Counter Cliche:  Ready, Set, Exit

Fred’s VC Cliche of the week is the about the Quick Flip.  My counter to that is Ready, Set, Exit (image from Google Images).

Most quick flips involve a huge element of luck.  For every quick flip out there, there are dozens of companies that thought they’d be quick flips and ended up crashing and burning instead.  Back in 1999, when we started Return Path, another Internet entrepreneur I knew loved the idea so much that he told me to start writing the book then, because I would be able to sell the for $100 million before we even had a product in the market.  He said the title of the book would be Ready, Set, Exit.

We were careful not to behave that way, and that’s one of the reasons we’re still here and doing as well as  we are doing today.

As nice as it is to be an investor or an entrepreneur who falls into a Quick Flip scenario, beware of anyone who’s planning on Ready, Set, Exit, whether you’re being pitched to invest, to join the company, or even to be a customer.  Ready, Set, Exit scenarios can’t be manufactured or counted on (if they could, everyone would do them), and that whole mentality is completely antithetical to the stamina required to build a real company.

I think it’s analogous to what everyone tells you when you’re in junior high or high school:  you’ll never find a girlfriend/boyfriend if you’re out looking for one.

Comment on Political versus Corporate Leadership, Part II: Admitting Mistakes

My colleague Mike Mayor writes:

So you’e only asking for politicians to be honest Matt? Is that all? 🙂

Couldn’t agree more on the CEO side. A CEO who cannot admit to failure is doomed to be surrounded by “yes men” and, therefore, must go it alone, whereas the CEO who admits to having the odd bad idea every now and then is more likely to get truthful and accuruate information from those around him/her. Which scenario would you prefer to base your next decision on?

However, I look more to Hollywood for fostering the faux CEO/Board Room stereotypes, not politics. Look no further than the highest ranked show among 18 to 46 year olds: The Apprentice. Trump is just one contemporary example of successfully perpetuating the “kill or be killed” mentality of the ideal CEO. In his book, “How to Get Rich” one of his lessons is to “never take the blame for anything” (meanwhile Trump gets rich by being a caricature of a CEO).

The ideal CEO needs to set the example for the behavior of his employees, and creates opportunities by building relationships not “squashing the competition.” And like it or not, the ideal Board Room is actually a Think Tank of great minds working toward a common goal rather than a place to play mind games and mental poker.

Unfortunately, both of these things make for a horrible TV show but do contribute to building truly great companies! On the other hand, watch too many TV shows (or follow the politician’s lead) and you’ll likely become a CEO whose success is comparable to the CEOs of Enron and Tyco.

(Post 4 of 4 in the series on Scaling CMOs – other posts are, When to Hire your First Chief Marketing Officer, What Does Great Look like in a Chief Marketing Officer and Signs your Chief Marketing Officer isn’t Scaling)

Similar to interactions with all CXOs, you’ll have to capitalize on your moments but there are a few ways I’ve typically spent the most time or gotten the most value out of CMOs over the years.

 One of the key ways to engage with the CMO is to include them in meetings with the rest of the go-to-market (GTM) executives as a group, not in a silo.  While of course I have always had 1:1 meetings with my CMO, I find that the most valuable conversations are the ones with the GTM group as a group, talking about shared objectives and the underlying drivers and coordination points to get there. You might say, “Well, Matt, that’s true of all the GTM executives,” but I disagree. It’s even more important to have the CMO in the same room as the other GTM roles like Sales, Account Management, and Partnerships because marketing needs to be on the leading edge of GTM, not just a function working in a silo at the direction of the other GTM leaders. A lot of what happens in the GTM meetings is nuanced and since Marketing has to somehow make everything tangible, the earlier they hear about it and can start thinking about it the better off the whole company is.

On the other end of the spectrum, I find it very useful to create a thinking session with the CMO, where we take time away from the day-to-day to do deep dives on strategic topics like the company’s positioning, voice, or brand.  Sometimes I like to do these in the context of reading a relevant marketing book or business journal article, or after reading something I ran across on the internet, or something I learned at a conference—something that piqued my interest. Sometimes I don’t have a perspective or an idea, but the thinking session is valuable either way.  I find that the most creative thinking and ideas happen in some of these longer form, unstructured conversations. These sessions are not limited to ideas, positioning, or branding because even the quantitative part of marketing involves a lot of creativity. So, the thinking session can be wide open in terms of agenda, but it needs to be scheduled and done, otherwise all these ideas just ramble around and we don’t make as much progress.

