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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!

Posted in saas | 6 Comments »

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 »

Microsoft: World’s Worst Customer Service? (Walmart, Amazon, GE, BestBuy, MacMall, and Paypal Not Far Behind)

Posted by Bob Warfield on July 28, 2014

microsoft-surface-pro-3I recently tried and failed for the fifth time to buy a Microsoft Surface Pro 3.  It’s been a real comedy of errors, but the latest attempt has been by far the most spectacular failure.

Let me start out by saying I really like the Microsoft Surface Pro 3.  I am a perfect candidate for it as I would like to replace the combination of my Macbook Air and iPad with just one device for travel and for demos of my software away from the office.  The business I’m in is software for the CNC Manufacturing world, and while my own software runs on both Mac and PC, most from that world is PC-only.  Hence a device about the size of an iPad that can run desktop Windows software would be a real boon.  The Surface reviews I’ve read have been largely positive, and I played with one at a Microsoft store for long enough to feel like I would be very productive on it.  The keyboard was great and I had little trouble dealing with the Win 8 differences everyone is complaining so much about.  So I resolved to get one.

In fairness, all of my problems have stemmed from one little wrinkle in how I wanted to buy the device.  I’m looking at about $1500 all in, and I wanted an interest free for 12 months deal–the same kind of deal I used to purchase my Macbook Air.  My business is steadily growing and I like the idea of charging most of the cost to the larger version of the business that will exist down the road.  These offers all involve signing up for a credit card, with my Apple Macbook Air it was really no big deal.  I recently had paid off the Macbook Air and so time to get another device.

Here’s what happened.

Fail #1:  Best Buy

Despite haunting the Microsoft Store since the Surface launched in hopes of their offering a deal, no joy.  So I started Googling and wound up at Best Buy.  Looked great, so I attempted to make the purchase.  The online credit card app simply froze up the browser and would neither confirm nor deny I would be able to do the transaction.  Geez, how can a company the size of Best Buy have IT producing forms like this that flat don’t work?  Seems like they’re wasting a lot of opportunity if it happens to very many.

Fail #2:  Walmart

A little more Googling and I discover that Walmart has the same deal.  Great.  Except, oh oh, same problem–the credit card app just fails.  Takes all the info, hit the button to go for it, and nothing happens.  I’m now starting to wonder if the problem isn’t some common third party?  It doesn’t really matter, both these two retail behemoths have lost a $1500 transaction for a stupid reason–their web site didn’t work.

Fail #3:  Amazon

At this point I am thinking it can’t be that hard, SOMEBODY must do this.  So I tried Amazon.  Aha!  They’re offering the no interest deal I want!

I filled out all the information to apply, the application worked (I guess Amazon knows a lot more about software than Best Buy or Walmart), but it turned out to be bait and switch.  Buried in the fine print is a notice that GE Capital would only finance $500 of my $1500 purchase.  Now I have a GE Credit card that will get shredded and never used.  That has to be sub-optimal for both GE and Amazon–they went to all the trouble and cost but are getting no revenue from me.  Not to mention a $500 limit is insulting.  Amazon knows I spend a fortune with them on all sorts of things including Amazon Web Services and have never missed a payment.  Come on guys, do your computers talk at all?  Why offer this stupid $500 credit card on a $1500 purchase?

Fail #4:  PayPal + BillMeLater + MacMall

I went back to the PayPal site to process some orders for my business, and noticed BillMeLater being advertised.  Wow!  I had seen the ads come up every time I had paid for something with PayPal, but I generally just pay cash and had more or less ignored them.  They have a product search that will plug you into a BillMeLater transaction with some merchant that has what you want.  I promptly searched for “Microsoft Surface Pro 3” and got vectored onto MacMall.  Hmmm, that’s kind of odd to buy a PC from a company that sounds like a Mac company, but why not?  I was getting pretty tired of the chase by now.  I started down the path and promptly noticed I was only going to get 6 months interest free, but again, I was beaten down and ready to do a transaction, so I went ahead.  Filled out all the forms, yada, yada, and BOOM!  I was back to Fail #1 and Fail#2:  PayPal reported that they couldn’t complete the transaction for unspecified reasons (like those other credit card apps just freezing up) and I should try again later.  WTF?!??

Fail #5:  Microsoft + PayPal

Is this becoming Epic Fail, or what?  It’s almost comical by this point.  But, the best is the final episode (so far) and involves Microsoft and Paypal.  I was still focused on the idea of using BillMeLater and it was a new day.  So I had the idea of just seeing who would sell me a Surface Pro 3 and let me pay with PayPal.  I tried Microsoft first, and sure enough.  Excellent!

So I hopped on, performed the transaction, got to the part where you pay PayPal, and for the first time ever (I have made hundreds of PayPal purchases) I saw almost nothing of PayPal and never got the opportunity to use BillMeLater.  Bloody Hell!

