Getting Started by Kris Olson

Lessons from the Met: A Turn-around Story for All of Us

2008-07-12T19:41:00Z

Sometimes when you join a startup, you are joining an existing company that needs help desperately. The product needs help, the marketing effort could be more strategic and effective, or new business models could be developed.

I found this blog by Ben Rosen [former chairman of Lotus and Compaq—remember them? – and also of my first startup, Ansa Software (Paradox, relational DB—still marketed 20+ years later by Corel—“ Who woulda thunk it?” to quote Ben)] to be a wonderful case study of turning around an organization. Granted, the organization (the Metropolitan Opera) that Ben writes about is BIG compared to most software startups, but I think there are insights that all of us can glean from in this story. Ben was on the board of the Met during this story and head of the marketing committee—applying what he learned about creating very successful, large tech companies to a cultural icon. When he was still a VC, Ben used to teach a class at Columbia business school on entrepreneurship and venture—thus the case study format for his tale.

I really enjoyed this story -- let me know what you think!

Here are some highlights from the story—but do read the whole blog. It’s also filled with photos and before-and-after charts and graphs.

Met Opera sets at Saks Fifth Avenue

The situation analysis

Okay class, pay attention. Here’s today's business problem:

It’s 2006. You’re hired to run the largest performing arts organization in the world, a 125-year-old household name. Every year, you stage over 200 performances per year of a couple of dozen different operas. Your performances are heard by millions of radio listeners around the world. And until the year 2000, your ticket was the hardest to score in New York City.

But in the last six years, everything’s gone awry. Attendance has declined sharply. Costs have risen every year. Philanthropic contributions have flattened out. The endowment is woefully inadequate. Competition for the cultural dollar is soaring. There are signs of organizational complacency. And even though your audience is disappearing, you have no marketing organization in place to try to offset the decline.

What to do? Can anything be done? Is there a solution?

The dire situation outlined above is not hypothetical; it’s real. It’s what faced the Metropolitan Opera just two years ago.

The problem – the virtual perfect storm

Read the blog to see how complex the problem was. Ben says: Then came the millennium, and everything changed, and for the worse -– attendance, philanthropy, competition, subscriptions, and the bottom line. There are a lot of reasons for this collapse. For the Met it was a virtual perfect storm.

Turning the battleship around

To turn the ship around – i.e., fill the house -- three major initiatives were undertaken: (1) improve the product, (2) create a major marketing effort, and (3) add new sources of revenues and audience development.

Ben just cuts through the complexity to boil the solution down to three seemingly easy -- but clear-- goals. Gotta love that!

The product improvement story is terrific. But I’ll skip to a marketing insight that many of us, I am sure, have been asked to ignore in favor of creating demand for unfinished or weak products:

Rule One of marketing is, Great marketing starts with a great product. Rule Two is, See Rule One. As noted above, the overriding effort of management is to make the entire opera experience better than it has ever been. Once that has been achieved, marketing can go to work and help fill the house. But if the product isn’t any good, no amount of marketing can make it succeed. As Bill Bernbach, the founder of legendary advertising agency Doyle Dane Bernbach said, “Good advertising makes a bad product fail faster.”

So what did the Met do? Engaged in some marketing techniques that reached out into the community and built word of mouth -- hmm, that sounds familiar!

Times Square opening-night live telecasts
Opera sets displayed in Saks Fifth Avenue windows
Red carpet opening nights
Free opening-performance dress rehearsals
Creation of an art gallery
Met signs and banners and posters everywhere-many featuring very attractive stars
Narrow-focus marketing techniques to create demand for specialized operas
Live high-definition telecasts to theaters around the world. After just two years, more people now watch the Met Opera in movie theaters that in the opera house itself (around 850,000). The PR from this has been huge. Creating a new generation of live opera viewers?

Case Study Conclusion: The Battleship Has Turned

There seems to be enough data now to demonstrate that the Battleship Met has indeed turned around. Just two years ago, every indicator for the Met Opera was pointing down. And now they’re all pointing up -- attendance, subscriptions, sellouts, philanthropy. And if one looks at that ephemeral quality associated with success -- buzz -- the Met now has it again. In fact, the Met has become the hot cultural ticket in town.

Yes, it’s costing more money to effect these changes, but the increases in revenues -- from philanthropy, box office, and telecasts – are likely to offset these costs in the future.

Even though opera is an anachronism, a centuries-old art form replete with some of the creakiest plots imaginable, in 2008 opera – at least the Met Opera-- is where the action is. The Met has begun a new act. Who woulda thunk it?

What Makes a Community Meaningful?

2008-07-04T17:14:00Z

In early May, at Startup Camp in San Francisco, I had the chance to talk to two startups about their open source projects and how community plays a role in these projects. I have been thinking about the best kind of community we could create on the Microsoft Startup Zone for .NET companies worldwide.

One entrepreneur was not "religious" about open source vs. non-open-source. In his first job in Australia, working for a large firm, he did not have the skills to pick up Java quickly, but for his types of projects discovered PHP, learned it quickly, could apply it quickly and so fell into the world of open source. When he came to start his startup, he realized that the functionality of the online service he wanted to create could be met by using an existing blog platform, as opposed to custom development. After some research, he chose WordPress MU and tracked down a specific community that is supporting this open platform. Word Press also discovered Beau, since he was really pushing the platform, and thus a great synergy was born with lots of exchanges and helping each other. My take away is that what worked for Beau about this community was the size and intimacy of it. They learned to know each other through the online community, respect each other, helped each other. Beau's company is www.myBabyOurBaby.com -- sort of a collective record keeping for a baby by all the adults in his or her life. Shutterfly on steroids; an online baby book (you know, the thing you create for your first child and have nothing for your last one. My mom did that for my brother and me, and I have nothing to show for my second two children. Where was Beau when I needed him?)

The second entrepreneur I talked to had a similar experience with community. He initially worked for a software company using Java in the US and was asked to file a patent for his work. Philosophically, he was opposed to patents, and this experience led him to the world of open source software. After a failed startup during the dot bubble era, Roy Feldman moved to Bangkok, where he has started another software company, also using open source, called OpenSoft Solutions. Its product, Open Software Factory, "turns UML models into executable application code. It currently supports the rapid development of web service enabled J2EE applications that run on any J2EE server." They are now developing a new module which will support .NET developers.

