In 2022 I started writing some longer articles as well as new blog posts.

Because I wanted a new format, with more fine-tuning, special control over image processing, and a print-specific PDF, I created a new website:

https://longform.asmartbear.com/

Please join me there!

The post More posts and long-form are over here appeared first on @ASmartBear.

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We had been flying for four hours, but both gas gauges still read “full.” I didn’t need a pilot’s license to know that couldn’t be right, nor to feel the rush of adrenaline in my gums at the thought of the engine sputtering to an eerie quiet death, propeller blades windmilling as we scream “mayday mayday” and “set it down over there” like in the movies, hopefully including the part where the heroes confidently stride away while the wreckage ignites in a fireball, such a banal event in their exhilarating life that they can’t even be bothered to glance back at the carnage.

“Umm, this can’t be right” I said to Gerry, the real pilot. “Yeah,” he said, “the needles get stuck to the glass.” He flicked the glass. The needle didn’t move. “So… do we have enough gas?” “Yeah, we have another hour, I stuck the tanks before we left.”

“Sticking” means plumbing a wooden dowl through top of the wing, into the gas tank, judging the gas level by the height of the resulting wetness. Sometimes the simplest technology is best. Wooden sticks don’t run out of batteries or make you wait forty-seven minutes for a security update.

Trust, but verify.”

—Ronald Regan, repeating a Russian rhyming proverb: Доверяй, но проверяй

It’s not even good enough to just have “two of everything.” If two things both rely on electricity, and the electricity goes out, you lose both. There were two gas gauges; both failed for the same reason. It needs to be differently-implemented as well, like a stick versus a gauge. For example, there’s a normal magnetic ball compass floating in liquid that will work even if other power sources fail, but it’s hard to read as it bounces around from the vibration so it’s good to have another one that runs off suction—air pressure differential between the outside and inside of the cabin—which is stable even when you’re turning the plane in turbulence.

Gerry used to say: “Who’s lying?” Usually your instruments are correct, but sometimes one is lying. Maybe the suction system isn’t working, so you double-checking suction-based dials with the electric-based dials. You stick the tank, in case the gas gauge is lying.

The same lesson applies to our daily life of data and metrics. You think you understand what each number means, and usually you’re correct. But sometimes you’re running out of gas and don’t realize it. I’ve seen this happen for all sorts of reasons: The spreadsheet had a subtle bug in a formula, the analytics JavasScript code was accidentally left off one page, the survey email didn’t get sent to all the customers in the cohort, the database query did/didn’t filter something important, a nightly update script hasn’t been running for three months.

A good way to check for bad data is to replicate the airplane dashboard method of deriving the same information in two different ways. Revenue from your billing system compared to cash flows from your bank statements. (Once I discovered our credit card processor was delaying our cash receipts.) Number of active customers from Stripe, and from your User Portal. (Because sometimes a cancellation in one system fails to cancel in another system.) Web traffic from Google Analytics but also another analytics system, or your raw web logs. (If you use five web analytics tools, they’ll all give you different numbers; this could be due to differences in definitions of things like “visit” and “session,” but is that truly all it is?)

Besides paranoia, I’ve found another advantage in computing the same data twice: a better understanding of the forces behind that data, and therefore better analysis of how the company operates and how the market is changing. Consider web traffic. There are analytics that tell you where traffic originates (imperfectly, especially with the latest browsers and extensions intentionally obscuring or blocking data), data about your advertising click-throughs, your own raw web server logs, and broad industry data (e.g. Google Trends on how search-traffic for your keywords is changing). They all tell a different story. None has the full picture; all are biased. But taken together, your picture of the world is more complete, and biases might be cancelled through averaging or by paying heed only to the clearest, most consistent trends. If four different sources agree that a trend is happening, then it’s definitely happening.

If a metric is important enough to watch it every day, and to act if its behavior deviates from expectation, then it’s important enough to be double-checked. Both for accuracy, and for completeness of comprehension.

If your dashboard isn’t redundant, you’ll never know… who’s lying?

Click to RT

The post Who’s lying? appeared first on @ASmartBear.

Do you feel the crushing weight of the disadvantages facing every new company? No brand, no features, no customers, no money, no distribution, no search engine rankings, no efficient advertising, no incredible executive team, no NPS, no strategy.

How do the successful startups rise above all that? Do they solve all those problems at once, or at least quickly?

No.

I apologize in advance for using the dang iPhone as an example but… The iPhone is one of the most successful and important products of the past few decades. But the first version launched with a mountain of issues. It was a terrible phone, ironically. The whole idea was that it was a “smart phone,” yet everyone agreed their cheap-o Nokia flip-phone was ten times better at being a phone. Also, imagine launching an operating system that didn’t include “copy/paste.” Terrible!

But, the iPhone did something so well, that people wanted so badly, they would put up with all the other crap: You could actually use the internet. The real Internet with full websites and everything. The web actually worked (even if slowly). Email actually worked. In your pocket. It’s hard to explain the magic and excitement to a Gen-Z’er who takes it for granted. This was so compelling, all the other problems didn’t matter.

For more than ten years — an eon in tech-time — Heroku has been the dominate way that Rails developers launch public applications. When it first came out, it was rife with “deal-breakers” that developers continually winged about. “What do you mean I have to use Bundler — it’s broken half the time!”  “What do you mean I can’t change the filesystem at run-time — I’ll have to change my algorithms!”  “What do you mean it doesn’t support MySQL — everyone uses MySQL!  My queries are going to break.”  “Wow these websites are really slow.”  On and on with the complaints, and all quite valid.

But, Heroku did something so well, that people wanted to badly, they would put up with all the other crap. You could type git push production and your site went live. You could use a knob on a web page to determine how scalable the site was. (Don’t worry, that knob is also connected to your wallet.) You never saw a server. You never messed with backup. You never worried how to securely stash your API keys. You always had a staging area to test things in a real server environment before pushing code live. DevOps became a thing of the past for a large class of applications. This was a revolution so important, so compelling, all the other problems didn’t matter. Developers changed their workflows and their code around Heroku and “12-Factor” apps; Heroku did not change to suit developers.