I immediately went to PayPal and cancelled the transaction.  There’s a button right there and they accepted and confirmed the cancellation.  Then I went back to the Microsoft Store.  Not so easy to cancel there, I had to call  the dreaded 800 number and wait.  But eventually I got a Service Agent and after answering many strange questions, she assured me that the transaction was cancelled, and that she couldn’t really help me in any way to purchase a Surface with 12 month no interest financing or even to use BillMeLater to make the purchase.  Gee thanks, Microsoft.

So I’m thinking this is pretty silly.  Microsoft must want to be moving these stupid devices and should be making it easier, right?  Maybe I would just go lob a suggestion in to them and maybe someone would get back in touch with me with the right stuff.  I searched in vain both the Microsoft site and the Microsoft Store site for some place I could make the suggestion.  Apparently they are not at all interest in hearing from customers.  I guess I should’ve expected that after getting this far.

Fail #6:  Microsoft + PayPal, Again

This morning I logged into my computer to find 3 email message from Microsoft–a return authorization, a notice that the cancellation had failed, and another notice telling me I should just refuse deliver on the shipment.  Oh boy.  You would think Microsoft could manage to process a cancellation that happened within minutes of an order to avoid needlessly shipping physical goods to a customer who doesn’t want them.  No joy.  So then I bopped over to PayPal to confirm that my cancellation of the prior day was still in place.  The report had been updated to say they were going ahead and paying Microsoft.  WTF?!??  Really?  After both organizations had confirmed the cancellation the prior day?  Are you kidding me?

Now I’m angry.  Both these behemoths had clear instructions from me and had accepted and confirmed.  So, I called PayPal Customer Service.  A nice lady eventually picked up (yeah, lots of voice menus for THEIR convenience) and she confirmed from her screen that I had indeed cancelled payment.  Why then, does my report show this as a transaction that will be paid and why is the cancellation no longer showing?  Well, it looks like the transaction went through before the cancellation could take effect was the response.  OK, why does my balance still not reflect a deduction for the payment then if it’s too late to cancel 24 hours after the cancellation went in and was accepted?  “I’m sorry sir, but it is too late to cancel.  You’ll have to wait 48 hours to see if the seller has refunded your money and if they haven’t, you could file a dispute at that point.”

 

Conclusion

I was really pretty excited about getting a Surface Pro 3 when I started this trek.  I’m shocked at just how many organizations screwed up their Customer Experience along the way and at just how low the bar is set for that Customer Experience to be acceptable to them.  It can’t possibly be a good thing for sales of the Surface for there to be this much friction in the process.  I am hopeful that some one of the organizations involved will read this and contact me with a solution I’d like, but at the same time, I don’t think I’ll hold my breath.

Macbook Air and iPad?  You’ve got a solid year ahead of you still.  Maybe I’ll just wait until the Surface Pro 4.

Posted in amazon, apple, business, customer service, gadgets, Marketing, microsoft surface, mobile, strategy | Leave a Comment »

Authentication as a Service: Slow Progress, But Are We There Yet?

Posted by Bob Warfield on July 11, 2014

BankVaultSmallAuthentication as a Service solves a problem every Cloud Developer, mobile or desktop, has to solve.  As one player in the space, AuthRocket, puts it:

Do you really want to write code for users, forgotten passwords, permissions, and admin panels again?

To that I would add, “Do you really want to have to be a world class expert on that stuff to make sure you don’t leave some gaping security hole out of ignorance?”  I think the answer is a resounding, “NO!” to both questions.  Why do it in this world of Agile Development, Lean Startups, and Minimum Viable Products?  It’s one of those things everyone does (and should do) pretty much the same way from a user’s perspective, so there is no opportunity for differentiation.  You have to do it right because the downside of security problems is huge.  You have to do it right up front to protect your customer’s data and your investment (so nobody gets to use your products for free).  There’s basically very little upside to rolling your own (it’ll only slow you down) and tremendous downside.  Hence, you’d like to buy a service.

I keep going around this block for my own company’s (CNCCookbook) products, and I surely would like to get off that merry g0-round.  I wanted to buy this some time ago, and have written about it for quite a while.  For example, in an article I wrote 4 years ago on PaaS Strategy (Platform as a Service), I suggested login would be an ideal service for a pass to offer with these world:

Stuff like your login and authentication subsystem.  You’re not really going to try to build a better login and authentication system, are you?

I sound just like AuthRocket there, don’t I?  I’m sure that’s not the earliest mention I’ve made, because I’ve been looking for this stuff for a long time now.  As I say, I had to roll my own because I couldn’t find a good solution.  I would still like to replace the solution that CNCCookbook uses with a nice Third-Party service.  I only have few very generic requirements:

–  It has to offer what I need.  Basically that’s Email + Password login with all the account and forgotten password management interactions handled for me.  It would be very nice if they do Federated Login using the other popular web services like Amazon, Facebook, Twitter, Google, or whatever.  It would also be very nice if it could do 2 factor login.  The latter two are optional.

