The conclusion: People problems are the leading cause of failure in startups.

The patterns he focusses on are:

• Career Dilemmas – Should I found? When? Why? With Whom?
• Wealth vs Control Dilemmas – The finding that drives this is On average, the founders who keep the most control over their company make the least amount of money.
• Founding Team Dilemmas – Solo vs Team? Friends? Roles? Rewards ( Equity Splits and Compensation), Hiring, Investors, CEO-Succession

Many of us have a few unique experiences in each of these areas, but none of us have this huge array of experiences. It is good to see that we’re not alone in our experiences and that there are other choices to make.

The Wealth vs Control Dilemma is a curious one to me. It really grabbed me when I read Eric Ries’ review of this book last year. It made me think of PMC-Sierra founder Greg Aasen right away. I always thought his “give up control” strategy was unique and only worked for him. But turns out, “it’s a thing”. A good “thing”.

The only “quibble” that I’ve found so far with this book is that “It’s not a practitioner book”. It’s a data driven study of startups. That’s not bad, just is what it is. How one chooses to “interpret” the data always creates some “tension”. It’s also “too logical”, if that makes any sense.

More Stuff

• There is a good review by Eric Ries focussing on Equity Splits
• Chapter 1 is available at the author’s website, Read Chapter 1 « Noam Wasserman
• There is also more great material on Noam Wasserman’s Blog

Here are the highlights.

Theory

Let’s start by referring to Drucker. We get the following definition from pages 20 & 21 in “Essential Drucker“.

There will always, one can assume, be the need for some selling. But the aim of marketing is to make selling superflous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.

Here are some more supporting points from those pages:

• Business has 2 basic functions: marketing and innovation.
• Despite the emphasis on marketing and the marketing approach, marketing is still rhetoric rather than reality in far too many organizations.
• True marketing does not ask, “What do we want to sell?”. It asks, “What does the customer want to buy?”
• It does not say, “This is what our product or service does. It says, These are the satisfactions the customer is looking for, values, and needs.
• Indeed, selling and marketing are antithetical rather than synonymous or even complementary.

Discussion — Overall, this is a very tall order.

How many products/services fit this bill? The product that comes to mind quickly is iPod. The iPod, and its ecosystem, illustrate just how difficult it is to get a product to sell itself. It’s iPod, iTunes Player, iTunes Store ( they solved legal DRM problem and got music industry on board), an O/S for multimedia, the CD ripper/burner, and more details. It’s taken ~ 5+ years to get going on all cylinders. It was obvious in the early years that people wanted music on the net ’cause Napster was such a huge thing. But making iPod mainstream, that is a work of pure genius (and loads of hard work). It was a good idea that was refined, refined, refined, and is still being refined. It’s like a non-stop loop of listen & react. ( I think the Japanese have a word for this “kaizen”)

Seth Godin’s “Purple Cow” Ted Talk is still “remarkable”.

I like how Seth starts with the no-brainer idea of “sliced bread”. Yup “Sliced Bread” sucked for 15 years, it was not an instant hit.

More On Purple Cow Book

He argues that the only way to cut the hyper-clutter of products and advertising today is to innovate something new, unique and remarkable – like a purple cow.

In a world of too many options and too little time, our obvious choice is to just ignore the ordinary stuff. Marketing guru Seth Godin spells out why, when it comes to getting our attention, bad or bizarre ideas are more successful than boring ones. (via Seth)

Part 3 – Who Is The Customer?

Why is that all of us can have a good meeting with a customer and then come back to the office to disagree with everyone else on what the customer wants? Most people are good at talking to the customer. Our society prepares us well by banging the customer into our heads all the time with phrases like, “The Customer is always right!”. We all know about Listening and Reacting. Why are we so often individually correct and collectively in disagreement?

The root of this disagreement is often that the customer is more than one person and communication between all the groups within a customer is not perfect . Each of us talks to a different set of people who each have different requirements. Few of us talk to more than one department within the customer’s organization. We know what each individual group wants, but often we don’t understand what the “whole” customer wants. We need to aggregate all this communication and we’ve got to decide which “customer/prospect” we should be talking to.

