SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

It’s Time to Tax the Robots, Not the People

Posted by Bob Warfield on May 20, 2015

I read a fascinating piece on the economic impact self-driving cars and trucks will have and it’s not a pretty sight.  A quick glance at this map showing the most common job in each state makes it clear:

JobsByState

The most common job in each state in 2014…

You don’t have to study the map very long to conclude automating truck driving away as a way of life is going to have a profound effect on our economy.  When you consider that truck drivers make an average of $40,000 a year, which is more than almost half of all tax payers, and you add in all the jobs related to the truck driving industry, it may be one of the biggest impacts we see in our lifetimes.

Can this really happen?  When will it happen?

The article goes on to show that the world’s first driverless truck has already hit the road in Nevada, and was built by Mercedes Benz.  They present estimates from a variety of sources that suggest somewhere between 2020 and 2030 completely autonomous trucks will begin to take over by storm.  Google has demonstrated self-driving vehicles and Teslas have the capability already built in to cars already on the road.

All of the proponents of driverless vehicles are loudly trumpeting that the vehicles are safer, cheaper, and more fuel efficient.  But what they’re not considering is the impact on the economy.  What will all the truck drivers that lose their jobs do to earn a living?  Who will benefit?

As it stands, large organizations that can afford to buy driverless vehicles will be the beneficiaries and nobody has a plan for what will happen to the truck drivers.

This looks like the third tranche of job-destroying disruption.  The other two–the destruction of Retail jobs first by firms like Walmart and later by the Internet, and the Offshoring and Automation of Manufacturing jobs, are well underway.  The economy is still limping in the wake of the Great Recession, and it’s tough to say we’re out of the woods except for the most dyed in the wool political supporters who want to claim victory for their side.  Meanwhile, Main Street America is braced and wondering what the next big shock to the Middle Class will be.

The article argues its time to get some sort of Basic Income plan in place to provide a Safety Net.  Safety Nets are fine, but I want to know how the Middle Class can do better than a Safety Net.  A vibrant Middle Class does not sit at home waiting for its next Government Safety Net check to do something.  A vibrant Middle Class has hopes, dreams, and upward mobility. Those are all things a Safety Net can’t cover–only Opportunity can provide hope or fulfill dreams.

It’s time to start Taxing the Robots, Not the People.

If the Robots are going to take over more and more of the economy to the detriment of the People and the benefit of those few who can own thousands of Robots, why not tax the Robots?  In fact, why not look at any practice that wholesale destroys lots of jobs as being worthy of taxes to pay for programs to help those who’ve been displaced?

If we look at it that way, there are several areas to think about applying progressive taxes:

–  Taxes on automation and robots

–  Taxes on offshoring jobs

–  Taxes on monopolies that take over markets and then use their unfair influence to gut jobs by destroying all competition

These taxes will automatically be progressive.  They will help balance the playing field so that progress can still come, but there are costs that result in funds to help those displaced by progress.  We don’t want to eliminate the progress, we just want to even out some of the unfairness that comes when we let progress run completely roughshod.

So far, we’ve done very much the opposite, which is part of our problem.  Our system makes hiring more expensive not less.  However good its intentions, Obamacare is a net job reducer because businesses have to pay for it based on how many employees they have.  What if instead they paid based on how many robots, or on how many jobs they had offshored?

There’s been such a massive transfer of wealth that clearly there is money to pay for such programs.  Much more than enough.  While we’re at it, we should be exempting smaller businesses from such programs.  It’s been well proven that Small Businesses are the engines of job creation and growth.  As a nation, we’re sold on the idea of more and more progressive taxes for people, but we have left off progressive taxes for businesses.

We have a tax system that allows 43% of Americans to pay no Federal Income Tax.  Why not a system that allows the smallest 43% of businesses to pay no taxes?  That would dramatically level the playing field and re-ignite Small Business growth.

So, in a nutshell, what we could do to offset a continuing economic disaster for the Middle Class would be:

1.  Tax Robots, Offshoring, and Monopolies so that organizations involved with these practices have the highest tax rates

2.  Radically lower taxes for Small Business.  Some meaningful fraction of them shouldn’t have to pay taxes at all.  Perhaps not 43%, but certainly the 20% or so smallest business.  Make up that lost revenue by increased taxes on larger businesses.

3.  Make #1 and #2 net positive tax revenue generators to allow for new programs.

4.  Put a solid Safety Net in place.

5.  Stimulate the Small Business economy with what’s left.  In addition to Radically Lower Small Business Taxes, we should increase the availability of Small Business Loans and we should make Education cheaper.  The latter will make it easier for those whose jobs were automated away to retrain as well as ensuring an increasing pool of talented labor.

The biggest obstacle in all this thinking is that currently, the people calling the shots in terms of lobbying and poltiical contributions are precisely the ones we propose to have pay for these new programs with new taxes.

How will we ever break out of that cycle?

Posted in saas | 2 Comments »

Oh Dear, the Green Pundits Don’t Understand the Cloud or Multitenancy

Posted by Bob Warfield on January 16, 2015

forestRecently I was drawn into a discussion of how Green the Cloud is where I responded as follows:

SaaS is going to come out ahead of any reasonably calculation of carbon emissions versus on-prem. Multi-tenancy is just a lot more efficient. Look at the data centers of companies like Google, Amazon, and Facebook. Most corporates wish they could come close as they watch these companies dictate every detail right down to the exact design of servers in order to minimize their costs. As everyone agrees, most of that cost is energy.

So choose SaaS if you’re worried about carbon, and yes, it could become another axis of competition in terms of exactly which Cloud provider does it best.

Tom Raftery immediately responded:

The answer is that it depends, tbh. It depends entirely on the carbon intensity of the data centre (where it sources its energy), not the efficiency of the data centre.

If you have a data centre with a PUE of 1.2, and it is 50% coal powered (not atypical in North America, Germany, Poland, and others, for example), it will have a higher CO2 footprint than a data centre with a PUE of 3.0 powered primarily by renewables – again I have run the numbers on this and published them.

Similarly with on-prem. If I have an app that I’m running in-house, and I’m based in a country like Spain, France, Denmark, or any other country with where the electricity has a low carbon intensity; then moving to the cloud would likely increase the CO2 footprint of my application. Especially if the cloud provider is based in the US which has 45% of its electricity generated from coal.

Tom is the chief analyst for Greenmonk, which writes about this sort of thing for a living.  He’s been quoted by others who are in the same camp such as Brian Proffitt on ReadWriteWeb.  And who wouldn’t love a nice juicy story to put those darned Cloud vendors in their place?  Those guys have been riding high for too long and ought to be brought down a notch or two, harrumph.

I have a lot of problems with this kind of math–it just doesn’t tell the whole story.

First, I can’t imagine why Tom wants to be on record as saying that PUE (Power Usage Efficiency) just doesn’t matter.  Sure, he has found some examples where CO2 footprint overwhelmed PUE, but to say the answer depends entirely (his word) on the sources of the data center’s energy and not on the efficiency of the data center just seems silly to me.  Are there no data centers anywhere in the world at all where PUE matters?  Did all the Cloud data centers with great PUE just magically get situated where the carbon footprints are lousy enough that PUE can’t matter?

I’m very skeptical that could be the case.  You must consider both PUE and CO2 per Kilowatt Hour, how could we not when we’re talking per Kilowatt hour and PUE determines how many Kilowatts are required?

Here’s another one to think about.  If this whole PUE/CO2 thing matters enough to affect the economics of a Cloud Vendor, we should expect them to build data centers in regions with better CO2 energy.  Since they put up new data centers constantly, that’s not going to take them very long at all.  Some are talking about adding solar to existing facilities as well.  Now, do we want to lay odds that corporate data centers are going to be rebuilt and applications transferred as quickly for the same reasons?  If you’re running corporate IT and you have a choice of selecting a Cloud Data Center with better numbers or building out a new data center yourself, which one will get you the results faster?  And remember, once we are comparing Apples to Apples on CO2, those Cloud vendors’ unnaturally low PUE’s are going to start to haunt you even more as they run with fewer Kilowatt Hours.

Multitenancy Trumps all this PUE and CO2 Talk

But there’s a bigger problem here in that all data centers are not equal in another much more important way than either PUE or fuel source CO2 footprints.  That problem is multitenancy.  In fact, what we really want to know is CO2 emissions per seat served–that’s the solution everyone is buying.  Data centers get built in order to deliver seats of some application or another, they’re a means to an end, and delivering seats is that end.  The capacity they need to have, the number and type of servers, and hence the ultimate kilowatts consumed and carbon footprint produced is a function of seats.  Anyone looking purely at data centers and not seats served is not seeing the whole picture.  After all, if I run a corporation that has a datacenter, it’s fair to charge the carbon from that datacenter against my corporation.  But if I am subscribing to some number of seats of some Cloud application, I should only be charged the carbon footprint needed to deliver just those seats.  Why would I pay the carbon footprint needed to deliver seats to unrelated organizations?  I wouldn’t.

Corporate data centers have been doing better over time with virtualization at being more efficient.  They get a lot more seats onto a server than they used to.  The days of having a separate collection of hardware for each app are gone except for the very most intensive apps.  But that efficiency pales in comparison to true multitenancy.  If you wonder why, read my signature article about it.  I’ll run it down quickly here too.

Consider using virtual machines to run 10 apps.  Through the magic of the VM, we can install 10 copies of the OS, 10 copies of the Database Server, and 10 copies of the app.  Voila, we can run it all on one machine instead of 10.  That’s pretty cool!  Now what does Multitenancy do that the VM’s have to compete with?  Let’s try an example where we’re trying to host the same software for 10 companies using VM’s.  We do as mentioned and install the 10 copies of each kind of software and now we can host 10 tenants.  But, with multitenancy, we install 1 copy of the OS, 1 copy of the Database, and 1 copy of the app.  Then we run all 10 users in the same app.  In fact, with the savings we get from not having to run all the VM’s, we can actually hose more like 1000 tenants versus 10.

But it gets better.  With the Virtual Machine solution, we will need to make sure each VM has enough resources to support the peak usage loads that will be encountered.  There’s not really a great way to “flex” our usage.  With Multitenancy, we need to have a machine that supports the peak loads of the tenants at any moment in time on the system.  We can chose to bring capacity on and off line at will, and in fact, that’s our business.  For a given and very large number of seats, larger than most any single corporate application for most corporations, would we rather bet the corporation can be more efficient with on-prem software in its wholly owned data center or that the SaaS vendor will pull off far greater efficiency given that its software is purpose-built to do so?  My bet is on the SaaS vendor, and not by a little, but by a lot.  The SaaS vendor will beat the corporate by a minimum of 10-20x and more likely 100x on this metric.  You only have to look to the financials of a SaaS company to see this.  Their cost to deliver service is a very small part of their overall expenses yet most SaaS apps represent a considerable savings over the cost of On-Prem even though they carry the cost of delivering the service which the On-Prem vendor does not.

Conclusion

Raftery says, “energy use” and “emissions produced” have been conflated to mean the same thing.  I say he’s absolutely right about that but hasn’t seen the bigger picture that it is not energy use nor emissions produced in isolation, it’s seats delivered per emissions produced.  Itt’s having the flexibility to make a difference rapidly.  And that is why we bet on the Cloud when it comes to being Green.

Posted in cloud, data center, enterprise software, saas, strategy | 1 Comment »

What Can a Poor Dumb Engineer Do That Most Marketers Can’t?

Posted by Bob Warfield on January 12, 2015

This is a tale of bootstrapping and bucking the conventional wisdom.  This is a tale of applying an Engineer’s overly top down facts sifted through logic lens to what is traditionally a touchy feely shoot from the gut discipline.  This is the story of how my little one man bootstrapped SaaS company competes with giants in marketing, even though I am but a poor dumb engineer.  And yes, the title is pure link bait.  Many marketers can do and do-do (uncomfortable with that) this sort of thing.

