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3 Key Ways To Measure Social Marketing ROI

May 9, 2011 By visionedge Leave a Comment

3 Key Ways To Measure Social Marketing ROI

By: Laura Patterson

Are you investing more in social marketing this year? If so, you are among the many marketers making this same decision. EMarketer estimates that four out of five U.S. businesses with at least 100 employees will be marketing on social media this year, and U.S. ad spending on social networks is expected to reach over $3 billion.

How do you plan to measure the ROI of your investment? Many marketers use site traffic as their primary metric plus “soft” metrics such as counting fans and followers and positive buzz. But more and more companies are looking for social marketing metrics that pack a better business punch, such as in increase in the number and rate of conversions.

Unfortunately, a recent study by Alterian found that 80% of the 1,500 marketers who completed the survey do not have a good understanding of how online conversations are impacting their business. As usual, the bottom line is being able to measure the impact on, well, “the bottom line.”

What information do you need to measure the value of social marketing on the bottom line?

Understanding two key variables will help you learn whether your additional investments in social marketing are leading to incremental revenue opportunities:

  1. The level of engagement with followers, advocates, influencers and readers.
  2. The impact of engagement on acquiring new prospects and improving customer loyalty.

Both variables will require measurement and analytical capabilities. To measure the first element you will need to be able to monitor and understand the relevant social conversations. The Alterian study found that fewer than one-third of marketers have a strong understanding of the social media conversations happening around their brand, and 31% have very little or no understanding at all. If you aren’t monitoring the conversations relevant to your product and companies, it’s time to begin.

And once you have the information, you will need analytical capabilities — another missing link. The Alterian study also revealed that many marketers still have limited analytical competency in general; about 39% of the 1500 respondents are using ad-hoc tools to measure social media conversations. If you’re investing in social marketing and counting on it making a difference, it is also time to identify and add the systems, skills, and processes necessary to monitor and measure engagement.

 

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.

Filed Under: Laura Patterson, Marketing Tagged With: Marketing ROI

Reputation isn’t as powerful as you imagine

October 25, 2010 By Jason



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The most common reaction to my recent announcement of starting a new WordPress hosting company was that this blog provides me with a ridiculous unfair advantage.

But was it?

Here’s what people said:

“[You're starting from nothing] except approximately 18,000 prospects. How convenient. ;) I wish I had that kind of mailing list starting out.”

“You’re doing this the easy way, publishing this post so that thousands of users see it.”

“It is, of course, simple to talk about how easy it is to be popular, when you’re the already established prom queen.”

Fair point, but what actually happened after that post announcement? How unfair was this advantage?

Interestingly, Eric Sink got the same reception years ago when he launched a little company of his own. It’s worth hearing Eric defend himself because it’s just like my scenario, but because this happened six years ago I can reveal his results at the end of this post:

“Reactions to my Winnable Solitaire experiment were mostly positive, but several people claimed my experiment was “unfair” or “invalid”. In a nutshell, they argued that because I am already “famous” for my writings about the business of software, I have an advantage that is not available to my readers. My experiment is therefore meaningless because I did not duplicate the conditions a regular person would be facing when trying to launch their own micro-ISV.”

Let’s start with the results of my post:

WPEngine got two new signups. Only two. That with 17,000 wonderful, loyal, friendly, supportive RSS subscribers and as many page-hits from Twitter and HackerHews.

Not exactly the massive boost you or I was expecting. I figured on 10-20 new customers at minimum and dreamed of 50. I was wrong by an order of magnitude.

Eric had a similar result: One month into his Winnable Solitaire experiment he had sold a total of six copies. Hooray for fame.

And let’s put this into broader context: At WPEngine we had 50 paying customers (not prospects) before my post went live. Most pay $49/mo, a few pay north of $1000/mo (large blogs with serious traffic). So whatever we did without the advantage of this blog was far more important, at least in the one case of getting initial customers. (I’ll explain exactly how we did that in future posts.)

Still, the blog was instrumental in getting those first 50 customers, but not because I’m able to push WordPress hosting onto 17,000 unsuspecting victims. One of the biggest reasons was in building the team.

It’s no secret that the team is a critical factor in a startup’s success; have you ever heard otherwise? But there’s precious little advice about finding and gathering that stellar team. Interviews on the subject invariably turn up explanations like “we went to school together” or “we worked together” or “we met at StartupWeekend.” In short, you put yourself in an environment where you’re likely to interact with other intelligent, capable people, and hope that you find someone socially compatible who is also crazy enough to want to do a startup. It’s a good strategy, and anyway what else can you do?

I knew I needed a killer team for WPEngine — not just “capable,” but a group that would itself be an unfair advantage. See, WordPress hosting is already a commodity, with every hosting company on Earth offering something at every price point from $0/mo, $5/mo, $15/mo, $40/mo, and even $500/mo + $200/hr consulting fees. In a mature market you need severe points of differentiation, and one of those (I felt) had to be the team itself.

We needed someone like Aaron Brazell. Aaron is a WordPress core contributor and the author of WordPress Bible (Wiley). He’s famous enough that strangers at WordPress conventions ask for autographs of their dog-eared copy of his infamous tome. He has seventeen zillion Twitter and blog followers, most of whom are themselves active in the WordPress community. He knows all the major players in the industry including the key folks at WordPress.com, BZ Media (the CopyBlogger media group), ProBlogger, and members of the press at Mashable, TechCrunch, and others.

Maybe with an Aaron we’d have a chance. His network should provide an ocean of free leads. His reputation transferred to the company would bless us with instant credibility. His press connections should give us pops of traffic and external legitimacy. His intimate knowledge of WordPress internals and roadmap should mean our service is technically superior. That’s a lot of advantages! Maybe enough to make or break the company.

Well we got Aaron, and it’s because of this blog. When I called Aaron he was charging an obscene (and well-deserved) hourly rate for WordPress consulting in Washington DC, but he was yearning for the startup life. He was ready for the trade-off of less money now in exchange for more money later, and for building something of lasting value instead of the impermanent drudgery of un-screwing hacked WordPress installations.

And the blog sealed the deal. Aaron could have joined (or startup) any number of startups, but he liked WPEngine because he wanted to do a startup with me. And he wanted to do a startup with me because the blog revealed my attitude, perspective, and credentials.

Aaron picked up, moved to Austin, and has already been instrumental to our success thus far.

So fame does help in important ways — enough even to deserve the title of “unfair advantage” — but startups are still hard and unlikely to succeed no matter who’s at the helm. Case in point? Eric Sink.

Eric’s experiment eventually failed. Well, “fail” is a too harsh a word, it’s just the one in-vogue nowadays, especially when describing an wonderful experience in which you had fun, learned a lot, grew as a person, and wouldn’t trade it for anything, particularly not a dull, predictable day job. You know, the kind of “fail” that characterizes a lot of software startups.

On sales of $216, Eric sold Winnable Solitaire for a small sum. Of course neither the exit nor the to-date revenue amounts to anything that anyone would declare a solid success.

WPEngine’s revenue to date is several orders of magnitude more, so hopefully we’ll avoid that fate. Still, our expenses are also orders of magnitude more than Eric’s, and as I hope I’ve shown, although we have decided advantages it’s never an easy road.

But then, if it were easy it wouldn’t be worthwhile, right?

Have your thoughts about reputation changed, or is this blog still an unfair advantage? Continue the debate in the comments.



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Filed Under: blogging, Essays, fame, Marketing, sales, social media

If you build it, they won’t come, unless…

October 11, 2010 By Jason



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This is Part 5 of the 5-part series: 5 lessons from 150 startup pitches.

Ask a technical founder about his startup, and he’ll proudly describe his stunning software — simple, compelling, useful, fun. Then he’ll describe his cutting-edge platform — cloud-based, scalable, distributed version control, continuous integration, one-click-deploy. Maybe you’ll even get a wobbly demo.

