Posts filed under 'Finding your Niche Stage'
November 19th, 2008
“Less is More.” Robert Browning
(often attributed to Luwdig Mies van der Rohe)
“Less is Often More.” Christoph Martin Wieland
I see so many blog posts lately about how to do more with less. I get announcements for events on how to do more with less. It’s always seems like a good idea.
I don’t think it’s possible in a downturn if you have already been paying attention to your personal and team productivity.
Startups survive because they can live on the scraps of a market (a niche) that larger competitors ignore or would be unable to pursue profitably. This is doing less with less.
The trick is to minimize the amount of wasted effort. The challenge is to launch new initiatives and projects that build on existing relationships, knowledge, and successes. I was not a huge fan of dogster as a business because I had felt that the founders had been fundamentally unserious. But I was extremely impressed by a post on their blog “10 Tips for Building a Profitable Business.” Some key points:
1. If being a business person is not your goal find a business partner immediately. Without someone on the team that relishes sourcing customers, closing revenue deals, perfecting sales messages, it will always be an afterthought.
I have seen it happen too many times that a technical team believes that they can invent their way out of a problem. If you have a customer you can be extremely inventive. But if you don’t have customer interest it’s difficult. Or it’s not yet the right time to give consideration to the business model. You can have a sequence of models you may want to try, but I think you have to have a plan for how you will make a profit before you found a firm.
2. Consult anyone you know that has run a earnings-based business (VC funded companies are rarely helpful here). The concerns of a restauranteur, law firm, or even landscapers are entirely applicable when it comes to long-term strategies for profitibility. Anyone running a business for years will know volumes about hiring, cashflow, and compensation.
I think is overly broad, in particular software and Internet companies have a very different physics from manufacturing and retail businesses but have a lot in common with service businesses. But it always helps to compare notes on the nuts and bolts of running an earnings based business. This is one of the advantages of Bootstrappers Breakfasts as well you have a chance kibitz with other entrepreneurs who are focused on organic business growth based on customer revenue (vs. how to raise (another) investment round).
7. Don’t lie to yourself. We find a lot of entrepreneurs practice their elevator and investor pitches for so long they believe their rosy sounding forecasts are actually going to happen. The only thing you know is what you’ve proven. Everything else are items that still need to be proven or listed as false starts. While it’s important to strive for the big potential, it’s critical you protect yourself against the much more likely realities.
This is extremely difficult. Entrepreneurs are naturally optimistic. Russell Ackoff’s “decision record” methodology is a great way to calibrate you and your team’s ability to plan and forecast. When you make a decision have everyone write down what they believe the likely outcome will be in what time frame. Collect what they have written so that there is a record. Check back every week, month, or quarter depending upon the scope of the decision. When you compare what actually happened with your prediction it allows you to get better at appreciating the likely impact of decisions that don’t have fast feedback.
One of the real risks of “doing more with less” is that you are tempted to try new things–many new things–as the one roll of the dice that will solve this month’s problems (or this quarter’s or this years). I have seen a number of teams succumb to a plan based on an untried method or technology and embrace it by “testing the depth with both feet.”
Another variant of doing more with less is taking advice from venture capitalists about how to stretch your funding instead of raising another round. I blogged about this in “Save $189 On Your Next Breakfast”
When you are invited to a roundtable on “How to Manage the Downturn” that’s held at the Stanford Park Hotel in Menlo Park and put on by folks who until recently were focused on “get big fast” you have to wonder. It’s unusual to have to spend $189 to get advice from a VC in a crowded room.
That same $189 will pay for more than a year of breakfasts at the restaurants where we meet, and you can compare notes with other entrepreneurs who understood how to manage their cashflow before it was trendy.
One of the key pieces of advice John Doerr is reported to have offered at the event was
“Renegotiate any contracts that you can. Everything is negotiable.”
Doing less with less. That’s our plan for 2009-10. Kill the initiatives that aren’t working, experiment cautiously, and be as careful of our social capital as our fiscal capital.
November 2nd, 2008
The last six weeks or so I have encountered a number of folks who have decided to use the downturn to launch their consulting career. Typically they have been encouraged in this by their former employer who has given them a large check a lot of free time. But some have chafed at cubicle life and left without monetary encouragement.
