A Blind Spot - Reflections on technology and obsolescence

For my friends the young tech-preneurs that follow this blog, I decided to share my 40 years perspective on the growth and decline of new technologies.  It is a personal experience that I hope may help understanding the process at work and may prevent them from repeating some of the blunders I made from incorrect assumptions.

Background
I am 61, grew up in Europe in a family of several generations of entrepreneurs. Went to university in the US ad got a BA in Psychology and MBA in International Business, Finance and Accounting.  From those experiences I developed a curiosity for technology - perhaps I am lazy and I valued technology's leverage to let me do more for less effort. I was blessed to grow up in the dawn of computer technology - I remember at age 9, my father, an engineer, tell me of his wonder at his first encounter with IBM computers and punched cards, etc. in 1960; it was a glimpse of the future and I was sold.  My MBA thesis, 14 years later, would be a FORTRAN program for financial analysis, a box of punched cards (three months of work in 1973 that I replicated in 1983 with Lotus 123 in three hours).
My career as a banker and later as serial entrepreneur was always leveraged by using computing technology from HP calculators to punched cards, to Apple II, to CPM microprocessors to DOS and Windows. I tinkered with these tools sooner and more than most people I knew. I saw the future coming and I wanted to usher it in.

Possible insights
My fascination with digital technology led me to always overestimate how quickly the "computing future" would come, how fast the masses would adopt and how fast "older stuff" would be abandoned. The reality is that except for early adopters, the masses are slow to abandon old habits and do so only when the process of change is easy.  The change that to me was challenging, fun and satisfied my curiosity, to most others was hard work, so broad based technology acceptance was always late.

This blind spot probably was the root of all business failures or slower-than-hoped successes I had. It was really unjustified since I was privileged to insight to the contrary. Shame on me; here is one example:

In 1983 I worked for a company in Seattle, DP Enterprises, that had two existing product lines: 1. selling IBM minicomputers and 2. maintaining the left-over key punch machines still needed to run the first generation mainframes. I was product manager of the minicomputers line, I disdained the old junk keypunches, and longed to transfer to a new upcoming initiative to sell the new-on-the-market IBM PCs (floppy disk only, XTs would come later).  Ed Benshoof, the owner, was making money faster than he could count it and built one of the biggest and nicest office buildings in town, overlooking Lake Union and with his penthouse on top of it . I heard that the profits were coming disproportionately from the "junk dealer business" of scavenging parts, refurbishing and reselling keypunches to companies with very old mainframes that could not afford the conversion costs to migrate to "my" newer minicomputers.
Duh! Even my seven year old son could have drawn the right conclusion. Not me. I was smitten with the future, only too soon.

Countless other ventures followed with too-soon-technologies that would eventually be applauded when I had moved on to.  Some of the ideas I followed paid off well enough, but I could have saved myself a lot of troubles if that blind spot had not been there.

Lessons learned

• Do not bet on fast mass adoption of anything that requires learning, work or effort. It's not that people are dumb, they just have better things to do with their time.
• Fast adoption happens only with super-intuitive products that require virtually no learning (all benefits no costs), like smart phones of the iPhone and Android generation (not the earlier Palm Pilots), or like the iPad and Android tablets (not the Windows tablets of 2002-3)
• Particularly for small businesses (cash strapped) and very large enterprises (logistically bound), obsolescence does not mean that the obsolete product goes into the garbage can.  It will continue in use if no effort or cost is involved in its continued use. It may be re-purposed if the required effort is minimal (e.g. a PC passed down to children, secretaries, assistants, warehouse staff, kiosk, etc.)
• Where complex or critical systems are involved the cost of changeover will be accepted only when the benefit is substantial. The more complex, mission critical the system the slower the changeover
• For most products, changes in User Interface (UI) are very risky as they require users to learn something different: 1. unlearn the familiar and 2. relearn the unfamiliar. If it is hugely beneficial they will do it, else they will resist.  That is why 30% of PCs still run XP after 10 years that sales stopped, that is why it took years for Windows 7 to get market penetration equal to Vista (the epitome of a dog failed product), and why Windows 8 is getting no traction.  It is also the reason why all cars still have steering wheels, sticks to put in gear automatic transmissions !?, keys to start, knobs to control A/C, radio, etc.