This disagreement is exacerbated by the fact that post-sales departments usually have better relationships with the customer than pre-sales departments ( ie sales & marketing ). The post-sales guys actually work with the customer over long periods of time and have to develop a working relationship. A lot can be learned about what the customer wants from post-sales staff. That said — The post-sales guys can also be a real drag when a past great customer becomes a bad investment. These departments will resist change and will question “new prospects” forever. They’ve invested a lot in the past customers. I read a great quote the other day in the Wikinomics Book that fits here, “These people act like Tarzan … they hold onto the old vine until the new vine in securely in place.”

In summary, Listening and Reacting to the customer is challenged by the following points.

• The Customer is a “group” of differing opinions.
• You (The Vendor) are a “group” of differing opinions.
• You have many departments that have a strong preference for who the customer should be.
• It is very rare that the “whole” customer and the “whole” firm meet at the same time.

These challenges define the most important actions that people with marketing titles perform. That is:

• Know who the right customer is.
• Connect that customer with the right people, and information, inside the firm.
• Let go.
• Keep notes … Repeat.

I’m going backwards thru my backlist of “What Does Marketing Do?”. This is #5. /enjoy.

—

When I started this series I wanted to the say the following things, but I kept getting off track.

• In an ideal world there would be “nothing” for people with marketing titles to do.
  • Each department would “gather & coordinate” all the information needed to develop the product that sells itself.
• In the “real world” Marketing peoples tasks are all about “passing & playmaking“.
  • They keep the ball/puck “in play“, put it “where it needs to go“, and most importantly they “let go“.
  • The “glory guys do the scoring”. (Exec, Sales, Engineering)
• Steve Nash & Gretzky are the “sports analogies”.
  • This presents an extreme challenge for companies because a Nash, or Gretzky, only comes along once a decade. These types of people are very difficult to find, develop, recognize, reward, etc.
  • These guys don’t look the part of “star”. Gretzky & Nash are the scrawniest guys on the playing surface … most great Marketing people share the same traits … they have great stats (if someone actually collects them ), but they don’t look the part.
  • Marketing departments are “scrawny” and don’t have the bulk to do the glory. Marketing departments are very small relative to other departments. This is not a bad thing (just a fact )
• This “highly skilled unselfish play”, “lack of bulk”, and “secondary glory” is hard to live every day. Thus most marketing departments bias themselves towards “sales” or “engineering”. The tasks are do-able and there will be a chance to share in some glory.

Note: In re-reading this … it appears kinda harsh. I’m not trying to be pessimistic here. I’m just trying to get at some of the fundamental challenges of working in marketing departments. I know that understanding the above “really” helped me many times.

The full series can be found in the “here”

After reading the “Freak Out” post my buddy Seattle Dave recommended that I read, “Leadership and the New Science, by Margaret Wheatley“. I’m almost finished it and my first reaction is wow! This is awesome Just how many exclamation points can I put in a post

The concept of her book is simple — apply the concepts of 21st century science to organizational behaviour. The result is shocking and inspiring. It provides a great deal of hope for the future. This book must be read.

The key point that she focusses on is that “new science” is all about relationships and not Newtonian reductionism. Topics covered are: “Field Theory” ( provides an analogy of corp vision and EM fields ), Heisenberg Uncertainty Principle (Measuring one variable more accurately comes at the expense of less accuracy in other variables. You can’t know it all at the same time. In fact knowing more about one thing ensures that you’ll know less about another.), Quantum wave/particle duality ( if the experiment looks for waves it finds waves and if it looks for particles it gets particles), Schrodinger’s Cat ( admits to not getting it, but then applies it to the common phrase “you see what you want to see — so choose something nice”), self-organizing systems, information vs. content, and more.

Quotes – There are some great quotes on the Margaret Wheatley Wikipedia page. The first paragraph ends with this sentence

She describes her work as opposing “highly controlled mechanistic systems that only create robotic behaviors.”

Warning: For some this book may come off as too “New Agey” and “difficult”, especially when she starts off by noting “Fritjof Capra‘s Turning Point (another book I loved) and reading some quotes from it. I urge all readers to to get/look past this and “listen”.

