Archive for October, 2011

Quotes For Entrepreneurs–October 2011

Written by Sean Murphy. Posted in Quotes, skmurphy

You can follow @skmurphy to get them 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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“Real achievement comes from racing ahead when no one else sees a path–and holding back when the rush isn’t going where you want to go.”
Seth Godin in “Run Your Own Race

More context

If you’re going to count on the competition to bring out your best work, you’ve surrendered control over your most important asset. Real achievement comes from racing ahead when no one else sees a path–and holding back when the rush isn’t going where you want to go.

If you’re dependent on competition then you’re counting on the quality of those that show up to determine how well you’ll do. Worse, you’ve signed up for a career of faux death matches as the only way to do your best work.

Self motivation is and always will be the most important form of motivation.

Seth Godin in “Run Your Own Race

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“My inbox is like a sunken ship filled with gold. Yikes! Need to be better at getting things into my to do list.”
Chris Miller

I like this “sunken ship filled with gold” metaphor.

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“He who stops being better stops being good.”
Oliver Cromwell

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“Every day of our lives we are on the verge of making those slight changes that would make all of the difference.”
Mignon McLaughlin

I originally used this in “Hello 2008” my inaugural post for 2008.

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“Find a Problem so Bad That People Pay You To Solve It and Let You Keep the Software”
Bill Paseman(paraphrased from his LinkedIn profile) see  “Find a Problem So Bad that People Pay You to Solve It and Let You Keep the Software“)

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“In a world of hyper-abundant content, point of view will become the scarcest of resources…”
Paul Saffo “It’s the Context, Stupid

Originally from a March 1994 Wired article “It’s the Context, Stupid“, more context:

“It is not content but context that will matter most a decade or so from now. The scarce resource will not be stuff, but point of view. […]

The future belongs to neither the conduit or content players, but those who control the filtering, searching, and sense-making tools we will rely on to navigate through the expanses of cyberspace. […]

“Point of view” is that quintessentially human solution to information overload, an intuitive process of reducing things to an essential relevant and manageable minimum. Point of view is what successful media have trafficked in for centuries. Books are merely the congealed point of view of their authors, and we buy newspapers for the editorial point of view that shapes their content. We watch particular TV anchors for their point of view, and we take or ignore movie advice from our friends based on their point of view.

In a world of hyperabundant content, point of view will become the scarcest of resources, and we will race to model human points of view within the personalities of our software agents.”
Paul Saffo in “It’s the Context, Stupid

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“True remorse is never just regret over consequence; it is regret over motive.”
Mignon McLaughlin

I used this as my closing quote to “Learning from Netflix

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“Experience comprises illusions lost, rather than wisdom gained.”
Joseph Roux

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“The future isn’t measured by years or technology, but by how it disagrees with the past about what is and what is not important.”
Carlos Bueno “Steampunk, Progress, and You

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“Ideas are easy to come by but reduction to practice is an arduous but inspirationally rewarding matter.”
Buckminster Fuller in “Critical Path

In running this down I came across the “Fuller Map,” a great overview of Fuller’s work.

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“The skill of writing is to create a context in which other people can think.”
Edwin Schlossberg

h/t Jim Flowers (@startwithmoxie)

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“Nothing ventured, something lost.”
Neale Clapp

I mentioned this in “Success for a Bootstrapper

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“Creativity is the sudden cessation of stupidity.”
Edwin Land

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“Entrepreneurs sell because they need to meet a payroll not a quota.”
Sean Murphy

My critique of Rain Today’s “Entrepreneurial Selling” course. I realized the third time that I heard someone mention “make your quota” in the promo videos I realized that this was not the entrepreneurial selling I was familiar with.

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“We experience moments absolutely free from worry. These brief respites are called panic.”
Cullen Hightower

A Professional Always Specializes

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

I watched the Grey Fox recently as was struck by two pieces of dialog.   Richard Farnsworth plays Bill Miner, “the Grey Fox” a train robber and “gentleman bandit.”

When asked by another ex-convict to take up robbing banks instead of robbing trains he answers:

Bill Miner: “A professional always specializes.”

I first heard this line when the movie came out in 1982 and I took it to heart.

Later he decides to leave his sister’s house and start robbing trains again.

Sister: “But I thought things were going so well.  You have work and a place with us. What will you do?