Marco Messina

Patents - Great News and Not So Great

Today, the news below is GREAT news.  One of the worst Patent Trolls (it's synonymous with scum bags) has finally been thrown down the toilet where it belongs along with all its peers "non practicing entities"

The Web’s longest nightmare ends: Eolas patents are dead on appeal

Web pioneers united to stop "interactive web" patents at an East Texas trial.

For entrepreneurs pitching investors the glories of their patents, filed and issues, however, the news has also another slant. It reminds investors that even issued patents can be disallowed if prior art is brought to the PTO. It is a tough and expensive battle, so a patent is still well worth having.  However from the many instances similar to this one (some reported in this blog) investors have learned that patents have also real costs beyond filing and prosecution. They need to be defended, and that is expensive, or they need to be enforced, even more expensive.  Are they ready to see their investments re-purposed to IP litigation fees?  Probably not and certainly not before our company has grown very fat cash reserves.

Conclusion: if you have a patent it is better than not, point it out as an asset, but (outside the pharma sector) do not count on it making the impression it used to.

Marco Messina

Startups, Sales, and Sales Hires

You have a startup, you seek funding and your investors appear singly focused on your sales. If only you only had more sales! If only you had a sales person. May be so, but it more likely not.
The best case made that I have read in this regard is reprinted below from Matthew Bellows, CEO of Yesware.
Beware the Sales Hire.To address the concerns of your investors you may need more results from a "Cofounder/Selling CEO" as referenced below. If you cannot do it, then find one, but it is a very different talent that a Salesperson.  Read carefully

You're Not Ready for a Sales Hire: 4 Reasons 

Hiring a salesperson too early is a good way to distract your team and waste money. But there are three signs when it is time.

Do you work in a start-up? Do you look around every once in a while and say, "You know what we need? We need to hire a salesperson to really get this company off the ground?" Well, you're probably wrong.

It's strange for me, a lifelong salesman who started a company to help salespeople, to advocate not hiring one of my own. But that's exactly what I'm suggesting, at least until you and your company are ready. Here's why:

1. Salespeople need something to sell.

Some thing—not a concept or a prototype. In general, salespeople stink atproduct development. They excel at revenue development. If you are envisioning a great salesperson rounding up customers for your idea, your beta trial, or your brand new service, then you are dreaming . Good morning sunshine!

2. Salespeople are expensive.

The better a salesperson is, the more expensive he is. If a salesperson feels your product isn't ready to bring to his contacts, she will hold back. Experienced salespeople are more protective of their contacts than the memory of their high school sweetheart. So for every day that your new sales gun thinks your product isn't awesome, she is paying a big opportunity cost by working at your start-up.And she is going to charge you for it either in money or in frustration.

And if you find a salesperson who offers to work for equity, ask her how many times she's blown away her quota.  Chances are she never has.  Don't make the hire. If you do find the exception to the rule, that person isn't in sales—she is a co-founder. Give her equity (that vests). 

3. Salespeople are hopelessly optimistic.

If you hire a salesperson, he is going to run at the job like a pole-vaulter. Heknows he'll clear the pole. But it's a rare salesperson who can keep the energy up if he doesn't get quick, positive feedback from potential customers. After a couple of weeks of failing, most good salespeople are going to start thinking about other poles they could be clearing. And the ones that just want to hang on to the job? Well, there's no quicker way to murder your company vibe than listening to your new salesman get dinged on 60 cold calls a day.

4. Salespeople are mostly risk-adverse.

Call it the curse of the fat bonus. A salesperson who has made $200,000 or $300,000 for a few years in a row is going to be counting the days until she can make that again. There just aren't that many money-really-doesn't-mean much-to-me-it's-the-work-that's-important kind of salespeople. 

So please, don't hire a salesperson to figure out what your customers need or whether they will buy some future product that might have some certain set of features. That's the job of the founding CEO. Yes, it's your job, even if you are an engineer.

