OnStartups

Highlights On The Business of Software (2012)

Posted by Dharmesh Shah on October 8, 2012 17 Comments

The following is a guest post by Matthew Dean. Matthew is a Center of Excellence Leader at CTS Inc., a privately held IT consulting firm servicing enterprise customers with offices in Atlanta, GA ; Birmingham, AL ; Charlotte, NC ; Chattanooga, TN ; and Mobile, AL. You can follow him on Twitter at: @GoghUA

Within the past week, my son turned four, my daughter turned one, and I attended the hands down best conference I have ever attended. It has been a great week and thus, I was inspired to share my experience at the conference, Business of Software, or BoS for short. The conference website is businessofsoftware.org and the hash tag was #BoS2012.

Business of Software logo

This was the second time I have attended the BoS conference and the first time it has been hosted at the Intercontinental Hotel in Boston, MA. My first visit was in 2010, when it was hosted at the Seaport Hotel and World Trade Center in Boston, where I came away inspired in a different way. This first visit really kicked off my interest for reading business oriented books which began with one of the books provided to conference attendees, Youngme Moon's Different: Escaping the Competitive Herd. I quickly plowed through this book on my way to picking up Seth Godin's Linchpin: Are You Indispendable for the plane ride home. Both Youngme and Seth were speakers at the 2010 conference, among many other outstanding speakers such as Eric Ries (The Lean Startup) and Scott Farquhar (Atlassian).

When the time came for the 2011 conference, my wife and I were expecting our second child and the due date aligned with the conference. One of these things I simply could not miss. Fortunately, 2011 marked the first year that the conference was to be streamed live online. I was not able to listen in to the entire conference, but I was able to experience a few of the, once again great, speakers. Primary among them, Clayton Christensen gave an outstanding presentation that made me instantly grab a copy of The Innovators Dilemma . Other great speakers in 2011 included Alex Osterwalder (Business Model Generation) and Alexis Ohanian (Making the World Suck Less).

Early in 2012, when the conference dates were announced, I jumped at the opportunity and registered right away, even before the speakers had been announced. With what I had seen over the past two years, I had full confidence that the 2012 lineup would be top notch. As the year went on, I continued to be impressed with the lineup that was coming together and chief among that list for me was Dan Pink. I had previously read Dan Pink's book Drive and seen his brief Ted presentation on the topic, so I knew he would be one to look forward to. Other names that piqued my interest included Kathy Sierra, Dharmesh Shah, Noam Wasserman, and Bob Dorf. The latter two whose books, The Founders Dilemma and The Startup Owner’s Manual respectively, had been queued on my Amazon wish list for some time. During the conference these two books got dropped off my wish list, not because they failed to impress with their presentations, but because they were both giveaways to conference attendees. Outside of the great speaker lineup, reading my mind with the book selection wasn't the only way the conference impressed me. The excellent food, intriguing workshop, and overall high quality of attendees also greatly enhanced the experience. Overall I was very impressed with the conference and look forward to returning next year.

The remainder of this post will summarize my thoughts in each of the presentations at this year's conference. Unfortunately if you weren’t in attendance, these summaries simply won’t do the presentations justice as there were so many stories and anecdotes to go along with them that provided much context and value as well. Thus, I would highly recommend that you follow the BoS conference blog as videos will eventually make their way onto the site.

Day 1

Kathy Sierra

Building the Minimum Badass User

With a title which was clearly a play on the concept of a minimum viable product, as popularized by Eric Ries, Kathy proposed that in order to address the problem many companies face of great product, didn't sell or GP;DS for short, that we should not be focusing on making an awesome product but instead on making awesome, or badass, users.

Kathy outlined three popular myths when looking to create expert users:

  • Expertise comes from more knowledge
  • Expertise comes from more experience
  • Expertise requires natural talent

On your way to building badass users and debunking these myths, Kathy identified three things that you need: models, edge practice, and forward flow. As the first speaker of the event, she foreshadowed the last when she referenced Dan Pink's as "the best summary of determination theory." She wrapped up by providing the following guidance for each of the three identified needs for building badass users.

  • Models: provide high-quality, high-quantity examples of badass
  • Edge Practice: provide exercises designed to build precise, measurable, fine-grained skills in 1-3 sessions
  • Forward Flow: provide motivation to keep users making forward progress

Jason Cohen (@asmartbear)

How data, statistics, and “the numbers” will make you totally do the wrong thing

Jason’s presentation was interesting warning to consider with the rise A/B testing popularity and the measure everything philosophy. Although, none of this should be news as Jason addressed this on his blog in 2009 and he was even kind enough to create a friendly URL to share the math: bit.ly/abhamster

Jason proposed that instead of blindly testing headlines and other tweaks that you instead identify a theory and focus on testing that theory. Thus, your strategy should not necessarily be to measure everything but instead to pick 1-2 key metrics to optimize, a few thresholds to watch, utilize simple sensitivity analysis, and most importantly, fold real data back into the model.

