AnshuBlog: The Stack Fallacy

Go forth and multiply — your apps.

2017-08-02T11:26:00.000-07:00

There’s a new wave of reporting focused on the post app era. The Recode announces “App Boom is Over”. Quartz points out how most users never download any apps. Let me be very clear: The App Boom is Not Over.

The reporting on this topic made me think of an imagined Yogi Berra quote.
"Nobody downloads apps anymore, it’s too crowded."
-Yogi Berra (imaginary tweet)

The $100 Billion Dollar, 20% CAGR Market

Let’s start with facts. The real numbers are amazing — we are in an unprecedented era of growth when it comes to revenue from apps.

Revenue is hard to manipulate since it ties back to financial filings by Google and Apple and needs to be audited.

App revenue is growing and is expected to reach $100 Billion dollars by 2020.
source: VentureBeat & App Annie

Source: Venture Beat/ App Annie

Lies, Damned Lies and Statistics

The news and editorial stories doing the rounds have many flaws.

Take app downloads news as an example: it talks about how apps downloads have stalled by pointing out the numbers for top apps.

In truth, the newer apps like Uber, AirBnB, Snapchat are all growing fast while, expectedly, most top apps that have been there for a while and have saturated the users like Facebook are not growing any more.

To use this data, to point to the end of an app boom is somewhat misleading.

Never Been a Better Time for Apps

There has never been a better time to be an apps developer. Billions of users have access to cheap new smartphones, data plans are becoming available globally and the app store owners like Apple & Google are being more generous than ever.

Apple is supporting lower fees on subscription revenue — going from 30% to 15% in year 2 onwards.

As a SaaS guy, let me tell you this is an amazingly insightful decision by Apple — if most developers can be nudged to think subscriptions, in turn making consumers pay more per month, you end up with a very long term, sticky revenue base. Even more importantly this revenue is cheaper and results in a virtual lock in as consumers with more subscriptions are much less likely to switch ecosystems.

Go forth and multiply. Your apps.

Amazon: The Company with a 100 CEOs Cannot Be Stopped

2017-07-07T11:28:00.000-07:00

A company with a 100 CEOs can do anything.

Amazon appears to be a unique success when it comes to not just the success it has achieved but the diversity of businesses it has succeeded in — from online retail to web services, and the march continues into many, many new lines of business.

Almost every large, successful company struggles with growing beyond its core business. Oracle is great at selling software, Salesforce is great at cloud CRM, Apple is great at selling devices and they do an okay to good job of selling products and services that are complimentary — often through the exact same distribution channel.

The constraint is senior leadership bandwidth.

If your CEO and executive leadership of the company need to be bought in before you can execute, as a business leader you have to now convince leaders who have great instincts for say a retail or ad business to grok an entirely new business model. This is not easy. Most companies fail here.

Google is a great example — it’s done a great job of winning the online search market and almost anything that can be monetized using the same business model — ads. But when it tries to get into new businesses like grocery delivery, selling phones (Motorola & now Pixel), robots that walk, cars that drive themselves — it often appears to struggle on the goto-market and business side. Where it sets up clear business units with leaders it does well, YouTube under Susan Wojcicki being a great example.

What makes Amazon succeed where others struggle so hard?

Amazon appears to be one company run well by Jeff Bezos and his direct reports like Andy Jassy — but in reality Amazon has succeeded in building a culture of 100 CEOs — it hires, grooms, develops and builds “General Managers” — there is literally over 100+ of them*.

A company with a 100 CEOs can do anything.

While many companies give GM like titles to their executives, they are often constrained by central planning of some sort. They pay what is known as the corporate strategy tax. At a company like Oracle, I couldn’t price product A if it would impact the profitability and revenue of (cash cow) product B. Every major successful company learns to protect its cash cow — and while this initially helps, often for decades, it eventually turns into a millstone around the neck of every business. Be it mainframes, databases, ERPs, ad revenue, or whatever.

100 Mini-Me CEOs

(Technically speaking, the titles at Amazon are a little mixed. Not all GM’s lead businesses but many do — from Alexa to Redshift Analytics. But the business is structured around these BU leads some run all of India while some are growing new businesses like “live video”.)

Why can’t every company declare 100 CEOs?

Companies often talk about agility and the desire to move faster and move decision making to the edge but they are not truly built for it.

Amazon was built ground up on APIs and Categories

Amazon’s first foray into books meant when it entered new categories, it appointed GMs for new categories who ran them as businesses. Pretty close to how a brand manager at P&G can make decisions around Tide.

But it was the key technological architectural decision of being API driven for every single (micro) service in the company that truly enabled Amazon to be a network of business units — interacting and doing business with each other with clear APIs and rules of engagement.

Companies like Google realize this and hence the move to Alphabet, and appointing a clear CEO of Google Cloud (Diane Greene) but its hard to retrofit this model unless you have practiced it and its deeply ingrained in your culture.

In some ways, GE was the original conglomerate with many businesses operating under leaders but they are big businesses.

Amazon grows BU’s that look like startups from $0 to $100M and sometimes to $1B+ under GM’s that literally start out with nothing more than an idea. Amazon’s database business is one such example.

As Amazon, welcomes its one more CEO — Mackey of Whole Foods, its good to remember that he joins a long list of executives at Amazon running billion dollar businesses, and there will be more grown internally, and acquired.

Engineer’s Guide to Picking an Early Stage Startup

2017-04-27T11:29:00.000-07:00

What I wish I had known 10 years ago

One of the questions I often get from engineers I mentor is how do you decide on what early stage startup is worth working for? Often, this is long before you have paying customer logos or big name venture funds with substantial commitments as ‘signals’ of potential success.

I was a programmer once. And I had to wrestle with this question too. How do I decide?

More than a decade of experience building new products and businesses, here is what I wish I had known.

Complexity is your enemy

Most great companies are built on solving a big problem with an (after the fact) obvious new viewpoint. Let’s take a few:

Uber: Solved an obvious problem — finding a cab during busy times. And they had a somewhat obvious viewpoint — why don’t we use these new iPhones to find out where the cars are at and get them here. Yes, it gets fairly intricate after that but the core premise was not that complicated to understand.
Salesforce: When Marc Benioff met his technical co-founders (Parker Harris, Dave Moellenhoff and Frank Dominguez), he had a clear big problem — enterprise software should be more like Amazon.com — accessible as a website (yup) on the internet. And he was going to start by building a way for sales people to manage leads.

The world is full of complexity. The genius of these founders was to find a simple solution to complex problems.

Uber was slowly setting out to solve a transportation logistics problem by building a real-time marketplace of drivers and users leveraging cloud computing, mobile payments, phone-based GPS systems and more.

If you saw all this complexity but couldn’t reduce it down to a simple one line problem statemnt — you may make a great economist but not a startup founder.

Market is your friend

It’s hard to say it any better than Marc Andreessen (who gives Andy Rachleff credit for helping think this through). As always, he is right:

When a great team meets a lousy market, market wins.
When a lousy team meets a great market, market wins.
When a great team meets a great market, something special happens.

Let’s apply this to a couple of examples.

Uber: If you look at the negative press and all the mistakes they made along the way, billions of dollars poured by American and foreign companies determined to slow its growth — and the company has survived and done well as a business primarily because the market needed this. Lives of millions of consumers (and drivers) are better because we have a solution to a key problem where we spend billions.
Nutanix: This is a great team that met a great market. I know because I was lucky to be there from day 1. CIOs spend over hundred billion dollars a year on storage and compute infrastructure. When you build something better, you get to go from zero to a billion in revenue in less than 7 years.

You cannot build a billion dollar company in a million dollar market. No matter how much machine learning, cloud computing and clever UX and design we throw at it.

Salesforce Founders — the Engineers and the CEO. It worked out well.

Find your Benioff (source: FlickR)

CEO: Can she raise capital? Can she sell? Can she hire?

