Efficient Analytics for Start Ups

Years ago, being data driven in your decision making gave you a competitive advantage. These days, being data driven has become table stakes to compete in the hyper-competitive business world.

But, what does it mean to be data driven? How do you even get started?

Last week, I gave a talk to help answer those questions at the Alchemist Accelerator and I was told it was very helpful. You will find a video of the talk embedded below, optimized for your web viewing pleasure. I hope you find it useful.

If there are other topics you would like to see me publish talks about, please let me know.

The Last Startup Company

“Evernote is our life’s work. It’s my third company. The whole point is we don’t want to sell another company. We wanted the next thing to be sufficiently epic, so that we never want to do anything else. I hope to be involved in Evernote forever.”

Phil Libin, CEO of Evernote

There seems to be a growing trend of founders to want to create lasting, iconic companies. On a regular basis I hear founders describe their current startup as a “100-year company” or “my last startup”, implying the company will last for a very long time. Gone are the days when being a “serial entrepreneur” was the aspiration of founders, now they want to found the definitive companies of the next century.

Why the change?

I have no simple answer, nor enough data to create a complete picture of how large this trend might be. However, I do have some observations that I think shed light on why the thinking around entrepreneurship is changing:

  • The cost of starting a company has plummeted. There was a time when simply starting a company and bringing a product to market was a major achievement. These days, technology, automation and outsourcing means that high school students can launch revenue generating products between classes. With little value attached to simply founding a company, founders aspire to a higher standard.
  • Failure really sucks. Despite anything you might read, failure really sucks. Any entrepreneur that has failed at least once will actively avoid repeating that experience. If you’ve failed more than once, the idea of starting a company and running it forever sounds pretty great. It means you’ll never fail again (at least in that way) and can wrap yourself in the warm blanket of success.

Why does all this matter?

Whatever the reason, I admire the vision of creating a 100 year company while at the same time worry about how it changes the thinking of founders. In the same way that aiming for a short term acquisition will hurt your company (see Why You Don’t Want to be Acquired), aiming for a perpetual business may cause you to make decisions that are not ideal for the business.

For example, early in the life of your company you need to focus as much as possible (see The Only Thing That Matters). This means that you might need to pass on some big market opportunities or not build products that have large future potential. If you are focused on the present this decision is easy, but if you focus on the future you might be unwilling to give up so much future value. Once that decision becomes hard, you will start to make mistakes.

Likewise, you are much more likely to over-capitalize your company in the early days if you are aiming for the kind of company that lasts forever. Ensuring you have the right amount of funding for the stage of your company is important (see Fundraising Fever) and you can limit future options by over or under capitalizing. If you are focused on a 100 year plan, over-capitalizing might seem like a good idea and lead you to make mistakes.

These are just some examples and not all founders are blinded by their 100-year aspirations. However, no matter how self aware you might be you are shaped by your goals. Adding any goal, especially the goal of existing forever, will shape your thinking even if you don’t realize it.

100 years is a long time

If you aspire to creating a 100-year startup, I sincerely hope you succeed. I would love to know that in this age of short-term earnings focus it is possible to build a long-lasting company.

I will leave you with a list of the oldest companies in the world, according to Wikipedia. Unsurprisingly, the companies that last the longest are the ones who work in businesses that are fundamental parts of human life (hospitality, construction, food). I wonder if technology and especially software will ever be in that category.

Unfortunately you and I will never find out. 100 years is a long time, after all.

The $0 Marketing Budget Lie

It has become popular recently to brag about burningmoneyhow large your business has become without spending a single dollar on marketing. If true, such a statement paints a powerful story about how your product resonates with customers. If you don’t spend on marketing, they must be finding you and telling their friends about you! Everyone wants that kind of free marketing.

Unfortunately, when you dig deeper it is almost never true. When someone claims they have never spent on marketing, what they typically mean is that they have never spent on paid advertising. They have likely spent on one of the following marketing channels:

  • Referral programs. Companies like Dropbox and Wealthfront will offer you free service upgrades in return for referring other customers. In some cases they will actually pay you cash. In all cases, these incentives are lost revenue and hence a cost of marketing.
  • PR. If you frequently read about a company in the news, they likely have some kind of public relations help. The best PR firms are very expensive and, even though they position themselves as consultants, those news articles come at a steep price.
  • SEO. Getting a high search rank seems like a great alternative to paying for search ads, right? Yes, but it is hard to do when starting from scratch. Many companies hire SEO experts and firms to help boost their organic ranking, which makes that “free” placement less than free.