How do you know that you are ready to hire a salesperson? Consider these three things: 

1. There's enough opportunity.

It will vary by company, but $1 million is the number I use. There has to be another $1 million in revenue that you can identify but that you cannot pull into your company because you are too busy selling to other people. If you can identify $1 million worth of prospects, it's a great time to hire a salesperson.

2. Your product is awesome.

What does that mean to a salesperson? It means you have reference clients—paying customers who the salesperson can leverage. When she sees your customer list, you want her to think, "Oh man, if the founder can get these customers, I am going to KILL IT here."

3. Your culture can handle an influx of sales energy.

If you have a tight, technical team, bringing in salespeople is going to change the atmosphere like a high-pressure system moving into the tropics. Batten down the hatches.

Hiring a salesperson too early is a great way to distract the team, waste your money, and bury a company. Hiring one too late means you won't grow as fast as you otherwise could. It's best to be on time, of course, but given the risks and rewards, it's much better to wait until you, your product, and your company have reached some of the milestones I've mentioned. Then make that first sales hire.

Matthew Bellows is CEO of Yesware, an email service that helps salespeople track conversations, create sales templates, sync emails with CRM and much more. @mbellows

Working Backwards

New entrepreneurs seeking funding from angel investors often appear surprised by the multitude of considerations and requirements they must satisfy to get funded. If they can keep both the big picture and the details in perspective, the puzzle is not so difficult to solve.

Working backwards from the investors' requirements and preferences one can create a proposal that will "sell" provided that all the underlying reasoning, projections and plan are supported and convincing. Conversely, if you cannot make a credible case that your venture meets the investors' criteria time may be better spent seeking other forms of financing.

You can navigate the roadmap below opening  and closing various branches to look into the details and reasoning behind them, or hide them to stay focused on specific HOW and WHY of various aspects of the problem.

I am experimenting with this method of communication. It allows you to switch between details and summary views.  Your comments would be greatly appreciated. Is this method effective for you or not? In either case why? Thanks Email me

Working Backwards

Apple - The Great Innovator Or a Bully And a Con?

Check the below article reprinted from ReadWrite.com.  
Apple's glorious "pinch and zoom" patent just got invalidated.  Only a company with the deep pockets of Samsung could pursue the fight all the way to "invalidation", and even after paying Apple about $1 billion awarded by an incompetent jury.Something is profoundly wrong.  Ask yourself how many smaller companies have been put out of business by similar Apple tactics? The irony is that consumers have been bamboozled into believing that Apple is the great innovator on account of these cons.  Was Jobs brilliant at seeing value in other people's ideas and make something of it with brilliant repackaging? Yes absolutely, all the way back to the mid 80's when he ripped off Xerox PARC's mouse, icons and windows UI (Gates and others that saw exactly the same stuff, could also have done the same, but did not "get it" for a few years longer than Jobs).  Unfortunately Apple's deep pockets also allowed it to become a destructive IP bully for which all consumers pay a price.  Small startup innovators cannot defend, they just get put out of business.  The optimist in me likes to think "all cons come to an end", to wit some companies like GM sold junk and lost shareholders value for years but eventually came to their deserved end (unfortunately we also bailed it out and now taxpayers are losing 1/2 their investment thanks to Treasury's decision to unload the stock - but that's another story).

Next time you hear that Apple is king of innovation, remember the story below and ask how many true innovators have been squashed by their con.

Another Apple Patent Gets Smacked Down, And Its 'Thermonuclear War' Becomes Even More Of A Farce

Dan Lyons yesterday

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This time it's the so-called "pinch and zoom" patent getting rejected by the US Patent and Trademark Office (USPTO), and this is a big deal since that patent was one that Apple used to achieve that huge $1 billion verdict against Samsung in a California kangaroo court last summer.

Now what happens? Does the court in California go back and subtract all the damages that the jury awarded to Apple based on this patent that Apple should never have been granted?

Apple took a big victory lap after that ruling but it's looking like maybe it popped the champagne too early.

The ruling by the USPTO is not final, and no doubt Apple will appeal the decision, but suddenly Apple isn't looking so powerful. In fact, it is looking a bit, well, ridiculous. (And  that's the kind word for it.)