–  It has to work well.  I judge this by who has adopted it and how it is reviewed.

–  It has to be here for the long haul.  I’ll judge this by size of customer base and quality of backers.  AuthRocket, for example, is still at the invitation-only Beta stage.  That’s too early for me.  I have mature products and don’t want to have to change out this service too often.

–  It has to be easy for me to access the API’s.  I prefer a nice RESTful API, but I will take a platform-specific API for my chosen development platform: Adobe Flex.  And no, I don’t want to debate that platform, it has worked fabulously well for me, the products are mature, and I am not looking to switch.

–  It has to be easy to tie it back to securing my data in the Amazon Web Services Cloud.

–  Optional Bonus:  It helps me solve the problem of disconnected data access.  My apps are Adobe AIR apps.  You download and can run without a web connection for a period of time.  This is important to my audience, but means I’ve got to use data models that keep local copies and sync with the Cloud when they get connected.

While my apps are not yet available on iOS or Android, all of those things are almost exactly the same problems any Mobile App developer faces.  Therefore, this ought to be a hotbed of activity, and I guess it is, but so far, I still can never seem to find the right solution for me, and I don’t think I’m asking for anything all that crazy.  But, I have yet to find a solution.  Let me tell you a little bit about my 2 most recent near misses.

Amazon Cognito

I was very excited to read about Amazon’s new Cognito service.  At CNCCookbook we’re big Amazon believers, and use all sorts of their services.  Unfortunately, at least until Cognito, they didn’t really have a good service for solving CNCCookbook’s authentication problems.  They had IAM, which is a very complicated, very heavy-weight, very Big Corporate IT kind of solution.  It looked kind of like maybe you could do it if you had to, but you’d still wind up writing all the darned password management stuff and it looked like it was going to be a real ordeal.  Mostly, I think of IAM, as the tool used to define roles for how broad classes of users can access the various other Amazon offerings.  I wanted another service of some kind to be the sort of simpler, friendlier, front end to IAM.  Enter Cognito, and it sure sounded good:

Amazon Cognito lets you securely store, manage, and sync user identities and app data in the AWS Cloud, and manage and sync this data across multiple devices and OS platforms. You can do this with just a few lines of code, and your app can work the same, regardless of whether a user’s devices are online or offline.

You can use Amazon Cognito directly from your mobile app without building or maintaining any backend infrastructure. Amazon Cognito handles secure app data storage and sync, enabling you to focus on your app experiences, instead of the heavy lifting of creating and managing a user data sync solution.

A guy like me loves the part about, “You can do this with just a few lines of code” followed by “without building or maintaining any backend infrastructure.”  Now that’s what I’m talking about, I gotta get me some of this!

It’s nearly all there:

–  Amazon is an outfit that can be trusted for the long haul.

–  REST API’s are no problem, that’s how Amazon prefers to operate.

–  Tie back to other Amazon Web Services?  Puh-lease, who do you think you’re talking to, of course one Amazon Service talks to the others!

–  Sync?  Yeah, baby, that’s what Cognito is all about.  More potential time savings for yours truly.

Oops, just one little shortcoming:  it only does Federated Login via Amazon, Facebook, or Google.  That’s cool and all, but wheres my Email + Password login so I can seamlessly move customers over to it?  Maybe I missed it, maybe it’s coming, or maybe Amazon just doesn’t think it’s important.  Can I live with forcing my users to make sure they have either an Amazon, Facebook, or Google account?  Yeah, I guess maybe, but we sell a B2B app and it sure seems kind of unprofessional somehow.

Amazon, can you please fill this hole ASAP?

Firebase

I hear fabulous things about Firebase, I really do.  People seem to love it.  It’s chock full of great functionality, and on the surface of it, Firebase should fit my needs.  Yet, when I dig in deep, I find that the login piece is kind of a red-headed stepchild.  Yeah, they advertise Email + Password Login, and they even tell you how to do it.  But there’s no RESTful API available for it.  They list all the right operations:

–  Login, and returns a token
–  Create a new user account
–  Changing passwords
–  Password reset emails
–  Deleting accounts
etc.
However, it appears that those things are handled by a client library which is in a very dev platform specific format.  If you use one of their chosen platforms, it’s ok.  If not, you can only use their rest API’s for the Cloud Database–no login functionality.  That’s going nowhere for me.  It would’ve been so much nicer had they packaged what’s in the client library in their Cloud and provided RESTful API’s for the functions I’ve listed.  As I told them when I made the suggestion, that makes their offering accessible to virtually every language and platform with the least effort for them instead of just the few they support.
Conclusion:  Crowd Sourcing?
Hey, I’m open to suggestions and the Wisdom of the Crowd.  Maybe someone out there knows of a service that meets my requirements.  They seem pretty generic and I’m frankly surprised I still can’t find such a thing after all these years of building almost anything you can imagine as a service.  We’re not very far away from it.  Either Amazon or Firebase could add the functionality pretty easily.  I’m hoping maybe I’ll get lucky in the next 6 months or so.  If anyone knows the right people in those organizations (or their competition), pass this post along to them.