Roy's perspective on community is that the quality of the input and participants matter -- not necessarily the size: "In the case of open source developer communities, size becomes a problem when the number of "new users" grows significantly without a comparable growth in developers and power users that are willing and able to respond to the "newbies". All things being equal, I personally prefer communities that are small and highly focused. However, some large developer communities can be very helpful, they just aren't as much fun."

Roy added that early communities often exsist as a group of developers on an email group, with some of the real experts participating. When the open source project gets more successful, the community gets switched to an online forum. At that point, one can simply do a web search for the problem he/she is trying to solve and get taken right to the answer on any forum; you don't need to join and participate in a formal community to get the answers he needed. This discussion raised questions for me about how many communities can we each join and participate in meaningfully? How do we choose those around our business projects?

Roy mentioned that he refers to a site called Ohloh to check the health of a community. Anyone can register an open source project. Perhaps surprisingly, the site was started by some ex-Microsofties and is in Bellevue. Their goal when they founded the company in 2006? To create a directory of open source projects that would help people find open-source projects and compare them. The site presents clear information about each project, including information that helps developers make build vs. buy decisions by offering code analysis, # of active developers on a project, licensing information, etc.

My take-away from these conversations is that for community -- intimacy, focus and size matter. The value is more around having "real people" offer real insight to the community; smaller size and quality improve the experience. It's probably the relationships as much as the content that matter.

We are always looking at what support we can offer for Microsoft-based startups on this site. At this point, we are headed towards providing more content that helps startups (any startup) become successful instead of a structured online forum. The goal of this site (www.microsoftStartupzone.com), by the way, is to create conversation around the business value of working with Microsoft, not to duplicate all the tech discussions that already exist on MSDN, Channel 9, etc.

I'd love to hear your thoughts! What support would you like for community for startups on this site? Also, should we move to more videos or are text blogs OK? (Some on our team think they are faster to read, definitely cheaper and faster to create, but others prefer pictures. Your thoughts?)

Marc Andreessen Joins Facebook Board

2008-07-02T02:00:00Z

The news today was Marc Andreessen's joining the board of Facebook. From Netscape to Facebook, some interesting ironies along the way. Marc is also a founder of Ning, a social networking application. So why is this important to startups? It's because Marc will be a terrific mentor to Mark Zuckerberg. Having the right board members is so important to your startup's success. This is Mark's quote"

"I know Marc will be a great mentor to me and our leadership team. He has experience that is relevant to Facebook in so many ways: scaling companies that are experiencing extraordinary growth, creating successful technology platforms, and building strong engineering organizations."

Marc (the "c" Andreessen variety) writes a wonderful blog for startups with great thoughtfulness on what it takes to build a company. While I don't know Marc personally, I have been impressed by his writing and speaking. Having someone of his caliber and experience on your board is a great coup. He may not be the board member for a Fortune 500 company, I don't know, but he will be perfect for today, and probably have a blast while he is at it.

The Microsoft Emerging Business Team is apparently fond of Marc Andreessen, having written 5 or 6 blog posts on him before.

Congrats to Mark and Marc.

A New Task Market for Startups - micro work

2008-06-26T03:19:00Z

Thanks to PartnerUp.com, I was introduced to a new Microsoft site (I love the serendipity and connections in our connected life) called TaskMarket. It’s actually being run by MSR, Microsoft Research, in the Office Labs.

Here is a description for Janine Perret, program manager for the product. Please post comments about the concept, or post at the last link below (a blog from her team.) Would you use this? How can it be improved. As as the post says below, kick the tires – try it out!

Welcome to the Task Economy.
Here at Office Labs, we’ve developed a site that may just help create a new economy of know-how.

It’s called Microsoft® Task Market, and it’s a new Tech Preview site that lets people with tasks to do find people with the know-how to do them – saving time, and improving the end product. We’d like you to be among the first to experience it, kick the tires, and share your opinions.
We think there’s a lot of potential here. Because for every person who throws up both hands at the prospect of creating a complex formula in Microsoft Excel, somewhere in the world there’s another person who can make it look easy. For every poor proofreader, there’s an expert one out there who wouldn’t mind making a few extra dollars. For every small business owner who doesn’t have time to do background research on a new business prospect, there’s a talented researcher who could quickly put together a dossier. Task Market aims to create a viable market to get them all together and things get done.

Task Market is in the Tech Preview stage. That means that we’re releasing the site “into the wild” to demonstrate the potential of the technology, investigate the breadth of user adoption, solicit ideas on how to improve the site and, ultimately, create a market of Task Posters and Task Solvers to help people get their office tasks done.

A Task Market Task is:

Something that can be done for $20 to $500
Something that the Task Poster could use help doing
Something that can be delivered electronically, such as a Microsoft Office document (or design element like a logo or business card, or a short software task, proof reading, translation, etc.)

A Task Market Poster might need help with:
·     a specialized Excel formula
·     language translation
·     letter writing
·     an aspect of their accounting
·     making a PowerPoint presentation “pretty”
·     graphics, charts, formatting or logos
·     research gathering
·     proofreading
·     building sell sheets, listing sheets or simple brochures
·     fact checking

Task Market Solvers create profiles of their skills to help Posters assign tasks. They get email alerts when a job arrives that fits their skills. Posters can award and pay several solvers for tasks to compare results, and give more work to the ones they like.

We’re just getting started, but check out the working tech preview at www.taskmarket.com. Who knows. We may be building a whole new economy. We’d love to hear from you as the site populates and you try it out. Let me know if you have any questions.