Startups are hard and you have to make difficult decisions with limited data. You have to raise money from investors who are friendly at cocktail parties but become real bankers when you have to raise money. You want a CEO who can help VCs see the vision.

All startups die when they run out of money.

Its the job of the CEO to find your first 10 customers. Can she do it? Will people listen to her because she has insights, charisma and credibility? If the answer is yes, you are on the right path.

All startups die when they run out of customers.

Now, you have a CEO who can raise capital and get first few customers, but can she hire? Can you imagine your friends wanting to work for her?

All startups die when they run out of engineers.

Vision & Mission

Almost every analysis of the startup journey shows that risk adjusted, you are better off keeping that BigCo job.

At the end of the day, you should do a startup only if it aligns better than your way of being.

While the above heuristics are how I have judged products and startups both as an investor and as an executive, nobody knows if a startup will succeed.

Embark on this journey if the team’s vision and mission aligns with you. If it passes the shower test. If you wake up thinking two days after meeting the founder(s) that you wish you were working with them. If your imagination allows you to see this early stage seedling of a startup could one day be truly a company that changed something big.

As my mentor and role model, Marc Benioff often says:

People overestimate what you can do in a year and they underestimate what you can do in a decade, unless you’re (Apple CEO) Steve Jobs.

When joining a startup, focus on seeing what this company could transform in 10 years. Does that excite you?

We are hiring for our startup. If you are an engineer and want to come work with me — email me at anshu dot Sharma at prekari.com

Riding with Nutanix from Day Zero

2016-09-29T11:31:00.000-07:00

What I learned from angel investing

I am the luckiest guy in the world. I met Dheeraj (CEO) during my years at Oracle more than 10 years ago, and Bipul (Board Member) during my years at IIT more than 20 years ago. When Bipul reached out and told me that Dheeraj was building a company, I had never invested in a startup but I knew one thing: always be closest to the smartest people you know.

Nutanix is Web Scale Computing (XKCD explains it best)

Despite my role leading platform at Salesforce, I knew very little about storage infrastructure so I should have walked away because you should only invest in what you know, says Warren Buffett and every other investment guru I listen to.

But, I wasn’t trying to invest.

I was trying to learn how startups get made.

I had recently become an executive for the first time in my career and I was learning from the very best leaders like Marc Benioff, Parker Harris and Steve Fisher. I was building new products that were on the path to billion dollar businesses.

Yet, something was missing. I wanted to not just build products but also learn how to build a company from scratch.

And I thought if I write a check, I would get to see how the sausage is made. And its been an amazing experience.

Table is set for the IPO

Things I learned

Mission Matters: Dheeraj had a clear mission to turn our data centers into invisible infrastructure just like iPhone made cameras, phones, keyboards all disappear into one converged reality.
Team, team, team: Dheeraj and his co-founders picked and hired some of the smartest people at companies like Google and Oracle combining deep consumer and enterprise expertise.
Big on vision, pragmatic on GTM: By focusing early on VDI as a high pain point, Nutanix was able to ramp up revenue early.
Prioritize Long Term, Execute Short Term: Every time I talked to Dheeraj, he always talked about the long term — how the industry was evolving, where the market was headed, how VDI was only step 1, hyperconvergence is only step 2, and where it is all going.

Your People are Your True Legacy

Finally, we are all busy building our companies and yet we are all part of one interconnected whole in silicon valley, and globally.

People you start working with go on to build their own great companies (hat tip Cohesity, ThoughtSpot) — just as Larry Ellison has a string of next generation companies like NetSuite and Salesforce, and Marc Benioff has helped create many in turn.

If Nutanix is to be a true silicon valley success, the people that grow with you and the people that leave must in term build their own successes.

I am excited to see what happens when Nutanix starts trading but am even more excited to imagine how the team will change the world in next 10 years.

Why We Invested in ProsperWorks CRM

2016-09-27T11:43:00.000-07:00

With so many CRM products in the market, I was not looking for a new CRM startup. But when I met Jon Lee, the founder and CEO of ProsperWorks, two years ago I thought he was on to something big by solving the biggest, unsolved problem of CRM:

Sales people hate entering data

They do it because they are forced to do it or they don’t get paid.

Its not as if every CRM vendor does not know this — they all do. I have worked for 2 of the largest CRM players in the market and we all knew what the challenge was so we worked hard to make the CRM beautiful, and mobile, and social, and cloud.

But Jon had a different idea:

What if we could make the CRM disappear?

The Zero Input CRM

What if you started with the tool sales people already use the most and spend their lives in — email. And build the functionality right into the world’s fastest growing email product: GMail.

The ProsperWorks team launched the product and has gained amazing momentum. In our diligence, we compared the revenue and growth to some of the fastest growing SaaS startups in year 1 and year 2 of their lives — like Salesforce, Marketo and Zendesk — and found ProsperWorks was on to something epic.

Source: G2 Crowd User Reviews

We wanted to dig deeper into what was fueling this growth over and above a winning product that customers love — with 4.8/5 stars on G2Crowd. The key to their growth was focus.

Secret to Success: Focus

A startup must decide what it wants to do insanely better than the incumbents. Jon chose to focus on Google and making ProsperWorks the best CRM for Google Cloud customers.

ProsperWorks CRM

Every CRM company pays lip service to email integration. Just go to any of these leading CRM companies websites and review forums and you will see a litany of broken connectors and widgets that work half the time if at all.

By choosing to focus on Google Cloud, the team made a brave but strategic choice. ProsperWorks is one of six apps recommended by Google Cloud, and Google itself is a customer.

The Google Cloud Bet

As an investor, I am convinced Google Cloud — apps and platform — is growing fast and is on the cusp of an even bigger break out. The Google Apps for Work as its popularly known has been reported to be a multi-billion dollar business for Google, and growing fast.

At Storm Ventures, we believe Google Cloud under the new leadership of Diane Greene will continue to be an ecosystem where new leaders will emerge.

ProsperWorks has an amazing head start for companies that are betting on the Google apps and cloud ecosystem and with this infusion of $24M, I am excited to see what we can do in the next 10 years.

When Free is Not Really Free

2016-02-11T00:13:00.000-08:00

The Free Basics program which has become a topic of intense debate thanks to the tweetstorms by Marc Andreessen — is a stroke of genius. The program is called free, it sounds like free, and it is “free”.

Yet, it is not truly free — for it comes with many restrictions that limit the usefulness of the service, the freedom of people using it and lacks fairness of equal access to content and app providers.

While nobody in their right mind refuses “free”, as Marc pointed out in his tweets, the FCC of India (called TRAI) rightly decided against the Internet.org Free Basics program.

After all, what does free even mean?

Free:

1. adverb: not under the control or in the power of another; able to act or be done as one wishes.

2. adjective: without cost or payment.

The Free Basics program is the latter kind of free while we all want and demand the first kind too.

The Ma Bell Free Internet

Imagine a 1990's program called “Ma Bell Internet for Poor and Parsimonious People” — a program that seeks to help millions of Americans who crave access to the internet with “free internet”.

Except the so called “free internet” will have rules that essentially limit which parts of the internet you can visit and for how long.

You are free to go about this free internet as long as you visit the following 1763 websites, using only these 2 browsers and refrain from other parts of the internet unless you want to pay for them above and beyond.

How many people in America want to have this second-class internet? In fact, we have fought tooth and nail in this country over the last 20 years to keep the internet from turning into any single company’s “information superhighway” or any single company’s walled garden AOL.

Andreessen, Netscape and Facebook

Marc Andreessen, who as Facebook board member, supports the Free Basics program vehemently fought against the monopoly of Microsoft — and their decision to bundle Internet Explorer for Free. This Wired article on Netscape vs Microsoft explains this in detail.

Among other moves, Microsoft’s browser would be improved, made faster, and offered online for free.