Finally, a lot of my engagement with the CMO is actually a continuation of a longer relationship, before they become the CMO.  Let me explain what I mean. For years, we went through CMOs at Return Path at the same clip as other companies: every 1-2 years we’d make a change and bring in the new flavor-of-the-month CMO and we had a pattern of hiring them from the outside.  Over time, though, we realized that we would be much better served by having more continuity in marketing by investing in our own people and promoting them from within.  The last few CMOs we had at Return Path were all promoted into the role — so I got to know them pretty extensively ahead of time. I was not only thrilled to give them a shot at the top job, but I was in a great place to understand their strengths and weaknesses coming into the role so I could most effectively mentor them.  Of course, you can say the same thing for the other functional departments, but marketing is more acute based on the average tenure of CMOs.

(You can find this post on the Bolster blog here).

Political versus Corporate Leadership, Part II: Admitting Mistakes

The press conference this past spring where President Bush embarrassingly refused to admit that he had ever made any big mistakes, other than to reiterate his gaffe at trading Sammy Sosa when he owned the Texas Rangers, brings up another issue in this series: is it good for leaders, both political and corporate, to admit mistakes?

On the corporate side, I think the ability to admit a mistake is a must. Again, I’ll refer back to Jim Collins’ books Good to Great and Built to Last, both of which talk about humility and the ability to admit mistakes as a critical component of emotional intelligence, the cornerstone of solid leadership. And in another great work on corporate leadership, The Fifth Discipline, writer Peter Senge talks about “learning systems” and the “learning organization” as far superior companies. My experience echoes this. Publicly admitting a mistake, along with a careful distillation of lessons learned, can go a long way inside a company to strengthening the bond between leader and team, regardless of the size of the company.

But in politics, the stakes are higher and weirder — and the organization is a nation, not a company. Publicly admitting a single mistake can be a leader’s downfall. It’s too easy these days for political opponents to seize on a mistake as a “flip flop” and turn a candidate’s own admission into a highly-charge negative ad.

There was a fantastic op-ed in The Wall Street Journal back on April 15 on this topic, which unfortunately doesn’t have an available link at the moment, entitled “Bush Enters a Political Quandary As He Faces Calls for an Apology.” I’ll try to both quote from and summarize the article here since it’s central to this topic:

“For a politician, is an apology a sign of weakness or strength? That is the debate now swirling around President Bush after a prime-time news conference in which he refused reporters’ invitations to acknowledge any specific mistakes in handling the issue of terrorism or offer an apology to Sept. 11 victims’ families. Mr. Bush deflected the invitation, saying, ‘Here’s what I feel about that: The person responsible for the attacks was Osama bin Laden.’ Mr. Bush’s quandary is a time-honored struggle for politicians. While some have found a public apology helps them out of a tough spot, others discovered it can fuel more criticism. So far, there isn’t a definitive answer.”

The article goes on to say that while Harry Truman’s “the buck stops here” mentality was de rigeur in the Beltway for a while (through Kennedy’s Bay of Pigs fiasco and Reagan’s poor handling of Beirut), nowadays, apologies are a dreaded last resort. The reason? The rise of partisanship and the use of ethics and congressional or special counsel investigations used to humiliate or defeat political opponents by raising the spectre of corruption. The examples? Gingrich’s struggles in 1996 over his book; Clinton’s ridiculous linguistics machinations (“it depends what the definition of ‘is’ is”) around the Lewinsky scandal; and Lott’s downfall over segregationist comments.

The piece wraps up by saying that “Mr. Bush was backed into the apology quandary by one of his administration’s toughest critics, former White House terrorism expert Richard Clarke…Since then, White House officials have been pressured to do likewise [apologize to victims’ families about the government’s failings on 9/11] — or explain why they won’t…[but] aides are convinced that admitting error would only embolden Mr. Bush’s critics in the Democratic Party and the news media.”

