From cdixon.org

For some reason when you are selling information technology, big companies are referred to as “enterprises.” I’m guessing the word was invented by a software vendor who was trying to justify a million-dollar price tag. As a rule of thumb, think of enterprise sales as products/services that cost $100K/year or more.

I am by no means an expert in enterprise sales. Personally, I vastly prefer marketing (one-to-many) versus sales (one-to-one), hence only start companies making consumer or small business products (advertising based or sub-$5000 price tags). But I have been involved in a few enterprise companies over the years. Here’s the main thing I’ve observed. Almost every enterprise startup I’ve seen has a product that would solve a problem their prospective customers have. But that isn’t the key question. The key question is whether it solves a problem that is one of the prospective customer’s top immediate priorities. Getting an enterprise to cough up $100K+ requires the “buy in” of many people, most of whom would prefer to maintain the status quo. Only if your product is a top priority can you get powerful “champions” to cut through the red tape.

My rule of thumb is that every enterprise (or large business unit within an enterprise) will, at best, buy 1-3 new enterprise products per year.  You can have the greatest hardware/software in the world, but if you aren’t one of their top three priorities, you won’t be able to profitably sell to them.

One final note: enterprise-focused VC’s sometimes refer to products priced between (roughly) $5k and $100K as falling in the “valley of death.” Above $100K, you might be able to make a profit given the cost of sales. Below $5k you might be able to market your product, hence have a very low cost of sales. In between, you need to do sales but it’s hard to do it profitably. Your best bet is a “channel” strategy; however, for innovative new products that is often a lot like trying to push a string.

From cdixon.org

Over the last decade or two, the supply of venture capital dollars has increased dramatically at the same time as the cost of building tech startups has sharply decreased.  As a result, the balance of power between capital and startups has shifted dramatically.

Some VCs understand this. The ones that do try to stand out by, among other things, 1) going out and finding companies instead of expecting them to come to them, 2) working hard on behalf of existing investments to establish a good reputation, and 3) just being friendly, decent people.  Believe it or not, until recently, #3 was pretty rare.

As a seed investor in about 30 companies, I’ve been part of many discussions with entrepreneurs about which VC’s they want to pitch for their next financing round.  More and more, I’ve heard entrepreneurs say something like “I don’t want to talk to that firm because they are such jerks.” In almost all cases these are well-known, older firms who come from the era when capital was scarce.

Every experienced entrepreneur I know has a list of “toxic” VCs they won’t deal with. (Often because of horror stories like the “partner ambush“). There are so many VCs out there that you can do this and still have plenty of VCs to pitch to get a fair price for your company and only deal with decent, helpful investors. It sounds kind of crazy, but being a reasonably nice person has become a competitive advantage in venture capital.

From cdixon.org

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From Raw Thought (from Aaron Swartz)

Today’s iPad introduction has to be about the most depressing Apple product launch I’ve ever watched. As has been noted, Jobs’ Reality Distortion Field only works when he believes in what he’s selling and he didn’t seem to really believe in this. The audience must have further added to the disappointment, expecting a revolutionary product and only getting an oversized iPhone (iPod touch, actually).

That’s not to say the iPad won’t sell, or that I don’t want one. The scariest thing is that I think it probably will. It’s clear that Apple plans for the iPhone OS to be the future of its product line. And that’s scary because the iPhone OS is designed for Apple’s total control.

A lot of people have argued that requiring Apple to approve every application for the iPhone OS is some kind of “mistake”, something they’ll remedy as soon as they realize how bad things have gotten. But recent events — Phil Schiller’s personal interventions, comments on their call to analysts, etc. — have made it clear it’s not a mistake at all. It’s their plan.

The iPad is their attempt to extend this total control to what’s traditionally been thought of as the computer space. This is just the first step, but it’s not hard to imagine Apple doing their best to phase out the Macintosh in the next decade, just as they phased out OS 9. In their ideal world, all computing will be done on the iPhone OS.

And the iPhone OS will only run software that they specifically approve. No Flash or other alternate runtimes, no one-off apps or open source customizations. Just total control by Apple. It’s a frightening future.

I don’t know why they’re doing it. It’s hard to see how it makes them more money. (Curating all those apps must be expensive, not to mention the lost sales from the unapproved ones.) I can only presume it’s a result of Jobs’ megalomaniacal need for control — not only does the hardware have to be flawless, the software must be too. And the only way to ensure that is to have Apple approve every inch of it.

I love Apple products. I’m a huge Apple fan. I’d buy an iPad right now if I could. But, for the first time, I’ve got a real sinking feeling in my stomach.

