The Facebook Fad

I’m sure someone will shoot me for saying this, but I don’t get Facebook.  I mean, I get it, but I don’t see what all the fuss is about.  I made similar comments before about Gmail (here, here), and people told me I was an idiot at the time.  Three years later, Gmail is certainly a popular webmail service, but it’s hardly changed the world. In fact, it’s a distant fourth behind Yahoo, Microsoft, and AOL.  So I don’t feel so bad about not oohing and ahhing and slobbering all over the place about Facebook.

Facebook reminds me of AOL back in the day.  AOL was the most simple, elegant, general purpose entree for people who wanted to get online and weren’t sure how in the early days of online services, before the Internet came of age.  It was good at packaging up its content and putting everything “in a box.”  It was clean.  It was fun.  People bragged about being an AOL member and talked about their screen name like it was on their birth certificate or something.  And the company capitalized on all the goodwill by becoming a PR machine to perpetuate its membership growth.

Now Facebook — it’s the most simple, elegant, general purpose social networking site here in the early days of social networking.  It’s pretty good about packaging up its applications, and certainly opening up its APIs is a huge benefit that AOL didn’t figure out until it embraced the open web in 1999-2000.  It is pretty good about putting everything in a box for me as a member.  And like AOL, the company is turning into a PR juggernaut and hoping to use it to perpetuate its registration numbers.

But let’s look at the things that caused (IMO) AOL’s downfall (AOL as we knew it) and look at the parallels with Facebook.  AOL quickly became too cluttered.  It’s simple elegance was destroyed by too much stuff jammed into its clean interface.  It couldn’t keep up with best of breed content or even messaging systems inside its walled garden.  Spam crushed its email functionality.  It couldn’t maintain its “all things to all people” infrastructure on the back end.  Ultimately, the open web washed over it.  People who defected were simply having better experiences elsewhere.

The parallels aren’t exact, but there are certainly some strong ones.  Facebook is already too cluttered for me.  Why are people writing on my wall instead of emailing me — all that does is trigger an email from Facebook to me telling me to come generate another page view for them.  Why am I getting invitations to things on Facebook instead of through the much better eVite platform?  The various forms of messaging are disorganized and hard to find. 

Most important, for a social network, it turns out that I don’t actually want my entire universe of friends and contacts to be able to connect with each other through me.  Like George Costanza in Seinfeld, I apparently have a problem with my “worlds colliding.”  I already know of one couple who either hooked up or is heavily flirting by connecting through my Facebook profile, and it’s not one I’m proud to have spawned.  I think I let one of them “be my friend” by mistake in the first place.  And I am a compulsive social networker.  It’s hard to imagine that these principles scale unfettered to the whole universe.

The main thing Facebook has going for it in this comparison is that its open APIs will lead to best of breed development for the platform.  But who cares about Facebook as a platform?  Isn’t the open web (or Open Social) ultimately going to wash over it?  I get that there are cool apps being written for Facebook – but 100% of those applications will be on the open web as well.  It’s certainly possible that Facebook’s marrying of my “social network” with best of breed applications will make it stickier for longer than AOL…but let’s remember that AOL has clung to life as a proprietary service for quite a while on the stickiness of people’s email addresses.  And yet, it is a non-event now as a platform. 

It will be interesting to see how Facebook bobs and weaves over the coming years to avoid what I think of as its inevitable fate.  And yes, I know I’m not 18 and if I were, I’d like Facebook more and spend all day in it.  But that to me reinforces my point even more — this is the same crew who flocked to, and then quickly from, MySpace.  When will they get tired of Facebook, and what’s to prevent them moving onto the next fad?

Poor Systems Integration Just Makes It Worse

I attended  a day of classes at Harvard Business School in 1992 as a college senior.  I distinctly remember a case study on how poor systems integration was impacting companies’ ability to get a whole view of their customers and thus provide high service levels.  In fact, the case study I remember was about American Airlines and how one system showed that a customer’s flights had been delayed or canceled, while another system showed a customer’s travel patterns and was able to tell when the customer had defected to another airline, and a third system sent out rewards and notices to customers.

That was 16 years ago.

I received an email from American Airlines today about this past week’s service debacles around additional airplane inspections.  It was a good email, until I read this line:

If in your travels you were among the many who have been personally affected, I sincerely regret the inconvenience you have experienced.

Um, hello?  McFly?  Shouldn’t you know whether or not I was “personally affected” by your cancellations?  You haven’t figured out how to tie those disparate systems together in the last 16 years?

American’s not alone, by any stretch of the imagination.  I see the same problem all over the place — banks, telco, retail.  I just find it amazing that large companies with huge IT budgets and decades to work with can’t figure out how to tie systems together to understand what’s going on with their customers.  Still.