The lesson we all learned from the attempts by the big companies to dominate the internet by using their market power and offering “free” is that we need to beware of the free.

The Power of Default

What Microsoft was trying to achieve in late ’90s was the ability to default our browser choice to Internet Explorer and make it difficult, if not impossible, for an average person to switch to Netscape.

We also know that Apple Maps on iOS is dominating ever since it replaced Google Maps as default.

In fact, the value of being default option is billions of dollars. Google paid over $1B to Apple to be the default search engine choice in Apple’s iOS devices.

In other words, a ‘free internet program’ that pre-selects a set of apps for the average new millions of users in India could potentially alter who wins in India — and is therefore worth billions of dollars.

Final Words

While I disagree with the “Free Basics” program of Facebook, I do think that its possible that Mark Zuckerberg and his team were genuinely trying to help millions of people go online.

I grew up in a socialist India which was backwards by most standards, and therefore, just like my online friend Marc Andreessen, I want to see private companies solve big problems enabled by a free & fair capitalist system. While he may be on the other side of this debate and have made some questionably worded tweets — I believe Marc is coming from a place of intellectual honesty and nothing but respect and admiration for India and its people.

We are all fortunate to live in a world where billionaires and thought leaders like Zuckerberg and Andreessen not only engage with the challenges at a global level but they do so on Facebook and Twitter where we can all express opinions, outrage and then come together to find ways to achieve our stated common goal — let’s get the next billion people online faster.

The Stack Fallacy™: Why Big Companies Keep Failing

2016-01-23T11:15:00.000-08:00

Stack Fallacy™ has caused so many companies to attempt to capture new markets and fail spectacularly. When you see a database company thinking apps are easy, or a VM company thinking big data is easy — they are suffering from Stack Fallacy.

Stack Fallacy™ is the mistaken belief that it is trivial to build the layer above yours.

Source: http://xkcd.com/435/

Mathematicians often believe we can describe the entire natural world in mathematical terms. Hence, all of Physics is just applied math. And so on and so forth.

Stack Fallacy™ — “Just an App”

In the business world, we have a similar illusion. Database companies believe that SaaS apps are ‘just a database app’ — this gives them false confidence that they can easily build, compete and win in this new market. As history has shown, Amazon is dominating the cloud IaaS market even as the technology vendors that build ingredient, lower layer technologies struggle to compete — VMware is nowhere close to winning against AWS even though all of AWS runs on virtual machine technology, a core competency of VMware; Oracle has been unable to beat Salesforce in CRM SaaS despite the fact that Oracle perceives Salesforce to be just a hosted database app. It even runs on their database!

by Ananth Sharma, FlickR (Creative Commons)

Apple continues to successfully integrate vertically down — building chips, programming languages, etc. but again has found it very hard to go up the stack and build those simple apps — things like photo sharing apps and maps.

History is full of such examples. IBM thought nothing much of the software layer that ran their PC hardware layer and happily allowed Microsoft to own the OS market.

In ’90s, Larry Ellison saw SAP make gargantuan sums of money selling process automation software (ERP) — to him, ERP was nothing more than a bunch of tables & workflows — so he spent 100s of millions of dollars trying to own that market with mixed results. Eventually, Oracle bought its way into apps market by acquiring Peoplesoft & Siebel.

Why do we keep falling for the Stack Fallacy?

The Stack Fallacy™ is a result of human nature — we (over) value what we know. In real terms, imagine you work for a large database company — and the CEO asks — can we compete with Intel or SAP? Very few people will imagine that they can build a computer chip just because they can build relational database software but because of our familiarity with building blocks of the layer up — it is easy to believe you can build the ERP app. After all, we know tables & workflows.

Often the bottleneck for success is not knowledge of the tools but lack of understanding of the customer needs.

Database engineers know almost nothing about what supply chain software customers want or need. They can hire for that but its not a core competency.

In a surprising way, its far easier to innovate down the stack than up the stack.

The reason for this is that you are yourself a natural customer of the lower layers. Apple knew what it wanted from an ideal future microprocessor. It did not have the skills necessary to build it but the customer needs were well understood. Technical skills can be bought/acquired where as its very hard to just buy a deep understanding of market needs.

Its therefore no surprise that Apple had an easier time building semiconductor chips than building Apple Maps.

Google, Facebook, WhatsApp

Google is a great example here. It owned our email graph, it owned our interest data (search) and yet found it very difficult to succeed in what looks like a “trivial to build” app — social networks.

In fact, this is the perfect irony of Stack Fallacy. You can build things higher up the stack. Its just that its often not clear what to build.

Product management is the art of knowing what to build.

The Stack Fallacy™provides insights into why companies keep failing at the obvious things — things so close to their reach that they can surely build. The answer may be: the what is 100x more important than the how.

When do SaaS Startups get M&A Offers?

2015-12-21T13:55:00.005-08:00

There are many points along the SaaS startup journey where its ripe for M&A from acquirer perspective:

Is their a right time to be eaten?

Product Market Fit (<$5M in ARR): Your startup is in a new or adjacent area for us (the acquirer) and you have proven product market fit. At this point, we can visualize you growing into a $100 to $200M business but you are young enough that we can swallow your tech, rebuild it as needed and go to market. This can be very lucrative for founders even if VCs won't like it as the total $ returned can be small. RelateIQ or Assistly/Desk acquistions are a great example here.
Pre IPO ($30 to $150M in ARR): At this stage, you have taken out both product & market risk - we would buy you so you can be an entire new Business Unit for the company. Typically there is minimal rewrite - there may be integrations built to core. These became hard to pull of in 2011-14 because of the very high multiples private companies had but may again be happening soon as public markets are ruthlessly compressing multiples at IPO. If SAP were to buy Docusign right now in 2015 end, it would be a great example.
Post IPO: This is common and well understood. Oracle bought Responsys, Salesforce bought ExactTarget. Easier to negotiate these transactions as the market price is easy to verify. Hard to do in real world because SaaS businesses are hard to integrate without a lot of rewriting. This is why Aneel Bhusri and others have stated - in SaaS you have to build to be truly a winner.
Team Sale: This is a failed startup having a hard time raising money typically after angel round but can be any stage. You sell for whatever you can make. This is one area where top tier VCs are often good - they have connections and can make a soft landing lucrative. Some have argued Diane Greene's startup acquired by Google fits this pattern.

How do I find a co-Founder?

2015-05-21T07:44:00.000-07:00

Find your POV and you will soon attract the right potential cofounders. (POV stands for point of view.)

Unless you have been organically working with and talking to potential cofounders who want to work with you because you like each other etc, the main reason someone will work with you is because of shared interests.

The POV can be in the form of:

Problem statement: e.g, you think the cab market is broken. You think mobile apps can help solve this. You will now attract people who like the space and have some ideas - you will have something to talk about. You get to know each other by solving the problem together.
Target Market: You think Obamacare is going to change healthcare. Now you have something to filter each other by. Ideas will come up.
Technical Architecture: You believe that Hadoop is just plain dumb for real time analytics and the right way to do big data analytics is by using X. Now you can sit down and discuss Hadoop and X. You can then find some problems to solve with X.

In short, act like a sole founder that has a mission - solving a problem, attacking a market, disrupting a company, leveraging a new technology - and you will find like minded cofounders, investors and others who are ready to sign up for the cause.

Before your startup is a company, its a cause. Identify the cause. Build a movement.

Death of Native Apps on PC: Trillion Dollar Transfer from Microsoft to Apple

2015-05-18T20:03:00.002-07:00

The web browser is dead or at least dying. After its peak of popularity in early 2000's when we spent our time on the internet and that primarily meant the web browser, we are now living in the age of the apps.
The web browser was never invented to run apps — it was meant to render the web of HTML pages interspersed with images and other multimedia. It worked so well for the web that we hacked it to serve our apps.