There are countless more examples which are not paid advertising, but are still marketing spend. In fact, many companies will spend on paid advertising and still claim they have never spent on marketing. The narrative of “no marketing” is so powerful companies will lie to have it.

In reality, there are remarkably few companies that have grown to substantial size without spending anything on marketing. Almost all of them are communications tools like Skype, Hotmail and Snapchat. Truly viral growth is something that is very elusive in the real world.

Marketing is Not Free

The irony is that spending on marketing is a natural part of doing business. Everyone spends on marketing, because if you didn’t your customers would never learn about your product in the first place. There is no reason to be ashamed of it.

Google is a great example. Google is a household brand and if anyone has “word of mouth” working for them, it is Google. Regardless, one of the largest costs Google incurs is its Traffic Acquisition Cost (TAC), which is jargon for paid marketing. Google pays over $3B in TAC every year which includes over $1B to Apple alone. If Google spends that much for their business, why can’t you?

The only danger in using paid marketing channels, including paid advertising, is if you are paying more to acquire users than you make from them (see The Most Important Equation). If a customer is worth $20 to you, why not spend $5 to acquire them? You still make $15 from that customer and can likely grow much more quickly than if you try to grow without spending.

Advertising exists for a reason: Customers need to learn about your product before they can consider using it. If you are starting a new business how will they learn about it? You should pursue any and all channels to get the attention of potential customers, even if that means spending some money.

Don’t be afraid of paid marketing. Instead, be afraid of having no customers.

Image made available via Creative Commons by Flickr user Purple Slog, although there seems to be some confusion over whether he/she had permission to assign that license. 

What Does Your Company Remember?

Your company’s memory is only as old as your most recent hire.

The human brain is an amazing thing. In Angry_elephant_earsaddition to the ability to perform high level reasoning and split second decision making, the average brain can store over 2.5 petabytes of data. In extreme cases there are children who have photographic memories (eidetic memory) and adults who remember every detail about their lives (hypermythesia). You can spend your entire life learning new things and not fill up the memory in your brain.

Groups of people also have a form of collective memory but it is much less impressive. A group remembers things by sharing memories between the members of the group, creating a series of shared memories. Stories, songs, religions and mores are all ways that groups remember things. While there are models of how groups of people remember things together, groups of people change over time making it difficult to understand.

Your company is, of course, a group of people and if you are growing quickly it is most definitely changing. As a group, your company has a memory and that memory is a very important thing. That memory is where your corporate culture lives.

Evolution of Corporate Memory

At the beginning, your company has a perfect memory. You and your co-founders will know everything about the company including why you started the company in the first place. You will know what all of your customers say about you and what problems you had to overcome to keep them happy. You’ll know what worked and what didn’t work along the way.

As soon as you hire your first employee, your corporate memory becomes imperfect. The new employee will not remember all of the things you learned before they joined. Even if you document everything, they will never internalize everything you have lived every day.

Then you hire another employee, and then another. Pretty soon there is a mix of employees, each with different levels of knowledge and memories about why the company was started, what worked in the past and what didn’t.

Additionally, these employees make more mistakes and learn new things. The knowledge that makes up your company starts to grow in many directions at once and everyone contributes to it. Pretty soon, even as the founder, there are things about your company that you do not know.

Planning to Forget

Since your company memory is destined to be imperfect, you have to plan to forget. From the very beginning, you should identify the things that you cannot forget and focus on making them part of your corporate memory. You make them part of the corporate memory by writing them down and constantly repeating them as part of how you do business. Some examples:

  • Remembering your vision. Print out your vision in large font and post it on the wall. Preferably somewhere everyone sees it everyday (near the door or on the fridge). Bring it up during all-company meetings and discuss it during the interview process. Eventually, everyone at your company should be familiar with the vision and be able to discuss it.
  • Remembering mistakes. It is fine to make a mistake once, but not twice. Write down the mistakes you made and how to avoid them. Make it part of your processes so that people understand why you do things the way you do instead of taking it for granted. Remove any stigma associated with mistakes by making them part of everyday discussions.
  • Remember decisions. In the face of rapid changes, you might make dozens of decisions everyday. Make sure there is clear follow up to look at the results of major decisions, or else you will have no way to learn from it. Often, it’s best that the follow up comes from someone other than the decision maker so the memory is shared.

Most of all, never assume the members of your team know everything that you know. As the founder, your job is to identify the most important things your employees need to know and make sure they know them.

Sometimes You Want to Forget

It is not a bad thing that your company will have an imperfect memory. Adults with hypermythesia describe it as a debilitating disorder since the sheer information overload prevents you from seeking out and learning new things. If you remembered everything, you would lose the creative spark of revisiting old problems and finding better solutions.

