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Communicating context to drive specific behaviours

Words like “consultant”, “workdriver” and “special projects” still create a PTSD style effect in my head. These words drip with corporate context, very clearly and precisely signalling whether you were succeeding or failing. The email announcing a VP moving to “special projects” triggered a global cascade of watercooler conversations where we each dissected and calibrated their missteps and realigned our own. It feels like a high performing culture because you’re communicating in flow – there are barely any words exchanged but you can replay together how a pattern of behaviour over years became fatal for said VP. It’s almost a cult like sensation. People worry about leaving because they fear never experiencing this level of flow (read: intelligence) ever again?

Tim Fung from Airtasker reminded me of that on his webinar this morning. Why do leaders communicate? His example was a mistake he made, sending an email whilst under stress that the expected working hours were 8:30am – 6pm. On reflection, he wasn’t trying to communicate an expected outcome – people in seats. Instead his company was under serious financial pressure and the next few weeks required a mammoth effort to keep the dream alive, but he failed to communicate that context and lost good people because of it.

So what was Tim trying to communicate? Well the zeitgeist answer would be that he was trying to communicate a cultural expectation. But if your company goals are service quality and people focus, perhaps that internal culture would be counterproductive? No, this wasn’t an attempt at ongoing cultural change.

Tim specifically reflected that the goal of this communication was to set context. He wants to know that when a specific context is shared, a certain set of behaviours are triggered at scale. For example if an “investor presentation” is announced for a few weeks time, an increasingly large ship needs to transform immediately. The operations team cut costs, HR cancels all off-sites, engineering ships the shiny MVP that wasn’t quite ready. This is not a cultural theme that persists during the year, but instead a carefully communicated and indoctrinated context that dictates specific behaviour.

I suppose most of the time this context, just like culture, is set through repetition. But what if you could construct context more deliberately? If there are 3 regular events that are critical to your business every year, how could you communicate the context of those events in a crystal clear way? For example if you are Apple and your company’s innovation appetite pivots on the annual WWDC event, how do you describe that context to a new hire or even a customer?

Pivot points get a lot of discussion in the startup world, but I think these context events are the pivot points every company needs to know, and communicate heavily and precisely.

The 3 stages of a services marketplace

The Silicon Valley alter that is the whiteboard

1. The Hands On phase

Like every great episode of Silicon Valley, it all starts with a whiteboard. Customer (demand) and worker (supply) names are written on the board, with relevant skills and availability scribbled down. Everyone gets on the phones and calls each side, trying to make connections. Every connection is a new possibility, a new thread in the web you’re trying to spin. You’re losing money on every one, but if you’re doing it right they start to become sticky.

This means customers are not just delighted that you introduced them to someone that can solve a problem for them, but that it has the seeds of an ongoing relationship. They enjoy working with the person, they need that problem solved ongoing and (for your benefit at least) they see the value you add as the third wheel.

At worst they appreciate the comfort of having you on the phone to handhold them through the process, at best you are a critical part of the value chain that is hard to replicate without scale. Except you don’t yet have scale so this might cost you big time upfront – software, insurance, data, templates, logistics, call centre etc. Don’t resent the cost, because it’s also your barrier to competition. Watch that burn while you find market fit.

2. The Acquisition Marketing phase

Once the relationships are sticky and your churn is under control, you need to scale quickly to bring your unit cost down and start to pay off that upfront investment (or raise on a growth pitch to kick this can down the road). It’s time to look at the chicken and egg problem of liquidity. What services are not getting traction, and how might each translate into an efficient performance marketing campaign?

You probably have no brand equity, so your performance marketing needs to be very targeted and ideally not competing with established sector players. It’s also tricky to scale, because your segments could be very small and fast moving. 95% of marketplaces are demand constrained, so start by focusing on 1 side only.

Start testing campaign segmentation by customer type first until you get your CPA down to at least breakeven, before trying to solve for secondary variables like geography or availability. You’ll also need to start building a view on Lifetime Value (LTV) by each segment, so eventually you can think about bidding based on Return On Ad Spend (ROAS) or similar metrics. But every customer is different, and so this quickly also becomes a scale challenge that will require marketing data investments.