 

 

Posted in bootstrapping, business, cloud, mobile, platforms, saas, service, software development | 3 Comments »

Let’s Try Another Verse of Your SaaS Company Does Not Need a Sales Force

Posted by Bob Warfield on May 23, 2014

MorpheusNoSalesForceIt’s time for another installment of what some of the Enterprise Irregulars have called the Jason and Bob show.  Jason and I have disagreed on a fair number of issues over time, though we have also agreed on a lot.  Jason’s had a great run and is now in the rarefied atmosphere of VC’s.  All of his material is thought provoking and well worth a read.

Today, we’re going to talk about Outside Sales or indeed the question of whether SaaS companies must have a sales force at all, inside, outside, or otherwise.

Jason’s post today is “Inbound or Outbound Sales? The Answer is Yes.”  In it, he argues that

There’s a meme, a CommonThink, among certain segments that Outbound Sales is Bad, or at least, a Little Unseemly.  And maybe a lot bit Old School.

That we’re in a new world of sales, a new consultative world, where leads come in, prospects can try and learn before they even talk to a human, and then, a sales rep thoughtfully answers questions, models business process change, and helps them decide how and why, and if, to buy.

And that’s true.  We are in that world.  Inside sales is terrific.  Warm leads are great.  Live trials of easy-to-use-and-deploy web services really have changed the game.

And yet …

The reality is, by revenue, this isn’t the way the majority of the world buys.

My role here today is to cast a dissenting vote, and to explain why.  In fact, this one’s been argued between us before so I’ll just refer you gentle readers to my original response to get the ball rolling:

Does your SaaS company have to have a sales force?

In that article I make the case that, no, your SaaS company doesn’t automatically need Outside Sales. It’s a function of who you need to sell to and that’s a function of what your solution costs. The more money involved in an individual sale, the more likely you need Outside Sales.  This isn’t really news or something I made up, by the way.  I learned it at the knee of one Geoffrey Moore, he of the Chasms and Gorillas and such.  I find it makes a lot of sense to think about how you need to sell based on the size of the transaction involved.  In hindsight, it’s obvious that a very expensive purchase carries a lot of risk and that a large organization will need to involve many people and ultimately a highly placed decision maker to get it done.

Jason does tip his hat to this notion with some remarks about selling to SVP’s, but I believe it’s something that startups need to think really carefully about very early on.  Horses for courses. What’s the right way to sell for my specific product and opportunity?  You need to make a conscious choice during the very early stages of the startup about what your strategy will be in this respect, because it’s going to have a profound impact on what sort of company you’re building, what kinds of skills you will need, and even the capital needs of your venture.

Jason mentions the “meme” that Outbound Sales is Bad.  Surely that’s damning with faint praise, but there are sound reasons why that meme is out there.  He says, “by revenue, this isn’t the way the majority of the world buys,” referring to purchasing without the need for Outside Sales.  Au contrare, Jason.  I don’t believe it and I have never seen any data to support it.  In fact, you don’t have to look far to see that the biggest revenue is associated with offerings that don’t require either inside or outside sales. Think Apple, Walmart, et al. Their selling is totally self-service and marketing-driven. Not software? How about Google or Facebook? Oh, not business enough? What about Github, Amazon Web Services, or many other ventures that are hugely successful.  While we’re at it, let’s look to where the majority of the profit, not the revenue goes and the differences are even more stark in favor of finding models that don’t require Sales.

What if that’s the real opportunity–start something that works and doesn’t require Outside Sales.  Or if you prefer, consider the potential for disruption that going into a market with a product that can work without Outside Sales offers. That’s exactly what PC’s did to the Minicomputer vendors. The Rolex-clad, scratch golfing, Armani suited crowd with good haircuts laughed at the little computer stores and the pathetic IBM PC.  Ken Olson himself laughed at them all the way to the point where DEC disappeared and was never heard from again and in a very short span of time.  Hitting an Outside Sales-driven industry with a solution that requires no sales creates the Mother of all channel conflicts for the poor sales-driven company.  It is just as toxic to companies with Sales Forces as Subscription models are to Perpetual License models.

The other reason the meme is strong is capital requirements.  Outside Sales-driven opportunities are going to require more capital to finance their longer sales cycle.  It’s unavoidable when you have to wind your way through the organizational complexity that’s there to stop a company from foolishly spending its money without proper checks and balances on your expensive solution.  SaaS itself is already capital inefficient because it pulls expenses forward and pushes profit out over time relative to getting it all up front in the Perpetual License model.  We live with it to get to the pot of gold at the end of the rainbow, but what if we could at least mitigate it by selling a product cheap and easy enough that it didn’t need Outside Sales or even Inside Sales?