The patent was struck down because the USPTO found prior art. Meaning Apple didn't actually invent the stuff it claimed to have invented. It copied it from others, then went and got a patent on it anyway, and then used that bogus patent to sue rivals.

Worse yet for Apple, this new ruling from the USPTO comes just two weeks after the USPTO smacked down another of Apple's patents, one that related to multitouch and was known as the "Steve Jobs" patent.

I wrote at the time that Apple's "thermonuclear patent war" was a farce. Now that farce seems even sillier.

These Ideas Were Around Long Before Apple 'Invented' Them

Killing Your Startup

The post below should be required reading for any entrepreneurship class or prospective entrepreneur.  I've lived it this more than once but did not write it so poignantly about the experience. Anyone who starts "up" is more likely to end here than on top of the mountain simply because there are fewer black swans than we think and we can know only post facto.  The reality is even more grim, because after the difficult and seemingly heroic decision and the catharsis of thank-yous, the drudgery of closing takes months of endurance, one day at a time without the excitement of a dream in the making. It is not for everyone.


Some crazy dreamers have it in their DNA to do it more than once, learn from the experience, try again until they succeed (my bet is that Lucas Rayala is one of them). When they do they will value their success the more knowing how rare it is, but the pain he feels is very real nonetheless.
A note for students: in this shutdown, in the ashes, there may be the seed of  the phoenix's rebirth - If you go to the original post below and read the comments, you'll see that there is one entrepreneur, a stranger, that sees the value of Lucas' dream and efforts.  He offers to discuss collaboration to try and keep Lucas' dream alive. Always keep dreaming, the night is darkest just before the dawn starts.

Killing Your Startup on a Thursday Night

Lucas Rayala (Founder of Altsie)

This is what you do when you close down your startup: you call Rackspace and cancel the Windows SQL server plan. You email SendGrid and give them notice on your Silver SMTP Service Package. You close down your Wells Fargo Business Checking account and your Paypal Merchant account. Glamorous stuff. Harder than that: you email your cofounders and tell them you’re jumping into the deadpool. Your fingers will hover over the keyboard for a long time as you decide what to say. Because now shit is getting real.

Entrepreneurship, Not for Everyone, Salesmanship Is for Everyone

It may be because of where and with whom I hang out, but these days Entrepreneurship seems to be the magic word of the day. Policy makers and economists tell us that with more of it the country will be more competitive, jobs will be created, we will stand up to China, we'll fix the national debt, we'll have a credible national medical insurance, etc. If only we had a Steve Jobs at every corner, the American Dream will be assured. It is all true, but it does not follow that it is true for all.

The message to high school and college grads these days seems to be: it's easy, be an entrepreneur, be a Jobs, or a Zuckerberg, or a Gates,  have an idea and make it a Google. All true and as possible like winning Olympic medals, entering the NBA, winning the lottery, but let's be honest with the youngsters who struggle with figuring out how make a living for their future.  The odds of all of that are pretty low and it takes much more than an idea.

To keep the discussion short, I developed the roadmap below as a way to look at the principles and the details of what I think is in play. As in some of my other posts, I try to synthesize the issues and the logical relationships to be considered to reach a clearer understanding.  The objective is to not waste energy in impossible quests (see "Working Backwards" and "Angelcalc" for when not to bother seeking funding from angel investors, or "Should I Get a Patent?", etc.)

This roadmap, as in other cases has no absolute answers or recommended solutions, only considerations to be explored and used in seeking a best answer for oneself (notice ONEself not ALLself). 

One, and only one of many conclusions, is that a temperament for risk-taking is mandatory for entrepreneurship. Salesmanship on the other hand is a skill fundamental to entrepreneurship, BUT also applicable to all other activities in human activity and commerce.

So, the question for which unfortunately I have no answer is: Why salesmanship is not a primary skill taught at all high schools, colleges and graduate schools?  Why as a society we leave it to Xerox, IBM, Proctor & Gamble and similar companies or to multi-level marketing companies to impart that training with a planned and focused process?  The Introduction to Dale Carnegie 's How to Make Friends and Influence People pointed out that tragic circumstance decades ago.  Why are we still at the same point?
Why is it so hard to find a high school or college grad with even only a cursory idea of how to sell an honest product to a respected customer that has a need?
Perhaps it is time for some bright entrepreneur to design and roll out an effective online sales training program for all those recent grads that are not finding the job they trained for or the countless unemployed displaced by technological change.


