ton about usability of the product, and we also learned which parts of the product were more useful than others.  The product improved hugely in the April-Dec timeframe, to the point where we now view it as very much out of beta.  Along the way we picked up users from a broad range of backgrounds: students using it for group projects, other entrepreneurs using it for their startups, people using it for political and advocacy purposes, folks in enterprises…

The basic product is of generic use, but we think the value proposition is strongest when distributed teams have to collaborate, because then the greatest risk of project failure comes from team members not being on the same page, all the time — and not because team members are inherently incompetent or lazy.  We are now focusing our marketing focused around this single message: Kerika can eliminate (or at the very least mitigate) the substantial project risk that comes from people not being aligned on strategy, structure and content.

The company is self-funded again (i.e. “me-funded”), and will probably remain that way for a little while longer: I want to see more traction before I seek funding.

Q: What are the two or three things that you have been able to accomplish that you take the most pride in or satisfaction from?

Getting an offshore team working well has been a source of great satisfaction. That’s not easy, and it’s not accidental.  I have learned a lot over the years about making cross-border teams work, and getting an offshore team working well takes a mix of cultural, technical and management skills.  At this point now I feel I have one of the most productive teams I have ever had, and they are producing output of a higher quality than I could get from local talent.

I don’t know if Kerika is for everyone, but for some people it really does match their style of working.  I love the moments when I demo the product to someone who has been looking for a visual collaboration tool for years, without even knowing that they were looking for such a tool, and their face lights up as they immediately “get it”.

Finally, there is the professional joy of being in a startup, where you have to wear so many hats: you have to take on all these different disciplines and jobs that would normally be done by some other department, if you were in a bigger company.

Oh, and getting a patent issued was a pretty big high…

Q: What has been the biggest surprise? What was one key assumption you made, perhaps even unconsciously, that has caused the most grief?

With the first version of Kerika (“K1″), the biggest blunder we made from a technology perspective was relying upon JXTA.  It seemed perfect when we first came across it: a beautiful architecture for p2p networking that had been designed by Bill Joy himself, which was now an open source project.  However, the project was never really “open” because Sun controlled it too much, and eventually smothered it.  JXTA had a number of critical flaws that we assumed would go away over time, because they were all right there on the product roadmap, but the flaws remained and Kerika 1 was inherently unstable as a result. It was really heartbreaking to see people come on board, get all excited about the product, and then walk away in frustration when they realized the communication and collaboration wasn’t reliable.

The big lesson learned there was: if you are going to use an open-source technology, make sure that (a) the technology already has everything that you think you might need, so that if it never improves in the future you are still in good shape, and (b) the product has a vibrant opensource community with a lot of active contributors.  Something that is open source may yet prove to be the most expensive decision you will ever make.

With K2, we may have made a strategic miscalculation in assuming the product will be used only by small professional services firms, because we are finding unexpected interest in larger organizations.  That’s going to require some changes to our product roadmap.

Q: What development, event, or new understanding since you started has had the most impact on your original plan? How has your plan changed in response?

In Kerika 2, we have a feature that we originally considered to be considered relatively minor: you can place arbitrary text on a project page.  The original purpose of this feature was to put labels on pages, but we happened to build it with a rich-text editor.  This little feature turned out to have much more appeal than we had every anticipated.

It took me a while to understand what this is all about, but now I realize that formatted blocks of text (containing lists, tables, pictures, etc.) are what I would call “glass-box” documents: you can see what’s inside without opening/launching that document.  There’s an 80/20 rule in effect that much of what people need can be better served with glass-box documents than with black-box documents.  In other words, our “little” feature is actually more important to most users, more of the time, than our “big” feature of offering seamless integration with Google Docs.

On the business front, we originally planned to market the product exclusively to small professional services firms. But we are getting unsolicited interest from enterprises, and supporting enterprises will require some significant changes in our product roadmap.  We are still grappling with this issue.

Q: Do you have some key lessons learned?