Miner: “I will head down Portland way and so some prospecting.”

Sister: “The Gold Rush is over Bill.”

Miner: “Seems like I missed out on all of the good opportunities.”

Sister: “Please stay.”

Miner: “I have realized something about myself.  I have to act on it. I am just no good at work that’s planned by other heads. I’ve got ambitions in me that just won’t quit.”

This conversation reminded me of several I had with my father. He was independent in his own way, as was his father–and by all accounts his grandfather. He wasn’t against entrepreneurship, but he felt the legal profession would provide more security.

Planning for 2012: We Are Interested In Your Insights and Suggestions

Written by Theresa Shafer. Posted in skmurphy

We are starting our planning process for 2012 even as we scramble to finish everything still on the cooker for 2011.  We have meetings scheduled with our partners to help us assess what we have learned from 2011 and arrive at a working consensus for 2011-13.

I welcome any suggestions for:

  • How to improve this blog and related website.
  • How to improve the Book Club for Business Impact.
  • How to increase the impact of usefulness of the Bootstrapper Breakfasts for bootstrapping entrepreneurs.
  • Other programs, talks, workshops you would like to see us offer.

I am very interested in any insights you care to share about key technologies and business trends likely to impact bootstrapping entrepreneurs in the next year or two. In particular in these areas:

  • New models for global teams and multi-firm collaboration that are predicated on transparent incessant collaboration among experts.
  • Perspective on the impact of communication and pervasive connectivity in creating new business models.
  • Is video the new HTML? Will it be as ubiquitous and interactive as HTML within five to ten years.

If you interested in partnering on a joint project or initiative we are always happy to talk with other serious entrepreneurs.  We do business with teams all over the world.

You can reach us at / 408-252-9676 / or use the contact form

Details as they unfold.

Founder Story: Eric Deal, Cyclic Design

Written by Sean Murphy. Posted in Founder Story

This originally appeared in EETimes on-line as “Eric Deal bounces back from a startup shutdown to establish Cyclic Design” on Dec-20-2010.

I met Eric Deal, president of Cyclic Design, through the IEEE Consulting Network of Silicon Valley and was impressed by his energy and enthusiasm in bouncing back from one failed startup to begin a second one.

The ongoing recession is encouraging a number of engineers to be more entrepreneurial. I think entrepreneurial engineers will find Eric’s answers insightful. His approach to establishing Cyclic Design as a successful IP company had three key components:

  • He built on his two decades of design expertise.
  • He leveraged his knowledge of trends in the solid state drive (SSD) market.
  • He reframed the problems the recession was causing his prospects as an opportunity he could focus on.

What follows is an edited transcript of our interaction with links added for context.

Q: Can you talk a little bit about your background

I graduated from Texas A&M University in 1992 with a BS in Electrical Engineering. Over the past 18 years, I have worked in digital logic design and architecture on a variety of projects at IBM, Conexant, and Sigmatel.

In 2008 I left Sigmatel to found an enterprise SSD startup called Multixtor as the VP of Hardware Engineering. In this role I defined, designed, and verified the hardware architecture for a multi-channel SSD. Unfortunately, we began fundraising about the time the market crashed, so in June 2009 we decided to pursue other options.

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

In the middle of the recession, I didn’t see any interesting opportunities at local companies, so I took the opportunity to start my own business doing consulting. To differentiate myself (and keep myself busy since few companies were hiring contractors/consultants), I took my expertise with error correction and created BCH IP (the algorithm used for NAND flash) that I could license to companies in need of a solution.

When I left Sigmatel, they were left without an ECC expert. I wondered how many other companies would be in a similar position as layoffs and lack of investment in R&D during the recession; when designs started ramping up again as the economy recovered, they would be left with a deficiency in the ECC of their NAND flash controllers.

I also saw the transition in NAND flash correction block size as an opportunity. The companies I had worked for were designing large SOCs, where they typically had designed their NAND controllers as a highly-integrated portion of a larger IO controller. For these companies, buying a new NAND controller was not a good option since it would require discarding their legacy hardware design and software drivers. It seemed that these customers would benefit most from simply integrating ECC IP into their controllers, preserving this investment.

Q: How did you get started?