Drawing the Line:  Where We Come out

In the first post in this series, I laid out a dilemma we’ve had internally at Return Path in recent months: whether and how we accept clients who are in “grey” businesses like alcohol, pornography, and neutriceuticals, and whether that applies uniformly across all of our products (software vs. consulting vs. whitelist). In the second post, I reposted a summary of all the comments we received from readers. Now comes the fun part — the so what.

We had a good series of conversations internally on this issue that included some very spirited debate. Here’s where we come out.

First, we drew a distinction between three types of potentially “troublesome” clients: those whose businesses are illegal, or who advertise or sell illegal products; those whose businesses are involved in litigation around email, data, privacy, or security; and those whose businesses are in the grey area, or what we called in our discussions “morally hazardous.” In the end, we decided that for us, there’s no difference by type of product in terms of how we handle the situation. But each class of client has its own issues as well as enforcement mechanisms.

Let’s start with the easy one. Clients who break the law or whose businesses encourage others to do so have no place in our company. The challenge here is more on the edge cases — what about companies whose products or advertising are sometimes illegal (by geography or by age of target audience)? I will come back to that topic.

Next, we move on to those companies who are involved in email-related litigation. We added this category to our thinking because we view ourselves as advocates for end users, the champions of good, high quality email. Ultimately, the decision about whether or not to take on a client who is involved in email-related litigation is subjective. One example of a client we would take on is a very reputable company that has a single instance of a CAN-SPAM violation or investigation by the FTC. But there are other companies who are in much deeper. I will somewhat impolitely refer to them as “pissing in the pool.” As advocates for good email and as stewards of the email ecosystem, we can’t in good conscience allow some of these people to be clients, even of our software, if they have the potential to use the software for evil and not for good. Of course, once the litigation is finished we can re-assess, assuming the company was found to not have violated any laws.

Finally, the tough category, the “morally hazardous.” There certainly is something that resonates with us around one user’s comment that, to paraphrase, if you’re not comfortable telling everyone around the dinner table that you work for Client X, you shouldn’t work for Client X (or, Client XXX, as it were). But at the end of the day, legislating morality is impossible to get right for everyone, at every time. We think it’s not our business what kind of legal business our clients are in. In fact, we go so far as to say that as advocates for end users, our criteria around which clients to accept should be as objective as possible — that is to say, much more around their email reputation (how much do users like the content) than about some arbitrary judgment about what’s right and what’s wrong. We feel like as long as we maintain our policy of allowing employees to opt-out from working with clients or seeing clients’ content that makes them uncomfortable, we’re in as good shape here as we’re going to be.

Of course, that’s not to say we won’t, on a case-by-case basis, turn down a client because of their business. We aren’t a public utility. We have the right to walk away from a client for any reason (or, not to put too fine a point on it, no reason at all). But as a matter of policy we’ve decided to focus on email practices as a basis for who we work with and leave questions of morality of certain types of business aside.

As a final note, we clarified our policies for vetting and enforcing these standards. These do differ a bit by product. For our by-application whitelist, Sender Score Certified, we will continue to ask questions around the types of products and content that prospective clients include or link to in their emails. We will perform extra pre-client research on clients that check a number of boxes on the application that indicate they might be in a grey area or are involved in litigation. We will ask clients to self-certify their goodness. We will perform spot audits of these clients to make sure they stay in compliance with the things that are impossible to automatically monitor, even those tricky ones which are “sometimes legal.” And we will not be shy about terminating those who aren’t.

For our software and professional services, we have a “client vetting” document that asks some of those same questions, and against which we will research and audit as appropriate. For clients of our professional services, we require that sales/client services fill out this document 100% of the time for our standards and compliance team to review. For software clients, we leave it up to sales/client services management to flag the cases where there might be an issue and to run only those clients through the same vetting process.

I think that about wraps this topic up, at least for now. We do our best on this stuff, but it’s tricky, and I have no doubt that however we handle these situations, we will upset someone. I appreciate everyone’s input on this, and I welcome more by commenting below.

Entrepreneur’s Perspective on Non-Competes

(Note: I just found this post in the “drafts” folder and realize I never put it up! It was written months ago, although I just updated it a bit.)

Bijan Sabet kicked off the discussion about non-competes by asserting that they are a barrier to innovation and that they are unenforceable in California anyway, so why bother?