A couple of reviews on this web site/application:

Microsoft launches Task Market for Office jocks – Rafe Needleman

Microsoft Task Market Project – Kick the tires and give us your feedback! – Eric Ligman, Microsoft

Five Social Media Books Worth Reading - Chris Brogan's Blog

2008-06-24T23:03:00Z

Continuing the theme of identifying useful books to tech startups, this blog post by Chris Brogan caught my eye. He writes on community and social media. Lots of ideas on building an audience. My comments on the book list: I read Paul Gillin's book, The New Influencers, early on in this job. Great introduction to many concepts in social media with a practical focus. I just picked up Groundswell and look forward to reading it. And have heard David Meerman Scott talk at Software 2007 -- again, good ideas to really use.

For the Bookshelf: Five Social Media Books Worth Reading - by Chris Brogan

First, let me tell you that I'm a HUGE fan of public libraries. You can get most of these books through your greater library system. But, if you want easy access to links to read more about the books, I've provided Amazon links to these books that I think rock. [Note from Kris: the Amazon links got stripped when I posted this so I am supporting a wonderful, long-time local bookstore in Silicon Valley, Kepler's Books, with links to their site. My small stand against the inevitable. I,too, still love bookstores and libraries.]

Now Is Gone - If you want a fast, easy, useful, effective book that you can hand the senior team and share what social media can do for you, get this gem from Livingston and Solis.
The New Rules of Marketing and PR - David Meerman Scott has a pretty solid book here, with lots of great advice. My only ding is that it was published before Facebook got big, so that one little part feels like it's lacking. He's got 2 new books coming out over the next several months, so that'll fix that. But check this out.
Groundswell: Winning in a World Transformed by Social Technologies - Though I disagree with a few points here and there (mostly the Forrester speak), Li and Bernoff did a good job of discussing how the "crowd" part of the wisdom of crowds is impacted by social media.
Predictably Irrational: The Hidden Forces That Shape Our Decisions - Whitney Hoffman referred this book to me, and she's now 2 for 2 with her great book suggestions lately. It's not exactly a social media book, but Predictably Irrational is really useful in understanding how to use social media tools to build influence.
The New Influencers - Paul Gillin has a lot of great advice and starting points for getting your feet wet with social media.

Again, if you have other books that you think will help entrepreneurs build successful companies, please send them along!

Halo 3: How Well Is It Selling?

2008-06-23T17:31:00Z

Last November I heard Jeff Bell talk about (and I blogged about) the launch of Halo 3 -- including the cool viral strategies used. Today I noticed that the internet ad for Halo 3 had won first place in the Cannes Lions International Advertising Festival. It shares that award with a TV ad for Cadbury. According to this article, "it was the first time at the ad industry's top annual event that Web-only video was eligible to compete with commercials for TV and cinema use."

The advertising for the Microsoft Xbox game, which has sold nearly 10 million copies since its debut last fall, also on Saturday won the Integrated Grand Prix for multimedia campaigns and a Gold Lion in Film for the TV commercial. The complex promotion spanned Web, TV and cinema advertising, including a real-world Museum of Humanity, with a diorama of an epic humans vs. aliens battle.

Reading that Halo 3 had sold more than 10 million games since it launched last fall made me wonder how well XBox 360 is doing and what the attach rate is. Answer found: "Halo 3 Still Selling Like Hotcakes." Forty-six percent of xBox system buyers are also buying Halo 3 -- a remarkably high attach rate.

Additionally, a worldwide sales total of 17.7 million Xbox 360s was announced - meaning that across the globe, the attach rate of Halo 3 is an absurd 46%. (That's not quite the 52% figure for the US alone, but still ridiculously high - almost one in two Xbox 360 buyers have also picked up a copy of Halo 3.)

My 14 year old (daughter) loves Halo. She is one of the 46%.

Five Things to Do Differently as an Entrepreneur

2008-06-19T19:08:00Z

I decided to get serious about Technorati today and have "claimed" my Microsoft Startupzone blog. (Of course, I thought I had done this a year ago!) I have an authority of 1 and it's ranked 2 millionth something. We'll see how that changes over time.

One of the benefits I got from registering at Technorati is the delivery of blogs on topics I care about. The first one offers some heart-felt insight into the pitfalls of starting a business, "even" for those with an MBA (which is of questionnable value, of course, for knowing how to run a business from the ground up - athough I have one!). It's by Joshua Long, "After Five Years as an Entrepreneur, Five Things I Would Have Done Differently." Read the post - it's long but thoughtful. I picked out few highlights below and have added a few comments based on my own experience in several software startups.

Have Financial Controls in Place

Because I did not have the systems in place, like an in house bookkeeper that keeps track of all income and expenses properly on Quickbooks, I could never tell exactly where we were and what trends were taking place for us to plan from. I could tell you what was in our bank account since I carried the checkbook with me and had to balance it regularly, but that is not running a company ‘by the numbers’ as the majority of truly successful businesses do.

Kris: Every startup I have worked in immediately started with Quickbooks, but that is probably because they were venture-backed and had access to experienced coaching and networking. (Microsoft offers Microsoft Office Accounting, I must mention.)

Do Not Become the Only Sales Professional

…to breakthrough to the other side of owning a growing business instead of merely a job, you have to choose not to produce and keep being the engine behind the revenue and start recruiting, training and managing the sales force that will become that engine.

Investing in your future growth always comes first.

Take Off Time for Fun and Relaxation

By forcing yourself to get everything done in 30-40 hours, you get more done because you have deadlines and time restraints and you start doing only that which is truly important

At my business school reunion a year or two ago, a very successful classmate shared how he has made having fun a priority (Mexico, skiing, golf, kids, etc.) -- maybe two full days per week-- and is able to be more focused and efficient. He does work from whever he is. A new model? Working smart vs. working hard. Stressed out entrepreneurs do not always do the best thinking, collaborating or people managing. I can vouch for that from first-hand experience!

Find the Right Mentors and Resources

A lot of the guys I listened to were full of hype and could not give actionable advice and strategy to implement and get results from. Here is my shortlist of people that I respect and listen to for the following areas of any business in any industry:

Mental Strength / Toughness: Tony Robbins http://www.tonyrobbins.com/
Systemization / Management: Michael Gerber http://www.e-myth.com/ & Scott Hallman http://www.smallbusinessgrowthclub.com/
Strategy: Blue Ocean Strategy http://www.blueoceanstrategy.com/
Marketing / Lead Generation: Dan Kennedy http://www.nobsbooks.com/
Sales: Chet Holmes http://www.chetholmes.com/

These resources are interesting to me because they come from outside the high tech world. I look forward to exploring them.

