Steve Blank's Blog, page 46

The Lean LaunchPad Online

You may have read my previous posts about the Lean LaunchPad class taught at Stanford, Berkeley, Columbia, Caltech and for the National Science Foundation.

Now you too can take this course.

I’ve worked with the Udacity, the best online digital university on a mission to democratize education, to produce the course. They’ve done an awesome job.

The course includes lecture videos, quizzes and homework assignments. Multiple short video modules make up each 20-30 minute Lecture. Each module is roughly three minutes or less, giving you the chance to learn piece by piece and re-watch short lesson portions with ease. Quizzes are embedded within the lectures and are meant to let you check-in with how completely you are digesting the course information. Once you take a quiz, which could be a multiple-choice quiz or a fill in the blank quiz, you will receive immediate feedback.

Sign up here

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Why This Class?

Ten years ago I started thinking about why startups are different from existing companies.  I wondered if business plans and 5-year forecasts were the right way to plan a startup.  I asked, “Is execution all there is to starting a company?”

Experienced entrepreneurs kept finding that no business plan survived first contact with customers. It dawned on me that the plans were a symptom of a larger problem: we were executing business plans when we should first be searching for business models. We were putting the plan before the planning.

So what would a search process for a business model look like? I read a ton of existing literature and came up with a formal methodology for search I called Customer Development.

That resulted in a new process for Search: Customer Development + traditional product management/Waterfall Engineering. It looked like this:

This meant that the Search for a business model as a process now could come before execution. So I wrote a book about this called the Four Steps to the Epiphany.

And in 2003 the Haas Business School at U.C. Berkeley asked me to teach a class in Customer Development.  With Rob Majteles as a co-instructor, I started a tradition of teaching all my classes with venture capitalists as co-instructors.

In 2004 I funded IMVU, a startup by Will Harvey and Eric Ries. As a condition of my investment I insisted Will and Eric take my Customer Development class at Berkeley. Having Eric in the class was the best investment I ever made. Eric’s insight was that traditional product management and Waterfall development should be replaced by Agile Development.  He called it the “Lean Startup.”

Meanwhile, I had said startups were “Searching” for a business model, I had been purposefully a bit vague about what exactly a business model looked like. For the last two decades there was no standard definition.  That is until Alexander Osterwalder wrote Business Model Generation.

This book was a real breakthrough. Now we understood that the strategy for startups was to first search for a business model and then after you found it, put together an operating plan.

Now we had a definition of what it was startups were searching for. So business model design + customer and agile development is the process that startups use to search for a business model.

And the organization to implement all this was not through traditional sales, marketing and business development groups on day one. Instead the founders need to lead a customer development team.

And then to get things organized Bob Dorf and I wrote a book, The Startup Owners Manual that put all these pieces together.

But then I realized rather than just writing about it, or lecturing on Customer Development, we should have a hands-on experiential class. So my book and Berkeley class turned into the Lean LaunchPad class in the Stanford Engineering school, co-taught with two VC’s – Jon Feiber and Ann Miura-Ko. And we provided dedicated mentors for each team.

Then in the fall of 2011, the National Science Foundation read my blog posts on the Stanford version of the Lean LaunchPad class.  They said scientists had already made a career out of hypotheses testing, and the Lean LaunchPad was simply a scientific method for entrepreneurship. They asked if I could adapt the class to teach scientists who want to commercialize their basic research. I modified the class and recruited another great group of VC’s and entrepreneurs – Jim Hornthal, John Burke, Jerry Engel,Bhavik Joshi and Oren Jacob – to teach with me.

We taught the first two classes of 25 teams each, and then in March of 2012 trained faculty from Georgia Tech and the University of Michigan how to teach the class at their universities. Georgia Tech and the University of Michigan faculty then taught 54 teams each in July of this year and will teach another 54 teams in October.

We then added four more schools – Columbia, Caltech, Princeton and Hosei – where our team taught the Lean LaunchPad. We also developed a 5-day version of the class to complement the full semester and quarter versions.

Then last month we partnered with NCIIA and taught 62 college and university educators in our first Lean LaunchPad Educators Program.

And now we’ve spent weeks in the Udacity studio putting the lecture portion of the Lean LaunchPad class online.

Sign up and find out how to start a company!

Filed under: Business Model versus Business Plan, Customer Development, Lean LaunchPad

Entrepreneurship is hard but you can’t die

We Sleep Peaceably In Our Beds At Night Only Because Rough Men Stand Ready To Do Violence On Our Behalf

Everyone has events that shape the rest of their lives.  This was one of mine.

——-

I’ve never been shot at. Much braver men I once worked with faced that every day. But for a year and a half I saw weapons of war take off every day with bombs hanging under the wings. It never really hit home until the day I realized some of the planes didn’t come back.

Life in a War Zone

In the early 1970’s the U.S. was fully engaged in the war in Vietnam. Most of the fighter planes used to support the war were based in Thailand, or from aircraft carriers (or for some B-52 bombers, in Guam.)  I was 19, in the middle of a hot war learning how to repair electronics as fast as I could. It was everything life could throw at you at one time with minimum direction and almost no rules.