I started networking with companies in Austin to determine if I could address this disconnect in the NAND market with a service. My goal was to determine if firms would value ECC as a consulting service. If they did, my plan was to offer a faster time to solution by building on a flexible ECC IP platform. I found my first customer at NXP for their SOC applications. I also promoted Cyclic Design online and became a Design & Reuse partner to improve visibility outside of Austin.

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

There were a few bleak periods, but now Cyclic Design is to the point where we have a few customers and a few more on the way, and it’s getting easier to find and close new business. As a small company, we can provide a high level of service to customers and have the ability to customize the IP in order to better fit their needs. Cyclic Design has also expanded IP offerings to support higher ECC levels for MLC flash as well as providing a solution for SLC devices as customers transition from single-bit Hamming codes to BCH algorithms requiring 4-12 bit correction.

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?

As a designer, it is satisfying to see Cyclic Design’s IP used in a wide variety of applications across the market. It is also pretty incredible to think that with easy access to global communications, Cyclic Design is providing solutions for companies all over the world.

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

Probably the biggest surprise is how hard it is to get potential customers from first contact through licensing. Having a solution that meets an engineering need doesn’t necessarily turn into a successful business relationship.

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?

Over time we learned that our initial ideas about customer demand was a little off, but we were able to learn and adapt our offerings. Now we believe we’ve gotten a better understanding of what most of the customers need, and we have a pretty good handle on what product offerings to do next.

Q: Any other remarks or suggestions for entrepreneurs?

You have to find something you love doing; otherwise, it is really hard to make it through the down times with little to no income or when a client changes direction and decides not to use your product or services. Also, before starting a venture, you need to know how long you can afford (financially) to stick with it before moving to something else; in this respect, a good financial adviser is a great asset.

Q: Thank you for your time.

Dave Stubenvoll Guest for “Origin & Evolution of New Business” Oct-26-2011

Written by Sean Murphy. Posted in Books, skmurphy

Our “Book Club For Business Impact” promises actionable insights for entrepreneurs and change agents, drawn from the panelist’s experience and informed by the book’s content.

Dave Stubenvoll, CEO of Wowza Media, joins the discussion of Amar Bhide‘s “Origin and Evolution of New Business” this Wednesday October 26 at Noon PDT.  Click
to attend at no charge.

A co-founder of Wowza Media Systems, Stubenvoll has over 23 years of experience in enterprise and consumer products and services. Prior to Wowza, the fifth new business he has developed, Stubenvoll served as an Entrepreneur in Residence/Senior Director at Adobe Systems and previously managed mergers and acquisitions. Stubenvoll has also held senior management positions at Intuit, and was President of GALT Technologies (an Intuit subsidiary) and was a co-founder and CEO of Freeworks. Stubenvoll, who holds two patents, earned his BS in Mechanical Engineering from Clarkson University, his JD from Boston College and an MBA from the Carnegie Mellon Graduate School of Industrial Administration.

We interviewed Dave Stubenvoll in 2008 where he highlighted the impact of “Origin and Evolution” on his startup planning process:  “Founder Story Dave Stubenvoll of Wowza Media”  What follows is an outline for the discussion, including key excerpts from the book and some prepared questions for Dave.  The audience is free to ask their own questions at any time as well.

Key Take Aways We Expect The Audience to Gain from this Roundtable Discussion

  • Understand How to Probe / Explore
    • Uncertain and Ambiguous Opportunities
    • Emerging Markets
  • By Taking Risks That Are
    • Large Enough to Allow You To Learn
    • Small Enough You Can Afford to Lose

Background:  Key Diagram from book: “Irreducible Uncertainty, Investment, Expected Profitability”
Bhide: Irreducible Uncertainty, Investment, Expected Profitability
Amar Bhide on the “Entrepreneur’s Irreducible Uncertainty”

“Entrepreneurs who undertake uncertain initiatives face a wide spread between desirable and undesirable outcomes, but they cannot quantify the odds they face or even fully anticipate the possible results. The uncertainty is irreducible to the degree it cannot be resolved without undertaking the initiative by prior testing and research.”

Questions for Dave Stubenvoll: How did you assess the risk in starting Wowza Media? What did you do to mitigate it?

Amar Bhide on Niche Markets

“Serving niche markets not only allows entrepreneurs to start a business with limited funds, it also limits the competition they face from well capitalized entities…
Therefore, the bootstrapped entrepreneur in a niche market faces direct competition mainly from other undercapitalized businesses.”