“Great,” I always exclaim, sharing the thrill of modern software development, “so how will people find out about this brilliant website?”

Cue sound of cicadas buzzing.
 (Or “crickets chirping” but in Texas the cicadas are louder.)

Four uncomfortable seconds later, a smile breaks across the founder’s face. “Here it comes,” I think, “there is a strategy after all!”

Except the “strategy” is a tirade of drivel I’ve heard so many times I can lip-sync as the words spew out the founder’s mouth:

  • “We’re going to A/B-test AdWords campaigns until we discover our hook.”
  • “We’re going to A/B-test our landing pages until the right message appears.”
  • “We’re better than everyone else at SEO.”
  • “A friend of mine knows how to get popular on Twitter.”
  • “We’re going to get reviews on blogs.”
  • “We’re going to start with our own network and grow it from there.”
  • “We’re going to use an affiliate program so our customers sell it for us.”
  • “We’re putting a ‘Retweet’ button inside the product to encourage viral growth.”

The obvious problem is that every new startup on Earth says exactly these things. Nowadays the “strategy” above sounds the same as:

  • “We’ll have a website so people can read about us.”
  • “We’ll have an email address so people can communicate with us without picking up the phone.”

Yes, you’re going to do those things, but since millions of other people are doing that too, you’re still invisible. Visibility-fail. Anyone-gives-a-crap-fail.

OK, so what can you do to rise above the cacophony that is the Internet? Here come a few ideas; leave more and discuss in the comments!

Infection built-in, not bolt-on

WhenBusy is a bootstrapped startup that lets people schedule meetings with you in currently-available time-slots without you having to share your calendar [disclosure: I'm an advisor]. For example, here’s what the founder’s (Josh Baer) availability looks like:

whenbusy schedule

Instead of trading emails with lists of available time-slots, Josh just sends the link to this page and the other person uses the product to schedule a meeting. This is the viral step: Having trialed the tool, the stranger might use it herself, then more people find out about it, and so forth.

Note that at no point did I say “a button lets people ‘like’ this on Facebook.” I know of no companies who have “gone viral” because of buttons. Buttons are good — why not use them? — but they don’t make your product intrinsically viral like WhenBusy.

Which is OK — not all products need to be viral! But if it’s not viral you still need a killer method of finding customers, and if it is supposed to be viral it better be encoded in the DNA of the application, not bolted on as an afterthought.

Frightening honesty

Balsamiq Mockups is a ludicrously popular wire-framing tool. The software is good — don’t get me wrong — but what sets Peldi (the founder) apart isn’t prescient feature selection or bug-free releases, it’s his startling transparency. He published revenue figures even when they were still pathetic, he pledged loudly and eagerly to give away lots of free copies to non-profits, and he revealed all his (remarkably effective) marketing strategies (updated here) even though it meant competitors would learn them too.

He didn’t just have an “authentic voice,” he made public promises. That’s compelling.

He didn’t just “tell it like it is,” he gave up his marketing secrets and opened his company books. That’s newsworthy.

This isn’t merely “being human” and all that claptrap, it’s almost too much honesty, like when you ask someone how it’s going and they tell you about a weird pustule on their middle toe that’s been oozing since last Wednesday.

In a world where everyone and their brother is “joining the conversation” (oops, I use that phrase constantly!), you have to truly bare your soul if you want to compete on the transparency front. It’s not for everyone, and I’m not suggesting it ought to be, but there’s no sense in half-assing it.

Making Oprah cry

The number one mistake founders make when trying to generate press is talking about what the company does rather than telling a compelling story.

Does Twitter get press when it helps Iranians fight an illegitimate government or when it creates a new internal IT process to increase up-time? Does Apple win the hearts (yes, hearts) of millions because of their obsession with design or because of their development APIs? Does 37signals have over three million users because their software is “better” than the competition, or is it because they motivate designers and entrepreneurs through their writing and philosophy?

Without a powerful narrative, your chances of getting big press and enthusiastic users who spread the word for you approach zero as a limit.

It took me years to figure this out at Smart Bear. At first when someone asked what the Smart Bear tool suite was, I would say:

Smart Bear makes data-mining tools for version control systems.

It’s a description so esoteric that, although accurate, not even a hardcore geek would have any idea what it is, much less why it’s useful.

Years later, when it was clear that code review software became our sole focus, I got better at describing it:

You know how Word has “track changes” where you can make modifications and comments and show them to someone else? We do that for software developers, integrating with their tools instead of Word and working within their standard practices.

Better, yes, and for a while I thought I nailed it, but still no press. Eventually (thanks to helpful journalists) I realized that I was still just describing what it is rather than why anyone cares. I left it up to the reader to figure out why she should get excited.

Eventually I developed stories like the following, each tuned to a certain category of listener. Here’s the one for the journalists:

It’s always fun to tell a journalist like you that we enable software developers to review each other’s code because your reaction is always: “Wait a minute, you’re seriously telling me they don’t do this already?” The idea of editing and review is so embedded in your industry you can’t imagine life without it, and you’re right! You know better than anyone how another set of eyeballs finds important problems.

Of course two heads are better than one, but developers traditionally work in isolation, mainly because there’s a dearth of tools which help teams bridge the social gap of an ocean, integrate with incumbent tools, and are lightweight enough to still be fun and relevant.

That’s what we do: Bring the benefits of peer review to software development.

Now the reason for excitement is clear: We’re transforming how software is created, applying the age-old techniques of peer review to an industry that needs it but where it’s traditionally too hard to do. That’s a story.

It took me five years to figure out (a) I needed a story and (b) what the story was. It’s hard. But one story beats a pile of AdWords A/B tests.

Advertising → [transmogrification] → Revenue

Yeah yeah, nowadays marketing is about “relationships” and “authority” and other things which cost time but not money. It’s all I hear about anymore.

But don’t be so quick to throw out the idea of spending money to make money. Advertising isn’t dead; you can still buy eyeballs. I’m not talking about “triage” strategies like buying AdWords linking to a page of ads, I’m just pointing out that most companies on Earth don’t depend on “joining the conversation” to acquire customers.

It sounds simple: The average cost of acquiring a customer is $C (advertising, sales, support, doing demos) and the lifetime revenue you get from that customer is $R, so if C < R you have a business. C can be driven down with cheaper ads, better lead quality, a more efficient conversion rate, and straightforward trials with minimal tech support.

Of course it’s not that simple, and many business plans I’ve seen (unintentionally) omit many of the true costs of acquisition. Read this great interview with Sean Ellis at VentureHacks for a great discussion of how to seek a repeatable, profitable model where C < R, and then optimize and grow. It’s a little heavy on the “huge VC-style company” strategy for my style, but you’ll come away with a strong perspective on how to build a machine that turns advertising dollars into (a greater number of) revenue dollars.

Celebrity Championship

I already beat you to death about how celebrity endorsement can serve as an untouchable competitive advantage, and it’s also an answer to how to burst out of the dull roar of Internet marketing.

Take me. I’m no Seth Godin, but consider what I could do if I were a co-founder in a new software development tool company:

  • I have personal relationships with the CEOs and other influencers at hundreds of software development companies. During ideation, they would brainstorm. During beta-testing they would be guinea pigs. After release of v3.0 some would be ready to become paying customers.
  • I have relationships with editors of nearly all software development publications (on-line and off); I’ve already published articles with them. Some would help vet our stories, some would publish our articles.
  • I’ve bought ads in every major (and quite a few minor) software development websites, magazines, newsletters, conferences, and webinars. So when it’s time to advertise, we’ll come in with the right message for the audience and probably cut a deal.
  • If you read this blog you’re probably a software developer, so even just a few mentions here might be more powerful than $10,000 in A/B tested Google AdWords.
  • If we were trying to raise money, my previous success would not only get us the initial meetings but would be a significant bump in our chance of raising it.

