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Gluecon 2011 – Day Two

May 26, 2011 By Jeff 1 Comment

Day two of Gluecon felt more oriented to the developers attending.  They were a happy lot.

It’s been a long time since I’ve written code, so I spent more time talking with the demo companies than attending breakout sessions, but I did want to note at least one presentation.

Marten Mickos of Eucalyptus gave the morning keynote challenging us to think about macro development trends over the decades.  He posits that we are only at the beginning of the cloud movement, which he predicts will play itself out over the next 10 or more years.  As we transition from the predominant development theme of LAMP to Cloud, our thinking needs to change too.

Where we once though of:

  • code, we now think of APIs
  • scaling, we now think of elasticity,
  • stacks, we now think of ensembles (the group of cloud APIs and services we pull together to make an application)

Marten is a clear thinker and compelling speaker – reason enough to ignore my laptop and listen.  That said, maybe it was the lighting, but seeing his Finnish good looks on stage and hearing the slight accent had me thinking of the Terminator.  Anyone sent from Skynet gets my immediate attention.

On to the demo companies.  Here are some of my favorites:

  • Standing Cloud offers an innovative Platform as a Service (PaaS) solution.  They allow you to quickly create a new image, install many commonly used applications, easily back up the instance, monitor availability, automatically move your images from one cloud platform to another, and more.  Remember the recent AWS failure?  Had you been a Standing Cloud customer, you could have quickly moved your images to a completely different cloud provider.  Yeah, pretty impressive.  Check them out.
  • StatsMix is greasing the skids on collecting, analyzing and presenting internal corporate data.  Think dashboards on the quick.  If you are an internal IT developer and a business manager asks you to start tracking a metric for analysis and reporting, don’t groan.  Instead give StatsMix a try.  In minutes you’ll have solved the problem and look like a hero.
  • BigDoor has made layering game mechanics on your existing site very easy.  At a past company I led, before BigDoor existed, we rolled our own game mechanics and watched a significant improvement in engagement.  BigDoor provides a cloud service that you can expose on your website via a minibar at the bottom of your browser.  They promise to offer widgets soon.  Or, if you have the time and budget you can use their API and customize the game layer on your site.  I wish BigDoor had existed back in 2008.

Glue’s Demo Pavillion of start-up companies was new this year and was a big hit.  15 companies were selected to demo completely free.  What a great benefit to the start-up community.  Thanks to Alcatel-Lucent for sponsoring this welcome addition.

Gluecon was another outstanding Eric Norlin conference.  Didn’t make it?  Take a look at Defrag coming up on November 9th & 10th.

I’ll see you there.

Filed Under: Defrag Conference, Entrepreneur, Entrepreneurship, Jeff Herman, Startup, Startups, Uncategorized Tagged With: API, cloud, Glue, Gluecon, startup

Gluecon 2011 – Day One

May 25, 2011 By Jeff Leave a Comment

If you’ve never been to an Eric Norlin created conference, do yourself a favor and go.

I’ve been fortunate enough to attend several Defrag conferences and decided to check out his Glue conference this year.  What keeps me coming back is that they are so well designed.  They aren’t the huge conferences where you lose yourself and anyone you’re trying to meet.  They aren’t on topics that have been done dozens of times before.  They don’t have speakers who leave you uninspired.

With Glue, Eric has created a community around the white-hot topic of cloud computing and the burgeoning API economy.  Glue introduces you to relevant start-ups, reacquaints you with established companies, and surrounds you with the best thinkers in the space.

Most technologists are familiar with cloud computing and the use of APIs, but what becomes clear at Glue is the vibrant and growing ecosystem that will affect nearly every company out there.  Not having a strategic vision is to your peril.

A few highlights from the first day:

  • Chris Hoff of Cisco gave a rousing opening keynote regarding the weaknesses and disconnects of typical security practices as they relate to cloud computing.  He illuminated why they exist and suggested how they might be solved.  Somehow he managed to use the history of toiletry as an analogy to make his point, which was entertaining and informative in and of itself.
  • Paul Guth of Cloudscaling discussed the complexities of monitoring performance in the cloud, and championed using telemetry that truly reflects the services your users expect.  If a server’s utilization is pegged at 100%, but your user facing metrics are in good shape, you don’t really have a problem.  To those paying attention, he also slyly revealed that he’s a car nut and Formula 1 fan – both good qualities in my book.
  • Dave Asprey of TrendMicro gave a fascinating look at the potential for ambient cloud computing – the use of a volunteer/paid consumer computing devices to create a secure, scalable and very powerful enterprise quality computing resource.  It’s not just for botnets anymore.