It would be decades before I would realize I had an unfair advantage. I had grown up in home where I learned how to live in chaos and bring some order to my small corner of it. For me a war zone was the first time all those skills of shutting out everything except what was important for survival came in handy. But the temptations in Thailand for a teenager were overwhelming: cheap sex, cheap drugs (a pound of Thai marijuana for twenty dollars, heroin from the Golden Triangle that was so pure it was smoked, alcohol cheaper than soda.) I saw friends partying with substances in quantities that left some of them pretty badly damaged. At a relatively young age I learned the price of indulgence and the value of moderation.

What a great job

But I was really happy. What a great job – you work hard, party hard, get more responsibility and every once in awhile get to climb into fighter plane cockpits and turn them on. What could be better?

Near the beginning of the year when I was at an airbase called Korat, a new type of attack aircraft showed up – the A-7D Corsair. It was a single seat plane with modern electronics (I used to love to play with the Head Up Display.) And it was painted with a shark’s mouth. This plane joined the F-4’s and F-105 Wild Weasels (who went head-to-head with surface-to-air missiles,) and EB-66’s reconnaissance aircraft all on a very crowded fighter base.  While the electronics shop I worked in repaired electronic warfare equipment for all the fighter planes, I had just been assigned to 354th Fighter Wing so I took an interest in these relatively small A-7D Corsair’s (which had originally been designed for the Navy.)

He’s Not Coming Back

One fine May day, on one of my infrequent trips to the flight line (I usually had to be dragged since it was really hot outside the air-conditioned shop), I noticed a few crew chiefs huddled around an empty aircraft spot next to the plane I was working on. Typically there would have been another of the A-7’s parked there. I didn’t think much of it as I was crawling over our plane trying to help troubleshoot some busted wiring. But I started noticing more and more vans stop by with other pilots and other technicians– some to talk to the crew chief, others just to stop and stare at the empty spot where a plane should have been parked. I hung back until one of my fellow techs said, “Lets go find out what the party is about.”

We walked over and quickly found out it wasn’t a party – it was more like a funeral.  The A-7 had been shot down over Cambodia.  And as we found out later, the pilot wasn’t ever coming home.

An empty place on the flight line

While we were living the good life in Thailand, the Army and Marines were pounding the jungle every day in Vietnam. Some of them saw death up close. 58,000 didn’t come back – their average age was 22.

Everyone shook their heads about how sad. I heard later from “old-timers” who had come back for multiple tours “Oh, this is nothing you should have been here in…” and they’d insert whatever year they had been around when some days multiple planes failed to return. During the Vietnam War ~9,000 aircraft and helicopters were destroyed. Thousands of pilots and crews were killed.

It’s Not a Game

I still remember that exact moment – standing in the bright sun where a plane should be, with the ever present smell of jet fuel, hearing the engines of various planes taxing and taking off with the roar and then distant rumble of full afterburners – when all of a sudden all the noise and smells seemed to stop – like someone had suddenly turned off a switch. And there I had a flash of realization and woke up to where I was. I suddenly and clearly understood this wasn’t a game. This wasn’t just a big party. We were engaged in killing other people and they were equally intent on killing us. I turned and looked at the pilots with a growing sense of awe and fear and realized what their job – and ours – was.

That day I began to think about the nature of war, the doctrine of just war, risk, and the value of National Service.

Epilogue

Captain Jeremiah Costello and his A-7D was the last attack aircraft shot down in the Vietnam War.

Less then ninety days later the air war over Southeast Asia ended.

For the rest of my career when things got tough in a startup (being yelled at, working until I dropped, running out of money, being on both ends of stupid decisions, pushing people to their limits, etc.), I would vividly remember seeing that empty spot on the flightline. It put everything in perspective.

Entrepreneurship is hard but you can’t die.

Filed under: Air Force, Family/Career/Culture

Vision versus Hallucination – Founders and Pivots

A founder’s skill is knowing how to recognize new patterns and to pivot on a dime. At times the pattern is noise, and the vision turns out to be a hallucination. Knowing how to sort between vision and  hallucination can avoid chaos inside your startup.

———

Yuri, one of my ex students started a big-data analytics company last year. He turned his PhD thesis into a killer product, got it funded and now was CEO of a company of 30. It was great to watch him embrace the spirit and practice of customer development. He was constantly in front of customers, listening, selling, installing and learning.

And that’s where the problem was.

I got to spend time inside his company while I was using their software to analyze early-stage ventures. What I saw reminded me of some of the best and worst things I did as a founder.

A Pivot a Week

It seemed like once a week Yuri would come back from a customer meeting brimming with new insights. “We’re building the wrong product!” he’d declare. “We got to pivot now.” Tossing their agile development process and at times their entire business model in the air, the company would go into fire-drill mode and engineering would start working on whatever his latest insight was.

Other weeks Yuri would be buffeted by the realities of his burn rate, declining bank account and depressing comments from customers. This time he’d be back in the building declaring “We’re going to be out of business in 3 months if we don’t get our act together.”  I even heard him say to a customer, “If we don’t get your order we’ll just have to close up in 90 days.”

As a consequence everyone was afraid to make a decision because they couldn’t guess what Yuri wanted to do that week. Some of the engineers figuring if the founder was declaring they were toast in 90 days were updating their resumes. The company already was gaining a reputation as one without a coherent strategy.

I cringed when I saw this – it sounded like me early in my career. I would come back from customer visits convinced that what I just learned was the “real” solution to the company’s future and havoc would reign.