While everyone else is mucking about with a new blog, blasting their LinkedIn network with pleading emails, and paying out the nose to test AdWord variants, we’re years ahead in the marketing war.

Let’s generate more ideas

Share the love in the comments section. Let’s come up with more ways to reach customers that isn’t the same as everyone else.



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Filed Under: advertising, branding, How-To, lead-gen, Marketing, positioning, social media

Why You’re Going to Hire the Wrong Designer

September 14, 2010 By Tony Wright

“We are not UI experts but do know when we see a good design.”

I saw this on a mailing list I occasionally read, in a post where a company was looking to hire their first design employee/contractor. I think it’s a big part of why hiring designers is a process that often ends in failure: because most people who aren’t UI experts (heck, most UI experts fall into this camp as well), don’t know when they see a good design.

The challenge, of course, partially lies in the definition of “good design”. Let’s run through a few, in increasing order of importance.

Good Design = Beautiful/Cool Design

In this arena, we might actually know when we see a good design. We often have pretty good instincts on beauty and have a lifetime of training in understanding what other people find beautiful. Beautiful design can be important– but on the web it doesn’t seem to be a necessary element to success. Take the top 50 sites on the web. For a designer who primary considered themselves an artist, how many of those sites would be a source of pride if they were in their portfolio? Designers who primarily seek beauty/coolness often get lost in their own sense of beauty and engage in what I like to call “design guitar solos“– the visual equivalent of the talent-intensive squeeling that guitar pros engage in which only another guitar pro appreciates (or even understands). In the web design world this can range from a nuanced photoshop manifesto with dozens of layers to an incomprehensible JavaScript-powered UI. With great power comes great responsibility– and oftentimes a simple melody is the most effective song.


(note: grabbed from a 1994(!) article post by Peter Morville)

Good Design = Elicits the Desired “Feeling/Motivation”

This brings us closer to a good definition of effective visual design. While it’s not a web site, take a look at Apple’s FaceTime commercial. It’s simple. It doesn’t have the cyborg eyes and spinning globe of apps that Android’s recent commercials do. The design lead on that commercial didn’t get to do the metaphorical equivalent of playing a 12-minute solo behind his head in front of a sold out crowd. No epic visual effects. Just an emphasis on generating emotion– and pretty damn effective as Apple keeps trying to battle their way to the other side of the chasm. (Side note: I think Android’s robot craziness isn’t all that bad– they are currently aiming at early adopter geek-types. Remains to be seen if that’s brand they can pivot away from when the time comes to court “normals”. It wouldn’t be the path I’d choose, though!).

Good Design = Measurably Gets the Job Done

(note: Dave McClure is putting on the WarmGun Conference on October 8th that’s centered around conversion-centric design – Check it out)

THIS is the kind of design that very few people shop for– and indeed, don’t know how to shop for because they can’t “know it when they see it”. As I’d asked in a post WAY back in 2007 (“Do Designers Deserve a Seat at the Strategy Table“), when was the last time you saw a web portfolio that talked about metrics and goals? That talked about how the new design kicked the old design’s ass as far as the numbers were concerned? That talk about an X% SEO lift over Y months? On multiple occasions, I’ve seen uglier designs tromp prettier ones, and we can look at the aforementioned top sites on the web and see that it’s chock full of ugly.

One thing that’s important to note– the experts are wrong just about as often as they are right. As a self-proclaimed expert (!), this is hard for me to stomach, but it’s true. Check out this (somewhat murky) video of the head of Microsoft’s experimentation efforts. There’s plenty of gold here. First, he runs through a couple of design variations and asks the audience (chock full of startup geeks) to guess which performed better. By and large, the audience was wrong as often as they were right. Taking this further, Ronny tells is that the internal experts at Microsoft had similar luck. Said another way, the smartest people about UX and conversion made educated guesses, tested those guesses, and found that their efforts improved their target metric only SLIGHTLY more often than they made it worse.

Good Design = An unseemly mashup of Usability, Marketing, Credibility, and Usefulness

The problem gets worse, because “getting the job done” isn’t just about pure conversion mechanics and A/B testing.

  • There’s design STRATEGY (most of the above is about tactical design). Is your designer the type of person who wants to have stategy handed down to him? Or is he the kind of person who is going to agitate for a 2-sided referral program? Or something clever like UrbanSpoon’s Spoonback effort?
  • Are they thinking about marketing? Do they think like a user? Do they understand your market? Do they want to? Marketing isn’t just about outreach– there’s a whole discipline around understanding a market, getting their feedback (from user studies to poring through support/feedback email), etc.
  • How do you deal with the conflicts between what your business wants the user to do and what THEY want to do? In my opinion, the best businesses have those goals perfectly aligned– but any ad supported site knows that their job is to find exactly how aggressive they can be with ads and pumping page views.
  • What about SEO? Content sites need to optimize for SEO. Yes, the first rule of good SEO is quality and linkworthiness. But there are design/markup considerations, anchor text concessions to consider, and more.
  • Load time. There are breathtaking studies about the effects of page load time and conversion. How many designers obsess about speed? Not enough, given that adding 2 seconds to page load showed a 4.3% reduction in revenue/user.
  • Considerations vary wildly based on the type of offering. Sites that you use every day clearly need to be faster/leaner. Are there sites out there that can afford to be slower? Apple, for example, serves up enormous (and gorgeous) photography on their home page.
  • Does the designer love writing headlines? Writing is one of the biggest parts of design– if they’d rather you do all the writing and prefer to work with Lorem Ipsum text, they have a big hole in their skillset.
  • How much do they like saying no? At any company larger than a few people, designers meet the “too many cooks” problem fairly quickly. Good design is not only a bizarre blend of graphical, technical, marketing, strategic, and writing expertise– it also requires a healthy dose of political acumen and salesmanship. What are they going to say when Alice swings by their desk and says, “You know what? I think it’d be awesome if we had a block showing our twitter feed on the home page. Maybe with one of those cute blue birds at the top?”

The problem with hiring designers (and the reason that they so often don’t work out as contractors or employees) lies squarely on the shoulders of the people doing the hiring. They’re still looking at screenshots in portfolios and saying, “Beautiful! Wow! This must be our guy/gal,” when they should be looking deeper.

Filed Under: Design, Marketing, SEO, Startups

The right way to position against competition

August 23, 2010 By Jason



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google-goldfish

This is Part 4 of the series: 5 lessons from 150 startup pitches.

After seeing hundreds of startup pitches for this year’s Capital Factory program, I can tell you that the two most common errors in positioning a company against competition are, strangely, opposites:

  1. Claiming you have no competition.
  2. Defining your company’s offering and positioning by combining “the best” traits of 6 competitors.

This isn’t just a problem when pitching — it’s a problem with you defining who your customers are, what they want, and your role in the marketplace.

Let’s break down the ways these fallacies manifest and what you can do instead.

There is no competition

Here’s what this sounds like in the wild, and my reaction when I hear it:

  • “I have no competitors.”
    Either you’re ignorant of direct competition, or your not considering alternate solutions like “build it yourself.”
  • “No one is doing it like we are.”
    Of course you’re going to position your company with a unique offering: exclusive features, a distinctive culture, a refreshing pricing plan, an innovative sales strategy, etc.. But uniqueness doesn’t imply lack of competition!
  • “There’s no competition because this is an industry that has never used software to solve this problem.”
    I know that sounds like a good thing, but what this also implies is that you’ll have to convince computer-phobic people to trust software, and that’s a disadvantage. You’re competing against the status quo.
  • “There’s no competition because people haven’t realized it’s a problem.”
    If they don’t already know they have the pain, the sales process is going to be excruciating. There’s a word for that — evangelism — which conjures other words: Expensive, difficult, time-consuming.