Interesting new start-ups demoing their product:

  • ReportGrid offers a cloud-based plugin that gives other SaaS application providers a ready-made analytics and visualization platform.  Instead of an application provider rolling their own, they just use ReportGrid and instantly have Wired Magazine quality infographics. Very cool.
  • LocVox has created a cloud API intended for mobile applications that need military-grade voice authentication.  If you need on-the-fly mobile voice authentication, check them out.
  • Rainmaker has crafted an identity Rosetta stone via cloud API that allows customers to provide a single unique chunk of information about a person and be able to get back a full profile of information about them: phone numbers, email addresses, physical addresses, Twitter IDs, etc.  A bit scary.  I’m glad these guys aren’t evil.

Day two is tomorrow and I’ll report back on other interesting happenings.

Wishing you were here?

 

Filed Under: Defrag Conference, Entrepreneur, Entrepreneurship, Jeff Herman, Startup, Startups Tagged With: API, cloud, Glue, Gluecon, startup

Activity Streams vs. Email

November 11, 2009 By Nathan Kaiser Leave a Comment

A concept that came early in this session:  “Activity streams are taking over – email is becoming a secondary tool.”

A quick reaction:

I don’t get how a blast of small messages not necessarily intended for you is better than email. I can see it being complementary at best. At worst, a huge distraction.

If you are needing something specific, an answer to a question for example, then absorbing a stream sucks. Asking the stream is better. But a person-to-person message (e.g. email) to a known answer source is best.

Streams seem to excel when you want to get a sense as to what’s happening in general.  And, there is a place for that.

But, no one can sell what we already have in enterprises, email. Perhaps something new has to be created so that there is something new to sell.

Filed Under: Defrag Conference, Jeff Herman Tagged With: Defrag Conference, email, stream

Microsoft Research Thinking About Social Productivity @ Work

November 11, 2009 By Nathan Kaiser Leave a Comment

Lili Cheng did a great job this morning representing several ideas that Microsoft is researching.

The one idea that struck a chord with me was how to make email better in the workplace.  This is near and dear to my heart because of the work I did at Fuser where we tried to innovate how a user communicates via email, social networks, micro-blogs, etc.

We were focused on aggregating all these sources of information into a clever new interface, and we were trying to be very complete, so that all a user’s messaging sources were available to them in one place.  A one stop shop.

Because of the space we were in, we were aware of others like Xobni.

I was reminded of Xobni this morning as Lili described some experiments Microsoft was doing around helping email users be more productive.

She brought up the concept that email is still the center of social interaction within many companies.  I agree.  All of these cool social media technologies are interesting and fun, but few have or will supplant email anytime soon.

So, with that in mind, how can email be bettered by following the lead of social media?  Lili showed some of what Microsoft was thinking.

They’ve created a prototype side bar for Outlook that allows a user to see relevant information about the person who has emailed you.  It shows their picture, emails they recently sent you, etc.  Sound familiar?  I’m not sure which came first, but the prototype looked a lot like Xobni’s sidebar.

As I recall, Microsoft tried to buy Xobni a while back.  They should have.  Xobni is all over this concept.  At the very lease their fresh thinking will be complementary to Microsoft’s, but I think that the Xobni product should become a feature of Outlook.

I’m not saying anything earthshaking here.  I think anyone who has used Xobni has thought to themselves “why hasn’t Microsoft done much of anything to innovate Outlook over the years?”  It’s a very reasonable question, and I’m glad Lili was here to inform us.

Email is begging for true innovation.  Like a friend of mine, Seth Levine of Foundry Group, recently said, email innovation needs to be done incrementally, otherwise user’s heads will spin.  Witness Google Wave.

What Microsoft is experimenting with and Xobni has already completed, is a great step-wise, incremental gain for email.

Many of us would love to see Xobni-esqe technologies become a part of Outlook.

And, since Microsoft is already thinking this way, we may get our wish.