That’s how the companies I’ve mentioned got to be so big so quickly.  That’s why this so-called meme is a real business strategy that’s disruptive and must be considered by any startup.

Figuring out how to leverage strategies like this in new markets where you can be supremely disruptive to the incumbents is what successful startups are all about.  Don’t be a slave to tradition.  You’re not here to build another SAP.  You’re here to build the next generation by disrupting SAP and Oracle.  SaaS is probably not enough to do that, though some argue otherwise.   I think many of those are confusing disruption with room at the bottom (great link from Jason, BTW).  The thing is, everyone’s doing SaaS now, so what’s different about your story?

 

Posted in bootstrapping, business, enterprise software, Marketing, strategy | Leave a Comment »

Random Thoughts on Customer Engagement, CRM, and Social CRM

Posted by Bob Warfield on May 13, 2014

Can Enterprises learn to talk WITH Customers rather than AT them?

Can Enterprises learn to talk WITH Customers rather than AT them?

I read with interest Paul Greenberg’s, “Random Thoughts on CRM.”  They don’t call Paul the “Godfather of CRM” for nothing, and this post got some old neural circuits firing again just like it was yesterday.

The gist of the article was about how a much larger market, called “Customer Engagement”, will eventually subsume CRM and make CRM just a feature of the larger Customer Engagement matrix.  The process of assimilation is already underway and presumably resistance is futile.  Paul characterizes Customer Engagement as involving all that is CRM plus the following:

 

  • Customer journey management
  • Customer experience management
  • Customer analytics including sentiment and text analysis
  • Social listening
  • Gamification engines and platforms
  • Customer engagement platforms (broad definition here)
  • Feedback management systems including ranking, rating engines)
  • Reputation management engines
  • Customer interaction engines (e.g. Epiphany, Exact Target)
  • Self-service knowledge engines
  • Community platforms
  • Social networks
  • Personalization engines
  • Communications platforms that foster customer communications (parts of unified communications fit the bill here though UC is a lot more than this)
  • Enterprise video chat/conferencing
  • Customer Effort Scoring (score on what you do. Thanks to Esteban Kolsky for this one). How much effort does a customer make
  • Loyalty and Advocacy systems

I wholeheartedly agree, and it was as I was reading that list that I suddenly had my epiphany:

Customer Engagement is nothing more than Social CRM writ large.

Or if you prefer to be a little less dramatic, Customer Engagement is the Second Coming of Social CRM.

Whether you believe Social CRM failed, was an idea before its time, or is simply percolating along and growing steadily, I can’t think of a better way to describe Social CRM than to say that it’s all about Customer Engagement.  The difference between Social CRM and Conventional CRM is almost entirely a matter of perspective:  are you talking WITH your Customers or talking AT your Customers?  CRM talks AT them.  It values them solely as leads to be qualified and sold to or as an expense area in the case of Customer Service to be minimized.  Paul’s list of Customer Engagement activities is nothing more than a list of what sorts of conversations can be had WITH Customers and what tools may be available to facilitate those conversations.

That problem of talking AT your Customers (and yes, “Customer” must be capitalized in this era when those who can’t learn to talk WITH them will start to increasingly lose) is a cultural problem born of seeing Customers as accounting line items and metrics rather than as PEOPLE who can choose to do business with us or not. Social CRM skeptics back in the day (seems so long ago since I was part of that world) danced around the cultural issues–they were sure Social in the Enterprise couldn’t work just because Enterprises were all about Command and Control and not what it takes to be Social.  Not all Enterprises are, BTW.  Companies like Southwest Airlines come to mind as counter-examples.  But by and large, Enterprises are very much about Command and Control.  I believe that a close relative of the Innovator’s Dilemma is what I will dub the “Politician’s Dilemma.”  It’s what happens when an organization grows large enough that the primary skill needed for advancement is not creativity or the ability to make good decisions, it’s the ability to be a good politician.  It’s been the undoing of at least as many large organizations as the Innovator’s Dilemma, and it is also closely related to those pesky cultural problems that prevent Enterprises from seeing Customers as Customers rather than $customers (and I wish I had an even smaller font for “customers” and a bigger one for “$”).

Here’s where I wonder about Paul’s view that Customer Engagement is, in fact, going to eat CRM.  I wonder because I can’t see much evidence these cultural biases that prevent Enterprises from being good at CRM have even remotely diminished.  Perhaps over time the Internet will exact a toll on their callous disregard for real Customer Service.  Certainly the frictionless exchange of information about what a Company’s products are REALLY like and what it is REALLY like to deal with that company help.  But, our fixation in the 80’s, 90’s, and 2000’s with reducing regulation and empowering ever larger monopolies (and hence the 1%) has been a powerful counterbalance to any renewed sense of egalitarianism the Internet brings.  Simply put, it’s business as usual for these companies.