Why did the Apps in the Browser Succeed?

If you go back in time, to the late 90's and early 00's, the operating system of choice at work was Microsoft Windows. Windows was not a very well designed OS when it comes to security and stability. Installing one app could open the possibility for security holes and for one app to hurt the performance of other apps- remember the corrupt registry problem?

CIO kills the Native Apps — Microsoft helps

The CIOs who run our computers at most workplaces responded to the various challenges by essentially locking down our computers. We could not install any apps as end users because we were not given the permission to do so by the CIO. This facility — the ability to remotely control and manage our computers — was a key selling point for the Windows platform.
Essentially, the apps we could access on our computers were the ones built by the likes of Microsoft (Excel, Word, Outlook, Powerpoint), a few large software companies like Oracle & SAP, and 3–5 apps the CIO built. That was the computer. You as a user had NO CHOICE.
In theory, you could install other apps by following the company processes — go buy app, get CIO to approve the purchase, get CIO to test the app, and then isntall it. It was just too difficult.

Unlocking the locked PC

If you were an employee at a company and wanted to use a new piece of software it was nearly impossible to get access to it on your PC laptop. This, by the way, was equally true for Mac or Unix systems which were locked down.

Nature Abhors an App Vacuum

However, we still had a lot of tasks that were not yet automated like customer relationship management (CRM) for which we as end users wanted to try out new software and were often willing to pay for it, albeit in small dollar amounts. Similarly, the users could imagine better versions of tools they were using or being forced to use at work.
The software vendors were suffering too. They had to go through the CIO to sell every new app to the end user or a department. What if we could bypass this CIO?

SaaS is the Market Response to the PC Lockdown

At the same time, as our PCs were getting locked down on the apps side, we could visit all kinds of magical places on the internet and do things like buy books online. As Marc Benioff said — what if we could use enterprise software the way we buy books on Amazon?
You could sign up online and using just your web browser access new functionality. The rest as they say is history.
The browser apps were NOT better than the native apps in terms of core funcationlity — even today a natively installed Excel or Numbers app beats the best online spreadsheet.
It took Steve Jobs and opening of the app store for us to realize that you can actually get best of both the worlds — cloud backends and a fully native, rich app running on your device fully exploiting its resources — rather than a boiled down version of the app forced to fit into the browser.

Today, the Apple app store and the Android app store have millions of apps with millions of developers making billions of dollars while there is no such equivalent for the PC.
Microsoft’s biggest failure of the last decade may not have been missing the cloud and the mobile revolutions but giving away probably the biggest advantage it had — developers building killer apps for your ecosystem. Microsoft seems to have finally acknowledged, and under Satya Nadella’s leadership is fighting back with innovations like apps that sit inside a VM container to isolate them and make them safe to install.
Today, the browser based cloud apps on the desktop completely bypass Microsoft’s Windows stack by running on the browser and most of the mobile apps run on either Apple iOS or Google Android. A daylight trillion dollar heist.

The Missing  Watch Billionaires: The Platform Test?

2015-03-09T09:38:00.001-07:00

Every new platform enables a new breed of entrepreneurs to change the world and become billionaires in the process.

The iPhone (and the smartphones that followed) produced the Uber billionaires, the WhatsApp billionaires, the Snapchat billionaires and so forth.

If Apple watch is to be successful, it must not just sell a lot of watches - it must enable developers to dream up entirely new forms of applications that enrich our lives and solve problems that we didn’t even particularly know we had. Think Uber - there were no Wall Street Journal editorials on the challenges of hailing cabs. Ditto for hotel rooms and AirBnB.

The amazing thing about great platforms is that even the builders of the platform don't know what amazing new apps will become reality. When we were building the Salesforce platform, we were always amazed by the ingenuity of our developers and startups who built things we thought were impossible. The ecosystem humbles you and makes you successful.

What could the watch enable?

An Apple Watch could enable founders and dreamers to rethink some apps - and succeed with this new form factor where most others have failed in the past.

Here are some candidates:

Kill the Password: The watch is the ultimate personal second or third factor in Authentication. Passwords are a bane for our financial and communications security.
Make us Healthy: While I loved my Fitbit, and even Philips DirectLife (now discontinued), I kept forgetting them and losing them. Entrepreneurs who use the watch to deliver the right nudges to us - to take a walk, to eat healthier, to snooze better, to sit straighter - can help us live better and longer.
Train a Dragon: Well, you may not actually train a dragon but the watch sensors could be used as an input device to play games. Just as an iPhone can be tilted, the Apple watch can enable new gestures to be used as input.
Money: The obvious use case of using Apple Watch to make payments which Apple has already thought through - you can reimagine all kinds of processes from how you order at a restaurant to how you get notified when food is ready.

In a few years, we will look back and if Apple Watch was more than a blip it would have changed our lives in meaningful ways - enabling and enriching a new set of entrepreneurs who add new verbs to our lives. I cant’ wait to find out what comes after Ubering?!

The SaaS Billionaires and Naysayers

2015-02-26T15:00:00.001-08:00

If you are on your journey as an entrepreneur to truly build something new and revolutionary, you will hear a lot of naysayers along the way. Today, Salesforce and Workday both announced their financial results — once again showing that they continue to grow as part of the larger movement to SaaS. Salesforce is now generating almost half a billion dollar a month in revenue and still growing over 30% year over year which is just remarkable. Workday is growing even faster in %-age terms and is the second largest independent SaaS player. But this journey was not easy for the likes of Marc Benioff or Aneel Bhusri.

While the big legacy vendors are now talking and acquiring SaaS, this is what we heard over the last 10 years:

Multitenancy is irrelevant. (And then they tried all kinds of mega and virtual tenancy stuff only to learn that its a hugely important piece.)
They said — Cloud is “just” a deployment choice. Customers want “choice” of on-premise, hybrid and cloud.
They said — you can serve SMB on multi-tenant cloud but never “real” enterprise.
They said — cloud is not secure. Its secure here but not in Europe.
They said — “roach motel” of enterprise software.
They said — yes, revenue but really NO PROFITS at @workday and @salesforce. See the numbers now.
They said — cloud is all about virtualization of data centers. And public cloud is a ‘phase’.
They said — no Startup will ever go IPO on a 3rd party cloud platform.
They said — legacy software companies can “simply” start hosting. (Yes, like Ford can simply start cars-as-a-service and become Uber.)
Finally, to the VCs who said “CRM is dead. I will fund next @Salesforce.” What are your startups doing in MRR? $500M in MRR anyone?

Even as these companies continue to grow, the doubts continue to be raised.

When you are inventing a new future, expect resistance.

Deconstructing Governments: Is Estonia the first Full Stack Government Startup?

2014-10-07T07:28:00.002-07:00

The purpose of a government is provide services to its citizens. After all its all about 'for the people'. Many of these services are not related to a geographical boundary - a few like fire, safety and roads are. This is why we already experience multiple government bodies - city, county, state and federal but they are all structured linearly, one inside the other like a Russian doll. It does not have to be this and Estonia is leading the way.

by permission (Creative Commons)

The governments don't have to be structured this way geographically. It can be a graph of nodes. Think of each government today - city, state, etc. essentially offering an (outdated) API to a set of services they offer - registering a title for example.

But there is no reason why title registration has to be done by your county. They need the information but the actual act can be performed by a third party and the government can make an API call to verify this information. (Yes, I know title companies help do this but they are acting as an agent not a their own system of record.)

Break up the Government API
Today, governments are like a mainframe system - everything is mingled into one giant, expensive, outdate machine that is sub-optimal. We know that a distributed architecture works better in most cases - and I would argue its true for government too.

The government of Estonia is embarking on one such journey - to offer us many unique online services by taking the first step of offering an online 'government issued online identity'. Think of it in simple terms as somewhat similar to getting a Facebook account and using it to log in to say a news website. Similarly, you will be able to use your Estonia issued electronic identity to do things like sign papers (legally in EU).

