Business of Software Blog

Times are changing

This is a guest post by Bob Walsh of 47hats.com

Neil's latest post, BoS digest: why you can't just trim the fat, I thought was a good one, but it neglected the 14th principle of the Toyota Way: Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen).

Put another way, that means stop ignoring and resisting the ways the world has changed. I've noticed that established ISVs have extreme difficulty in understanding some of the fundamental changes that have happened in the last several years, especially when it comes to social media.

Today, because so many of your customers connect with each other online, your market is a conversation you do not control. Furthermore, much of that conversation is happening on networks you don't understand. But because of internal politics, inertia, and that few C*O's are technology early adopters, this shift is someone else's problem and the can gets kicked down the road to the next meeting.

If at this juncture you don't understand that interrupt advertising is broken, that the old ways of doing business are broken, you have a serious problem. Yes, there's plenty of hype in the social media world - but dismissing social media as something unimportant at this point misses the point.

Here's a little test:

1. Do know what getsatisfaction.com is and actively participate there?
2. Do you have a Chief Community Officer?
3. Do you and your other execs talk with customers via your robust company blog?
4. Do you and your other execs understand and use Twitter, Facebook and other social media?

If you don't at least get 2 out of 4 of the above, how do you expect to survive the next 24 months?

No one expects or wants your company to become a social media powerhouse that transparently converses with your customers overnight. But the time for sitting on the fence regarding social media is up. And since social media is an intensely disruptive force to traditionally organized hierarchical entities (read - your company), this is not a matter to be taken lightly.

Time is not your friend right now.

Bob Walsh is by turns a consultant, blogger, developer, microISV, startup, author and podcaster. Too much free time on his hands is not a problem he has.

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Hiring people

I've got a guest post over on Bob Walsh's 47hats.com and although it's aimed at Micro ISVs ready to hire their first person I think points 2 - 7 are relevant to business of all sizes. Here's point number 5:

If you’ve never hired for this role before, bring in an expert to help you. Hiring a sales person? Find somebody who’s hired a hundred sales people already. Don’t know an expert? Find somebody who does. Never, ever hire for a role you do not understand without outside help.

You can read my other 8 tips here.

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BoS digest: why you can't just trim the fat

I think it was J.K. Galbraith, the economist, who pointed out the problem with trimming the fat in hard times. The image is of taking a slice of bacon and then cleanly removing the fatty rind with a sharp pair of scissors, just leaving the meat behind. In reality, the fat is marbled into your company's flesh. There's no easy way of getting rid of it. And, indeed, often you shouldn't: it's the fat that gives Wagya beef its flavour and keeps Eskimos warm in winter.

So what do companies do when they need to lose the flab? Unfortunately, a lot of them take the effective, if drastic, short-term weight-loss solution of cutting off both legs. Wouldn't it be much better to be "lean"? As a Venture Hacks article in October explains:

“Lean” is the most capital-efficient way to run a business. Lean is the never-ending process of eliminating waste: finding every activity that does not create value for the customer and eliminating it. The two greatest wastes are overproduction (making things the customer doesn’t want) and inventory (making things that aren’t used immediately) [...] Lean startups eliminate waste: they eliminate every activity that is not necessary for creating customer value.

Sounds sensible, right? What can be wrong with eliminating waste? And 'lean' is such a nice word, with its connotations of health, lissomness, agility and athleticism.

But drill into it and the metaphor shatters.

Sure, 'lean' is good if you're trying to build as many widgets as possible, in the fastest time and with the lowest defect rate; or if you're trying to fly as many people from London to Paris as cheaply and efficiently as possible; or maybe even if you're trying to ship a single product release with a given feature set as quick as you can. But creating a software business isn't like running an assembly line or running a no-frills airline. It's not about maximising measurable output and minimising inventory or aircraft turnaround times. It's about creating an environment where highly creative people can thrive, and building products that your customers might not even know they need yet.

And what is "value for the customer" anyway? Value for the specific customers in your current customer base, right now? Or value for all your potential customers over all time? Or do you need to strike a nuanced balance between the two? And isn't the "value" you can provide to your customer somehow correlated to the culture of your organisation? So how much time, and money, should you spend on that?

Earlier this year Red Gate hit a long-standing sales target. To celebrate, we hired out the local Apple store after hours, closed it to the public and gave everybody at Red Gate £300 ($600 at the time) of Apple vouchers. Was this an activity "necessary for creating customer value"? No. Was it a hell of a good thing to do anyway? I think so, and that's because running a software company for the long term isn't as narrow as shipping an individual product as quickly as possible with the minimum set of features to keep the maximum number of customers happy.