Most are “consulting until they find a full time job.” Or consulting to make a little money until they get their next job. Or they wanted to take it easy for a while because they have been working hard and just consult.
My approach is to be helpful but not encouraging until they have shed a few key but crippling illusions.
- It’s easy to move between consulting and a full time job
- It’s easy to establish a practice
- It’s quickly lucrative
Unless a job is “temp to perm” it’s normally not a useful interview strategy to inquire if you can become full time if you do a good job. If you want a full time job you are better served to focus on finding a job and associating with other job seekers, who have a fundamentally mindset from consulting associations.
It’s a lot of work to establish a new practice. Some consultants are lured into believing that it’s easier than it really is because a friend or former co-worker gives them an opportunity very quickly. This ultimately causes them several problems. They stop prospecting and marketing their services because they are approaching their consulting career in the same way that they approached regular employment. When their assignment ends, unless they convert to perm–and let’s face it if your friend was going to hire you full time they would do that initially instead of hiring you as a consultant, they are back at ground zero.
If you’ve been laid off and believe that you want to consult here are six things you can do that will stand you in good stead.
- Cut your personal spending to the bare minimum right away. The vagaries of private practice are such that you will always want a cushion for lean times and you will need to invest in marketing and other practice building activities.
- Assume it will take between two and five years to get established. If you are not entrepreneurial (and at least a little crazy) then look for full time work. In a downturn take a job that’s “beneath you” and continue to look for a full time job that you want.
- If you do get hired as a consultant don’t the assignment full time unless it’s just two to three weeks and requires full time. Always take a least fours hours a week to look for more clients and continue to observe rule #1 (keep personal spending to a bare minimum). Work assignments at one third or half time so you can find another client and work both in parallel.
- Whenever you ask someone else for help, be clear on how you can help them. Go beyond quid pro quo to help folks when you can, even if the immediate payback to you is not clear. But never just take.
- Don’t confuse a professional consulting organization with a job search group. Folks in a job search group expect to be a member for perhaps three to six months. Professional consultants expect to be at it for a long time.
- Put your free time to good use. Too many folks think because they aren’t getting paid they shouldn’t work at something. Volunteer or offer to help someone else at little or no cost. Make commitments and honor them even if you get busy. Idleness and a loss of structure are extremely corrosive to work habits and a sense of self-worth.
Some related posts:
November 1st, 2008
Many start-up founders believe that the sales process should be this straightforward:
- Get the phone to ring (or e-mail inbox or skype or web contact form)
- Tell your prospect about your offering
- Take the order
Alas it is normally not this simple, especially if you are selling to businesses. We do encounter some startups that are looking for “smarter prospects” who will buy after they explain their offering but the typical business customer has a more complex buying process. At a minimum the prospect needs to understand your offer, to believe you can deliver the benefits that you promise, and to act based on an important if not critical business need.
It will normally take multiple interactions with a prospect to turn them into a customer. For business customers this may take weeks to months. This means that you will need to keep track of more than one prospect and more than one contact with each of them. Even for those readers blessed with a powerful memory this will require a system and a systematic approach. There are number of software tools available to track contacts/prospects:
Any of these are acceptable provided that you enter a minimum amount of information for every prospect and every contact with them. To be able to determine if a particular lead generation approach is working you will need to track the source of each prospect’s call and whether or not you ultimately won their business. This allows you to reinforce methods that are working with more time and budget, and to adjust or discontinue methods that fail generate calls that lead to revenue.
We believe that you need to be tracking the following:
- Opportunity (Contact Name, Company, E-Mail, and Phone): If you are selling to a business you may need to group several different contact names under one company or opportunity name.
- Source (e.g. Person, Event, Ad, URL): Be sure to track the path that each prospect followed to find you. Ask if it was a referral (if so from whom), a search engine query, an advertisement, a paper or blog post, or a speaking engagement.
- Status in sales process (e.g. Initial Contact, Percolate, Pitch/Demo, In Evaluation or Benchmark, Quoted/Proposal)
- Next Action Date: Always get clarity with a prospect on when you will contact them next, even if they plan to contact you (e.g. “If I don’t hear from you by Wednesday I will call you Monday of the following week). This should be less than six weeks and is normally one or two weeks for an active prospect.