If you’re tempted to argue that you’re the exception, here’s how to elucidate the advantages you’re seeing, but in a way that actually makes sense as a business strategy:

  • We’ve carved out a niche specific enough that no one else is actively targeting it. There are similar competitors A, B, and C, but they’re not targeting this niche because of X, and would be hard for them to switch into this niche because of Y. In fact, it’s quite possible that we’d end up partnering with or being bought by A, B, or C exactly because our idea is similar but out of their reach.
  • We’ve identified a market too small for the large, established players to address, but big enough to build a company. For example, because an 800-pound gorilla like Microsoft is so inefficient at building new software, it can’t go after a market unless there’s a billion dollars at stake. We think there’s a solid business to be made in this hundred-million-dollar market. However, whereas Microsoft can’t afford to build this from scratch, if we show good growth and profits it would be an obvious acquisition target for them.
  • We’ve created technology so different from the incumbents that we’re changing the conversation about how people solve this pain.  Though it’s different, our solution is very easy to describe and to use. (Example: Netflix)
  • Our target customer has traditionally solved this pain themselves or just lived with the pain rather than paying for relief. However, a combination of newly-available technology and modern mindset makes this the right time for a new software play.For example, my company Smart Bear created the first commercial peer code review tool. Before us, there was no software competition but there were plenty of alternative processes — looking over someone’s shoulder, sending emails with diffs, code review meetings, even “Formal Inspections.” By tackling a few specific annoyances with peer code review and leveraging newer technology (like the advent of ubiquitous version control), we completely changed what a “code review” could be.
  • It’s true that this industry hasn’t yet seen a software solution, but that’s not because they hate computers, but rather that it hasn’t been possible to address that market with software. Now it is because (pick one):
    • We’ve built an improbable team that spans geeks and industry insiders.
    • New hardware/networks have just appeared which makes this possible.
    • New attitudes towards the Internet (e.g. ubiquity of Facebook even among traditional technophobes) enables new workflows.
    • This industry is commoditized so giving a player the slightest edge is a big deal.
    • This industry is just now starting to show tangible signs of embracing technology.
    • We have three lead customers signed up for alpha testers; if we make them successful the case studies will be all the evangelism we’ll need.

Defining your company by the competition

Your company is defined by its own strengths, values, customers, and products, not by how it compares with other companies. You need a strong position, something that would be equally clear and compelling even if competitors didn’t exist.

Here’s some ways this mistake manifests:

  • “We combine the best traits of our competitors, letting them show the way to our success.”
    I like the idea that you can learn from the mistakes and successes of similar companies, but “combining the best” misses the point. There are specific tradeoffs each of those companies are making; things you see as “not best” might in fact be best for their target market. Why are you sure that your notion of “best” will result in enough customers who not only agree with you, but is so convinced that they’re willing to switch to you?
  • The rubric.
    A chart with one row for each “feature” and one column for each of six “competitors.” There’s checks and X’s everywhere, except of course a glowing, highlighted column representing your company which just happens to be full of checks. C’mon, everyone knows this is bullshit; it’s insulting.
  • “We’re just like competitor X, only we’re Y.”
    In that case you’re betting your future on the fact that Y is overwhelmingly compelling to a large market segment. X automatically has advantages over you (brand, customers, revenue, inside knowledge, a team, momentum), so Y had better be brain-explodingly awesome.
    Oh, and it’d better be impossible for X to implement Y — or even 1/3 of Y — themselves. Talk about putting your fate in others’ hands!
  • “We’re the same as X, only cheaper.”
    Being cheaper is a strategy, but it can’t be your only strategy. It’s too easy for competitors to change price or offer deals. Typically the best customers aren’t as price-sensitive anyway, so you’re actually biting off a less desirable segment of the market. Often this claim is paired with “We’ll do 70% of the features for 50% of the price,” but supplying less for less is not inspirational.

So how do you look inward to establish your company, contrasting with the competition but not letting the competition dictate your identity?

  • We’re targeting the market segment defined by X, Y, and Z.  We’ve spoken with 20 potential customers who match at least two of those criteria, and they agree our product is exactly what they need and that none of our competitors are doing an acceptable job addressing their issues.
  • Our company has core value X that we exude everywhere from our AdWords to our tech support to our product. (Example value: Simplicity. A simple product with few features, low-cost, pain-point obvious, not tackling complex problems, focussed on making life easier rather than on saving money.) We own this value because we’re completely committed; this is the one point on which we will never compromise. Our customers know it and value this too, which is why it doesn’t matter what features, prices, or advertisement our competitors have.
  • This is the competitive matrix. Note that each player in this space is targeting a different market segment, as is clear from feature selection, pricing, and advertising/messaging. We, too, are targeting a niche; as you can see our offering is consistent with owning that niche, and doesn’t overlap significantly with competitors. It would be difficult for any of them to “switch” into our niche, because as you can see they’d have to change the product, pricing, and their company’s persona; that’s a risk we’re willing to take.
  • We’re going after competitor X. We know they already have a ton of advantages over us — well-known, well understood, and a deep feature list. However they haven’t done anything new in 3 years and we have evidence that their customer base is pissed off. Not only that, they’re famous for annoying attributes A, B, and C (Examples: buggy, slow, confusing, must install, expensive, crap tech support). We see a huge opportunity in their wake of destruction, vacuuming up their customers with our overwhelming advantage. They can’t do this themselves because they’re too big to turn the ship, and anyway the past 3 years shows they’re not able to change.

What else?

How do you cope with competition, incorporating it into your strategy while not letting it consume you? Leave a comment and join the conversation.



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Filed Under: branding, competition, How-To, Marketing, positioning, strategy

What the crazy name "Smart Bear" taught me about branding

August 2, 2010 By Jason



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smart bear logoEvery founder struggles to find a great name for her company. Often it’s the first source of good-natured strife between co-founders. It’s an exhilarating, scary combination of having to decide who you are — what you do, the persona you expose — combined with the technical issues of being memorable, spell-able, and available as a domain name.

My name started as a whim, was almost changed for the wrong reasons, and ended up with a punch-line I would never have dreamed of.

Storytime! (Lessons at the end.)

hotel new hampshire

An inauspicious birth

The origin of “Smart Bear” is John Irving’s Hotel New Hampshire, a surreal novel in which a “smart bear” plays an important role; near the end we are told repeatedly that “a smart bear makes all the difference.” I chose it because at the time my (then new) wife and I were into John Irving and it was whimsical, fun, and meaningful, albeit just to us.

In other words: I picked the name with utter disregard to marketing or business sensibility. I’m not saying that’s right or wrong; maybe all it means is that some branding principles, while interesting, aren’t as vital as they first seem.

“It sounds like shareware.”

A few years into Smart Bear I was still toiling away at the compiler when I was approached by an ex-VP of Sales from a company that had IPO’ed. He wanted to partner up — I’m the young geek, he’s the silver-haired, golf-bag-toting, sports-metaphor-slinging salesman.

The full story of that ill-fated misadventure is related here; the relevant detail is that this guy insisted that we change the name of the company:

“Our potential customers — IBM, Intuit, Adobe, Qualcomm — aren’t going to take us seriously with a silly name like ‘Smart Bear.’ It sounds like shareware, not enterprise software.

“Big companies buy from companies with formal names like IBM, CA, BEA, CSC, HP, stuff like that.”

His suggestion? Software Test and Deployment Systems, Inc, which shortens to the unfortunate “STDS.”

Yeah, an acronym already taken by gonorrhea.