So the question is: would Bush be better off by saying “Sorry, folks, we thought there were WMD in Iraq, but it turns out we were wrong. And we miscalculated how difficult it would be to win the war, how many troops it would take, and how many lives would be lost. I still feel like it was right for us to go to war there for the following four reasons…”?

I’m not sure about that. He’d certainly be more intellectually honest, and a number of people in intellectual circles would feel better about him as a leader, but my guess is that he thinks it would cost him the election in today’s environment. My conclusion is that today’s system is discouraging politicians from admitting mistakes, and that it will take an exceptionally courageous leader (neither Bush nor Kerry as far as I can tell) to do so.

In the end, while humility appeals to many people in a leader, it’s not for everyone. Fortunately for us, CEOs don’t have to run for office and most CEOs don’t have to face some the same level of public, personally competitive, and media scrutiny that politicians do. Now that’s an interesting conclusion that I didn’t intend at the beginning of the post — being a good political leader and being a good politician are sometimes deeply at odds with each other.

Next up in the series: Not sure! Any ideas? Please comment on the blog site or by emailing me.

Driving Out of the Bubble

It’s easy for those of us who live in the Internet bubble to confuse the words “startup” and “entrepreneur” with the word “technology.”  Every once in a while, I am struck by a fantastic entrepreneurial idea that’s low-tech or no-tech. 

In the last few weeks, I’ve learned of two of them — oddly, very similar ideas.  They’re both going after the New York City black car limo market (all those car services that take business travelers to and from airports and meetings), which is a lucrative but kind of gritty business.  I’ve used black car services for 16 years now, and while I’ve found one that’s pretty good, they all have massive customer service problems and are pretty expensive.  It’s a market ripe for revolution.  But how to execute it?

Kid Car New York is one new service that is attacking this market with an alternative car service that’s oriented around families and kids.  The cars are mini-vans.  The drivers are trained in safety and friendly.  The cars all have car seats and bases in them, which are sanitized from one passenger to the next.  The drivers are actually employees with benefits — this company is trying to do to car services what Starbucks did to convenience store workers.  There is a membership/subscription pricing model that makes it feel more like a club.  While it’s moderately more expensive than black car competition, Kid Car is a natural alternative that appeals to a big niche audience.  The entrepreneur is a friend and former Return Pather, Topher McGibbon.  He’s excited about revolutionizing a sleepy, rough industry.  Mariquita and I have used Kid Car for a bunch of trips with the kids, and it’s like night and day.

In a different way, Ozocar is doing the same thing.  It’s a black car service with a fleet 100% made up of Toyota Priuses (if that’s the plural — I keep wanting to call them Prii). That’s the hook.  If you care about your carbon footprint but still have to do things like fly on planes and get to and from airports, why wouldn’t you pick a service that’s more environmentally friendly?  I tried Ozocar last night for the first time, and it was perfectly fine.  Plus, I felt better about myself the whole 18 minutes home from LaGuardia. 

Ozocar reminds me of my friend Andrew Winston’s book, Green to Gold (I posted about it here), and how businesses can be both more sustainable and more valuable at the same time.  Both Ozocar and Kid Car are great examples of innovation being driven by customer needs and market opportunity unrelated to high tech.  They’re great services, and I hope they succeed.  I just wonder how businesses like these get funded with all of the venture focus in the world on high tech and life sciences.

The Limits of Perseverance

My Dad has a great saying, which is that

It’s ok to chip away at a brick wall, but not if you’re using a toothpick

Entrepreneurs are famous for persevering in the face of adversity, a trait more commonly known as stubbornness.  And generally, that’s a good thing.  Breakthrough ideas aren’t easy to come by, nor is leading the market.  If those things were common, they wouldn’t be breakthrough.

But perseverance doesn’t go anywhere without amassing the proper resources to do the job at hand.  Just as you’d never chip away at a brick wall with a toothpick, you’d never willingly go up against a fierce competitor without a great product or sales effort, or you’d never hire an entry level person to do the job of an executive.

The key word here is “willingly,” and I think the business lesson you can derive from this great saying is that while you can easily identify the resources you’re WILLING to put against a particular problem, it’s much harder to correctly estimate the size of the problem, or the resources REQUIRED to get the job done well.  And even harder than that is recognizing when the resources you’re putting against a particular problem are INSUFFICIENT to get the job done.