Start Simple
In the beginning, we will see very simple services like identity used for online signatures and other basic stuff. Today, we use our email address and password to sign using EchoSign or DocuSign - this will be a step up.

Over period of time, you will be able to create legally viable business entities. I am not aware of Delaware's plans but there is no reason why Delaware could not create an API for creating C corporations for example tied to my identity.

The Beginning of the End of The Big Government
Today, as a resident of say New Delhi or San Francisco, I am beholden not just the local laws but also to the local bureaucracy. My cousin had to bribe someone in India to simply attest a copy of his birth certificate which he wanted to use in Australia. For services like this, there is no reason to rely on your local government service provider. As long as its consistent with the law, you will be able to use any service provider globally.

Balaji and others at Andreessen Horowitz have talked about government as a trillion dollar market and I think they are right. As governments get deconstructed, there will be room for private companies not only to make governments better but to replace entire government departments and programs with private service providers - the 'full stack' startup for government sector is not a Palantir or a OpenGov (read this) but Estonia and many other full service providers.

New Motto: Don't just make government better, replace it.

Is Your Product Roadmap Just Burning Your Money?

2014-10-06T10:40:00.003-07:00

The number 1 mistake I have seen companies of all sizes make is to let the customers, sales people, engineers and tactical product managers decide the product roadmap by adding one feature after another.

by Disaster Area (Creative Commons)

If you have product market fit and are doing more than a few million dollars in ARR (annual run rate), you don't need new features to sell your product. If your product is good enough for a few customers with little marketing then it is reasonable to expect that there are many more customers for whom the product is good enough.

Your sales people will complain when they lose to a competitor because of feature X but will likely not be ready to commit to a bigger quota. This is a tell tale sign that this is not a true gap.

Given my experience with 10+ startups and at Salesforce.com, here is my key learning: most product roadmaps do very little to move the needle on growth.

Ask the Hard Question: What if we did no new features for a year?

The way to tease out what is truly strategic and important is to start by framing the problem differently. Think of it as zero based budgeting. - you don't assume that you keep doing the old stuff, you question everything.

I usually ask the management team - CEO, VP of product, VP of sales - to individually assess the change in top line revenue 1, 2 and 3 years out if we stopped building all the new features except bug fixes and just plugging gaping big holes.

The answer is usually shocking - most startups (and big companies) spend most of the R&D budget building features that are unlikely to move the needle.

What would you build to increase revenue 24 months from now?

There is very little that a product can do to truly change the revenue trajectory for a post product-market fit company in the short term. But if you invest in the right areas, it should impact your longer term roadmap. For example, HubSpot adding CRM to its feature set is definitely going to impact its TAM (total addressable market) unlike adding lots of bells and whistles to email marketing. Workday needs to build all the HCM features out but real top line growth from R&D comes from building Financials or Supply Chain products.

Great companies and great product leaders are naturally good at this. They intuitively understand what the market wants and deliver it.

We all intuitively know this for companies that ship hardware. Everyone is asking for the next iPad, the next iPhone - not just a slightly better Macbook. Its important to finish what you started - and there is whole blog post on this - but its important to know that the two buckets are different.

You will never build an iPhone by incrementally improving your Macbook.

Similarly, a software company that keeps adding features to its one product without thinking in terms of new editions, new product lines or new go to market - will end up with a bloated product not a richer set of products that can alter the future of the company.

I leave you with this thought - what features are you building today that will truly significantly change the your future? Are you building the next iPhoneor are you just adding the 10th button and the 7th app on a Blackberry?

Full Stack Startup Index - and the hunt for Uber Unicorns

2014-06-09T14:59:00.000-07:00

Given that full stack companies are in a league of their own - in terms of the markets they serve and how they are built - I think its time to maintain a list of all full stack startups.

Uber Unicorn: yes, its full of diamonds

Before we do that, let me give you a brief definition of Full Stack startup that builds on the work of Chris Dixon at a16z.

Definition: A full stack startup is a technology enabled product or service that directly provides the full solution to the end customer unlike other technology startups that sell their product or service as a technology for internal use typically to the CIO.

Typically full stack startups don't charge for the software but bundle it with the service.

For example, most software companies sell to the CIO or CMO or line of business, and target the IT budget. Full stack companies like Redfin or Wealthfront directly displace incumbents and are not paid for or thought of as a 'software'. You are paying for real estate transaction, a cab, money management and not separately for software.

The full stack startups are probably the best candidates for "Uber Unicorns" - companies that will be worth more than $10B. I would argue the adjective uber is apt. I am going to kick this off and will keep this updated as time passes.

AnshuBlog Full Stack Startup List

Name	Eats	Valuation Estimate
Uber	Taxis, Rental Cars and more	$19B
AirBnB	Hotels	$10B
Homejoy	Cleaning services	$1B+
Munchery	Restaurants	Unknown
Warby Parker	Luxotica "mafia"	$1B+
Wealthfront	Financial Advisors	Unknown
Redfin	Real Estate Agents	Unknown
Betterment	Financial Advisors	Unknown
Lyft	Taxis, Rental Cars and more	Unknown

For those who are skeptical of full stack startups and their valuations, you should take a second look at history. Biggest 'tech' winners like Google, Amazon, eBay of last 20 years all attacked industries outside of traditional IT and are worth over half a trillion dollars.

AnshuBlog Full Stack Startup Index

Name	Eats	Valuation Estimate
Netflix	TV	$25B+
Tesla	Gasoline Cars	$25B+
Amazon	Walmart and other retailers	$150B+
eBay	Classfieds	$60B+
YouTube	TV	$1B
Nest	Thermostats, Fire Alarms and more	$3.2B

Watch this space.

Tech Bubble? Full Stack Goes Beyond $3.7 Trillion IT Budget

2014-05-05T11:16:00.000-07:00

I want to convince you that this time it really is different.

Its fundamentally different because the silicon valley is bursting out of tech.

In the earlier generational shifts of computing paradigms from mainframes to client server and then from client server to internet, we were primarily still constrained by the IT budget.Gartner predicts IT spend to grow a meager 3% this year which is still much better than the historic growth rates. So, clearly we can't create 100s of billion in new value within this constraint. Or can we?

We have 3 reasons why Silicon Valley is going to be bigger than ever:

$3.7 Trillion IT Budget moving to SaaS & Cloud: The $3 Trillion in IT spend today is dominated by last generation of on-premise, desktop era. As what we do increasingly happens in SaaS apps running on mobile phones and data center gets virtualized - we will shift 100s of billion in spend from old to new architecture.
Mobile: Mobile apps not only enable us to rebuild old CRM and HR apps into new apps, they fundamentally increase the number of users that can now access technology. The security guard in our office building now walks around with a super cheap Android phone clicking pictures every day to document his work. The apps are no longer for office workers - truck drivers, security guards, sales people on the move all now have more apps than ever. This is net new spend.
Full Stack - Software Eating Hotels, Taxis, Money Transfer, Credit Cards:Technologies like Uber, AirBnB, Bitcoin, etc. are not sold as IT. They are directly competing for dollars that earlier went to banks and hotels. This is net new TAM. Add in what the future of healthcare, robotics, drones etc looks like and you are talking very large multi-hundred billion dollar markets getting disrupted. A small share of these industries can create enormous value. Just go back 10 years and see what Google and Apple have done to advertising and media.

There in lies the answer: mobile and cloud enable are enabling digital disruptions that are turning vacant rooms into hotels and personal cars into taxis. This is not your grandfather's IT budget. This is not even IT. This is IT enabled disruption of entirely new industries and markets.

Oracle, IBM, HP, Salesforce, Box, Dropbox, EMC, VMware, Workday are all in the business of meeting the software needs of companies. These companies collectively represent 100s of billion in market cap and revenue potential. But this all comes out of the Gartner's $3.7 Trillion number.