For example, you want to forget the short cuts you made in the early days just to get by. As your company grows, short cuts won’t scale and you need to revisit them to build sustainable processes and strategies. Employees that don’t know how or why you solved a problem in the past will be in a great position to find better solutions, without the constraints of history.

Memory, either human or corporate, is a fickle thing. It helps us avoid mistakes we’ve made and move forward faster and faster as we learn. Plan for the memory of your company and make sure that it never holds you back.

Image made available via Creative Commons by Flickr user Mister-E.

Guest Post: Deathmatch Motivation

The following is a Guest Post by Mike Rollins, Lead in the Developer Relations group at Yahoo! (formerly Flurry) and the host of the Techmoonshine Podcast

Management styles are as varied as the number of managers out there.  There are quite literally millions.  Each style has some strength, and each has some flaw, but some are much stronger than others.

I have at one time or another been managed by Sean Byrnes.  I was not the only one managed by him and in fact I was never managed directly by him.  But I have had the pleasure (and sometimes terror) of interacting with him as a manager.

I have also spoken with many of his direct reports.  Quite a few of them are my personal friends whom I respect greatly.  We have all spoken at length about Sean’s management style and we all agree it is singularly effective and utterly terrifying…  But not for the reasons you’d think.

Sean is not prone to yelling, tantrums, fist-shaking, flights of utter fancy or inarticulate demands that bear no resemblance to reality.  In fact, Sean has always, at least in my seeing, been even, measured, rational and erudite.  Never has a word come out of his mouth that is not followed up by very sound reasoning that is utterly convincing.

So, why would that be terrifying?

You see, Sean makes you deathmatch against yourself.

“Pardon?”  You say.  “How does one deathmatch against themselves?”

Well, typically, when Sean starts an interaction with you, he says something along the lines of, “There is a problem, and I know how we should handle it, but I want to hear how you will handle it first.  You have 24 hours.”

This is not any problem.  Sean does not bring you the small things.  He trusts and expects you to deal with the small things.  You are, after all, a completely competent, rational person.  Sean would never have hired you if that were not so.  Sean would never bring you a small thing.

No, Sean only makes these statements when the world is burning.

There is one time that sticks out in my mind.  My boss, a man I also call an extremely close friend, was on vacation and  I was his backup.  Now, as is typical when your boss walks out the door, someone sets the world on fire.

The conflict was that one team which we worked with was not best pleased with one of our team’s performance.  To make matters worse, they were intent on delaying a feature that we saw was critical to the continued success of the product.  The two were not distinctly related, but both would have been disastrous.

So, it was with some horror that I answered a call at 11 PM from Sean.  I’m pretty sure there was a quaver in my voice when I answered the phone and said, as casually as possible, “Hey Sean, I assume that since you’re calling me there is some very dire issue.”

Sean, in a good-natured how-do-you-do said, “Why yes, there is!  And since you are your boss’ second-in-command, it falls to you to solve it.  I will call you back in a day.  Just know that this is pretty big, and the solution you choose will set the course for your organization for the foreseeable future.”

We went on to discuss the problem at great length.  Never was it discussed that anyone else would handle it, it was just assumed that I was the one.  Sean stated his complete belief in my ability to solve it and we hung up the phone.

In 24 hours, I was at the bottom of both problems and I had formulated a plan of action.  True to his word, Sean called back at 11 PM and asked what my solution was.  I delivered my report, followed by my plan of action, and was then tasked with executing it.

Sean was right, it altered the course of our organization.  I horse-traded, I politicked and I architected, but I came up with something that worked.  I set a few folks on courses that were alterations to their immediate futures and some are still on those courses.  My boss would have done things differently.  He stated as such.  But he acknowledged that it was a fitting solution and that it would work.

That decision, to this day, gives me confidence.  I did something I had never done before.  It turns out that I was very well suited to the task.  And that’s why Sean brought it to me.  He believed in me even when I was quaking in my boots.

There are other times I’ve heard spoken of when Sean would bring something of this nature to other individuals.  They would ponder and then deliver their pronouncement.  Sean is well known for responding “See, that’s not a bad idea, but I would look at it this way…”  Then go on to outline a wholly more fitting solution, but without a hint of ridicule or disappointment.  After all, Sean assumes you did your best, and he sees it as his job to make you better.

And that’s why it’s a death-match against yourself.

  • You respect your leader.
  • You know that your leader believes in you.
  • He won’t bring you the small things, he expects that you’ve already handled them.
  • He trusts you.
  • You do not want to violate that trust.
  • You want to demonstrate that you can rise to the occasion.