Question:  You entered a market that Adobe already had an established lead in, was there a niche that you focused on? How did you determine where to focus?

Amar Bhide on “High Uncertainty / Low Capital”

“Promising startups cluster in market niches characterized by high uncertainty generated by technological, regulatory, or other such exogenous changes or by the amorphous nature of customer wants…High uncertainty and low capital and opportunity costs create a ‘heads-I-win-tails-I-don’t-lost-much’ proposition for entrepreneurs.”

Question: How did you calculate the opportunity cost of market exploration

Amar Bhide on Ambiguity

“Ambiguity is known to be missing information or not knowing relevant information that could be known.”

Question: When you started what was the “known to be missing information? What key information did you discover that was relevant to making Wowza a success?

Final Questions From Audience

Please join the discussion of Amar Bhide‘s “Origin and Evolution of New Business” this Wednesday October 26 at Noon PDT.  Click to attend at no charge.

Founder Story: Ghislain Kaiser, Docea Power

Written by Sean Murphy. Posted in Founder Story

This interview originally ran Nov-4-2010 at “Docea Power Successfully Bootstraps As a New EDA Player.”

I had a chance to catch up with Ghislain Kaiser, CEO of Docea Power, a promising new startup based in France. Their product, Aceplorer, has been gaining increasing acceptance in the power and thermal management space. Ghislain was kind enough to share how they got started and some of the key things he has learned bootstrapping a new EDA startup. What follows is an edited transcript that I have added hyperlinks to for context.

Q: Can you talk a little bit about your background?

I’m CEO and one of two co-founders of Docea Power. The other founder is Sylvian Kaiser, my brother, who is CTO and R&D director.

I worked for STMicroelectronics as senior system architect on wireless applications and before that as project leader for the set-top box division. I have a Master of Science degree in Electrical and Computer Engineering from Supelec (Ecole Supérieure d’Electricité, France).

Sylvian worked at Infineon then TTPCom, covering multiple aspects of 3G/2.5G modem circuit design like system and algorithm definition, embedded software development and validation on FPGA and silicon. He has a Master of Science degree in Electrical and Computer Engineering from SupTelecom (Ecole Nationale Supérieure des Télécommunications, Paris, France).

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

At ST I was in charge of defining power management strategy at system level for wireless applications like Application Processor engine. I had a second role which was to represent ST at MIPI consortium for system power management topics where I had the chance to work with the best power experts from the major semiconductor and system integrator companies.

Most of the time architects develop complex spreadsheets to estimate power consumption early in the design phase and drive implementation teams with specifications. But this approach is not scalable with the increasing complexity of the SoC and in an environment involving multiple teams over the world.

After visiting many companies and meeting many designers and architects I can say that the Excel spreadsheets represent 90% of the solutions used for power planning.  The spreadsheets are a
quite good solution when the system is not too complex and dynamic analysis is not required.

In 2005 Sylvian and I believed two things:

  1. The spreadsheet approach would be no longer be satisfactory for the next generation of SoC designs.
  2. Temperature issues would become a critical constraint for more and more electronic applications because of:
    • Increasing dependency of the leakage current with the temperature at each new technology node.
    • Increasing integration capability also increases the power density and the pressure on costs of chip packages.

This led us to found Docea Power in 2006. We collaborated with research centers for two years to develop our first product, Aceplorer, which helps architects explore low power/temperature architecture.

Q: How did you get started?

In 2006 we started with $400k by winning the national innovation award organized by the French ministry of research. We also received grants also from European and national Research projects as we are involved in several collaborative projects. We had service revenue as well from customer engagements during our first two years.

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

Aceplorer and our methodology have been adopted and deployed by several major chip and system manufacturers, including ST-Ericsson. At DAC 2010 we announced a common laboratory with CEA-Leti around 3D chip design which raises new challenges like low power / thermal architecture exploration.

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?

First, we bootstrapped Docea for almost 4 years. Our first round of funding was done only this year. It was not an easy exercise to develop a product, get the first customers and drive our solution to industrial maturity

Second, we have managed to raise an investment round in a tough context for EDA start-ups. Fortunately our revenue growth and strong  customer references made it possible.

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

The economical crisis was certainly the most unexpected event for us. Late 2008 corresponded to the launch of our first product Aceplorer but also to the beginning of economy slow down. The situation couldn’t have been worse. Fortunately we were able to get our first customers in 2009.