I read somewhere a few years back ( I think it was in Harvard Business Review ) that the right level of stress/frustration for an executive is when “There are only 2-3 days per month when you want to give up, set the building on fire, and start again”. This comment was very “eye opening” for me, I had thought that I was the only one who “suffered” thru these days.

It was good to know that I was not alone in the Monthly “Freak Out” or “Pit of Despair”. Turns out that we all have these days, but how does one deal with it under the microscope of a team looking for direction? How does one act? Do I wear it on my sleeve? Or do I attempt to hide it? Teams are tough investors because they are making the toughest investment of all ( their time & careers ). There is also the challenge of executive pay. It is well known that corporate pay scales resemble the “long tail’ curve. Thus teams’ have little sympathy, they expect “positive” direction and answers from executives. They probably “Freak Out” more than me.

Unfortunately giving teams what they want and hiding the “Freak Out” is exactly the wrong thing to do. No one can predict the future. No one knows the “exact” path to success. For example, Burton Malkiel’s famous investment book “Random Walk Down Wallstreet” notes that Wall Street analysts can do a great job at crunching the “historical” numbers for any company, but the “valuation” of a company still requires a “forecast” of the future. Thus Wall Street analysts valuations are “educated guesses” with batting average like success (i.e. 20% or less). An executive can do no better , trying to predict the future will only focus ridicule and crushing morale issues in your direction.

The best policy is to keep the “story” open all the time (ie share the pain ), celebrate every success like there is no tomorrow, be organized in describing/tracking “the journey” to success, keep modifying the story as it changes (’cause it will… Nothing moves in a straight line), fail often, and try again. It takes a lot of courage & hard work to do this in the open, but it is the only way I know to get the team to buy in.

In closing If you are not “Freaking Out” regularly, then you’re probably not taking enough risk to succeed” . Also, if you’re having this day today, you can look forward to the ~17 good days per month where “you truly believe that you’re gonna change the world”

Note: I found the above more important when I was a low level manager …. ’cause I didn’t think I was an executive yet. I may have been far down the food chain and closer to my team, but I had little information with respect to the “whole project” and hence got myself in even more trouble when I tried to directly address a “Freak Out”.

Dark Side Please take the time to track your “Freak Outs”. If they start to become too frequent, it is time to move on. I made this mistake in the fall of 2000 Your health is more important than your dream.

The (New) Product Team’s success is dependent on getting those two groups ( The Customer and Rest of Company) to interact so well, that you can let go, and let the product take on “a life of its own.” Your goal is to do such a great job at connecting that, in the end, you need to do “Nothing”
Connect – Part 7 – What the !@#$ Does Marketing Do?.

This is “intra-praneurship”. Much better described in The Other Side of Innovation (Execution) « by VG & Trimble

fun

Yes. Yes, I’m having a good time reviewing my “backlist“. In some ways it is “pretty bad” and in some ways “it’s pretty good”.

Sadly … Still very relevant. Here is some “burnout slideware” on the topic.

Full Text of “I Forget What 8 Was For? – What the !@#$ Does Marketing Do?”

I’d like to forget that I’ve experienced the following “pre-cursors to burnout” events too many times in the competitive technology industry.

• Getting dizzy spells during a meeting.
• Watching a colleague fall asleep during the weekly update.
• Watching a customer fall asleep during a meeting.
• Forgetting a close colleagues name.
• Forgetting a bosses name.
• Forgetting how I got to this meeting room.
• Getting dizzy spells on the drive home.
• Not being able to get out of bed for 2-3 days after a big conference.

These events are a way of life, they happen all the time. The unwritten rule of thumb is “Just play thru the pain like pro athletes” do. But in my reality the tech industry is “burnout central”. I see it too often. We forget that Pro Athletes don’t play everyday and the ones who have long careers take care of themselves very well.

Anedotal Evidence ( tech is a high risk environment ) — I know a handful of burnout victims whose symptoms were so serious that they had to make significant career changes. Most of them were marketers, none were VP and above. Not a large number, but depending on how I count, this is anywhere from 20 to 50% of some job categories. Note that these percentages include only the ones who have confided in me. Few people like to advertise that they can’t cut it anymore.

