Thursday, October 29, 2009

Lessons from the Australian Army

As many of you know, I spent the first seven years of my working life as an Officer in the Australian Army.  The 25th anniversary of our officer training class is this year, and we've had emails flying around organizing a reunion - it's great to hear from people that I haven't seen in 20+ years.

While many people don't like military analogies, much of our training was around management theories, and how to get the job done efficiently.  We studied much of what your typical MBA student would cover, and were able to put it into practice in our careers.

One of the classmates from Officer Cadet School (OCS) Portsea is Cameron Hetherington, and he now works as a consultant in Brisbane Australia, specializing in business planning I was struck by the simplicity and accuracy of this message from Cameron:

"You probably released very quickly, as I did,  how useful our military training has been when you start working with some of these businesses; basic organisation, leadership and communication are lacking.  It’s amazing the success that can be achieved when a well communicated plan is in place!"

Absolutely correct - I know that success in my own startups has largely been due by paying attention to the basics above.  All the vision in the world, market and product plans, opportunities, contacts etc cannot make up for a lack of effective execution, so focus on:
  1. Basic Organization - have defined processes to get things done.  These don't need to be complex, but encourage repeatability, and everyone knows what needs to happen for success.
  2. Leadership - motivate your employees to do great things.  Leadership is not the same thing as management - leadership is inspiring your people. John Gardner said it well "...leaders can conceive and articulate goals that lift people out of their petty preoccupations and unite them in pursuit of objectives worthy of their best efforts."
  3. Communication - make sure everyone knows what is happening. A 15 minute standup meeting every day, and a one hour team meeting each week is a great way to keep everyone informed and make sure the left hand knows what the right is doing.
Nice one Cameron.

Wednesday, October 28, 2009

Humor has a place

OK, this doesn't really belong on a product blog, but it's simply too precious to not discuss.  Anyone who lives in California knows that the state has huge financial problems, and the governor, Arnold Schwarzenegger, is exasperated with the house not addressing the problems.

Yesterday he rejected a piece of legislation, and buried in the text was a hidden message directed at State Assemblyman Tom Ammiano, author of the bill, according to the San Francisco Bay Guardian. Ammiano had strongly criticized the governor in early October and reportedly told Schwarzenegger at the time to “kiss my gay ass.” Schwarzenegger’s veto letter, issued a couple of days later, reads:

Take a close look at the first letter on each line.  It's pretty funny.

A quick footnote...  This is NOT a joke - it really happened.  Check out the online newspapers.

Saturday, October 17, 2009

SmartGrid Interview

Last month I presented at a SmartGrid Conference in Los Angeles, and as part of the conference did an interview. This gives you a good idea of Mocana and how we relate to the Smartgrid space:

Sunday, October 4, 2009

The Perfect Product 10

I was talking last week with the CEO of a startup who was brought in by the board of directors to turn the business around. The company had taken in $17M of venture capital, and investors were unwilling to contribute more. His mission was to get them to a position of either profitability or where more money could be raised. My friend is a very experienced sales executive, and took a company public very successfully.

He told me that after seven months, when he was able to earn the trust of the board of directors, executed his plan and shut the business down. I asked him why, and he said that right from the start it was obvious that the business would never be profitable - a sizing of the available market and the revenue per customer showed clearly that there just wasn't a viable business. And with so much capital injected, it just didn't make any sense to attempt a restart to a new market. So he now has a management team and $2M that he is looking to seed invest (the investors didn't want the money returned).

This tale reminded me of the "Underpants Gnomes" from a South Park episode. For those that haven't seen this, it's a hilarious views of many start-up businesses - you can watch the segment here.

They had a phase 1 plan, phase 3 was profit, but were missing phase 2 - how many businesses are like this? Of course this applies to any business, but we're going to focus on how it applies to technology products. As you talk to the VC's of Sandhill Road, the most common initial question to entrepreneurs pitching is "How will this make money" i.e. what is Phase 2.

As we were talking about this, I started thinking about a simple checklist to evaluate product opportunities. So here's the list so far:

  1. Meets a customers need or solves a customers problem (don't even continue if you score a zero here). Products dreamed up in offices are often cool and visionary, but don't solve any need can be a company's death wish.
  2. Available market opportunity is big enough. This is an important one - getting in early on a future large market is critical - analyst market predictions help and confirm with potential customers (at Citrix a rule was thumb was that we should see at least a $200M market within a few years). Coming in late into a mature and crowded market is bad unless you can be truly revolutionary. As an example, the WAN Optimization market is now mature and crowded (so avoid it), but we are just on the cusp of the mobile internet device (MID) evolution (nice place to prospect).
  3. High Differentiation and (therefore) low competition. If you are competing on the basis of being smaller & faster then accept that this isn't sustainable over the long term (remember Novell?). Don't enter a market that is choked with competitors or dominated by a few large players.
  4. High Sales leverage (e.g. channel, online) - don't build a business that requires scores of highly trained and paid direct sales guys - this will constrain your growth. Sales guys are absolutely critical to any business, but you need to go out and get leverage to scale quickly.
  5. Low cost of sales and short sales cycle - some products require length sales cycles, with multiple customer department involvement, and even consideration up to the board level. As an example, think of the long length of time for an enterprise to approve a new financial or ERP system. On the converse side, people buy apps from the Apple App store on a whim, and often after a friend's recommendation.
  6. Easy to evaluate - make it super easy for a buyer to try out your product. I'm a big fan of the "freemium model" where you give away something basic free, and then up-sell. Look at what it did for the recently public LogMeIn.
  7. Low Support needs - build the need to call support out of the product, make the product self-supporting, well documented, give end-users forums etc. Do whatever you can to stop them needing to call you (and costing you money).
  8. Demonstrate clear customer ROI - in a downward economy customers are not going to buy anything unless there is a clear return on investment. Help them see that with an ROI calculator. Many companies are moving to a SaaS model as it makes the customer ROI much quicker without an infrastructure to deploy and maintain. If your customer doesn't help a customer save money or generate new money then it's probably a bad idea.
  9. Easy to market, explain, and understand - How easy is it for your customers to grok what the product does. If you can't explain in 2 sentances, then it's not the right thing.
  10. Generate recurring revenue - this last one is a biggie - you must be able to sell more to existing customers, or generate recurring revenue, such as with a service. We all know that it's much easier to sell to existing customers than find new ones - so give your customers way to continue to spend with you.
Of course no product is going to meet all these criteria, and some are more important than others. I am putting together an excel sheet that applies weightings as well as scores, and will post it to the blog when complete. Using this sheet I intend to help one of the companies I am advising what product ideas to focus on further - we'll end up with a top 3 ideas and then build more detailed business plans on each. The other advantage of this approach is that it generally resonates with engineers, as it is an analytical approach.

So let's go out and create our own perfect 10.