Uber, AirBnB, Wealthfront, Coinbase, GrubHub, Munchery don't care about the Gartner IT spend. They are the future versions of hotels, banks, wealth management, money transfer, taxis and more.

We have seen this movie before in select few industries - media advertising and retail. Google and its ilk got so big and so profitable because they were busy eating the newspaper and TV's lunch. Amazon has set its eyes on retail and built a very large business.

People like Chris Dixon of venture firm Andreessen Horowitz call these startups "full stack" companies.

Next time you drive down silicon valley and see a billboard - ask yourself - is this company simply moving the IT dollars around or is it about to eat a whole new industry?

Is your company about to be BlackBuried?

2014-04-21T16:42:00.000-07:00

I had an interesting conversation with a fellow executive at Blackberry 4 years ago who wanted my opinion on their product strategy. What I said to him was so obvious that I almost hesitated - build an Android phone. Now, this was common wisdom in silicon valley that if you ran BB you would have built an Android phone - at the very least as plan B. But trying to dominate and win the market leadership role as the business phone of choice would have been a compelling alternative.

Of course, no one at BlackBerry wanted to hear this. They had better plans. They didn't care if they were going to get BlackBuried trying to impose their will on the market.

What is the lesson for your big company?

Listen to the Obvious

Satya Nadella after taking over at Microsoft has taken some fairly common sense decisions like bringing Office to the iPad. And recognizing the role of open source. These are not overly clever decisions but simply reflect a willingness to see the reality clearly and to act on it.

The big companies often have such high revenues and income that they become disconnected with the reality of what others can see.

The 20 something year old silicon valley engineer from a foreign country can often see this more clearly than CEO of Fortune 500 because he has to deal with reality as is. Be it seeing the rise of open source (Linux and Hadoop), the advent of sharing (Uber), the potential of a new type of currency (Bitcoin) - the established leaders will often go through all kind of contortions to deny what is patently obvious to the rest of the world - and to their customers.

Are you missing these trends?

Here is a list of trends that you may be trying to deny. If so, reflect on them.

Everyone is in the digital business: Starbucks, Sears, Best Buy, JP Morgan Chase, Goldman Sachs, Hertz, Hiltion all have to compete with Uber, Wealthfront, Square, Amazon, etc. If you are not yet digitally disrupted, you are not looking hard enough.
Your Company as an App: Uber is an app for "taxi". AirBnB is an app for "hotel". They are not an app to get in touch with a taxi or a hotel. They are the taxi and hotel. Wealthfront is an app for money management. Its not software to record your money management - it manages the money for you.
Big Data is the new Oil: Companies like Uber, AirBnB, Wealthfront will find and leverage this oil. Do you have any idea how to do this?
China and India price: If your product is not competitive in China (and India) then one day you will end up losing in your home country too.

Try this: Write one obvious simple statement about the reality of the world that you/your colleagues are finding hard to internalize.

The Social Kerfuffle: What is an Employee?

2014-03-18T13:15:00.002-07:00

Who owns the behavior of an employee on the social networks? In a world where we have all gone BYOD, and I would posit - gone BYOS (Bring your own "Social Network") - who owns what? And who is responsible when an error is made by the employee? What is an error? What is an employee?

By @profete

Here is what is reported to have happened - Oracle employee Jill Rowley has been fired by Oracle apparently for talking to the press. This wouldn't be such a big deal because all companies have rules on who can and cannot talk to the press. But she was running an active Twitter account and a social network campaign to the knowledge of Oracle. In fact, she was featured in news about how Oracle retained top talent and was using social just last year. In an unrelated news, Github is trying to figure out what it means for your employee to resign and then tweet about it.

I have no strong opinion one way or another on the Oracle-Rowley story although lots of pundits have jumped in. But I do have one big question - in a world where the employee is no longer "inside the firewall" or even the four walls, where are the boundaries and what is the definition of what an employee can and cannot do without explicit consent.

What is an Employee?

An average employee today will have over 7 jobs in their working life (if not more) and the employers don't even pretend to do what's best for employees anymore. They nickel and dime you to death - see what IBM did to save a few bucks - apparently a new standard in helping your employees.

Meanwhile employees have their permanently updated resumes posted on LinkedIn - a thinly disguised job hunting site. Savvy employees build a network of connections with customers, prospects, media and employees using all the modern tools - LinkedIn, Twitter, Facebook, etc.

Companies actively encourage their employees to "retweet" messages from corporate leadership - help recruit, help spread the message about upcoming event, help find new customers and prospects, etc.

Employers actively leverage employees' social networks for their goals. In exchange, they lose control of the clean boundary of 9 to 5 and four walls of the office. If you are posting how awesome your CEO is, what happens when your friend who happens to be a blogger asks back a question about a controversial issue. Are you or are you not allowed to speak?

We live in a new world and we have to redefine the employer-employee "social" relationship by answering many of these questions:

When employees are actively used by an employer to spread a message on social network, how do you deal with the employee that changes the message or responds to a follow up. What is the line? What happens when an employee adds a picture, a smiley face, a wink to the tweet? What happens when she talks to a blogger? Reporter? CEO of a partner? You can't lead the employee to a situation where they are likely to trip over and then show them your official rule book.
What are the employees rights? Can they refuse to tweet? Will they be penalized for keeping their work and social life/network independent? Should they be paid? What if an employee has a million followers because she blogs about cars and she works for a telephone company? Does she owe helping her employer?

What does it mean to be an employee? What is the bill of rights of employees on social networks?

What is Really Not Being Said About Bitcoin?

2014-02-28T10:30:00.001-08:00

Bitcoin is not a game. The key players are asking ordinary people to invest their real-world money into a virtual currency that has a lot of potential to save us on transaction costs and speed but is also one of the easiest ways to lose half a billion dollars with no recourse!

Brian wrote an excellent post on TechCrunch What's not being said about Bitcoin. I actually agree with him that Bitcoin - the movement, the protocol if not the currency in its current form - has the potential to really be disruptive and meaningfully change how we transact business - impact on small $ transactions where we pay 2.5% to credit card companies simply to buy a latte or international money transfers where I have paid thousands of dollars just to have money reach my Dad two weeks later.

Real Money from Real People
But, and you knew there was a but - are we really ready as an ecosystem to get everyone on the Bitcoin system when one of the largest exchanges can lose half a billion dollars. Yes, its not the end of the world for the Bitcoin world but it is meaningfully hurtful to people who based on similar articles invested large sums of money into Bitcoin. And I use the word "invested" carefully because at this time Bitcoin is largely an "investment" and much less of an every day convenience.

Limits on Bitcoins
Should the Bitcoin wallets voluntarily limit (or at least warn in big red letters) the dollars spent by individuals on Bitcoin. The government prevents anyone who is not an accredited investor from buying stock in pre-IPO Google but apparently there is nothing preventing Bitcoin operators from openly soliciting, advertising Bitcoins as the next big real thing. Even the biggest advocates of Bitcoin like Brian and Marc Andreessen would readily admit that Bitcoin is not yet a fully secure, fully functional currency right for an average person to be pouring life savings into.

Insurance
My credit union which is heavily regulated is insured. My bank is insured. And these institutions have been functioning for over a hundred years. Even when banks fail (in this country), we know what to do with them and have processes in place. Shouldn't we take some of these learnings and apply them to Bitcoin?

Bitcoin Enthusiasts are Killing Bitcoin
In our desire to move fast and break things - which is awesome when you are breaking "Like" button on kitten pictures - we are moving fast and losing hundreds of dollars (and occasionally millions) of real people's money. This will damage the Bitcoin brand and writing lots of op-eds on how we should all ignore this as a "learning" is too cavalier.