It is interesting that most statistics that I’ve read talk about this executive (VP+) dividing line as well. The most common explanation is that executives spend a lot more time reviewing the the “pros & cons” of projects, they have a lot more information, they are usually the first to “buy in” to programs, they are on the hook to “sell the program” downstream, and generally have more control of their environment. This does make some sense, but I’m still not sure about this explanation.

Being a “poster child” for burn-out has also put me in a position to constantly hear anecdotal comments from friends and colleagues all over the industry. I hear the following phrase too often, “there is sooo much of what you have in the valley”. These numbers are the same everywhere. I’m guessing that every tech worker has had a few scares along the way.

It’s Not Gonna Happen to Me ( wrong ) — I’m not saying that everyone should go out an quit their job now. I’m saying that you’ve got to be aware that you work in a high risk environment. You’ve got look at the example of Pro Athletes — take care of yourself if you want a long career. If you start having symptoms act on them quickly. Don’t let them slide. Better yet — be proactive.

It’s good to know how you react to stress, so that you can act on it. This is difficult, not everyone reacts to stress in the same way. Some people develop more physical ailments like rashes, back pain, numbness, etc. Another indicator is how you make decisions. Most managers take a test to see how they make decisions under stress. I forget the name, but its the one where the results are plotted on “triangle graph” – blue in top left, red in top right, and green on the bottom. You mark the point where you are with little stress and the point where you are under lots of stress. The “vector” then describes you under stress.

If you have a “long vector” it is relatively simple for you, and others, to determine when you’re are under stress. Unfortunately for me I am one of those people whose dots sit on top of one another — The Hub guy — I’m an ice man — no difference between stress and no stress. The good news — I play great under pressure — the bad news — this group is the most susceptible to burnout.

It’s Ok … Burn Out doesn’t last forever ( wrong ) — Unlike a cut or a broken bone, burnout often doesn’t heal well. It usually leaves a permanent “scar”. In my case I have effects that are analogous to a person who has had multiple concussions. My “concussions” are brought on by a combination of stress and situations which require me to follow multiple “threads” of conversation/thinking. In computer lingo I don’t “task switch” well ( if at all ). If I get myself into a situation where “task switching” is key — like a meeting or party I’ll slowly begin having difficulty following the conversation. If I stick with it I’ll soon begin having “concussion” like symptoms — starts with ringing in the head & can get as severe as near blackout.

In daily life this is confusing for most people I interact with because I look normal. In fact most people note — you look great. This is likely to be true since I’m down to university level clothing sizes. But just like a “Lindros or Lafontaine”, whose pro hockey careers ended due to concussions, I look like I can play. I want to play. But if I do play, I’m putting my long term health in jeopardy every time that I step on the playing surface I have effects every meeting ( social or work ) that I attend. It never goes away.

Movin On – I put the Daedalus and Icarus picture above because it describes how I feel when I’m working with others these days. I have plenty of experience which can help people to fly. But this knowledge also allows them to fly too close to the sun. Just like I did

Inspiring! Wow! The story of the Aravind Eye Hospital in the book Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion is “mind blowing”.

There are good works happening in the world today! This is a feel good book like Abundance: The Future is Better Than You Think.

In 1976 Aravind opened in Madurai, India, with 11 beds and a mission to eliminate “curable blindness”. In 1981 they did 10,000 surgeries. In 2009 they did 300,000! In the process they developed their own rural out-reach programs, cataract surgery processes, started a company (Aurolab) to build lenses, started a training program LAICO for third and first world training. Just wow!

The high volume is because they do “free” and “less than” free surgeries as well as paid. Chapter 2 is “When Free is Not Enough”. For their poorest patients they need to do more than just pay for the surgery. Aravind’s fee structure for 2010 (page 289 ) was

• Free 27%
• Minimal Payment 26%
• Regular & Premium Payment 47%

10x More Cataract Surgeries per Doctor per Year

The most amazing statistic is Average Number of Cataract Surgeries per eye surgeon per Year. It’s 10x the developed world! (page 291) And the complication rate is equal or lower! (page 292)

• Aravind 2,000
• USA less than 200

More Links

• So amazing that there has been an HBR case available since 1993.
• Profitable Audacity: One Company’s Success Story « Vijay Govindarajan – Harvard Business Review