Joel Spolsky (@spolsky)

The cultural anthropology of Stack Exchange

We all know Joel from his popular blog, Joel on Software, his company, Fog Creek, and as the CEO of Stack Overflow. If you aren’t already familiar with Stack Overflow and other websites in the Stack Exchange network, then you likely would have been lost in Joel’s presentation as he focused on the structure and how the community functions. In short, the communities that thrive around the Stack Exchange model are best described as, in my words not Joel’s, passionate and nerdy. Take a look at some of the more popular, outside of Stack Overflow of course, Stack Exchange based communities: Math, Paleo, Gaming, and the English Language (if you found this from here, please excuse my inadequacies).

Dharmesh Shah (@dharmesh)

Lessons from the trenches

Dharmesh is a BoS regular and always delivers a great presentation. I think this year’s most tweeted quote award goes to Dharmesh for the insight that “before you gamify your product, you should decrapify it.” The reminder of his presentation will filled with so many other great insights that instead of spend the rest of the article writing about those, I will wrap up into a few key highlights:

  • There is no better time, since the early 1990’s, to build a software business
  • You don’t just want customers, you want crazy loyal fans.
  • The technical switching costs of you software should be low but the emotional switching costs should be high.
  • You should pick markets where the barrier to exit is low.
  • You should strive not just to build a great startup, but to build great entrepreneurs.

 

Peter Bauer

Founding principles versus scaling principles

Peter discussed his experiences from founding and scaling Mimecast from 2003 to now and addressed four principle items that he learned along the way: building something with friends, deal constructively with my fears about success, never allow an investor that would change chemistry, and have clear intent and logistics. The first three allowed Peter to provide some insight into his specific experience going from the incubation to growth of Mimecast while the fourth principle provided the actionable items for audience takeaway. Peter argued that “intent creates a power multiplier,” or in other words, if you are intentional about the goals and directions of your business, the power or drive towards those goals will be even more powerful. The most powerful part of Peter’s presentation was, at least for me, the message that all too often it is the accounting (or revenue) measures that shape the intent of a business, thereby causing the business to lose its grip on its vision. Hence, we must ensure the clear intent and logistics to avoid straying down this path.

Noah Kagan (@noahkagan)

Lovegasms

Noah made a last minute change in his presentation topic, originally slated to be Rogue Marketing Strategies, in order to cover something that was more relevant and timely to his passion. Noah shared a chart of AppSumo’s revenue that showed a clear decline beginning around the October 2011 timeframe and was very open about the lack of passion and customer focused that had resulted from his disconnection thus, the topic change. The reason for the loss of passion and the decline was summed up in short as: get rich, get boring and risk adverse. Hence, the AppSumo Framework for decision making was born:

  1. Is this X something we’re Proud of?
  2. Is it simple?
  3. Are we having fun?
  4. Is it profitable?

In addition to this framework, AppSumo developed Project Happiness to track what their customers were saying. At time of writing, this happiness index is hovering slightly about the middle in the “ok” category and well below the “Amazing” category. As part of the project, AppSumo is looking to six steps evaluate the business on and hopefully get their customer happiness score into the “Amazing” category.

  1. Core Values aka The HELL YES/NO
  2. Value
  3. Authenticity
  4. Surprise
  5. Consistent
  6. Personal

Day 2

Peldi (@peldi)

Coding is the easiest part

On the morning of day two, I rode the elevator down with Peldi and another conference attendee, where Peldi shared with us that he was a bit nervous. If you’ve ever seen Peldi present or talked with him, you would certainly find this humorous as you would never guess that he is the nervous type. Despite his stated nervousness, he delivered a great presentation with a focus on six key areas, aside from coding, that are crucial to the success of your business: vision, product (or service), marketing, company, support, and ecosystem. Throughout his review of these areas, Peldi shared insights that he gained from Balsamiq in each of these areas. The following were some of my key takeaways:

  • Embrace your ecosystem.
  • Surround yourself with excellence. Peldi even said that he always wants to be the dumbest person in the room. If this ever happens, I would really like to meet the people in that room.
  • Laws are like features, easy to add, but really hard to remove.
  • Don’t put in place unnecessary policies, the main goal of a policy should be to keep everyone on the same page. If/when a policy is needed, you should explain why it is needed. Balsamiq’s vacation policy is: take some.
  • Pace > Deadlines, everyone works at a different pace and if you can find and embrace that pace, they will be more productive than simply setting a deadline.
  • Remove salary from the equation.