The ancillary problem, once you’ve determined that you’re bailing out a cruise ship with a thimble (another colorful metaphor for the same issue), is to figure out whether the right next action is to beef up the resources, redefine the problem, or abandon ship altogether.  That can be an agonizing call to make, and maybe not a clear-cut one either, but at least it advances the cause in a more productive way.

In my mind, being able to slog your way through a problem like this is one of the many hallmarks of a great entrepreneurial leader.

A friend of mine just left his job as CEO of a growth stage company to become CFO of a Fortune 500 company.  That’s a big deal…and also a big change.  When I was talking to him about the move, he said the following to me:

Some executive teams are like baseball teams.  You play shortstop, and you bat 8th.  That’s just what you do.  The team needs one of those because the sport is structured that way.  The CEO of my new company likes to run his executive team as a basketball team.  Everyone has a position, but everyone also has to be capable of doing everything on the court well – shooting, blocking, rebounding, passing – and is expected to go after the ball any time it’s nearby.

It’s one thing to say that of a Fortune 200 company, because you have the luxury of doing anything you want in terms of staffing at those levels.  My friend, who is financially oriented for sure, can be CFO of a company of that size because they probably have a strong Chief Accounting Officer.  But how does that dialog apply to startups?  Should you run a baseball team?  A basketball team?  Does it matter?  Can you switch between the two?

My take is that early stage startups need to be more like basketball teams.  You just don’t have enough people to get everything done unless you all take things off each others’ plates.  And you certainly don’t want to be siloed early on in a company’s life as you’re trying to find product-market fit and get those first customers on board.  Your CTO needs to be in front of customers in sales pitches.  Your CFO needs to run customer service and other staff functions.  Everyone needs to pitch in on strategy.

As companies grow, I think they need to become more like baseball teams because larger organizations require levels of specialized knowledge that you don’t often find in startup leaders (though you certainly can, especially as the world becomes more startup-oriented) if they are to survive and scale.  You need a CFO capable of putting in place more complex systems and controls.  You need a head of Sales who knows how to manage a more disciplined pipeline and sales power-driven machine, not just someone who is a fantastic closer of big deals.

At the larger sizes (well below the Fortune 500 level), you can afford to have more of a basketball team again.  You want people with areas of specialization, but you also just want great athletes, and you can have some of the more technical expertise working at the next couple levels down.

There are two challenges this metaphor raises for scaling businesses.  The first one is making your baseball team AS MUCH LIKE A BASKETBALL TEAM AS POSSIBLE when you’re in that mode.  Why?  I love baseball more than most as a sport, but executive teams of companies at any size need strategic thinkers and interdisciplinary, cross-functional work as much as possible.

And that leads to my second challenge with the metaphor, which is that you don’t want to swap out your executive team multiple times in a rapidly scaling business if you don’t have to.  So this begs the question – can you turn a great specialist into a great generalist and vice versa?  We have gone through transitions this past few years at Return Path from a functional structure to a business unit structure and back (sort of).  My take in the end is that it’s easier to turn a specialist into a generalist than to turn a generalist into a specialist.  You can interview for this.  There are great specialists in every discipline who are capable of being generalist thinkers.  But it’s really tough to take someone without proper training and experience in some disciplines and make them a specialist.  Not impossible (although in some disciplines it actually is impossible – think about General Counsel), but difficult.

Closer to the Front Lines

When we started Return Path, we added a little clause to our employee handbook that entitled people to a sabbatical after 7 years of service (and then after every 5 incremental years).  Six weeks off, 3/4 pay.  Full pay if you do something “work related.”  Sure, we thought.  That’s an easy thing to give.  We’ll never be 7 years old as a company. 

Now, 8 1/2 years later, of course, the first wave of people are reaching their sabbatical date.  A couple have already gone (one trip around the world, one quality time with the kids).  A couple others are pending.  Four of us at the exec level are overdue to take ours, and we all committed to take them this year, planning them out so we can back each other up.  My colleague George Bilbrey is in the middle of his 6 weeks off now, and I’m his backup.  And wow – is it a great experience.  Busy, but great.