Filed Under: Defrag Conference, Jeff Herman Tagged With: Defrag Conference, email, foundry, microsoft, research, wave, xobni

Hello World: Blogging Defrag 2009 in Denver

November 11, 2009 By Nathan Kaiser Leave a Comment

This will be an interesting experiment.

I’ve thought about blogging for years, yet never found the right moment or topic.  Today that changes.

I’m at the 2009 Defrag Conference, in it’s third year.  My third year too.  Each time I come here I meet interesting folks who’ve been thinking interesting thoughts.  Like via my favorite novels, my brain is fed fresh new ideas to think about.  I bet this year will be no different.

If you never experienced Defrag, you should come.  But, not too many of you.  Part of what makes this conference so special is that it’s big enough, but not too big.  You feel like you can wrap your head around it.

Stay tuned as I give you a taste of what will make Defrag 2009 so great.

Filed Under: Defrag Conference, Jeff Herman Tagged With: Defrag Conference, ideas

What Do NBA Coaches and Entrepreneurs Have in Common?

August 10, 2009 By Nathan Kaiser 1 Comment
doh

When Nathan asked me to write a post about how to decide whether to pursue a specific idea when starting a company, I quickly launched into analytical mode: analyze the market, talk to customers to understand their problems, brainstorm solutions, rank each solution against specific criteria, and so on. It’s a fairly standard approach that relies on data and analytical thinking rather than just “gut”. And yet, when we see smart, accomplished, analytical individuals launch new businesses, we often say to ourselves: “What a stupid idea. How did he make that decision?”

Of course, there are many possible answers to this question and, in truth, we generally make the good decision/bad decision judgment with the benefit of 20/20 hindsight. But research in cognitive, behavioral and social psychology has clearly demonstrated that, no matter how analytical and data-driven we may think we are, there are limits to how rational we can be. We are, as academics say, “boundedly rational”.  This means that there are common traps, or cognitive biases, that all of us — novice and expert, engineer and marketer — fall victim to. We are wired, in many ways, to be our own worst enemy.

The “Sunk Cost Effect”
One of these traps, which in my experience is particularly prevalent in startups, is the “sunk cost effect”. In a nutshell, the more we invest in an idea, the more committed we become to that idea, even in the face of evidence suggesting we are going down the wrong path. The notion of sunk costs is familiar to anyone who has taken Econ 101, which teaches that “economically rational” investments should be made based on forward-looking marginal costs and marginal benefits – previous investments should not be considered.

It’s a logical approach, but easier said than done. Why? In part, because it’s hard to ignore the psychological investment we have already made in specific beliefs and actions. The more time, energy, and emotion (i.e. ego) we have personally invested in a particular project, the more likely we are to continue investing in that project regardless of what new data and analysis suggests about the likely return.

Sunk Costs in the NBA
And if you think this impacts just passion-infused entrepreneurs, think again. Even highly paid, sophisticated NBA coaches are susceptible to the sunk cost effect, according to a study published by Barry Staw of the UC Berkeley Haas School of Business. He studied the records of 241 players selected from the 1980 – 1986 NBA drafts, all of who received contracts and played at least 2 years in the NBA. Specifically, he examined whether a player’s utilization and longevity in the NBA were influenced by the how high in the draft he was chosen.  His conclusion:

“…the higher a player was taken in the college draft, the more time he was given on the court, even after controlling for other logical predictors of playing time, such as performance, injury, and trade status. Similarly, the higher the draft number of a player, the longer was his career in the NBA and the less likely he was to be traded to another team, controlling for performance and other variables.”

Closer to home, examples abound where the sunk cost effect has likely been at work. IBM investing billions in OS/2 when analysts believed they would never see a positive return. Jerry Yang refusing to sell Yahoo! to Microsoft for more than $40 billion. Newspapers across the country refusing to adopt new business models in the face of changing consumer behavior.  You’ve likely seen this behavior in your co-workers, management, and boards, and, if you’re honest, in yourself.

How to Avoid It
How do we guard against the sunk cost effect? The short answer is that we can’t, at least not completely. And it’s particularly difficult for entrepreneurs, who out of necessity are constantly selling their idea to potential investors, clients, employees, and anyone who will listen.

But there are some common-sense steps we can take to mitigate its impact when we are making important decisions.