Unfortunately for Yuri’s company, while there were three other founders, Yuri was the CEO and none of them had the stature to tell him that his “insights” were damaging his company.

So when we had a few minutes alone I offered Yuri that he was misusing the word “pivot” and confusing it with “whatever I feel like at the moment.” I said, “You got to realize you’re not just a smart engineer anymore; 30 people are dropping everything they’re doing when you make these pronouncements.”

Pivot as an excuse

I wasn’t surprised when he pushed back, “I’m just getting out of the building and listening to customers. All I’m doing is pivoting based on their feedback.”  By now I’ve heard this more times than I liked. “Yuri, one of the things that you make you a great founder is that you have insight others don’t. But like all great founders some of these insights are simply hallucinations. The problem is you and other founders want immediate action every time you have a new idea.”

“That’s a mistake.”

“A pivot is a substantive change to one or more of components to your business model. You’re using “Pivot” as an excuse to skip the hard stuff – keeping focused on your initial vision and business model and integrating what you’ve heard if and only if you think it’s a substantive improvement to your current business model. There is no possible way you can garner enough information to pivot based on one customers feedback or even 20. You need to make sure it’s a better direction than the one you are already heading in.”

Sit on it for awhile

I said, “Sit on your great insights for 72 hours and see if they still seem good after reflection. Better, during that time brainstorm them with someone you trust.  If not your co-founders, someone outside the company.”

I offered that at Epiphany, my partner Ben’s office was the first place I would go when I thought I had new “insights.” And we’d run them to the ground for days before we’d even let anyone else know. Most of the time after a few days of thought, these insights were really not much better than the current course the company was on. Or by then other customers would tell us something quite different. And the rule was we weren’t changing anything about the product architecture until Ben and I agreed. Which required Ben hearing from the same customers I did.

Change Value Proposition Last

Second, that he needed to recognize that changing the value proposition – the features of the products/services he was offering – was a lot more traumatic for a startup than changing other parts of the business model.

He should make sure that there aren’t other parts of the business model (revenue model, pricing, partners, channel, etc.) that couldn’t change before he declares “we’re building the wrong product.”

In searching for product/market fit (the right match between value proposition and customer segment) the product should be the last part you think of changing – not the first – as the cost of upending your product development organization is high.

And to make sure everyone knew what he was doing, he might want to consider letting the entire company know “don’t worry when I’m talking about changing our business model every week – it’s a natural part of searching – only worry if I ask you to change the value proposition every month.”

Find a Brainstorm Buddy

Finally, I suggested that he find someone he respects on his advisory board, who he was comfortable brainstorming with and would tell him when he has a bad idea.

Yuri sat quietly for awhile. I wasn’t sure he had heard a thing I said, until he said “Wait 72 hours? I can do that.  Now can I call you when I have a hot new idea?

Lessons Learned

Founders are great at seeing things others don’t – at times it’s a vision, most often it’s a hallucination
Founders want immediate action – often they call it a pivot
A Pivot should not be an excuse for a lack of a coherent strategy or a lack of impulse control
Disconnect your insights from you mouth for 72-hours
If you can unilaterally overrule your co-founders there are no brakes on you
Your board members are not your brainstorm buddies-find others you trust


Filed under: Customer Development

The Lean LaunchPad Class Online

Filed under: Customer Development, Lean LaunchPad

When Microsoft Threatened to Sue Us Over the Letter “E”

By 1997 E.piphany was a fast growing startup with customers, revenue and something approaching a repeatable business model. Somewhere that year we decided to professionalize our logo (you should have seen the first one.) With a massive leap of creativity we decided that it should it should have our company name and the letter “E” with a swoop over it.

1997 was also that year that Microsoft was in the middle of the browser wars with Netscape. Microsoft had just released Internet Explorer 3 which for the first time was a credible contender.  With the browser came a Microsoft logo.  And with that same massive leap of creativity Microsoft decided that their logo would have their product name and the letter “E’ with a swoop over it.

One of E.piphany’s product innovations was that we used this new fangled invention called the browser and we ran on both Netscape and Microsoft’s. We didn’t think twice about.

That is until the day we got a letter from Microsoft’s legal department claiming similarity and potential confusion between our two logos.

They demanded we change ours.

I wish I still had their letter. I’m sure it was both impressive and amusing.

I had forgotten all about incident this until this week when Doug Camplejohn, E.piphany’s then VP of Marketing somehow had saved what he claims was my response to Microsoft’s legal threat and sent it me.  It read:

Response Letter to Bill Gates

Dear Bill,

We are in receipt of your lawyer’s letter claiming Microsoft’s

ownership of the look and feel of the letter “e”.  While I understand

Microsoft’s proprietary interest in protecting its software, I did not

realize (until the receipt of your ominous legal missive) that one of

the 26 letters in the English language was now the trademarked

property of Microsoft.

Given the name of your company, claiming the letter “e” is an unusual

place to start. I can understand Microsoft wanting exclusive rights to

the letter “M” or “W”, but “e”?  I can even imagine a close family

member starting your alphabet collection by buying you the letters “B”

or “G” as a birthday present.  Even the letters “F” “T” or “C” must be

more appealing right now then starting with “e”.

In fact, considering Microsoft’s financial health and legal prowess

you may want to consider buying a symbol rather than a letter.

Imagine the value of charging royalties on the use of the dollar “$”

sign.