(The jokes, though, were almost worth it. Viral marketing! Our invoices flare up every year!)

I got lucky, though. I was all set to pair up with this guy and change the name, but in another example of serendipity being more influential on business success than purposeful action, I happened to receive a hugeamongous purchase order from Intuit, a whopping $50,000.

You know, exactly the kind of order from exactly the kind of company who would never do business with silly old “Smart Bear” run by non-salesy, geeky Jason. Today, as you can see from our customer list, all the companies he listed are, in fact, customers, and many more besides.

All with a silly name and informal sales.

The VP of Sales’ rationale made sense though, and of course Smart Bear might have been equally successful if named STDS. But once again I learned that maybe the name isn’t as important as either of us thought.

“Let’s just ask the customers.”

Fast-forward six years to present day. I sold Smart Bear a few years ago to AutomatedQA — a great company with a compatible culture and similar goals where Smart Bear (now as a division) continued to thrive (meaning: more revenue, more profits, bigger-and-badder software, and happy customers).

After making a few other acquisitions and continuing to grow, AutomatedQA is now a large company which in the next few years is on a path to be successful even by a VC’s standards. If you thought “Smart Bear” was too informal before, now it’s even more out of place. (If you subscribe to that theory.)

But having all these departments with different names (AutomatedQA, Smart Bear, Pragmatic Software) sucks when you’re trying to build a company which is starting to capitalize by making already-best-of-breed tools work together, especially with customers who we all share. So they decided to rebrand everything under a single name.

But which name? AutomatedQA (the one which was biggest to begin with and clearly a great name)? Smart Bear? Something new? STDS?

So they decided to poll everyone they could find in the software industry — customers and otherwise. They asked positioning questions like:

  • Do you have a good or bad immediate impression of this brand?
  • Have you heard this name before, and if yes what have you heard?
  • If you have experience with this brand, what was that like?

The result? See for yourself: As of July 19th 2010, the entire company has been rebranded Smart Bear. Come see the new website — it’s neat to see something start out so ugly and terrible and end up as the banner of what is already a massively successful, many-million-dollar business.

So what’s in a name?

What’s in a name? Not as much as some folks say, it appears.

The lessons I took from this are:

  • It’s what you do, not what you call it.
  • It’s more effective to do/say something important/valuable than to hope a logo or name will say it for you.
  • Being memorable is more important than what they remember.
  • First impressions are important, but so are all the other impressions, and the latter can trump the former.
  • Your time isn’t well-spent fretting about brand (early on).
  • You can change your brand later.

Continued in the comments…

What are your experiences with naming and branding? Am I being too harsh in dismissing the value of branding? Let’s continue the discussion in the comments.



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Filed Under: branding, Design, Essays, Marketing, positioning

Real Unfair Advantages

July 19, 2010 By Jason



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This is Part 2 of the series: 5 lessons from 150 startup pitches.

santa's naughty list

What if someone copies your awesome business idea?

About twenty people on Answers OnStartups have asked this question in one form or another:

When I meet an angel investor, he may ask: “What if a big company copies your idea and develops the same website as yours after your website goes public?”

How can I answer this question?

No, the question is: What are you doing now knowing that a big company will copy your idea?

No, wait, the real question is: What are you going to do when another smart, scrappy startup copies it, and gets $10m in funding, and is thrice featured on TechCrunch?

No, wait, I’m sorry, the real question is: What are you going to do when there are four totally free, open-source competitors?

No wait, I forgot, actually the question is: What happens when employee #2 makes off with your code and roadmap and marketing data and customer list, moves to Bolivia, and starts selling your stuff world-wide at one-tenth the price?

The good news: There are good answers to these questions!

The bad news: Almost no one I talk to has good answers, but they think they do. And that’s fatal, because it means they’re not working towards remedying that situation. Which means when one of the above scenarios happens, it will be too late.

The first step is admitting you have a problem.

Last week I detailed the most common misconceptions about competitive advantages, so go read that if you haven’t already.

To summarize: Anything that can be copied will be copied, including features, marketing copy, and pricing. Anything you read on popular blogs is also read by everyone else. You don’t have an “edge” just because you’re passionate, hard-working, or “lean.”

The only real competitive advantage is that which cannot be copied and cannot be bought.

Like what?

Insider information

They say the only way to consistently make money on Wall Street is to have insider information. Unfortunately it’s not a joke, and although it’s illegal (and people occasionally go to jail for it), those in the know will tell you it’s the norm.

stock-dance

Fortunately, using intimate knowledge of an industry and the specific pain points within an industry is a perfectly legal unfair advantage for a startup.

Here’s a real-world example of how this advantage manifests. Adriana has been a psychiatrist for 10 years; she understands the ins and outs of that business. During a lull in her practice she got a serendipitous opportunity to shift gears completely and ended up leading software product development teams.  (Turns out that for big-business project management it’s more valuable to be a sensible thinker and counselor than to be an expert in debugging legacy C++ code.)

Now Adriana has an epiphany: Traditional practice-management software for psychiatrists totally sucks; she knows both the pain points and the existing software first-hand. But now she has the vision and ability to design her own software, capitalizing on modern trends (e.g. a web application instead of cumbersome installed applications) and new interpretations of HIPPA regulation (which allows web-based applications to store medical records like patient histories).

Adriana holds a unique position: Expert in the industry, able to “geek out” with her target customer, yet capable of leading a product team. Even if someone else saw Adriana’s product after the fact, it’s almost impossible to find a person — or even assemble a team — who has more integrated knowledge. At best, they could copy. Of course by then Adriana has moved on to version two.

Single-minded, uncompromising obsession with One Thing

A popular comment on the previous post was that a “Unique Feature” could be a competitive advantage in some circumstances. Some examples of a feature being a company’s primary advantage are:

  • Apple compromises everything in the name of design. Their products are over-priced (magically being profitable at half the price 12 months after release), buggy (how many iOS debacles have there been?), and every experience I’ve had with their tech support has been atrocious, but man their stuff looks and feels nice! (I’m typing this on an Air and there’s an iPhone in my pocket, so no Apple fan-boy mail please.)
  • Google’s search algorithm was just better, therefore they won the eyeballs, therefore they were able to monetize. Sure Bing and Yahoo are good now, but the advantage lasted long enough.
  • Photodex is a little company you’ve never heard of I worked for in Austin in the 90′s. We made an image browser with thumbnail previews so you didn’t have to open each file individually to see what it was. (In the 90′s, y’all, before that was built into all the operating systems!) Our advantage was speed. Not the best, not the most stable, didn’t read the most formats, didn’t have the most features, just “fastest.” For many users of that product, speed wins; Photodex now makes tens of millions of dollars a year, and “speed” is still the only point on which they will not compromise.

However it’s not enough for a feature to merely be unique (like my mini-browser) because it’s still easily duplicated. Indeed, most of the innovations we’ve made at Smart Bear in the art of code review have already been duplicated by both commercial and open-source competitors.

Rather, this requires unwavering devotion to the One Thing that is (a) hard, and (b) you refuse to lose, no matter what.

Google has spent hundreds of millions of dollars on their search algorithm, the single biggest focus of the company even today, a decade after they decided that was their One Thing. They refuse to be beaten by competitors or black-hat hackers, whatever it takes.

37signals can build simple — almost trivial — software and earn three million customers because they absolutely will not compromise on their philosophy of simplicity, transparency, and owning their own company, and that’s something millions of people respect and support. Competitors could build trivial web applications too (as Joel Spolsky is fond of saying, “Their software is just a bunch of text fields!”), but without the single-minded obsession it’s just software with no features.

