Small Town, Big Ideas

High Stakes, No Prisoners

I just finished reading High Stakes, No Prisoners by Charles Ferguson. What an awesome book.

Charles was the original CEO and co-founder of Vermeer Technologies, maker of what is now known as Microsoft FrontPage. Charles provides a DETAILED account of what it was like to start his business and after just a few months of operations, sell it to Microsoft. Charles is a very direct, to-the-point, no bullshit type of guy who isn’t afraid to speak his mind. The story is incredible as Charles takes readers through the following:

• Being a first time entrepreneur and chief executive officer
• Starting a business in 1994, on the cusp of Internet commercialization
• Raising serious venture capital money
• Taking a startup through a hardcore product development life cycle
• Dealing with some of the toughest venture capitalists in the business
• Hiring a “real” CEO that turns out to be a flop
• Going through the launch of a startup company and product
• The importance of being loyal to co-founders and co-workers
• Watching out for everyone that wants to screw you and your business
• Negotiating with Microsoft and Netscape
• Selling the company to Microsoft for $130 million shortly after launching

If you’re an entrepreneur or involved in an Internet related business, this is a great book to read.

The Search

I finished reading The Search today by John Battelle. I thought it was an intriguing book, one that I would especially recommend to anyone that doesn’t “get” the search industry and especially how Google, Yahoo, and others make billions of dollars in that market. I knew a lot about the industry and its players going in, but it was still interesting to get Battelle’s viewpoint and to learn a little more about the history of online search and the companies that thrive in that marketplace. Battelle also shared his theories on where the market is going—the future definitely looks bright (and somewhat scary if you’re not a search company).

It was quite fitting to finish this book on the plane ride to Rhode Island were I met with our new online advertising agency to kick off our latest advertising initiatives. That’s right—we hired a company to help us spend more money with Google, Yahoo, and other search engines. Something about that just sounds crazy!

What Businesses Can Learn From Open Source

I just read a great essay by Paul Graham, a writer/blogger I follow and the author of Hackers and Painters (which I have not read, although I’ve read many of the essays in his book, which are also posted on his web site, all of which are great reads). I recommend subscribing to his RSS feed if you’re interested in business, startups, entrepreneurship, hacking/coding and forward thinking when it comes to the business world.

In his essay, Paul talks about how unproductive most businesses are with their old school ways of thinking and how much businesses can learn from the open source and blogging movements. Here are some of the excerpts...

...the most important of the new principles business has to learn is that people work a lot harder on stuff they like.

Business still reflects an older model, exemplified by the French word for working: travailler. It has an English cousin, travail, and what it means is torture.

The atmosphere of the average workplace is to productivity what flames painted on the side of a car are to speed. And it’s not just the way offices look that’s bleak. The way people act is just as bad.

To me the most demoralizing aspect of the traditional office is that you’re supposed to be there at certain times. There are usually a few people in a company who really have to, but the reason most employees work fixed hours is that the company can’t measure their productivity.

The third big lesson we can learn from open source and blogging is that ideas can bubble up from the bottom, instead of flowing down from the top. Open source and blogging both work bottom-up: people make what they want, and the best stuff prevails.

Many employees would like to build great things for the companies they work for, but more often than not management won’t let them.

So these, I think, are the three big lessons open source and blogging have to teach business: (1) that people work harder on stuff they like, (2) that the standard office environment is very unproductive, and (3) that bottom-up often works better than top-down.

Google is a rare example of a big company in tune with the forces I’ve described. They've tried hard to make their offices less sterile than the usual cube farm. They give employees who do great work large grants of stock to simulate the rewards of a startup. They even let hackers spend 20% of their time on their own projects.

Just last night I was having a conversation at a bar with one of our newest employees about how open source and blogging have affected the technology industry, the business world and the world as a whole. I explained to Steve that I now read more blogs than books, newspapers and magazines combined and that I do this not because it’s cool but because I learn more from the bloggers I follow than most of the journalists I used to follow. This essay expands on the conversation we had last night and is a great example of how much I can learn from a blogger (a term Paul says will fade away in due time... to be replaced by the term “writer”). Paul, for example, started an Internet company, sold it to Yahoo, probably did some other stuff I don’t know about and is now an investor, investing in computer-related companies. On top of that, you can tell his writing style is direct and honest (you don’t have to agree with all of it, but at least he speaks his mind).

As far as what businesses can learn from open source and blogging... I believe the answer is “tons.” Business is all about people. I agree with Paul in the importance of allowing people to work on things they want, building them a great place to work with the ultimate level of flexibility, and providing them with the opportunity to make a difference through the contribution of their own ideas. We’re trying to hard to make good on each of these, and more. I know we’ve got a long way to go but I think understanding the importance is a big first step.

I’m happy to take feedback from anyone, inside or outside of our company, with regards to how we can do better.

Go here to read the entire essay.