The Venture Hacks article goes on to quote Taiichi Ohno, the founder of the Toyota Production System:

True efficiency improvement comes when we produce zero waste and bring the percentage of work to 100 percent

Can you hear that rumbling noise? That's Ohno turning in his grave. Sure, superficially, the Toyota Production System is about eliminating wastage and increasing productivity. But it's deeper than that: it's a product of the Toyota Way, which is not a set of processes but a philosophy. It's about - among other things - being humble, reflecting on oneself, experimenting, iterating, learning and continuous improvement. Taking lessons learnt in one industry and blindly applying them to another would be anathema to Taiichi Ohno.

Hmm. Running a software company turns out to be a lot trickier than, paraphrasing, not spending time and money on worthless crap.

The Business of Software social network is growing, but can you help us grow it even more? Take a look at this link for a couple of ideas.

It's almost the New Year, and Mark Dalgarno asks what are your New Year resolutions?

I've got a guest post on hiring your first employee at 47hats.com.

I've got three speakers signed up for BoS 2009 so far - Don Norman, Geoffrey Moore and Joel Spolsky. I'm hoping to announce some more soon.

Perry Ismangil is presenting to 7,000 people at a conference and would like to know how to maximise the opportunity.

Tom Moellering wants recommendations for a web usability company in San Francisco or Chicago.

I'm going to leave last week's question of the week on who would you like to hear speak at Business of Software 2009 open for another week, and add a new QOTW for this week: what are your predictions for 2009? $20 of Amazon vouchers will go to the best replies on both posts.

I probably won't blog again until the New Year, so, in the meantime, have a cracking Christmas and if you liked this post then please follow me on Twitter or subscribe to my blog's RSS feed.

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BoS digest - the terrifying economics of running a conference

The economics of conferences are terrifying.

If you want to run a conference then you need a place to hold it. The places with the best locations, and the best meeting space, are the hotels. But hotels don't make their money from renting out their ballrooms. They make it from selling hotel rooms; from heads in beds. The more people stay in the hotel, the more $5 cans of coke, $10 videos and $20 cheeseburgers get sold.

So the hotel asks you to guarantee that people will stay in their hotel. And your conference delegates need a place to stay. That's why, for Business of Software 2009, I've had to promise the hotel that they'll sell some 600 hotel room nights. And if they don't, then I'll have to pay for them myself. And then there's the cost of feeding all those hungry conference delegates. With coffee at $10 a cup, and a bacon and egg muffin double that, it's not surprising that we spent $9,171.60 just on ice cream in one of the breaks last year.

Which is why, on Friday, I underwrote about $300,000 of costs. Which is terrifying.

But, as Theodore Roosevelt said about bear hunting, the thrill is in overcoming your own fear. So I did it anyway. With the economy nose-diving and the future opaque, it would have been sensible, understandable, not to run the conference in 2009. It's easy to be cautious, to cut back, to think twice, when things are uncertain. To lay people off, to cancel Christmas parties, to freeze and wait and see what everybody else does before you move. To kill your side projects, to abandon your mISV and to return to the cozy safety of your day job.

But if you do what everybody else does, what results do you get? You get the same results as everybody else. Which is great in a boom, but not in a bust. The only way to thrive in a bust, to beat the market, is to be different.

The second London Business of Software meet-up is under a month away. To join us, sign up online.

Last week's question of the week was 'What would you change about how you write software?' Jonathan Wax wins the $20 for the best answer of "stop making up requirements based on internal debate", a common problem in software development.

This week's QOTW is 'Who would you like to hear speak at Business of Software 2009, and why?'. I'll give $20 to the best answer.

Business of Software 2009 will be held in central San Francisco from November 9th to November 11th. It's a Joel on Software conference for the second year running. To stay up to date, follow me on Twitter or subscribe to my blog's RSS feed.

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Changing the metaphor - what if we didn't think about "shipping" software, or software "projects"?

The term "war on terror" has always made me squirm. But there's no denying the power of the metaphor. As a recent article in Scientific American argues, the metaphor you choose defines the way you think. Call the incompatibility between the West and fundamental Islam a "war on terror" and you are forced to think about how best to beat the "enemy" into submission; how to crush them militarily. It becomes a zero sum game, to be settled with violence.