To remain un-copyable, your One Thing needs to be not just central to your existence, but also difficult to achieve. Google’s algorithm, combined with the hardware and software to implement a search of trillions of websites in 0.2 seconds, is hard to replicate; it took hundreds (thousands?) of really smart people at Microsoft and Yahoo years to catch up. 37signals’ ranting platform — a blog with 131k followers and a best-selling book — is nearly impossible to build even with a full-time army of insightful writers.

“Being hard to do” is still a true advantage, particularly when you devote your primary energy to it.

P.S. For more, here are detailed examples of how this mindset also sets up your sales pitch.

Personal authority

codereviewbook-smChris Brogan commands $22,000 for a single day of consulting in an industry (social media marketing) where all the information you need is already online and free. Joel Spolsky makes millions of dollars off bug tracking — an industry with hundreds of competitors and little innovation. My company Smart Bear sells the most expensive tool of its kind. How did we earn this powerful authority, and how can you earn this overwhelming advantage?

I’m a great example of someone who wasn’t an authority on anything, but built that authority over time to the point where now my company (Smart Bear) is untouchable as the leader in both revenue and ideas in the area of peer code review.

Not only was I not an expert on code review prior to building a code review tool, I wasn’t even an expert on software development processes generally! I didn’t give lectures, I didn’t have a blog, I didn’t have a column in Dr. Dobbs magazine, and most interesting of all, I didn’t even know “code review” was going to be what made the company successful!

Unfortunately all this “authority” crap takes years of expensive effort, and even then success is probably due as much to luck as anything else, so is it worthwhile? Yes, exactly because it takes years of effort and a little luck.

Authority cannot be purchased. You can’t raise VC money and then “have authority” in a year. A big company cannot just decide they want to be the thought-leaders in their field. Even a pack of hyper-intelligent geeks cannot automatically become authorities because it’s not about how well you can code.

But how does authority convert to revenue? Here’s one tiny example:

I give talks on peer code review at conferences. My competition pays thousands of dollars for a booth, then spends thousands advertising to attendees begging them to come to that booth, then gives sales pitches at the booth to uninterested passersby who are also being bombarded by other pitches and distracted by the general hubbub.

Whereas, because I’m a known authority on code review and software development, I get to talk for an entire hour to a captive, undistracted group of 100 people, self-selected as interested in code review. After the talk typically 5-20 people want to chat one-on-one. Some head straight to the booth to get a demo; for many I give a private demo of the product on sofas in the hallway. It’s not unusual to get $10,000-$50,000 in sales over the next three months from people who saw me at that talk.

That’s just one example!  Now add to that: What’s the effect of a blog that tens of thousands of people read? What’s the effect on sales of my writing the book that’s the modern authority of code review?

Authority is expensive and time-consuming to earn, no doubt. But it’s also an overwhelming, untouchable competitive advantage.

(P.S. I’m hoping that the authority I’m slowly earning from this blog will help when I launch my next venture. That’s not why I blog, but I certainly will leverage it when the time comes!)

(P.P.S. I apologize for blatantly abusing the word “authority,” considering I just lambasted everyone who does things like that.)

The Dream Team

The tech startup world is littered with famous killer teams: Gates & Allen, Steve & Steve, Page & Brin, Fried & DHH.

In each case, the founders were super-smart, had complimentary skill sets, worked together well (or well enough to get to important success milestones), and as a team represented a unique, powerful, and (in retrospect) unstoppable force.

Of course that’s easy to see in retrospect, and retrospect is a terrible teacher, but the principle can work for any startup, especially when your goals are more modest than being the next Google.

Take the success of ITWatchDogs, the company I helped bootstrap and eventually sell (before Smart Bear). The elements of our Dream Team were obvious from the start:

  • Varied skillsets. One experienced startup/business/salesman (Gerry), one proven software developer (me), one proven hardware developer (Michael).
  • Common vision. We agreed what the product ought to be and that the ultimate goal of the company was to sell it.
  • Insider knowledge. Gerry had done another successful startup in the same space, I had deep experience with the language and tools for embedded software, and Michael had decades of experience building inexpensive circuits and processors.

Of course a Dream Team doesn’t guarantee success but it significantly reduces the risk of the startup, and furthermore is difficult for the competition to duplicate.

This is especially true when someone on the team is already successful in their field, e.g. with a massively successful blog or a big startup success under their belt or a ridiculous rolodex. Since those are the kinds of competitive advantages that can’t be bought or consistently created, having that person on the team is by proxy a killer advantage.

P.S. This is the primary competitive advantage in a new startup I’m working on right now (to be announced soon), so shortly you’ll see another example of this theory and — better yet! — you and I both will witness over the subsequent months whether or not this really resulted in a killer advantage! (Yes of course I’ll share details!)

(The right) Celebrity endorsement

Hiten Shah’s third company is KISSMetrics. On the surface, it’s yet another “marketing metrics” company. This is a crowded, mature market with hundreds of competitors in every combination of large/small, expensive/mid/cheap/free, and product/service/hybrid.

But Hiten has something none of those competitors has: Investors and mentors who are celebrities in exactly the market he’s targeting. Folks like Dave McClure, Sean Ellis, and Eric Ries, all of whom not only help via conference call but actively promote KISSMetrics on their blogs, Twitter, and personal appearances.

How much advertising will it take for competitors to overcome Hiten’s endorsements and exposure?  Even if a competitor also wanted celebrity endorsement, these guys are taken, and in any field there’s a limited number of widely-known and respected authorities.

Many competitors have more features than KISSMetrics has. I can see the sales pitch now…

The customer objects: “Gee it would be nice to have all those features,” and Hiten responds “Well not really, because Dave, Sean, and Eric all say that those features are actually distractions and don’t add to your bottom line. Our features are the right ones, as evidenced by these 20 companies that have shown increases in revenue.”

Just on the basis of these advisors, Hiten will get hundreds if not thousands of customers. You can’t buy that kind of jumpstart, not even for millions of dollars, because it’s not about faceless leads who saw KISSMetrics in an ad, it’s people who trust Hiten because of his association with other people they already trust.

P.S. If you’re raising money, investors love to see a co-founder or even just an advisor who has been successful before. The VC game is more lemming-like than most care to admit.

Existing customers

…or as Frank Rizzo says: Open your ears, jackass!

Everyone you’ve ever sold to (and those who trialed but abandoned) possess the most valuable market research imaginable, and it’s the one thing a new competitor absolutely will not have.

This is kind of a cheat, because everyone says “I listen to my customers,” which (nowadays) is just as bullshit as “We’re passionate,” but it’s true that if you’re actively learning from your customers and you never stop moving, creating, innovating, and learning, that puts you ahead of most companies in the world.

As a company becomes successful it gains momentum, which means that it’s going in one direction with one philosophy. Like physical momentum, change becomes harder to affect. It’s logical; for example at Smart Bear we have 35,000 users, so making a drastic change to the user interface or typical workflow would mean too much retraining, even if the end result is better.

Even “cool, agile” companies like 37signals are trapped. They’ve been so clear and confident in their philosophy of “do less,” they cannot go after markets where “less” is not more but, actually, just less. For example, with more than a few sales people in a traditional sales organization it’s impossible to use Highrise — the folks-of-many-signal believe pipeline reports and geographic domains and integrated campaign management are unnecessary complications, but actually it’s Highrise that is unnecessary.

Of course the world is changing, and in particular your customers are changing. Normally this leaves room for the next competitor, but if you’re already entrenched you can leverage your existing status, insider knowledge, and revenue stream as long as you’re willing to change too.

You have more money, you’re better known, you have existing happy customers to help spread the word, you have employees to build new things, and you have more experience with what customers actually do and actually need, which means you should have the best insight.

Any new competitor would kill for just one of these advantages. If you’re not using them, how silly is that?

