Recap Semifore MVP Clinic: Selling To A Team of Diverse Experts

Written by Sean Murphy. Posted in 4 Finding your Niche, 5 Scaling Up Stage, Audio, skmurphy


Series profile
Thinking about this using an OODA loop model – — Observe -> Orient -> Decide ->  Act

  • Orient part is sensemaking — its own kind of fast learning
  • Often takes a long time in a complex situation (e.g., all situations where learning is involved); subject to error because it’s “culture bound”
  • What we do
    • Asking what you see
    • Asking what are interactions (including between people, process, platform, and practices)
    • focused on  asking good questions / suggesting questions to research;  avoid giving advice
  • Audience: other entrepreneurs

Hosts

Presenter profiles (see extensive write up a “Semifore Execs Share Bootstrapping Lessons and 2014 Scaling Up Plans at Jan-17-2014 MVP Clinic)

  • Robert Callahan, COO Semifore, Inc.
  • Herb Winsted VP Business Development and Customer Care, Semifore, Inc.
  •  Semifore, Inc: niche software player in Electronic Design Automation founded in 2006 with a focus on tools for memory map management

Initial questions

  • How do we scale and grow the business
  • What strengths or accomplishments will you build on
  • What existing or constructed vantage-points (data-collection opportunities) have been or will be most useful?
  • What capabilities need to be developed
  • What’s the primary barrier or key challenges you need to overcome
  • talk about product and challenges –    cross functional nature
  • talk about what you have learned – making sense of current experience
  • look ahead 2014 talk about plans

Problem profile

  • complex sales environment
  • education / learning involved
  • many prospective clients have rolled their own
  • side issues = standards, interaction with purchasing
  • Usually find a pre-existing culture / product team /  team
  • more complex sales and adoption problem
    • touches hardware team (e.g. system architect, RTL developers)
    • software developers
    • documentation specialists
    • documentation consumers – e.g. verification and validation team
    • plus “team in larger team or org issues”

This is a mid-course correction conversation. We have a viable product that’s now robust

How do you scale the business?
Competitors are “in-house” solutions – first generation build out.  Semifore product replaces spreadsheets and in-house Perl scripts that represent a career path for internal tool developer

Questions from Audience 
Q: How many employees does Semifore have?
A: five direct plus some other outsource teams we draw on for specialized resources

Q: Do you monitor feature usage and see which ones are used and which ones are not? Do you remove unused features?
A: it’s on-premises software, there is no monitoring except in conversation with customer. Will be deleting some obsolete standards but have to provide a lot of legacy support and backward compatibility

John observed: consider inserting learning & feedback loops here.

Q: Do you have any services revenue?
A: We have  a hybrid license. basic level charge, tiers of users (groups of 10). we sell licenses in batches of 10 with a decreasing cost per incremental seat even as total site license fees go up. We have some project support service fees; there are also fees for “global license”

Q: Tips for growing from small groups to more users in the companies.  How to encourage spread inside customer
A: We believe the following have been key to our success:

  • spend face time with customers
  • dealing with the internal script-writers “who can do stuff.”
  • sales opportunity: when the script-writer leaves

Q: What percentage of customers did you have pre-existing relationships with (from Magma, as an ex-employee of that company, etc.)?
A: really only first customer, most of the rest were “cold starts”

Q: Also, is the tool compelling to any functional area as is, or is it compelling primarily because there’s a lack of resources for the previous internal approach?
A: a bit of both.  solutions exist in organizations that are not visible to management.

Notes from Live Session

Walking around the issues —

Rob: in the Valley back when disk drives looked like washing machines.  Finance roles, then managing channel and tech support.  EDA for last 15 years.  External advisor to Semifore, joined the firm a couple years ago.  growing the business from boutique to a real business.

Herb: business development VP — customer facing activities. started in the electronics business back in the ’70s. Projects in Europe, Japan, US, involved with Semifore since 2008. Semifore is the “right size” for connecting directly to customers.

Have both survived and added customers.  Tool crosses several different disciplines,  enabled by high level

Some standards IPXACT and System RDL but for the most part replacing either custom scripts or Excel input based techniques.
Rich Weber drew on experience at SGI, Cisco, Stratum One to create cross-compiler
selling to sw, firmware, and documentation teams proliferating from early beach heads

Respond to customers quickly. agile response.  Keeping customers.

Initial sell to a small team.  from 10 users to 100 in the same company. tool goes viral.  education challenges to begin using the tool.  Support requests are often enhancements to connect with their local requirements.

How to proliferate. Getting information early in the design / development process. Measure speed.  Perceiving the activity outside “my silo.”  It’s a blazingly fast product once it’s in place.