  • The first is just to be aware of it. By recognizing that this trap exists you will be able to step back and question whether you are making the decision based on past financial and emotional investments as opposed to your best judgment about the future.
  • A second approach is to play devil’s advocate with your idea, or get someone else to. Challenge your idea, and actively seek out data that disproves it.
  • Finally, seek out the opinion of people you trust and who will give you their honest, unfiltered, and unbiased opinion.

None of these is a panacea, and you may not like what you hear. But it could save you from pursuing that next stupid idea.

Paul Bloom has conceived, launched and managed dozens of new software and online products for consumers and businesses. His most recent entrepreneurial venture was as co-founder of Avvo.com, a lawyer search web site. Paul is currently consulting with technology companies to help them identify and exploit new opportunities for growth. He recently started The Maginot Line , a blog which explores interpersonal dynamics, internal conflict, politics, and other organizational issues that can kill your startup.

Filed Under: Paul Bloom, Startups Tagged With: decision making

Some well worn advice for any startup

July 30, 2009 By Nathan Kaiser 2 Comments
firehosedrink_3

by John Dietz of Adometry

When we started our company last year, we got a fair amount of advice, and most of it we even asked for.  Among the usual stuff like “Build a business, not a product” and “Everything takes longer than you think it will”, we also heard the standard “Get to market as fast as you can, even with a limited feature set.” We knew that we didn’t have all the answers, so we’ve appreciated the advice and help we’ve gotten from a number of sources, notably adjusting our development schedule to get to market as fast as we could.

Based on the idea of getting to market quickly, we had a UI prototype complete that we showed to as many people as possible, potential customers (advertisers and agencies), related companies (various publishers), other technology companies, and perhaps even some competitors.  Our goal here was to get feedback to validate or evolve the direction of the product and business we were building.  We followed that quickly with a functional beta product while continually getting feedback from our customer base.

Of course to get to this point quickly, like a lot of startups we took shortcuts. We chose what our priorities would be (scale, validity of data), but left some of the detail work for later.  The architecture isn’t necessarily what we want to end up with, but we wanted to spend our early development efforts proving we could collect and analyze the data we were pitching.

Then one day it happened.  We’d been chugging along happily for a few months with some small beta customers, when we finally got the signed contract from a very large Fortune 100 company that was very interested in using our system to show the value and efficiency of their online advertising purchase. The same afternoon we received the signed contract we had the email outlining the campaign they wanted to run. It wasn’t a huge campaign in the overall scheme of things, when I was at Disney we would easily serve a billion ads per day, but this campaign would represent a magnitude more traffic than we were seeing with our earlier betas. It was go time, or perhaps go go time since a couple of days later we got agreement from our next major customer who would generate for us another large volume of requests.

As everyone knows, success is not a bad problem to have, but our engineers and I worked hard and late for the next several days scaling out our Amazon EC2 tiers and doing some extra load testing to make sure we could handle the traffic.  Because we have a good relationship with these customers, we convinced them to do incremental campaign analysis, just as an extra precaution.  Our focus at this point was entirely on our customer experience. Whatever happened on the back end, or whatever extra effort we put in, our customers needed to see and trust the data we were providing.

To prepare for the traffic we took several steps:

  • Moved key files to a CDN (Content Delivery Network) for quick delivery
  • Validated multi-tiered environment with load balancers and failover for most important services
  • Generated traffic and data sizing projections
  • Performed load testing
  • Server resource monitoring

At 2 PM on a recent Monday, the fire hose opened and we watched carefully.  Things looked good and traffic was climbing. Our servers were running fine and data was showing up in our UI with about a 3 minute lag from real time.  We were watching error logs, server utilization, and log sizes. At 2:32 one of our logging servers failed, unfortunately due to some processes left running on that box from when we ran the entire system on that box, but the failover process worked perfectly and we lost no data (I would rather have not had the failure, but it was a nice production test of our failover ability).

We quickly found another bug in the data parsing and were able to resolve in quickly, again with no data loss. In all, we spent the next several hours watching, tweaking, and on edge. This time may be the most exciting time for a startup.

The system is still running just fine, and we are projecting traffic based on this data for bringing on the rest of this campaign, and for the start of our second big customer, scheduled to go online shortly.