My company is called “CNCCookbook.”  We are a niche SaaS software company focused on CNC (Computer Controlled) Manufacturing.  Both the CNC and SaaS within the CNC world are very much niche plays.  Public companies in manufacturing software are few and far between, and most VC’s wouldn’t touch it with a ten foot pole.  To paraphrase a more colorful turn of phrase, they wouldn’t invest in it with YOUR money, let alone their own.  Most of the software here is not SaaS–it arrives on a bunch of CD’s and is after much installing, dongling, and license keying, you’re left with a vintage 90’s User Experience.  I love this niche because what I know from working in more progressive markets gives me an edge that I bring to Manufacturing software.  I love it also because it is my hobby–yes, Virginia, I use CNC machines to make things for fun.

I’ve been at it in this marketplace for a while now.  I grew the business to the point where it pays me as much as I have made at any Silicon Valley Startup except those where stock options mattered.  I should know, CNCCookbook is my 8th trip unto the breach, dear friends.  Now what’s all this about competing with giants in marketing?

Let’s start by looking at how CNCCookbook is marketing.  I came across this great infographic from Marketing Tech Blog that shows the conversion rates of various B2B marketing techniques:

B2BMarketingChannels

B2B Sales Channels via Marketing Tech Blog

Strictly speaking, CNCCookbook is both B2B and B2C since the hobby CNC market are decidedly “C’s” while the business CNC market are “B’s.”  No matter.  The takeaway from the article is that a lot of the marketing world is a bit surprised at how some of the tried and true techniques are not working so well any more.  If we look at what CNCCookbook does from this list, we have tried Webinars and Paid Search and found both to be unprofitable and ineffective.  Today, we’re totally focused on our Website/Content Marketing and Facebook/Twitter.  You could call it luck that we wound up on two of the highest converting channels, but we did test an awful lot of different possibilities and I have had the luxury of seeing how things worked for other companies.  The latter meant that I was unlikely to try event marketing, trade shows, partners, or sales cold calling (it’s just me in this company, I don’t have time to cold call), for example.

The Facebook and Twitter work is almost 100% automated–I simply co-announce any new blog posts to those channels automatically with a WordPress plugin and I make sure any non-blog content I publish is also announced in a blog post.  Simple, and effective.  I monitor these and many other channels for opportunities to engage with my customers, but the rest is automated.

What do I spend most of my marketing time doing?

The answer is writing articles for the blog and web site.  I alternate between blog posts and what I call “Cookbooks.”  Cookbooks are in-depth go-to resources that consist of many articles.  I try to introduce a new Cookbook every year and we’re up to 5 of them at this stage. They’re solid traffic producers and what the marketers like to call “Evergreen Content.”  Good reference content seldom goes out of style and accretes links very well.

And how much time is spent on marketing?  My days and weeks divide roughly into 20-40% marketing with the rest focused on software development.  Since I believe Good Customer Service is critical to marketing, I charge my Customer Service time to Marketing as well.  FWIW, I work 7 days a week and often a fair number of hours, but the business is such that I can do the work almost anywhere–from a Cruise Ship Cabin or a leased Condo on an Exotic Caribbean Island (both are real examples).  As long as I have a decent but not spectacular Internet connection, I get by.

That’s a bit about how it’s done, now what’s been accomplished?  What can one poor dumb software engineer working part-time (20-40% time) accomplish by way of marketing?

There are a lot of ways to look at it.  Ideally, one should look at leads, but it’s hard to find out how many leads the other organizations you want to benchmark against are getting.  As a reasonable proxy, I like to use SEO Traffic.  Who doesn’t love free (heh, we won’t count all those hours writing content!) over the transom leads that come from searchers finding your opportunity for the first time via Google or some other search engine?

To do this comparison, I like to use SEMRush.  It’s been a valuable tool for me in a lot of ways (keyword research, understanding pay per click which I ultimately have given up on, etc.).  You can get quite a lot from it for free even.  Here are a set of comparative SEO stats drawn from SEMRush that compare CNCCookbook’s traffic to others in our industry:

SEOIndustry

CNCCookbook vs Industry Comps for SEO Traffic…

Pardon the length of the list, but I do this for my own analysis purposes and didn’t want a cherry-picked list.  These are real companies that are big names or names of interest to me in the CNC Manufacturing world.  Some will be familiar like Autodesk, but most are probably unknowns unless you happen to be familiar with this market.  We can pick out some highlights though:

–  Makezine and Hackaday reflect the popularity of the Maker Movement, and so I wanted them here to gauge my impact on that world.

–  Practical Machinist and CNCZone are the two biggest online communities in the space, so were obviously of interest.  Amazing to see CNCCookbook is doing better than CNCZone as it is quite a big community.

–  Haas Automation is the world’s largest maker of CNC Machines and has in excess of $900 million a year in revenue.

–  IMTS is the industry’s largest trade show and an online magazine as is mmsonline.

–  Kennametal, which ranks immediately below CNCCookbook is a $3 Billion a year company that makes cutters and other tooling for CNC.  Iscar is a tooling company that Warren Buffet paid $2 Billion for not that long ago, and I can assure you that tooling companies don’t have zillion to one valuation ratios nor would Warren Buffet buy one if it did.

The point is there are a lot of solid businesses on the list.  Many are quite large and no doubt have large marketing staffs and budgets.  Yet CNCCookbook has been able to make its mark by joining their ranks, at least in terms of search engine traffic.  What a triumph for content marketing–if ever there was a reason to believe in it, seeing a guy work part time to deliver these kind of results ought to be it.

Here’s another list, this time with names that will be more familiar to Smoothspan Blog readers:

TechComps2

Startups, Tech Marketing, and other Tech Related Comps…

These are startups, tech marketing companies, software companies, and other tech related startups I wanted to compare to.  A lot of these are talked about a lot.  A lot of them are in the business of telling others how to do marketing (sometimes I wonder if I should be in that business too, lol).  Considering the amount of resources available to these companies and the fact that as many of them are marketing companies selling to marketers who therefore should know a lot about how to do this, I feel good about how CNC Cookbook ranks alongside.

What Should We Conclude From This?

There’s only one takeaway I would encourage you to have: engineers with limited resources can successfully market their bootstrapped companies.  There are broader ramifications perhaps for broader markets and audiences, but I’ll let others decide whether they want to jump to those conclusions.  I know what I did for my market and what results that produced and I’m very happy with them.  We live in a time when this sort of thing is much more achievable than it once was because the Internet is so much more ubiquitous.  For those who want to follow a similar path I would urge you to choose your market carefully and find one where content marketing (also called inbound marketing) can be extremely effective.  You don’t need to be the world’s great graphic designer (I am so not that!), but you need to be a good writer, you need to have passion for your subject matter, and you need a market whose audience never gets enough content to satisfy their thirst for more knowledge.  If you can put all that together, it’s hard to see how you wouldn’t build a following.

Posted in bootstrapping, business, Marketing, strategy | 1 Comment »

Yes, In It’s Pursuit of Being a High-Margin Luxury Brand, Apple Must Eventually Be Less Functional

Posted by Bob Warfield on November 3, 2014

DSCN0023Even Seth Godin flushes out the Apple Fan Boys sometimes.  David Terrar has an, “I disagree with Seth Godin,” post going.  Seth’s premise, as set forth in, “Decoding Apple as a luxury tools company,” is that eventually, as a company builds a luxury brand, they must choose between luxury and utility or be trumped by another luxury brand that did make the choice.

I’ll cut to the chase–Seth is right and David is wrong to disagree.  Now I’ll explain.

David Gives The Best Counter-Examples to His Own Position

He talks about Patagonia being able to continue on utility and still function as a luxury brand.  But that misses the nuance of Godin’s article.  Patagonia is trumped by Louis Vuitton and countless others precisely because they were focused entirely on luxury with no need for any utility-seeking compromises.

He askes whether Ferrari, Bentley, Bugatti, or Aston Martin compromise their engineering in the interests of luxury, and suggests that of course they do not.  Au contrare, David, aucontrare.  At the risk of mobilizing both the legions of Apple Fan Boys and still more fans of these fine marques, they do compromise engineering.  Enzo Ferrari used to purposefully limit the performance of his street vehicles because he didn’t feel his customers were competent to drive cars with greater potential.

This practice didn’t stop when the Old Man checked out.  Every Ferrari I’ve owned or driven compromised all sorts of handling performance in the interest of greater comfort.  They love that light steering feel and the cars are ever so much more supple over bumps because of course we need to protect the delicate posteriors of our customers.  Luxury?  Absolutely.

Much the same can be said of Bentley, Bugatti, and yes, Aston Martin.  Their cache is exclusivity or outrageousness, not fine engineering.  We may as well lump Lamborghini into all that, if need be.  McClaren?  The jury is still out on that one for me, perhaps there is one shining exception.  Or indeed, perhaps individual models (F40) escape.  But overall, these auto brands are great examples.  Mercedes and Porsche are luxurious, but they are not apex luxury like these other cars.  They have much better engineering and bring more innovations to the table.  Heck, the lowly Corvettes have Utility advantages over many of these cars and are at best low-end luxury.

Watches?  Don’t get me started.  The luxury time pieces favor mechanical movements.  My Rolex loses time every day compared to a decent Swatch.  But it just wouldn’t be right to stick a quartz movement into a luxury watch like the Rolex, Patek, or name-your-expensive-Swiss-timepiece-here.  So they don’t, and have therefore done something to benefit their luxury status to the detriment of their utility functionality.  You could argue they’ve abandoned Utility altogether from any objective measure of what the Utility of a wrist watch ought to be.

Must Apple Do This?  Has Apple Already Done This?

So far, I think most agree that while Apple may have flirted with sacrificing Utility for Luxury, they haven’t actually crossed that line decisively.  There are certainly needless dogmatic issues that drive anyone transitioning from a PC crazy.  I have True Apple Fan Boy friends that only use their Macs with PC keyboards and PC mice.  It seems they want real <Del> keys, <Home>, <End>, scrolling mouse wheels, more buttons and all that jazz that Apple mysteriously refuses to give them.  In the past there have been missing fans and arrow keys that were again nods to Luxury versus Utility.  But Apple backed away from them.  Perhaps they’ll fix their keyboards and mice too.

These things happen because part of being apex luxury is ignoring customers.  After all, you are the infallible arbiters of style.  What you produce is by definition better than what anyone else produces.  What could a mere customer possibly have to tell Louis Vuitton about how to make more luxurious cases?

Yes, it’s arbitrary, dogmatic, and a chase your tail kind of tautology.  But that’s the nature of Luxury and Style versus Utility and Function.  It starts with how the brand is judged, and it would be hard to argue that Apple doesn’t see themselves firmly in the Luxury versus Utility side of the judgement game.  They don’t consider anyone worthy of judging their products.

What About the Ecosystem?

We shouldn’t leave this whole Luxury/Utility dichotomy without touching on the issue of ecosystems.  Luxury goods don’t have them.  Utility goods do.  There can be little question that ecosystems add utility value, though they can also add complexity and other pain.  My Macs plug and play with, well whatever they’re willing to plug and play with.  My PC’s plug into vastly more things but very often they don’t play very well once plugged in.

Apple has sharply limited their ecosystem to that which they strictly control.  In so doing, they have made some choices not unlike the Godin quote:

When Apple dumbs down Pages or Keynote or allows open bugs to fester for months or years, they’re taking the luxury path at the expense of the tools path.

Consider the whole approval cycle for their App Store ecosystem.  They will argue it is there to protect users from junk apps.  I’d argue it’s more about closing Apple’s ecosystem so it cannot threaten them in any way and so they can maximize their profits from it.  Here’s what I mean about the Godin quote being close to home:

One of the great advantages of SaaS is keeping everyone on the same release and making sure that release can be quickly and easily upgraded.  I surveyed Enterprise Software Customer Service one time and discovered that companies estimated that 40-70% of bugs in open trouble tickets were fixed in the current release.  That’s how important updates are–they literally keep 40-70% of your customers from even seeing the bug in the first place.

Yet, because we have to protect these  Walled Garden, it may take quite a lot of time and effort to get a new release approved.