Q: does tool help to measure design cycle impact?
A: It’s really a technology driven company working with engineers who focus primarily on technology, but our customers live in a business environment. more recently customers are coming in and asking for automation of the creation of these architectural descriptions. Once the tool is adopted there is a shift from create the “perfect document” to ‘good enough distributed widely’.
Semifore enables a start from a terse description that can be elaborated.  EDA Process Workshop in Monterrey – need a good plan more than a good tool

Herbie: Making the transition from supporting a wide variety of design styles to a smaller subset that the industry as a whole seems to be converging on.
Sean: similar to what happened in networking where there was a convergence from “multi-protocol” to IP and Ethernet.

As an introduction strategy Semifore offers a sandbox model.

John: have you thought about a user conference where you can share lessons learned and foster “viral process”?

  • Rob: good idea, we could do it in the Valley
  • Herbie: one challenge is a lot of our customers are direct competitors and don’t allow us to talk a lot about what they are doing or even that they are using it.
  • John: breakfast at Coco’s might actually kick this off; talk about failure as much as glossy success. provides access to design ideas and source of marketing insights.
  • Sean: first Verilog user group was very low key.  It was at Denny’s.

Rob: engineer to engineer conversations have been of great benefit, but we have trouble translating that into business impact.

  • Sean: boiled frog problem- registers grow incrementally.  complexity ….  how to trigger the epiphany that “it’s getting hot”.  how describe the environmental question about increasing complexity.
  • Rob: we see people saying “we can’t manage any more. please help”
  • Sean: need to crystallize this customer’s business insight into tools for engineer customers at other firms (including prospects) into a compelling business proposition. Problem has scaled from hundreds to tens of thousands of registers

Sean: What is one thing that would change the equation:

  • Herbie: go to next level in revenues. A potential contract on the horizon would generate more human resource.
  • Rob: finalize and accurately describe tool functions, so can present / educate people at higher levels of the organization..

Q: What is your licensing model?
A:business predicated on one year licensing deals, renewals are based on internal uptake not multi-year contractual obligations. Avoids some issues where customers wait for end of quarter/year asking for large discounts

John: your great strength is your engineering view, but is this in some ways a weakness? Could you do more to see into the customer organization w/o more revenue?
Rob: A senior VP engineering has a P&L and a business view. We are a small tool in price, it’s hard to get their attention.

Take-Aways

  • Herbie: this session was out of our normal activity.  appreciate opportunity.  learned working inside orgs & managing projects: the reality of business situation, putting together the fifth team.
  • Rob: better mousetrap doesn’t always sell.  Semifore has good technology.  challenge is to refine the messaging.  describe “breakage is around the corner.”
  • Sean:  need to explain to prospects that they have gotten used to dealing with “broken”. I think Semifore’s challenge less in engineering more making business case to pragmatic buyers.

Semifore Execs Share Bootstrapping Lessons and 2014 Scaling Up Plans at Jan-17-2014 MVP Clinic

Written by Sean Murphy. Posted in 4 Finding your Niche, 5 Scaling Up Stage, EDA, Events, skmurphy

Semifore , Inc. was founded in 2006 by Richard Weber based on his system design experience at several startups and some larger systems firms. All of them struggled with the need for  tools and methods to keep the hardware architecture in sync with software architecture and to ensure that the development and customer documentation was up to date. He developed an application that worked from a common specification to generate high level hardware description language specifications, software source code, and human readable documentation for the memory maps and configuration/control register behavior. Semifore has bootstrapped growth since 2006 and has seen their offering adopted at a number of major semiconductor firms. and system houses.

  • What: Semifore Execs Share Bootstrapping Lessons and 2014 Scaling Plans
  • MVP Clinic Format: Webinar with shared note taking in a PrimaryPad
  • When: Fri-Jan-17-2014 10am PST
  • Cost: No Charge
  • Register: https://www3.gotomeeting.com/register/251287126
Register Now

We have two members of the Semifore executive team joining us 10AM PST on Fri-Jan-17-2014 for a discussion of what they have learned about their success so far as a niche player in the Electronic Design Automation space and their plans to scale up in 2014. You can register to take part in the conversation at

  • Rob Callaghan, COO of Semifore Inc.
    Rob was previously  Vice President of Operations for sales and technical support at Magma Design Automation. Prior to Magma, he was Group Director of Business Development as well as Director of Sales Operations at Cadence Design Systems. He has worked with other large electronics firms such as L.M. Ericsson, Amdahl Corporation, and Memorex Corporation in the functions of Product Marketing, Field Operations, Finance and Accounting. His expertise includes strategic and operational planning, operations management, market research, and financial operations for organizations such as direct sales channels, product marketing, R&D operations, corporate business development, corporate mergers and acquisitions and strategic investments. He has a BS in Finance from the Menlo School of Business and a MBA from Golden Gate University.
  • Herbie Winsted, Vice President of Business Development and Customer Care
    Herb is a veteran of over 26 years in the EDA and Semiconductor industries. He has held positions of Director Business Development and Director IC Implementation and various individual contributor assignments at Cadence Design Systems. He has also assumed management responsibilities for CAD teams and IC layout groups at National Semi, GEC Plessey, and AMD. Herbie has also lead hundreds of multi-discipline automated layout projects in different roles at Silicon Valley Research (Silvar-Lisco) working with major Semiconductor companies worldwide. He has excelled at team building and establishing both business and personal relationships at every level of the organizations he has serviced. He has wide experience in creating marketing messaging, training, and sales collateral. He has always put customer requirements as his highest priority and excels at finding practical solutions that satisfy all parties concerned.