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 our original plan we didn’t anticipate the emergence of new standards related to power topic. In 2007 a new area of standardization appeared and two new standards started fighting : CPF first, proposed by Cadence, then followed by UPF driven mainly by Synopsys, Mentor Graphics and Magma.

We have modified our original roadmap to include support for both of these standards in our Aceplorer product.

Q: Any other remarks or suggestions for entrepreneurs?

Three things I have learned in the last four years:

  • Cash flow is key when you are bootstrapping: understand where  you are spending money, what commitments you have made on your  cash, and when you are likely to see revenue.
  • People make the difference, not the technology.
  • Be more than a vendor, be a partner to your customers: you must collaborate with your customers, not just sell to them.

Q: Thanks for your time.

Business Model Representations

Written by Sean Murphy. Posted in Customer Development

In a blog post last October entitled “Entrepreneurship as a Science – The Business Model/Customer Development Stack” Steve Blank suggested

Alexander Osterwalder and Yves Pigneur defined a business model as how an organization creates, delivers, and captures value. More importantly they showed how any company’s business model could be defined in 9 boxes. It’s an amazing and powerful tool.  It instantly creates a shared visual language while defining a business.  Their book “Business Model Generation,” is the definitive text on the subject.

Currently there are a number of templates and tools that help teams build a business model canvas:

Osterwalder’s formulation reminds me of Newton’s dot notation for calculus (fluxions or derivatives). It points out the need for a formal notation but it’s too cumbersome and not usefully extensible. I don’t question the need for meaningful and portable representations of business models, and the canvas may be the best thing we have today, but I think it will represent an evolutionary dead end.

It seems like much of the push for it comes from folks who look at many business models (e.g Angels,incubators, and VCs) and want them to be easily comparable, not from entrepreneurs who want to be able to track what they need to validate next and the evolution of their thinking and hypothesis set over time.

For me the approaches suggested below seem more promising, at least through the Find Your Niche stage.

Our approach for bootstrapping entrepreneurs who target businesses includes:

Update Oct 24: Rob Fitz has blogged that he is “Phasing out Canvas and Dashboard Tools.

What Happens When The “Come As You Are Party” is Over

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, skmurphy

“Nobody makes a video game about the quartermaster division, but armies win and lose on logistics and supply, and politics and diplomacy, and the work people do on the homefront.”
Mike O’Malley in “History-ness and Video Games

Idea/FormationThe first stage of a bootstrapped startup is a “come as you are” party. The founders are living off of their savings and are driven by passion. They are developing a product or service offering and if they are prudent they are working simultaneously to understand who their customer will be.
Open for Business

But at some point you have to see revenue and start to map a path to profitability. You have to stop relying on spouses,  significant others, or relatives to pay the electric bill and put food on the table and offer them a plan to meet the opportunity cost of your involvement.

You have to put a price on your services or your product and start selling.

The party ends when you are “open for business.”

In “Finding a Co-Founder: 3 Months is a Long Time” I suggest that you need to get to revenue within three months or risk losing your team.

Expiration Dates

Written by Sean Murphy. Posted in Rules of Thumb

“Deadlines and commitments,
What to leave in, what to leave out.”
Bob Seger “Against the Wind”

I was thinking about the deadlines and commitments bootstrappers need to meet (perhaps without realizing it the first few times) if they want to  meet their cash flow objectives. Here are some examples I came up with:

Commitments to Prospects or Customers
Commitments you make (or negotiate) with a prospect or customer come with a date if they are meaningful. Trust evaporates rapidly if that date is missed unless expectations are re-negotiated well in advance.

Trade Shows and Industry Events
New products may not arrive on schedule but trade shows and industry events do. Work backward from the date to determine what functionality you can demo.

Speaking Events
Budget your time so that you can solicit feedback on early versions and your delivery from many people with relevant insights. Winging it rarely generates leads or future speaking opportunities.

Demo In Someone’s office
After five or six minutes without a meaningful payoff in our demo many prospects’ interest has expired.

Demo in a Trade Show Booth
If you cannot explain what you do in 30 seconds and show them something relevant in another minute a booth a visitor is likely to leave.

If you cannot give them a reason to call you back in 30-45 seconds a longer message probably don’t help. Don’t repeat your phone number, say it slowly and distinctly once.