Don’t purely optimise on cost however, as the goal of this phase is to build number of connections not the number of users. Don’t underestimate power users who create a lot of connections even if they don’t spend a lot, you need to talk to and learn to love these people without becoming too dependant.

This phase is why 50% of startup investor’s money goes to Facebook and Google, you need to learn to love their tools and optimise (aka the sexier “growth hacking”) like crazy. But this needs to be just a phase – if you never graduate then you are at the mercy of the next algorithm change and/or well funded competitor. Don’t become the next GroupOn who spent like crazy here but never graduated.

3. The Product Growth Phase

Also called the Network Effect phase. This is the holy grail, where your product flywheel starts to spin and growth happens organically. There are 3 major things required here.

Finally and foremost – you need to understand what part of those calls in phase 1 relied on the human touch, and what was to overcome objective friction. Pour the gold of your customer service team over the trust issues, and scale the rest in-product with great UX that makes your funnel so intuitive as to be invisible.

Focus relentlessly on removing any friction in making a new connection; this could be through removing double commits, applying data and recommendation engines, teaching your users how their behaviour affects their success, systemically weeding out quality and fraud issues and many more concepts.

Finally you should clearly commit only to verticals where you can be number one. Your next key competitor will play in a narrower not a wider vertical than you, so you need to lead market share not just overall but more importantly in the key customer segments you care about. The network effect is a big moat, but it isn’t the winner takes all endgame it was first thought to be.

Are you working for a tech company?

Computer code screen

Is the company you work for a “tech” company? What does this even mean in today’s world where almost every company would grind to a halt without its technology systems?

There appear to be short and long term answers to this question.

The short term answer is that when you’re disrupting an industry and trying to raise capital, calling yourself a tech company helps. It promises higher growth, more access to tech VC capital, higher appeal to talent and disruption through innovation. These are all critical for kickstarting your startup and so adopting a tech company mantra at a startup phase makes commercial sense.

The long term answer is more complicated. In my experience, there are a number of behaviours within a company that determine it’s true identity as a tech company:

  1. Resourcing – At Google, the sales team proudly proclaim “we keep headcount tight so that we can invest in engineering”. Everyone knows the resource priority and it is actually realised. This is not purely a political hierarchy, the non-technical teams truly believe that only technology can scale fast enough to hit the audacious growth targets. There’s no such thing as “throwing bodies” at the problem – at least in terms of full time employees. Vendor or contractor growth however is a sign of masking an emerging problem here.
  2. Growth Targets – Technology works best at scale. For example, most national retailers don’t need automated warehousing because the number of SKUs and locations is not that high. If you’re Amazon however, you absolutely need this technology automation to even have a chance of hitting your massive growth targets – it only later amortises to become a competitive advantage. Tech companies truly believe that their growth goals far outstrip any organic growth projection for the sector as a whole.
  3. Time Horizon – Tesla believe that their most valuable asset will be the self-driving data accumulated over millions of kilometres of driving. This not only takes years of operating at scale to collect, but won’t become valuable until self-driving cars are truly pervasive and actually autonomous. It’s not a priority to fix the panel gaps on a $100k+ car, this will get fixed with scale and simplification. The core strategy and focus is their long term goal that requires almost puritan belief. This approach is certainly rooted in the evangelical beliefs of those who originally settled the west coast of the US.
  4. Leadership – You can’t stay the course on these long term goals if your leader doesn’t have the engineering ability and credibility to constantly reinforce the mission. As Bond Capital put it, “successful companies are led by planners – they have short and long term (10-20+ year) visions and business plans focused on data, execution, iteration, engineering and science”. It’s not just CEOs that need engineering ability, but also the board and investors are required to be increasingly technical in order to understand and support the tech company’s long term vision.

So, do you still believe you work at a tech company?