Background for discussion

Semifore Inc. is a software startup in Palo Alto Ca. The company provides a software product platform that automates and manages the register information for the Hardware / Software interface during the definition, specification, implementation and verification phases of the ASIC and/or FPGA design process. The company is privately held and has no external investors. It was founded in 2006 by Richard Weber who is currently the CEO of the company.

Currently the company has over a dozen paying  customers which are using the platform to deliver their chip sets to customers. Logo’s such as Altera, AMCC, Microsoft, and other large firms have embraced the tool and associated design methodology to reduce their design cycle time and improve their product functionality.

Semifore’s products are used by Systems Architects and designers, Verification Engineers, Software Development Engineers, and Technical Publications teams inside of Semiconductor companies.

The company has been funded via “bootstrapping” and is operated solely from operating cash flow. This has provided sufficient funds to get through the product development and early customer engagements that allowed Semifore to market, test, and refine the technology to a state of high reliability and functionality with low post-sales support requirements. The product does what we say it does and once it’s installed the product often goes viral.

The company has relied on trade show attendance and word of mouth to secure additional sales leads to qualify and move to a product demonstration. The customers for this product, are for the most part, currently internally developing their own solutions in this space.

Market / Customer Challenges (Lessons Learned 2006-2013)

  1. Internal solutions are viewed as “free” and they get the job done today. The cost is buried across many functions within the customer and the time hits they take are part and parcel of the “design silos” in most organizations.
  2. The teams that have “created” the internal solution often have a vested interest in keeping them alive.
  3. The currently employed internal “methodology” touches many organizations that may not be the purchasing entity or the driver for the decision or have the ability to overrule and drive a central technical solution throughout the organization. Many large customers have several different of internal solutions in this design space.
  4. This design problem is very niche and eclectic and often is not highly visible to upper engineering management. It’s noise to them. Education at all levels is required for buy in on this kind of tool.
  5. Internal solutions tend to be limited to file transforms and depend on rigid input formats to produce useful results. Very little true design intelligence for detecting correct semantics and interface capability to other tools or standards.
  6. There is considerable confusion regarding the status and capabilities of the “standards” that support this particular design methodology that adds to the tendency to “wait and see “ before making buy decisions.

Key Goals for 2014

  1. Expand the adoption by existing customers who have embraced the tools and succeeded using them in production.
  2. Build on current success to add new customers, large and small.
  3. Determine level of participation in existing standards committees and explore offering our proprietary language as a standard with endorsement from existing customers.

Update Fri-Jan-17: here is the audio for the event.

Product Market Fit Metrics

Written by Sean Murphy. Posted in 5 Scaling Up Stage, Rules of Thumb, skmurphy

Q: I am considering product market fit metrics for an add-on new product launching in a well established company that  makes equipment to test electrical cables (for the last 29 years). We are introducing a new product that is an add-on to existing products (it is only useful if used with the existing product). This is a project that was pushed by our founder and has been developed for the past year. We were able to get a little bit of feedback along the way from customers but not much.

How To Thrive After An Acquisition

Written by Sean Murphy. Posted in 5 Scaling Up Stage, Founder Story, skmurphy

Q: I was CTO and co-founder of a small technology startup that was recently acquired by a much larger firm. We have a two year earn out that I would like to collect. I see myself as a serial entrepreneur (this is my first successful acquisition but I have founded or co-founded several less successful startups in the last decade) but realize I should probably learn how to thrive in a large  firm environment as well.  In the next two years I would love to have learned how to operate in a public company  and to have a few solid wins where I’ve shifted the acquiring company’s business in a positive direction. Any advice about keeping sane and happy, and making sure I could actually make an impact at the new company.

First of all these are a great set of goals: stay sane and happy and learn how to make an impact in a large firm. Here are a couple of suggestions:

  • Attend manager / new manager training: this will allow you to meet other managers in the firm and make connections. It’s also a way to learn the “unwritten rules” of your new employer.
  • Ask to be assigned another manager as a mentor for an on-boarding period (60-90 days), with mutual consent you can continue beyond that point.
  • Attend the “engineering bagel meeting” or “nerd lunch” or brown bag lunches: if there isn’t a regular (e.g. once a week twice a month meeting where engineers present work that they are doing, offering to help organize an event where folks bring in lunch and can meet in a room or over Webex where one engineer presents some recent results and others can ask questions. Presentation might be 6-12 slides 15-20 minutes followed by Q&A and general networking. Rotate speakers from different groups and teams including your own.
  • Attend Miller Heiman sales training or Solution Selling sales training: protecting your budget and “tin cupping” from other departments for requisitions and project funding benefits from sales skills.
  • If your company was not the first acquisition seek out other CEO’s and founders whose company was acquired by your firm–whether or not they are still with the company–and ask for a coffee break or quick call to get some advice on what to watch out for and what they have found helped them.