I understand the legal complaint refers to the similarities of our use

of “e” in the Epiphany corporate logo to the “e” in the Internet

Explorer logo.  Given that the name of my company and the name of your

product both start with the same letter, it doesn’t take much

imagination to figure out why we both used the letter in our logos,

but I guess it has escaped your lawyers.

As to confusion between the two products, it is hard for me to

understand why someone would confuse a $250,000 enterprise software

package (with which we require a customer to buy $50,000 of Microsoft

software; NT, SQL Server and IIS), with the free and ever present

Internet Explorer.

Given that Microsoft sets the standard for most things in the computer

industry, I hope we don’t open the mail next week and find Netscape

suing us for using the letter “N”, quickly followed by Sun’s claim on

“J”.  Perhaps we can submit all 26 letters to some sort of standards

committee for arbitration.

Come to think of it, starting with “e” is another brilliant Microsoft

strategy.  It is the most common letter in the English language.

Steve Blank

Epilogue

Given later that year Microsoft ended up being a large multi-million dollar E.piphany customer all I can assume is that cooler heads prevailed (more than likely our new CEO,) and this letter was never sent and the threatened lawsuit never materialized.

Ironically, since the turn of the century Microsoft has done great things for entrepreneurs. Their BizSpark and DreamSpark programs have become the best corporate model of how a large company can successfully partner with startups and students worldwide.

But I am glad we helped keep the letter E in the public domain.

Filed under: E.piphany, Marketing

At times not losing is as important as winning

At times not losing is as important as winning.

Customer Validation

E.piphany was an 11-month-old startup with 31 people and on fire. We had closed four $100,000 deals for our customer relationship management software.

Joe Dinucci, our VP of Sales, was hot on the trail of our next big order. He had just demo’d our product to his friend, the CFO of Autodesk. After seeing the demo, the CFO walked Joe over to the office of Autodesk’s VP of sales, and said to her, “I think this product might solve your sales reporting problem.”

After a demo she agreed it would.

Joe came back to our company excited. If we won the Autodesk account it could be worth half a million dollars or more.

They Have A Problem and Know It

At the time Autodesk’s sales organization was frustrated with their IT department. It took weeks or months for Sales to get financial, sales results and customer reports from IT. Autodesk’s VP of Sales fit the profile of a earlyvangelist: she understood she had a pressing problem (couldn’t get timely data needed to forecast sales), she was searching for a solution (beating up the Autodesk CIO on a weekly basis to solve her problem), she had a timetable for a solution (now) and her company had committed budget dollars to solve this problem (they spend anything to stop missing forecasts.)

A Match Made in Heaven

For the next several weeks, the entire E.piphany engineering department worked with Autodesk’s sales operation team to build a prototype using real Autodesk data. Joe made a compelling ROI (Return On Investment) presentation to the VP of Sales and the CFO. E.piphany and Autodesk seemed like a match made in heaven and it looked like we had a $500,000 deal that could close in weeks.

Not quite.

The CIO

The CFO casually mentioned that as IT would install and maintain the system, they would have to recommend and sign off on an E.piphany purchase. As the CIO worked for the CFO, Joe paid what he thought was a courtesy call on Autodesk’s CIO.

The CIO didn’t say much in the presentation (warning, warning) and he passed Joe on to his manager of data warehouse development. What Joe didn’t know was that months ago, this IT group has been tasked to solve Sales’ reporting problems and was struggling with the complexity and difficulty of extracting data from SAP.

Joe was aware of the tense history between Autodesk sales and its IT department, but given how happy the VP of Sales was with E.piphany’s prototypes plus Joe’s personal relationship with the CFO, he didn’t see this as a serious obstacle. Joe believed the IT organization had nothing but technical piece parts to compete with E.piphany’s complete solution. Given E.piphany had a vastly superior solution, Joe believed there was no logical way they could recommend to the CIO to deploy anything else but E.piphany.

Wrong.

The IT Revolt

Unbeknownst to Joe a revolt was brewing in Autodesk’s IT organization. “Sales keeps asking for all these reports and now they are telling us what application to buy?  If we deploy E.piphany’s entire solution, we’ll all be out of jobs. But if we recommend software tools from another startup, we could say we’re solving the needs of the Sales VP and still keep our jobs.“

Late in the afternoon, Joe got a call from a friend in Autodesk’s IT department warning that they were give the order to another startup. And the CIO would approve the recommendation and pass this to his boss, the CFO, the next day.

We’re Going to Lose

Joe arrived in my office, his face making it clear he brought bad news. E.piphany was now about to lose a half million-dollar Autodesk sale. Joe looked at his shoes while he muttered his frustrations with internal Autodesk politics.

We had a long discussion about the consequences if we lost. It was one thing for a startup to lose to a large company like Oracle or IBM. But to lose the sale to another startup with an inferior product would have been psychologically devastating to our little startup. E.piphany’s product development team had spent weeks inside the account, and they believed the deal was all but won. The competitor would trumpet the sales win far and wide and use the momentum to get more sales.

We couldn’t afford to lose this sale. What could we do?

The Third Way

It struck me that there might be more than two outcomes.Sales had defined the problem as a win or lose situation. But what if we added a third choice?  What if we formally, publicly and noisily withdrew from the account? The worst case was that we could tell our engineering team that we should have won but the game was rigged. While we certainly wouldn’t win the business, withdrawing would solve the more emotionally explosive issue of losing. (And In the back of my mind, I believed this third way had a chance of giving us the winning hand.)