Graduating from my INSEAD EMBA

insead mba infographic17 months, 52 days of full time study, 3 major assignments and 10 exams later I have finally graduated with my Global Executive MBA from INSEAD! Given I now have the benefit of hindsight, let me try and answer some of the big questions I had going into the program:

Should I do the MBA or EMBA?

The MBA has an average age around 28, and the EMBA 38. If you have minimal exposure to the basics of finance, marketing and operations for example and can afford a full year off then do the MBA. If however you just need to know enough to ask smart questions of your team, the cost of a year off is very high, and you have 8+ years experience then you should do the EMBA. Many people doing the EMBA are almost there in a mid-life crisis scenario – they have achieved a lot and are financially very comfortable, but have no idea what really makes them happy. The EMBA program is really set up to help you explore that.

Do the MBAs and EMBAs cover the same content?

Overall yes, however in a much shorter time. EMBA’s cover in 3 days what an MBA would cover in 12 days over 3 months. That means EMBA’s have more assumed knowledge, readings must be read and you never walk into an exam feeling really confident as you often have 12 hours post-lecture to prepare. The EMBA course is also more practical, it doesn’t go into the theory as deeply but is very strong on the implementation and case study side.

Why INSEAD over a US School?

INSEAD celebrates diversity in a big way. It’s a constant throughout teaching, participant selection, group selection and even social programs. I genuinely think part of the selection criteria is to maximise the number of participant countries more than pure test results. Group exams, simulations and projects are quite common. Traveling to electives is organised in groups, often with people sharing accommodation. Sharing summary sheets before exams is common. There is a real sense of shared destiny. One key observation I had was that in US programs the exam results are published to all members, and the bottom 5% given a warning – three warnings and you’re out. At INSEAD no results are published, and make-up exams are held quietly at a later date. Don’t get me wrong, people still fail and drop out, but everyone bonds together and that makes for a strong shared rather than individual experience. Networking is 50% of the reason people are here, so don’t underestimate the benefits of this culture. It’s also the #1 or #7 school in the world, depending on which program you take.

What was the hardest part?

The hardest part for me was the switching cost. By that I mean having a tough week at work, and then flying out to take a tough lecture on a totally different subject. I have learned that my brain loves to follow a long term focus and become great at it, so constantly disrupting that was at times even physically painful. I had to become comfortable with taking a day or two of constant effort to switch focus. If you don’t switch off work emails for example, then your brain never really internalises what you were meant to learn. You can’t look back at notes, it’s really experiential learning. By that I mean that the actual MBA content is pretty standard across all the programs I have seen. The exceptional part about INSEAD is the quality of lecturers – they are incredibly passionate, entertaining and challenging to listen to. As an introvert, I walked away from many lectures just needing and hour or so to sit and reflect on everything I had just heard.

Prioritising under pressure would be the second hardest part, but I feel that the program was structured in a way that it gradually made this harder rather than hitting you from day 1.

What was the best part?

The people. 95% of the participants were “just like me”, similar life stage and questions. It’s funny when you bring a group of highly successful people together and they all realise how lost each of us actually is. The first few modules are academic focused and people are still presenting a facade, but then one by one people open up and confess their flaws and insecurities. Some people have total breakdowns, some people quit their jobs and some get divorced. That’s not great in itself, but if people are actually facing issues that have bubbled under the surface then I do think that’s a great thing. Be warned though that taking the time to hold a mirror up to yourself can be dangerous! If you push through that phase though then you will have a more honest view of yourself and the world. You can address some things while in the program, but not all. I walk out of the program feeling more confident that I know myself and have the tools to make my life and the life of those around me genuinely better. I just hope I can hold onto this feeling.

How have I changed?

I don’t think I can objectively answer that. I filmed a before and after video, so maybe you can tell me?

Life in Start-up Country

Life of a Start-up
Living in a corporate apartment in the SOMA district of San Francisco is pretty glamorous. Cheerios, bottled pasta sauce, a coffee percolator and a laptop on the couch. Still, it’s quite a good experience and I have enjoyed the feeling of being amongst it all. Luckily I actually still get a wage from a company that is doing better than break-even, so I guess I’m not really living the start-up lifestyle.