Mikey Trafton (@mikeytrafton)

How to build a world class culture in three easy steps

Mikey is a long time BoS attendee whose first time presenting was a runaway success. If you haven’t heard of Mikey before, he is the Founder and CEO of Blue Fish Development Group and Fire Ant Software, both services companies that sell to “big freaking companies.” Mikey’s presentation was all about the importance of building a great culture to the success of a company, summarized in three steps as follows:

  1. Decide what you care about.
  2. Hire people that care about the same things you do.
  3. Pay attention to the things you care about.

While these steps may seem obvious, Mikey was able to share many lessons learned in each of these areas that really sold the importance understanding these three steps. When growing Blue Fish, Mikey made the decision that above all else, Blue Fish stood for “client elation,” and in order to achieve client elation, he wrote down these five core values:

  • Client focus, take the clients goals and make them our own.
  • Teamwork, build and elite team rather than a team of elites.
  • Accountability
  • Excellence
  • Communication

Mikey stressed that writing down these core values made it concrete and tangible and really allowed him to hone in on identifying people who were the right cultural fit. However, just finding the right people doesn’t end your effort to build a great culture as you must constantly be paying attention to the three steps because “you will get the behaviors that you tolerate” and you must ensure that you are always focused on what you care about.

Adii Pienaar (@adii)

Going global form the edge of the world

Adii is one of the founders behind Woothemes. Woothemes is headquartered in Cape Town, South Africa, not exactly a city known as a great place to build a startup. Adii’s presentation likely hit home to many entrepreneurs in the room as he used his story to focus on the unimportance of where you are building your startup. My key takeaways from Adii’s presentation were as follows:

  • Invest in branding because it’s free. Your culture and how you portray yourself is the brand.
  • Customer service is cheap marketing.
  • When trying to identify your business model, find something that enables others to make money because that will be recession proof.

Dan Lyons (@realdanlyons)

What would Steve do? The insider’s guide to talking to the media.

Dan Lyons was a senior editor at Forbes is now a writer at Newsweek and is the guy behind “Fake Steve Jobs.” I’ll have to apologize to my readers that I didn’t take very good notes during Dan’s presentation because he was so entertaining I had a hard time keeping up, this was truly one where you had to be there. However, I did manage to jot down the primary takeaway from Dan, which loosely paraphrased is:

If you are basing your business on anything other than mobile, you should stop now.

Gail Goodman (@Gail_Goodman)

When software and people mix

In 2010, Constant Contact was ranked 134th in Deloitte’s Technology Fast 500, however not that long ago, they too were a startup struggling to find their business model. Gail told the story of Constant Contact’s growth over the “long slow ramp of death” from 2002 – 2005 as they were “only eating what they were killing.” There are no silver bullets, she said, but there are many little things. First and foremost, you should start with the view from the customer’s perspective, not by looking at your metrics. Optimizing the sales funnel is anything but low touch Gail argued, it requires a combination of technology and people you have to iterate in “measure – test – repeat” cycle until you get it to work. Finally, Gail wrapped revealing that word of mouth has been the single best channel for Constant Contact and that the best gas pedal they have found for word of mouth is a great customer experience.

Paul Kenny (@PaulKennyOL)

Resistance is futile!

Day two wrapped up with another BoS conference regular, this time everyone’s favorite sales guy. Paul opened up with a list of things that good sales people do really well:

  • Understand “value”
  • Dialogue
  • Share stories
  • Ask for a commitment
  • Manage resistance

The remainder of the presentation focused on the last item on this list, managing resistance. Paul argued that many sales cultures take the path of least resistance and that this is largely detrimental to a sales process because “a sales conversation with no resistance rarely ends in a deal being done.” Most customer resistance (or objections) are either logical (i.e. it won’t work for us) or emotional (i.e. I don’t like it) and typically facilitate two traditional responses attack or give up. In effectively dealing with objections, Paul suggested that there are eight things that are required of a sales person, the first four which can be trained, while the later four cannot be trained and you must there for look to hire for. Those either things are: client awareness, market knowledge, product/service knowledge, sales technique, speed of though, staying on side, persistence, and reframing. Whether you are an expert in these eight areas or you just want to pass this along to your sales guy, Paul offered the following general principles for dealing with objection:

  • Understand and isolate the underlying objection
  • Get on side (empathize)
  • Respond / Reframe
  • Confirm and Close
  • Don’t use “why”, it puts people on their back

Day 3

Noam Wasserman (@noamwass)

Understanding founder dilemmas

Professor Noam Wasserman started out day three by not even taking the stage, instead he constantly wondered the audience delivering a steady stream of insight that was truly engaging. Leading in with a quote from New Venture Labs that “most companies fail,” Noam immediately took the opportunity to deliver some statistics on failure based upon the research for his book, the aforementioned Founder’s Dilemma, where he stated that 35% of failures are based upon product development, functional management, and/or market fit problems while the remainder of failures, 65%, can be attributed to people problems. The research for Founder’s Dilemma encompassed four thousand startups, ten thousand founders, and twenty thousand executives, which by my calculations is at least a few more than you get to interact with in your local startup events.