At first Joe hated the idea. Like every great sales guy, he was eternally optimistic about the outcome. However, I wasn’t in the mood to put the company’s future at risk on the testosterone levels of our sales guy. Withdrawing by claiming that Autodesk’s IT staff had already decided that it was “any solution but ours” was making the best of a deteriorating sales situation.

Joe called his friend the CFO, waiting until after 5pm, when he was sure he wasn’t in his office, and left him a message: “Thanks for introducing us to the VP of Sales and your technical staff. We really appreciate the opportunity to work with you. Unfortunately it looks like this deal isn’t going to happen. You have a bunch of smart guys working for you, but they are determined to make sure that the status quo won’t change. We have limited resources and can’t continue to give demos and hold meetings when the outcome is predetermined. My guess is we’ll be back in six to nine months when the VP of Sales is still unhappy. I’m going to call her and let her know that we can’t put in the system that she wanted, but I thought I’d check-in with you first. Thanks again for the opportunity.”

The “Take Away” Gambit

This is known as the “take-away” gambit. I believed that by pulling the deal away, there was at least a 50% chance the CFO would do what I knew he didn’t want to – go to his CIO and help him make the “right” decision. I understood that a potential downside consequence of this maneuver was an uncooperative IT organization when we tried to install the product, but by then their check would be in the bank, and I had a plan to win them over.

Joe was concerned that we had just lost the account, but he made the call and left the message.

Two hours later Joe got a call back from the CFO who said,, “Wait, wait! Don’t pull out. Why don’t you come up and meet with me tomorrow morning. I’ve chatted with my staff and we’re now ready for a contract proposal.”

Autodesk became our third paying customer. Over the next year they paid us over $1million for our software.

After a full-court charm offensive, the IT person who wanted anyone but us became our biggest advocate. She keynoted our first user conference.

Lessons Learned

In complex B-to-B sales, multiple “Yes” votes are required to get an order.
A single “No” can kill the deal.
Understanding the saboteurs in a complex sale is as important as understanding the recommenders and influencers
We needed a selling strategy that took all of this into account.
In a startup not losing is sometimes more important than winning.

Filed under: Customer Development, E.piphany, Marketing

Massacre at IBM

Long before there was the Lean Startup, Business Model Canvas or Customer Development there was a guy in Santa Barbara California who had already figured it out.  Frank Robinson of SyncDev has been helping companies figure out their minimum viable product and pivots since 1984, long before I even knew what it meant. They’ve done it for more than 400 companies ranging in size from 200 hundred starts-ups, one of whom was Citrus Systems that became Citrix, to IBM.

Here’s a guest post from Frank.

———-

I want to tell you a story about how a team pivoted and succeeded by synchronizing product and customer development. Though it’s about a large company, it’s applicable to teams in start-ups. It’s vivid with respect to method and outcome.

Massacre at IBM

Intel was angry at their supplier about a third-generation wafer-inspection system. “How dare you,” the fab manager said. “We shut down production to setup your machine.” He blocked new business for two years.

The supplier’s CEO directed his business unit general managers to take a SyncDev workshop. The inspection- system GM decided to use it for his fourth-generation system, an 18-month program.

Though development was already underway, I kicked-off SyncDev in early November. The core team — a cross-functional team who could make all the business and technical decisions within a set envelop ─ consisted of product manager, hardware-engineering manager, software-engineering manager, applications analyst, and software designer. We would travel throughout the US and Asia to test-sell a validation prototype, listening to each customer as a jury listens to each witness.

The first wave of meetings was with five US customers in mid-November. On Monday, in San Jose, near the factory, we met with UltraTech Stepper, a friendly account. We did a quick overview of the product. That earned us the right to ask questions of fact about their department’s mission, goals, operations, volumes, tools, methods, and success metrics. We asked, “Given all that, what problems are you having?” We followed that with an hour-long design review, including disclosure of product limitations. For 30 minutes we did trial closes: Who would use it, how often, how would you justify it, and where does it rank on a list of purchase and to-do priorities.

The customer asked, “Where’s off-line setup?”  The product manager said, “It’s in the release after this.”

That night we flew to Boise. Tuesday, 17 people at Micron asked the same question. We responded the same way.

We took a red-eye to JFK and a commuter to Burlington, VT for a 9:00 AM Wednesday meeting at IBM. At noon the boss said, “You guys have no credibility. We’ve asked for off-line setup for years. No one listened!”

Leaving the parking lot, the engineering managers in the back row of the van argued. The product manager who was driving whispered, “For years that said no one needs off-line setup. Now they’re arguing about how to do it.”

Wednesday night we flew to Orlando for A&T. Thursday, off line set up was not an issue. The same thing happened on Friday in Austin. Off-line set up had disappeared into the team’s rearview mirror.

Thanksgiving had come early that year. We were on the road again by late November to meet IBM in Fishkill, NY. After a 15-minute overview, they asked about off-line set up. After we responded their boss said, “Gentlemen, this meeting is over. We don’t want to hear about your roadmap. Please leave!”