The only possible option for any sane individual in this circumstance is to do their absolute, dead-level best. You are forced to compete against yourself to be the best you can be.

And it reinforces itself.  As you tackle and make decisions, you gain confidence.  As you are gently corrected to better choices, you gain wisdom.  Confidence and wisdom are two incredibly valuable tools in any inter-personal relationship, and that is what managing is all about.

Of course, this management style is not perfect.  There is a very real side-effect to this style, one which is unsettling.  You see, any question can be construed as a possible death-match.

This is particularly bad when dealing with Sean.  Sean has a… unique sense of humor.  One that is very, very ironic and often relies on rhetorical questions.  And so, you might find yourself one day with your heart racing as Sean asks a very simple question of “Why would anyone do something like that?”, all the while looking at you knowingly.

Suddenly, your heart is racing, your palms get a bit damp.  “Is this it, is this another one?”  Because, let’s be honest, the last one exhausted you.  By its very nature, it pushed you to your limits.  “Is now the time I do it again?!?!”

But, any flaws aside, making your people death-match themselves is an incredibly awesome way to motivate and grow your team and invest in their futures.  We never compete so fully, or with such passion, as when we compete with ourselves.  The winner is always you in that scenario.

Performance Reviews That Don’t Suck

I recently completed my end of year personal feedback process. I have long been an advocate of collecting personal feedback as I try to live my life as a process of continuous improvement. How can I improve if I don’t know where I am weak?

I find it surprising how few people solicit feedback and how few startups have an employee review process. I suspect that “performance reviews” remind everyone too much of large companies so they avoid them like the plague. It’s a shame, since early stage companies need employee feedback more that anyone else. In fact, doing regular performance reviews early in the life of your company can build a culture of continuous improvement that will be an asset when you grow.

The key is making it easy.

How to make reviews painless

Most people hate performance review processes for a few reasons:

  1. They take too long to complete.
  2. They hate hearing bad things about themselves.
  3. They hate saying bad things about others.
  4. They don’t think they add any value.

All of which are likely true for most processes. However, over the years I’ve found a simple process that is easy and most people find very useful.

Step 1. The Two Threes

Both the reviewer (usually the boss) and the person being reviewed (reviewee) prepare beforehand. They both assemble a list of the three top strengths of the reviewee, and the three top areas for improvement (weaknesses). Note that this means the reviewee is completing a self-assessment while the reviewer is doing a third party assessment.

It is important to identify specific examples that involve the identified strengths and weaknesses so that there can be useful discussion later. In fact, the more detail the better.

Step 2. The Review

The actual review should be an in person meeting at a casual setting (not a windowless room). The person being reviewed should go over their list of three things they think they do well and both people should discuss them. Then the reviewer should go over their list of three things the person does well and more discussion should ensue. The person being reviewed then should go over the three things they want to improve. Finally, the reviewer should go over the three things they think the person should improve. For all areas of improvement, there should be discussion of practical steps that can be taken.

The order is important since you want to start with the positives, which will put everyone at ease. It is also important that the reviewee goes first because their review is the hardest, and the most likely to be biased by the other.

The focus should be on the differences. Do both people identify the same strengths and weaknesses? Very rarely. In many cases, it is the differences in the lists where the most interesting insights come about.

Step 3. The Plan

It’s then up to the person being reviewed to decide what to do with the feedback. Most people will assemble a set of goals to tackle the areas of improvement that became clear through the discussion. It becomes a great way to set goals for yourself and check in on them during the next review. Whatever they decide, you cannot force someone to improve. If they choose to disregard the feedback, you’ll know because the same three areas of improvement will appear next time.

For bonus points, you can collect similar lists of 3 strengths and 3 weaknesses for someone from other members of the team and assemble it into anonymous feedback for the reviewee. That is called a 360 degree review since you get feedback from all sides.

What I like about this style of review is that you can do it as often as you like since it does not take very long. While people think of performance reviews as an annual activity, I find that six months is as long as you want to wait between them – especially at a fast paced startup.

Okay, what about your review?

To prove that I don’t just blog about these things, I wanted to share the feedback I received this year. I had to modify the process above for 2014 since I haven’t had a full time job for most of the year. Instead, I reached out to all the companies, founders and firms I advise/mentor/coach and asked them these three questions:

1. What was the most helpful thing I did for you in 2014? (Feel free to say ‘nothing’)
2. What did I not do for you in 2014 that would have been the biggest help?
3. What is the most important thing I can do to help you in 2015?