Let's be honest - Bitcoin is an amazing invention but its early days. We don't know all the ways this can break. At this stage, Bitcoin should be running $10 experiments helping run cafeterias at Stanford. Its not yet ready to be the means of commerce where people can lose their life savings. While not directly marketed as such - we are not actively doing anything preventing a minimum wage worker from putting his life savings into Bitcoin. Sounds wrong to me.

Time for Code of Conduct
I think Bitcoin ecosystem needs to have a Code of Conduct. We need to have rules for ourselves. May be we warn people that Bitcoin may become worthless one day. Coinbase, since they wrote this article, needs to say more than "Bitcoin, Safe and Easy" on its home page. The SEC doesn't even allow me to say that about Google or Apple stock. You have a long disclosure on the home page of E*trade.

Let's make Bitcoin successful but let's not inadvertently ruin people's financial lives by pretending that everything's OK.

Facebook WhatsApp Red Ocean, Google Nest Blue Ocean

2014-02-20T09:15:00.001-08:00

I come here to bury the WhatsApp conversation not to praise it. The Noble Om hath told you Zuck was ambitious. And grievously he is paying for it.

Yes, $19 billion dollars. Yes, half a billion people use WhatsApp and its on its way to being the next biggest social network with a billion people on it. You have read the commentary.

Facebook is chasing the social networking market. Google appears to have moved on and decided to focus on the next $10B markets that are not yet crowded, dominated or even formed!

The Google acquisitions lately have been less focused on getting one or more useful apps in its fold - messaging, chatting, pictures, address books are all nice and good but they are incremental innovations at best.

Red Ocean of Messaging Apps

Facebook has had to pay up for apps like Instagram and WhatsApp because its a red ocean - its full of competitors who would also be happy to acquire these apps. And even after it acquires the leaders, its not clear that Facebook can fend off the competition from likes of LINE, WeChat and dozens of others that are being built, funded and incubated as we discuss this.

Are you sure that 5 to 7 years from now you will be using WhatsApp? Are you even sure we will 'need to' find, download, open and use a third party application to perform the single most important function we buy phones for - to communicate. Paul Graham framed it best when he said - "One lesson from WhatsApp: Abusive monopolies create a lot of potential energy." The failure of phone companies to offer a reasonably priced easy to use messaging app has created this huge opportunity.

Blue Ocean of Robots, Connected Homes, Driverless Cars

Meanwhile, both Apple and Google appear to be trying to find really big, hard problems to solve. Apple's conversations with Tesla are an indicator. Google clearly has eyes set on solving transportation via driverless cars and further evidenced by their investment in Uber and acquisition of Waze.

Google's foray into robotics is an epic example of blue ocean exploration. I think its fair to say that most of us expect robotics to make a huge dent in our lives 10 to 15 years from now and whoever gets there first will have a huge advantage. Not eyeballs and messages sent and apps downloaded advantage but deep learning applied to robotics and vision advantage.

Chinese Curse

We are surely living in interesting times. I think Facebook spending 10% of its equity to acquire the most interesting messaging app shows ability to make big bold bets in a very fast changing world where lives of apps and companies may be getting shorter (see MySpace, Friendster, Blackberry, AOL, etc.) and rise to the tops getting faster (see LINE, WeChat, etc.). I am also sure that Google would have gladly offered a very handsome number of billions for WhatsApp. At the same time, I believe taking the long view of what 10x innovation in new markets means may prove to be the smarter bet. For now, I am more excited about robots, glasses, connected devices than I am about my messaging app.

The AOL 401K Lesson: Is HR Failing at Your Company?

2014-02-10T13:52:00.002-08:00

The cost-cutting policy change at AOL intended to save a few million dollars a year (hey, free money to bottom-line) is yet another example of a failing human resources function in many companies. While there are many reasons to justify cutting corners in benefits to employees especially in an earnings-starved company like AOL, it was a poor decision, poorly executed. The decision has since been reversed after major adverse public reaction.

Courtesy: Lifehacker

The question HR executives happily titled as "Chief People Officer" need to ask is - what is their role? Is it to simply rubber-stamp and execute the policies that the CEO and other executives come up with?

I would argue that the head of human resources' job is to think from the employees' perspective and represent their interests in management meetings. Just as a good CMO thinks from the customer's perspective, the Chief People Officer must think from an employee's perspective. Bringing that perspective to the table is how a human resources executive earns a seat on the table.

Policies that appear to save money in the short term may cost a lot more in the long run.

Let's start with a very simple question: Why have a 401K program?

There is no legal requirement to offer 401K. Even more, there is no requirement forcing you to offer 401K matches. Companies offer 401K as a perk because its something employees value. Rather than paying $4K more in salary to someone who earns $80K, its good for the employee and in the best interest of the company to offer a retirement plan encouraging employees to save.

Given that AOL has voluntarily set up this program with a match, what was the justification to change it? A few million dollars. For a company with more than half a billion dollars in sales, there are many other ways of saving money. And if the financial situation was really terrible, AOL could have taken the employees into confidence and made changes to this or other program in an open and transparent way.

In stead, AOL leadership appears to have chosen to break the employees' trust - many did not even know of these changes - and essentially market it to investors in an earnings call.

To me, this is an epic fail by HR - it was their job to stand up and explain to even the CEO (assuming he had made this decision single handedly which seems unlikely) the effect on morale on current employees. And the effect on their ability to attract top talent in future.

It seems we executives are very eloquent in explaining the market forces that drive executive compensation but when it comes to being able to explain the value of employee compensation many seem to think less is better.

I will wait for the day when HR awakens to its rightful leadership role earning a seat at the table by doing its job - valuing talent, explaining the value to the leadership team and putting programs and processes in place to execute on the talent strategy.

What can your company learn from this disaster?

Talent is Everything: In today's day and age, your people are your competitive advantage especially in high-tech. Companies spend millions acquihiring a few engineers - and your bone headed policies can turn away many more.
Value of Communication: Not only did AOL get the policy wrong, it was poorly communicated. How well are you at communicating your policies? What tools do you use? How do you know your employees know?
Value of Listening: The AOL employee whose baby was indirectly named by the CEO wrote a letter in Slate magazine. Why was it easier for her to do that than to email Tim? Did her manager reach out to her? When? Did HR reach out to her proactively? Why not?
Evaluate Invisible Costs: Sometimes we all fall for the free lunch. When an outside consultant comes up with a brilliant cost cutting idea by making expense reports harder to file or moving 401K payments or reducing cost of travel by making employees fly with stopovers etc. - always ask the question what will it cost in the long run? Does it make it more likely to attract and retain top talent? Will it burn out my employees? How will it effect morale and productivity?

Satya Nadella: Microsoft, Coffee and the Relvence Question

2014-02-04T14:20:00.001-08:00

Satya Nadella is a highly accomplished, extremely smart Microsoft executive who is correctly receiving a warm reception from media and pundits. The question that remains open however is - is he the change agent that can help Microsoft avoid the fate that other Wintel players are facing? He clearly seems to have taken to Marc Andreessen's Software is eating the world and uses the term "software powered world" in his welcome note as CEO.

But as we move to a world, where even my coffee is served via a mobile phone enabled by the cloud - how and what can Microsoft do to become more relevant?

Google is growing through breakthrough innovation - Chrome, Android, driverless cars, robotics, and more. And its becoming more relevant every year.

Apple is growing through breakthrough innovation - iPad and iPhones are a majority of its revenue and didn't even exist a few years ago. And its staying relevant.

Amazon is growing through breakthrough innovation - Kindle, AWS, robotic delivery and more. And its touching the lives of many of us and staying very relevant.

Microsoft has been meanwhile innovating by improving Windows and its enterprise products and bringing them to the cloud. Its well accepted that they essentially missed and were slow to the two biggest trends of last 10 years - cloud and mobile. Satya has helped them make a lot of good progress in cloud earning him the top job. Mobile will be his big challenge and opportunity. Microsoft calls it 'devices'.