The reason it’s great is that I am one step closer to the action.  Usually when someone on my team goes on vacation, we just let things run for that week or two.  The people who report into that exec know I’m around if they need something, but I don’t take over actively working with them.  Not so this time.  Six weeks is too long for that.  I’m actively subbing for George.  I’m sitting in his office in Colorado every other week for the sabbatical.  I have weekly meetings with his staff.  I’m working with them on their Q2 goals (for added fun, we’re even working on George’s Q2 goals!).  I’m attending meetings that George usually attends but that I’m not invited to.

The insight I’m getting into things in George’s area of the business is great.  I’m learning more about the ins and outs of everyone’s work, more about the team dynamic, and more about how the team works with other groups in the company.  Most important, I’m learning more about how George and I interact, and how I can manage that interaction better in the future.  And I’m making or suggesting some small changes here and there on the margin.  Hopefully I’m not messing things up too badly.  Otherwise, I will hear about it in 3 1/2 weeks!

I strongly encourage everyone who is a Manager of Managers or higher in their company (especially if that company’s name rhymes with Geturn Fath) to use any vacation of someone on their team as an excuse to really substitute and get closer to the front lines.

Silly, Silly Patent Nonsense

Some news floated around the email marketing world yesterday that is potentially disturbing and destructive but highlights some lunacy at the same time.  I hope I’m getting enough of the details right here (and quite frankly that isn’t a joke, which it feels like).

Tom DiStefano of Boca-based PerfectWeb Technologies is suing direct marketing behemoth InfoUSA for patent infringement of a business process patent for bulk email distribution that he received in 2003.

I will first issue my disclaimers that I’m not a patent lawyer (nor do I even play one on TV) and that I have only quickly read both the legal complaint and the patent.  But my general take on this is that it’s more silly than anything else — but has the potential to be destructive at the same time.

Silly reason #1.  I’d like to go patent the process of blowing my nose with facial tissue predominantly using my left hand after a sneeze — will you pay me a royalty every time you do that, please?  That’s a short way of saying that I am increasingly finding that the patent system is deeply flawed, or at least very ill-suited to the way technology and Internet innovation work today.  For centuries, patents have been put in place to provide inventors adequate incentive to invest in innovation.  That made sense in a world where innovation was expensive.  It took a long time and a lot of capital to invent, say, the cotton gin or the steam engine.  It takes a long time and a lot of capital to invent a new life-saving drug.  But Internet-oriented business process patents are just silly.  It can take a guy with a piece of paper a few minutes to sketch out a business process for some niche part of the Internet ecosystem.  No real time, no real capital.  And worst of all, it’s generally easy to “design around.”  Disclaimers and all, this seems to be just such a patent.

Silly reason #2.  The patent was issued in 2003.  Really?  I’m not sure when the patent holder claims he invented the bulk email distribution process, but unless it was in the early 90s before the likes of Mercury Mail, First Virtual, Email Publishing, etc., then it’s highly likely to be “non-novel,” “obvious,” and conflicting with lots of “prior art.”

Silly reason #3.  Why wait four years to prosecute a patent that the inventor believes has been violated so obviously by so many (hundreds, maybe thousands) companies for so many years?  I don’t quite get that.

I’m not exactly seeing the David vs. Goliath here.

So here we go.  It will likely take months and millions before this thing gets resolved.  If our legal system doesn’t come through as it should, or worse, if InfoUSA punts and settles, this is going to cause big problems for many, many companies in the industry.

I hope our friends at InfoUSA are happy to dig in and fight to have the patent invalidated, although that’s expensive and time consuming.  And assuming that the patent holder is likely to go on a rampage of legal complaints against every other player in the industry — someone should tell Vin Gupta that we can all band together to fight this silliness.  We’re happy to help here at Return Path.

Like all CEOs and VCs, I’m a big believer in the power of pattern matching. I just wrote a whole blog post about the limits of pattern matching after hearing the quote above at a board meeting recently. But then a little alarm rang in the back of my head, and realized that I wrote about the value and limitations of pattern matching here years ago with an even better quote from my father-in-law:

When you hear hoof beats, it’s probably horses. But you never know when it might be a zebra.