To David’s list of brands and the power of ecosystems, I’ll bring in the world of audio.  Bang and Olufsen are beautiful.  They’re luxury.  But are they utility?  Are they the best sounding audio?  They’re all in one and they eschew an ecosystem, but is that really a good thing if you want to maximize their Utility (e.g. Audio Performance)?  No, not really.  And look at how similar B&O are to Apple.  Interesting parallels there.

Is Apple helping their Utility or their Luxury by limiting their ecosystem so much?  At one time, I think they were helping their Utility, but that balance seems to me is shifting more to Luxury.

Godin’s Decoding of Luxury vs Tools is Not Unlike Michael Porter’s Competitive Strategy

I found Godin’s view of the Luxury vs Tools markets to be not unlike Michael Porter’s venerable Competitive Strategy, for those who remember their B-School studies.  Porter argues that there are only 3 successful competitive strategies:

1.  Be the Best.  Here he means “having the most utility” vis a vis Godin’s take.

2.  Be the Cheapest.  This is Microsoft and Dell to Apple’s “Be the Best.”

3.  Serve a Niche that #1 and #2 are under-serving.  This is where the most Luxurious winds up.

Porter suggests that companies need to pick just one of these strategies.  Trying to serve more than one divides your resources and will allow a competitor that focuses on just one of the strategies to beat you.

What often happens to brands that start out to be the Best is they can’t sustain that advantage.  That requires too much engineering inspiration and innovation, which is just not reliably schedulable when you need it.  So instead, they start to flirt with design inspiration, which can be scheduled and in fact is more desirable if things change often because what that audience seeks is distinction.  They relish the opportunity that there is new distinction constantly being made available for their delight.

The situation for Apple is sustaining that pace of innovation.  My Microsoft Surface Pro 3 is a good example.  It’s hardware is absolutely up to Apple’s standards in every respect.  Apple at this time has no notebook tablet.  Will they build one?  Or will they insist that since they are Apple, the world must follow their lead and they will not be following anyone else?

Can there be a MacBook Tablet, or will it go the way of the keyboards and mice, wishing they had the PC functions or worse, suffering the indignity of having PC hardware plugged into the pristine Mac User Experience?

Is Apple selling the Best Technology or Silicon Haute Coutoure for the Well-Monied Gadget Set?

Oh and David, you mention you wished there were comments on Seth Godin’s blog?  I sure wish Medium where your article appeared had them too.

Posted in saas | 10 Comments »

Secrets of When and How to Talk to Customers at a Startup

Posted by Bob Warfield on October 9, 2014

elephant-with-blind-menJason Lemkin says forget building wireframe UI’s and start out interviewing 20 customers, because you just won’t understand your customers until you do.  Here’s the gist of why you need 20 interviews before you do anything else:

And you have to do 20.  I know it’s hard to get to 20.  But it’s the right number:

  • You need the First 5 Interviews just to truly understand the white space and the current opportunity.  Yes, you probably think you already understand it.  But you are the vendor, not the purchaser.  You need to understand your prospective app from the purchaser’s perspective, for real.
  • You need the Next 5 Interviews to confirm your pattern recognition.  You learn from the first 5, you confirm in the next 5.
  • You need Interviews 11-20 to Nail Your Pitch and Hone Your Thesis.  Once you truly understand the white space from a buyer’s perspective, and you’ve figured out the nuances and challenges … it’s time to nail your pitch for real.  And by doing this, you’ll also hone your thesis and strategy.   That’s what interviews 11-20 are.  To get real critical feedback on what you’ve learned.  To learn about corner cases that may in fact be critical insertion points for you to win.  To dig in on what is really 10x better, not just 2x or 5x better.

And let me tell you, at least from my experience, don’t expect all 20 to be positive.  Many of My 20 Interviews in both my start-ups were very critical.  Or worse, lukewarm.  Lukewarm is even worse, because it says yeah it’s sort of interesting … but no way I’d buy … and implicitly … your idea is a huge waste of time.  I’d rather get the negative feedback ;)

I get the Steve Jobs thing.  You just have to build it.  You do.  But this is SaaS.  You’re solving a business’ problem.  They don’t know how to solve it, or what you should build.  But they do now how to express their problem.  Acutely, and thoughtfully.

Here’s the funny thing–in some ways I agree with Jason and in others I totally disagree.  It depends really on what it is you’re trying to learn from your 20 interviews.  Jason says you’re trying to understand the white space and the current opportunity and that you’re trying to nail your pitch and hone your thesis.  He’s thinking about it like a Sales Guy, more power to him, someone in your company ought to be.  But there’s more to life and startups than Sales Guys.

Here is what I worry about validating in the early days of any startup:

1.  What is the problem we’re trying to solve for customers?

2.  Is it a real problem?  Do a large portion of customers believe they have this problem?

3.  Will the solution we’ve imagined actually solve that problem?  Do the customers agree that it solves their problem?  Can we charge enough to make a real business for this solution?

4.  Do we have a pitch that communicates we have a real and effective solution quickly?

I see Jason’s 20 interviews as helping to solve #2 and #4, but not really making much impact on #1 and #3.  Moreover, I see #4 as being pretty tactical, unless, of course, you need that finely honed pitch to convince investors.  It’s tactical because we won’t need it until it’s actually time to get customers to deploy beta product.  In other words, we have quite a lot of time to solve it.  #3 is not so tactical.  In fact, if we don’t solve #3 right up front, we could easily spend the bulk of our time building a product that we think solves the customer’s problem but that customers aren’t confident in.

Let’s drop back and work on each one of these 4 critical questions and see how and when in the startup cycle they should be tackled.

1.  What is the problem we’re trying to solve for customers?

This is a tough one for many entrepreneurs.  I’ve seen a few decide to try to find a hard problem to solve by interviewing potential customers.  What keeps you up at night?  What do you hate about your job?

Ugh.  That seems so hit or miss.  None of the ones I met who’ve tried this got very far with it.  They got problems that software was just simply not the cure for or they got problems that are more conditions of the human race than anything.  Jason says customers, “Know how to express their problem.  Acutely, and thoughtfully.”  Actually, they don’t, not so much.  They know how to resonate with a problem that you’ve stated acutely and thoughtfully.  They know how to resonate when you state a problem as a near miss to how they really think about it.  But customers are not product designers nor company founders for the most part.  They’re severely myopic.  As Henry Ford famously put it,

“If I had asked people what they wanted, they would have said faster horses.”

So don’t rely on customers to tell you what the problem is.  Really on them to confirm you’ve found a problem they feel.  Later, they’ll remember it as you having discovered the problem from them, but that’s not really how it works most of the time.

There are a lot of reasons for this.  The myopia is one but another is they just don’t know much about the medium you work in–software.  They have little idea what software can do for them.  They think of most software in terms of software they already have, which is another form of myopia.

You are not going to figure out that problem, in all likelihood, through a few simply interviews.  You’re going to have to live the life of your customers for a while, walk in their shoes, and feel their pain.  You need to know their domain intimately, which is not something that’s going to happen in 20 interviews, no matter how good they are.  That’s how two great Sales Guys wound up creating two great CRM companies–Tom Siebel with Siebel Systems and Mark Benioff with Salesforce.com.  I interviewed with Tom Siebel when he had less than 20 employees and the one thing that was absolutely clear about the man was that he knew the domain and its problems cold.  That’s the kind of solid domain knowledge you really should have in your startup.  Who can you point to who has lived and breathed the problems and knows them cold?

Is that the only way?

No, there are plenty of exceptions.  There are proxies available too.  Finding a large online community of your desired customer can give you huge insights into what their world is all about.  What do they ask questions about most frequently?  What do they complain about frequently?  These communities are so helpful to startups both for gathering information as well as for getting out the word that I’m not sure I’d want to do a startup that couldn’t identify an online community specializing in its customers.  In this age of Content Marketing, it seems to me that such a community would be a very valuable indicator that the market was going to be reachable and at reasonable costs.  I don’t want to have to advertise or cold call my way into existence, though many have certainly done so.

To put this into the perspective of Jason’s 20 interviews, you need domain knowledge for your startup before anything else.  You won’t get it from the 20 interviews, and it is just table stakes that you have to find.  Maybe you’re counting on a founder for it.  Maybe you have the world’s ultimate advisory board.  Maybe you’ve sold to these poeple in a former life and know all about them.  Maybe you’ve spent a year studying and interacting with their online communities.  Whatever it is, you’d better have it.

 

2.  Is it a real problem?  Do a large portion of customers believe they have this problem?

Having gotten your domain knowledge together, you believe you’ve discovered a real problem.  Now that you can articulate that problem, it’s time to confirm it with potential customers.  Jason’s 20 interviews are perfect for this stage.  I don’t know that there is anything magical about 20 or that this even has to be done via interviews.  If you’re going to be using feet on the street to move your product (e.g. a scratch golfin’ highly paid salesforce), you should probably get started with interviews.  If your Sales Guy can’t line up 20 interviews in his sleep, there is something wrong, so may as well set him to the test.  If you weren’t planning to get a Sales Guy until later and you can’t line up 20 interviews on your own, you better get the Sales Guy sooner.  There’s a lot of good that comes from achieving the 20 interviews and here Jason and I agree wholeheartedly.

But in addition to 20 interviews, I highly recommend a few other things.

One of my mentors has used the method multiple times of creating a web site that’s all about the proposed problem and solution.  He sets it up like there’s a product ready to go, except there’s no way to order it.  You can simply request more information.  He gauges the quality of the idea by whether he can get many information requests.  And yes, he understands the need to do some tuning up before giving up.  This is a case where having online communities of your potential customers is awesome.  If you have a simulacrum site as described (looks like a real company and product), you can ask the folks in the community what they think of the company and idea.

If you don’t like that approach because it just feels a little too funky, try my approach.  I started a blog before I started my current company and I waited to see if I could drive significant traffic to that blog discussing the kinds of problems I wanted to solve.  I would talk about how people were solving their problems today, rather than how I proposed to solve them.  I measured traffic using all of the standard web analytics to see what resonated and what did not.  I built a lot of credibility and I had a following already in place that I leveraged to a significant Beta test and significant cash sales when I was finally ready to launch the product.  But, before I started building the product, I knew from how people were reacting to my writings that I understood the customers and their problems very well.  I achieved what I call “Content-Audience Fit” (a precursor to Product-Market Fit).  More about that below under #3.

 

3.  Will the solution we’ve imagined actually solve that problem?  Do the customers agree that it solves their problem?  Can we charge enough to make a real business with this solution?

Here’s where I probably disagree with Jason the most.  He says, “So if you haven’t started yet, as fun as it is to just build the wireframes and get a codin’ … do the 20 Interviews.”

Here’s my problem–as I’ve mentioned, the Customers really can’t articulate their problem unaided.  They can only resonate with your articulation.  We may have to agree to disagree on that, but figuring out how to resonate well is a huge function for Sales precisely because the customer can’t do it for themselves.  They often need help even in how to present it to each other to get buy-in within their organizations.  When you go interview them, you’re going to get a variation on the three blind men encountering an elephant for the first time.  One touches the trunk, and thinks it’s a snake.  Another touched the tale, and thinks it’s like a straw fan swishing back and forth.  While the third touched the legs and pronounced that elephants are like trees.

When it comes to envisioning a solution, especially in software, things get far worse.  At least they have all experienced the problem, even though it may appear to be a snake, a fan, or a tree.  But nobody outside your company even has a glimmering about your proposed solution.

I’ve done lots of focus groups over the years and lots of the kinds of interviews Jason talks about, and I am here to tell you it is pointless to do either if you expect to get feedback about a software solution unless you have at least some wireframes and storyboards to show.  With modern tools, it’s just not that hard to produce these things.  I’m working on our third product at CNCCookbook.  I was able to put together a UI prototype that is substantially what our finished product will be with about 6 weeks worth of effort.  It’s been hugely valuable in securing feedback for the product and I have learned an awful lot from it.  Perhaps the biggest problem it has is people start to mistake it for a finished solution or they assume it’ll be ready much sooner than it will and they get too excited.  They’re ready to buy immediately.