But what would happen if you changed the metaphor? If you were to choose the metaphor of terrorism as disease, or crime, rather than military enemy? Then you would think about the problem in different ways. Rather than war, you might consider innoculation or policing as effective counter-strategies.

But this blog isn't about politics, it's about software. The reason I bring up the "war on terror" is because of something Tim Lister said last week. I'd always thought about our product plans as a "pipeline". But Tim said that his preferred metaphor was a bookshelf*.

Define product plans as a pipeline, and you immediately start thinking about funnels, filtering and distillation. You think about linear progression, of ideas entering the pipeline at one end and then emerging, linearly, first in first out, from the other. You worry about filling the pipeline and keeping the ideas flowing.

But change the metaphor to a bookshelf, and everything changes. Filling the bookshelf becomes a parallel task. You can put up different types and sizes of books, and you can take them down in any order. You pay attention to the book covers - how to make the book look good, and what blurb to put on the dust jacket so people will choose to pull your book off the shelf and read it.

What would happen if we changed an even more fundamental metaphor?

We aways talk about software projects. The word project makes you think of planning, spreadsheets, milestones, checkpoints and gantt charts. What if we chose a word other than project? What if we called them software organisms, or software shrubs, software herds or software jigsaws?

Would that change the way we thought about writing software? Would we come up with better ways of shipping software?

And how about "shipping" software? Is that another metaphor ripe for challenge?

Post your comments here ...

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[* The bookshelf metaphor was actually one that Dom made and Tim picked up on]

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BoS digest: video of Steve Krug on the least you can do about usability

Tim Lister, the author of Peopleware, spent a couple of days at Red Gate last week. I was slightly nervous - Tim’s last visit culminated in my group haranguing by thirty developers, testers, designers and technical authors following Tim’s excellent, concise and witty summary of all Red Gate’s - and, implicitly, my - failings.

It was worth it though. In the year and a half since Tim was last here we’ve implemented many of his recommendations. We got rid of project team bonuses, improved our project approval process and hired six more people to join our user experience team. Sure, we’re not perfect, but we’re a lot better than last year.

One thing that Tim noticed was how articulate and passionate our development team is. According to Tim,

"Software development is about informed argument. Arguing about what the product is, and how exactly it’s going to do it, is fundamental to building a product that people will pay real money for."

But although articulateness and passion produce better quality arguments, and hence better software, they also have a bastard cousin: obstinacy. As Tim said,

"Obstinacy is “I know the best about everything”, which comes from a child’s view of the world. Being obstinate is friction. It’s wasted energy. We need a definition of what is valid debate and what is obstinacy: the debate has to come to closure. You win some, you lose some, but you need to move on."

Tim also made the excellent point that individual team members, especially developers, need to de-optimize themselves to optimize the team. The aim isn’t to get developers developing in the most efficient way: it’s to deliver a complete product. An individual developer might need to sacrifice some personal productivity for the benefit of the overall project. He might need to change the way he works, or throw away some code, or go off and do something else for a bit, so a tester can test sooner or better and the project can run quicker.

Which leads me to this week’s question of the week. If there was one thing you could change about the way you write software, what would it be? And what’s stopping you? $20 for the best answer. Post here.

Last week’s QOTW was “Why do, or why don’t you, use Twitter”. Of the 25 replies, I think Adriana Iordan’s deserves the $20 prize.

On the forums, Michael P asks for advice on pitching to bloggers. If you’ve got some advice for Michael, or a story about what you’ve tried worked or failed, then post it on the forums.

I hope you can join Steve Johnson and me for an online chat about product management on Friday. Steve is an expert - he’s taught thousands of people about product management, and presented at the Business of Software conference two years running. You can sign up here.

The video of Steve Krug’s talk at Business of Software 2008 is now online. Steve has a theory that our lives are full of things we know we should do, but don’t really want to do: brushing our teeth, doing our laundry and usability testing, for example. So what is the least you can get away with? It turns that you can get extraordinary results with a minimum of input. For usability testing, anyway. Watch Steve’s video to find out more.

I’m hoping to announce the date and location for Business of Software 2009 very shortly. If you want to be the first to know, then follow me on twitter.

Interested in building long-term, profitable, sustainable software businesses? Then join the Business of Software social network.

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BoS digest: on Twitter

I’m late to Twitter. At first, I didn’t see the point. Why would I care that you had bacon and eggs rather than your usual organic muesli this morning, and how exactly can the headache that’s currently splitting my head rock your boat? But now, I’m hooked. I still don’t care about your breakfast and won’t tell you about my aches and pains, but I’ve slowly realised that I’d missed the point. It’s not about sharing the boring minutiae of our lives. Instead, I’m using it to share useful snippets of information I come across.