This is a universal pattern I call the “Important Thing.” Successful products deliver on something so fantastic, so game-changing, so important to the customer, that it is sufficient to override the overwhelming deficiencies of the rest of the product and company. So great that people tell their friends or force their colleagues to use it too (defeating the lack of marketing). So great that they’ll use it even if support is slow and releases have bugs (defeating the lack of operational excellence). So great that they’re excited to support a promising new company instead of worried about creating a dependency on a wobbly new company (defeating the lack of brand).

The Important Thing isn’t always a feature or technology. Fogbugz was never the leading bug-tracking system, but I employed it for most of the 2000s because I was a huge fan of Joel Spolsky’s blog, so it felt good to use a product made by a company whose values and behaviors I respected and learned from. The same happened with Basecamp and the 37signals blog. (You might be tempted to say Basecamp was successful because the work-style espoused by 37signals leads to successful products, but the contrary evidence is that all of their many subsequent products — built with the same work-style, by the same people, and even with the same code base — where all dramatically less successful, to the point that all of them have now been discontinued, and the company has been renamed “Basecamp” to emphasize that only the first of those experiments was ultimately successful.)

Here’s how to apply this to your own business:

It’s easy to get overwhelmed by the myriad of inadequacies you undoubtedly have. It’s tempting to attack them all, but worrying about everything and attacking simultaneously on all fronts with no weapons just leads to burn-out, and does not result in a company that is excellent on any front. Fortunately, you don’t need to solve all those problems. You need to solve almost none of them.

Instead, you need to focus on the one thing (maybe two) which is your Important Thing. The thing where, if you’re extraordinarily good at it, customers will overlook everything else.

It could be a feature (e.g. disappearing messages with Snapchat), but you can look beyond features. It could be enabling a lifestyle (such as remote-work or with-kids-work). It could be your online reputation (e.g. Joel Spolsky for me). It could be that you’re solving a problem in an industry that others overlook; having “any solution, even with problems” is better than having no solution. It could be that your culture resonates with an audience (e.g. 37signals), maybe due to an informal voice in an otherwise formal market, or because you have a cause — a higher purpose — so that people aren’t just buying a shirt or some software but rather they are supporting a movement (e.g. Patagonia who cares so much about the environment that there’s a company policy that they will bail employees out of jail if they’re arrested for peaceful protest, and by the way one of the results is that they have only 4% annual employee turn-over).

You should select something that you want to obsess over for the next five to ten years, that gets your customers excited, and which you at least have a possibility of executing. And then do that. Maybe only that. If you let all the other fires burn, maybe you have a shot at actually being excellent at that Important Thing.

If you do, all those other disadvantages exist, but aren’t fatal. That’s all you can hope for, at the beginning. And all you need.

The post What’s The Important Thing, that is powerful enough to override all your deficiencies? appeared first on @ASmartBear.

I won a fake stock market competition in elementary school. 

I put all my money in a few penny stocks — where prices are less than a dollar, and because of their small denomination, their value (as a percentage) fluctuates wildly. Some days I had the worst portfolio, other days I had the best. The competition happened to end on an up-day.

This was an example of “high risk, high reward.” Like startups.

Startups need luck too, in finding advertisement channels that work, in the right mix of features and usability that triggers product/market fit, in cultivating a useful social media presence, on employee number one working out well, on a competitor not making a fatal move, on there being enough money in the market, on appropriate pricing, on market forces not shifting the rules of the game, and the list goes on. And that’s after the luck of where and when you were born, the color of your skin, your gender, and that list goes on too. 

When you put it that way, it’s obvious why startups fail so frequently! They need a lot of success in a lot of areas, which is a lot of “good luck” to string together.

What can you do, to reduce this effect and maybe even turn luck to work in your favor?

The list above is a bunch of “ands.” That is, you need a good marketing channel and you need a few killer features and you need great initial employees and you need a healthy market, etc.. “And” is bad! It’s bad because each one has a probability of success, and you compute the total probability of success by multiplying them. No matter how optimistic you are about those probabilities, the end product is a small number.  Even 70% multiplied by itself five times is only 17%; most of those things don’t have as good of a chance as 70%. 

So the first question is: Can you reduce the number of things which have to go right? Can you convert some of those things into 100%?  For example, can you pick a large and growing market? Can you compete in a niche where incumbents don’t care or cannot move quickly? Can you hire someone you’ve worked with before, or build something sustainable without hiring?

Even so, there will be plenty of challenges, so we need a second technique for boosting probability: Leverage “or” instead of “and.”

Consider marketing channels. You could get your first few hundred customers through GoogleAds, or Facebook ads, or affiliate sales, or targeted outbound sales, or partnering with a high-profile reseller, or great press about your unique brand and message, or other ways. Only one of these needs to work! So although the probability of success for each one of these is low, the probability that something will work is higher.

This is true of everything from product features to website copy for conversions to avenues for exiting the company years from now. The general rule is optionality is strength.  When there are lots of ways for things to go right, that is a strong position even if you haven’t actualized one of those ways.

The converse of this is a business that has extra “and” clauses — even more than usual. Marketplaces, for example, almost never succeed. When they do succeed, they are often durable and profitable, which makes them a smart bet for a Venture Capitalist that can maintain a diversified portfolio of attempts, but for the individual business it’s a tough road. For example, a marketplace has to thrive both with the sellers and the buyers — if either one is disinterested, or is too expensive to corral, or doesn’t find value, or prefers to transact outside the marketplace, then the marketplace fails. Those are “ands!” Also, many marketplaces often only deliver value at scale; so another “and” is that they have to also “scale down” so the first 100 buyers and sellers also see value.

By accumulating “and” requirements, you are lowering the probability of success. By stringing together possible solutions with “or,” you are increasing the number of ways that luck could smile upon you. 