Yes, it may be fun to build wireframes, but it is also fun to have real meaningful conversations with prospective customers about your proposed solution.  You’re going to learn so much more about everything if you can do that around a real demo.  You’ll learn about positioning, sub-problems and edge cases that as Jason says are critical insertion points to win.  You’ll learn whether your proposed solution really fixes the customer’s problem in their eyes.  You’ll feed on the enthusiasm they have for what they see, and that enthusiasm is valuable fuel for your startup, for convincing critical new hires, and for any potential investors you may have.

If it’s really going to be hard for you to get interviews with 20 real prospective customers, people who are solid citizens in their markets and who are not your buddies.  People who will give you the straight scoop, help guide you, and who you’re hoping will be early adopters.  If it’s that important and that tough, I can’t imagine wanting to do it without bringing along a UI mock up.  It isn’t just my current venture, I have done this at every single one of the 7 startups I’ve been with.  I have done it for every new product release.  It’s actually integral to how I approach the Agile Software experience.

If your Sales Guy can’t get 20 meetings, get another one.  If your Product Guy can’t get you a UI prototype quickly, get another one there too.  Both are equally as important.

One more thing–that last part, “Can we charge enough to make a real business with this solution?”  That’s critically important to answer ASAP.  It’s also nearly impossible to get a very good answer to it without a UI prototype.  Yes, they will give you some answers, but I am talking about real answers that will hold water when it’s time to cash the checks. Don’t you want to know whether customers will pay up for what you’re going to build as early as possible?

 

4.  Do we have a pitch that communicates we have a real and effective solution quickly?

This is what I call “Content-Audience Fit“.  I believe achieving that fit needs to come ahead of finishing the product if for no other reason than that you won’t know if the product is finished nor will you be ready to efficiently leverage content for product traction unless you do.

Jason’s 20 meetings go towards this end, but it’ll take more than 20 to really nail your pitch.  Personally, I don’t like to burn real perspective customers, investors, or other scarce as hen’s teeth resources for a company if I can find another way to test this stuff out and perfect it.  The online world and Content Marketing are your gateway to doing so. Once you can resonate with those audiences, break out the Rolodex (kids you’ll have to look up what that is) and start asking for meetings.  You’ll be bringing to that meeting a laundry list of good-as-gold asssets:

–  By this point you have a UI prototype to demo.

–  You have verified that you can talk about the problem and with the audience with enough credibility that they’re at least starting to come to you for answers.

–  You’ve had the opportunity to test a number of things with your growing audience.  You’ve probably even been able to do some surveys.

–  You have a corpus of content that you can point potential meeting invitees to that helps establish your bona fides and gets the conversation off on the right track.  If done right, this can be a warm call and not a total cold call.

Most importantly, none of this is all that expensive or time consuming.  You can do it on your own nickel without waiting for a Series A VC round.  I know I have more than once.  I’d set a goal of 3-6 months to get to this point.  If everyone is firing on all cylinders, you’re producing good content, you’ve gotten through your UI prototype, and you’ve made contact with a decent sized audience, you’ve accomplished a lot at your startup.  You’re right where you need to be.  Now line up those 20 meetings, get in there and make those 20 people your first Beta tests, and hit the ball out of the park for them.  They’ll love you for it and you’ll have set the stage for your next 6 months as you drive to launching the Beta and eventually real Sales.

Posted in bootstrapping, business, enterprise software, saas, strategy, venture | 1 Comment »

Microsoft’s 4 Real Problems that Gates, Nadella, and Ballmer Can’t Fix

Posted by Bob Warfield on October 8, 2014

WushuI just finished the Vanity Fair piece on Gates, Ballmer, Nadella, and whether Microsoft can be rebooted to its former glory.  It’s a good article, but it’s all about the past mistakes and there’s little about the future there.  Mostly, it is the account of how two best friends (Gates and Ballmer) broke up over the internal stresses of running Microsoft.  Ballmer characteristically doesn’t accept blame for much (we missed search and phones, but our real problem was the Longhorn project which the article implies he blames equally on Gates) and Gates never really talks much about what went wrong at all.

I’ve written a little bit before about what I see as the problems, but wanted to do a full treatment of it.

Problem number 1:  Microsoft Was Never Agile

Remember the old saw about how Microsoft products were never very good until the 3rd release?  Add to that the notion that the minimum product cycle was about 2 years and often 3 or 4 and you begin to get an idea of just how non-agile the company is. There are claims that this is being fixed, but it is a huge cultural problem to fix.  Microsoft is run by committees chaired by Product Managers and MBA’s.  Those folks are not agile by their very nature, meaning they don’t understand concepts like “Minimum Viable Product” nor how to work off a strictly prioritized agile backlog.  It’s just not how the culture works and it will take Herculean upheavals and new tissue grafts to ever make it very agile.

I’ve been through this conversion on more than one occasion, and it’s never easy.  Unfortunately, the very tenets of agile done right are at odds with how Microsoft makes its decisions.  Gates, Ballmer, and Nadella grew up developing software the Microsoft Way, which is not the Agile Way.  They may pay lip service to Agile, but until they have lived and breathed it, or brought in those new tissue grafts who have lived and breathed Agile, it’ll just be a lot of talk and Microsoft will continue to move far more slowly than Agile competitors.

Problem Number 2:  Microsoft is a Commoditizer, not an Innovator

Microsoft has always been a commoditizer.  They take someone else’s Great Idea, build a high quality facsimile, and sell it under the brand and monopoly umbrella.  That worked well for a long time, but the combination of frictionless product discovery via the Internet, the pace of agile software development, and new business models such as advertising make the role of commoditizer, at least as Microsoft plays it, very difficult.

In the past, people bought the commodity for a couple of reasons that are not nearly as strong today:

–  Brand:  The power of brands has greatly diminished, Microsoft’s brand has become tarnished, and there are many new brands to choose from.  If nothing else has happened during Microsoft’s corporate life, the world has learned that relative unknowns become Big Brands in a very short time.  There’s not nearly the stigma buying lesser names that there used to be. Brand is also about getting noticed, and the increasingly frictionless web has made it easier and easier for upstarts to get noticed.

–  Price:  When I was a General in the Office Wars, Microsoft beat Borland and my Quattro Pro product on price.  It was clever pricing too–who wants to buy individual best of breed products when you can get such a great deal on a suite with everything you need?  Today, Microsoft is hard pressed to be the low cost provider.  Open Source and Advertising Models have completely destroyed that advantage.

–  Interoperability:  This is Microsoft’s last bastion.  We buy Windows because so much that we depend on in terms of applications, data, and hardware needs Windows to function.  But this is not a particularly strong barrier.  It amazes to me that companies like Google haven’t worked harder to eliminate it.

Problem Number 3:  Microsoft is Not Especially Good at Strategy

I know this will come as a shocker to many, especially those inside Microsoft, but it’s true.  Once Microsoft’s essential monopolies were cemented, their strategy consisted 100% of holding onto them and milking them for every last penny they could.  You could call that strategy, but it isn’t competitive strategy, and that’s where Microsoft have been losing their shirts.

When you’ve been so successful for so long with such strong monopolies, it isn’t surprising that strategy becomes atrophied.

When you’ve gotten there by copying and commoditizing the Other Guy’s Ideas, who will deliver the next great Strategic Ideas that change the terrain meaningfully to Microsoft’s advantage?

Strategy is what you do to make winning easier.  When you have a very hard time admitting you’re losing badly and you think you have all the time in the world to fix it with overwhelming force, why bother with Strategy?

Perhaps Nadella is a strategically subtle Guy, but he hasn’t shown that side yet.  Sure, there are some decent tactics at play, but aren’t they more finally accepting the Other Guy’s Playbook than genuinely inventing any new plays yourself?

Problem Number 4:  Microsoft is Clueless About Creating Insanely Great Products

This has been clear for a long time.  As they commoditize Other People’s Ideas, the results have never been quite as good.  It’s like there’s a little extra noise each time you copy a tape.  By that 3rd generation where Microsoft supposedly gets it right, there’s quite a lot of noise.

The blame here goes squarely with Microsoft’s Product Management Culture.  There has been a misconception about Product Management for a long time in High Tech.  Many see them as the ones who write the stone tablets that are product vision and hand them to engineers who then laboriously transcribe those visionary ideas into products.  While a tiny percentage of Product Managers may be good at that, the vast majority are not, though their organizations give them that power for a variety of historical and political reasons.

Here’s the thing:

Product Managers are the only people in the organization whose sole job is to listen to the customer and help inform product direction of that feedback.

That’s it, that’s all, it’s a full time job, full stop.  They pass those customer insights on to whomever really does do the Product Vision.

The other shoe that drops is implementing laundry lists of literal customer requests does not a product vision make. Instead it creates the cluttered messes that are what we hate about Microsoft software today.  Synthesizing all of those requests to understand the real underlying problem customers want to solve may inform at least a portion of the vision.  But most of the real visionaries take this input as just a set of anecdotes.  They derive a vision far larger than the input because innovation cannot be deduced it can only be imagined and concieved.  The results may even be at odds with the customer input.  Most game changers are.  Characters like Steve Jobs and even Henry Ford (if I’d asked customers what they wanted they’d have said a better horse, not a car) worked that way.

By this stage, Microsoft software usability is hugely tarnished to the point of embarrassment.  No fiddling around with the current Product Management-based culture will fix it.  Real Product Vision is a fairly dictatorial process.  Until Microsoft finds and empowers some real visionaries, little will change.

Whither Thou Goest, Oh Microsoft?

Four tough problems that the current and past leadership and in fact the very culture at Microsoft are not well equipped to deal with.  Yet there are some mitigating factors.

Hardware and the Steady March of Moore’s Law Will Help to Buy Microsoft Time

I recently acquired a Microsoft Surface Pro 3.  It’s a fantastic piece of hardware–every bit the equal of Apple’s iPad or Macbook hardware.  The software is flawed, but relatively fixable.  When I use it, I can’t help but wonder if it were a little bit cheaper and the usability flaws were fixed, why would I care about iPads or Android tablets?

Those older devices have the compromises that were needed to make them work given the hardware limitations of their day. As it becomes possible to offer anything that could run on a PC in that form factor, such devices seem increasingly anachronistic.  This is a wide open opportunity for Microsoft to re-emerge if they can fix the usability problems of Windows 8.

Unfortunately, I don’t see Windows 10 doing that, but that’s a subject for another article.

Microsoft’s Chief Rivals are Not What They Used to Be

Apple and Google may be bigger than ever before, but their inevitability is much more in question than at various times in the past.

Apple is sorely missing Steve Jobs and has had a raft of problems lately ranging from privacy breaches to the painful task of propping up a stock price that already touches the sky.  In may ways Tim Cook could turn out to be Apple’s version of Steve Ballmer.  He’s certainly no Steve Jobs, and the question will be whether he can create a sufficiently Jobsian substitute in the already extant Apple Culture to keep the pace of innovation on.  The longer they keep up with ho-hums like the iPhone 6 or their wrist watch (battery life of one day and most of my friends have completely stopped wearing wrist watches) the more the world will begin to wonder.

Every day brings Google closer to being unable to sustain the growth needed for its multiples on its core search advertising business.  Every day customers are educated more fully that they are really not customers–in an ad-driven business model they are the inventory, and they’re not treated nearly as well as customers expect to be.  Google is so far another Microsoft milking its monopolies while it thrashes around wildly looking for new revenue sources that are big enough and profitable enough to matter.  Most of their acquisitions die with a whimper.

Microsoft Have a Monstrous Huge War Chest

The acqusition of Minecraft and Nokia makes that clear.  If Microsoft can find suitably strategic targets of opportunity, they certainly have the cash to acquire them.  The trick is in finding the right targets.  All too often this becomes an excercise in tying two stones together in hopes they float better than one.  Most of these acquisitions wind up net destroyers of capital.