The feedback was fairly consistent and is summarized below:

1. What was the most helpful thing I did for you in 2014? (Feel free to say ‘nothing’)

I asked hard strategic questions which helped keep the founders focused on the big picture instead of getting lost in the details.

2. What did I not do for you in 2014 that would have been the biggest help?

I did not provide enough introductions to potential customers and investors.

3. What is the most important thing I can do to help you in 2015?

Continuing asking hard questions and provide more customer introductions.

The good news is that this provides a straightforward personal improvement plan for 2015. I will be finding ways to help the companies I work with source customers and investors.

So, what is your feedback for 2014?

 

Tell Your Own Story

One of the most effective ways to explain book-97709_640something is to use a story. Humans are story telling creatures, we consume stories (both real and fiction) in every part of our lives for both work and entertainment.

When people try to understand your new company, they will use stories. The story might be as simple as “they are horrible” or as detailed as “let me give you an example of how they helped me…” or as soaring as “they are changing the world, let me tell you how…”. The story may include metaphors (e.g. “they are Google for Sheep Herding”) or use personal anecdotes. Stories come in all shapes and sizes.

If you are very lucky, you will be the one telling telling your story and explaining it in a way that you think captures the entirety of your vision. Unfortunately, most of the time your story will be told by someone else. Hence, it’s important to craft a positive story that others will tell on your behalf.

Storytellers

Everyone who interacts with your company will have a story to tell. That includes customers who had a great experience and investors who believe in your vision. It also includes customers that demanded their money back and investors that decided to invest in your competitors. Depending on their experience with your company, the story someone tells might be great or very, very bad.

The best way to combat this uncertainty is to realize that everyone you touch is a storyteller, so you should give them every reasons to tell a great story about you. While you can’t control what they say, you can make sure their experience with your company is as positive as possible. Specifically:

  • Treat all potential customers as well. Regardless of whether they become customers, you want them to know that your company cares about them and is focused on delivering quality. Even if they choose to work with another provider, they should walk away feeling good about having contacted your company. You should also be sure that they remember your differentiation very well, so if someone asks them they will relay that as part of their story.
  • Sell hard to everyone you interview. Anyone who interviews for a position at your company should walk out the door thinking your company is something special, regardless if you plan to hire them or not. This means you need to spend time during the interview selling yourself (See Recruiting is a Form of Sales) even if the candidate is weak. You never know who they might talk to about their interview.
  • Build relationships with all investors. Even if an investor passes on your company, you should make sure they know how passionate you are and why you believe it will succeed. You may end up raising more money in the future and these investors might realize their mistake and come back again.

Customers, candidates and investors all talk to each other and you cannot know who they will talk to about your company. Treating everyone extremely well will put you in the best position to ensure their stories as as positive as possible.

Providing a Narrative

It’s not enough to treat people well, you need to give them an easy story to remember. The story of your company encompasses your vision, your differentiation (See The Only Thing That Matters ) and your people in a narrative that ties them all together. Often, the best way to do this is to talk about how your market is changing and how your company is at the center of that change. A successful narrative describes your company as more than a company – it describes it as a movement.

Crafting that narrative is something that is a critical responsibility for you as a founder. But once you have it, what do you do with it? It’s not enough to blog/tweet/post about your company narrative, as no one will read it. You need to broadcast it far and wide so people will see it multiple times and become familiar with it. Some examples:

  • Public Speaking. When you speak in public about your market, you are telling your story. While you might not talk about your company specifically, the tone and content of what you say reflects on your company. If your knowledge and passion come through clearly, people will want to learn more about what you do.
  • Public Relations. PR has a bad name since many companies use it for the wrong reasons (customer acquisition, etc.). One great use of PR is to start telling your story to the world. Your goal is not customer acquisition, but customer familiarity, which is achieved by talking about the movement that is your company.
  • Social Media. While simply posting to social media is not enough, engaging in conversations can be very important. People will watch how you behave, who you talk to and how you do it. That will reinforce your story and encourage them to learn more.

Conveying your narrative in the way I describe here is hard, as it requires you to tell your story through actions instead of directly through advertisements. However, you will find that people would much rather hear you talk about a topic that interests them instead of talking about yourself. Use that to your advantage.

Stories Evolve

Your story will not be a book you print and store on a shelf, it will be constantly changing. Embrace that and allow your story to grow, while being sure that it stays true to your vision. If others begin telling your story in a slightly different way, that is a good sign that they believe your story and are building on it themselves.

If you are successful, you may eventually have someone tell you the story of your company without realizing it is your story. That is the most fulfilling feeling a founder can have, since it means you have succeeded in spreading the story you are building.

Image made available on Pixabay to the public domain via Creative Commons.