Fred continued the discussion and made some good assertions about the value of non-competes, summarizing his points as:

Non-competes are very much in the interests of our portfolio companies. But the non-competes need to be tightly defined and the term of the non-compete needs to be paid for by the portfolio company if the employee was forced out of the company. The non-competes should certainly apply to all senior management team members and all key employees (like star engineers and such). It takes a lot of work to build a company. You should not risk all that knowledge and talent being able to walk out the door and set up shop across the street.

Brad and Jason/Ask the VC are generally on board with Fred’s view.

We’ve had non-competes since the beginning at Return Path.  I am generally in agreement with Fred’s parameters, but to spell out ours:

1. Our non-competes are very narrowly defined.  I had a very bad taste in my mouth when AOL acquired my former company, MovieFone, back in 1999 and stuck a 3-year non-compete in front of me that would have prohibited me from working anywhere else in the Internet.  I think the language was something like “can’t work in any business that competes with AOL or AOL’s partners in the businesses they are in today or may enter in the future.”  It was just silly.  Our non-competes apply very narrowly to existing direct competitors of the part of Return Path in which the given employee works.

2. We do not pay for non-competes.  Because our non-competes are very narrowly defined, we don’t expect to pay for someone to sit on the sidelines.  If people leave, or even if people are fired, they have 99.99% of the companies in the world as potential employers. 

3. We are willing to excuse people from non-competes if they are laid off.  Fair is fair.  However, we still expect our confidentiality and non-solicit agreements to remain in full force.

4. Everyone signs the same non-compete.  100% of the people, 100% of the time.  Same language.  No exceptions.  Again, this comes back to how narrowly defined the non-compete is.  It shouldn’t just be limited to senior executives.  Obviously you have to respect local laws of places like California or   Europ which have different views of non-competes.  If these cause in equalities in your employee base by geography, we make an effort to “re-equalize” in other ways.

5. We enforce non-competes in all situations.  I don’t believe in selective enforcement.  That sends the wrong message to employees.  We have had a couple instances where junior people have left and brazenly gone to a competitor.  While we have never blocked someone from starting a new job, we would if there wasn’t another resolution.  Fortunately, in those cases for us, we have contacted the employee and the hiring company and been able to work out a deal — the employee went to work in a non-competitive part of the new company, we struck a commercial relationship between us and the hiring company, etc.

6. We try to play by the rules when hiring people who have non-competes.  I think consistency is important here show to employees.  If we expect people to respect our non-compete, we should respect other companies’ non-competes.  This doesn’t mean we don’t try hard to lure competitors’ people to us when the situation warrants — it just means that if a non-compete is relevant and in effect, we will either make a deal with the other company, or in special circumstances, we will pay the employee to sit on the sidelines and ride out the non-compete.  This is a tricky process, but we’ve had it work before, and we’d do it again for the right person.

Our people and intellectual capital are a huge source of competitive advantage.  They are also the product of massive investment that we make in developing our people.  A good, narrow, non-compete is important for the company and can be done in ways that are fair to employees who are the beneficiaries of the training and development as well as their employment.  I think that’s part of the social contract of a great workplace.  Non-competes don’t stifle innovation — they protect investments that lead to innovation.  I suppose the same argument could be made of patents, some of which make more sense than others, but that’s the subject of another rant sometime.

But at the end of the day, it’s up to us to retain our people by providing a great place to work and advance careers so this whole thing is a non-issue!

Lessons from the Election

There will be so many of these posts flying around the web today and in the coming weeks, but there’s at least one lesson from yesterday’s election that really struck me in the context of business leadership:  the importance of authenticity.

Obama won — and McCain lost — for many reasons.  But I think one of the main ones is that McCain didn’t run as McCain.  The number of Democrats and Independents who I heard say things like “I would have voted for the McCain who ran in 2000,” or Hillary supporters who said they’d never vote for Obama against McCain and then did, was huge.

McCain is a maverick.  There’s no doubt about that.  But he didn’t run as one — he tried to be something he’s not by pandering so much to the Republican Party’s base that he forgot who he was.  The result was a candidate who didn’t look comfortable in his own skin, who lacked a focused message, and who didn’t come across as himself. 

In politics, lack of authenticity is worse than the “flip flopper” charges that get thrown about so often.  Everyone’s entitled to a change of opinion on a key issue here and there as circumstances change.  Mitt Romney may have switched his view on abortion, for example, but you never had any doubt where he stood on it in the present and future.  With McCain, on the other hand, no one could tell how he’d actually govern and what positions he’d really take on a bunch of key issues because his whole persona seemed to shift.

The lesson for business leaders?  BE YOURSELF.  Could you see through McCain?  Your people can see right through you.  They may or may not appreciate you, your style, your humor, your decisions — but as long as they can tell where you’re coming from, you have a good shot at leading them.