A couple of last thoughts and learnings:

Advice about getting to market fast is right on. The feedback we got from early customers was fantastic and has helped us build a better product.  Had we gone heads down for 12 months to build what we thought was the perfect product would have likely missed the mark

It’s okay to take shortcuts, but understand your core value, and don’t skimp in those areas.  Had we not built for scale, we would have had more problems and might have lost data

Design for system failure. Although we didn’t expect things to fail, we planned for it and I’m glad we did when one of our logging servers locked up.

We were fortunate to have some very good data to use when forecasting traffic, and we spent a lot of time forecasting optimistically and pessimistically to make sure we understood what would happen in each case.

Don’t be afraid of success. When we first got that contract back quickly followed by the size of the initial campaign, I’ll admit to a short period of panic. I still wanted to call this a beta, I knew there were going to be problems. Fortunately we had planned well and focused on what we knew was important.

John Dietz (LinkedIn profile) is a co-founder of Adometry, a startup focused on online advertising metrics and writes about online advertising metrics atblog.adometry.com.

Filed Under: Entrepreneurship, John Dietz, Metrics, Startups

get a little closer…it pays!

May 20, 2009 By Nathan Kaiser Leave a Comment
Music Product Value Curve

Given everyone loves music these days, why are artists still starving? Below is a theory I’ve been considering regarding the viability of various music industry business models. It helps explain recent business successes and failures, and provides a simple framework for evaluating and predicting future profitability.

…

Theory: the perceived value of music related products and services is a function of the connection it creates between fans and artists. The “closer” the connection the higher the perceived product value and the more willing consumers are to pay for it. At the far left of the closeness scale (minimum) are recorded performances. CDs, radio, etc. To the far right is a face-to-face personal interaction with the performer. On the perceived value curve, recorded music is relatively low in value. Whereas a backstage pass is nearly priceless.

The curve looks something like this:

Specific examples of products and services in each closeness category include:

recorded performances: radio, mp3s, cds and dvds.
merchandise: t-shirts, dolls, underwear
anonymous participation: Tap Tap Revenge, Rock Band, remix contests
live performances: stadium concert, small venue show, bar gig
exclusive merchandise: limited edition albums, anything autographed
personal interaction: back stage pass, face-to-face conversation

Not surprisingly, record labels (and many artists) focus most of their effort on generating revenue from recorded music. Until recently this was a reliably lucrative part of the curve because labels control large catalogs of content that they market to massive audiences with a minuscule cost of goods sold. Sounds good, right? Well, it was.

So what’s changed to put record labels and their dependents in such a bind? Two things. For one, labels have effectively lost control of their content to rampant piracy. Listeners are simply unwilling to pay for something they can easily get for free. Secondly, their leverage with artists has greatly diminished as computers and the internet make self producing, marketing and distributing content easier than ever.

Looking at examples towards the other end of the closeness curve, it’s clear that music fans are still willing to pay a relatively high price for exclusive merchandise and live performances. Case in point, Trent Reznor of NIN recently hit one out of the park with the ultra-deluxe $300 album package for “Ghosts I-IV”, which sold out of all 2500 units in less than two days grossing $750,000. And judging from the price of a typical concert ticket these days (averaging around $100 for U2 or The Rolling Stones), I would argue the perceived value of live performances has only increased. The downside with these products is that their potential sales volume is inherently limited. In fact, scarcity is a big part of their perceived value.

Standard merchandise on the other hand is available in large quantities and is definately a solid source of revenue for bands. But these products suffer from relatively low margins mostly due to their production costs.

This leads us to anonymous participation. This is the category with the greatest growth potential. The sweet spot. Mass-producible, easily distributable, simulated closeness. The two standout successes in this category are the ridiculously popular iPhone app Tap Tap Revenge from Tapulous and the dangerously addictive video games Rock Band from Harmonix and Guitar Hero from Activision. Also in this category are remix contests and products that give fans an opportunity to interact with their favorite artists and music.

I expect we’ll see a fair bit of growth in the anonymous participation category as technologies advance and artists become more comfortable sharing the [virtual] stage with fans. We’ll also see a blurring of lines between anonymous participation and live performances as the real-time stream of web consciousness gains mainstream momentum.

I’m curious to hear what YOU think. Can this theory be extended to other industries? How about other intellectual property businesses like those based on newspapers, books, movies and software? Is there an analogous value curve for them?