Will he double down on Windows? On Intel? On Azure? On Bing? Or will we see him take on one or more of the following opportunities:

Internet of Things (IoT): From thermostats to vending machines, we are connecting everything. Windows CE used to power the last generation of IoT - a lot of telematics and small devices used Windows as the embedded OS. But now its mostly a Linux and Android world.
Big Data: Hadoop and its cohort of technologies is changing the landscape.
Marketing Platform for Digital Evolution: Known by different names ranging from Salesforce's "Connected Customer" to IBM's Smarter Planet - we are moving to a world where customers and citizens are always connected. In 1990s companies used PCs and servers to connect to their customers in a very preliminary way - but this new digital evolution is exemplified by likes of Starbucks mobile app for payments and loyalty. Its all about Apple, Google, Square, etc - how can Microsoft become relevant here?

In short, the greatest new things my friends and I have used in the last few years - iPhone, Uber, Square, Tesla, Nest, Walgreens app, Starbucks app, AirBnB app, HotelTonight app - they all seem to be operating in a world untouched by Microsoft - something unimaginable in 2000. And that is the biggest existential risk and opportunity.

Can Satya make Microsoft relevant again?

Update: Satya Interview TiECon 2013
I really love this interview of Satya where he describes his approach to life and career. Starts at 18:40. (The first part is somewhat banal explanation of Azure.)

Forbes: What do Startups not know that Big Companies know?

2014-01-28T13:33:00.003-08:00

The Quora editorial team picked out my post on this topic and published it on Forbes.

Forbes Quora: What do Startups not know?

1. Most startups are afraid of charging real $$$$.
You can charge $5M for a website with 7 static pages. Annually. For a very public example of this, just take a look at the cost of http://Obamacare.gov and think what you would have charged as a startup? See a difference? That’s called missed opportunity.

Startups think cheaper is better.

What if I charged you only for the users that actually use the product? Sounds good in theory, but most CIOs and other buyers want a predictable price so they can budget for it. They don’t want to pay $7.47 one month and $74.80 the next.
What if I gave away feature X for free? Well, most likely the corporate buyer will assume your feature X is a mediocre implementation. They have learned this the hard way, and you are not going to be able to convince them otherwise in most cases unless you have really thought this through. There are many counter examples to this, but be careful to not assume this.
What if I made my product free and charged a % of transactions? While that sounds like a steal for you – because you are a cash poor startup that wants to pay as you go and as you succeed – the bigger corporations learn that its best for them to use their cash upfront and get their marginal costs down. This means they will often rather pay a high fixed fee than % of x.

2. Cash is NOT always the same as Real Money:

For a lot of young entrepreneurs, you run your startup constrained by just one thing – CASH. You focus and obsess on cash in and cash out. This means you don’t really worry about things like what is a capital expense or not. You don’t worry how you ‘recognize’ revenue. You don’t worry about ‘flushing’ cash so you can spend more money than needed to even out the earnings bump.

In a real big corporation, common sense often goes out the window as things get managed quarter to quarter and are often dressed up for Wall Street. This has a real impact on how much cash can be spent on certain things.

You get seemingly insane behaviors like spending $1 Billion to acquire a startup with 30 employees while denying your internal team X working on same breakthrough $10M to hire 10 employees more and build a small lab.

As a startup, you can understand these motivators and behaviors, and then leverage them.

Does your Startup Charge too Little?

2013-12-12T13:28:00.002-08:00

Most startups are afraid of charging real $$$$.
You can charge $5M for a website with 7 static pages. Annually.

There is a trend I have seen with accelerator startups - charging too little. I think this comes from youth and the feeling that if X was 10 times cheaper you would buy it. In our real life, this is mostly true - if I could get a TV for $100 in stead of $1000, or buy a BMW for $2000 in stead of $50,000 wouldn't I buy it?

But its not really true. Not even for us - you and I often pay $150 for a shoe manufactured for $5 and even if you could buy the shoe for $5, you wouldn't. This is how Nike makes money.

This is especially so for big corporations - they are looking to minimize risk to their multi-billion dollar business and by being cheap about paying $5 for storage vs $50 they don't want to incur the risk of having a million dollar loss or more.

For example, Avon had to put its latest IT fiasco in its 8K filings to investors (see Avon Order Management System Unusable). This means real damage to their brand and investors. They are not looking for cheaper, they are looking for something that's more usable.

For a more public version of this, just take a look at the cost of http://Obamacare.gov and think what you would have charged as a startup. See a difference? That's called missed opportunity.

Startups think cheaper is always better. Not true!

What if I charged you only for the users that actually use the product? Sounds good in theory but most CIOs and other buyers want a predictable price so they can budget for it. They don't want to pay $7.47 one month and $74.80 the next.
What if I gave away feature X for free? Well, most likely the corporate buyer will assume your feature X is a mediocre implementation. They have learned this the hard way and you are not going to be able to convince them otherwise in most cases unless you have really thought this through. There are many counter examples to this but be careful to not assume this.
What if I made my product free and charged a % of transactions? While that sounds like a steal for you - because you are a cash poor startup that wants to pay as you go and as you succeed - the bigger corporations learn that its best for them to use their cash upfront and get their marginal costs down. This means they will often rather pay a high fixed fee than % of x.

Thinking like your customer is a real listening skill that you must hone to be successful. Aaron Levie seems to get this - no wonder he's been selected entrepreneur of the year!

Bitcoin is Not like Gold

2013-11-24T18:08:00.001-08:00

antanacoins

Bitcoin has a uniqueness problem - Bitcoin has lots and lots of unique features and advantages that you can read about. However, I find one particular risk that you can drive a truck through. Compared to US Dollar (or Euro, Pound, any national currency) which by definition can have only one of each - and therefore is limited in number of 'types' of currency. So while in theory the Federal Reserve can print infinite dollars, there is only one Federal Reserve with only one dollar. But nothing prevents "multiple Feds" to exist in the virtual coin world - you can imagine an infinite number of currencies each with a finite number of coins. We already have Litecoin. What prevents me/you/anyone from creating Goatcoin, Sheepcoin, Bitcoin2, Bitcoin3,..BitCoinN? Why should Bitcoin then retain its purchasing power except for the first mover advantage.

Bitcoin is not like Gold
I keep reading how Bitcoin is like Gold. Well, its like Gold in the sense that there is only finite number of Bitcoins. But Gold has very little competition - Platinum and Silver being too very good alternatives. We are limited to the number of elements in the periodic table and within that to the elements that are considered to valuable metals - typically stable or nearly inert metals.

In case of virtual currencies, its possible to have an infinite number of 'alternatives'.

Think of it this way: If Bitcoin is like Gold then you can imagine Litecoin to be like Silver. Except we can have way to many of these Coins.

This means that we can have an infinite currencies each with a finite number of coins. This means that the total supply of coins of all possible types is unconstrained and nothing like Gold or even Gold, Silver, Platinum combined.

Bitcoins in not like Fed
Another way to think about Bitcoin is to compare it to the US Federal Reserve - both 'print' coins. Except the Fed can print infinite while Bitcoin only allows for finite number of coins. This is hailed as one of the key big features of Bitcoin. Except that there is only one very unique Federal Reserve created by our government and there is only one - by law.

No law, no technology prevents us from having an innumerable number of Bitcoin equivalent currencies.

One counter argument - and somewhat valid - is that Bitcoin is already accepted by many people who have agreed to value it. This is true and this may mean that Bitcoin continues to hold or even increase its value. But its also true that there is nothing preventing from one or many more currencies to be launched and supported - we already have many already listed here at List of alternative crypto currencies.

Update: Bitcoin seems to be going through near-existential crisis. http://techcrunch.com/2014/02/25/mt-gox-demise/