Engineering Your Sales Process Workshop Feb-8 Early Bird Closes This Weekend

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, Events, Sales, skmurphy

Register Now Just a heads up that the early bird rates for our next “Engineering Your Sales Process®” Workshop close Sun-Jan-28.

This is the same workshop that Scott Sambucci and Sean Murphy offered at the Lean Startup Conference in December 2012 but we are limiting the attendance to 12 entrepreneurs to allow it to be even more interactive and in depth. Our focus is on entrepreneurs who are selling complex new products to businesses and face these challenges among others:

  • You can’t get potential customers to call back.
  • Prospects won’t make a decision.
  • Prospects like what they see in beta and ask for extensions but will not buy (yet).
  • Your deals stall.
  • Prospect stays with the status quo.

This interactive workshop will help you learn from these problems by using conscious planning and experimentation. Traditional sales training stresses “every no moves you closer to a yes.” Our approach to engineering your sales process says instead, “What looks like noise is often actually data.” Designing and debugging a repeatable sales process is key to a sustainable business, and we’ll address how to diagnose common problems to determine likely root causes. You will leave with a scientific approach to understanding your customers’ needs and their buying process so that you can scale your business in harmony with it.

ABOUT THE SPEAKERS:

Sean Murphy, CEO of SKMurphy, Inc. has taken an entrepreneurial approach to life since he could drive. He has served as an advisor to dozens of startups, helping them explore risk-reducing business options and build a scalable, repeatable sales process. SKMurphy, Inc. focuses on early customers and early revenue for software startups, helping engineers to understand business development. Their clients have offerings in electronic design automation, artificial intelligence, web-enabled collaboration, proteomics, text analytics, legal services automation, and medical services workflow.

Scott Sambucci is the Chief Sales Geek at SalesQualia, a company dedicated to improving sales performance. With more than 10 years in Silicon Valley and 15 years in sales, management, and entrepreneurial roles in the software and data industries, Scott merges the attributes of a successful salesperson and entrepreneur, putting his experience to work for SalesQualia clients every day. He’s lectured at numerous universities across the world, presented at TEDxHultBusinessSchool in San Francisco, and recently published  “Startup Selling: How To Sell If You Really Really Have To And Don’t Know How.”

Register Now

Impatience For Success Works Against Learning

Written by Sean Murphy. Posted in 4 Finding your Niche, 5 Scaling Up Stage, Consulting Business, skmurphy

Q:  We’ve sculpted our product in a niche that was  a subset of the larger target audience. But it is not a niche product–and our investors agree–it’s aimed at the the middle of the bell curve. We feel impatient with our progress and are considering a significant investment in a traditional PR firm; we hope this will dynamite our whole effort with a big splash.

Most successful products start out in a niche and move to a sequence of larger/adjacent niches. Impatience for success works against learning.

You Tried: It’s OK To Make a Change

Written by Sean Murphy. Posted in 4 Finding your Niche, 5 Scaling Up Stage

“In restless dreams I walked alone,
Narrow streets of cobblestone.”
Simon and Garfunkel, “The Sounds of Silence”

Nothing new ever works, but doing the same thing over and over again without variation or detecting and correcting mistakes is insanity (or at least bureaucracy). So many startup overnight success stories that stress the importance of passion and persistence leave that part out.

Retry, Vary, Or Make a Change

In the early going especially you are always wrestling with whether to:

  • Retry without variation: persevere using the same methods to achieve the same near term goals.
    • This is the absence of learning.
    • Retry without variation (not wasting any time trying to learn) is an anti-pattern beyond third or fourth iteration. Unless you are playing a slot machine or are in a similar situation where you can either make one move or not play
  • Retry with variation: adjust your methods but keep aiming for the same near term results.
    • This is single loop learning. Also called Plan-Do-Check-Act or Build-Measure-Learn or “being in flow.”
    • Here the challenge is more complex: how to recognize the limits of a particular approach and try a different one. It’s easy to switch between strategies or techniques that you are comfortable with, but it cam be intensely uncomfortable to learn a new approach and incorporate it into your repertoire. Starting over as a novice can be daunting.
    • the goal is not achievable or there are better near term goals given your current resources and knowledge.
  • Play a different game: challenge your assumptions, change your goals, give up or defer one or more current objectives and abandoning some or much of your current approach.
    • This is double loop learning. Also called “lateral thinking” by Edward DeBono or associating in Innovator’s DNA.
    • Here the challenge is to determine if another technique or strategy–one that you may be unfamiliar with or have little expertise with–will allow you to reach your goal, or if you need to adjust your goals to something that’s feasible.