…

Brian McNaboe is the founder of Fremont Forward, creator of AudioFuse – a music engagement platform that helps fans get inside their music. He’s also a former rocket scientist, occasional software consultant and perpetual dreamer of crazy ideas. You can contact Brian directly at brian@audiofuse.com.

Filed Under: Brian McNaboe, business model, Revenue Model, Startups Tagged With: music

Baseball, Cherry-picking, Sample-size, and Startups

May 13, 2009 By Nathan Kaiser Leave a Comment
baseballs

On May 5th 2009, the Seattle Mariners stood in first place in the American League West, with 15 wins and 11 losses. How excited should we be about the success of the M’s in Seattle? I suppose I temper some of my own excitement by looking at the data. One of the reasons that I love baseball is that we store very detailed situational data for baseball games, with some historical data going back 100 years. One of the easy things to look at is OPS (On-base Plus Slugging), a nice simple number for a team that correlates fairly nicely with a team’s ability to score runs over a long period of time.  The M’s have a team OPS of .707 (as of May 5th), ranking them 13th out of 14 teams in the American League, not very good. Looking at the numbers more closely, perhaps there’s another reason (besides great pitching) that the M’s are winning.  When you look at the numbers with runners in scoring position (runners on 2nd and/or 3rd), the M’s rank 5th in the league with an OPS of .847. The question that obviously follows is, can the M’s maintain that performance over the course of the year?  And are your early successes and failures for your startup likely to continue? But first, a little more baseball…

Baseball is a great forum for statistics. Have you ever watched a baseball game on TV and heard the announcer say about a batter that this guy is hitting .400 on Tuesdays, or is hitting .350 against a certain pitcher? I certainly have, and that’s the beauty and curse of baseball. Baseball people, and announcers in particular, frequently fall into two of the biggest pitfalls of statistics: cherry-picking and sample sizes. In 2008, Ichiro had a .367 batting average against teams in the AL Central Division (his overall average was just .310 last year.  Does this mean that Ichiro should never take a day off against the AL Central? Adrian Beltre (Mariner’s third-baseman) batted .316 when batting 3rd in the lineup, but only .258 in other spots, should Beltre always bat 3rd for the M’s? In both of these cases, I can find this detailed information (thanks to ESPN.com), but I’m specifically picking data points that make a point and have relatively small sample sizes. If I look back over several years these trends tend to level out as the sample size gets larger. Going back to how the Mariner’s are doing this year, they are very unlikely to maintain that big an improvement on batting with runners on base for the entire season, I can look at a hundred years of historical data to back up my assertion.

Like with baseball, startups can fall into these same traps, with access to detailed data and the urge to use that data to drive strategic decisions. The key is to recognize the data that really indicates a trend and data that is an anomaly due to small sample size.  Unfortunately most of the data we collect doesn’t fall nicely into a sample size calculation that assumes a random sample of data (our data always has multiple variables).  If you are looking at some sales data, conversion data, web growth, etc., here are some ideas for identifying real trends:

  • Look for external causes – If my web site suddenly sees a lift in new registrations on Tuesdays, is it because the last two Tuesdays my site happened to get some press coverage? Perhaps there was some Twitter buzz growing that traffic.
  • Check for segmentation – If my sales are disproportionately high in Nevada, I can try to further segment my customers to see if there is a trend that makes sense
  • Increase your sample size – If my conversion rate from 2-6 PM is double other times of day, I will likely try to pull more historical data to see if there is a significant and consistent historical lift.
  • More advanced trending – If there really is a trend here, I don’t want to ignore it. If you have the chops for it, you can apply some statistical trending models (it’s actually not too hard, Excel has some built in).

Even if you don’t have to time to do mathematical models, you can get a benefit from trying to understand the variables that affect your metrics, and if people really are more receptive to your message on Thursday from 4-7 PM you might want to think about advertising during those times.

As for the Mariner’s, I’ll still root for them and look for signs of real success.  I don’t think Junior is going to hit .190 all season, he’s due.

John Dietz (LinkedIn profile) is a co-founder of Adometry, a startup focused on online advertising metrics and writes about online advertising metrics at blog.adometry.com.