The Purple Cow

We’re in a lot of marketing-oriented transitions right now. 1) We’re in the middle of a web site redesign; 2) We’re in between public relation firms; 3) We’re refining some of our core messaging attributes; and 4) We’re deep into several product development projects. For all of the above reasons, I’ve gone deep into the marketing trenches over the past couple of weeks, doing lots of thinking, reading and more thinking. The first book I read was Purple Cow by Seth Godin. The Purple Cow definitely got me thinking – I’m not sure there is anything too revolutionary here, but sometimes pointing out what should seem obvious really does help. Seth points out that in his opinion, old school marketing (i.e. commercials, magazine ads, etc.) is out and that in order to effectively market something these days, you must focus on building something remarkable, something worth talking about. He says that:

“Remarkable marketing is the art of building things worth noticing right into your product or service. Not slapping on marketing as a last-minute add-on, but understanding that if your offering itself isn’t remarkable, it’s invisible.”

This reminds me of how some recent startups like Oddpost, Bloglines and Flickr all launched, got lots of chit-chat in the blogosphere; subsequently their services spread like wildfire and before long they were all acquired by the likes of Yahoo, Ask Jeeves and Yahoo, respectively. I don’t think any of those companies spent much time or money on marketing. Pretty crazy to think about.

The Purple Cow was a quick read, something I can appreciate, especially these days. I enjoyed its approach to marketing and got some definite value out of it. This is the first book I’m going to have every one of our product developers read… why you might ask? My favorite line in the book is a quote from David Packard – it sums up my reasoning pretty well: Marketing is too important to be left to the marketing department. Or the CEO I might add. :-)

Can we build a Purple Cow here? I hope so.

Moneyball, Baseball, Business and Entrepreneurship

I just finished reading Moneyball. Moneyball is about how Billy Beane, the manager for the Oakland Athletics has developed a unique recruiting system and with one of the lowest salary budgets in baseball, Oakland has become one of the most successful teams in the league, year after year.

Major League Baseball is structured a lot different than some of the other popular pro sports, especially football. For example, there is no salary cap and there is no division of income amongst the teams, like there is in football. The result is teams in larger markets, like New York and Boston, end up with higher game attendance, more memorabilia sold and most importantly, bigger television contracts. For example, although I don’t remember the exact numbers, the New York Yankees salary budget is something like $140 million per year versus the $40 million Oakland has to spend.

With such budgeting differences, Billy Beane, a formerly player himself, is forced to look at players in a different light. He doesn’t have the ability to go out into the market and spend whatever it takes to bring the best ball players to Oakland. So instead, he crunches numbers and analyzes statistics more and in a different way than anyone in the league. Instead of surrounding himself with former baseball players, he hired a genius from Harvard who heads up his statistical analysis. Together, they work to find players that achieve greatness in what are seen as odd-ball categories by the baseball elite. They never recruit hotshot high school players. They never recruit the top prospects already in the majors. They go after the proven college players that nobody else looks at, or for one reason or another, they just don’t get the attention of the traditional scouting departments.

I see many parallels between what Billy Beane has done in Oakland and what we have done here in Blacksburg. Likewise, I see some major differences between baseball and business. Here are some of the parallels and differences I see:

1. Like Oakland, we have had a very small budget to deal with over the last five years. You might not know it by looking at us, but we have never raised any venture capital. We’re almost 100% self-made (we did raise some startup cash from friends and family and we are in the process of doing another small capital raise from the “angel” community here in Blacksburg – all to accelerate growth, not support a burn rate). This is in stark contrast to some of our “competitors” like Critical Path who have raised “bazillions,” yet still aren’t achieving great success. With a much lower budget, we’ve had to be very careful about who we hire, what we spend and what types of returns we get for each investment we make. I personally believe this is a good thing and is one of the bigger reasons we survived the dot-com meltdown and unlike so many others, we are achieving great success today.

2. Unlike Oakland, we do our best to keep the great people we hire. Because of the budgeting restrictions Billy Beane is faced with, he must trade players once they make their mark in the majors. Once they make their mark, their value across the league rises, and the richer teams then shell out the high dollars for those players. This is not to say that Oakland isn’t making the best out of their situation. The real problems lie in the facts that there is no salary cap in baseball, players are way overvalued and teams like Oakland simply can’t afford to soak up their entire budget on one or two players. Billy Beane makes the best out of this situation by recruiting players before they are stars, turns them into stars, then trades them away for draft picks and lesser known players – from there, the cycle continues.

3. Unlike Oakland, we are growing and have the potential to grow even faster, based on performance. One thing that didn’t make sense to me in Moneyball, and in baseball in general, is why the team’s salary budgets don’t seem to rise with success. In business, if we bring in the right people, execute the right strategy and continue to “win,” in theory our business will grow, we’ll be able to bring in better people and pay our great people more. We can also tie some of our higher paid people (especially in sales) to revenue-based performance. So in this respect, even if someone’s salary grows to un-proportionately high levels, the performance and growth of the business should theoretically be there as well. It seems that it would make sense for Oakland’s budget to grow in proportion to their success, but maybe not.