Chris Argyris developed the concept of single loop and double loop learning. In his “Teaching Smart People How to Learn” he outlines a set of attitudes that work well to foster single loop learning but create a “doom loop” when a change in goals (double loop learning) is required.

There seems to be a universal human tendency to design one’s actions consistently according to four basic values:

  1. To remain in unilateral control;
  2. To maximize ‘‘winning’’ and minimize ‘‘losing’’;
  3. To suppress negative feelings; and
  4. To be as ‘‘rational’’as possible—by which people mean defining clear objectives and evaluating their behavior in terms of whether or not they have achieved them.

The purpose of all these values is to avoid embarrassment or threat, feeling vulnerable or incompetent.

Four Approaches That Minimize Learning: Make a Change

If these four rules are your working default it is very difficult to engage in double loop learning.

  • unilateral control: works against getting a broader perspective from others, asking for help and advice.
  • minimize losing: you have to admit to yourself that your current approach is not working if you are going to question your assumptions and change goals and/or methods.
  • suppress negative feelings: sometimes it’s necessary to feel bad to develop the willingness to change and improve.
  • clear objectives and pass/fail thinking: innovation requires a willingness to tolerate ambiguity, allow for evolving objectives that are fuzzy, and say better or worse not pass or fail.

I don’t think it’s a matter of “getting comfortable with failure” as much as “getting comfortable at getting better” instead of holding yourself to a standard of perfection. I think it’s less about “failing fast‘ and more about “failing well” or “failing safely.” Single loop learning is being in flow, double loop often requires a period of discomfort, uncertainty, and restless dreams.

Related Blog Posts

Case Study: eMOBUS Experience With SKMurphy

Written by Sean Murphy. Posted in 5 Scaling Up Stage, skmurphy, Testimonial

We normally we work with a team of two to five engineers or scientists who have working technology and deep domain knowledge but who need help identifying and exploring opportunities for scaling up their business based on building long term customer relationships that provide recurring revenue. The eMOBUS team knew how to sell and had deep domain knowledge for cellular spend management, they wanted practical insight into how to incorporate software technology into their service offering in a way that aligned both with customer needs and larger technology trends.

Moe Arnaiz, CEO of eMOBUS co-founded the company in 2005 to bring stability to the fragmented world of mobility management. Under Arnaiz’s direction, eMOBUS has grown from an idea into a rapidly growing cloud computing company – providing web services and licensing its platform to various VAR’s and consulting companies. eMOBUS is the only mobility management platform to take a preventative cost containment approach, which has earned the respect of industry leaders such as Netsuite, Johnny Rockets, Master Halco and Swinerton Builders. Moe honored as one of “40 under 40” to watch by San Diego Metropolitan Magazine in 2010.

SKMurphy has helped us with several key transitions in our business over the last four years. The impact on our business has been to move from a carrier reseller model under increasing margin pressure and shrinking differentiation from other resellers to a fast growing technology enabled service organization who offers a platform that is so compelling that we are licensing our technology to other providers in addition to continuing to use it to power our own business.

From the beginning Sean challenged us to change our perspective from acting as an agent for the carrier to an advocate and trusted advisor for our customers. This resulted in a shift in our focus from procurement and transactions that migrated a customer onto a different carrier to a monthly service that monitored their business needs and current billing,  making adjustments as necessary to get them the most cost effective configuration with either their current carrier or a new one.

As we continued to work with SKMurphy they helped us to identify and explore opportunities where software-enabled solutions not only allowed us to scale the business but allowed us to focus on building long term relationships with our customers that provided recurring revenue.

They were also helpful in recruiting our CTO, who has migrated our business from Excel and Quickbase to a cloud solution that is scalable to the needs of our growth plans. This migration to the cloud has also enabled us to offer a platform as a service to telecom expense management firms who wanted to add a mobility management component to their offering. Through out the process, SKMurphy provided insight into the technology trends that we should leverage.

I think two of the hardest challenges that a startup faces are hiring the right people and winning the early deals that establish credibility. Both of these problems are ultimately the CEO’s responsibility. Sean was available as needed, working nights and weekends when we did. What was surprising was that each new level of deal required us to learn a new way of selling.

We have other advisors whose sales, financial operations, and technology insights we value, I think where Sean has been most helpful was in thinking through and then executing the switch to a software-enabled services firm selling subscriptions from a rep firm focused on the next sales transaction.

As the CEO I have gathered a team of talented advisors because I want to make effective decisions. Their value is in the questions that they ask that force me to look at the problem from a variety of perspectives.

Startup Stages Overview Video

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, skmurphy, Startup Stages

This is Sean Murphy for SKMurphy, Inc.  I want to talk to you about our startup stages model and understanding that risk reducing milestones that separate each stage.

We break the startup journey into five stages.  In each stage you will explore different options and converge on a key risk reducing milestone. Starting from idea or formation, moving through open for business, early customers, finding your niche,  and scaling up.