Create a Compelling Competitive Advantage & Unique Selling Proposition

[This] is a must. This competitive advantage needs to be distilled into a Unique Selling Proposition (USP) that clearly explains in one sentence why people should come to you for what you are offering instead of every other company available. Then, once this USP is figured out, you need to leverage it into at least two solid lead generation systems that produce qualified, high quality prospective clients to work with.

I agree with Josh: writing down and understanding your compelling competitive advantage and unique selling proposition are fundamental to starting and growing your company. They come first. They inform and drive your entire company strategy.

Josh provides a good example of a unique selling proposition and resulting business strategy by Domino’s Pizza.

Steve Blank's List of the Best Books for Building a Startup

2008-06-18T13:00:00Z

Steve is an old friend and keeps this great bibliography of great books for startups. It grows over time. He uses it in his classes at Berkeley and Columbia on entrepreneurship. He graciously provided them to me in unlocked format to share with you. Please share your own list of favorites and we'll build an even better list!

If you have not heard of Steve, he has had an interesting career in Silicon Valley. I met him first when he was VP of Marketing for SuperMac and focused maniacally on getting great product reviews. Then he and Peter Barrett co-founded Rocket Science Games -- which rose to astouding heights and got sold in pieces to Sony, etc. Some really creative people came out of that company, including Peter and Bruce Leak, who started WebTV. Peter joined that company before it was sold to Microsoft and is still here heading technology in the IP TV business. Steve then went on to fo-found e.piphany.com -- made some money -- and started teaching and investing. I know he is on the boards of IMVU and CafePress (a .NET company.) Steve gives an interesting talk on the true history of Silicon Valley. He is also on the National Audubon Society board, California Audubon and the California Coastal Commission -- an interesting combination, startups and conservation.

So, Steve's list of the best books for startups -- with his annotations. Let me know if you have others we should include. I have a few I'll add in another post. Several on his list are old favorites. If you have read Regis McKenna's books, you know that he understood "influencer marketing" long (long) before the term was invented and used today. And so many of the smart folks he hired have gone on to found more really smart PR firms or write great books, like Geoffrey Moore.

Must Read Books

These four books changed my outlook on new product introductions, early stage sales and business in general. Crossing the Chasm made me understand that there are repeatable patterns in early stage companies. It started my search for the repeatable set of patterns that preceded the chasm. The Innovator’s Dilemma and Innovator’s Solution helped me refine the notion of the Four types of Startup Markets. I read these books as the handbook for startups trying to disrupt an established company. The Tipping Point has made me realize that marketing communications strategies for companies in New Markets often follow the Tipping Point.

The Innovator's Dilemma & The Innovator's Solution by Clayton M. Christensen
Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers
Inside the Tornado: Marketing Strategies from Silicon Valley's Cutting Edge
Dealing with Darwin : How Great Companies Innovate at Every Phase of Their Evolution
all three by Geoffrey A. Moore
The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell

Strategy Books for Startups

The Entrepreneurial Mindset articulates the critically important idea that there are different types of startup opportunities. The notion of three Market Types springs from here. The book provides a framework for the early marketing/sales strategies essential in a startup. Delivering Profitable Value talks more about value propositions and value delivery systems than you ever want to hear again. However, this is one of the books you struggle through and then realize you learned something valuable. Finally, while New Venture Creation is a textbook used in business schools to teach entrepreneurship, there is way too much great stuff in it to ignore. At first read it is simply overwhelming but tackle it a bit a time and use it to test your business plan for completeness.

The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty by Rita Gunther McGrath and Ian MacMillan
Delivering Profitable Value by Michael J. Lanning.
New Venture Creation with New Business Mentor 2002 by Jeffry A. Timmons

New Product Introduction Methodologies

Eric Von Hippel and the notion of “Lead Users” offer many parallels with Customer Discovery. Von Hippel’s four steps of 1) goal generation and team formation, 2) trend research, 3) lead user pyramid networking and 4) Lead User workshop and idea improvement is a more rigorous and disciplined approach then suggested in our book.

Breakthrough Products with Lead User Research by Eric Von Hippel and Mary Sonnack
he Sources of Innovation by Eric Von Hippel

“Marketing as Strategy” Books

Offering more than some handy tactical tidbits, these books offer a chance to change your entire strategy. Peppers and Rogers opened my eyes to concepts of lifetime value, most profitable customers and the entire customer lifecycle of “get, keep and grow.” Bill Davidow introduced me to the concept of “whole product” and the unique needs of mainstream customers.

The One to One Future: Building Relationships One Customer at a TimeH by Don Peppers, Martha Rogers
Marketing High Technology: An Insider's View and
Total Customer Service: The Ultimate Weapon by William H. Davidow

“War as Strategy” Books

The metaphor that business is war is both a cliché and points to a deeper truth. Many basic business concepts; competition, leadership, strategy versus tactics, logistics, etc. have their roots in military affairs. The difference is that in business no one dies. At some time in your business life you need to study war or become a casualty. Sun Tzu covered all the basics of strategy in The Art of War until the advent of technology temporarily superseded him. Also, in the same vein try The Book of Five Rings by Miyamoto Musashi. These two books have unfortunately turned into business clichés but they are still timeless reading. Carl Von Clausewitz’s On War is a 19PthP century western attempt to understand war. The “Boyd” book is a biography and may seem out of place here, but it’s hard to understand the importance of John Boyd’s OODA loop to business strategy without the context. And Boyd’s OODA loop is the core concept reinvented for the Customer Development Process. Read it and then look at all the web sites for Boyd papers, particularly Patterns of Conflict. The New Lanchester Strategy is so offbeat that it tends to be ignored. Its ratios of what you require to attack or defend a market keep coming up so often in real life, that I’ve found it hard to ignore.