From cdixon.org

Almost every startup has big companies (“incumbents”) that are at some point potential acquirers or competitors.  For internet startups that primarily means Google and Microsoft, and to a far lesser extent Yahoo and AOL.  (And likely more and more Apple, Facebook and even Twitter?).

The first thing to try to figure out is whether what you are building will eventually be on the incumbent’s product roadmap. The best way to do predict this is to figure out whether what you are doing is strategic for the company. (I try to outline what I think is strategic for Google here). Note that asking people who work at the incumbents isn’t very useful – even they don’t know what will be important to them in, say, two years.

If what you are doing is strategic for the incumbents, be prepared for them to enter the market at some point. This could be good for you if you build a great product, recruit a great team, and are happy with a “product sale” or “trade sale” – usually sub $50M. If you are going for this size outcome, you should plan your financing strategy appropriately. Trade sales are generally great for bootstrapped or seed-funded companies but bad if you have raised lots of VC money.

If your product is strategic for the incumbent and you’re shooting for a bigger outcome, you probably need to either 1) be far enough ahead of the curve that by the time the big guys get there you’re already entrenched, or 2) be doing something the big guys aren’t good at. Google has been good at a surprising number of things. One important area they haven’t been good at (yet) is software with a social component (Google Video vs YouTube, Orkut vs Facebook, Knol vs Wikipedia, etc).

The final question to ask is whether your product is disruptive or sustaining (in the Christensen sense).  If it’s disruptive, you most likely will go unnoticed by the incumbents for a long time (because it will look like a toy to them). If the your technology is sustaining and you get noticed early you probably want to try to sell (and if you can’t, pivot). My last company, SiteAdvisor, was very much a sustaining technology, and the big guys literally told us if we didn’t sell they’d build it. In that case, the gig is up and you gotta sell.

From cdixon.org

It is almost religious orthodoxy in the tech community that “open” is better than “closed.” For example, there have widespread complaints about Apple’s “closed” iPhone app approval process. People also argue Apple is making the same strategic mistake all over again versus Android that it made versus Windows*. The belief is that Android will eventually beat the iPhone OS with an “open” strategy (hardware-agnostic, no app approval process) just as Windows beat Apple’s OS in the 90’s.

With respect to requiring apps to be approved, consider the current state of the iPhone platform. There are over 100,000 apps and thus far not a single virus, worm, spyware app etc. (I don’t count utterly farfetched theoretical scenarios). As a would-be iPhone developer, I can report firsthand that the Apple approval process is a nightmare and should be overhauled. But what’s the alternative? Before the iPhone, getting your app on a phone meant doing complicated and expensive business development deals with wireless carriers. At the other end of the spectrum: If the iPhone OS were completely open, would we really have better apps?  What apps are we missing today besides viruses?

With respect to the strategic issue of tightly integrating the iPhone/iPad software and hardware, a strong case can be made that Apple’s “closed” strategy is smart. Clay Christensen has given us the only serious theory I know of to predict when it’s optimal for a company to adopt an open versus closed strategy for (among other things) operating systems. The basic idea is that every new tech product starts out undershooting customer needs and then – because technology gets better faster than customers needs go up - eventually “overshoots” them. (PC’s have overshot today – most people don’t care if the processors get faster or Windows adds new features). Once a product overshoots, the basis of competition shifts from things like features and performance to things like price.

The key difference today between desktop computers and mobile devices is that mobile devices still have a long way to go before customers don’t want more speed, more features, better battery life, smaller size, etc. Just look at all the complaints yesterday about the iPad - that it lacks multitasking, a camera, is too heavy, has poor battery life, etc. This despite the fact that Apple is now even building their own semiconductors (!) to squeeze every last bit of performance out of the iPad. Until mobile devices compete mainly on price (probably a decade from now), tight vertical integration will produce the best device and is likely the best strategy.

*It’s worth noting that Steve Jobs wasn’t the one who screwed up Apple. Jobs co-founded Apple in 1976. He was pushed out in in May 1985 when the company was valued at about $2.2B. He returned in 1996 when Apple was worth $3B. Today it is worth $187B.

Need an opportunity to get out of the office a bit early? Want to grab a drink in historic and startup-mad Pioneer Square? If your answer is yes to both of these or really to either, then stop by the nPost Pub Crawl on Tuesday, February 9th.

It is free (to attend), fun, and free flowing (we only know where we will go when we get there). You have to follow us on Twitter to keep up…

This one is sponsored by Parker Technical. Thanks guys!