Humiliated and depressed, our ride to the hotel felt more like one in a hearse than a van. The customer’s wants the next day would be no different. The product manager described the metamorphosis:

We gathered that night at the hotel, but we were changed.  Humility had crumbled the walls between marketing and engineering. We had heard the voice of the customer as a team and they were unhappy.  Thank God the whole team was there so we could decide on the spot.

For appetizers we slashed requirements.  For soup we compressed schedule. For the main course we sliced up the configuration into bite-size pieces. For dessert we integrated customers into our testing. For after-dinner drinks we polished the new presentation and said a short prayer.

The next day was sunny. Breakfast was actually jovial. We looked back at yesterday with humor, not to cover our humiliation but because we had pivoted.

The next meetings went far better.  We took wounds, but none like those at Fishkill. We continued with three more meetings. We returned to the factory and presented our new path.

“Are you nuts?” our product board asked. “You can’t change direction midstream!”

Without missing a beat, Engineering quoted the customer. I explained how we’d manage technical risks. We were a team, convinced by a shared experience, that we knew what to do. Better yet, we had switched the burden of proof from us to our skeptics.

In December and January we met with ten customers in Korea, Japan, and China. Changes were minor. Instead of pivoting we built virtual backlog.

In February, we returned to Fishkill. “Congratulations, gentlemen,” IBM said, “We apologize for November. With the train heading our way, we’ll get on now. We’ll take two more old units (multi-million dollar) now and replace all seven with new ones when it ships.”

In 90 days the team pivoted the product, saved a major account, captured a large order, cut schedule from 18 months to nine months, and developed virtual backlog.

Two years after release, product market share was up by 30% to 70%. Twelve of 17 competitors were gone.  The division was the dominant global player.

The team followed these rules:

Cardinal Rules of Synchronous Customer and Product Development

Meet Customers as a Core, Cross-Functional Team authorized to act within a defined envelop.
Report to a “Board,” to explain and defend your strategy and business case
Meet Customers’ Decision Making Teams not just users
Meet on Site in the customers’ habitat: Home, office, lab, factory, or playground. See what they do. Meet their colleagues, form relationships, help fix stuff now, and return as required
Test Sell a Validation Prototype: Renderings, specs, and props. Don’t sell a vision! False positives result.
Ask questions. Take Notes. Ask question of fact, not opinion and shut up. Take notes. Tag data and quotes.
Disclose Limitations to surface objections. It enhances your credibility, too.
Conduct Trial closes. There are thirty good ones starting on slide one.
Meet in Waves to get bonked over the head by patterns, two customers per day, Tuesday to Thursday.
Find and Fix Bad News. Bad news early is good news, if you find and fix it early.

Filed under: Customer Development

Lying on your resume

It’s not the crime that gets you, it’s the coverup.

Richard Nixon and Watergate

Getting asked by reporter about where I went to school made me remember the day I had to choose whether to lie on my resume.

I Badly Want the Job

When I got my first job in Silicon Valley it was through serendipity (my part) and desperation (on the part of my first employer.)  I really didn’t have much of a resume – four years in the Air Force, building a scram system for a nuclear reactor, a startup in Ann Arbor Michigan but not much else.

It was at my second startup in Silicon Valley that my life and career took an interesting turn. A recruiter found me, now in product marketing and wanted to introduce me to a hot startup making something called a workstation. “This is a technology-driven company and your background sounds great. Why don’t you send me a resume and I’ll pass it on.” A few days later I got a call back from the recruiter. “Steve, you left off your education.  Where did you go to school?”

“I never finished college,” I said.

There was a long silence on the other end of the phone. “Steve, the VP of Sales and Marketing previously ran their engineering department. He was a professor of computer science at Harvard and his last job was running the Advanced Systems Division at Xerox PARC. Most of the sales force were previously design engineers. I can’t present a candidate without a college degree. Why don’t you make something up.”

I still remember the exact instant of the conversation. In that moment I realized I had a choice. But I had no idea how profound, important and lasting it would be. It would have been really easy to lie, and what the heck the recruiter was telling me to do so. And he was telling me that, “no one checks education anyway.” (This is long before the days of the net.)

My Updated Resume

I told him I’d think about it. And I did for a long while. After a few days I sent him my updated resume and he passed it on to Convergent Technologies. Soon after I was called into an interview with the company. I can barely recall the other people I met, (my potential boss the VP of Marketing, interviews with various engineers, etc.) but I’ll never forget the interview with Ben Wegbreit, the VP of Sales and Marketing.

Ben held up my resume and said, “You know you’re here interviewing because I’ve never seen a resume like this.  You don’t have any college listed and there’s no education section.  You put “Mensa” here,” – pointing to the part where education normally goes. “Why?” I looked back at him and said, “I thought Mensa might get your attention.”

Ben just stared at me for an uncomfortable amount of time. Then he abruptly said, “Tell me what you did in your previous companies.” I thought this was going to be a story-telling interview like the others. But instead the minute I said, “my first startup used CATV coax to implement a local-area network for process control systems (which 35 years ago pre-Ethernet and TCP/IP was pretty cutting edge.) Ben said, “why don’t you go to the whiteboard and draw the system diagram for me.”  Do what? Draw it?? I dug deep and spent 30 minutes diagramming trying remember headend’s, upstream and downstream frequencies, amplifiers, etc.  With Ben peppering me with questions I could barely keep up. And there was a bunch of empty spaces where I couldn’t remember some of the detail. When I was done explaining it I headed for the chair, but Ben stopped me.