Set yourself up for luck!

The post Capturing Luck with “or” instead of “and” appeared first on @ASmartBear.

Startup strategy is like Kung Fu. There are many styles that work. But in a bar fight, you’re going to get punched in the face regardless.

I can only teach you my style. Others can only teach you theirs.

This is my style.

“MVPs” are too M to be V. They’re a selfish ploy, tricking people who thought they were customers into being alpha testers. Build SLCs instead.

I don’t like freemium; I want to learn from people who care enough to pay, not from the 20x more who don’t. 

Founders almost never have a real strategy. They say things like “we have a unique feature” and “the incumbents are dumb,” which might be true, but isn’t a strategy. They don’t know how to analyze a market or competition, so they make it up instead learning how to do it. This is a common but largely unacknowledged reason why companies fail. Founders explain failures with things like “our two main competitors did [thing] to us” or “customers didn’t understand [our point of view].” The implication is that this was unknowable or bad luck, but the truth is, this was a predictable result of not understanding the market.

Power Laws are useful to understand and exploit. But don’t get hung up on it. The 10,000th biggest company in the world is a very successful company, as is the two-person company where the founders each take home $300k/year. 

All startups are screwed up. Even when they’re succeeding they are screwed up.  (HT Mike Maples Jr)  Corollary: A startup has to be so excellent at one or two key things, that they can screw up everything else up and not die. Sometimes that’s airtight product/market fit. Sometimes that’s defensible distribution channels. Sometimes that’s product design so thrilling that every customer spreads the word to five more. Sometimes that’s a market insight that takes competitors five years to understand. Sometimes that’s a dream team that weathers the storm that sinks the other boats. The bad news is, you don’t know ahead of time what that thing will be. The good news is, it’s OK that most things are screwed up.

Another Corollary: Your competitors are screwed up too. Don’t assume they’re smarter than you, faster than you, more strategic than you, growing faster than you, making better decisions than you. They are doing that sometimes, but you are too, and all of you are screwed up. When you look at them, you’re seeing their best, exaggerated projection, which isn’t the truth. Every time a company dies, read what they were writing a week earlier: proud, confident, optimistic, possibly even arrogant and boastful. Ignore all of it.

If you have more than three priorities, you have none.   (HT Tony Hsieh)

It’s better to complete 100% of 8 things than of 80% of 10 things.  (HT Dave Kellogg)

Too often, decisions are made “because a competitor is doing [something]” or “because a competitor might do [something].” Occasionally, that’s the right motivation. But usually, you should focus on what’s best for the customer and your company.

Before you pronounce one of your competitors “dumb,” consider that it’s much more likely that everyone working there are very likely of above-average intelligence. More useful is to ask: “If a thoughtful person were making that choice, why would that be?” You might learn something about their strategy or goals.

LTV is invalid until the company is more than five years old; even then it’s more noise than signal. Instead, watch payback period for acquisition efficiency, watch retention for product/market fit, watch expansion revenue for long-term growth, and watch gross margin for long-term profitability.

Churn needs to be lower than you think; 3% monthly churn is too high, and means you’re either not delivering recurring value, haven’t found product/market fit, the market stinks, or some other critical problem.

There isn’t one most important SaaS metric.  Priority depends on your goals (e.g. profitability versus size) and on what, at this moment, is so out of whack that ignoring it is fatal. 

You’re not allocating enough costs to gross margin or the cost to acquire a customer. You think this doesn’t matter because you’re not a public company or didn’t raise money, but it does matter because it means you don’t understand the financial mechanics of your business.

Fermi estimation is a good way to figure out whether a startup or product could even theoretically be viable. Beware: people tend to round up to the better power of ten because they don’t want to face the truth. Real life usually rounds down.

Being focussed on SaaS metrics is not incompatible with valuing employee fulfillment and customer happiness.  In fact, the latter two is crucial for producing the former.

A lot of businesses aren’t profitable even at scale. Founders assume “we can fix that later.” Often, you can’t.

I know you got profitable in three months, but you didn’t.

Telling the truth to customers and employees, especially when it’s difficult, is how you earn trust and loyalty. 

The best business model in 2019 is “doing good.” It attracts and retains talent even when salaries are low and risk of failure is high. It attracts customers even when prices are high and quality is low. It’s also the way to marry capitalism with morality.

Your values are tested only when the decisions are tough, like losing money, hurting your brand, firing a highly-productive employee who isn’t a culture-fit, or a wonderful culture-fit who isn’t productive. Your values are defined by what you tolerate. Your culture, and even your purpose, is the outcome of living your values.

Find and focus on one reliable distribution mechanism before diluting your time diversifying. If you can’t find one sizable sustainable source of customers, the solution won’t be found by piecing together three small unsustainable ones.

The shiny new fad is hyper-competitive, temporary, and money pouring in means crappy companies can mess about for years, poisoning the market. The “boring” but established, large market is where revenue is easy and competition is old, slow, and has something to lose. 

The only time you need “truly unique” tech and “an impossible-to-cross moat” is when your goal is to build a $1B+ company, which almost no one is (or should).

You can start by selling to small customers and evolve to larger ones, because you’re starting with a low cost-basis and then maturing your product and service. Or you can start selling to enterprise — nothing wrong with that — but then your high cost-basis of marketing, sales, and service will not scale downward.

Selling to the mid-market is hard. If you do it, expand into it later, after you’ve already mastered a different segment.

If you think Biz Dev is the solution to a difficult problem, you’re wrong. If you think it’s a way to add incremental value, then maybe, but still unlikely until you’re at $50M+ in ARR.

Great products don’t sell themselves, but they can cause customers to talk about it to other customers. You still have to get the first customers, and most of the rest, yourself.

Most “customer discovery” is really a founder in love with a product, trying to justify to herself that there is a market. She does this by selling for forty-five minutes instead investigating and disproving. And by talking about cool features instead of asking about price. And by remembering confirmatory evidence while conveniently forgetting or explaining away the rest, even though “the rest” is where the real learnings reside.