The Art of War by Sun Tzu, translated by Thomas Cleary, or the one by Griffith
The Book of Five Rings by Miyamoto Musashi
On War by Carl Von Clausewitz’s Everyman's Library Series
Boyd: The Fighter Pilot Who Changed the Art of War by Robert Coram
Lanchester Strategy: An Introduction by Taoka and/or
New Lanchester Strategy: Sales and Marketing Strategy for the Weak (New Lanchester Strategy)
by Shinichi Yano, Kenichi SatoT, Connie Prener

Marketing Communications Books

Ries and Trout positioning books can be read in a plane ride, yet after all these years they are still a smack on the side of the head. Regis McKenna has always been a favorite of mine. However, as you read Relationship Marketing separate out the examples Regis uses into either startups or large sustainable businesses. What worked in one, won’t necessarily work in another. Read these books first before you dive into the 21PstP century stuff like Seth Godin.

Seth Godin “gets deeply” the profound changes the internet is having in the way we think about customers and communicating with them. Godin’s Permission Marketing book crystallized a direct marketing technique (permission marketing), which was simply impossible to achieve pre-internet. His follow-on book, Ideavirus is worth it after you’ve read Permission Marketing. His follow-on books are all worth having in your library. Lakoff’s book, while written for a political audience has some valuable insights on framing communications.

Positioning: The Battle for Your Mind The 20th Anniversary Edition and
The 22 Immutable Laws of Marketing: Violate Them at Your Own Risk by Al Ries, Jack Trout
Relationship Marketing: Successful Strategies for the Age of the Customer by Regis McKenna
Permission Marketing: Turning Strangers Into Friends, and Friends into Customers and
Unleashing the IdeavirusH by Seth Godin
Don’t Think of an Elephant! by George Lakoff

Sales

Many of the ideas of Customer Validation are based on the principles articulated by Bosworth, Heiman and Rackham. Bostworth’s Solution Selling is a must read for any executive launching a new product. Its articulation of the hierarchy of buyers needs as well its description of how to get customers to articulate their needs, makes this a “must read”, particularly those selling to businesses. Heiman’s books are a bit more tactical and are part of a comprehensive sales training program from his company Miller-Heiman. If you are in sales or have a sales background you can skip these. But if you aren’t they are all worth reading for the basic “blocking and tackling” advice. The only bad news is that Heiman writes like a loud salesman – but the advice is sound. Rackham’s Spin Selling is another series of books about major account, large ticket item sales, with again the emphasis on selling the solution, not features.Lets Get Real is of the Sandler School of selling (another school of business to business sales methodology.)

Solution Selling: Creating Buyers in Difficult Selling MarketsH By Michael T. Bosworth
The New Conceptual Selling: The Most Effective and Proven Method for Face-To-Face Sales Planning and The New Strategic Selling: The Unique Sales System Proven Successful by the World's Best Companies by Stephen E. Heiman, et al
Spin Selling Hand the HSpin Selling Fieldbook HBy Neil Rackham
Lets Get Real or Lets Not Play by Mahan Khalsa
Sandler Selling System Hwww.sandler.com
Miller Heiman Sales Process Consulting & Training Hwww.millerheiman.com

Startup Nuts & Bolts

Jeff Timmons Business Plans that Work summarizes the relevant part of hsi New Venture Creation book. However, both are worth having on the shelf as his model of how to look at startup opportunities provides a rigor and framework that I only wish I had used. Nesheim’s book High Tech Startup is the gold standard of the nuts and bolts of all the financing stages from venture capital to IPO’s. If you promise to ignore the marketing advice he gives you, Baird’s book, Engineering Your Startup is the cliff notes version in explaining the basics of financing, valuation, stock options, etc. Term Sheets and Valuations is a great read if you’re faced with a term sheet and staring at words like “liquidation preferences and conversion rights” and don’t have a clue what they mean. Read this and you can act like you almost understand what you are giving away. Gordon Bells’ book High-Tech Ventures is incomprehensible on the first, second or third read. Yet it is simply the best “operating manual” for startups that has been written. (The only glaring flaw is Bell’s assumption that a market exists for the product and that marketing’s job is data sheets and trade shows.) Read it in doses for insight and revelation and make notes, (think of reading the bible) rather than reading it straight through.

Business Plans That Work and New Venture Creation with New Business Mentor 2002 by Jeffry A. Timmons
High Tech Start Up: The Complete Handbook for Creating Successful New High Tech Companies
By John L. Nesheim
Engineering Your Start-Up: A Guide for the High-Tech Entrepreneur By Michael L. Bair
Term Sheets & Valuations - An Inside Look at the Intricacies of Venture Capital by Alex Wilmerding Aspatore Books Staff, Aspatore.com
High-Tech Ventures: The Guide for Entrepreneurial Success by Gordon Bell

Manufacturing

I've yet to meet a manufacturing person that does not reference The Goal when talking about lean manufacturing principles first. It's a book inside a novel - so it humanizes the manufacturing experience. Lean Thinking is the best over all summary of the lean manufacturing genre. Toyota Production System is the father of all lean manufacturing - it's simple tone is refreshing.

The Goal by Eliyahu Goldratt
Lean ThinkingH by James Womack

Toyota Production System: Beyond Large-Scale Production by Taiicho Ohno.

Product Design

Cooper’s book, The Inmates are Running the Asylum, had the same impact on me as Moore’s Crossing the Chasm – “why of course, that’s what’s wrong.” It’s important and articulate.

The Inmates Are Running the Asylum: Why High Tech Products Drive Us Crazy and How To Restore The Sanity by Alan Cooper

Culture/Human Resources

If you are in a large company and wondering why your company isn’t going anywhere your answers might be found in Good to Great. Written by Jim Collins, the same author who wrote Built to Last, both are books that “you should be so lucky” to read. What differentiates good companies versus great? How do you institutionalize core values into a company that enable it to create value when the current management is long gone? When I first read these, I thought they were only for companies that were lucky enough to get big. Upon reflection, these books were the inspiration for the “Mission-Oriented Culture.” Read these two books together.
Ironically, the best HR stuff for anyone in a startup to read is not a book. It is the work James Baron at Stanford has done. Download his slides on the Stanford Project on Emerging Companies. Baron’s book, Strategic Human Resources – is a classic HR textbook. Finally, if you are working at a startup and wondering why the founder is nuts, The Founder Factor helps explain a few things.