The purpose of marketing plan is simple - to create a navigation and communication tool that serves as a roadmap for finding, keeping and growing the value of customers. Because marketing is about creating customers, a marketing plan must be customer centric, that is, it must focus on how to maximize the value to, for, and of customers. Therefore the marketing plan must be developed with the customer in mind. This means you need some information, information about your customers, your market and competition. So while it may seem that a ready, fire, aim approach is faster, if your resources are limited, you may run of out gas before you reach your destination.

A thorough analysis of the opportunities and challenges facing your business and a good understanding of your existing and prospective customers’ needs and wants are a good starting point. When you understand your competition, market, customers, and company you can set a course for maximizing your market opportunities. While there’s no one way to create a plan, certain elements have come to be relatively standard in a marketing plan.

At a minimum these elements include:
1. A situational analysis that summarizes the market, industry, competitive, customer and company assessment and provides insight into the actions needed for the organization to capitalize on opportunities and offset challenges
2. A set of measurable marketing objectives that are aligned with the organization’s business outcomes marketing is expected to impact. The objectives in some way reflect how marketing will positively affect customer acquisition, customer retention, and customer value growth.
3. A strategy for realizing the objectives.
4. Programs and activities with performance targets designed to implement and achieve the strategies and objectives.
5. A calendar and budget

The finished result should be a customer-centric measurable marketing plan that aligns marketing with the business outcomes, identifies, your objectives and provides direction for future marketing efforts that everyone within the organization will understand and support.

The purpose of marketing plan is simple - to create a navigation and communication tool that serves as a roadmap for finding, keeping and growing the value of customers. Because marketing is about creating customers, a marketing plan must be customer centric, that is, it must focus on how to maximize the value to, for, and of customers. Therefore the marketing plan must be developed with the customer in mind. This means you need some information, information about your customers, your market and competition. So while it may seem that a ready, fire, aim approach is faster, if your resources are limited, you may run of out gas before you reach your destination.

So before you hit the road, take some time to step back and answer these questions:
Where you want to go? – (how many and which customers do you need to acquire, which customers do you need to keep, which customers can you grow).
What is/are most effective and efficient routes to get there?
What obstacles might you encounter along the way and how you might overcome these?
What resources do you have and do you need to make the trip successful

A thorough analysis of the opportunities and challenges facing your business and a good understanding of your existing and prospective customers’ needs and wants are a good starting point. When you understand your competition, market, customers, and company you can set a course for maximizing your market opportunities. While there’s no one way to create a plan, certain elements have come to be relatively standard in a marketing plan

At a minimum these elements include:
1. A situational analysis that summarizes the market, industry, competitive, customer and company assessment and provides insight into the actions needed for the organization to capitalize on opportunities and offset challenges.
2. A set of measurable marketing objectives that are aligned with the organization’s business outcomes marketing is expected to impact. The objectives in some way reflect how marketing will positively affect customer acquisition, customer retention, and customer value growth.
3. A strategy for realizing the objectives.
4. Programs and activities with performance targets designed to implement and achieve the strategies and objectives.
5. A calendar and budget.

The finished result should be a customer-centric measurable marketing plan that aligns marketing with the business outcomes, identifies, your objectives and provides direction for future marketing efforts that everyone within the organization will understand and support.

The value of establishing and tracking customer loyalty and engagement is that they provide some effective leading indicators into how your customers are going to behave.  A survey by SAS and Peppers & Rogers Group polled 150 senior executives from leading US corporations to gauge their customer experience management capabilities. The results, published in the first annual Customer Experience Maturity Monitor study, found that only 39% of the study’s companies rated their capabilities as ‘good’ or ‘excellent’ in predicting a customer’s likelihood to purchase, cancel or defect. The study found those companies that have better customer experience management capabilities enjoy a distinct competitive advantage and outperform their competition. The survey also noted that customer-centricity is growing as a key strategic concept and that companies are beginning to incorporate customer metrics as key performance indicators. There are three customer metrics we recommend you include in your marketing executive dashboard: customer trust, customer loyalty, and customer engagement.

With the renewed emphasis on customer, there are six customer related metrics that every company should be familiar with and know how to calculate: Churn/Attrition Rate, Customer Retention Equity, Share of Wallet, Customer Trust, Customer Loyalty, and Customer Engagement.  Here’s a quick summary of each of these:

1. Churn rate is a measure of customer attrition.  Today, companies realize the value of focusing on and investing in keeping customers. Churn is a commonly accepted statistic related to customer retention (source: “Leading on the Edge of Chaos”, Emmett C. Murphy and Mark A. Murphy). Data shows that companies with high retention grow faster. Knowing how many are defecting and why is the reflection of knowing how many are staying and why.