As an entrepreneur you are not selling to make quota but to make payroll, but the deadline is just as clear.

Market Windows / Selling Windows
If you are introducing tax preparation software it needs to be ready well in advance of the filing due date. If you are selling project management software and the prospect’s new project is already well underway you will  have to wait for the next one. Understand what events will trigger the need for your product and the time windows  a customer has to work within to complete the change process to incorporate your offering into their workflow.

A note on demos: You need to be able to get through a basic demo–one that substantiates a compelling capability that would allow them to address a critical goal or need–in less than five minutes. Peter Cohan’s “Great Demo” book is well worth your time in learning how to do this. This is true for any product that you are selling to busy people (e.g. almost anyone who manages a budget). They may give you more than five minutes once they see the first capability that you demonstrate, but show the capability most likely to resonate with their situation first.

See also:Experiments vs. Commitments

Tips for B2B Customer Development Interviews

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

Office Hours: MVP Readiness ReviewThis post on customer development interviews is one of my most popular. If you would like help preparing for customer development interviews or reviewing results from recent interviews please sign up for a no cost no obligation office hours session and I will be happy to help you rehearse or de-brief. Here are my lessons learned from taking part in interviews where the startup planned to offer a product or service to a business.

Purpose, Patience, Politeness, and Prudent Risk Taking

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

A bootstrapper needs four attributes to succeed: purpose, patience, politeness, and prudent risk taking. These are markers for strength not weakness.

Four Strengths: Purpose, Patience, Politeness, and Prudent Risk Taking

  • Purpose: a sense of purpose that springs from a desire to solve a problem or meet a need for a target set of customers. It’s been my experience that purposeful founders do not fail, they adjust their plans to reflect the current environment they find themselves in.
  • Patience: is always a requirement for success.  Many entrepreneurs are unhappy with one or more aspects of the status quo, but to convince people to change and adopt a new solution always requires patience.
  • Politeness costs you nothing and allows you to foster goodwill in situations where a way forward might not otherwise be available.
  • Prudent Risk Taking:  mastering the calculation of affordable losses, only committing resources (time, money, social capital) whose loss you can recover from to learn more about the market or how to improve your business allows a team to master both the market and business operations.

“Logical consequences are the scarecrows of fools and the beacons of wise men.”
Thomas H. Huxley

Two Key Risks: Pride and Perfectionism

  • Pride: you need confidence but if you are too proud to acknowledge your mistakes to co-founders, customers, and partners you won’t learn as fast as your competition.
  • Perfectionism:  high standards are important, especially in the personal value and ethics of the founders.  But an unwillingness to deviate from your view of the ideal product or ideal customer can blind you to real opportunities.  Early customers don’t expect perfect products from a startup, but they do expect them to continually improve. Perfectionism can also trap you in the BatCave, continually improving your product in response to imaginary conversations (typically imaginary criticism) with prospects instead of testing your vision by asking for real feedback on your understanding of the problem and the product concept.

“A windmill is eternally at work to accomplish one end, although it shifts with every variation of the weather cock, and assumes 10 different positions in a day.”
Charles Caleb Colton

I used the Huxley quote in “Julian Fellowes on Persistence, Getting Started, and Logical Consequences“which also touches on these same issues.

This was written as a rebuttal to Marc Cenedella’s repellent blog posPolite, Purposeful People Create Startups That Fail related




Malcolm Gladwell Suggests Appreciative Inquiry Into Inner-City Schools

Written by Sean Murphy. Posted in Customer Development, skmurphy

From a Time Magazine December 2009 interview with Malcolm Gladwell

I’ve always been fascinated by the idea that in inner-city schools, the thing they do best is sports. They do really, really well in sports. It’s not correct to say these schools are dysfunctional; they’re highly functional in certain areas. So I’ve always wondered about using the principles of sports in the classroom. Go same sex; do everything in teams; have teams compete with each other. I’d like to try that. I don’t know whether it will work, but it’s certainly worth a shot, and we could learn something really useful.

I have written about Appreciative Inquiry and Amplify Positive Deviance as useful models for entrepreneurs  in analyzing both their own experiences and expertise and their customers’ needs and capabilities. I really like that Gladwell suggests starting with the demonstrated strengths of an inner-city school to foster improvements.