In the Idea and Formation stage you are searching for a customer need, a problem solution fit, and a team. You know you are done when you have a problem that energizes a team that is mutually accountable and jointly capable.

In the Open for Business stage you are searching for a business model and proof of value. This allows you to formalize the team commitment and make firm offers at a price.

In the Early Customer stage you are searching for proven value, and the proof is that customers actually pay you, not just tell you that they will pay, they actually pay. That’s only possible once you are set up and are able to transact business.

In the Finding Your Niche stage you now have a target customer type that you are going to select from customers that you have already done business with who reference each other’s buy decisions.  You need to learn the domain language of that specific customer set and learn how to find similar customers.

In the Scaling Up stage you are now looking for product scale. This requires that you have a repeatable scalable process, that you can identify additional niche markets , and identify additional opportunities. What was heroic has to become routine. Now you are adding employees who are specialists.

In each stage we see this same pattern of exploration and convergence. You are going to look at many options and then converge on key solutions.

Thank you, this has been Sean Murphy for SKMurphy, Inc. We help technology firms find early customers and early revenue.

Zoom In For Traction, Zoom Out For Impact

Written by Sean Murphy. Posted in 2 Open for Business Stage, 4 Finding your Niche, 5 Scaling Up Stage, skmurphy

Your startup is  a work in progress.  When most entrepreneurs evaluate where they are it’s difficult not to include the promising future they foresee naturally ensuing from current efforts (or on bad days the certain doom no matter what they do). If you are not getting traction, if you don’t have the ability to reliably set and hit goals, then you need to narrow your goals. Zoom in for traction.

Learning From Netflix: Lenny Greenberg’s Response

Written by Sean Murphy. Posted in 5 Scaling Up Stage, skmurphy

Lenny Greenberg, Founder and CTO of Assistyx, e-mailed me a long and thoughtful response to my “Learning from Netflix” post. In fact it was is good that I am publishing it with his permission.

There are a lot of lessons we can learn from this:

  • It was smart for Netflix to look at their streaming and DVD business differently and treat them as to different operating models. Running them operationally as separate businesses was necessary. – Having a separate pricing model for both was inevitable. Bandwidth and streaming content isn’t free. This separate pricing was inevitable. They could have survived the poor roll-out over time; we can all theorize how to best communicate a price hike.
  • It was a huge mistake was to imagine that the splitting of the businesses operationally and from a revenue perspective required two totally separate businesses under different names. A large part of Netflix’s value is their brand; in one stupid move the value of that goodwill plummeted. They were willing to toss aside the goodwill of the Netflix brand very casually. If you have built a great name, leverage it, don’t toss it. Even laundry soap companies know that.
  • No one seemed to care a bit about the customer and their ratings, queues, and ease of use. This was inexcusable. Even companies as backward and clumsy as AT&T have figure out how to give you a single bill.

Assuming that these types of strategic decision require some board approval; one wonders where all the “smart” people were.

As for disrupting their own business, they did that when they introduced streaming and got wide adoption. They were willing to cannibalize their “cash cow” to stay competitive. That was important. Splitting the user experience and rebranding was disruptive, but not in the good way.

My question is, did they resuscitate the Blockbuster brand from near death?

Refine and Curate Your Thoughts as FAQs, Articles, and Talks

Written by Sean Murphy. Posted in 4 Finding your Niche, 5 Scaling Up Stage, Blogging, Consulting Business, Rules of Thumb, skmurphy

Prospects gain an appreciation for your expertise and ability to understand and to solve their problems through what you write, what you say, and what your customers’ say about you. You should have a plan for developing referrals and testimonials, but I want to focus writing and public speaking as opportunities to demonstrate your expertise and give prospects a reason to believe that you can assist them. These outbound messaging strategies will complement your referral program and are essential to attracting new customers and cultivating valuable long-term business relationships.

Here are some suggestions for practices that will help you routinely refine and curate your thoughts.

Written content:

  1. Collect Good Questions & Your Good Answers: When you get a good question from a prospect or a customer take the time to write up a succinct answer in a follow up e-mail (even if you have answered it in a phone call or face to face meeting).
  2. Refine & Generalize Your Good Answers: save your e-mail in a special folder for “good answers” and set aside time every week or month to reviewing and refining it so that it becomes a more general answer that’s applicable to more than just the person you initially answered it for.
  3. Start a FAQ on your website: If you don’t have one it’s worth considering starting a “Frequently Asked Questions” list. If a particular question indicates you have a defect in our standard presentation or marketing materials it’s more appropriate to fix the source of the question instead.
  4. Reformat Your Generalized Good Answers: Convert good answers into articles or blog posts.

