The Complex System: Story of an Entrepreneur

Competition, Love Em’ or Hate Em’

Competition in business is inevitable but it’s also necessary. Still, that doesn’t mean I have to like it, right? Well I struggle with this more than I want to. On the one hand it’s a sign of good business when you’ve got competitors nipping at your heels; and even bigger kudos when you keep meeting new ones and old ones fade away. For us it’s been that way from day one. There are always the usual suspects, but we’ve consistently pulled away from them as new competitors appear on the scene. I’ve heard the statement more times than I want to, “hey, company XYZ has got this feature or that price… we’re in trouble now”. It definitely stirs some rage inside… I’m thinking, where did these guys come from all of the sudden? We’ve been doing this for years and now this company has what feature and they’re selling it at what price? It’s aggravating at best.

But then my mind goes to work. How do we beat these guys? How do we outsell them? Do we compete on price, features, value, what? I think competition drives innovation, which I’m a huge proponent of. Innovation isn’t always about products, sometimes it’s about sales process or marketing strategies. And that too can get you the edge you need to pull ahead.

So I guess I can’t get upset about competition. Competitors are the fuel that drives us to excel in the marketplace and keeps us on our toes. It also serves the customer because it forces companies to regularly re-evaluate their services, pricing and value proposition. In the end we’re in this for two things, making money and serving clients. I don’t think we can do both without healthy competition.

So take off your gloves (you know who you are) and let’s get in the ring.

Right or Wrong, Make a Decision

One of the biggest and best lesson’s I’ve learned thus far in business is the art of making big decisions amidst a sea of uncertainly. Well, let’s just say I’ve learned the importance of this art, but I haven’t yet mastered it.

Sometimes decisions are easy; there is a clear path to the end result or at least there is a clear marker to the lesser of two evils. But often decisions get clouded and one’s passion for making the right decision can stop you in your tracks. I’ve certainly experienced that more than one time.

Recently I’ve been tested with some pretty big decisions and what I now believe is that in the face of extreme uncertainty the making of a decision is actually more important than making the right decision. In other words sitting in limbo awaiting more information or the right information to lead you to making the right decision can be more detrimental to your business than making the wrong decision.

I’d say I’ve done some damage in the past just waiting for the answers to come. If I had made a decision and gone with it, right or wrong, the outcome would have been better. I know this because I have experienced wrong decisions as much as I’ve experienced the right ones. One of the things I’m really good at is figuring out how to make lemonade out of lemons. Put me in the middle of a wrong decision and I’ll make the best of it and find a way to turn it into an opportunity. The point is I’m in action. Noting get’s done in pause. Things can only be achieved when the movie is playing and making a decision takes you out of pause and puts you into action. That’s where great business people, entrepreneurs and innovators do their thing. That’s the only place I’ve ever been successful.

I know now to stay aware of being stuck; indecision is a dangerous state and I don’t want to be there for too long. When I’m not sure which road to take I set a deadline to gather as much information as I can do a gut check and make the call. Either way, I’ll figure out how to make it work.

Investor Add-In; Investor Add-Out

One interesting aspect about having an investor is the inevitable conflict of interest. Sometimes this conflict of interest is in our favor, sometimes it’s not (hence add-in/add-out). Your investor is also investing in a company that you want to do a partnership with: conflict of interest add-in. You want to raise more money and your investor gives you advice about how much and at what terms: conflict of interest add-out. Your investor has another portfolio company that you want free service from: add-in. You get the picture. I guess there are pros and cons of just about everything. I think when it comes to investors, and you’re dealing with a conflict of interest not in your favor (add-out), just hope you picked the right investor. I’ve had my share of battles with our investors, but in the end there is respect and I know they have integrity. Sadly, that’s not the case with all of them.

Remember the Alamo, er 37signals That Is

In 2004 when I started Leads360, there was a soon to be very well known software startup that was making a lot of noise with a downloadable eBook about the future of software development. In it, 37signals touted the keys to successful on-demand software. It was great timing because we were in the early stages of our 1^st development cycle on the Lead Manager and we really took to heart some of the concepts. The most significant was the idea of less is more. These guys said keep it simple, features make things worse, not better. Somewhere along the line we started to veer away from this thinking. I wouldn’t say we’re over the top bloated compare us with the CRM solution we use, Right Now Technologies, and you’ll see the spectrum of complexity is very large. Still we’ve learned a lot about what clients want, how to service them and how to run a lean organization. We recently re-tooled our entire product line and released products that were “less” than our flagship software.