Nadella has the Honeymoon Period’s Willing Suspension of Disbelief

He has time, perhaps two more years, to start making meaningful progress out of the quagmire.

Gates is no dummy either.  In fact he is probably the smartest person I’ve ever met.  Vanity Fair got it wrong when they said he’s a big picture guy.  I spent an afternoon debating deep product architecture with him as he considered acquiring my company and at least at that time he had deeper product knowledge than any CEO I’d ever met.  Unfortunately, he has little knowledge that’s relevant to the 4 big problems I’ve outlined.  But, he has always been the sort to throw himself deeply at problems, even intractable problems of the third world as the Vanity Fair piece suggests.

The trick for both of these gentlemen is focusing on the right problems to solve.  If they can, they’re likely to make a difference.  If they can’t, there will be change visible but it will be for naught.

What odds do you give them and what are the right problems for them to focus on?

Posted in saas | 2 Comments »

How I Helped Start the Agile/Scrum Movement 20 Years Ago

Posted by Bob Warfield on October 2, 2014

ShopFloorTeamI’m a day late, it was 20 years ago yesterday that Dr Dobbs published James Coplien’s article on how my Quattro Pro team was building software at Borland.  Jim sent me a very nice note of reminder on it:

20 years ago today, the famous Dr. Dobb’s article on Borland QPW was published: foreshadowing agile and Scrum’s daily standup (Jeff got the idea from an earlier draft floating on the web). http://www.drdobbs.com/examining-the-software-development-proce/184409329
Thanks for being there :-)

This is a good occasion for me to tell that story of how (with Jim’s article!) I helped start the whole Agile/Scrum thing going.

The article came about because Coplien was studying software development productivity while he was with Bell Labs.  He was interviewing various groups, measuring their relative productivity, and trying to figure out what the most productive teams were doing differently.  At the time, Borland was very much in the throes of launching a slew of products that were brand new code bases for the then very new Windows platform.  I agreed that it’d be fine for him to come in and study our team’s efforts.

I didn’t know an awful lot about how other companies were developing software, heck I didn’t know too much about how Borland was doing it either except that our team seemed to be smaller than a lot of the other ones out there (including many Borland teams) and that we seemed to be more nimble (avoiding the use of that loaded word “agile”).

I was very young back then, having started my first company straight out of grad school at Rice University.  I never did get that PhD in Computer Science because instead of writing a thesis, I decided to write a business plan instead.  One thing I will say for Rice is that it was a great education in CS.  It was also the genesis of my ideas about how to build software.  One of the most interesting things that went on there was they brought in guest lecturers who gave us some impression of what was happening elsewhere in the Computer Science world at large.

I vividly remember the first “famous” software developer I met as a guest lecturer.  It was Stu Feldman from Bell Labs who had invented a program called “make”.  We all used it constantly to discover which files had been changed and speed up the compilation process so that only those files had to be recompiled and they were recompiled in the right order.  This is so basic few even talk about it anymore, but back then it was worth noticing.

What was interesting about Stu’s talk was that what he had to say about “make” was a side I had never even considered.  It was obvious to me how it worked when I saw it first, but Stu was there to talk about programmer productivity moreso than “make,” and what he had to say really caught my attention.

Programmer Productivity was a pet of mine at the time, and I had visions of going forth in the world to create the world’s greatest programming tools–tools that would radically increase every developer’s productivity.  My first startup actually built some tools like that, but that’s a story for another post.  Suffice to say that when Feldman went down that path, he had my undivided attention, because he said “make” had come about because he was tilting at the same windmills I wanted so badly to attack.

Feldman boiled the central problem in productivity down to very simple terms.  Essentially what he said was that we didn’t know how to get very many people successfully working together on a project.  After maybe 10 or 12 developers, adding more generally degraded the group’s overall productivity more than the new developer’s additional productivity could help. The central problem, according to Feldman, was communication.  “We just don’t know how to get more than 10 or 12 communicating together effectively nor how to keep them all on top of what’s going on so they could do their jobs well.”

Of course I immediately went forth after that seminar and started to soak up any wisdom I could about these issues.  Brooks Mythical Man Month (you can’t use 9 women to make a baby in a month) was also a huge influence.  In the course of reading such things, it became clear to me that software tools were not enough.  What we needed were processes and cultural changes to manage those communication problems.  This realization led me to some very basic conclusions that have informed the culture and methodologies I have used for software development ever since.  They were alive and well when Coplien analyzed the Quattro Pro team.  In fact, they were 4th generation by the time James got to see us in action.

I haven’t changed these things much.  I go through an Agile or Scrum book every so often.  They make sense, but I don’t know that they’ve influenced me to change much.

Here are the fundamental tenets I follow from these experiences:

1.  Keep teams to 10’ish or smaller in size.  I’ve never really tried to push this envelope much.  In fact, not too long after Coplien’s work came out, I wound up in charge of all Engineering at Borland and one of the things I did was to insist on all teams fitting within this parameter.  Specifically, we cut back to 10 developers, 10 QA, and 3 writers on every project.  That included consultants and part-timers.  It was met with a high degree of skepticism and emotion as you would imagine, but it worked.  We cut costs and kept all the projects within the schedules that had been set before we scaled back.  The exception to the rule is projects where you can create solid API firewalls between components and put 10 developers on either side of the firewall.  Classic for Enterprise Software projects.

2.  If you can only have 10 on the team, they’d better be the very best that you can find.  Sure seems obvious to me, but I am continually surprised at how seldom it is followed for all the wrong reasons.  Get the best you can find means you’d better be prepared to do a lot of things:

–  Make engineering a first class part of the company.  You’ll often hear me saying, “They’re called Software companies, not Sales, Marketing, or Finance companies.”  If developers are second class citizens, they’ll smell it a mile away and won’t come near.

–  Pay what it takes.  Yeah, I know, every HR group on the planet will wave a bunch of studies saying compensation is not a motivator.  They’ll tell you, “We like to pay at the 70th percentile,” if you’re lucky and it’ll be 50th if you’re not.  Most studies of most things describe very eloquently a regression to the mean.  If you’re happy being on the mean, do what they have to say.  If not, ask yourself what you’re going to do differently.  I had the whole nth percentile pay conversation with probably my favorite PR professional in the industry.  This individual is probably also the most famous for various reasons.  Eventually I had to go to the CEO of the company to make the point about why we had to pay what we had to pay and after that, I believe this individual added it to her bag of tricks.  The bottom line is that the developer may not care about any specific bonus.  But they know they have the talent and they know when they’re being paid less when others of similar talent.  That’s a very bad thing to let happen, trust me.

–  Give them a high performance environment to work in.  Today, cubicles and often desks packed as tightly as possible together are being pushed as the ultimately productivity tools.  That’s horse hockey.  Writing software requires laser-like focus and concentration.  I am all about communication, that’s how I came up with all this, but communication needs to be engineered into the process and not slapped on by osmosis.  Maximize the distractions for these kind of people and you will minimize their productivity.  I can’t tell you how many places I’ve worked that just don’t get this.  Typically, you have to cheat it into the system with a liberal work-at-home policy.

–  Parallel Career Tracks for Pure Techies and Management.  This is another one that non-developers don’t get.  The worst days on the job for someone like me are when one of their very best individual contributors asks for a one on one, comes in all tense, and announces they’re ready to be made a manager.  I always start that discussion out by asking them why they’re attracted to the job.  If I get any variation on the flavor of, “I want to make the decisions because I have the most talent and will make the best decisions,” that individual gets counseled out of being a manager.  If we reach a point where they insist or they’re leaving, well, I tell them I will miss them.  Better to lose a great architect that turn them into a lousy manager who will no doubt piss of their team and then you lose a lot more.  As I said, those are among the worst days in my career when those things come up.

3.  Great teams build great software relatively cheaply.  Nothing is more expensive to a company than having a lousy team build lousy software.  Where am I going with this?  Forget outsourcing, offshoring, consultants, and all the rest of the silly things companies do to try to save a dime here or there on software development.  Lots of very smart people argue with me on this one constantly, but it’s true.  Look, if you’re hiring all the uber talented 10 person teams you can lay hands on and going offshore is just a way to hire even more (Google, you know who you are), it’s fine.  But if you can build anything with 10 or fewer great engineers, how much savings potential is there really in going offshore versus how much risk?  Which really awesome products in this world were built entirely offshore or outsourced.  And if communication is the biggest challenge affecting developer productivity, why would you put one team half a world away, make sure there were tons of cultural disconnects, make sure there were time zone challenges, and then just to be double darned sure you interfered with communication as much as possible make them talk over the two tin cans and a string called Skype to save a few more nickels?

4.  With only 10 on the team, they can know everything that’s going on.  OK, now we’re onto communication principles.  With only 10, they can all sit in a room together and know everything that’s going on.  Why not have them do that, every single day?  They’ll help critique each other’s work.  They’ll get fired up and empowered.  They’ll know things that the others don’t and share them.  They’ll all be on the same page, for goodness sake.  Wait.  Oh my, I hear the complaints and jeers.

Meetings are such a time sync.

Yes they are if you can’t manage one effectively.  What, did you think that you Mr Manager, were in that meeting solely so that  your subordinates could make you more efficient?  Hell no.  You’re in that meeting to make your team more efficient.  Use an agenda, keep the meeting short, make sure it starts and ends on time, change up the format to make sure people pay attention, assign everyone homework for the meeting so it doesn’t go stream of consciousness, make everyone present something, and when all else fails, make it fun.  Build the camaraderie.

I’m an extroverted management by walking around kind of guy.  Having meetings like this every morning was my attempt at letting everyone share the joys of that.  It was a crucial part of our productivity, and today it is a cornerstone of Agile/Scrum where it is called a “Standing” meeting or a “Stand Up” meeting.  Apparently some folks took it a bit literally and started doing the meeting without chairs.  That’s fine, I think I’ll keep the chairs in my meetings, but they’re short enough that not having chairs shouldn’t be a problem.  I used to tell people to get them to the meeting on time that there’d be two fewer chairs than attendees, but that was just my lame joke and I don’t recall actually every doing that.

5.  If communication is the challenge, focus the communication, make it count, and minimize unnecessary communication that just sucks up bandwidth.  The best way to do that is laser-like focus that fiercely attacks each challenge and finishes it before moving on to the next.  Thus was born the Agile Backlog on my teams.

I’m a compulsive list maker.  I always thought of them as ToDos, I made them long life documents, and I constantly evaluated priorities, deferring as much as possible until later.  Imagine my surprise the first time someone asked to see my “Agile Backlog” and I had no idea what they were talking about.  After a laborious explanation, I trotted out the “ToDo” for that project and they were invariably overjoyed.  Nothing like fancy terminology to elevate an obvious idea to sainthood, lol.

My role in the meetings was to present the near-term portion of my Todo, um, I mean the Agile Backlog, to the team.  Keep them focused at 2 week intervals was and is my mantra.  Keep dragging the highest risk most poorly understood items to the front of the Backlog so they get hammered down and solved.  That latter I got from a book on military strategies and was credited to Rommel, the Dessert Fox, who always believed on focusing his guns on his most dangerous adversary on the battlefield, moving to the next most dangerous, and so on.

6.  Make it clear with pictures.  UI Mock ups and Storyboards beat pages of narrative time and time again.  People hate PowerPoint, but that’s usually because they didn’t consider the alternative of reading a 70 page document that accomplishes the same purpose.  I am a big believer in building the UI first to this day, so we can argue usability and understand what the underlying engines will be called on to do right from the start of a project.

7.  Code Reviews.  I always made my developers present their major subsystems twice.  First was an architectural review before much code had been written.  Here’s the problem we’re trying to solve, here’s how we’ll solve it, here there be dragons, here we’re not so worried.  This was done in the morning meetings and everyone chimed in with thoughts. Everyone got to hear the underlying assumptions and could squawk if they saw a bad one.  The second meeting was a demo meeting when whatever it was got to “Beta” quality and a “Here’s what worked and what didn’t” if there was no demo.  The what worked and what didn’t often wound up being a dive into the code.