2. Customer Retention Equity/Lifetime Value.  In most businesses, existing customers are the most valuable assets that a company has. Most surveys across industries show that keeping one existing customer is five to seven times more profitable than attracting one new one (source: “Companies Don’t Succeed - People Do!”, Graham Roberts-Phelps).

3. Share of Wallet and Potential Wallet Value.  Many businesses use “share of wallet” as a way to improve their understanding of where added value may exist among their customers. The wallet of a customer is defined as the total amount this customer can spend in a specific product category. The share-of-wallet then is how much they spend with a particular seller.  By understanding the total wallet and the share-of-wallet you can identify which customers are the most “loyal” and which customer have the greatest growth potential. Both the ratio and the actual difference is important – the first tells us the share of wallet and the second the potential value.

4. Customer Trust - A study by the CMO Council found that some 99% of customers surveyed said they would either scale back or terminate relationships with vendors who fail to build customer trust. The Oxford Dictionary defines trust as “a firm belief in reliability, honesty, veracity, justice, strength of a person or thing; reliance on truth of statements without examination; confident expectation; accept without evidence.” Trust implies an absolute and assured resting on something or someone; often suggesting a basis upon other grounds than experience or sensible proofs. Results from the annual Edelman Trust Barometer, which surveys nearly 2,000 opinion leaders in 11 countries found that the most important factor in building trust is “Quality products and services.” In addition, trust is built through frequent interactions. These interactions are your opportunity to build trust. How are you measuring customer trust?  And when was the last time you mapped all your customer touch points and the frequency of interaction per touch point?

5. Customer Loyalty - Behavior is more important than attitude.  Customers show their loyalty by the direction of the feet.   Are your customers staying or defecting?  Do they serve as advocates for your company?  Do they proactively endorse your company, its products and services?  What customer behaviors can you measure and impact that demonstrate the company is improving customer loyalty? You will want some way to measure loyalty. There are a number of approaches to help you measure loyalty.

6. Customer Engagement - Engagement should be defined by customer response. Gallup Consulting developed a series of 11 questions that measures both a customer’s rational assessment of a brand as well as their emotional attachment.  In addition to questions related to how a customer is to continue to choose/repurchase [brand] and how likely they are to recommend [brand] to a friend/associate, responses to questions related to confidence, pride and passion are used to determine the emotional attachment. This might be a good resource for you to explore.

VisionEdge Marketing, Inc, is a leading data-driven metrics-based strategic and product marketing firm located in Austin, Texas. The company specializes in consulting and learning services that help organizations use data to make fact based decisions to address market, customer, and product opportunities and to improve and measure marketing performance. For more information, go to www.visionedgemarketing.com.

From A Smart Bear: Startups and Marketing for Geeks

“I feel like a fraud. I’ve been at this for 16 years and I still feel like a fraud. I’m just waiting for the day they see through the façade, but they keep coming back every year.”   –Jason Young

Ah yes, the awe-inspiring words of confidence from the seasoned entrepreneur. My friend Jason intended this as soothing words of solace during (one of my) periods of personal freak-out while Smart Bear was in its infancy.

I felt like a fraud every day. Here I was, selling a wobbly, buggy tool and pawning myself off as an expert in a field that didn’t exist. (My software was the first commercial tool for code review.) Every second I felt like I was putting one over on the world.

I would explain how my tool cuts code review time in half, but was that actually true or had I just repeated the argument so many times that I stopped questioning it? I would instruct customers on “best practices” for code review, but who am I to tell other people how to critique code? I would orchestrate purchases, but should I be handling large sums of money with no knowledge of accounting, cash-flow, invoicing, purchase orders, or “enterprise sales” process?

Aren’t I too young? Isn’t the tool too crappy to charge for? Aren’t I too inexperienced? Don’t I need an MBA or at least some sales training?

Is Smart Bear a “real company?” What does that even mean?

Objectively, and with hindsight, my feelings were misplaced. The tool really did save time and headache; customers said so. As much as I doubted the title “Code Review Expert,” I had developed more experience with more teams in more situations than any one person could (because everyone else was busy doing their actual jobs). And sales isn’t as mystical and unknowable as I feared.

Still, emotions don’t respond to logic. Jason was telling me that these feelings don’t go away, even when they ought.