  • From Kerika 1: don’t spend too much time on market research.  After some point, you are not discovering anything new; you are just hearing the same points being rephrased in different ways.  Move faster into building your first couple of versions.
  • From Kerika 1: be very careful about what open-source products or libraries you incorporate into your own product.  If the feature is really important, it’s not free.
  • From Kerika 1 & 2: watch users where possible; don’t rely upon them to tell you what they are having difficulties with.  People often don’t articulate problems if they think they will look stupid in doing so, and sometimes people don’t even realize what problems they are having.  With face-to-face contact and conversation you can find out what people want to achieve, which is often different from what they are complaining about.
  • From Kerika 1 & 2: your users will use your product in ways you never considered.  That’s a good thing.  When you are trying to find your product-market fit, remember that you can’t push on a string: you need to find a use case where someone is pulling on the other end.  And if that particular use case wasn’t the one that you envisioned originally, that’s an opportunity not a problem.
  • From Kerika 1 & 2: stay true to your vision, which should transcend details of implementation, strategy or tactics.  Kerika’s vision is about getting people to understand their project’s current state, structure and trajectory.  In terms of path taken to realize the vision, be very flexible: desktop app, Web app, mobile app — these are all different embodiments of the vision, they aren’t necessarily the vision itself.
  • From Kerika 1 & 2: your family are fellow-entrepreneurs.  If they are not 100% behind your idea of being an entrepreneur, you need to exit before you damage your family.
  • From Kerika 2: build your value hypothesis, your discovery hypothesis and your growth hypothesis carefully by identifying all your leap-of-faith assumptions.  Cross-check them for coherence.  You will be surprised at how the corollaries of your various leap-of-faith assumptions can end up clashing against each other.  Once you do that, you will be further surprised to learn that what your startup needs to succeed is not what you read about on TechCrunch, or what you think is “conventional wisdom”.
  • From Kerika 1 & 2: a programmer without an understanding of computer science will build you a prototype very quickly, and possibly cheaply, but will not be able to build you a scalable, robust product.  Algorithms, data structures, etc. are all still relevant topics, no matter how high-level your scripting language.
  • From Kerika 1 & 2: you will almost never fire someone too soon.
  • Overall : I have become much more aware of the need to get all the details right.  Concepts are great, but execution is what matters, and execution is just plain laborious most of the time. I have come to understand  that there are no instant successes: every successful company has a revisionist history that makes its founders look unusually brilliant. I have realized that you can fail by misfortune, but are unlikely to succeed by chance.

Q:  What key skill or experience did you lack when you started that has caused you the most problem?

I knew about marketing in general, but not enough about online marketing, or marketing Web Apps or SaaS.  And much of what I had learned about marketing tactics was irrelevant when it came to SaaS.  That said, a lot of the basic concepts about positioning and competitive analysis are still relevant.

I had a ton of business experience, but very little of that was in sales itself.  Where I had done sales before, it was at a business development level: e.g. building strategic partnerships.  I really wish I had more sales experience itself: the hard-core stuff about cold calls, follow-ups, etc.

Q:  You seem focused on  global teams and multi-firm collaboration, what do you see coming?   

I think the key phrase is “incessant collaboration”.  That’s because any knowledge-intensive work (software, management, marketing, design…) is based more upon discovery during the execution phase of a project, and less on perfect planning at the start of the project.

Our project tools need to embrace change, because resisting change, or treating it always as a danger to your project model, is simply an unrealistic option.  Consider SharePoint for example: when you create a new SharePoint page, you have to decide what kind of page it is — a document library, a workspace, etc.  Once you decide, you are stuck with that decision.  If your project changes radically — and it surely will — e.g. the entire project gets subsumed by some larger project, or some hitherto small piece (sub-project) grows to swallow it’s parent project, you are pretty much screwed: there’s no easy way to reconfigure your SharePoint pages to reflect the new reality.  And the reality changes every day, because every day you discover something new: you learn more about a particular requirement, you learn more about your competitors, you learn more about your customer needs, something you thought would be easy turns out to be particularly hard or vice-versa.