- Quoted - Proposal Expiration Date. Never put a quote or proposal in front of a prospect without an expiration date. This sets up two natural follow up points: before it’s due and after it’s expired. This also allows you to have a discussion about their decision time frame (e.g. “How long would you like the quote good for?”).
- Win/Loss: Always follow through and determine if they ultimately selected another vendor and if they did buy, why did they buy.
Startup founders with an engineering background tend to focus much more on the tool, and selecting a tool, and less on the daily follow through need to track essential information for each contact with every prospect. For most of the firms that we work with, until they are really scaling up, Excel or an on-line spreadsheet will work just fine. If you have less than 100 leads–not suspects but firms that have actually contacted you and demonstrated interest and a business need–just use Excel and bake the update process into your daily practice.
October 31st, 2008
The third form of happiness, which is meaning, is again knowing what your highest strengths are and deploying those in the service of something you believe is larger than you are.
There’s no shortcut to that. That’s what life is about.
Martin Seligman interview in Edge “Eudaemonia, The Good Life“
Here are three activities to cut back or stop altogether:
I was fortunate–although I didn’t realize it a the time–when it happened , when our television screen gave out with a blue flash and a loud pop late last year. We took it into the shop and there were several weeks of diagnosis trying to determine which part to order and then realizing that the part would cost as much as a new set. We went shopping for a new one and couldn’t decide. At that point something funny happened. We stopped shopping because we realized we were getting more done and the boys were much better about chores and finishing homework. In the end we hooked up a projector to the DVD player and stuck with Netflix but have yet to replace the television.
OK, on those last two do as I say not as I do. That’s the problem with proverbs and rules of thumb. For challenges in the realms of idealized problem solving like mathematics or chess (anywhere there are child prodigies), you can learn a lot from a proverb. But many insights in life can’t be reduced to writing, especially those involving either self-mastery or other people (and startups, alas, involve both).
If you read the history of an event how does that compare to living through it? Can you learn to ride a bike from a book? The challenge with a startup–like many other things in life–is that you need to integrate many different inputs, your own hopes and fears among them, and negotiate a working consensus with your co-founders.
Things to do in your newfound time
- walks or other exercise: obligatory, again do as I say not as I do
- reading books: an excellent way of visiting another world or appreciating another perspective. They help to pull me out of a rut and give me access to information that’s not part of casual conversation or the daily news cycle.
- more time with your family: things change. At this point I find myself listening to Rush’s “Time Stand Still” more frequently, I just want to savor things as they are.
- reconnect with old friends and co-workers: they are your tribe. Not that you can’t make new friends.
- visiting nature, a museum, or other thin places where you can appreciate beauty: I was “home base” tonight for the Trick-Or-Treaters and I spent the early evening feeling a storm moving in and looking up at the clouds gliding across the sky. It reminded me of my boyhood: some days I miss St. Louis.
“Time Stand Still” lyrics excerpt:
I’m not looking back
But I want to look around me now
Time stand still
See more of the people and the places that surround me now
Freeze this moment a little bit longer
Make each sensation a little bit stronger
Make each impression, a little bit stronger
Freeze this motion a little bit longer
The innocence slips away
October 28th, 2008
A couple of thoughts on focus. Rizwan Virk, the Zen Entreprenueur, wrote about the Bootstrapper’s Dilemma early last year:
The question of focus is an important one for any entrepreneur. […] But in a bootstrapped company without outside financing, this becomes a particularly tough issue: the question is where to focus and for how long? And what to do if the focus isn’t working? And is the current focus (the one you started with) blinding you to where the real opportunity is? Or is your real problem a lack of focus? […]
1) you need enough cash and profits to keep the company going, and
2) you have very limited resources so it’s important not to spread yourself too thin.
In fact, these two demands are at the core of what I call the Bootstrapper’s Dilemma: If you have limited cash and need to keep company going you are likely to take any sales/revenue you can get, even if it’s not in the area of your focus. Furthermore, you may discover that the real opportunity is in a market/area that is adjacent to what your first guess was. But if you don’t focus, you are not likely to make much headway in any of the areas that you are attacking.