So rather that rewrite that entire post, I thought I’d just add onto it a bit here with a current example in my head about executive recruiting and hiring executives. But then I realized I wrote that as well – the myth of the playbook. Think I’ve been blogging too long now, or what?

So let’s focus on these two angles instead: first, how do you know when you’re in a situation where You’ve Seen One, You’ve Seen Them All, or if you’re in a situation where You’ve Seen One, You’ve Seen One? And second, how can you protect yourself from a “seen one, seen one” situation when you are approaching the situation as “seen one, seen them all”?

Here are three ways to think about the decode – is this a pattern or is it a one off?

1. The list is long. It’s not actually Seen One… so much as it’s Seen X. The longer the list, the more likely you’re seeing a link in a chain instead of a one-off
2. The item is more everyday/less bespoke. Back to my example in the playbook post I referenced above, hiring a late-stage CFO is bespoke. Hiring an entry level collections person for your AR team is a lot more everyday
3. The item is more specialized. No two companies are exactly alike. No two SaaS companies are alike, but they’re more alike than two random companies. No two B2B SaaS companies are alike, but they’re even more alike than two SaaS companies. B2B SaaS companies with email marketing platforms. B2B SaaS companies with email marketing platforms serving SMBs. You get the idea

And here are a couple tactics to mitigate against calling a pattern where a pattern doesn’t exist:

1. Do a premortem (I wrote about this concept in this post) and ask yourself “If this turns out to be wrong, what are the possible reasons it was wrong?”
2. Build a very small bullet-point level mitigation plan against the top three reasons you come up with

There’s no guarantee that the sound you hear is horses and not zebras. But these indicators may help raise the odds that your pattern match is on point or protect against an unexpected herd of zebras.

Shifting Gears

My Grandma Hazel has a Yiddish saying that she uses to describe me from time to time — "gor oder gornisht" — which means "all or nothing."  My Dad has a Greek saying that he uses to describe me from time to time — "meden agan" — which means "everything in moderation."  These two approaches to life seem diametrically opposed.  Which is right?

Being a successful entrepreneur requires BOTH approaches, each at different times, and more important, the ability to shift gears between the two and be clear about the shift to yourself and to others.

There are periods of time when you need to be in "all or nothing mode."  Push extremes.  Demand more from your team.  Drop lots of the items on your to-do list and grow a singular focus on The One Big Thing.  Don’t go for a light jog — train for a marathon.

Then there are periods of time when you’re in execution mode.  The path has been defined.  Things are working.  Put the "life" back in your "work-life" balance.  A marathon?  Are you nuts?  Just run 3 miles a day and stay in shape.

You — and your organization — need to be able to shift gears between the two modes.  An organization that never goes through extreme periods is in grave danger of stagnating.  No one in an exciting company ever has "business as usual" emblazoned on their to-do list 365 days a year.  Organizations tend to take their biggest leaps forward when there’s an extreme situation, an all-hands on deck, a crisis.

But an organization that ONLY knows how to exist in crisis mode can be miserable.  Trust me, I’ve worked in one before.  There’s a shiny new object every week that everyone has to drop everything to pursue.  Everything gets started, but nothing gets finished.  People are frustrated.  They burn out. 

Companies and people (most mortals, anywway) have to go through periods of time where they thrive on the routine and celebrate their everyday achievements.

The trick to getting this duality right is to make sure you are clear to yourself, and when necessary to others, about when you’re shifting gears.  For yourself:  when you go into "gor oder gornisht" mode, clear that calendar and set aside the time to do the job right.  For others:  don’t make them guess where you’re coming from.  If you’re hitting an extreme patch, let them know by meeting or email/memo.  And make sure you’re fair to them as well.  If you’re forcing people in the organization to focus on The One Big Thing, make sure you recognize the changes that forces in their goals, their deliverables, and their external commitments and give them the flexibility they need to succeed.  Going back into "meden agan" mode is easier, but still requires a note of closure to your team, celebrating the success of the big push.

Fortunately, I can tell both Dad or Grandma that they’re right (how would I ever pick?).  I just hope the ancient Greek philosophers and bubbies everywhere aren’t spinning in their graves over the mixing of metaphors.