The other thing he was saying is: You’re not alone. As it turns out, it’s not even just business founders. Mike Meyers said “I still believe that at any time the No-Talent Police will come and arrest me.” Jodie Foster said “I thought it [winning the Oscar] was a fluke. The same way as when I walked on the campus at Yale. I thought everybody would find out, and they’d take the Oscar back.”

It turns out there’s a psycho-babble name for this: Impostor Syndrome. As Inc Magazine points out, studies show that “40% of successful people consider themselves frauds.” Ask any small business coach; they’ll confirm how prevalent these feelings are. It’s even common with PhD candidates.

Although not an official psychological disorder, and generally not crippling, if you have these feelings it’s useful to know that it’s common and there’s something you can do about it.

See if these sound familiar:

• You dismiss complements, awards, and positive reinforcement as “no big deal.”
• You are crushed by mild, constructive criticism.
• You believe you’re not as smart/talented/capable as other people think you are.
• You worry others will discover you’re not as smart/talented/capable as they think you are.
• You think other people with similar jobs are more “adult” than you are, and they “have their shit together” while you flounder around.
• You feel your successes are due more to luck than ability; with your failures it’s the other way around.
• You find it difficult to take credit for your accomplishments.
• You feel that you’re the living embodiment of “fake it until you make it.”

But wait, how can this be? This overwhelming lack of self-confidence is the opposite of the traditional entrepreneurial stereotype. Don’t founders forge ahead even when others say success is impossible? Doesn’t a founder invent a new product based on her confidence that others will want it? Doesn’t the very idea of starting your own company scream “I’m doing it my way, and my way is better?”

But it does make sense. Consider what it means to be a perfectionist. The perfectionist sees flaws in everyone else’s work; there’s always a way to make it better — her way. She doesn’t respond well to authority dictating how things must be; neither is she comfortable delegating to those who (by her definition) clearly don’t care as much as she does.

Sounds like the stereotypical attitude of the arrogant startup founder, but wait! At the same time, the perfectionist is never happy with her own work either, seeing (inventing?) a never-ending stream of flaws that require attention. No matter how highly others regard her work, the perfectionist insists it’s incomplete and unsatisfactory. She can’t accept the idea that others would be impressed with her accomplishments, since to her they’re mediocre works-in-progress. She worries that one day they’ll realize she’s right.

Our entrepreneurial motivation is not confidence, it’s an insatiable desire to improve. It’s not about thinking your ideas are better than everyone else’s, it’s about never accepting any idea as being best.

Can these feelings be constructive? Yes, if they’re a sign that you’re striving to learn and improve. As Andy Wibbels says:

If I don’t feel like a fraud at least once a day then I’m not reaching far enough.

If you aren’t scared shitless then why bother?

Here’s what it looks like when you’re channeling these self-doubts into something constructive:

• I doubt my title as “expert,” so every day I read, write, and immerse myself in my field.
• I doubt the quality of my software, so I fix bugs as fast as possible, I write unit tests proactively, and I thank my customers for their patience.
• I doubt I deserve my reputation, so I work hard to earn it.
• I’m not as good as I want to be at speaking/ writing/ programming/ designing/ managing, but I can see myself slowly improving.
• I’m not a “real company” yet, so I concentrate on making my customers successful, so they don’t care about corporate size or structure.

On the other hand, here’s what it looks like when these doubts are harming you:

• I doubt my title as “expert,” so every night I worry about what will happen when I’m discovered as a fraud. I’m absent-mindedly looking for trivially-easy jobs I could take where this pressure won’t exist. (Looking for an “escape-hatch” is a well-documented behavior.)
• I doubt the quality of my software, so I spend lots of time covering it up with graphic design and heavy sales pitches.
• I doubt I deserve my reputation, so I live in constant fear of exposure. I can’t sleep at night and I loathe myself for lying.
• I’m not as good as I want to be at speaking/ writing/ programming/ designing/ managing, so I go out of my way to avoid any of it, and feel like a trapped animal when I’m forced to do it.
• I’m not a “real company” yet, so I feel guilty every time someone gives me money or believes anything I say.

If you’re let these feelings get to you too, at least recognize it so you can deal with it logically.

And when logic fails, maybe this will help:

You believe that Mike Meyers and Jodie Foster are talented, right? You might even believe that I’m an expert in peer code review. Yet we doubt ourselves every day. And we’re wrong.

You know we’re wrong about ourselves; that means you’re wrong about yourself too.

Don’t stop striving to become better, just stop holding yourself up to an impossible standard.