Tuesday, July 30, 2013

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.

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

Tuesday, July 23, 2013

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

Friday, July 19, 2013

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