Seth Godin offers a critique of most schools in “Back to (the wrong) School

If you do a job where someone tells you exactly what to do, they will find someone cheaper than you to do it. And yet our schools are churning out kids who are stuck looking for jobs where the boss tells them exactly what to do.

Do you see the disconnect here? Every year, we churn out millions of of workers who are trained to do 1925 labor.

As we get ready for the 93rd year of universal public education, here’s the question every parent and taxpayer needs to wrestle with: Are we going to applaud, push or even permit our schools (including most of the private ones) to continue the safe but ultimately doomed strategy of churning out predictable, testable and mediocre factory-workers?

The post-industrial revolution is here. Do you care enough to teach your kids to take advantage of it?

What’s interesting to me is that Gladwell’s prescription would also address Godin’s concerns. Athletic teams are coached for individual and collective improvisation. Winning teams are creative and collaborative.

Several take-aways for entrepreneurs:

  • Your prospects want to understand how your product will help them outperform their competition.  This requires more than explaining to them it works.
  • If you wait for customers to tell you what to implement you will lose to other firms that ask questions that enable them to appreciate not only current weaknesses but also the strengths that they can build on.
  • It’s also important to fully appreciate why your customers call your baby ugly when you ask for feedback on your new product.

Appreciative Inquiry Mind Set Essential to Customer Discovery

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

Appreciative Inquiry is a mind set that is essential in customer discovery. It encourages you to look for what’s working in an potential customer’s organization and “work with the grain of the wood.” It enables you to build on demonstrated strengths and accomplishments in framing your solution to a critical business problem.

Customer Development Conversations With Busy Prospects

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

Question from an entrepreneur in the midst of customer discovery for a new product.
Q: We are preparing to launch our first product in a few months. Next week there is a conference sponsored by a professional society that represents one of our potential target markets.  We have already done about a dozen customer discovery interviews that lasted a half an hour to an hour, but at the conference it’s unlikely we will be able speak to attendees for more than a few minutes during breaks.  How should we take advantage of this opportunity to talk to prospects?

Attending the conference is a great idea.  Not only will you have a chance to meet potential customers but the sessions and the hallway conversations will also provide insights into the challenges and issues your prospects are concerned about.

But it’s not much of an opportunity to have a long customer discovery interview. Think about starting conversations that will develop into relationships.

You have 30 to 60 seconds to explain the problem you are trying to solve and see if it’s important to them.  If it is  ask if you can call them for a few minutes and exchange business cards to setup a time that’s convenient at a later date. Be succinct–rehearsal is key–and you will embody your promise not to waste their time.

If you want a piece of collateral fit your message on a 3×5 card: pain question, two or three sentences and contact info for more info. This form factor can be handed out in casual conversation without feeling awkward (compared to a sheet of paper or even a half-sheet).  It’s size will encourage you to consider how little time you have to get to the point. And it will be a good reminder for how little most folks will actually remember from the conversation.

Take care to become  a member in good standing of this professional community. Think longer term and win-win. Consider ways that you can sponsor and contribute to the event (even just by volunteering your time) so that you demonstrate your commitment to the group and the professional community’s goals.

Some related blog posts

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?

It’s the Picture on the Box that Sells the LEGO Set

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

A common  complaint an entrepreneur voices when they first try to explain why a prospect should pay for their product:

“It’s difficult expressing the value proposition in just a few words because there are so many different ways to use it.”
Many an entrepreneur with a new product

Here are some things to try to help focus on an initial value proposition:

  • Offer a few examples that are extremely specific.
  • Identify the most compelling value propositions. Even if they only appeal to a very narrow population, the more important thing is that they bring a lot of improvement to their current situation.
  • Be careful when you can envision many many possibilities as most may come with “some assembly required.”
  • Think about offering a new Perl compiler and saying “you can do anything you want with it.” Apple may have suggested that they were offering “a bicycle for the mind” but it was the specific promise of desktop publishing that triggered their compelling value proposition.
  • If you have paying customers look at what they have done with it. Specifically. What benefits have they gained?

Selling to a Business Requires Conversations that Build Trust

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

I am always interested in having a conversation with a prospect. If you are hoping to infer needs from seeing them press a menu button with an icon or one or two words on it I think that’s a poor substitute for a conversation. I know that people cannot always predict what they need or will use but this “rat psychology” approach (see what parts of the command maze a user explores looking for working functionality) strikes me as trust eroding. It’s a reflection of a deeper belief that your customers will have no memory of prior interactions with you where you showed them something that looked functional but was not actually functional. When they discover it was designed to do just that, look functional but not be functional, it may make them question anything you tell them.