8.  Interactive Middle-Out Programming.  That curious phrase is one I had way back in my distant past.  I was greatly enamored and possibly warped by the first computer language I ever learned:  LISP.  That phrase referred to building up the “bones” or what I called the scaffolding as much as possible before adding the meat.  Don’t insist that everything be finished before you connect it all up.  Connect it up with dummy responses at first and then build out the most critical and highly traffic portions next.  Fill in the details after that.  Most of all, keep something working every single build.  This was the precursor to the Continous Release mindset that we see today.  It’s the beginnings of Minimum Viable Products.

I always presented roadmaps to my management and to customers.  My goal in doing so was twofold.  First, I wanted them to get used to the idea that releases are small potatoes.  Don’t get hung up on what’s in a release, worry about the longer term vision.  Most customers are extremely understanding of that and much more willing to take a lesser product now if they’re sure you’ll eventually get where they need you to be.  Second, I always asked a lot of prioritization questions in those meetings and took every opportunity to defer things that didn’t seem high priority to later releases.  We did this right from my very first startup, so I guess we were early to the MVP bandwagon.

9.  Embrace Change.  Software is the most malleable medium in the engineering world, yet it can be brittle when timeframes are too short.  What you can’t do is ignore the inevitability of change.  We learn new things every day that can result in change.  We can fear change, or we can embrace it as opportunity.  So many aspects of the methodology I’m describing help you to embrace change when you need to:

–  Keeping the Backlog short-term focused means you can churn the heck out of the part the team hasn’t visited yet with impunity.  Re-prioritize.  Add.  Delete.  Most of all, Learn and React.

–  Middle Out Programming surfaces weakness in the interconnecting structure, the architecture, sooner.  So does UI prototyping.  Ignore the details that are not costly to change and focus on validating what is.

–  Small Teams of Uber Developers are inherently more able to change.

10.  Communicate Face to Face.  Make any documents as temporary as face to face communications.  In fact, make them only as needed to facilitate the face to face.  The software is the only long-term document to worry about.

11.  Lead, Don’t Manage.  Sell, Don’t Tell.  Everyone has to be sold.  Your team, the business side, and the customers.  Don’t hide out and expect the final product to be so dazzling you won’t have to sell.  Don’t hide behind your title secure that your people have to do what you tell them.  As soon as you get the idea, go to all your sounding boards.  As it resonates, grow that audience rapidly.  Make each meeting a learning experience on how to sell the next audience even better.  When people are sold, they become passionate.  Nothing is more valuable to the team than passionate talent.

12.  Don’t Prematurely Optimize, But Manage Technical Debt Consciously.  Middle out programming encourages the avoidance of premature optimization.  Always code it up as quickly as you know how.  But know as best you can where you think changes will have to be made.  And in so knowing, know how hard those changes will be.  If the write bones are there, the changes are confined inside particular internal organs.  If we have to change all the bones, every organ will be impacted. You don’t want Technical Debt in your bones because it becomes pervasive in a hurry.  A little technical debt in the organs is fine and can be dealt with quickly when the need is proven.

13.  Do Post Mortems and then Experiment.  After every release, we’d do a post mortem on our productivity.  What worked, what didn’t, what were the problems.  Then we’d ask for ideas on how to change.  We’d pick one or two of those and implement them on the next project.  Then, at that project’s post mortem, we would evaluate their efficacy and decide whether to continue the practice or not.

14.  Be a Software Factory, Not a Release Workshop.  I like this one to be the capstone of the principles I’ve used to guide my teams over the years.  You want everyone on the team as well as the rest of the company to think of the team not in terms of each release, but in terms of their efficacy as a Software Factory.  No competitive war is won with a single release.  No market is dominated by a single release.  Rather, it is the ability of the team to be a better Software Factory than any they compete with that wins the day.  If they can turn the release crank faster, if they can anticipate what customers want better, if they can deliver higher quality, and if they can do some combination of that more cheaply than the competition, they’re doing everything that can be expected of a Software Development Team to win the war.

Many types of investment in Software Development have to be understood in these terms because they can never be justified for a single release.  If your CEO insists on being exclusively release focused, he is going to have you mostly chasing the puck instead of skating to where the puck will be.

Today’s Agile:  Lean Manufacturing

I’ve followed those 14 tenets almost from my start.  They were certainly completely baked into my software development efforts by the Quattro Pro days, and I haven’t found much need to add to them since.

I can’t decide whether it’s ironic or inevitable, but today I am doing many of the same things I had focused on for developers for the CNC Manufacturing world.  Coplien and Scrum Founder Jeff Sutherland comment that Scrum was inspired by the Toyota Production System.

I knew nothing of Toyota when I created my methodologies (and have carried on without spending too much time on Agile or Scrum either).  I did what made sense to me based on the influences I’d had as I’ve explained.  But my bootstrapped company, CNCCookbook, is intimately involved with the CNC (Computer-Controlled Machine Tools, 3D Printers, and the like) Manufacturing World, so it was probably inevitable that I would eventually write a series of articles on Lean Manufacturing.

The series is not finished yet, but all the key concepts are there.  I can absolutely see similarities between Agile/Scrum and Lean Manufacturing, but with that said, I find them more cousins than siblings.  The Toyota work was done quite some time ago.  It’s lessons are still quite relevant to manufacturing, but I believe that what we (I) have learned about Agile methodologies are relevant to manufacturing.  CNCCookbook is currently developing a new product called G-Wizard ShopFloor that will bring that to light in a modern collaborative environment that emphasizes these hybrid methods.

The first “grainy photos” from ShopFloor are starting to come into focus, the UI prototype is done, we’re starting to show it to a few friendlies and the interactive middle out programming process is fully underway.  I’m having a lot of fun with it and can’t wait to see if the manufacturing world can benefit as much as software development has from these techniques.

I’m really having fun with it!

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23 Great Websites for Entrepreneurs: Plus Some Radical Advice from an Entrepreneur-Bootstrapper

Posted by Bob Warfield on September 24, 2014

advice_bad timeI recently came across two giant lists of websites for entrepreneurs, courtesy of Jason Lemkin (whose blog is listed in both):

Inc.com 50

Forbes 100

Now for some radical advice: the vast majority of the sites listed in those publications won’t help the vast majority of entrepreneurs at all.  In fact, many of them will be counterproductive in the extreme depending on what your goals are.

I can already hear the refrain:

Whoa, hold it right there Bob–them’s fightin’ words!

True, to a certain extent, but hear me out before you pass hasty judgement.

The vast majority of the sites listed, and I went through both lists carefully, are of interest to those entrepreneurs that are dead set insistent on going the path of Venture Capital.  Nothing wrong with that–I’ve been down that road on the majority of companies I have founded–3 were VC funded and 1, my latest is bootstrapped.  But I always ask every would-be entrepreneur I meet why they want to do a VC-funded startup and I wish I had gotten around to bootstrapping a lot sooner than I did in my life.

I’m not here to sell you on bootstrapping versus VC.  I have other articles that talk about my bootstrapping experiences and there are certainly many who will talk to the virtues of each.  But what I will tell you is this–Venture Capital does not equate to success for entrepreneurs, you can be wildly successful without it, at least unless you need to do a deal that is tremendously world changing or that makes you hundreds of millions of dollars.  If millions of dollars and running your own show will suffice, bootstrapping is an easier and less risky way to get there.   Most of the good VC’s, the ones you’d want on your board, that I talk to will freely admit this.  They encourage lots of entrepreneurs whose ideas and companies are not suited to the VC model to carry on without VC.

When you show an idea to a VC, they are predisposed to see it in VC terms–would it be a good investment for their portfolio?  A lot of their advice is going to boil down to pushing the idea in a direction that makes it a better investment for VC, and this is not necessarily a direction that makes it a better investment for the entrepreneur.  Because of that, I think you, my entrepreneurial friend, need to figure out whether you want to do a pure bootstrap or bootstrap your way into a VC deal as early as possible.   Ideally, you want to figure it out from the start.  If you’re going to do a pure bootstrap, take those long lists of websites for entrepreneurs and cull them carefully.  Most of the blogs written by VC’s, while they can be fun to read, have no bearing or guidance to speak of for your venture.  You know, the one you’re funding out of your own pocket that can’t afford to get a bunch of eyeballs now and figure out how to monetize later.  There are sites listed that want to walk you through all sorts of legal things and other artifices that are really only relevant when there’s quite a lot of money in play.  Not necessarily money in the form of revenue, but money invested and the expectation of Big Money in the future.

So forget most of the VC authored blogs.  Forget blogs that seem to be mostly telling you how to raise VC.  If you don’t have the real deal, you can’t game the VC’s well enough to fool them and you’ll regret it if you do fool them.  Forget most of the blogs by guys who were successful VC founders who want to tell you what worked for them or what they think about everything.  Most of it is too high level and many first time success stories have no idea what they did right versus what was luck.  Forget the inside baseball and gossip rags. AllThingsD and Techcrunch have almost nothing to tell you if you’re not doing a VC-funded startup.  You don’t care who got funded for how much or who bought what for how much.  You don’t care about the latest Culture du Jour piece.  Forget the musings of rich guys who’ve forgotten more about being an entrepreneur than you’ll ever know.  Their vacations to Lake Cuomo may be fun to hear about, but how is that really helping YOU to succeed?  And skip the self-help pump-you-up pieces.  If that stuff works for you, great, but attitude is not enough, and if you don’t really have the eye of the tiger deep down, you better get it before you start down the entrepreneurship road.  You get the idea of what I want to leave out from those big website lists.  Yes, it’s radical and harsh, but what should be left in are sites that give you real actionable insight into how to grow your business.

Let’s face the other thing–the vast majority of small businesses that start up in the world don’t have the luxury of VC money.  They’re restuarants, retailers, machine shops, auto garages, and a host of other things.  This is the world my own bootstrapped company (CNCCookbook) works with.  These people could care less about things that will only work if you can invest millions of dollars over time.  They don’t ever expect to be running a billion dollar company (or maybe they do and don’t want to give away most of it to their financiers).  They’re having the time of their lives starting and running their own businesses.

It is for the audience of those people (having the time of their lives running their own businesses) as well as for any Venture-funded businesses that are interested, that I have put together my own high octane feedstock of sites that will help you build your business.  These are tried and true sites that I read religiously because their insights are actionable and they make me think.  You want deep strategy and tactics that can be made to work for any business, not just VC businesses.  They are in no particular order, so here goes.

Saastr

I have to give Jason the nod here.  After all, he did put me on to writing this article and I do read his blog religiously.  There are many ideas there that are only suited to VC startups, but there are also ideas that I’ve found actionable for my own business.  Jason is a VC, but he did a number of startups before that and it is his operational knowledge that he largely shares.  We go back and forth and I often disagree, but it is always interesting.  Do a search here on Smoothspan for “Jason” and you’ll see some of what I have written about his thinking.  Better yet, just subscribe to his blog in your reader.

Seth Godin’s Blog

If you don’t read anything else, stop, do not pass Go, do not collect $200–read Seth Godin’s Blog!  The daily posts are short and pithy.  Taken in total they constantly explore every aspect of Godin’s unique tribal approach to marketing.  He understands marketing at its core in the way the every small business needs to understand it.  Read his stuff.  Let it provoke your thoughts.  Let it seep in constantly.  It will do you no harm and probably a lot of good.

Firehose Press

This blog is a total unknown.  It’s unadorned and has no editorial content of its own whatsoever.  It’s one of my blogs.  I list it early in this list, because it is a shortcut of sorts.  You see, Firehose Press is what I’d call a “clippings” blog.  I post a brief excerpt of every blog article about building a business or marketing and sales that was valuable to me on Firehose Press.  Believe me, I have a couple of hundred blogs in my reader and having somebody curate all that for you can save a lot of time.  The only question you need to ask is whether my taste in curation results in articles helpful to you.  The answer is easy enough–go look at it and decide.