Keeping with the theme of people problems, Noam identified the stages at which people are injected into the business which can cause dilemmas:

  • When to found / Core founder
  • Building the team / Co-founders
  • New-Venture Hiring / Hires
  • Beyond the Team / Investors, Partners
  • Exit Dilemmas / All of the above

The remainder of his presentation was filled with some great examples from ZipCar to Ockham illustrating various strategies for addressing these issues and their results. While he delivered more than enough details, the presentation will was just the tip of the iceberg for me as it bumped Founder’s Dilemma up to the top of my reading list.

Bob Dorf (@bobdorf)

Customer Development. The science of acceleration for growth Businesses

While Noam started with a quote that “most companies fail,” Bob started by saying that most startups fail to scale. Per Bob, the primary reason they fail is because they assume that their customer’s problem, and the product features needed to address their problems, are known. Bob’s presentation focused on addressing these failures by working through a customer discovery – customer validation – pivot cycle. For those familiar with The Lean Startup principles, Bob’s presentation would be familiar as he advocated that your goal should be to speed the time through this cycle in order to maximize chances of success. Ultimately, you should be working to find passionate “earlyvangelists” (i.e. customers who are desperate for you to solve their problem.)

Dan Pink (@DanielPink)

The surprising truth about moving others

First, I have to admit that Dan Pink was the speaker that I was most excited to see at BoS. I attribute that interest to my reading of his previous book, Drive . If you haven’t read it, I would encourage you to do so right away. If you are not a reader, then take nineteen minutes and watch Dan’s presentation on Ted. Now that I’ve got that out of the way, on to Dan’s presentation.

Dan began by saying that the upcoming book, To Sell Is Human: The Surprising Truth about Moving Others , upon which this presentation was based is only 96% finished. He would be rushing to wrap up the remaining 4% by his Friday deadline. It was great to see an amazing presenter like Dan deliver such a raw presentation on such fresh material. Further, it was exciting to hear how the idea for the book came about. Neil Davidson, one of the organizers of the conference, started a dialog with Dan regarding applying the principles outlined in Drive to sales people. This idea was intriguing enough to Dan that he embarked on a two year investigation of sales to find the answer. He summed up his two years of investigation into one word: disintermediation.

dis·in·ter·me·di·a·tion [ dìssintər meedee áysh'n ]

removal of intermediaries: the elimination of intermediaries such as wholesalers or retailers in business transactions between producers and consumers

On the surface it appears that in a world of Amazon, Expedia, and social networks, sales people are becoming obsolete but the research showed a different answer. The death of the salesman has been misreported, the facts simply do not back it up.

In the past, the salesman always had the most information, there simply wasn’t a way for the consumer to come to the table with the same or more information. In today’s world, we are moving from this world of information asymmetry to a world of information parity. This information parity forces people to take the high road. Hence, Dan proposed three qualities for “how to be” in this new world of information parity. No longer does ABC = Always be closing, the new ABC’s are:

  • Attunement - The ability to take another's perspective / understand where people are coming from. It is largely about perspective taking.
  • Buoyancy - The capacity to deal with "an ocean" of rejection
  • Clarity - The ability to cut through the muck and provide clarity

So in this new world, who makes the best sales person? The old adage that extroverts are the best sales people simply did not hold up to the research. The correlation between extroversion and sales is .07, basically zero. The evidence shows that the best sales people are “amibverts.” Ambiverts are those individual who fall somewhere on the spectrum between introvert and extrovert. Dan presented a graph of “sales revenue by levels of extraversion” where the numbers were virtually identical to that of what the general population distribution of introverts to extroverts. Correlate this revelation with the US Bureau of Labor Statistics showing that there are 15 million Americans in sales and Dan’s own research showing that all workers spend an average of 41% of their efforts on “selling” and not only are we all in sales now, we might just be the best salesmen.

So, since we are all in sales now and we might just be our company’s best sales person, Dan proposed three abilities needed by a successful sales person: pitch, improvise, and serve. What are you doing to improve these areas? I know for one that I will be preordering Dan’s upcoming book. 

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Did you attend the Business of Software conference this year?  Or, watch the livestream?  If so, what did you learn?