Marco Messina

Thoughts on Carl Schramm's "On Expanding The Entrepreneur Class"

Carl Schramm On Expanding The Entrepreneur Class - Business Insider:

Carl Schramm, the former long-time president of the Kauffman Foundation, isn't satisfied with the state of American entrepreneurship. It's not because people aren't getting into it — it's because they're not being taught correctly.

And it's society's fault, he says.

"The world needs more entrepreneurs: They make innovation real and advance what Brink Lindsey, of the Kauffman Foundation, has called the 'frontier economy,' he wrote in a recent column at Harvard Business Review.

"If their ranks are too thin, it is a failure of society—particularly because the knowledge and skills of a successful entrepreneur can be taught."

Schramm's theory is that leaving the education of entrepreneurs to schoolteachers is "inherently weak." Why? Because their choice of profession shows that they don't take risks — at least not economic ones. Plus, the material taught in college-level courses doesn't fit with what entrepreneurs need to succeed. You don't learn what it really takes the get a business started.

"The need is particularly acute in the United States," he writes. "Much economic success in the rest of the world has occurred through “catch-up growth” that leverages innovations hatched by U.S. entrepreneurs. If America falters in this, its economic advantage withers—and the rest of the world suffers, too."

What do you think about Schramm's theory? Let us know in the comments.

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Interesting argument and I would agree.  We can certainly point the finger at ourselves, the Baby Boom Generation, for not having done the best job, as a whole, of teaching the generation that follows the values many of our parents taught us.

Entrepreneurial success comes from belief, tenacity, hard work not only from creativity and surely not just from an MBA (I have one) that deludes you you are smarter than everyone else.  That training works well for Wall Street trading, or investment banking but it is poor training for testing ideas in the market.

The first step toward entrepreneurship is to go "sell" something to somebody - It is miserably hard work, one's ego is exposed to more rejection than a High School dance, but it is where one finds out what the real world thinks of that brilliant idea or of the shining prototype or that finished product you bet the company on. There you see what the market wants not what you want, and there is no fancy PowerPoint deck to hide behind.  It is you in the market and it is brutal  - no thin skins need applying.

Since the days of Netscape youngsters have been incessantly drilled with the idea that a "brilliant idea" is the key to rapid growth and financial success: a browser, an online auction, a Facebook, an iPod.  The reality is that all those brilliant ideas, first and through their development had to be incessantly "sold" to someone. Concepts have to be sold to partners and family and friends that share the earliest funding burden ; product development plans and ability to scale operations must be sold to seed funders; products have to be sold to consumers; the prospects for explosive growth has to be sold to VCs; the rationale for continued growth must be sold to the public in an IPO, or to a management team in a M&A exit.

Selling seems to be pretty fundamental to a business career and, for that matter, with different settings and nuances, to engineering, scientific and political careers. Yet, how many high schools curricula even mention it let alone teach the basics? How many business schools have specific courses on the subject, let alone curriculum requirements? Teaching "Selling" has been left to few private companies that developed formal training and a sterling reputation for it: Xerox, IBM, P&G, or to sales training consultants occasionally hired by big institutions. The curious and self driven can help themselves to an endless library including Dale Carnegie, Napoleon Hill, Stephen Covey, Zig Ziglar and hundreds more. In the last twenty years multi-level marketing organizations have done perhaps more than anyone to promote and standardize training, at least of techniques appropriate for their products.

In the end effective "selling" depends on the skills of: listening with a genuine interest, rapid organization of what is learned, ability to identify points of consonance dissonance between parties, clear and effective written and verbal communications, valuing honest long term relationship over expedient quick deals, the individual initiative to get into the market and play the game. Creativity alone generates only ideas. Implementation is key and selling is the first step to implementation.  

Unless we can honestly say we have been effective teaching the above skills to the coming generations, Carl Schramm is correct: as a society we have failed at a very achievable task.

Marco Messina