Pricing determines everything else. Corollary: Price must be part of your initial customer discovery, not an afterthought after you “first make sure there’s a pain. “

It’s hard to get 1000 paying customers. It’s easy to get to 100 if you have a real product. Price so that 100-200 is enough for all the founders to work full-time. This means you have to charge $50-$500/mo, and make something of genuine value.

Most of the time, real pain points addressed by great products are not a business. Which is why founders confidently begin and are surprised when it fails. A business also requires that there are many potential customers, who realize they have the problem, who you can reach at a reasonable cost, and then convince to convert, at a profitable price, against existing market dynamics, and last for years. Early on, your job is to validate that there’s a business, not to validate that your idea is good or that a pain exists. 

“Sales” is not a dirty word.

A reliable paid acquisition channel results in a somewhat stable business. It’s boring and doesn’t make you famous and doesn’t play into the false but common narrative that SEO and viral content will launch your startup into the market with almost no money. So people run after the false narrative instead of the thing that’s most likely to work.

People don’t value their time. They will do crazy things to save $2. Don’t sell a product that saves time to people who don’t care about saving time. Businesses often don’t care just as much as consumers don’t care.

Corollary: Sell more value, not more time. Even businesses who can compute the ROI of saving time, will compute a much larger ROI for creating value.

Multitasking is bad.

Your time being 90% allocated is bad.

Bet on things which are true today, and will be even more true in five years; not on your guess at how the future will be different. (HT Jeff Bezos) You want to argue that the future is unknowable, but that’s just an excuse for not having a strategy.

The “long tail” can sound appealing, but it sure is easy to sell vanilla ice cream at the beach even when you’re right next to another ice cream stand.

Yes, marketplace businesses can be valuable and defensible. But their failure rate is much higher than product businesses, and they require copious venture funding. They have to work with 10 people in the system, not just when there’s 10M. 

If someone deploys a code change and brings down the entire system, the fault is with the brittleness of the system, not with the person.

Corollary: If a talented person at your company does something “dumb,” the next question is: What did you fail to do as a leader? Did that person not have the right information, or enough context, or were they worried about something, or what?

One-on-ones are never a waste of time. Agendas are optional and sometimes even counterproductive. 

If you’re the smartest one in the room, you’ve made a terrible mistake. Either you haven’t hired great talent, or you have but you’re disempowering them. This is the opposite of what a great leader does, and minimizes the success of the organization. Andrew Carnegie wrote for his own tombstone: “Here lies a man who knew how to bring into his service men better than he was himself.” Ignore the gendered language but heed the lesson.

Starting up is the act of doing as many jobs as possible so your company can survive. Scaling is the act of shedding as many jobs as possible so your company can survive.  [quoted from Aaron Levie]

If you believe someone with a title of XYZ isn’t useful, or important, you’ve never worked with greatness at that function. Maintain that attitude, if you want a blind spot in your organization forever.

If someone at your company has no way to grow into a new role, they will leave, as well they should. “New role” can mean sophistication, management, or a different job. “No way” can mean because they’re unable or because the role they want cannot exist.

Founders are caught by surprise by the scaling phase. If you haven’t operated at the executive level at a scaling startup, you don’t appreciate how different and difficult it is. There are not enough blogs or books about this phase; often leaders go underground. Founders arrogantly believe that the beginning is the hardest part, because it is hard. But many startups top out between $5m-$20m in revenue. That’s fine if you don’t wish to scale. But if you do, your arrogance prevents you from the necessary transformations. What got you to $20m is very different from what gets you to $100m. You need help, new sorts of employees with a different organization, and you’d better surround yourself with people with more experience and skills than you have. How will your ego cope with that?

If you can’t unplug for a month without adversely affecting the business, then you have a brittle business. If the business is young, this is inevitable. Otherwise, this is a failure of organizational development.

Management systems, whether about performance management, or leadership, or healthy teams, or product strategy, or one-on-one interactions, or meetings, or productivity — are like deciding between coding styles. They’re all pretty good, so just pick one system you can stick to, and maximize it.

Make important decisions by optimizing for the one or two most important things, not by satisfying a dozen constraints. Maximize opportunity rather than minimize down-side.

Leave money on the table. The customer should derive 10x more value than it costs them. You earn loyalty and future upgrades. Karma works.

If you can’t double your prices, you’re in a weak market position. Determine the causes and address them purposefully.

Your product must materially impact one of your customer’s top three priorities. Otherwise, they don’t have time to talk to you.  (HT Tom Tunguz)

A good strategy is to be the System of Record for something.  (HT Tom Tunguz)

It’s more powerful to be 10x better at one thing, then to shore up ten weaknesses.

If your sales and marketing expenses are high, that either means your marketing is extremely competitive, or that people don’t naturally believe they need your product. If the latter, they might be right. If the former, you need large differentiation — more than a feature or two. If you don’t solve this problem, the company is ultimately unsustainable.

No one will read the Important Text in your dialog box.

Design is important, yet many of the $1B+ SaaS public companies have poor design. So, other things are more important.

Operate on cash-basis. Analyze on GAAP-basis. Don’t cheat on GAAP — you’re only lying to yourself.

“I don’t have time” actually means “I don’t want to.” 

The only cause of Writer’s Block is high standards. Type garbage. Editing is 10x easier than writing.

Vitriol online usually comes from that person defending self image or impressing others. Either way, it’s about them, not you. Often there’s a constructive learning inside which you should take to heart, but discard the petulant packaging.

Your Impostor Syndrome is tiresome. Just stop already.