4. Like Oakland, we have been able to find great people. Being in a market with a much lower cost of living than some of our big city competitors, they have been people we’re able to afford. This has been an enormous advantage for us and one of the biggest reasons for relocating to the up-and-coming, Blacksburg, Virginia. It’s also a good thing for us that most people that live in Blacksburg love it and wouldn’t have it any other way. That or they married into the area and can’t get out! :o)

Overall, Moneyball was a great read. It went quick and although it was very “baseballish,” there are a lot of similarities and parallels between baseball and business and Billy Beane and successful entrepreneurship.

Good to Great

I finished Good To Great last week.

I thought this was indeed a great book and I took several things from it. The three points of the book I was most intrigued by were:

1. Level 5 leadership
2. First who, then what
3. The Hedgehog concept

One of the most surprising things I found in the book, and coincidently the research team and author felt the same way, was the type of people that were leading the “good to great” companies. According to their findings, each company had a CEO at the time that was what they called a Level 5 leader. Level 5 leaders had some very interesting characteristics. First of all, they were not the outspoken, always on TV, always writing books, always giving speeches, type of leaders. They were ambitious alright, but their ambitions were 100% geared towards company results, not personal gains. They all had a “compelling modesty” as the author put it. They were as driven as the CEOs in the comparison companies (those that didn’t make the leap from good to great), but again, all of their drive was aimed at sustain results for their respective businesses, not themselves or their own personal careers. They were extremely hard workers and were willing to do whatever it took to make their companies great, no matter how hard the work or how tough the decisions. The bottom line is they were willing to do what it takes to get the job done. These leaders were real people, not celebrity CEOs. Each of them took their companies from “good to great” and set them up for a future ripened for success.

Next, the book talked a lot about, “getting the right people on the bus, getting the wrong people off the bus, and getting the right people in the right seats, then figuring out where to drive.” I like this analogy a lot. One of the biggest things I’ve learned over the last five years is how important it is to have the right people on the bus. Bad people cost a lot of money. Not just in dollars either... they soak up a lot of time and disrupt otherwise positive people and business cultures.

The author wrote about how the comparison companies employed leaders who followed the “genius with a thousand helpers,” model. This is where the CEO creates all of the vision, makes all of the decisions and simply hires people to carry out orders. Most of these leaders, he argued, set their companies up for failure as most of them suffered when that leader left the organization. Three important points in this chapter were:

1. When in doubt, don’t hire – keep looking
2. When you know you need to make a people change – act. He did say that first you need to make sure you don’t just have the right people sitting in the wrong seats. This has happened quite a bit in our company, so it was good to see that mentioned
3. Put your best people on your biggest opportunities, not your biggest problems

Getting the right people on the bus is a theme in most business books I have read, but I really like the amount of attention this book gives to the subject and how each Level 5 leader paid very close attention to it.

Lastly, I really enjoyed the piece on the Hedgehog Concept. The Hedgehog Concept comes from the analogy that great companies are like hedgehogs – simple creatures that are great at one big think, unlike foxes that are crafty, cunning creatures but lack consistency. The Hedgehog Concept says that in order to be a great company, you must have a deep understanding of three things:

1. What you are deeply passionate about
2. What drives your economic engine
3. What you can be the best in the world at

It talks about how you must decide not only what you can be the best in the world at, but that you must understand what you cannot be the best in the world at as well. It talks about distinguishing “best in the world” from “core competence,” explaining that just because something is your core competence does not mean that you can be the best in the world at it. Likewise, there are things you may currently not be doing that you could become the best in the world at.

This chapter especially hit home for me. Bill, Kevin and I are working hard on developing our Hedgehog Concept these days and it’s not an easy process. Like the book says, you really need to have a deep understanding of what you can be the best in the world at. Basing a Hedgehog Concept off of sheer desire or bravado doesn’t cut it. We’re trying our best to leave all of the theoretical crap at home and really define what it is in this big bad world we truly can be “the best” at. When we figure it out, perhaps I’ll let you know.

One of the things I liked the best about this book was how it was based a very rigorous study. I felt that the author did a very good job of explaining the study, how it was conducted, why some companies were included and others were not, etc. This as opposed to many of the books out there that focus in on someone’s experiences of how they see the world, based on those experiences. This was a very helpful book for me and I definitely recommend it to other executives as well as anyone else looking to learn how to turn an organization into a great one.

For now, I will continue to do my best to aim for Level 5 leadership, I will continue to search for the best people I can find and I will continue to work with my team to search for our Hedgehog Concept. Anything less than Great just isn’t good enough.