Good To Great and Built to Last by James C. Collins, Jerry I. Porras
The Human Equation: Building Profits by Putting People First By Jeffrey Pfeffer
Strategic Human Resources: Frameworks for General Managers by James N. Baron, David Kreps
The Founder Factor by Nancy Truitt Pierce

Venture Capital

Unlike the “how to” books above, these are personal stories. If you have never experienced a startup first hand, Jerry Kaplan and Michael Wolff’s books are good reads of a founder’s adventure with the venture capitalists. Eboys is the story of Benchmark Capital during the Internet Bubble. Ferguson’s book is a great read for the first time entrepreneur. His personality and views of the venture capitalists and “suits” are a Rorschach ink blot test for the reader.

Burn Rate: How I Survived the Gold Rush Years on the InternetH by Michael Wolff
Startup: A Silicon Valley Adventure by Jerry Kaplan
Eboys: The First Inside Account of Venture Capitalists at Work by Randall E. Stross
High Stakes, No Prisoners: A Winner's Tale of Greed and Glory in the Internet Wars
by Charles H. Ferguson

History

The best history of Silicon Valley you won’t read anywhere is actually a YouTube presentation: The Secret History of Silicon Valley. If you want the best-written summary of why Silicon Valley happened, (and why the east coast blew it) here it is. Though she misses the military-industrial complex contribution to the formation of Silicon Valley, Annalee Saxenian’ Regional Advantage nails most of the rest. The Nudist on the Late Shift is a book you send to someone who lives outside of Silicon Valley who wants to know what life is like in a startup. Alfred Sloan’s My Years with General Motors is a great read, but not for the traditional reasons. Read it from the point of view of an entrepreneur (Durant) who’s built a great company by gut and instinct, got it to $200M and is replaced by the board. Then watches as a world-class bureaucrat grows into one of the largest and best run companies in the world. Make sure you read it in conjunction with Sloan Rules and A Ghost’s Memoir.

The Secret History of Silicon Valley
Regional Advantage: Culture and Competition in Silicon Valley and Route 128H
by Annalee Saxenian
The Nudist on the Late Shift by Po Bronson
My Years with General Motors by Alfred Sloan
Sloan Rules: Alfred P. Sloan and the Triumph of General Motors by David R. Farber
A Ghost's Memoir: The Making of Alfred P. Sloan's My Years with General Motors
by John McDonal

Ten Tips for Creating Successful Web 2.0 Solutions Inside the Enterprise

2008-06-18T06:58:00Z

Tonight I attended a Churchill Club panel discussion on Succeeding with Web 2.0 Within the Enterprise, with Charlene Li of Forrester as the moderator. The four panelists each gave a run down on their internal Web 2.0 projects for employees -- all about sharing information and ideas.

Speakers:
Steve Bendt, Senior Manager, Social Technology, Best Buy
René Bonvanie, Senior Vice President, Worldwide Marketing, Partner Programs, and Online Services, Serena Software
Paul Pedrazzi, Vice President, Strategy and Innovation & Founder of Oracle AppsLab, Oracle
Shiv Singh, Vice President, Social Media & Global Strategic Initiatives, Avenue A|Razorfish

Here is what I took away from the discussion. It makes me want to dive in with a wiki or network of our own!

Ten Tips for Creating Successful Web 2.0 Solutions Inside the Enterprise

Trust is #1. Trust your employees to act like adults and do what is right. Trust them not to vandalize an internal wiki. They won’t.
Let go of control right away; let the users define it. Let users manage themselves.
Keep your budget and the project small to start – you want to experiment and learn.
Pick something really important to solve.
It’s all about sharing. Getting your employees to share will lead to innovation.
Reward those who contribute ideas and share content. Frequent contributors float to the top. It increases their social capital, they get to be known as experts in a field; they get new projects in those areas; people turn to them as experts.
Try stuff and fail. Best Buy reacts to the tangible. Theory is great but…..
Psychology and games. Students need to learn now for work later: social and behavioral psychology. Application of game mechanics to the enterprise. Make work fun.
Redefine privacy. Almost everything a company creates can be shared with customers. Only a few things, really, can’t be shared. Guideline: put everything on the network except for a few things. (Serena)
Provide sponsorship, not edicts.

What will you get if you do this?

Innovation!
“Unbundle the corporation.” (I am not quite sure what that is but I loved it. Rather like Question Authority.
Democratization of the corporation. The bigger the company gets, the more energy it needs to spend managing. Social tools remove the friction and let people manage themselves.
A flatter organization. Ideas can come from anywhere.
Young people coming out of college will expect these tools. Be ready to enable them to do their best work.
Meritocracy vs. aristocracy (what we have now: I have the title, you do what I say)
• If it’s done right, email volume will decrease in a big way. All the emails that go to more than one person and aren’t time sensitive (most of them) could go to a public site where they will be stored. We can quit asking for the same information over and over.

Some Practical Tips from the Panelists

Use software that makes it easy to change quickly. (Best Buy)
If using a public social networking site (e.g., Facebook), bring in 16 year olds to train your 40 year old employees on how to use, what to post (resumes are good) and not to post (party photos). (Serena)
Let employees use the social media they are already using. If they save a bookmark with delicious, or post a photo on Flickr, let them give it a special tag and have it automatically shared in your internal wiki. (Avenue A|Razorfish)
Can create successful projects bottoms up or top down. It depends on the culture of the company.
Measurement: Best Buy figures that if the benefits seem to outweigh the costs, you are doing well.
Every 6 months we change ownership of the wiki. (Avenue A| Razorfish)
How did the project get funded? Serena funded it by “no longer paying Microsoft for their stuff. We went to Facebook, it’s free, and now I have time for Facebook Fridays with my employees.” (my table mates smiled uncomfortably at me…)
Yes, you have to listen and pay attention to legal, IT and others. They have genuine concerns that you need to address in your project. But lots of these issues go away when the project becomes real. Charlene suggests putting together complete doomsday scenarios with planned mitigations to walk HR and legal across to see what the benefits can be.
Today, corporations incent employees to compete individually. They might like to share, but they have a job. People aren’t compensated on sharing ideas but on impressing the boss, competing with other employees. Today’s education system and corporations reward individual contributors. The world is far too complex for individuals to succeed. Need to depend on others. No one can know it all.