Signal vs Noise

These guys have some of the original great material on Bootstrapping that really got me fired up to do a Bootstrap.  They are not as prolific on the topic as they once were, but they’re still a good read.  Aside from bringing Ruby on Rails into the world, they’ve built a great company and lifestyle for themselves.  All entrepreneurs should be so lucky.  If you’re on the road to VC and read blog’s like AVC, the corollary for the bootstrapper would be blogs like this one.

Techmeme

I deleted so many other blogs of limited value to me (Techcrunch, ReadWrite, and many others) simply because Techmeme catches and serves up their best stuff.  I scan the headlines quickly and frankly delete most of it.  But at least if I’m off to lunch with a fellow Silicon Valley cohort, I will have heard about the trending topics.  And frequently, I latch onto a whole new source of the really good stuff because it popped on Techmeme.

Totango

These guys are on to some radical thinking.  They want to tie marketing (of a sort) with the customer experience as it unfolds pre- and post-sale.  Being able to do this well is one of the many things that I think will really separate the awesome products from the also-rans.  Read it and think about what they’re doing and how it applies to your software.  I certainly did!

KissMetrics

Analytical marketing insights and ideas.

The Buffer

Productivity hacks for marketing and social media.  My business doesn’t get great value out of Social Media, though I have experimented with it a lot.  Having a resource that helps me squeeze a lot out while investing as little as possible is helpful.

Succesful Software

Andy Brice is a fellow bootstrapper who often has some great insights for that life, at least for software bootstrappers.

Moz Blog

When the Gods of SEO speak, it usually shows up here.  As a dedicated content and inbound marketer, I hang on their every word.  Seriously, SEO is easier than you think and you can do it yourself without a high paid consultant if you pay attention.

SaaS Growth Strategies

More good basic marketing for software companies.  Much of it would work for many kinds of companies.

QuickSprout

Neil Patel can have a lot of good insights to share, but I warn you in advance, you have to penetrate his wall of Marketing Spam to get there.  His site demos every trick in the book to sell you while you’re trying to dodge all those “Let me close you now!” bullets and get a little value.  It’s worth it, but don’t say I didn’t warn you!

Marketing Experiments

Sometimes I just need an idea, something quick to implement or A/B test.  You know, a marketing “snack” I can get done quickly and see if it helps.  Plenty of inspiration for that here.

Marketing Technology Blog

It’s not just about Marketing Technology–lots of actionable strategy and tactics may be found here.

Jeff Bulla’s Blog

Tons of marketing and selling ideas for small business.

Inbound Hub

I love inbound marketing, and these guys popularized it and IPO’d a company on it.  There’s good info here.  With that said, quality seems to have diminished a bit in favor of quantity.  Scan the headlines and cherry pick–there’s still plenty of ripe tasty insights to be had here.

I Love Split Testing

More A/B testing ideas to snack on.  Your business needs to constantly be trying new experiments to optimize its marketing.  Get this kind of feed stock stimulating ideas ASAP.

Heidi Cohen

Great ideas from Heidi for Content Marketing.

Digital Marketing Blog

Every business needs more growth.  Digital Marketing is the cheapest way to get there, so take in all you can stand about the subject.

CopyBlogger

More great ideas for Content Marketing.

Convince and Convert

Content Marketing and Social Media.  Great content on those topics and surprising candor about how some of these things are not always the perfect Silver Bullet.

ClickTale Blog

Take a sexy technology that tracks what user’s are doing on your site almost better than the users even realize and you get some worthwhile insights.

Smoothspan Blog

Another shameless plug for my own content.  Smoothspan frequently covers Strategy as it pertains to this world of entrepreneurship.  The thing about good strategy is its hard to come by, but it is so valuable when you can get a true strategic insight.  Or, as I heard someone say one time:

Strategy is what we do to make winning easy.

I’m a student of Strategy, so I write it up often.

Conclusion:  What’s Here and What’s Missing?

If you made it this far, you will realize that a tremendous number of those websites have to do with helping your business grow.  Many of the things on the Forbes and Inc lists had little to do with that.  They might refer you to sites with CPA terms (I kid you not) or perhaps sites that tell a small business how to secure health insurance.  These are all valuable things, I’m sure, but they’re not life-threatening for small businesses and entrepreneurs.  They’re not problems that can ultimately never be solved, only worked away at indefinitely.  Growth is that sort of problem.  It is both life threatening and a problem you will probably never solve.  You’ll always want more growth and if you stop trying to drive it, your business will likely slow down.  So get used to the idea of constantly absorbing and evaluating new ideas for growth.  It’s all part of being an entrepreneur and it is the oxygen your business needs to keep going.

Posted in bootstrapping, business, strategy, venture | Leave a Comment »

Most Marketing Advice Tells Us How to Market to Marketers

Posted by Bob Warfield on August 18, 2014

free_lunchThink about it–the experts out there writing marketing advice as part of their content marketing strategies are all selling something.  They’re either selling software, consulting, or some other product.  And the audience they’re selling to are marketers.

Sure, many of them have practices or history that involved marketing to non-marketers, but right now what they’re doing is talking about how to market and the audience for that is other marketers.

I noticed a long time ago that what they were saying didn’t work for my own bootstrapped company (CNCCookbook).  It was fascinating to me when things that were repeated so often they seemed like gospel didn’t do me a bit of good, or worse, they actually lowered my conversion rates.

Here are some examples:

–  Infographics:  They’re all the rage.  Personally, I hate them because I am usually reading blogs on an iPad where they take too long to download and then you scroll and scroll and scroll.  But, the intelligentsia largely argues that whizbang infographics are some of the best content you’ll ever produce.  So I have dutifully produced a fair number of them and they’ve all yielded sub-par results.  There are likely a lot of reasons for it.  For example, when marketing to marketers, a lot of the audience are marketers marketing to more marketers.  An infographic that can be shared can have a trickle-down effect in that sort of niche.  In my world, I actually have by far the largest blog in my space and most of the other blogs are by stodgy corporations that aren’t about to share someone else’s infographic.  Disclosure:  I decided to write this article more or less in response to a Neil Patel article on how he is finding Infographics less effective over time too.

–  Controversy:  Lots of authorities have recommended controversy as a way to get read.  Some hugely popular blogs are so snarky I can hardly stand to read them sometimes.  Given my own personal distaste for this kind of thing, I haven’t done much of it, but I did feel it was being recommended so much that I had to at least test it for results.  Nada.  No interest.  Come to think of it, Neil Patel discovered some shortcomings here too.

–  Social Media: I’m down to running robots that post my blog posts at this stage.  Any more investment has never shown much result. Every time Facebook tweaks their algorithm you get less reach and it makes even less sense.  Twitter has never performed for me.  I remain convinced a huge percentage of Twitter users are bots that are incapable of being my customers, and recent Twitter disclosures seem to confirm this.  At best I regard Social Media as an alternative to RSS Readers and Email for a very tiny sliver of my audience.

– AdWords: Never seen these be productive. All the good keywords are hugely expensive due to competition. If you try to go too far out on the long tail, Google refuses to deal with those words saying there isn’t enough traffic.  I was so not surprised to read that eBay cancelled all their AdWords and it didn’t affect revenues.  Of course Google then levied a bunch of search penalties on them for having publicized this and they missed a quarter.

– Removing navigation from landing pages. I’ve tested this many times and every time it reduced the conversion rate. Hard to tell for sure from the analytics, but the bounce rates went up like crazy. My audience are highly technical, have lots of questions, and just didn’t like being stuck on the page with nowhere to go for more information.

–  Headlines on Landing Pages.  This one has been particularly frustrating.  I’m supposed to tell them what problem I am solving in clear and concise terms.  I have tested that endlessly and it gets poor results.  My audience is happiest (so far, I will keep testing this one for years) with a headline that too me seems far from benefit-speak, “Get the Latest Technology.”  I’ve paraphrased it so I don’t have to tell the back story, but that’s it in a nutshell.  People aren’t supposed to respond to that kind of thing.  Who cares what the latest technology is, what solves MY problem?  Yet it consistently beats every benefit-oriented headline I have ever tested, usually by a wide margin.

So what’s the answer?  Should we ignore all the marketing advice?  Should we maybe do the opposite of what they say?

The answer is not nearly so black and white, and if you think it is, you run the risk of throwing the baby out with the bathwater.

What every marketer has to realize (if they don’t already) is that every niche is different.  All of this Marketing Advice that’s available is great, but it isn’t gospel at all.  It’s just ideas.  The one critical deliverable you have to bring to the table to be a successful Marketer is some mechanism that takes all those ideas you want to try and effectively separates the wheat from the chaff.  That’s really the essence of Growth Hacking as I see it.  And the tools you need to do that work have to be Analytics and A/B Testing coupled with a keen analytical mind that thinks in these sorts of terms.  That keen analytical mind is particularly crucial because it is an art and a talent to devise experiments and then gain accurate actionable insights from them.  If you introduce too many variables (often unwittingly), your experiment may not be telling you what you think it is.  This is one reason why I test the Big Gospel ideas many times before I conclude they’re just not working for me.

So, by all means, collect the accumulated wisdom that’s out there, but verify that it actually works for your niche and your business.  I guess that’s what they mean by, “There ain’t no such thing as a free lunch.”

PS

I keep clippings of all the good marketing articles I find in a special blog called “Firehose Press.”  Check it out for a ton of good ideas, and remember, your mileage may vary!

Posted in business, Marketing, service | 1 Comment »

Best Way to Succeed as a Solopreneur: Go For Fewer Customers

Posted by Bob Warfield on July 29, 2014

I’m reading with interest some posts that are hot on Techmeme at the moment from Jared Sinclair and Marco Arment about succeeding with iOS apps and as a Solopreneur.  Jared’s blog post is a cautionary tale for those who would like to bootstrap a small venture well enough to quit their day jobs.

Many weigh in with various comments and based on his latest post, it looks like Jared was inundated with a bunch of notes from people who thought he just didn’t market the app enough.

I’ve been a solopreneur with some part-time helpers trying to make the gig into a multi-person bootstrap for some years now.  I’ve managed to create a business that now throws off more cash than I’ve gotten at any Day Job I ever had short of being an exec at a public company.  It’s been an extremely happy experience and I thank my lucky stars and my awesome customers every day for making it possible.  I want to talk through what Jared has bravely reported about his venture and compare it to what’s different about my own CNCCookbook and talk about how I think those differences matter to a successful solopreneur.

First the Results of Both Companies

Jared starts out presenting his financial results from his iOS app, Unread:

FirstYearSalesUnread

Unread Cumulative Sales in the First Year…

It’s pretty easy to see why Jared is unhappy–most of the action happens shortly after he shipped the initial application.  Yes, there’s steady growth afterward, but the actual sales per week or month (remember, the graph is cumulative) had to be pretty disappointing if you want to live off that income.  The app only costs $4.99, so Unread has actually been extremely successful in terms of the number of customers it has attracted–looks like somewhere between 6,000 and 7,000.

I wanted a way to provide some similar insight into CNCCookbook’s apps, but I’m not as interested in Jared in giving away my exact finances (sorry folks, you’ll just have to do some back of envelope calculating to figure it out).  Here is the cumulative graph of software license years sold for CNCCookbook’s software:

CNCCookbookCumLicYearsSold

CNCCookbook Cumulative License Years Sold…

I’ve been at it for a few years now, and the growth has been steady, almost hockey-stick-like–this is a very happy business!  The big bump between 10/22/12 and 10/22/13 reflects the launch of our second product.  I’m hoping to get another bump like that in the next 6-12 months as I launch our 3rd product.

With all that said, I want to make some suggestions about what I think has made CNCCookbook successful.

Suggestion #1:  Lead With Subscription Pricing for Recurring Revenue

First, what is a “software license year sold?”  CNCCookbook sells both subscriptions and perpetual (you buy the software for life with one payment).  Recurring revenue is essential for Solopreneurs because it means they’re getting new revenue without much new work other than keeping the software vibrant and useful.  Getting new customers is hard work.  In a minute I’ll discuss how CNCCookbook goes about it, but suffice it to say I have created a business where my biggest problem is having enough software to sell my customers moreso than getting the new customers.  Part of that is due to the recurring revenue stream.  If you’re a fan of the SaaS/subscription model as I am, you’ll realize that once one of these revenue engines gets up sufficient momentum, they’re almost unstoppable.