So when I read a recent post on Harvard Business Blog (again, this blog is amazing) about 37signals I was reminded of the importance. The 37signals guys had a new spin on the idea that less is more, they said “less is less” and that’s what you want. I love that. Why does more always have to mean better. I’m as big of an offender as anyone on this subject. They go on to explain how they don’t just build software under this premise, they run their entire organization that way. Don’t hire more people to get more done, just do less. Don’t work more hours to grow faster, just grow slower. That isn’t to say they aren’t interested in making money, they just focus on profit rather than growth. It’s certainly refreshing to hear and rings an all too true bell for this guy.

Just the Facts

I love this post on VentureBlog about entrepreneurs using adjectives in lieu of facts. Smart investors want hard facts about what you will do or what you did. It’s easy to skip the facts and insert a bunch of intelligence adjectives to fill the void.

In business, gathering factual intelligence about the company is done via metrics tracking. Easier said than done of course, but it’s an ultra-critical aspect of business. I’ve got another board meeting next week and this is a big part of the prep. I’ve actually learned quite quickly what works and what doesn’t work in a board meeting. It’s about sticking to an agenda, showing facts not color, staying on schedule coming to the board with specific recommendations, not topics for debate. Interestingly, this is a big part of what inhibits our internal meetings from being effective which I’ve talked a fair amount about lately.

Growing During Tough Times

Surviving a downturn is one thing, growing amidst a tough market is another? I read a great article on the Harvard Business Blog I started tracking (Nick Hedges would approve) about Accelerating Performance Through a Downturn. There are some advantages to this strategy, in particular the competitive advantages that can be gained if successful. If it's hard work for you, imagine how it must be for your competitors. When most companies are just trying get by and maybe even cutting costs to survive, a downturn is a great opportunity to build infrastructure, invest in technology and hit the gas on sales and marketing. Once the market comes back, and it will, you'll be in better position to really make an impact. And as this article shows, many companies in second or third place in a market moved up a few notches while the competition wasn't paying attention to growth.

Democracy Only Works for Startups

What is a democracy? What's so great about it? What's not great about it? When we think about the idea of a democracy most people think about our great country. After all it was a government by majority rule that gave us such a wonderful place to live and work. What about democracy in the workplace? Many companies operate this way and it can lead to some incredible success. My belief however about democracy in business is that it only works for startups.

When a company is first starting out it has only a few people. Usually that includes one or more founders and some key early hires. At this stage it's all hands on deck. Everyone must pitch in and everyone has input on how the company will be built. It's a fun time and these collaborative efforts are essential. Without democracy, things just don't get done. There is too much to do for one person or for everyone to work in a silo. Everyone works together to make decisions.

As the company grows the democracy begins to breakdown. More people mean more opinions. More opinions mean more time to make decisions and more chance of making the wrong ones. If you’re lucky you still come up with the right decision, but it may take you weeks longer to get there than it did a year earlier. The democracy is becoming counterproductive and starting to hinder growth, not facilitate it. Still, it's relatively early in the companies maturity cycle and at about 12-15 people things are still working ok.

Companies that make it past here must have some pretty talented and hard working people, that's great. Now it's time to hire more and start creating departments. The democracy is now implemented at the department level as well as the management level. Whoa, now things are really getting pushed back. More meetings are necessary just to go over everyone’s opinion. Meetings go longer and decisions are often postponed until another decision from another meeting can be made. Is democracy helping here or hindering?

At about 35+ people the democracy is totally breaking down. You can push through it and many companies at this stage do because democracy creates strong culture. When people at all levels give input, they feel like they are making an impact and this is one of the biggest contributors to job satisfaction. Don't want to lose that culture do you? Neither do I, it's critical. But wait, the democracy we've created is almost created a standstill. How do you balance the desire for killer culture and not get bogged down in the process? Good question, I deal with it every day and it should be the topic of yet another post.

Ok, now more than 50 people. Meetings are pretty much going on all hours of the day. Nobody is at their desk working. It's just one big decision making committee, or worse, a dozen committees all trying to make decisions so that another committee can make theirs. It just doesn't work. Management must step in and start leading. I don't suggest a dictatorship, but it’s up to management to get input quickly, analyze and make decisions, lest the inevitable paralysis.