“As long as you’re a the whiteboard, why don’t we go through the other two companies you were at.”  I couldn’t believe it, I was already mentally exhausted but we spent another half hour with me drawing diagrams and Ben asking questions. First talking about what I had taught at ESL – (as carefully as I could.) Finally, we talked about Zilog microprocessors, making me draw the architecture (easy because I had taught it) and some sample system designs (harder.)

Finally I got to sit down.  Ben looked at me for a long while not saying a word. Then he stood up and opened the door signaling me to leave, shook my hand and said, “Thanks for coming in.” WTF? That’s it?? Did I get the job or not?

That evening I got a call from the recruiter. “Ben loved you. In fact he had to convince the VP of Marketing who didn’t want to hire you. Congratulations.”

Epilogue

Three and a half years later Convergent was now a public company and I was a Vice President of Marketing working for Ben. Ben ended up as my mentor at Convergent (and for the rest of my career), my peer at Ardent and my partner and co-founder at Epiphany.  I would never use Mensa again on my resume and my education section would always be empty.

But every time I read about an executive who got caught in a resume scandal I remember the moment I had to choose.

Lessons Learned

You will be faced with ethical dilemmas your entire career
Taking the wrong path is most often the easiest choice
These choices will seem like trivial and inconsequential shortcuts – at the time
Some of them will have lasting consequences
It’s not the lie that will catch up with you, it’s the coverup
Choose wisely

Filed under: Convergent Technologies, E.piphany, ESL, Family/Career/Culture, Zilog

Unrequited Love

If there’s only one passionate party in a relationship it’s unrequited love.

Here’s how I learned it the hard way.

The Dartmouth Football Team

After Rocket Science I took some time off and consulted for the very VC’s who lost lots of money on the company. The VC’s suggested I should spend a day at Onyx Software, an early pioneer in Sales Automation in Seattle.

In my first meeting with the Onyx I was a bit nonplussed when the management team started trickling into their boardroom. Their VP of Sales was about 6’ 3” and seemed to be almost as wide. Next two more of their execs walked in each looking about 6’ 5” and it seemed they had to turn sideways to get through the door. They all looked like they could have gotten jobs as bouncers at a nightclub. I remember thinking, there’s no way their CEO can be any taller – he’s probably 5’ 2”. Wrong. Brent Frei, the Onyx CEO walks in and he looked about 6’ 8’ and something told me he could tear telephone books in half.

I jokingly said, “If the software business doesn’t work out you guys got a pretty good football team here.”  Without missing a beat Brent said, “Nah, we already did that. We were the Dartmouth football team front defensive three.”  Oh.

But that wasn’t the only surprise of the day. While I thought I was consulting, Onyx was actually trying to recruit me as their VP of Marketing. At the end of the day I came away thinking it was smart and aggressive team, thought the world of Brent Frei as a CEO and knew Onyx was going to succeed – despite their Microsoft monoculture. With an unexpected job offer in-hand I spent the plane flight home concluding that our family had already planted roots too deep to move to Seattle.

But in that one day I had learned a lot about sales automation that would shape my thinking when we founded Epiphany.

I Know A Great Customer

A year later my co-founders and I had formed Epiphany. As other startups were quickly automating all the department of large corporations (SAP-manufacturing, Oracle-finance, Siebel and Onyx-Sales) our first thought was that our company was going to automate enterprise-marketing departments. And along with that first customer hypothesis I had the brilliant hypothesis that my channel partner should be Onyx. I thought, “If they already selling to the sales department Epiphany’s products could easily be cross-sold to the marketing department.”

So I called on my friends at Onyx and got on a plane to Seattle. They were growing quickly and doing all they could to keep up with their own sales but they were kind enough to hear me out. I outlined how our two products could be technically integrated together, how they could make much more money selling both and why it was a great deal for both companies. They had lots of objections but I turned on the sales charm and by the end of the meeting had “convinced them” to let us integrate both our systems to see what the result was. I made the deal painless by telling them that we would do the work for free because when they saw the result they’d love it and agree to resell our product. I left with enough code so our engineers could get started immediately.

Bad idea.  But I didn’t realize that at the time.

It’s Only a Month of Work

Back at Epiphany I convinced my co-founders that integrating the two systems was worth the effort and they dove in. Onyx gave us an engineering contact and he helped our team make sense of their system. One of the Onyx product managers got engaged and became an enthusiastic earlyvanglist. The integration effort probably used up a calendar month of our engineering time and an few hours of theirs. But when it was done the integrated system was awesome. No one anything like this. We shipped a complete server up to Onyx (this is long before the cloud) and they assured us they would start evaluating it.

A week goes by and there’s radio silence – nothing is heard from them. Another week, still no news. In fact, no one is returning our calls at all. Finally I decide to get on a plane and see what has happened to our “deal.”

Instead of being welcomed by the whole Onyx exec staff, this time a clearly uncomfortable product manager met me. “Well how do like our integrated system?” I asked. “And by the way where is it? Do you have it your demo room showing it to potential customers?” I had a bad feeling when he wouldn’t make eye contact. Without saying a word he walked me over to a closet in the hallway. He opened the door and pointed to our server sitting forlornly in the corner, unplugged. I was speechless. “I’m really sorry” he barely whispered. “I tried to convince everyone.” Now a decade and a half later the sight of server literally sitting next to the brooms, mops and buckets is still seared into my brain.