“Desire to seem clever, to be talked about, to be remembered after death, to get your own back on the grown-ups who snubbed you in childhood, etc., etc. It is humbug to pretend this is not a motive, and a strong one. Writers share this characteristic with scientists, artists, politicians, lawyers, soldiers, successful businessmen — in short, with the whole top crust of humanity.” — George Orwell, Why I Write

The desire to impress others drives behavior more than logical argument. Founders start companies to show everyone else that they’re better than those everyones give them credit for. Angel investors want a story and celebrity by association at cocktail parties. Making your parents proud is often a stronger force than solving for the best risk-adjusted return.

It’s cliché, but it really is the journey, not the destination.

A lot of it is luck. Nevertheless, your operating plan should assume it’s all under your control, and run experiments. It’s your ego that needs to remember that a lot of it is luck.

Once we gain power or success, we forget what it took to get there, and we can’t account for the role of luck. This impedes sympathy and the ability to deliver appropriate advice. 

“Everyone thinks of changing the world. No one thinks of changing themselves.”  —Leo Tolstoy. Founders have to be arrogant to believe they can create something new and better, but the great founders are not so arrogant that they don’t evolve. Bezos, Zuckerberg, Page, Hoffman, all have a history of personal transformation. This is more difficult than building products.

You can have two Big Things in your life, but not three.

There’s no point in creating another huge company with a crappy culture that no one really wants to work at. But there’s every reason to create a company that creates 100 good jobs that people love working at, and where they are valued, and can grow. 

The first 10 people will join because you’re a startup: They get excitement, influence, caché, unique experience, and a small shot at outsized remuneration. But why will the 500th person join? If you can’t answer that, you aren’t building a company worth joining, which means you won’t be hiring awesome talent, and it means you don’t have a purpose other than revenue. Fix that now.

Your top talent are volunteers. They can get another job across the street for more money, because they’re the same person you hired except with more experience. It takes a different attitude and toolbox to motivate, inspire, and lead a volunteer, rather than a servant.

Making a difference in the world means having an impact on people’s lives. Even just a few people. It does not mean tricking 1,000,000 people to stick their nose in your app. One person who loves coming to work instead of loathing what they do with 1/3rd of their time on Earth, is enough. One person who was given a chance to grow and progress instead of being stuck being under-paid and under-developed, and under-appreciated, is enough.

Some things in life have to be experienced to be understood. Kids, founding a startup, scaling a startup, selling a startup. Does this contradict the rest of this page? Life can be contradictory.

This is my Kung Fu style. If you dislike my style, you are not wrong. In fact, that’s good — the world needs many styles. 

All styles have strengths and weaknesses. 

Pick the style that fits you, and master it.

The post Kung Fu appeared first on @ASmartBear.

You roll down the windows and wear a helmet when you take your car to the track. This does not make me less terrified of a fiery death.

The American Autocross champion was sitting in my passenger seat screaming at me to not let my foot off the pedal until I bounced off the RPM limiter. She was properly intense. I didn’t know what I was doing, but it’s fun to power through curves in a high-speed tenuously-controlled skid in my Mini Cooper S (plus Cooperworks).

The proper driving strategy for Autocross is bizarre. It is possibly the worst-case scenario for wear and tear on a car. The strategy solves for the spaghetti-like pattern of the track, which is composed mostly of turns and banks, so that the winner is the one who can best negotiate a complex path, rather than which car is fastest on a straight-away.

(The actual track I was on)

Driving strategy hinges on this constraint: a car can accelerate quickest when it is not turning. “Accelerate” means getting faster or getting slower. Mashing the accelerator pedal or brake pedal while turning, results in a spin-out.

So, you do this strange thing where you aim the car at a particular point near the first section of the turn and accelerate as much as possible in a straight line, as if you’re going to fly off the course. As you near that point, you break with just as much vigor. Still without turning the wheel. Then you turn and (more slowly) accelerate at just the right pace such that you’re gently skidding, but still in control. Until you can see the next point on the next turn that you full-accelerate straight towards.

What point should you pick? That depends on the curve, but drivers will find what they believe to be optimal points, and will often put small orange cones there as visual guide, especially during practice runs.

While this results in a unnatural, jerky, discontinuous motion, it is also the fastest way through the course.

Intuitively, it seems like there would be some smooth, efficient, graceful path, but that’s the slower way. And the goal is speed, not grace. (Of course, there’s a certain grace in speed, but not for the passenger being thrown about the cabin.)

Companies in the scaling phase feel like this too.

In most ways you are moving faster than ever, particularly when you’re moving in a straight line. For example, a new incremental product will launch to your existing customer base, with immediate impact in the millions of dollars — something a small company will take years to accumulate.

But in other ways it is jerky, unnatural course-corrections. Teams reform with new people and new missions. Things that worked for seven years suddenly don’t work, and “tiger teams” assemble to fix it, while new people wonder why it was ever built this way in the first place and older people laugh knowing that in two years, future-new people will be saying the same thing about what the now-new people are building.

Nothing is exempt: teams, processes, products, sales motions, branding, interviewing, culture, office space, customer interactions, architecture, security, finance, governance, hiring, …

It is certainly difficult to jerk around. Some people can’t take the forces, and that’s understandable. No one said this would be easy.

But it’s also the fastest way around the track.

And, while difficult, there’s no feeling like it.

The post When “fits and starts” is the most efficient path appeared first on @ASmartBear.

We all know that startups should make decisions quickly. Fast decisions leads to rapid action, which accelerates the loop of production and feedback, which is how you outpace and out-learn a competitor, even one that already has a lead.

But some decisions should not be made in haste, like a key executive hire, or how to price, or whether to raise money, or whether to invest millions of dollars in a new product line.

How do you know when your current decision should be made slowly: contemplative, collaborative, deliberate, data-driven, even agonizing?