Interestingly I think this theory also applies to government. When the country is small and trying to build all the pieces of the machine, democracy rules. But as a country grows and more and more people get to have a say, especially when it's combined with capitalism, problems arise. I personally think that's part of the challenge our own country is facing. Democracy w/ capitalism is failing and I'm not sure that time will heal it. There needs to be a change that facilitates growth, but that too is the topic of another post.

What Does Management Really Mean?

My fascination with management and what it really means began when we started to evaluate raising money. One of the most common questions posed to me in meeting with venture capital firms was “what is your management team look like?” They pounded me on having the right executive management staff to get the job done. Of course at the time, I didn’t have great answers for them. Perhaps that is why we ended up with Rustic as they banked on the idea that we were open to the idea of building a stellar management team rather than penalizing us for not having it yet.

Furthermore, in speaking with other proven CEO’s (by the way, I regularly reach out for advice from many mentors in the business community), the consistent message is; “build a superstar management team.” They say this is the key to managing and delivering exponential growth.

So as you can imagine, I've been wrangling with the question of management quite a bit lately, and I think there is more than meets the eye. As I strategize about the answers to this question, I think about my father’s long standing advice "hire people smarter than me", which I have posted about numerous times. I'm pretty sure this strategy plays heavily into being a good manager.

So what is management? Is it the same as leadership? Peter Drucker tells us management is doing things right, whereas leadership is doing the right things! In formulating my own thoughts on management I’ve pulled together elements from numerous sources including Wikipedia who defines management as directing and controlling a group of one or more people or entities for the purpose of coordinating and harmonizing them towards accomplishing a goal. The site continues citing these four critical aspects of management:

1. Planning: deciding what needs to happen in the future (today, next week, next month, next year, over the next five years, etc.) and generating plans for action.
2. Organizing: making optimum use of the resources required to enable the successful carrying out of plans.
3. Leading/Motivating: exhibiting skills in these areas for getting others to play an effective part in achieving plans.
4. Controlling: monitoring -- checking progress against plans, which may need modification based on feedback.

I love the simplicity of these four themes. I’m of the belief that simplicity is going to be a key driver of our success in 2008. Of course there is more to management than what’s listed here, but I think this list is a framework for my management plan.

Over the next few weeks I’m going to post more about my management strategy and how I hope to make Mr. Drucker proud.

Less is More

We've all heard the old addage, less is more. In 2008 it's more true than ever; at least for me. Quality sacrifices when we take on too much, and it's become somewhat of a habit for me to do just that. People have already started asking me the popular January question, "what are you New Years resolutions?" I put some thinking into that question this year and I have a different approach to answering it.

Rather than focus on making a resolution to do somthing that presumably I haven't done before, I'm going to focus on improving on the things I do, but maybe don't do as well as I could. It's that whole strengths vs. weaknesses thing that I frequently talk about. To that end, one of my resolutions is to focus on quality. I'm already good at getting thigns done and doing them well. But am I as good as I could be? Could I do things even better? That's where the whole less is more concept comes into play. If I focus on doing less things, I could do them even better. The upside is exponential.

Ok, so if less is more, that means I have to choose to do some things and choose not to do others. How do I prioritize on the things that are most important? I love that Stephen Covey quote "the things that are most important must never be at the mercy of things that are less important"; that's just it. I am prioritizing what I spend my time on, and as a CEO it's my responsibility to help those around me prioritize what they do. That means I have to utter the unfamiliar words "NO" much more in 2008. No, we can't do that now. No, that's not a priority. Maybe then if less is more, than no is even more important than yes!

As much as I like doing more, sometimes doing less makes all the difference.

Happy New Year!

Client Success; It’s an Inside Job

At the core, our mission is client success. Fundamentally, we want our clients to be more successful with us as a partner than without. But I think there is a big difference between having the goal of client success and actually delivering on that promise.

For us it’s about “being” client success; and to do that, we must transform our company from the inside out. We need to “be” employee success, team success, department success and company success before we help our clients be successful. Of course, we want to grow revenues and scale the business, but to some extent I think those things are the positive byproducts of success from within.

Ok, so how is this goal achieved? We’ll it starts with me, but that only goes so far. I can encourage others, that’s good too, but the real momentum occurs when others start encouraging others. Aaron Ross calls it the “drum beat”; it’s the impetus that naturally occurs when people are charging towards a common goal, especially when people are “being” not “saying” that goal. That’s the key; get your company to “be” your vision and they’ll just naturally pass it on to your clients. Maybe that’s why great companies don’t always have the best products; if you look close, I bet they have the best people.