Shawn Hessinger acknowledged this dilemma and added his “Five Thoughts on Bootstrapper Focus” late last year
- In bootstrapping, reality determines your focus.
- There is no growth without survival.
- Cash flow always remains key.
- Concept is nice but execution is everything.
- Focus on the business not the idea.
Michael Gerber in the E-Myth Revisited identifies three key roles or functions in a company
- technician or expert who develops and refines a practice that constitutes a core competency of the business
- manager who manages and orchestrates the set of practices needed for the business to succeed
- entrepreneur who understands how to find opportunities for the business and scale it
So, put these together and what do you end up with. I think Rizwan Virk identifies a clear challenge for may bootstrapper: how do I keep the lights on but develop a focused set of problems and customers for my business. This is the entrepreneurial challenge: how to identify and pursure opportunities where you can create value for customers.
The management challenge is, given this set of problems and for a target group of customers, a niche market, how do we orchestrate the delivery of our product or service across the set of practices (e.g. development, testing, marketing, sales, support) that are necessary to create full value for hte customer.
The technician or expert’s challenge is how do I engage in deliberate practice to improve skills and methods around a key process that will result in more value for the customer.
Since most boostrappers start out as “technicians with an entrepreneurial spasm” to quote Gerber I think you end up with the following conceptual picture for a bootstrapping startup (or any small business that is relying on organic profit for growth for that matter).
- Technician must answer “What are we good at?”
- Manager must answer “How can we tell, how do we measure it?”
- Entrepreneur must answer “Who wants it, where can we create value, is this the most valuable problem we can solve?”
- All have to answer: How long should it take us to know? Do we have enough time/cash to get good enough to create differentiated value.
Another way to look at it:
- Do we have the right expertise or what are our core competencies?
- How do we orchestrate and measure results end to end for our customers?
- Are we pursuing the right opportunities?
- Do we have enough time and cash to run enough experiments?
- Do we have sufficient control of our internal practice to understand how to add new staff productively?
- Do are have realistic expectations for how long it will take to succeed and enough gumption and wherewithal to see things through together.
October 20th, 2008
There is a risk of complacency for start-ups (and even larger firms) who have achieved a level of security in their first niche. Markets change, consumer needs change, and you need to continue to explore opportunities to sell your offering to new customers–non-customers–even though it’s a much harder sales process than a renewal, upgrade, or follow on sale to an existing customer. Peter Drucker warns about this in an interview in February 2002 issue of Information Outlook (hat tip to Pauline Harris “Peter Drucker’s at it Again!“)
Companies may know a good deal about their customers. They know nothing, as a rule, about their non-customers — the people who should be our customers but buy from someone else. Why do they do that? And yet it is the non-customer where important changes always start first.
It’s consistent with a 1994 article he wrote for Harvard Business Review entitled “The Theory of the Business.” He offers department stores as a cautionary example of a set of firms who had high customer satisfaction but didn’t realize that they were losing share. There were not talking to any non-customers, assuming that they weren’t customers because they couldn’t afford to be when in fact tastes were changing.
I was reminded of the value of talking to non-customers by a September 16 blog post by Brian Bailey entitled “Bye Bye Cadence.” Recent events may have rendered the title unintentionally ironic but the article relates a conversation Brian had with some Cadence employees after he gave a talk at CDNLive! (the exclamation point is part of the name).
Afterwards I was talking with a group of Cadence employees. They said that the total cost to put on such a show was significantly less than what they usually had spent on DAC. In addition they did not have to constantly look over their shoulders to see if someone was listening in to their conversations and the quality of the people who attended was so much higher than the leads they got from DAC. One person asked if they thought Cadence would ever go back to DAC. The consensus answer was – I don’t see why we would ever want to return to DAC.
I left a comment on September 25 (I only mention this to be clear that I am not “piling on” after the recent executive exodus at Cadence) that I wanted to end here with as well.
There is always strong value in a user group and communicating privately with your current customers. Not enough EDA vendors do enough to actually have a conversation with their customers. Full points for Cadence in doing so at CDNLive!