Talks

  1. Make the Time to Rehearse: Always leave time to rehearse in front of at least one other person before you give the live talk.
  2. Record Your Talks: Record at least the audio for your talks and listen to both your presentation and any Q&A. Listen to it again a few days later and a month or two later.
  3. Consider Writing an Article: either as a leave behind instead of your slides or as another blog post.
  4. Never Give a Talk Only Once:  Considering the cost in time to develop and rehearse a good talk, you want to find at least three opportunities to give a talk or variations on it.
  5. Videotape A Good Talk In Front Of An Audience: Once you have given a talk two or three times live either do a video recording of it or arrange to have later versions videotaped. You will look and sound much better in front of a live audience with a talk you are comfortable giving and this will come through on the video. Consider editing it into a couple of 5-10 minute chunks if you can to use as teasers,  summaries, or good stand-alone content.

It’s Not Bootstrapped vs. VC

Written by Sean Murphy. Posted in 2 Open for Business Stage, 5 Scaling Up Stage

From Hillel Cooperman‘s  “Bootstrapped vs. VC Funded–Who is Likely to Make the Most Money?

I bet that founders of bootstraps end up earning more money over the long haul out of their businesses than founders of venture-backed firms. The rare IPO may spike the numbers in the other direction, but I’d love to see the reality.

The question is, at a startup’s formation, is it better to focus on VC or revenue as the way to fund the business. That’s the first choice you get to make.

I think the odds favor bootstrapping since something like 1 in 200 firms are funded that seek funding without revenue, while somewhere between ten and thirty percent survive five years.

The next question is: if  you have successfully bootstrapped the firm to a reasonable plateau that’s sustainable, do you spend time seeking outside investment or continue to grow based on revenue. Here there are a number of factors that make it a much more case by case decision:

  • competitive landscape
  • addressable market size
  • use of funds (do you have a reliable model for generating demand)
  • do the founders have the desire to grow the business to be able offer investors an acceptable return

Tom Van Vleck’s “3 Questions” Complement Root Cause Analysis

Written by Sean Murphy. Posted in 2 Open for Business Stage, 5 Scaling Up Stage, Rules of Thumb

Tom Van Vleck has  a great collection of software engineering stories on his site. One particularly good article is “Three Questions For Each Bug That You Find” which offers the following key observation:

The key idea behind these questions is that every bug is a symptom of an underlying process. You have to treat the symptoms, but if all you do is treat symptoms, you’ll continue to see more symptoms forever. You need to find out what process produced the bug and change the process. The underlying process that caused your bug is probably non-random and can be controlled, once you identify what happened and what caused it to happen.

Before you ask the three questions, you need to overcome your natural resistance to looking carefully at the bug. Look at the code and explain what went wrong. Start with the observable facts and work backwards, asking why repeatedly, until you can describe the pattern that underlies the bug. Often, you should do this with a colleague, because explaining what you think happened will force you to confront your assumptions about what the program is up to.

These three questions take you beyond root cause analysis and corrective action for the particular problem.

  1. Is this mistake somewhere else also?
    Look for other places in the code where the same pattern applies. Vary the pattern systematically to look for similar bugs.
  2. What next bug is hidden behind this one?
    Once you figure out how to fix the bug, you need to imagine what will happen once you fix it.
  3. What should I do to prevent bugs like this?
    Ask how you can change your ways to make this kind of bug impossible by definition. By changing methods or tools, it’s often possible to completely eliminate a whole class of failures instead of shooting the bugs down one by one. The bug may be a symptom of communication problems in the programming team, or of conflicting design assumptions which need discussion.

I think this same approach is applicable for debugging not only software development issues but other processes in your business:

  • lead generation
  • selling and closing sales
  • customer engagement and on-boarding
  • customer service
  • systems administration
  • financial operations and cash flow management

Postscript:  Van Vleck’s motto is:  “You learn something every day, unless you’re careful.”

I included it in the July 2008 Quotes for Entrepreneurs because I find most days very educational.

Larry Lang on Managing Incentives

Written by Sean Murphy. Posted in 5 Scaling Up Stage

The recent troubles at Cisco have prompted a lot of commentary on the Cisco alumni e-mail list. One of the more thoughtful analyses was posted by Larry Lang (@llang629), who spent more than a decade at Cisco in a variety of positions. His last was as  VP and General Manager of the Mobile Wireless Group at Cisco, he is currently CEO of Quorum. The following is posted with his permission


I first joined Cisco in 1991, left for a startup, then returned for a second act which ended in 2009. Towards the end, I thought a lot about the changes at Cisco, seeking an objective framework with which to analyze the chaos surrounding the topic.

Fundamentally, a company consists of people, and their aggregate behaviors determine its direction. That behavior inevitably changes as the company matures. During hyper-growth, spending time on internal politics is generally irrational. Why waste time picking pockets when it’s raining money? But as growth slows, the rewards grow sparser, so spending time on internal competition makes more rational sense. At Cisco’s size, how much can any one employee make the stock price go up (assuming they hold enough stock to care)? Instead, they invest more time ensuring the reward-dispensing leadership, up to the CEO, holds them in greater esteem than their peers. You can wish this behavior weren’t true, you can decry it as evil, but objectively it becomes rational strategy for the individual employee.