So, my graph shows how many years of subscription were cumulatively sold for both products over time.  I plugged in a figure of “6” for any lifetime sale because that’s more or less how I think about my lifetime pricing.

Suggestion #2:  You’ll Want Perpetual Pricing Too, and the Subscription Helps Justify a High Price For It

 FWIW, I mostly wind up selling the lifetime version during sales, but that’s okay too because having a fairly expensive lifetime version does a couple of things.  One, it addresses the needs of customers who just don’t like getting tied to a stream of payments.  This is a very real audience, and if you don’t give them an out, you’re not going to reach them.  Why not choose a perpetual price where they’d have to keep resubscribing for so many years before you come out ahead that everyone can see it as a win-win situation?  Why leave the perpetual hole open for a competitor to come in and take over?  Once you have both pricing models, it gives your customers options.  Do they prefer to preserve cash flow?  My subscriptions do that, just like the lease vs buy decision on a car.

Suggestion #3:  Find the Sweet Spot on Price and Insist On It.  You Probably Want Fewer Customers Willing to Pay More.

My first product offering was $69 for one year.  It seemed like a lot to me at the time, but it wasn’t.  It was actually less than the product was worth–I raised that to $79 with no impact on the units whatsoever.  More importantly, it was and is too low for a business you want to have be your sole occupation.  This gets me to the point of my headline–figure out a business model that requires as few customers as you can easily sell to achieve your financial goals.  Jared’s Unread sells for $4.99–pretty typical for an iOS app.  But it took him almost a year of very hard work to produce it and it isn’t paying the bills.  It’s not really a matter of promotion–he has a ton of customers.  It’s a matter of the customers not paying him enough cash for each sale.

A solopreneur can only touch so many people.  You can only get the word out so far.  There is an upper limit on how many people you will have a chance to sell to when you launch, and on how fast you can grow that audience over time.  You need to be cognizant of that fact and find a product opportunity that can be priced accordingly.  Be brutally honest about how many customers you can close.  Forget models that require too many.

Advertising?  Fuhgeddabout it.  No hope in heck.  I’ve estimated that charging for your product is about 2000 times more effective than giving it away free and relying on advertising revenue.  Why make your job 2000 times harder?  It’s so attractive to sell Free until you realize the sheer magnitude of scale you must achieve.  Those are VC-only deals, folks.

Cheap Phone Apps.  Based on the information I’ve seen, Jared’s information, the problems with finding apps in the app store, and the platform owner’s huge tax of 30% on sales, I am strongly thinking phone apps are not a good target for bootstrapping or solopreneurs.  It’s too hard to market the apps, the platform owner has too much control over the walled garden, they get too big a share of your revenues (30% is huge if they’re not driving huge demand your way, and they’re not), and you aren’t able to charge nearly enough in most cases.

Phone apps have been a dilemma for me in my own business.  My audience would love one.  I have done the work to actually keep one code line running on PC, Mac, iOS, and Android, and there has even been a prototype run on iOS.  But the thought of the work involved finishing the app and questions of whether I’ll be cannibalizing my existing sales with sales that have a 30% tax to Apple or some other big guy has given me pause.  The project has been on indefinite hold while I look at other more promising ways to invest my time.

To get an idea of what you need to charge, look at some successful bootstrappers.  Take Basecamp–it’s $150 a month.  There are cheaper plans, but they limit the number of projects.  Eventually you will be likely to upgrade.  At $150 a month, you only need about 140 customers to be making $250K a year.  I see all these Solopreneurs talking about their $60K a year businesses and wonder why they aren’t aiming higher.

Or, if you have something with more mass market appeal, say like Smugmug, you an charge $40-300 a year.  It’s going to take a lot more customers than Basecamp, but if their average sale is say $60 a year, that’s about 4200 customers to do the $250K a year.  Given how many love photography, that again seems like manageable adoption to be able to succeed.  Either number is a lot fewer than Jared has already sold.

I mention that I thought my pricing was too low and I mean it.  $79 a year requires me to find 3200 customers to get to $250K per year.  It can be done, but I surely didn’t get there in 1 year or even 2 years.

If I had my druthers, I’d be looking for a niche that needs circa 1000 to 2000 customers to get to that $250K.  Hence, we are charging $125 to $250 a year or at least $99 a month.  Look around.  There are quite a few SaaS businesses at $99 a month.  I use a bunch of them to help me with CNCCookbook marketing–Wordpress hosting service Page.ly, SurveyMonkey, MailChimp, my shopping cart provider, etc., etc..

Things are priced where they are for a reason, and not simply because it’s what the market will bear.  It is not only what the market will bear, but it is also what can support a happy healthy growing business.

Suggestion #4:  Debug the Marketing and the Market Before You Ever Write A Product

Many solopreneurs are software developers.  I tell my non-developer friends about my business and they are envious, but can’t see how a marketer can get a product written without paying an engineer, at which point they’re no longer solo.  Engineers, OTOH, seem to think they can bump along and do a decent job of marketing.  As my marketer friends are fond of saying–everyone consumes marketing so everyone thinks they are an expert on it.

Here’s the thing: as a software developer, you know you can get the product built.  That’s pretty low risk.  It’s fun to dive in and start slinging code and pretty soon the demo starts showing some life.  But so what?  As I said, you know you can get the product out.  What you don’t know are two very important things:

1.  Are you solving a problem anyone cares about?

2.  Can you successful reach that audience to sell them your product?

Now here is the truly amazing thing:  you can answer both questions with very high confidence as a solopreneur in a relatively short time.  You can even do it fairly comfortably while holding down your Day Job–even better.

There’s a short list of tools and skills you’ll need to master that I’ll get to shortly, but in order to solve those two big marketing problems, you need one critical talent:

You’ve got to be able to tell a story people want to listen to, and you have to be able to do it in writing.

If you can’t tell a story people want to listen to, I think your future as a solopreneur is probably not going to go well because you’re going to be left either needing someone else to tell your story or just buying advertising.  I keep playing with advertising every six months or so.  I am very analytical and well versed in how to do it.  I have conversion hacked landing pages with great results and done tons of A/B ad testing to try to improve the results.  My conclusion each time I try the experiment is that it just isn’t very profitable.  It costs me so much to sell a customer using AdWords that it is hardly worth it.  I’ve talked to a slew of bootstrappers, and their mileage varies.  Many report something similar.  Many do not keep good enough analytics to even know, they just budget for it and spend the money, hoping it will work.  I guess if you want to depend on ads, this is also something you can know up front.  You can try ads that lead to a page and see what it costs you to get people to that page.  The trick is in what they do when they get there.  In my case, they sign up for a free trial.  That’s one conversion event.

The next thing is to convert them from the free trial to a paying customer.  That’s a second conversion event.  I do very well on the latter–about 20% of free trials become paying customers, which is very decent.  Where I fail is getting enough ad click throughs converted to the free trial relative to what the ad costs.  You can do the math:

1.  The ad costs $1.50 per click through, for example.

2.  The page converts 27% to click through to the trial signup.  Conversions for me are better if they don’t sign up on the landing page–that’s being too pushy for my audience.

3.  Once on the trial page, 25% successfully register for the trial.

4.  As mentioned, 20% of the trials convert to paying.

So if I get $79 for the sale, I can afford to pay $79 * 20% * 25% * 27% = about $1 to break even.  $1.50 is very unprofitable.  Even if I can buy ads for 50 cents, which I very seldom can, it still seems like I am giving Google the Lion’s Share of my hard work.   OTOH, if I am Basecamp, all that changes because I am looking at an annual value of $150 * 12 = $1800.  I can afford to pay quite a lot for advertising in that case.

Working through those numbers is how you debug advertising as a marketing possibility.  There’s still one other big advertising drawback even if you can afford it: it doesn’t create a sustainable marketing asset.  Once the ad has run, you quit getting value from it and you must spend more money on ads.  That’s one reason why I much prefer inbound or content marketing.  If you create great Evergreen content, and own the searches for those subjects, you own a marketing asset that keeps on giving without your having to do much.  You can spend time adding even more Evergreen content.  That model scales well for the solopreneur and small resource-limited bootstrap.

With that model, you’re relying on giving away great free information to attract people via referrals and search engine traffic.  This is the one you can really debug well without even starting a product.  This is the one where you need to be able to tell a story.  The reason is that you can start a blog aimed at your audience with an email mailing list for that blog and find out what works.  Do they care about a problem you want to solve with a product?  Write articles about the problem and see if anyone comes to the party.  Can you reach this market?  Go forth, read the relevant blogs, visit the relevant social sites, and find out what they’re talking about.  Find out what they’re interested in.  Start talking about that on your blog.  If they show up, start building your readership.  Collect their emails and start a weekly blog digest newsletter. Track your progress.

Now do some more back of envelope.  How many do you need in your fold?  I’ve typically been able to sell 4 or 5% of the folks on my email newsletter a new product.  So if I must sell 1000 to reach my financial goal, I had better have 20,000 folks reading my email newsletter.  I recommend you spend 6 months to a year building up your online content (blog) and building your newsletter before you even start writing your product.  Get a sense of how long at your current growth rates it will take you to have enough that you can meet your financial goals and plan it so that by the time you finish the product, the audience are already there, eating popcorn in their seats, and waiting to see what you can offer them.

This is what I mean by debugging the Market and Marketing before you start a product.  Nothing could be more frustrating than to turn in a ton of cubic hours building a sweet product only to have it fall far short of your financial goals for it.  You need to discover whether you can tell stories well (or write ad copy or whatever) enough to attract an audience without a product.  If you can do that and give them a sweet product,  you’re much more likely to succeed.

What about those skills and tools I mentioned?  Yeah, there’s time to figure all that out too during that 6 months to a year when you start creating content.  You have to figure out how to run a blog, (I have 4 or 5 kicking around here somewhere).  Just go get WordPress, don’t even mess with anything else.  Figure out how to use plugins.  Don’t write custom code, that’s a distraction.  You need to figure out how to collect the emails.  That’s a WordPress plugin plus an email service.  I use AppSumo’s List Builder (not here, on the CNCCookbook blog) and MailChimp.  Then there’s all the techniques of creating landing pages that convert and SEO and all that jazz.  It’s not that hard.  Seriously.  I have a clipping blog I call Firehose Press.  Every single great marketing how-to article I have ever read is there.  Read it and digest it and you will know nearly everything I know about marketing.  Go back over the articles in this Smoothspan blog.  There’s plenty of posts that chronicle various epiphany’s I’ve had about marketing along the way.

Conclusion

I didn’t write this article to knock Jared’s efforts–he’s done well by getting so many customers.  He obviously built a sweet app.  If I were to suggest differences, it would be in two areas.  Jared had wanted to succeed with his launch and with blog and social media mention.  In my mind, that’s too passive.  You have to create an engine that you can control with a throttle you can push when you need to.  My throttle is to write more and better content.  I suspect that the lack of controller marketing that could be invested in is what made Jared’s sales graph so flat, while a price that was too low is what made it so hard to live on the revenue from the product.

I didn’t write it to beat my chest about what I’m doing.  It doesn’t matter, it isn’t that big a thing, and I don’t believe it will help CNCCookbook in any way despite what some marketing folk say about such things.

I wrote it because I love being a solopreneur and bootstrapper.  I think it is the greatest thing since sliced bread.  I’d really like to see as many people as possible get a shot at it, so I’m trying to pass along what I’ve learned along the way.

As always, there are many strategies that work.  I certainly don’t have the One True Path.  But if I’ve helped clarify things even a little bit, then I will have accomplished what I wanted and I thank you for your patience reading through the post.

Posted in bootstrapping, business, Marketing, strategy | 5 Comments »

 
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