OK, and now I a confession to make. We have been tossing around ideas of creating a way for startups to publish information about themselves. And immediately lots of questions and objections arise. Who approves the submission? What is the workflow? How long do we wait before reminding the approver to approve? What qualifications should the startup have? How do we verify they have those? What if a company publishes garbage or rants or...? You get the idea.

I was discussing this scenario with a great little comany, Leverage Software -- with Joe Kleinschmidt, CTO and co-founder. Pretty soon Joe says, "Oh, Kris. Oh no no no no no. You have it all wrong. You don't need to worry about any of that." Turns out that Leverage has tons of customers and tens of thousands of users for their private label social networking software, and maybe 3 times out of hundred of thousands of posts has anything negative been posted. When it happens, the community lets the moderator know.

So, Joe was right all along, as Charlene Li said when she kicked off the discussion this evening: "Let go of control." People will manage themselves and it all works out in the long run.

How to Design Your Startup for Acquisition

2008-06-16T21:36:00Z

In my inbox today appeared SandHill's newsletter with an interesting post by Jon B. Fisher, who recently sold his startup, Bharosa, to Oracle. Selling his startup to Oracle was his plan from Day One. He covers the considerations a startup entrepreneur needs to weigh if acquisition is the most likely exit route: how can you design your startup to have the highest valuation and be likely to get acquired? Jon calls this new thinking "Strategic Entrepreneurship (SE), which can " can maximize your chance of success while minimizing your risks."

The general philosophy of Strategic Entrepreneurship is to maximize your change of obtaining a return by exiting earlier in a planned way, using less capital as you go.

"The typical business model for a startup assumes that the longer a company stays in business, the higher its valuation will become - but that’s not always true for two reasons. First, the longer a company stays in business, the greater the chance of failure, either through changing market conditions or growing competition. Second, the more funding your startup receives, the greater the dilution of ownership for the entrepreneur. The longer you hold on to a company, the greater the risk that your valuation may decrease."

Tips from Jon:

Instead of trying to become the one dominant company in your market, Strategic Entrepreneurism says that you want to be the one company that a larger, and more dominant company, wants to acquire.
From day one, create and design your company to become an attractive acquisition candidate. Identify the companies that you believe would most benefit from acquiring your company.
You must rely on far less investment capital to guard against dilution. The more money you accept to startup your company, the more you’ll have to pay back to these initial investors before you can make any money yourself.
You must build your company’s products so that they can seamlessly integrate with a potential acquirer in mind.
Find a niche for your company... look for a crucial problem that needs solving and then provide that solution for a Fortune 500 customer that a Fortune 100 company would want to do business with or is already doing business with.

Looking for a start-up idea and VC funding? Call Microsoft

2008-06-13T18:34:00Z

I came across this article about Microsoft's IP Ventures and Licensing team (by Eric Lai at Computerworld).

The article talks about a friendly and "progressive" Microsoft when it comes to licensing its technology to startups. Some of the $7 billion that Microsoft spends each year on R&D does not get used by the product groups -- making it available for outside firms to license.

The article contains a couple of intersting insights into how startups can get access to the technology portfolio at Microsoft:

Nope, the startup that licenses the technology does not have to be based on 100% Microsoft technology-- David Harnett, head of the team, cites the example of Skinkers that is using Java and Flash
Immediate monetization to Microsoft is not the chief goal-- so lots of flexibility to make the ventures that use these technologies successful.

For more info on IP Ventures, search this site -- there are 5 or 10 posts on the subject. Tony Bailey on IP Ventures team has an earlier post with a thorough background on the IP Licensing program -- here on the Microsoft Startup Zone.

There are also several companies that are IP Ventures "spin offs" that are members of the Microsoft Startup Accelerator Program -- Wallop and Zumobi, for example, as well as Inrix.

Moral of the story for entrepreneurs: don't forget to check out the IP Licensing technology -- it may provide you with a quick start. And that can be goodness in this market.

Women's Resource Center for Women Entrepreneurs

2008-06-06T19:44:00Z

I wanted to share some new resources for women entrepreneurs and small business owners. The focus in not on tech or software startups, but on small businesses of any type.

Explore the Office Live Small Business Women’s Resource Center where you can find expert advice, how-to articles, as well as free Web seminars.
Participate in enlightening and supportive discussions in the Office Live Small Business Women’s Community.
Keep in touch with fellow women business owners in the Vision to Venture Facebook Group. (you need a facebook account for this one.)
The on-demand Microsoft Vision to Venture sessions are now available for your viewing.

Another center for entrepreneurs is the Microsoft Startup Center -- again focused on all types of small businesses, and on very small businesses. It has some offers from partners, so you might want to check it out.

The Visual Display of Quantitative Information: Edward Tufte

2008-05-30T07:47:00Z

Writing the post on acquisitions in the softwae/Web industry -- and how several Web sites and blogs display that information - make me think about the power of the visual display of information. I remember discovering Edward Tufte's book, The Visual Display of Quantitative Information, at Esther Dyson's PCForum conference in 1983 or 1984. The two charts I was most impressed by are the one that shows the progress of the battle between Napoleon and Russia -- Napoleon's march to Russia (picture below) -- and the one showing how a doctor mapped locations of cholera with local wells -- then understanding that cholera was being transmitted through the water -- the beginning of epidemiology. Edward Tufte himself talked about the experience of visiting Dr. John Snow's cholera-infected water pump in London.