Paul brings up the 4 largest companies in the CRM space:  Salesforce, SAP, Oracle, and Microsoft.  It’s funny, but with the possible exception of Salesforce, you couldn’t ask for a stronger list of the Who’s Who of having abused their customers and maximized their Bully Pulpit Status.  Perhaps by being (or seeming to be) the exception, this is precisely what has driven Salesforce’s growth.  I certainly know people that work there and talk about it in much more glowing terms than the other 3.  Let’s leave Salesforce aside and ask about the other 3:

What are the chances that SAP, Oracle, and Microsoft can actually learn how to talk WITH Customers and not AT $customers well enough to participate in Customer Engagement at a more empathetic level than, say, researchers watching mice in mazes?

I’m not optimistic, and I don’t think Paul is either.  He offers the following critique of the four companies:

  1. Salesforce.com – They are getting so big and so process driven that a lot of the creativity that characterized the company is starting to seep out.
  2. SAP – The continuous politics at this company are forcing it to step on its own feet every time they make progress – and we start again.
  3. Oracle – They are totally locked and loaded into their customer experience messaging and it’s the wrong message to send to the marketplace.  This prevents them from thinking in terms of ecosystems – which is a 21st century requirement for a large company’s success.
  4. Microsoft – They are moving quickly but still don’t have the messaging down at all. They send mixed messaging signals to the market and they are hard to read. They need to clarify this right away, since they have successfully accomplished a radical transformation of their customer-facing applications for the better. Now the world needs to hear it.

Ask yourself whether the essential cultural virtues needed to thrive in a world of Customer Engagement are likely to be strong or weak in the light of those criticisms?  Even for Salesforce, eliminating personal initiative and emphasizing management by excessive process is a sure recipe for stopping any real conversations with Customers.  It’s hard to change for all the same reasons that once the Peter Principle has taken hold, you can step back from it.  People are hired by bosses who hire the sort of people they want to hire.  Bosses who think of Customers as $customers don’t hire people who think “Customer.”  They hire more $customer people.  Sure, you can add a few Customer lovers here or there, but they drown in the sea of $customer people.  It’s a vicious cycle that can’t be undone.  Command and Control never goes softly into that Good Night, least of all because it is very Commandingly In Control.

What does it all mean?

Optimistically, it means that these four will eventually give way to a New Guard of some kind.  I’d like to think that’s true everywhere and in every industry that finally understands the Customer is King.  Taking that view is a powerful Engine of Growth for new ventures.  It is disruptive in much the same way SaaS has been to Enterprise Software because where SaaS was a business model change that could not be achieved, Customer Engagment is a Cultural Model change that is too hard to achieve.  It’s relatively easy to hire a new CEO or merge to make a new entity.  So far, we are tragically short of good Existence Proofs that this New Wave is underway.  There are precious few Southwest Airlines and an endless stream of Ego-Du-Jour companies that power to the forefront or that cling tenaciously to the monopolies they already own.

Fundamentally changing the culture of a company?  That’s darned near impossible.  I’m not sure I’ve ever seen a successful example of it outside the fawning press releases and interviews telling us how transformative some new CEO has been, all of which turn out to be false hopes.  More’s the pity.

Postscript

Paul Greenberg’s response, via Facebook:

Bob, I read the post. I’m more optimistic than you on this, though I really liked your post. Also, these are random, and to be fair to the Big 4, I also noted what I liked big picture about each of them too. I just don’t have a black and white view of this at all. its a nascent, roiling market at the moment and lots to come of it hasn’t happened yet – and is indeterminate. Also, I agree with you totally that this is what you called Social CRM writ large though my take is a little different. You’ll see more on this in a series of major pieces that will be coming leading to the next book. Social CRM was the progenitor for customer engagement – it didn’t fail, like social business morphing in its short life to digital transformation, social CRM now CRM morphed to something much larger and more encompassing that the parent was/is. CRM becomes the operational components of the engagement market. You are a helluva writer, by the way. Seriously good.

Paul is not just a brilliant CRM analyst, but a gentleman and renaissance man of the sort that is seldom seen these days.  I know him via my past life in Social CRM and the Enterprise Irregulars.  Thanks Paul!

Posted in business, customer service, Marketing, strategy | 1 Comment »

The eBay Turnaround that Never Had to Be: Now Here’s the Rest of the Story

Posted by Bob Warfield on February 13, 2014

Read an interesting account of John Donahoe’s turnaround at eBay in Business Insider.  It’s a fascinating discussion that revolves around relatively few premises for how the turnaround was accomplished.  Here are the money quotes:

He de-emphasized eBay’s auction business and started describing the company as a “technology partner” to retailers small and large. eBay added clients Home Depot, Macy’s, Toys ‘‘R’’ Us and Target, helping them cope with a world dominated by Amazon.

So, making eBay a first class technology partner to large bricks and mortar retailers.  Great idea, more on that in a moment, but first, a couple more quotes from the article:

For example, eBay never bothered to develop sophisticated search technology. This made it dependent on Google ads, which took a bite out of profits. And it made it hard for users to find products they wanted to buy, dragging down sales.