I worry that sampling techniques that work when you are talking to a tiny fraction of a large potential customer base (e.g. someone who wants a calculator tool or a reminder service) are counter productive when you are attacking a smaller market (say 1,000 to 10,000 possible companies that might buy) and disastrous when there are only a few hundred possible customers (e.g. semiconductor manufacturers, pharmaceutical research labs, Fortune 500 IT departments that buy outsourced IT services,…).

I think the thing that excites many developers about some of these impersonal/automated techniques is the belief that they can write code and sell applications without ever having to have a conversation with a customer. If you look at established consumer products companies, folks like Proctor and Gamble for example, they spend a lot of time in structured conversations with prospects and customers.

When I play a computer game I can restart many times, I can try a variety of moves to explore and understand a situation. When I start over the Non-Player Characters in the game do not remember what I told them last time. But in real life I need to exercise much greater care. Everyone I meet in a market niche knows and will talk to other prospects– especially if I treat them poorly or act as if I don’t value their time.

I think tools that allow you to generate a dozen different home pages (because you cannot figure out which market segment to start in) may ultimately mark a team as fundamentally unserious in a  B2B space.  I wonder in a few years if anyone is going to put a real e-mail address into a one page website that has no identifiable people and no physical address mentioned. It’s a little bit like the small ads in the back of a magazine that only list a PO Box and no phone number, you are not really sure if they are real and therefore worth any of your time.

Learning From Netflix’s 2011 Pricing Strategy Mistakes

Written by Sean Murphy. Posted in skmurphy

“Never mistake a clear view for a short distance.”
Paul Saffo

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”
Roy Amara

Netflix increased prices by 60% for streaming media and DVD combinations and threatened to split their website into two halves–DVD and streaming, with separate queues and billing.

There have been several major pricing strategy mistakes:

  • Arbitrary price increase of 60%
  • Poor communication from the top
    • “apologize again to those members, both current and former, who felt we treated them thoughtlessly.” –Reed Hastings in “Explanations and Some Reflections” (emphasis added)
  • Demonstrated lack of concern for customer experience: most customers want both DVD and streaming, two queues vastly complicates this experience and encourages them to split their purchases with other services.

But I think the core mistake Netflix made was believing that they saw clearly how the future was going to unfold and not taking the time to explain their plans and perspective to the customers. They didn’t want to wait.  People may not tell you when they stop trusting you but in Netflix’s case a million subscribers have voted with their feet in the last few months.

“For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming.”
Reed Hastings in “Explanations and Some Reflections

This is not a “PR mistake.” A PR mistake is when you offer a poor explanation for a good decision. This was a business mistake:  they did not have the patience to engage in an ongoing conversation with customers about their needs and to share the internal understanding of the trends that were impacting Netflix’s business.

I think Jeff Nolan was prescient in his September 19 analysis of the price increase and service split at a time when many were praising Hasting’s willingness to disrupt his own business.

Netflix has in one act reaffirmed the pricing strategy that has cost them up to a million subscribers and split the brand into two entities, the unknown of the two being core business. Color me skeptical.
Jeff Nolan “When Smart People Double Down on #FAIL

See also Lenny Greenberg’s well thought out response. As I re-read Hasting’s blog posts I was reminded of Mignon McLaughlin’s perspective on apologies:

True remorse is never just regret over consequence; it is regret over motive.
Mignon McLaughlin

Update Nov-30-2011Netflix is broken with no fix in sight

“It is clear that a price increase was necessary, and equally clear in hindsight that a 60 percent increase on the hybrid customer was too much,” Pachter wrote to investors. “While we think that the company would have seen some customer defections and trade-downs at any price point, it is clear to us that the defections and trade-downs would have been less dramatic had the price increases been smaller.”

Last month, Netflix reported that it lost 810,000 subscribers in the third quarter and said that it expects to post a global net loss next year. Those losses and a rise in content costs have affected Netflix’s cash coffers so dramatically that the company was forced to raise $400 million earlier this month by way of a stock sale and private placement of convertible notes.

Update Feb- 22-2012: “Seeing Red

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