Zoho made exactly this argument to explain why they’re not terribly worried that Microsoft is now a direct competitor:

Companies don’t get killed by competition, they usually find creative ways to commit suicide. Office 2010 will be the end of Zoho, if we stop innovating, stop being nimble and flexible in our business model. Then again, if we stop all that, Zoho will die anyway, no Office 2010 needed to do the job.

37signals is trapped inside their self-imposed philosophy, but you don’t have to be.

Go git ‘em

Imitation might be the sincerest form of flattery, but it’s still sucks when someone does it to you.

Of course you can still battle it out in the marketplace, but you need something that can’t be duplicated, something they could never beat you on, then hang your hat on that and don’t look back.

Don’t despair if you don’t have an unfair advantage yet. I didn’t either when I started Smart Bear! But I built toward having some, and eventually earned it.

What else? What other competitive advantages can’t be easily copied, or if they are copied it doesn’t matter? Leave a comment and join the conversation.



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Filed Under: competition, How-To, inspiration, Marketing, positioning, strategy

5 Lessons from 150 startup pitches

July 11, 2010 By Jason



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I just reviewed several hundred startup pitches for Capital Factory. Most were on paper and video; 20 were invited to pitch in person.

three little pigs

Interesting patterns emerged:

  • Everyone makes the same classes of error.
  • Those who avoided just one of those errors stood out in the crowd.
  • These are problems with the business concept or the founder’s attitude, not specific to raising angel money.

You’re probably making a lot of these errors too.

Not that I blame you! After all, these became clear to me only after seeing hundreds of applications; you don’t have the luxury of that perspective.

So for the next few weeks I’m doing a series on these mistakes and what to do about them.  This post serves as a hyperlinked table of contents, so either bookmark this page or subscribe by email or RSS to get notified when new articles get posted.

Here’s the list:

  1. Invalid competitive advantages
    “Superior SEO” and “unique features” are not competitive advantages.
  2. Lacking an unfair advantage
    You need one killer advantage that no one on Earth can beat you on. (‘Cause you might get beaten on everything else!)
  3. No one said they’d buy it
    You don’t need statistically-significant studies before you begin, but it’s astonishing how many founders blaze ahead before they’ve found even a single person willing to give them money.
  4. Incorrect positioning against competition
    The two faults here are opposites: Believing that uniqueness means competition doesn’t exist, or defining yourself by the competition instead of constructing your own message.
  5. No significant route to customers (coming soon…)
    If your marketing strategy is to run A/B tests and build RSS subscribers, you’ve already lost.

There’s also this list, equally common but I didn’t feel the urge to write an entire blog post on each one:

  1. Unable to describe the company in 60 seconds.
    We’ve all heard of the elevator pitch, but when asked to produce it almost no one succeeded. This is important whether or not you’re raising money because it means you understand your customers and why they buy your stuff.
  2. Building for yourself instead of the market.
    “Scratching your own itch” is how many great ideas begin, but it’s not a business strategy. Often you assume your customer is the same as you — sees the problem the same way, wants to solve it your way, and wants to pay for it. But you’re explicitly not like your customers; for one thing, you have enough initiative and insight to quit your job to start a company. It’s easy to let your idiosyncratic preconceptions prevent you from observing what the larger market will accept.
  3. Pretending your faults don’t exist.
    You have all sorts of shortcomings: First startup, inexperienced, ignorant about how “sales” works, buggy software, whatever. None of it’s a problem if you’re willing to acknowledge and cope with it, but if you persist in lying to me and your customers about it, that’s a problem. (And a lie by omission is twice the lie.)
  4. Don’t know what you don’t know.
    I don’t care that your resume doesn’t prepare you for a startup — mine didn’t either! But if your answer to any question is “How do I know? I just do,” then I know right away you’re not only ignorant but incapable of fixing that ignorance. How do I know this will result in your business drifting aimlessly until you finally run out of money? I just do.

Stay tuned!  The first post in the series goes up Monday.



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Filed Under: advice, capitalfactory, competition, customers, How-To, investment, Marketing, positioning, starting, strategy

Human + Fallible = Love; Corporate + Sterile = Refund

June 28, 2010 By Jason



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A lovely new company/customer etiquette has emerged, and small startups are especially suited for exploiting it. I hope you’re not ignoring it.

Just yesterday someone explained to me what they expect from their website hosting company:

I want someone else making sure the server doesn’t go down. Or, if it does go down, I want someone to apologize to me.

Ten years ago, that bold text would have read: “Or, if it does go down, I want someone to scream at.” Or: “I want someone to give me a refund.”  The new attitude is not “Those assholes better not ever screw up,” but rather “I expect them to try hard, to care, and to treat me well when they inevitably screw up.”

This doesn’t mean you get a free pass to screw your customers, then earn forgiveness from a heartfelt “open letter from the CEO.” Rather, it means:

  • You’re doing your honest, level best to do right by your customers, evidenced continuously through all your communication — blog, tech support, website — not just after a crisis.
  • You’re learning from your mistakes, evidenced by problems tending towards the esoteric, and by explaining in your apology what steps you’ve taken to avoid this and similar classes of error.
  • You’re doing everything in your power to be the best, evidenced by a culture of awesome employees and inventing new ways to make your customers successful, so mistakes are ordinary human error, not negligence or indifference.

It’s not even the apology itself; no one’s convinced when a large company issues an insincere, legally-vetted “official apology” that you know doesn’t fix anything. What that quote above really means is: “I want to work with other people who behave like real people, who are obviously trying their best, and who respond to problems as earnestly and quickly as can be expected.”

In short: People readily forgive honest human error, but become adversarial and distrustful with the typical, sterile customer/provider relationship.

This is why every blog-about-blogging sternly instructs you to “be human.” Umm, what? Compared to what, being feline?

(Isn’t it weird that we have to be told how to “be human?” WTF?)

“No no,” they say, “it means let your humanity show — be authentic.” Oh brother, ok, how do I do that?

The typical advice for “being authentic” is to “just be yourself,” but I don’t know what that means. Thales said the most difficult thing is to “Know Thyself,” so it must be really hard to do that over Twitter and AdWords. (By the way, Thales also said the easiest thing is “To Give Advice.” I’ll let you bask in the irony for a minute…)

So I suppose one route to “finding your voice” is to take stock of your total life experience together with your ten-year goals, then synthesize a compelling, internally-consistent philosophy, apply that to all your actions and communications, and summarize it in four punchy words on your home page.

Yeah right, who can do that? Not me, I can’t even decide what to have for lunch.

So instead, here’s a few more practical ways to discover what’s essential to your personality and point of view:

  • Criticize others.
    If you especially enjoy someone’s slogan, why? Is it because it’s funny, clever, specific, unwavering, simple, conservative, confident, or ballsy? Conversely if you loathe someone’s “About Us” page, why? Is it because it’s too personal, not personal enough, too detailed, not detailed enough, silly, formal, useless, childish, lengthy, or arrogant? When you see something that strikes a nerve, complete the sentence: “I absolutely [love|hate] that because ….”
  • Decide what you are not.
    For example, you might say “I hate companies who use formal language; I’m never going to allow formality to dictate how I communicate.” Or the opposite: “I hate companies who think it’s funny and clever to use informal language; I’m going to instill confidence by showing that we behave like grown-ups.” It’s easy to identify corporate stuff that pisses you off; use that to decide both what not to do and what to do instead.
  • Copy something you love.
    Sounds weird I know — how can copying lead to a unique, personal style? But if you think about why you love something — a company, an attitude, a writing style, a philosophy — it’s because you identify with it so completely. It is you! Of course over time you’ll morph that copy into something unique, but there’s nothing wrong with getting a head start by imitating something you wish you had thought of yourself. Careful though — I’m not advocating plagiarism! The goal is mimicry, not theft, influence, not carbon-copy. Your mindset should be: The thing I’m copying is a rough draft that needs extensive editing but whose heart is in the right place.