Likewise, eBay under Whitman never developed a product recommendation algorithm to match Amazon’s — despite the fact that Amazon credits 30% of its sales to the tool.

Better search, and the ability to do merchandising and product recommendation like Amazon’s.  What if I told you eBay was offered a finished technology solution to each of these problems way back in 2001 and they completely blew it off as uninteresting for their business?

Trust me, I know, because my startup, which was called PriceRadar.com, was the group offering the technology.  We met numerous times with Jeff Jordan at eBay, and even had offices across the parking lot from eBay headquarters right there in Campbell.  We had built a sophisticated textual data mining technology, and had decided this technology could be hooked up to eBay’s data to produce a unique selling proposition.  We would visit with our customers, who were major bricks and mortars retailers like Sharper Image and West Marine, to name two companies that had worked with us.  Walking into a meeting we came to show them something special, something unexpected.  After sending our web crawler to visit their online catalogs, we could generate a report telling them exactly which of their products they could sell on eBay for just as much as they were selling in their catalogs, how many they could sell without depressing prices, exactly how to optimize their listings including which keywords, what time of day to list and close the auction, which eBay “extras” were worth paying for, and so on and so forth.  The software would even let them allocate quantities of product which we would then list on eBay for them to drop ship when the auctions closed.

The bricks and mortars retailers loved it–it was easy to sign them up.  For them, it was an extremely cheap way to add new customers to their house list.  You know, that list that causes them to dump endless catalogs at your doorstep if you order anything from them?  Our fees combined with eBay’s fees were a pittance compared to their existing marketing costs to add a new name to the house list.  So that’s quote #1, making eBay a first class technology partner to bricks and mortar retaillers.

That’s not all we could do.  The site was called “PriceRadar.com” because it had an extremely powerful search engine that was adept at finding listings that were hopelessly lost if you tried to find them with eBay.  We also tracked affinity patterns–if you bought “X” you were also likely to buy “Y” and “Z”.  Plus, we generated endless analytics that the eBay people had no way to track on their own.  They were always surprised and interested when we visited with this information.  It included things like a fine grained breakdown category by category (and I’m talking our categories, not theirs, a taxonomy of thousands of micro-categories) accounting of exactly where their business was coming from.  So much for quote #2 as well–better search and product recommendation.

So what happened?  Why did eBay pass on this opportunity way back in 2001?

Call it an idea ahead of its time.  We offered them the technology in 2001, but it wouldn’t be until 2005 that they’d start to massively lose market value.  By 2008, Meg Whitman was ready to move on and leave Donahoe as her successor.  All tragically avoidable if the article was right about the cure.  But, that’s just it–you would’ve had to see very far ahead to realize it.  4 more years is forever in High Tech.  It was probably starting to get scary even 2 years after our offer, but still, that’s a long time in the Dog Years these companies live in, and they would’ve handily rationalized early problems as being a temporary effect of the 2001 Dot Com crash that would go away.  Then there was the issue of eBay’s culture at the time.  Business Insider describes it well:

Partly, the issue was obvious: eBay had gotten fat and happy. For 10 years it had been a huge success, riding a wave of Internet adoption. During the mid-2000s, eBay was notorious for meetings that always ended in applause — even when the news was bad.

But eBay also had a problem attracting and retaining innovative, entrepreneurial people into its executive ranks.

The fat and happy part and the lack of innovation were terribly obvious every time we met with them or interfaced with their humongous software back end.  They just didn’t quite seem to understand what we were telling them about better search and what I pitched at the time as “Merchandising like Amazon’s.”  Things were so good it just didn’t seem like it was worth the effort to make things better.  They’d narrowly survived making their technology scale–we used to see the news trucks parked every day at eBay so they could run a story about how the site had gone down.  When you’re getting Boundless Growth and Unbridled Demand just for showing up at work, why rock the boat with any new ideas?

Then there’s that ole bugaboo called, “Innovator’s Dilemma.”  You have to be prepared to cannibalize your own business lest somebody else (like Amazon) decides to do it for you.  The most substantive objection eBay had about our technology was that they were afraid it would alienate the mom and pop businesses that were responsible for the Lion’s Share of eBay’s listings.  The message was something along these lines:

We’re afraid that if you make it super easy for Sharper Image to suddenly have a big eBay presence the mom and pops will take that as eBay competing against them and they won’t like it, they’ll pull out.

I tried hard to explain that they had no place else to go–they were hopelessly dependent on eBay.  There were no other easy partners who could create an e-commerce presence for what had been small bricks and mortar independent retailers.  At PriceRadar, we had interviewed dozens of the most successful resellers on eBay in various categories and learned that many of them had closed their bricks and mortar storefronts because eBay was so lucrative they’d rather sell online out of their home offices than pay the overhead of owning an actual physical shop.  Many of them had unique merchandise that the big retailers didn’t have anyway.  The eBayers would listen politely, smile, and then move on.