I’ve made the following scorecard to figure out whether it’s wise to go slow:

1. Can’t undo.  This is the classic one-/two-way door delineation. If you can’t easily undo the decision, it’s worth investing more effort into analyzing the likelihood of the upsides and risks.
2. Huge effort. Some things take less time to implement than to estimate or to debate.  Remember that it might take two engineers a week to implement something, but a few debates and some research might itself involve an entire engineering and product for a week as well. This is one reason why small teams without process can produce results faster than larger teams with process. If the effort to implement the decision is smaller than the effort to make a decision, just knock it out. But if you’re deciding on a path that could take six months to measure results from, taking time up front to research is wise.
3. No compelling event.  If the status quo isn’t that bad, there might not be a reason why a decision should be made quickly. Without time-pressure, it’s more justifiable to spend more time on the decision. Conversely, time-pressure means the more time you spend deciding, the less time you have for implementation and unanticipated problems, so you’re adding risk by dragging out the decision.
4. Not accustomed to making these kinds of decisions. Online marketing teams are accustomed to throwing creative things at the wall, with new technology and platforms, because that’s the day-to-day reality of their job.  Because they’re good at it, they don’t waste time hang-wringing over whether or not to try an advertising campaign on the latest social media platform; they just do it. Conversely, most organizations have no experience with major decisions like pricing changes or acquisitions, and most founders have no idea how to hire a great executive, or how to decide whether to invest millions of dollars in a new product line as opposed to “just throwing something out there and iterating” as was the correct path at the start of the company. When the organization has never made this type of decision before, the decision is at great risk, and being more deliberate with research, data, debate, or even outside advice, is wise.
5. Don’t know how to evaluate the options.  Even after generating the choices, does the team understand how best to analyze them? If the company’s strategy is clear and detailed, if relevant data is at hand, if it’s clear what your goals are, if the deciding team has confidence, then the decision could be easy and fast; if these things are absent, perhaps more deliberation is needed to clarify those things.
6. Can’t measure incremental success.  After the decision is made and implementation begins, can you objectively tell whether things are going well? If yes, it is easy to course-correct, or even change the decision, in the presence of reality. But if progress will be invisible or subjective, such that you will sink person-years of time into the implementation before knowing how things are going, it’s worth spending more effort ahead of time gaining confidence in the path you’ve selected.
7. Imperfect information. Buying a house is nerve-racking, mostly because it is likely the most expensive and difficult-to-undo purchase of your life, but also because you know so little about the goods. What does the seller know but isn’t telling you? What will you not discover until you’ve moved in, or a year later? Often it is impossible to get the data or research you need to make an objective decision. When this is the case, it is sometimes wise to spend extra time gathering whatever information you can, maybe investing in reports or experts (which is what you do with a house). Or you could look at it the opposite way: If it’s impossible to get objective data informing the decision, then don’t spend lots of time debating subjective points; just make the decision from experience and even gut-check, because we just said that’s all you have to go on anyway.
8. Decision requires multiple teams who haven’t worked together before.  At WP Engine we’re extremely collaborative across teams. The benefit is that we work together for a common goal, taking care of the needs of support, sales, marketing, engineering, product, and even finance, rather than solving for one department’s goals at the expense of another. But this also can make decisions more difficult, because finding a good solution is complex, often requiring compromise or creativity which requires time to be realized. This effect is amplified if the teams (or team members) haven’t worked together before, and thus have less rapport, common language, and common experience. In that case, give the decision more time to breathe and develop, because really you’re giving people the time to build relationships and discover great solutions, and that in itself is a benefit to them and your organizational intelligence, which is a long-term benefit worth investing in.

Actually this isn’t a scorecard, because important decisions aren’t a Cosmo Quiz. Don’t use this as a rubric; don’t score it 1-5 and add it up with a spreadsheet.

Rather, this is a framework for thinking through what needs to be done. Honestly answer these questions, and by the time you’re through, you’ll have a good sense of whether a light touch, quick decision is fine (which should be the default answer!), or whether you’ve justified taking more time.

And, depending on which pieces are problematic, you’ll have a guide for what needs to be done next.

For example, if “Can’t undo” is a big problem, can you rethink the solution so that it can be undone, maybe by investing more time, or creating a disaster recovery plan of action, or splitting up the decision so that part of is is undoable?

Or for example, if “No compelling event” is a problem, maybe the best answer is to “not decide,” i.e. don’t spend time on this right now, since you don’t have to. Some people will be disappointed in the lack of a decision, but it’s better to honestly state that “we can’t figure out the answer right now” than to make a rash decision that does more harm than good, or to invest time in a decision that doesn’t need to be made, at the expense of work that does need to be done.

I hope this helps you make the right decisions, in the right way.

The post A Scorecard: Should a decision be fast, or slow? appeared first on @ASmartBear.

Pricing is often more about positioning and perceived value than it is about cost-analysis and unconvincing ROI calculators.

As a result, repositioning can allow you to charge many times more than you think. Here’s how.

You’ve created a marketing tool called DoubleDown that doubles the cost-efficiency of AdWords campaigns. You heard that right folks — as a marketer, you can generate the same impact, the same number of conversions, the same quality of sales leads, but with half your current ad-spend. Wonderful! Who doesn’t want higher ROI.

What can you charge for this tool? Clearly you can’t charge as much as the money the customer is saving on AdWords, otherwise the net result is no savings at all. Let’s say you can charge 25% of the savings and still find many willing customers.

Here’s what your sales pitch looks like to a specific customer who spends $40,000 per month on AdWords:

Great deal! The VP of Demand Gen will be able to boast to the CMO that she saved the company $15,000/mo even after paying for DoubleDown, and you’re raking in a cool $5,000/mo. Everyone’s happy!

Now let’s see why you can actually charge eight times as much money for the same product.

Marketers have a single paramount goal: Growth. Even indirect marketing like brand, events, and PR have the long-term goal of supporting growth. In the case of DoubleDown’s customers it’s direct: Growth through lead-generation through AdWords.

Growth is much more valuable than cost. To see why, consider the following two scenarios:

1. CMO reports to the CEO: I was able to reduce costs 20% this year.  The CEO is happy. The CEO’s follow-up question is: How will we use those savings to grow faster?
2. CMO reports to the CEO: I was able to increase growth by 20% this year, but it also cost us 20% more to achieve.  The CEO pumps her fists amongst peels of joyous laughter. The value of the company increases non-linearly. The additional revenue growth more than pays for the additional marketing cost that generated it. The CEO’s follow-up question is: How can we ensure this happens again next year?