A trade show like DAC allows you to interact with prospects–potential new customers. It’s also a bigger draw than a single vendor (or even single vendor ecosystem) show. To the extent that Cadence wants to launch new products that carry them beyond their current customers they will need to do more than CDNLive! style events.
Clearly Cadence is already shrinking on a revenue basis, I would suspect that avoiding trade shows and other forums that would allow them to interact with non-customers will only allow them to continue to shrink more cost effectively.
October 8th, 2008
I had the occasion to send the following e-mail in July of last year after a series of conversations and e-mail exchanges with a struggling founder. I thought it was apropos the current angst in Silicon Valley.
Sent: Tuesday, July 03, 2007 3:32 PM
Subject: Please be healthy
It’s a challenge to maintain work life balance, whether it’s the driven by the demands of success or the need to make changes that will make your business work. Please take it easy and make one or two changes that stick (whether it’s walking or diet or meditation or spending more time reading). For me it takes months to change habits, so pick just one thing and make it stick: then a second might be easier.
Just a thought.
We work with a lot of folks who are restructuring or rethinking their business. The stress you feel is not at all uncommon. I have a quote from Gerald Weinberg that I keep handy “What looks like a crisis is only the end of an illusion.” I don’t pass this along to demean or diminish what you have accomplished, but to stress the need to see things clearly as they are.
One other thought: traction is the ability to set and hit targets reliably.
If you find that you are setting goals for things that are under you control (e.g. closing business is not under your control, placing calls or sending e-mails is) that you are not hitting, scale back until you are able to get traction. Free advice from someone who has been there (and returns periodically).
I leave you with a quote from J. R. R. Tolkein that I have found to be an inspiration when I am wandering, worried that I am lost:
“All that is gold does not glitter,
not all those who wander are lost;
the old that is strong does not wither,
deep roots are not reached by the frost.
September 30th, 2008
I have followed Herb Reiter’s consulting career over the last five years or so: there aren’t very many business development consultants who work with EDA firms, fewer who have the mix of semiconductor and design background that Herb accumulated on the way to honing his business development expertise. He is personable, methodical, and always interested in talking with new start-ups. He gives good advice informed by a perspective on both industry and technology trends. When he met with PicoCraft a while back he mentioned that he had been part of the team at Synopsys that helped to establish PrimeTime as a de facto standard for STA (Static Timing Analysis), building on experience he had gained doing the same for Motive at Viewlogic before they were acquired by Synopsys. I caught up with him recently and asked him to tell the story of PrimeTime’s early customer development and lessons it may hold for other EDA companies, especially start-ups. What follows is an edited (and hyperlinked, good blogging is good linking) transcript of our conversation.
Q: Can you give me a brief bio and some background on the events that allowed you to establish static timing analysis as a viable new tool in the ASIC design flow and PrimeTime as a key player in that market?
I spent almost 20 year in semiconductors, I have seen the consequences of insufficient design tools. For example, in the early to mid 80’s I was part of National Semiconductor’s plan to bring their impressive portfolio of micro controllers, communication chips, and other ASSPs as mega-cells into the rapidly growing ASIC world. A lack of good tools was the primary reason for this failed attempt.
When I joined VLSI Technology in 1989, VLSI had the best cell-based tools and flows. Their design centers were world-class, working with leading edge IC design teams at very successful companies. I got a close up view of the challenges the development of ASIC core technology represented. As VLSI’s lead in cell-based design methodologies waned, revenues and profits declined and eventually Philips acquired VLSI. After VLSI I joined Viewlogic. After I had been working there for a year, successfully encouraging many ASIC vendors to qualify Motive STA and VCS gate-level simulation as sign-off methodologies. Then Synopsys offered around $400M to Viewlogic’s shareholders and we merged with our former competitor.
Q: It’s rare that a larger EDA firm is able to develop and launch a new product in a new area. As you said, you were part of the Viewlogic acquisition at Synopsys. How did you build internal support to enable PrimeTime to achieve not just traction in the market, but ultimately dominant market share?