Filed Under: John Dietz, Metrics

It’s not your fault – but it is your problem

May 4, 2009 By Nathan Kaiser 2 Comments

They’ve been your customer for more than a year.  Your service is an integrated and valuable part of their business.  Heck, the marketing director even sent you a personal holiday card – they love you.  Which makes it all the more surprising when you get the word – the new finance director has ordered the program dumped.  How could this happen?

Times have changed – it’s happening all around us - it could happen to you.  In today’s environment, most companies are engaging in serious scrutiny of their expenditures, with marketing and advertising programs getting an especially critical eye.  The question that all programs are being held up to is as simple to ask as it is difficult to answer; “Does this program create a quantifiable financial benefit that exceeds its cost?”.  With management under the gun to cut costs, reduce waste and focus on profitable activities, the definition of a “successful” program, service or product has changed.  It’s no longer good enough to generate traffic, activity, usage or interest for a client; they want to know exactly how many contracts were closed, widgets sold and dollars made as a DIRECT result of using your product or service.  The kicker is that in many cases the customer isn’t sophisticated enough in terms of program tracking and analysis to answer their own question.  You’re giving them a fantastic service that you’re sure is driving lots of new business for them but they can’t say for certain how much their really getting out of it.  It’s not your fault – but it is your problem.

You can be pretty sure of two things this year: 1) Your clients will be asked to quantify how much money your product/service is making/saving them, and 2) If they don’t have a solid, defensible answer, you are in danger of getting the boot.  The fact that your internal champion at an account loves your product and thinks it’s valuable won’t be enough when corporate finance comes-a-callin’ to slash costs.  They need facts and they need your help to get them.  But first you have to do something that all entrepreneurs find difficult – you have to stop selling and listen.

While you can convince anyone of your products value, overcome any objection in a single bound, and justify the cost of your product to any prospect through sheer force of will alone, your customer cannot.  They have to look smart to their management team and have concrete reasons for using you that are consistent with the metrics that the organization uses to make decisions.  If you want to survive the budget cuts of 2009 you can’t rely on personal relationships and feel-good testimonials.  Facts, conversion rates and cost savings over competitive alternatives are the ammunition your clients need to defend your contract dollars.  You can help your clients and yourself by asking some basic questions like:

  1. How do you measure return on my type of program expense?
  2. What are the most important outcomes that you’re trying to achieve by using my product/service?
  3. How much are those outcomes worth to the company?
  4. What are the alternatives to my service that you’re currently using or would consider using if my service wasn’t available?

Listen carefully to the answers you get.  Are the metrics their company uses the same ones that you’re delivering on now?  Can you directly connect your service to profits or cost savings?  What is going on with market alternatives?  Are they getting cheaper or becoming more attractive?  How much money would THEY say they’ve made or saved because of you in the last year?

In this case, the old maxim “The best defense is a good offense” is absolutely true.  Don’t wait for a customer to ask you to help them figure out your value – work with them proactively.  Try including some value comparison metrics with their monthly invoices.  Give them a spreadsheet or email with a breakdown of how you’re critical to their business – suitable for forwarding to their boss or owner of course.  Create new metrics reporting on your side of the fence that mirrors or better aligns with the metrics they use.

But what if you can’t make a solid case for concrete value to your customers?  What if your clients are so unsophisticated that they don’t track results in a way that would allow you to prove your value?  This isn’t uncommon – but it’s still you’re problem.  Things you might consider:

  1. Explore integration of your services with existing internal performance tracking, CRM, website systems, etc.  Figure out what they’ve got and try to work with it.
  2. Partner with other companies in your vertical to give customers an integrated solution that has measured value.  Call tracking, lead-form tracking, call center servicing – if they won’t connect customer activity to orders then you need to help them.  You may even be able to create a new competitive advantage.
  3. Shift your sales focus.  If your current clients can’t connect the dots on value then find some that can.  It’s the only way you’ll stay viable in the long-run.

Derek Preston is  a technology entrepreneur based in Seattle, WA.  He is the co-founder and CEO of SNAPforSeniors, Inc., an information services company specializing in national senior and transitional care data.  He serves on several advisory boards including the National Association of Realtors SRES group and the Eastern Michigan University College of Technology.

Filed Under: business model, Derek Preston, Entrepreneur, Entrepreneurship, Startups Tagged With: Add new tag, Entrepreneurship, Seattle, startup
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