Why Do Companies Sell?

Fred has a good post today about Facebook and why they shouldn’t sell the company now, in which he makes the assertion that companies sell “because of fear, boredom, and personal financial issues.”  He might not have meant this in such a black and white way, and while those might all be valid reasons why companies decide to sell, let me add a few others:

• Market timing:  As they say, buy low – sell high.  Sometimes, it’s just the right time to sell a business from the market’s perspective.  Valuations have peaks and troughs, and sometimes the troughs can last for years.  Whether you do an NPV/DCF model that says it’s the right time to sell, or you just rely on gut (“we aren’t going to see this price again for a long time…”), market timing is a critical factor
• Dilution:  Sometimes, market conditions dictate that it isn’t the best time to sell, BUT company conditions dictate that continuing to be competitive, grow the top line, and generate long-term profits requires a significant amount of incremental capital or dilution that materially changes the expected value of the ultimate exit for existing shareholders (both investors and management)
• Fund life:  Fortunately, we haven’t been up against this at Return Path, but sometimes the clock runs out on venture investors’ funds, and they are forced into a position of either needing to get liquidity for their LPs or distribute their portfolio company holdings.  While neither is great for the portfolio, a sale may be preferable to a messy distribution

Fred’s reasons are all very founder-driven.  And sometimes founders get to make the call on an exit.  But factoring in a 360 view of the company’s stakeholders and external environments can often produce a different result in the conversation around when to exit.

Angry, Defiant, and Replete with Poor Grammar

I didn’t see Bush’s farewell address on TV on Thursday, but Mariquita and I did see his press conference on Monday.  It was exactly what you’d expect it to be and quite frankly just like the last eight years:  angry, defiant, and replete with poor grammar.

I’ve said repeatedly that I think Bush has destroyed the Republican party and will go down in history as one of the worst presidents this country has ever had, if not the worst.  It’s not surprising that his tone at the end is as the title of this post describes.  But it is a shame.  His whole administration is a shame.  The really sad part is that it didn’t have to be.  People make mistakes — even really bad ones.  And they can recover from them and go on to do great things in life if two conditions exist:

1. They solicit feedback on their performance, and

2. The internalize and act on that feedback

Bush not only didn’t “get” these two points; he seemed to revel in them.  “Not paying attention to polls” and “At least you know where I stand” seemed to him to be pillars of strength as opposed to pillars of ignorance and complete and total lack of intellectual curiosity.  You don’t have to try to win a popularity contest to find out when something is going wrong on your watch.  And you can be bold, admit a failure, learn from it, and move on instead of just digging yourself deeper and deeper into the same hole.

I read a great article in The Economist last night that summarized its current view of Bush’s legacy, and in fact it noted a bunch of areas in which Bush appeared to learn from his mistakes, though he probably wouldn’t phrase it that way.  The fact that his second administration did do more to reach out to key allies in Germany and France is one example.  And to the article’s credit, it even noted some of Bush’s accomplishments, or at least the areas in which his thinking was right — those those are just dwarfed in the end by his failings.  

At any rate, I’m delighted he’ll be leaving office on Tuesday.  Inauguration day is one of my favorite days in America, and I look forward with optimism to the incoming administration as I always do, regardless of how I voted.

But as for Bush, I think I’d rather have the pilot of that USAir flight as my commander in chief.  Now there’s a guy (I don’t even know his name, and I probably never will) who had a quick grasp of a difficult situation and produced a brilliant and elegant solution in short order!

Please, Let There Be Another Explanation

One of the things I was most excited about with an Obama presidency was that it finally seemed as if we had a real leader in the hot seat.  Someone who might actually be able to run an effective government instead of a bureaucracy paralyzed by partisanship.  I still have this hope.

But I also hope what we’re seeing around the stimulus bill is not what we’re in for the next four years.  What I’m seeing is a complete absence of leadership around the problem.  Seems to me, taking lessons from the corporate world, that Obama should have done two things that would have gotten the program passed in a bipartisan way much more quickly:

1. Build true consensus ahead of time and make the congressional leaders do the sales job in a bipartisan way.  It’s great that Obama went up to the Republican caucus to talk to them and get their point of view, but shouldn’t he have gathered the top 2-3 leaders of each party and each house of congress in his office (or in theirs) to whiteboard this whole thing out ahead of time, so that those people could be bought in and then go on to convince others?  Few successful major corporate initiatives are launched without a careful eye to how all major stakeholders will react so that the majority will be on board.