But SharePoint doesn’t embrace change: rather, it actively resists it.  And it doesn’t support easy management of Web-sourced content, which is increasingly more important than internally-generated content.  These days, the smartest guys in the room are the best curators of Web content, not the best writers of original content.

MS Project’s even worse: it’s basic metaphor is for engineering projects, like building a bridge where the science is exact and you really cannot experiment in mid-stream, but it is used for knowledge-intensive work where your goal is not as precise as “build a bridge across this river at this precise location”, but something vaguer like “connect these two systems/organizations/communities in a way that would achieve this other goal, while discovering and dealing with constraints on the problem as you move along a path that you will have to map out on your own”.

Global teams are much harder to synch up because there are fewer overlapping timezones where you can even communicate on Skype (for example) on a regular basis, and sharing a mental model of the project’s structure, strategy and content gets much harder with cultural and linguistic barriers.

That’s our core focus: we actually believe that asynchronous collaboration is far more important than synchronous collaboration. In other words, being able to catch up on my India team’s work when I wake up in the morning is much more important than being able to chat with them in the evening on Skype, because, by definition, my Skype calls will be limited in duration in comparison to the total workday for me and my India teams.

So, if you are trying to synch up when the other person is not online, what are your options? You have (a) text: someone writes a long email, (b) linear organization tools, e.g. use Google Docs and share a document dump, (c) hierarchical organization tools, e.g. try to synch based upon a common taxonomy of collections/folders.  Text/email is the worse of all options because the thread is lost very rapidly when there is more than one person involved in the conversation.  I can have a very long email thread with you as long as it is just the two of us, but the moment a third person joins the conversation and hits “Reply All”, we are all screwed because there is no telling where that person’s ideas will veer.

Linear organization, which I call the document dump because that’s the basic view offered by docs.google.com, places all the cognitive burden back on the user: here are all the leaves, go ahead and assemble the tree on your own.

Hierarchical organization is better only when the taxonomy is enforced with an iron fist: precise naming conventions, very hard rules about where individual items may be placed, etc.  There’s a whole class of document management tools (e.g. Documentum) that are in that business, and a whole class of users, e.g. people working on a new plane at Boeing, for whom this taxonomy works very well.  But for a bunch of other people, it places a set of unreasonable constraints on the user community.  The hierarchies don’t work because people don’t follow the rules, and people don’t follow the rules because the rules are viewed as peripheral to their core jobs of creating ideas and content.

Kerika believes the visual metaphor offers the least cognitive load, because it is based upon human biology: as babies, we learn to recognize faces and things long before we know their names.  When you look at a Kerika page, you can very easily grasp its organization and flow.  Many users have shared their private projects with me, so I have seen a wide range of styles in operation.  Some people are very hierarchical, and treat Kerika as a way of creating visual folders, others put everything on one big page and rely upon clustering (i.e. spatial organization) to lay out their thoughts.  The interesting thing is that it doesn’t matter what style they use: when I see their page I can, in just seconds, understand what their various projects are about.  And the visual metaphor then becomes a way of accessing their content.  Which means that when I get their content, I get it in a specific, useful, visual context.

When you have multi-firm collaboration, you are dealing with people from different corporate cultures, even if they are all from the same social culture. So you need some very basic, biology-based metaphor that everyone can understand.  If plane designers from Boeing are going to collaborate with a PR agency when their plane is ready for launch, you are going to have a massive clash of styles that will be frustrating for all concerned.  That’s where visual collaboration helps.

Q: How has your perspective changed on the available of Internet connectivity and the possibility for pervasive connectivity?

When I built Kerika 1, one of the reasons I decided to use p2p networking was that I didn’t believe there would be pervasive Internet connectivity soon enough, and I wanted to support offline usage because I envisioned my core user as someone on the road (or a plane) with a laptop.