If you’re curious, here’s what the old PriceRadar site looked like in 2000:

PriceRadar

We had even signed Gary Burghoff as a spokesman!

That was the Consumer Search front end circa early 2000.  There was another client used by the Retailers to list their products on eBay via our service.  We did a number of unique things at PriceRadar, many were things people said couldn’t be done.  Like downloading all of eBay’s auction data and processing it on SQL Server–the Unix guys all said we’d have to have Unix and Oracle to make it scale, but we didn’t.  We made it through the scaling hurdles that had plagued eBay in a relatively short time, handling their data volumes in our architecture.  Today, it would’ve been called a “Big Data” application, but back then nobody had heard that term.  The search algorithms were very sophisticated and involved a mix of computer algorithms and live human “taxonomy experts” that fine tuned the results by creating special search rules on the micro-categories.  In the end, it was a bust.  When we started, there were lots of auction houses out there, and it seemed like a super sophisticated search engine monetized by retailers who wanted to list was a great plan.  Unfortunately for us, network effects meant that eBay controlled that entire space in a relatively short time.  Once they were the only game in town, they were also the only buyer in town.

Too bad for all concerned eBay didn’t realize we had the solution for a lot of problems that would nearly kill the company.  PriceRadar was a great lesson in market timing and exit strategies in the face of network effects and derivative businesses.  It’s also the failure I regret most as the product and technology were dynamite.

Posted in business, strategy | 2 Comments »

The Problem With Replacing CEO’s, Boards, and Governance at Big Co’s

Posted by Bob Warfield on February 1, 2014

At some point, Silicon Valley VC’s, whom I am not always entirely complimentary of, decided it was easier to teach a Founder to be a decent CEO than it was to teach a Big Co Exec to fill in what they’d lose if a Founder left.  That doesn’t mean they don’t replace CEO/Founders, but it used to be an almost guaranteed matter-of-course.  The VC’s have it right.  We saw that unfold at Microsoft almost to the day Bill Gates handed the reigns to Steve Ballmer.  I believed then and believe now that Microsoft needed a Fighter Pilot and instead got a Moist N’ Easy Snack Cake Salesman.  Sorry Steve, you’re a good man, but you were not the right man for Microsoft.

Now the Microsoft Board is apparently on a path to making Satya Nadella, the President of their Cloud Business, Microsoft’s new CEO.  I read with interest in a WSJ article that he is asking Bill Gates to give him advice on Technology and Strategy.  That was my first red flag for this candidate.  Advice on Technology and Strategy?  Isn’t that exactly what’s been so badly lacking at Microsoft since Ballmer took the reigns?  Did he and Bill Gates just not talk?  Or is it possible that the company actually needs to find someone that knows enough about Tehnology and Strategy to chart their own course and actually dare to get Microsoft to do something different from what hasn’t been working all these years?

I read in The Telegraph the following from one of Nadella’s former computer science professors this ringing endorsement:

Former teacher and MIT director Vinod V Thomas told the Times of India he “cannot vividly recall” Mr Nadella as he “didn’t figure in either ends of the spectrum”, but added that records showed he was “a first-class student who achieved distinction.”

Any attempt to find out what Nadella has been doing for most of his career meets with a brick wall.  We know he did something for Sun Microsystems and that he has been at Microsoft for 22 years.  As the Telegraph article concludes:

Despite his enormous success in the tech industry, Mr Nadella is not the biggest user of Twitter. He has not tweeted since July 2010, and the messages he has posted are enthusiastic, but not particularly enlightening.

That seems to be basically this guys M.O.–he’s quiet, heads down, and steady.

Is this really what Microsoft needs?  Quiet, heads down, and steady?  I mean love her or hate her, at least Marissa Mayer has shaken up Yahoo to an extent.  At least Meg Whitman had done something everyone had heard about before she took over HP.

“But wait,” you say.  Hasn’t Nadella run one of Microsoft’s most important and successful divisions, the Cloud division?  Isn’t that a foward looking part of the empire?  Not really.  It didn’t take any great imagination or strategic prowess to deliver Microsoft to its present Cloud market position.  Microsoft was very late to the Cloud, played it very safe, and has yet to accomplish much there.

Herein lies the problem:  Boards want to hire the safe choice.  They don’t want to hire someone who will shake anything up until it is far too late.  They want consensus.  They want everyone to play nice.  They want to have nice informative Board meetings where they can get their two cents in and everyone in the room will nod sagely and take the advice.

There’s really only a couple of guys I’ve come up with who can make a difference for Microsoft.  Either Bill Gates can come back as CEO, or Jeff Bezos could add Microsoft to Amazon and go from there.  Neither one is apt to happen, so be ready to watch Microsoft flounder further.

Posted in business, strategy | Leave a Comment »

 
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