2. Link the plan to the election in an obvious way.  Obama can credibly claim that the election was a decisive call for change.  He can also credibly claim a small number of priority items that clearly emerged as points of change — reducing/eliminating our dependence on foreign oil, vastly expanded access to health care, reducing taxes on the middle class, and fixing the problem of the revolving door between lobbyists and government as the relevant ones here (there are others around foreign policy and the wars, of course).  Why isn’t the stimulus package pumping money in the economy to the specific ends that were articulated during the campaign, at least for 60-80% of the money, anyway? Seems to me like that’s the best way not just to sell the program to Congress and the American people, but to actually have it stand for something other than 535 people’s pet local projects.  Again, in corporate America, once everyone has agreed on a strategy and goals, it’s much easier to define a path forward around how to execute the details.

I hope something else is going on here — perhaps Obama just wants to make Congress look like a bunch of idiots, so they self destruct and ultimately yield more power to the White House — but my fear is that our new leader needs some lessons in leadership.

Education and Entrepreneurship

Fred posted his thoughts the other day that you don’t need a college degree to be a successful entrepreneur. He is clearly right in that one CAN be successful without it.  Gates, Zuckerberg, Dell have proven that. 

I’ve always said that I didn’t think an MBA was a prerequisite for a successful business career.  That’s easy for me to say, as I don’t have one despite many years of applying, deferring, cancelling, reapplying and general hand-wringing over whether or not to go in the mid-90s.  An MBA is probably a positive on a resume for the most part (hard to argue it’s a negative), but it’s not a prerequisite.  Every time I see “MBA preferred” on a job posting, I cringe (we never say that at Return Path).  Really?  You’d *prefer* to hire someone with an MBA over someone with two additional years of relevant work experience? 

That said, I’d note that there are things one gets out of a good college education that are critical to success in life.  Yes, they can be learned outside the classroom.  But unlike business school material, which is in many cases the stuff of work experience and more easily augmented by observation and the occasional business article or book (as far as I can tell), the things one learns in college which are applicable to entrepreneurship aren’t about the subject matter of the course.  They are things like:

– learning and applying new concepts quickly

– critical reasoning

– crisply presenting ideas

– respecting deadlines and guidelines

– understanding and appreciating other points of view

As with business school, these things *can* be learned outside a university environment, and certainly there are unusually talented people who have these traits hard wired.  But I do think the university environment cultivates and nurtures these skills in a way that is easier than the “do it yourself” world of teenage entrepreneurship. 

Five Years On

As of this past weekend, I’ve been blogging on OnlyOnce for five years.  My main reflection as I was thinking about it during this morning’s run is that blogging is different.  I started blogging to try out what was at the time the “new, new thing” (there were almost no CEO blogs at the time), just like I have tried out lots of other new technologies or web services from time to time over the years — from Skype to Facebook to Twitter to about 50 others.

You’ll never see a tweet from me about an anniversary of using Twitter.  Or any other comparable from that above list.  Blogging has ended up being fundamentally different.  It’s not just another expression of my status updates or another way to connect with friends and colleagues.  It’s become a core part of my business operating system, although I suppose that’s the case for many other tools as well. 

I think the main difference is that OnlyOnce has become a true form of creative expression for me.  It’s like (I imagine) writing a book or composing a piece of music. I’m not suggesting it’s high art, but I view it more as an ongoing project than most other online tools or sites I’ve tried out over the years.

Here’s to the next five years of it.

A Network of Teams, Not an Integrated System

We were in and out of the hospital a lot back in March/April for the last few weeks with one of our kids (she’s ok now).  One of us was with her 24 hours a day for the 10-11 days she was hospitalized, with lots of down time, which gave me lots of time to observe health care in action.  While she ultimately got very good care at a very good hospital, it was incredibly clear to me that the hospital functioned as a network of teams, not as an integrated system.

The nurses were great.  Followed their routine practices and responded to doctors’ orders on cue.  Same with the nursing assistants.  Same with the docs.  Same with the phlebotomists and labs.  Same with the hospital support staff.  But the hand-offs from one team to the next, and from one shift to the next within a team, were seriously lacking.

What was wrong with this?  Nothing was optimized around the patient.  I mentioned this to my father-in-law, who is an HMO executive, and he noted that the concept of “patient-centric care” was a hot topic in managed care right now — but that it had also been a hot topic 10-15 years ago, to no apparent end (and not just in this one hospital that we were at).  Seems like customer relationship management became a persistent priority in the rest of the business world years ago.  Why hasn’t this stuck in health care?

This was a great exercise for me in thinking about the customer-centric view of a business.  We talk here at Return Path about “stapling yourself to a customer” to see what they see.  Every business should go through that exercise at some level regularly to make sure they’re functioning as an integrated system as far as the outside world is concerned.