Did you know that Teddy Roosevelt said “The thrill is in overcoming your own fear” about bear hunting, or that Paul Romer said “A crisis is a terrible thing to waste”? When I read these, I have an irresistible temptation to share them. Twitter means I don’t have to resist: as Oscar Wilde said, the only way to get rid of a temptation is to yield to it. And did you know that Stephen Fry declared December 1st to be Oscar Wilde day and got hundreds of replies from his 25,282 followers?

So, if you want to know that President Tubman of Liberia gave two pygmy hippopotamuses to the Duke of Edinburgh in 1961, or that Churchill once said that however beautiful the strategy, you should occasionally look at the results, then join twitter and follow me. Often, but not always, if you squint hard enough and if you're clever enough then you’ll be able to spot a tenuous link to the business of software. My account is http://twitter.com/neildavidson

I’m reinstating the question of the week on the Business of Software social network. This week’s question is Twitter: why do, or why don’t, you use it? I’ll send a $20 amazon voucher to whoever comes up with the best response.

I’ve posted the video of Jessica Livingston’s Business of Software 2008 talk online. Jessica talks about the lessons she’s learned from her interviews with, among others, Paul Graham, Steve Wozniak, Mitch Kapor and Joel Spolsky.

If you haven’t already done so, then check out the other videos of Steve Johnson, Cory Doctorow, Paul Kenny, Eric Sink, Dharmesh Shah, Jason Fried and Alexis Ohanian.

Elsewhere on the forums, people are still discussing their biggest marketing mistakes, whether to use resellers and whether product managers are overpaid.

Finally, I dug up Hewlett Packard’s original 1937 business plan. Read about it on my blog, and post up your comments. I’ll send a copy of the HP way by Dave Packard to the best reply.

Next week, I hope to bring news about Business of Software 2009. To stay up to date, follow me on Twitter, or subscribe to my blog, or sign up to the Business of Software social network.

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Jessica Livingston on Founders at work

I've just posted up the video of Jessica Livingston at Business of Software 2008. Jessica talks about lessons learned from her interviews with, among others, Paul Graham, Steve Wozniak, Mitch Kapor and Joel Spolsky:

There are other videos of, among others, Jason Fried, Cory Doctorow, Dharmesh Shah and Paul Kenny on the Business of Software social network.

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Hewlett Packard's original business plan from 1937: erm, let's just do some stuff

Spurred on by an intriguing reference in Good to Great about the founding minutes of Hewlett Packard, I sent a request to the HP archive asking if I could get hold of a copy. Not only did Anna Mancini e-mail me a scan of the original August 23rd 1937 minutes, but she also kindly agreed to post an excerpt for everybody to see on her blog:

http://www.communities.hp.com/online/blogs/hparchives/archive/2008/11/27/original-business-plan-1937.aspx

I find these interesting for a couple of reasons.

Firstly, it's clear that Bill Hewlett, Ed Porter and Dave Packard wanted to work together, but didn't know what they wanted to do. This is a common theme across many different companies, including Red Gate.

Secondly, although HP is now "recognized as the symbolic founder of Silicon Valley", just imagine how their spawn - today's venture capitalists and investors - would have thumbed their noses at Hewlett and Packard's lack of ambition. Think how the elevator pitch would have gone. No paradigm-shifting, market-busting billion dollar vision, just something along the lines of:

"well, erm, we just thought we'd do some stuff. Maybe amplifiers or radio transmitters. Medical equipment, welding equipment and air conditioning controllers might be interesting too. Probably not public address systems, or selling other people's radios though. Who are our customers? Good question. We'd probably sell it to manufacturers. Not sure though - we haven't thought about it much. We might sell some services too if we have to."

Yet, despite a frankly rubbish business plan, no clear idea of what they wanted to do, and appalling timing (in the tail-end of the great depression, just before the second world war), Hewlett and Packard managed to create what would turn out to be a formidable institution. It would last some 70 years and generate hundreds of billions of dollars in revenue. Until Carly Fiorina screwed it all up, at least.

Here's the link again:

http://www.communities.hp.com/online/blogs/hparchives/archive/2008/11/27/original-business-plan-1937.aspx

What other lessons can you see in this fascinating excerpt? I'll send a copy of The HP way by Dave Packard to the best comment ...

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