Meetings happen faster here, you don’t have to think about timezones and languages so much and you can talk to product face to face if you don’t agree with their direction. These are things that are easy to take for granted if you work in the US. On the flip side the diversity and distance challenges in APAC make it an incredibly exciting area to be working in.

It would be nice to have the best of both worlds, but not sure when or if that will happen. I’m starting to think that the best way to operate is to make APAC as self-sufficient as possible. Borrow the good things, and go it alone in areas you don’t agree. I think we can even get to the point where APAC is the innovative region and the US can learn from us. That sounds like an inspiring challenge to me. It’s not quite a start-up, but it’s the same skills right?

 

Real men pay salaries

“Real men don’t earn salaries, they pay salaries”. This quote from “A Sparrow Falls”, the Wilbur Smith book that I am currently reading, really struck me like a slap in the face. Why was it so painful? How do I get to the stage where I am paying the salaries?

Lately I have been trying to build my management and leadership skills. Amongst other things, this involved taking a Leadership training course at Google. It emphasised a number of pretty deep concepts, things like being an authentic person and this importance of bringing this authenticity to work with you (which is a fairly intimidating concept). There were of course articles from the Harvard Business Review to cover, including the four steps in the art of persuasion. These being:

  1. Establish Credibility – demonstrate you know your stuff
  2. Frame for Common Ground – find the stuff you both agree on
  3. Provide Evidence – demonstrate something new that builds on your common ground
  4. Connect Emotionally – expand the current ground with them at your side

Next steps? Find mentors. I loved watching an interview of Jack Dorsey, one of the founders of Twitter and now Squareup. He isn’t an amazing presenter, however I feel that I present in a similar way and have a similar view on the world. Reading his Vanity Fair interview and numerous Venture Beat articles, it paints an inspirational picture of a guy who throws every part of him into his goals and passions. Is this authentic leadership? He built everything himself form scratch, based on his passion and getting his hands dirty. The noble story of the engineer, putting the product first and that product now paying the salaries.

Or what about someone like Greg Ellis, the current CEO of REA? I watched his CEO Hub interview today on Business Spectator. He built his career like a pyramid. Rather than rising to the top with a single skillbase and being forced to add to it while riding product growth, he worked the other way around. Build marketing, sales, HR, legal and other skills at the best companies you can find, and then find or make one of your own. Is this any more or less a noble to be paying the salaries?

Or maybe it’s like Alan Noble explained this week. It’s not about mentors, it’s about surrounding yourself with great people and taking the opportunities when you see them. Meanwhile, where is that copy of How to Win Friends and Influence People

First impressions of Silicon Valley

Although it is actually my second time in San Francisco, it is my first time purely for business. I wanted to record a vlog on my first impressions of Silicon Valley and how I felt as an outsider looking in.

The Goal – Book Review

The Goal by Eliyahu M. Goldratt was brought to my attention when my director came out to discuss our operations team and ask where the bottlenecks in our organisation lay. When he referred to Herbie, I had to know what he meant.

The first thing to note about this book is that it is a story, not your normal dry textbook style business book. I guess teaching through narratives worked for the Bible, so why not a business book? It is a tricky balance though, and I feel at some points the author gets a little distracted by the back story. To make up for this he then compresses a number of key points into one paragraph of wise dialogue. It all flows reasonably well overall, it just means you can’t start skimming what appears to be light reading or you might miss key insights.

So what are the morals? The story starts with plenty of despair and common frustrations, but I love that it also starts with a reasonable company making reasonable decisions – yet everyone is burned out and under resourced. In my experience this is an incredibly common situation and probably where the “work smarter, not harder” phrase comes from. Even though the book sets its story in a manufacturing plant I found it really easy to adapt to my experience, especially working with an Agile software development team.