Another interesting angle on Tufte is his thinking about the use and misue of Power Point for conveying information. Closer to the Microsoft home. When working in my first startup, Ansa Software (Paradox-- relational DB, still actually sold by Corel!), I had the opportunity to work with Ben Rosen, then chairman of Ansa, Lotus and Compaq. Ben coached us to quit using slides (a crutch), keep the lights on and look our audience directly in the eye. Talk to them, have a conversation, tell the story. So, entrepreneurs out there, when you pitch VCs, remember that the story you are telling is what matters. You can reach more about what Ben Rosen is up to at his blog and about his good friend, Jerry Weissman, who runs Power Presentations - the premier firm for prepping your CEOs for his or her IPO tour (and other strategic events). Onward to better presenations!

Tracking Web & Technology Acquisitions

2008-05-30T06:58:00Z

I recently found a neat blog on the technology acquisitions for 2007. Steve Nielsen of Partner Up combed many sources to compile this comprehensive list, complete with blog, media and press coverage. Steve's Q1 2008 list is here. This list includes 3 acquisitions by Microsoft: Danger, YaData and Caligari.

If you are interested in Microsoft's acquisitions, there are several good posts on this site by Don Dodge and Dan'l Lewin -- just do a search or check the tag cloud for "acquisitions".

Microsoft maintains an official public site listing its acquisitions.

Awhile ago I had stumbled upon a site that does a compilation of acquisitions by Yahoo, Google and Microsoft on a timeline. You can see the activity pick up over time. This one goes through August of 2007. And here is yet another timeline of acquisitions, updated through 2008 on the xtimeline.com site.

Hiring a Consultant to Write Your Business Plan: What Does It Cost?

2008-05-18T08:11:00Z

A recent post on the Stanford B-school alumni entrepreneurs list posed the question: how much should you charge, or be charged, for writing a business plan? The person who posed the question compiled answers from various alums and gave me permission to post them here. There seem to be 3 answers (and combinations thereof) to the question:
• Hourly
• Percent of equity
• Flat fee

I have included the responses pretty much verbatim so that you can see the arguments for and against these approaches. I thought this might be useful to startups.

ANSWER 1

There are business plans, and there are business plans. To quote a number off the bat may be limiting. I generally like to find out a client's needs in more detail. I would break this into three phases:

(1) Set up a retainer of say $1,500 to bill against in a "Strategic Planning" phase on an hourly basis, with the deliverable to be a clear sense of what is needed in the a Growth Strategy Plan, and on a Presentation to Raise Funds, which are really two separate projects.

(2) Create the Growth Strategy Plan.

(3) Create the Presentation.

I would guess that the Growth Strategy Plan could be anywhere from $3,000 to $5,000, and the Presentation could be an additional $5,000, give or take. But it really depends on what you find out in working with them.

ANSWER 2

A friend of mine does this as a consultant and there is no "standard fee per se, it depends on the situation, your available time and the opportunity you think the startup represents. Every plan and situation is different with some plans being more standard business models and others being more elaborate. A good place to start is to think about how much you think your time is worth on a per hour basis, i.e., if you were doing a standard consulting gig, how much would you want to be paid? Then estimate how much time you think it would take to research and write up the plan. That will give you a rough dollar amount and you can adjust as you see appropriate. Depending on how good you think the startup opportunity is and what they are able to pay, you may want to offer some choices trading cash for stock options in the company. If you go the stock option route, be careful that all the company's legal docs are in reasonably good order and it is recorded properly. If it is a foreign country, you may want to be more wary of stock unless you really know and trust the people you are working with.”

ANSWER 3

This is exactly the work that I do for startups in Silicon Valley. I have found that it is a bad idea to ask for a percentage of the amount raised:

(1) Under U.S. Law you have to be a licensed broker to do this, and such licensing is difficult to obtain
(2) More importantly, most VCs will either actively work to cut you out of the deal or tell the company that there is no deal unless they make you go away. They simply will not pay what they perceive to be a middle man.

What I have found works quite well it to charge the company an hourly rate for the actual work I do, and ask for a grant of common shares or options (the VC¹s generally don¹t care much about common shares).

ANSWER 4

It depends. I have done a fair bit of that myself and have done flat fee arrangements, hourly, and houly + equity. Flat fee is dangerous b/c it is hard to define the 'end' of the project in a disciplined way such that the client feels happy at the end. Then there is the question of what to charge and how for the additional work that inevitably is required following the initial completion. For that reason I strongly prefer hourly arrangements. When I have done flat fee arrangements, I charged $30-35K for a full plan with financials, market research etc. For straight hourly I charged $225-$275 depending on the client.

When I got equity, I tried for an amount equal to ¼ of what a VP of Marketing would get if hired at that time. I came to that under the assumption that an engagement would last less than a year but is valuable enough that it should get 'over compensated' and therefore is worth 1 year of a 4-year vesting schedule of a VP of Marketing. If I get equity, I tend to drop my hourly 10-15% depending on the amount of equity.

ANSWER 5

I have done this twice in the past in the US and billed at about $30.00 per hour of writing. Obviously I gave the client a ballpark figure and not broken down by the hour. You may not be able to get this much in Mexico, especially for a startup, so you may wish to consider some sort of equity participation.

ANSWER 6

I just did this. I simply charged by the hour. Depending on your experience level, $150/hr and up is reasonable.

ANSWER 7

In between startups of my own I wrote business plans for folks. Two suggestions depending upon what you think of the company's fundraising prospects:

(1) A flat fee. I priced my work based upon how many inches of plan they want (ie, how comprehensive), how much research I need to do and how I estimated the time based upon my existing (albeit market sensitive) set day/hourly rate. After all that, the fee ran from $5k - 30k.

(2) A lower flat fee with a % of the funds raised. Key here was if I was involved with the fundraising effort and my level of confidence of their prospects. The only time I did this I offered a 50% on the flat fee and a 1% of the money (have to consider the stage and target fundraising amount for the % to make sense) raised.

ANSWER 8

I run a company that provides these services up in Seattle and know virtually all of the competitors up here doing the same (it is a friendly group.)

Fees typically fall into the ranges below:

Cash Retainer                $5-8k per month
Equity Retainer              $5-8k per month
Milestone Fee                1-3% equity

These engagements typically include consulting services along with the things you list. We don’t take on “business plan-only” projects. Which might be a recommendation…don’t get trapped into taking a lower fee for writing the plan because you will inevitably do far more for them during your project.