It’s always 10x more valuable for a business to grow faster than it is for the business to save money.

This insight points us to an alternate pitch for DoubleDown. It’s not about spending less for the same amount of growth, it’s about spending more to create more growth.

In particular, using our example of the customer who currently spends $40,000/mo, suppose that customer is generating 200 quality sales leads per month from that spend. The sales pitch changes as follows:

You’re paying $200/lead right now, yielding 200 leads per month. Using DoubleDown, you can double the number of leads you’re generating, still at a cost of $200/lead:

The key is this: The customer is willing to spend $40,000 to generate 200 leads, and therefore is happy to spend $80,000 to generate 400 leads. It doesn’t matter how much of that $80,000 is going to AdWords versus going to DoubleDown. The key is not to “save money on AdWords,” but rather to “generate more growth at a similar unit cost.”

In the “saves money” pitch, the value was $20,000, and the customer needed to keep 75% of that value-creation. Whereas in the “generate growth” pitch, the value is $40,000, and the customer is happy to pay 100% of that value-creation to a vendor. Both the amount of value created, and the percentage of value the customer is willing to pay, is a multiple higher for the “growth” pitch versus the “save money” pitch.

So the next time you want to formulate your product as a way to “save time” or “save money” or “be more efficient” …. DON’T!

Instead, figure out how your product creates value in the way your customer already measures value, and position your product as a way to accomplish that.

The post How repositioning a product allows you to 8x its price appeared first on @ASmartBear.

People said there’s no money in hosting. WordPress is just a toy. After the success of Smart Bear, I should be setting my sights on something big, not this.

I’m sure people said similar things to Heather when she joined as our CEO.

The Silicon Valley-oriented technology press outlets don’t cover us because we’re not in San Francisco, even though we’re more successful than most of the startups they cover.

We’ve come a long way from switching this blog to WordPress in 2009, my systematic vetting of the business idea in 2009 (after needing it myself due to the success of this blog crashing my dedicated server every time I got on Hackernews), the “coming soon” pre-launch in April 2010, our Series A 3-minute pitch in 2011, our incredible CEO Heather Brunner joining in 2013, opening offices in San Francisco in 2012, San Antonio in 2014, London in 2015, Limerick in 2016, and Brisbane in 2017, the launch of the first Digital Experience Platform for WordPress this year, creating a truly incredible culture based on real values, managing scale, inventing new ways of building products, and even having this blog take a back seat to the demands of the business.

We just announced a few more things.

Late last year we passed $100M in annual recurring revenue. We’re less than 8 years old so you can do the math on growth rates and figure out that we’re on an elite trajectory. That revenue is thanks to 75,000 customers, earned through the hard work of 500 employees across six offices on three continents. Every day, 5% of the entire online world (roughly 3.5 billion people) visits a customer running on the WP Engine Digital Experience Platform.

This week we closed $250M in financing from Silver Lake, the premier technology private equity firm. The majority of the funds pay back our early investors who believed in us enough to trust us with their money.  Of course a nice chunk is primary capital, i.e. for the company balance sheet, to invest in growth initiatives, security and quality, and advancing our existing strategic priorities through acceleration and de-risking.

We have never been in a stronger position. We have never had the caliber of teams we do today, as evidenced by our award-winning 70+ NPS customer service, our historic-low cancellation rates, our security and uptime, our product and engineering initiatives, our global brand leadership, our customer acquisition through both marketing and sales, our hiring and employee experience teams, our finance, legal, and governance teams, our executive leadership, and perhaps most important of all, the strength of our culture which embodies excellence, service, transparency and inclusiveness. We remain steadfast in our commitment to continuing to increase all of the above.

And now, with Silver Lake’s investment and support, we can accelerate our growth investing even more into our strategic roadmap, and placing some new bets on ideas we’ve had but haven’t been able to find the space to explore.

I’ve always said nothing beats the high of getting that first customer to sign up.  It’s the heroin-hit that hooks the entrepreneur.  (The next sale isn’t quite as sweet.)

That’s still an accurate portrayal, but there are other moments that are even more thrilling. This moment in WP Engine’s saga is one of those.

Thank you to all our customers, who vote for us every month with their pocketbooks, but even more importantly, entrusting us with their brand and online success, which we treat as vitally as we do our own.

And a special thank you to Heather Brunner, our CEO for the past four and a half years. Long-time readers of this (11-year old!!) blog might automatically assume that all this success is due to my prescience and wisdom, but the truth is that although I’ll certainly take the credit for the initial construction and lift-off of the rocket, setting up an impressive and rare trajectory, the reason we are in the position we are today, with all the attributes listed above, is due to Heather’s leadership, strength, vision, and execution. Period, full-stop. And everyone else at WP Engine would tell you the same thing.

So to everyone at WP Engine, let me repeat the message from one year ago:

Look what we did!

The post WP Engine passes $100M in revenue and secures $250M investment from Silver Lake appeared first on @ASmartBear.

We’re tired of hearing how small software companies usually fail.

The data show that the two most common causes are: (1) Product isn’t useful to enough people, and (2) Problems with the team.

But what about the companies that die even though they did sell some copies of software, and where the early team isn’t dysfunctional?