The solutions expressed in the book are all about a back to basics approach to finding and optimising within your constraints. Every process has a bottleneck, the trick is identifying what it is and then applying techniques to make the best of what you have. For example, if your developers are constantly overworked then test the requirements documents before they start work and offload some of their tasks to other roles who are not bottlenecks. Sounds simple right? To justify these changes to your accountant you can note that if your developer works 50 hours a week and your total operating expenses for a week are $50,000 then the cost of them wasting an hour is $50,000 divided by 50 – $1,000. This is because it adds downtime and inventory jams across the rest of your process and is the limiting factor of overall output. Puts things in perspective right?

The book doesn’t stop there however – it talks about synchronising bottlenecks and non-bottlenecks, the importance of minimising inventory, how to focus on market demand across your organisation, why data is misleading and no substitute for getting out on the floor, problems with modern efficiency accounting practices and even how organising a regular “date night” with your partner is a good idea! Overall I really loved this book, it was very easy to read and relate to. Although it doesn’t mention this, I think it is a great read for fast growing companies that face resource constraints every day and can get easily distracted by their purpose as a company.

The Innovator’s Dilemma – Book Review

The Innovator’s Dilemma by Clayton M Christensen is one of the best business books I have ever read. It focuses on the practical aspects of innovation, with two key points (for me at least):

  1. You are most vulnerable when you are most profitable
  2. You need to create the start-up that undermines your most profitable products before someone else does
  3. New markets need simple, cheap products which hit a critical new requirement

This book is great inspiration for those seeking to become entrepreneurs, it shows practical examples of where start-ups have seized on opportunities and completely blind-sided the highly profitable incumbent. That’s the dream right? It also serves as a great warning to those in big business who feel chasing the margins instead of innovation is the path to success. It certainly puts forward a compelling argument, one that even NASA seems to think has merit.

Perhaps margins should be the guide for businesses, but they should work on a goal of an average margin across all their products instead. That way they can maintain a balance of high profitability mature businesses with low profitability emerging businesses. Of course this would need to be combined with some “profit margins must never decrease on a product” rule. Doing this without cannibalising your own offerings (by differentiating based on high end vs low end customers) however is a very fine line to tread.

The other practical reflection I had reading this book was on the Engineering vs Sales argument. Which side is better equipped to run a successful business? I am still yet to work anywhere that balances these two sides perfectly, it always seems to fall one way or the other. My thoughts after reading this book were that an emerging organisation needs to be run by the engineers (focus on product success, not profits or impossible projections) and mature businesses by sales people (focus on profits, finding upmarket customers).

What did you get out of this book?

Learning business by charts


I am someone who learns visually. I absorb charts, screenshots, videos etc. a lot faster than any other medium. Business knowledge is something that often doesn’t come in this format however (perhaps why the first business discipline I learned was marketing). However I have found a Twitter feed (yes, there is useful content on Twitter) that I have really grown to love. http://twitter.com/chartoftheday

This graph was used to illustrate how poorly Microsoft Office 2010 was performing sales-wise, but wow what a difference between Windows Vista (Jan 2007 launch) and Windows 7 ( Oct 2009 launch). It completely masks the decline in Office sales, even though Office sales are obviously an equally big cash cow for Microsoft. It also makes the Server and Tools slice of the pie look tiny, even though it actually represents $1b a year in operating profit.

I also liked this chart of how Apple cannibalised the entire mobile phone industries’ sales with the iPhone. I am reading the Innovators Dilemma at the moment, and the release of a well executed touch screen phone certainly represents a disruptive technology in my eyes. It still amazes me that such a massive market filled with well established players can just be turned on its head in a few short years. More specifically Nokia’s share price copped a beating ever since the release of the iPhone, the subject of yet another chart. What is interesting to me is that Apple’s rapid rise ironically precipitated a huge boom in the adoption of open source mobile software in Android. I guess that the previous market leaders had their hands full competing with Apple’s hardware and didn’t have the time or resources to produce new software from scratch.

There are plenty more charts out there that will make you stop and think, and each one can be read into (rightly or wrongly) 100 different ways.

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