I had poured everything into making this work and my dreams had been relegated to the janitors closet. My heart was broken. I managed to sputter out, “Why aren’t you working on integrating our systems?

Just then their VP of Sales came by and gently pulled me into a conference room letting a pretty stressed product manager exhale. “Steve, you did a great sales job on us. We really were true believers when you were in our conference room. But when you left we concluded over the last month that this is your business not ours. We’re just running as hard and fast as we can to make ours succeed.”

Unrequited Love

I realized that mistake wasn’t my vision. Nor was it my passion for the idea. Or convincing Onyx that it was a great idea. And besides not being able to tell me straight out, Onyx did nothing wrong. My mistake was pretty simple – when I left their board room a month earlier I was the only one who had an active commitment and obligation to make the deal successful. It may seem like a simple tactical mistake, but it in fact it was fatal.  They put none of their resources in the project – no real engineering commitment, no dollars, no orders, no joint customer calls.

It had been a one-way relationship the day I had left their building.

It would be 15 years before I would make this mistake again.

Lessons Learned

When you don’t charge for something people don’t value it
When your “partners” aren’t putting up proportional value it’s not a relationship
Cheerleading earlyvangelists are critical but ultimately you need to be in constant communication with people with authority (to sign checks, to do a deal, to commit resources, etc.)
Your reality distortion field may hinder your ability to realize that you’re the only one marching in the parade
If there’s only one passionate party in a deal it’s unrequited love

Filed under: Customer Development, E.piphany, Marketing

Tenacious

TE·NA·CIOUS/TƏˈNĀSHƏS/

Adjective:

Not readily letting go of, giving up, or separated from an object that one holds, a position, or a principle: “a tenacious grip”.
Not easily dispelled or discouraged; persisting in existence or in a course of action.

When I was a entrepreneur I’d pursue a goal relentlessly. Everything in between me and my goal was simply an obstacle that needed to be removed.

This week I had another reminder of what it was like.

Plenty of Time

I was speaking at the National Governors Conference in Williamsburg Virginia and my talk ended Sunday at noon.  I knew I had to be in Chicago at 9:30Am Monday for a Congressional hearing (I was the lead witness) so I made sure I was on the next to last plane out of Richmond (just in case the last one got cancelled.)

My wife and I got to the airport for our 4:45pm plane and found it was delayed to 6pm. Ok, no problem. Oops now it’s delayed until 7:30pm.  Hmm, the last plane out looks like it’s leaving on-time at 8pm – can I get on that?  No, sold out.  So we sit around and watch our plane get delayed to 8pm, then 9pm then 10pm, then cancelled. Oh, oh this is looking a bit tight, but there’s a 6am from Richmond to Chicago. No problem. If we can get on that I can still make the hearing. The nice smiling United agent says “oh that’s sold out as well. Now I’m getting a bit concerned, “Well how about the American Airlines 6am?” “Sold out” she replied. The next flight is at 8am.” Ok put me on that one.  ”Oh that’s sold out as well.”

We Have a Problem

I need to be in downtown Chicago by 9:30am.  Period.

So I ask, “where’s the nearest airport that has a 6am flight to Chicago?” Oh, that’s Dulles airport in Washington.”Ok, how far is that?” 120 miles.

We head back to the car rental booth, rent our second car of the day and head to Washington in pouring rain and drive in bumper to bumper traffic, crawling to our next airport. Three hours later we check into the airport hotel at 1:30am assured that all we needed to do is get 3 hours sleep and United would whisk  us on the way to Chicago.

Tenacious

Waking up at 4:15am I glance at my email and couldn’t believe it – United canceled our 6am from Dulles. The next flight they had would get us into Chicago at 10am – too late to testify in front of Congress.  It looked like there was simply no way to get where we needed to go.

My first instinct was to give up. Screw it. I tried hard, failed due to circumstances beyond my control.  Why don’t we just go back to bed and get a good nights sleep.

That thought lasted all of 30 seconds.

We quickly realized that Washington has two airports – the other one, National was 30 miles away. I looked up the flight schedule and realized that there was a 6am and 7am leaving from National. I booked the 7am online not believing we could make the earlier 6am flight.

The only problem is that there weren’t any taxi’s to be found at 4:30 in the morning – in front of the hotel or on Uber.  So I hiked over to the main road and flagged one down and had him drive me back to the hotel, pick up my wife and luggage and continued our adventure.

We got to Washington National Airport at 5am and walked directly into the longest security line I’ve seen in 10 years. Well, at least we can make the 7am plane (the one we’re ticketed on) and barely make the congressional hearing.

Getting through security the first gate we pass is the 6am for Chicago and they’re in the process of closing the door.  ”Any chance you have any seats left?”  Oh, we have two seats in the back of the plane but we don’t have time to re-ticket you.

Trying to remember my reality distortion field skills from my entrepreneurial days I convinced her to let us on.

We made it to Chicago.  I actually got to sleep in our hotel for 45 minutes before the Congressional Field hearing.

Then I got to share this:

Lessons Learned

Your personal life and career will be full of things that block your way or hinder progress
Keep your eyes on the prize, not the obstacles
Remove obstacles one at a time
There’s almost always a path to your goal
Never, never  never give up

Filed under: Family/Career/Culture