I don’t have data for that cohort (tell me if you do!), but informally I’ve observed the following things, which follow a pattern that can be identified and counteracted:

1. The initial marketing channel quickly saturated, so growth stalled at a non-zero but unsustainably-low rate.
2. The initial marketing channel was sustainable for a while, but got wiped away due to external forces.  Examples: large bidders tripled the cost per click, Google’s SEO algorithm changed, the event organizers changed the rules or stopped doing the event, the link-sharing site became irrelevant, the hot blog lost its traffic, the magazine running the ads finally failed.
3. The product was built on a platform, and the platform changed. Examples: A popular app drops to zero downloads after Apple builds it into iOS; A Microsoft Office add-on drops to zero sales after Microsoft builds that feature into Office; A Twitter utility breaks when Twitter removes functionality from their public API.
4. The company landed one big customer representing 80% of total revenue, but that customer canceled. It wasn’t a mistake to sign that customer — it funded the entire company. But sometimes you experience the adverse end of that risk.
5. A key employee left the company, which caused the company to fail. Early on, a 10x person can mint the company but also could be irreplaceable. A suitable replacement is too rare; it takes too long to find someone, convince them to join for almost no salary, and get them up-to-speed and productive.

When a company has revenue but is susceptible to the fatal afflictions above, I call it “brittle.” It’s a real business, but it’s easy to break.

The pattern, which suggests a remedy, is: Brittleness manifests wherever there is “One Thing.”

A technological example makes this clear. Suppose I have a single server that runs my website. Any number of things can cause this server to break — a power failure, a network failure, a bad configuration change, too much traffic arriving at once, and so on. How do you make this situation less brittle?

Let’s take power failure. Power can fail if the power supply inside the server burns up (typically because the fan inside it failed), or the power strip or power cord fails (maybe a wetware failure like accidentally unplugging it), or the power source running to the power strip could fail. You can address all this by having a second copy of the components — a second power strip with a second cord plugged into a second power supply. This is, in fact, exactly what data centers do! In short: redundancy — having two things that do the same job, instead of just one thing. It’s twice as expensive, but it buys you robustness.

But what happens if the power fails between the main power system in the data center and the cabinet where the two power strips are? That’s another case of “one thing.” So you could have two cables running to every cabinet, from two identical power units. Again this is what advanced data centers do.

But what happens if the city power fails? Data centers have their own gas-powered generators. Which means they have to stock large amounts of gasoline. Gas-powered engines that are used infrequently have a tendency to stop working, so they have to test and maintain those units. Data centers often have multiple generators. Robustness purchased at large expense.

In modern clouds we go yet another step further, because the entire data center itself is “One Thing.” So you have additional servers in other physically-separate data centers that draw power and network connectivity from different vendors.

The data-center example is applicable to all of the causes of failure above.

“One marketing channel” is brittle, because if anything happens to it, that could be the end of an otherwise-healthy company. The solution is to layer on additional marketing channels, so that variation in any one of them is not fatal.

“One platform” is brittle, because if they forward-integrate (i.e. copy you) or just fail, that’s the end of the company. One solution is to be multi-platform (which social media management tools did, and which we did with cloud infrastructure providers at WP Engine); another solution is to only build on platforms where you have a high degree of confidence that the platform owners are committed to supporting their ecosystem by never directly competing with them, and in fact promoting them. (Salesforce is currently the best in the world at this.)

“One big customer” is brittle. One solution is a long-term contract with a serious breakup clause, as insurance that pays for you to bridge to more customers. Another is to prioritize accelerating sales until that customer represents a percentage of revenue that you can stomach. Also, up-front payments, so you have the cash-flow to invest in that growth right now. The typical attitude is, “We now have a large customer, so pour extra money into development to make sure we don’t lose it,” but the right attitude is to use a lot of that money to land other customers.

“One key employee” is brittle. Not only might they leave, but what if they just get sick or need to take a vacation? The usual refrain in the startup world is that none of these are options — everyone has to work 70+ hours/week and never falter. Talk about brittle!

Solving these things takes time and money. These aren’t quick-fix solutions. You can’t just hire three more fantastic developers to create a robust engineering team, and you can’t just snap your fingers and find three new efficient, productive marketing channels.

Therefore, the right attitude is to maintain clarity on these risks and ask which one is best to work towards right now. For example, it’s cheaper and easier to experiment with new marketing channels than it is to find, interview, convince, and manage a second software developer, and plus if you can get a second marketing channel online, that will generate revenue, which in turn means you can afford a second software developer. In this scenario, the best thing is to focus all your energy on getting a second marketing channel running.

As you scale, the size of the “chunks” that create brittleness also scale, which creates new One Things, thus new risks and new investments. For example, with $260M in 2016 revenue, still growing at a blistering 60%/year, with a thousand employees, Hubspot is not brittle in any of the ways outlined above. But they recognized in 2016 that they were a single-product company. That is a “One Thing.” If there were a sea-change in the market for inbound marketing software, that could be fatal to Hubspot. It also limits long-term growth as the market matures and saturates. The way out is redundancy — becoming a multi-product company, but not where one product is 95% of revenue. They attacked that problem, and today (Nov 2017) they’re well on their way, as recognized by the media at large.

Finally, on a personal note, there’s another “chunk-level” that’s even larger than all of the preceding, and it’s a brittleness that almost all founders suffer from, including myself. The chunk of “the entire company.”

This is a component of why founders are almost always sad and sometimes permanently depressed even after a successful sale of a company. This was your “One Thing” for years. This is your identity, your life. You don’t have hobbies or even good friends anymore. You might have sacrificed family or health. Talk about a “One Thing.” Your entire life is brittle.

The solution here is not to have two companies or two jobs. That’s burnout; a lack of singular focus creates worse outcomes.

Rather, the solution is to realize that there were things you did and loved before and there will be things you will do and will love after. This is a chapter in a book. Even if one chapter is sad or has an unexpected twist, there’s still the next chapter which you can look forward to, even if you don’t yet know how that story will unfold.

Robustness, not in many things simultaneously, but in things serially. That’s the wrong attitude for solving tactical problems at work, but it’s the right attitude for thinking about the arc of your life.

Back to today and the here-and-now. Go list all the “One Things” which make your business brittle. Only tackle one or two things at a time — you have to manage risk, not pretend that you can eliminate all of it at once. Be thoughtful, and build steadily away from brittleness.

The post Brittleness comes from “One Thing” appeared first on @ASmartBear.