If you accept this inversion in the “motivational magnetic field,” then the main failing of John Chambers and the senior leadership team is not adjusting their compass to navigate by it. The challenge for a mature company is channeling the energy of internal competition into constructive external activity, which is not easy. Consider the esteem in which GE is held, as one of the few companies that display competence at this management imperative. You can also see why Cisco could postpone this transformation, considering how long the incredible networking market fueled its growth, well past the size where you’d expect it to fade.

Unfortunately, with his inverted compass, John made exactly inverse decisions (IMHO). Rather than using clear accountability and transparency to prevent destructive internal competition, he instituted the collaboration framework, with its infamous Councils and Boards. They created an environment of diluted accountability and undecipherable results, in which destructive internal competition festers out of control.

Can he turn this around? I’m not sure. It requires a very different style, driven by Excel rather than PowerPoint. I doubt I would thrive in it, one reason I voted with my feet.

I look back with nostalgia on earlier Cisco, but I know those times are gone forever, just as I look back with nostalgia on how a younger me used to party. But a forty-something returning to a frat house doesn’t recapture his youth; he just looks out of place and maybe even pathetic. Time to grow up.

I owe Cisco a great deal, not just financially, but also in terms of learning, life experiences, and friendships. I view its current struggles ruefully. Turnarounds on that scale are not easy. I wish them luck.


When Larry e-mailed his approval for me to post his remarks he added this postscript:

I thought about this for a long time, and wanted to offer the framework that helped me reach my decisions.  In the end, it wastes energy to curse the people at a more mature company for being idiots or bureaucrats or heartless or conniving or what have you.  As the economists say, people respond to incentives, the rest is just working out the details (and sometimes, discerning what the incentives really are).

I hope my comments are fair and empathetic.  My tiny CEO job has given me a whole new appreciation for the challenges Chambers has faced and overcome.  He may be struggling to find answers now, perhaps because there just aren’t great answers.  But overall he’s played a heck of a game.

I have written about Cisco in these posts:

New Capabilities We Plan To Develop in 2011

Written by Sean Murphy. Posted in 5 Scaling Up Stage, skmurphy, Tools for Startups

To ensure that conversations and requests for help were productive, Anthony Scampavia kept a question at the top of his whiteboard in his various offices at Cisco for more than a dozen years:

What is the problem you are trying to solve?

Here are three problems we have identified and capabilities we plan to develop this year to manage them:

Problem: Rich audio, video, and other multi-media are clearly emerging as a requirement for effective business communication. We will need to learn and deploy new systems to specify, create, edit, and manage a richer set of content than our current text oriented systems can support. It also means we need to develop a much deeper understanding of how to leverage media for effective business communication.

Solution: We need to develop a complex set of new capabilities, but will attack different aspects with different methods:

  1. Partner for technical creation and editing capabilities. Already active–and delighted–with DreamSimplicity and LectureMaker, we will likely add one or two more partners that have audio and animation capabilities.
  2. Systems for managing both finished audio and video pieces but also building blocks that are reusable assets.
  3. Develop internal expertise in specifying content requirements.

Problem: As a consulting organization we are delivering our value primarily as a direct service, whether it’s scripted or improvisation. This puts a lower bound on what we can charge to help our clients and makes it difficult to impact the many bootstrapping startups who might benefit from our tools and methods.

Solution: Develop knowledge products such as e-books, simulation models, interactive planning tools, and other simple applications to assist startups in customer development and scaling their business. Near term objective is half a dozen e-books that collect content from blog and workshops with checklists and other material to make them useful stand-alone. We continue to evaluate other customer development applications and would be happy to leverage those that are appropriate for B2B markets. Please contact us if you have something you feel we could incorporate into our practice.

Problem: the Bootstrapper Breakfasts® work very well as platform for early stage entrepreneurs to compare notes–to “eat problems for breakfast®” to coin a phrase–on their technology businesses as they wrestle with the challenges of organic growth. The breakfasts’ unconference format allows for anyone to drop in as they need and has fostered a number of business partnerships and co-founder relationships. But they don’t work well to support focused execution and provide ongoing support from a small group of trusted peers.

Solution: offer one or more Mastermind Groups aimed at early stage technology businesses. There are a number of models that work well for CEO’s of larger firms, typically involving one four hour meeting a month with a dozen other members, where each members is the focus once per year. But smaller firms are operating with less structure and in comparatively more dynamic situations. So shorter, more frequent, interactions that leverage a mix of face to face and on-line environments are probably more appropriate for their needs. We will continue to support and expand the Bootstrapper Breakfast program as it’s meeting the needs of very early stage entrepreneurs, but will explore adding Mastermind Groups to complement it.

Please contact us if you have any suggestions or questions on any of this. Details as they unfold.


I mentioned Scampavia’s whiteboard in “Ben Yoskovitz: Start With Passion For Solving a Problem.”

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