Even assuming you successful identify what “being human” means to you, it’s still surprisingly difficult to implement because every strong decision you make will necessarily alienate many people even while it’s thrilling others.

If you adopt an informal style, some people will find it refreshing while others find you untrustworthy. If you’re proactive in announcing bugs, some people will reciprocate by gracefully putting up with the problems, while others will be shocked – shocked! — and will Twitter that you sell shoddy software. If you admit the entire company consists of two people, some folks will smile knowing they’ll get primo customer service while others will flee because of the low probability you’ll still be around next year. If you curse on your blog, many people will wince and click “Back” but others will laugh and click “Subscribe.”

And yet, strong, specific, and honest you must be. Yes it means turning off some people, but the remainder will love you all the more (and make sure their Facebook “friends” know it).

What’s the alternative — having no persona at all? Then why would anyone get excited about you? Why would they put up with your faults? Why would they tell their friends about you?

Is your goal is to become a soulless corporation? No? Well then, do whatever it takes to be soulful.

Continued in the comments… How do you find your voice? How do you decide which people to alienate? Do you disagree with the premise? Leave a comment and join the discussion.



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Filed Under: culture, Essays, honesty, inspiration, introspection, Marketing, persona, philosophy, positioning, social media

Telling the 800-lb Gorilla to Shove it up his Ass

May 31, 2010 By Jason



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Every founder frets about competition from a big company, me included.

We scoff at their inability to innovate and for prioritizing shareholders over customers, but still we quiver in fear.

stock-dance

Dozens of people on Answers.OnStartups ask about it so I know I’m not alone. It always goes like this:

I’m just a two-person operation with no budget. What if a huge company with a hundred software developers and a million dollars in marketing budget decides to copy my idea?

Answer: You’re dead! Give up! No small company has ever survived competition with a large one!

Oh wait, that’s not true. But poking fun doesn’t help; maybe this article will.

First, take a deep breath and remember that every little software company on Earth in under this threat. This fact alone means competition — or threat of competition — isn’t fatal, and possibly not even important.

Don’t fear the dinosaur, fear the quivering warm-blooded tree-shrew

65 million years ago an iridium-enfused extra-terrestrial meatball o’ death caused what we would nowadays call a “disruptive market event,” and the cold-blooded dinosaurs couldn’t weather the shitstorm. It was the little cenozoic warm-blooded agile (oh sorry, now we’re saying “lean”) rodents who adapted by getting “outside the nest” to discover how to eat cockroaches, because we all know that cockroaches are the one form of life that can survive anything.

Like unadaptable dinosaurs, whatever your large competitor is doing now is probably what they’ll be doing two years from now, possibly four. Same message, same product, same pricing, and still taking a dump on Facebook instead of playing by the new rules. By then where will you be?

That kind of competition isn’t scary. What is scary is another scrappy, smart startup like yours — another tree-shrew. The one who silently observes you from afar, then drives down the road you paved, skipping the mistakes you made and copying the good parts.

Take all your angst about big competitors and refocus it on the little ones. (I’ll talk about this sort of competition in future post.)

You’re scratching out a living, not “beating Google.”

If your only conception of “success” is to utterly destroy large companies, then I guess you should stop reading now.

But if you want to build a solid company, something you’re proud of, something that pays handsomely but doesn’t have to be worth $1B, then the game isn’t “us or them.” The question is: How can you own your little piece of the world; Not: How can you wrest $100m of revenue from a big guy.

It’s not your purpose to “beat” another company. It’s your purpose to define yourself on your own terms, not in terms of how you’re like or unlike someone else.

Sure it’s constructive to “set your sights” on a competitor, actively trying to beat them in the marketplace or even steal their customers (e.g. give a discount if someone switches to you). But ultimately the only thing that matters is that you earn more and more customers, whether or not anyone else does too.

Using a gorilla to increase your own prospects

It can actually be an advantage to have a big player in your market, especially if they enter your market after you’re established.

At Smart Bear we make a peer review tool for software programmers; you don’t have to be a geek to know that any software development tool company shares the following fear: “What if Microsoft copies us?” But we know that any code review tool from Microsoft would work only with their own version control system and only inside Visual Studio. (Can you imagine a tool from Microsoft that supported ClearCase, ran inside Eclipse, and had excellent support for Java?)

So what if they did copy us, and what if as a result they owned 100% of the Visual Studio market? Well that still leaves every other market on Earth. And then all of Microsoft’s competitors would also need a code review tool so they don’t fall behind on the hallowed competitive analysis chart, so suddenly IBM, CA, Oracle, Serena, CompuWare, and HP would need a code review tool right away. What better way to accomplish that than to buy the #1 (or maybe now #2) code review tool company — hey that’s us! — which by the way is profitable at a time when any company is happy to have a department that’s generating cash.

In short, Microsoft copying the idea would only validate the market, causing the value of Smart Bear to increase.

What actually happened is instructive too: Microsoft added the concept of “shelving” and put the absolute least amount of effort into supporting code review (it’s literally a check-box that indicates that, somehow, somewhere, a code review happened), so the result is that we sell a ton of Code Collaborator to Visual Studio shops.

In other words, they validated the market by entering it, but exactly because they’re a huge company they couldn’t make it good enough to stop us.

Go where they can’t follow

Big companies play only in big markets.

It’s logical: With all the expensive machinery and bureaucracy it takes a dump truck of money and dozens of man-years to build something new, so the opportunity has to be enormous. Even if they were successful in a small market there wouldn’t be enough profits to move the big needle at the top.

So Microsoft can’t attack a market unless there’s a potential to earn at least $1B. But wouldn’t you be happy playing in a market where you’d be able to rake in “only” $100M? Of course you would.

I’m not talking about carving out micro-niches where only seven people on Earth are potential customers. Just don’t go after massive, general markets like “everyone with a digital camera” or “anyone with a smart phone” or “all software developers.”

big fish small pond

Do what they cannot

Big companies have significant advantages like money, a brand, a team, and a large customer base, many of whom will never switch even when presented with a clearly-better alternative.

Their brand alone is a powerful force you probably cannot overcome, e.g. ”eBay is trustable” or “Apple is cool” or “IBM is safe.”

But the same attributes which deliver those advantages are also restrictive:

  • They can’t release a completely-revamped, brand-new version because they can’t retrain 200,000 users.
  • They can’t take a risk because protecting the existing revenue stream is more important than anything else, even if it means their ultimate demise.
  • They can’t quickly convert new ideas to released code because there’s requirements and documents and designers and approvals and schedules and testing and vetting.
  • They can’t change their image because there’s too much momentum with the old one. For example if they have a reputation for bad tech support, even if it gets remedied most people will still think of them has having bad support.
  • They can’t observe and react quickly to changing market demands because there’s too many layers of people and process, and too many people whose careers depend on maintaining the status quo.

For example, Intuit needs to look solid and timeless, their developers know C++ and desktop applications, and they can’t retrain the computer-phobic home users of Quicken… so they cannot create Mint.

As another example, IBM requires expensive infrastructure, development teams, and sales channels to command multi-million dollar consulting deals, but that also means it’s not profitable to do a small deal, which means small consulting shops never worry about competing with IBM.

They can’t change their product, so you can innovate without competition. They can’t change their image, so you can fill the gap. They can’t listen to a customer and make an impact one week later; you can.

Do what they can’t do, be what they’re not, and you won’t have to worry about competing on those points.

What else?

What are more tips for defending, defeating, or just avoiding big companies? What are your experiences with meeting dinosaurs on the sales floor? Leave a comment and extend this discussion.



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Filed Under: branding, competition, Essays, Marketing, positioning
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