With Kerika 2, we are not even trying to implement offline usage, because I believe there will be relatively few instances when you truly will be without Internet connectivity, and when that does happen (e.g. you are trapped in a car in a blizzard in the mountains), getting access to your Kerika projects probably won’t be your biggest problem.  It’s like Apple dropping support for floppy disks before any other manufacturer, and then dropping support for CD drives: they are pretty good at skating to where the puck is going to be (although I think they misfired with Firewire).

(I think Google Gears is an example of a solution for a problem that is already disappearing.)

If you have vastly increased communication possibilities, are able to stay online more often (or, at least, whenever you want to), then the signal:noise ratio starts to become a bigger problem.  There’s a ton of content available, a ton of new content getting generated, how do you sort the wheat from the chaff?  I think new business models that address the signal:noise ratio will become very important in the future.  I don’t see enough of that today: every startup is creating its own version of signal and assuming that it isn’t adding to the noise.  (Someone could probably say that about Kerika, too ;-) )

Q: Thanks for your time

Seth Godin “Trust Is Even More Scarce Than Attention”

Written by Sean Murphy. Posted in Rules of Thumb

Here are my top seven from Seth Godin’s list of 21 ways to make money online. (original numbering preserved).

3. Get rich slow. [link added]

Slow means that you are not impatient and don’t cut corners. It also means you are confident

4. Focus on the scarce resource online: attention. If you try to invent a way to take cheap attention and turn it into cash, you will fail. The attention you want isn’t cheap, it’s difficult to get via SEO and it rarely scales. Instead, figure out how to earn expensive attention.

5. In addition to attention, focus on trust. Trust is even more scarce than attention.

Trust doesn’t scale, it’s built up by repeated interactions over time. That’s what makes it so important.

7. Don’t quit your day job. Start evenings and weekends and figure it out with small failures.

Having a plan for taking affordable losses means that you can play the game longer and learn more.

9. Obsessively specialize. No niche is too small if it’s yours.

15. Hang out with people who aren’t looking for shortcuts. Learn from them.

I am always looking for way to be more productive but I expect it will take a lot of hard work just to maintain the status quo.

17. Make money in the small and then relentlessly scale.

I like this list, it incorporates his premise that permission leads to attention, and attention leads to trust when the communication is personal, anticipated, and relevant.

Three Tips from Sid Faulkner For Preparing To Sell Your Startup

Written by Sean Murphy. Posted in skmurphy

Sid Faulkner, CFO of Ciranova gave a talk today on “Navigating the Treacherous Path of Mergers and Acquisitions” at an event at Abbot Stringham and Lynch. Mr. Faulkner was Vice President and Chief Financial Officer of Oak Technology, Inc. where he led the 1995 initial and secondary public stock offerings, established an active program of intellectual property protection, and participated in the acquisition of four companies. He was also CFO at Altos Design Automation when they were acquired by Cadence, CFO at Gemini Design Automation when they were acquired by Synopsys, and CFO at Auto ESL when they were acquired by Xilinx.

Here are three tips that I took away that are most applicable to bootstrappers:

  • Complex Roller Coaster Ride: Every M&A transaction will have negotiations, due diligence, plenty of work, and an emotional roller coaster. It may take anywhere from three weeks to six months to close a deal, after you have a term sheet. Avoid “We won the term sheet, they won the documents,” make sure that term sheet agreement is reflected in final deal documents.
  • There is Something About a Closet That Makes a Skeleton Restless: word of a deal will encourage competitors to press you harder,  suppliers to negotiate harder, unhappy employees to renegotiate compensation. Settle lawsuits, clean up the capitalization table and all stock and option agreements, and make sure intellectual property assignment, offer letters, employment agreements, and any termination agreements are all signed and filed before you start to shop the company.
  • You Know Your Customers Love You But Can You Prove It? Can You Quantify Their Love? Keep contracts, license agreements, purchase orders, invoices, and any and all revenue recognition policies and decisions documented and well organized. It’s better to maintain them as a part of an ongoing effort than try to pick up the slack during a due diligence cycle.

Update May 9: Carol Wagner, who moderated the panel, has posted her thoughts key take aways on “Mergers and Acquisitions: Your Price and Your People

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