At Viewlogic we had been winning accounts with Motive against Synopsys/PrimeTime at Viewlogic. When I “changed sides” many members of the PrimeTime team were interested in our approach. The first thing that I did for Motive and then for PrimeTime, was to narrow our focus from dozens of potential partners to the top dozen technology leaders. Both at Viewlogic and Synopsys my team used the same basic formula: We worked hard to understand our partners’ requirements, developed trust relationships with a dozen ASIC semiconductor vendors. This allowed us to make Motive and then PrimeTime an integral part of their ASIC design flows and the key to timing sign-off.
Just like my semiconductor partners, I had engineering sites all over the world, I wanted my people to be as close to these partners as possible. One of my engineering experts even worked at TSMC in Taiwan, and was instrumental in implementing Dr. Ping Yang’s vision of TSMC’s reference flow number one.
We also waived the PrimeTime training fees for the ASIC Design Centers of our partners. Synopsys’ product group gladly covered the training department’s exploding expenses and was rewarded with a flood of PrimeTime bookings from these Design Centers and their many ASIC customers. Just like TSMC’s first and second reference flows–which were dominated by Synopsys tools–increased Synopsys revenues at fabless IC vendors, these ASIC Design Center seminars did the same at our big partners and their ASIC customers. Most of the smaller ASIC vendors adopted PrimeTime quickly, after seeing its benefits giving their larger rivals a competitive advantage, and a de-facto Timing sign-off standard was established in about two years.
Q: What were a couple of lessons learned?
Introducing new EDA design tools is a lengthy and difficult process. Gate-level timing simulation was the proven and trusted methodology for timing verification through the 0.35 micron process node. But at 0.25 micron chip complexities and clock speeds increased the challenge of chip level timing closure, 0.18 micron was even more difficult, such that simulation run times approached eternity. Mask and re-spins costs, coupled with the economic impact of being late to market meant that an exhaustive method that guaranteed timing closure was urgently needed. PrimeTime’s static timing analysis offered a comparatively very fast way to do exhaustive timing verification and the product group as well as my team offered excellent support during this transition.
It’s important to note that static timing analysis had been around for more than a decade, Motive had originally been used for board level design. When my ASIC Vendor team at Viewlogic together with the Motive developers introduced it to the semiconductor vendors, we learned a key lesson: People were not willing to abandon a methodology that is working until it seriously hit their pocket book. Eternal runtimes of 0.18 micron chips and expensive re-spins because dynamic simulation is not exhaustive, helped us win STA converts.
Q: How big an issue was library management for the ASIC vendors?
Huge, ASIC vendors were at first reluctant to take on creating and supporting yet another library. One common complaint that I heard many times from ASIC vendors: supporting different libraries for different process technologies was a never ending effort. This huge effort got multiplied by the number of tools that relied on accurate libraries and, to make matters even worse, required a complete update and re-verification, whenever a new tool revision was introduced. I knew that we had to make it much easier for our customers to manage these libraries.
Q: When you talk about AEware (scripts written by Applications Engineers to supplement and extend the base product?
Already at VLSI I have seen our design centers developing a lot of what you call AEware, primarily to overcome tools deficiencies or extend the life of a proven tool. My SVP team at Synopsys worked very closely with the strong corporate CAD groups at our partners to temporarily give Synopsys tools important capabilities for chip design within existing flows and to demonstrate to the Synopsys product groups the importance of such features–with remarkable success. The product groups, especially the PrimeTime team, adopted many of these scripts and made them integral and professionally supported parts of the next tools releases.
Q: Can you talk about how this experience led you to form EDA 2 ASIC Consulting and what your business is today?
In my role managing Synopsys SVP team I really enjoyed being a bridge between the powerful ASIC industry and the innovative EDA industry. I saw PrimeTime, VCS, TetraMax, Physical Compiler and other Synopsys tools getting accepted widely and really making a big difference for our highly interdependent industries. When I started my own firm in 2002 I wanted to replicate my dream-job: Being a bridge between these two industries and bringing to my friends in the semiconductor industry innovative EDA solutions, now primarily from smaller EDA vendors. In the 7 years of managing my own firm I have been able to make a number of contributions to the semiconductor industry. But I still look back at the work I did at Synopsys. Together with the product group and the training department, we laid the groundwork for PrimeTime’s market dominance as a lasting contribution. PrimeTime is still at 87% market share today, almost ten years later, according to Gary Smith EDA.