Playing Offense vs. Playing Defense

I hate playing defense in business.  It doesn’t happen all the time.  But being behind a competitor in terms of feature development, scrambling to do custom work for a large client, or doing an acquisition because you’re getting blocked out of an emerging space – whatever it is, it just feels rotten when it comes up.  It’s someone else dictating your strategy, tactics, and resource allocation; their agenda, not yours.  It’s a scramble.  And when the work is done, it’s hard to feel great about it, even if it’s required and well done.  That said, sometimes you don’t have a choice and have to play defense.

Playing offense, of course, is what it’s all about.  Your terms, your timetable, your innovation or opportunity creation, your smile knowing you’re leading the industry and making others course correct or play catch-up.

This topic of playing defense has come up a few times lately, both at Return Path and at other companies I advise, and my conclusion (other than that “sometimes you just have to bite the bullet”) is that the best thing you can do when you’re behind is to turn a situation from defense into a combination of defense and offense and change the game a little bit.  Here are a few examples:

• You’re about to lose a big customer unless you develop a bunch of custom features ASAP –> use that work as prototype to a broader deployment of the new features across your product set.  Example:  Rumor has it that Groupware was started as a series of custom projects Lotus was doing for one of its big installations of Notes
• Your competitor introduces new sub-features that are of the “arms race” nature (more, more, more!) –> instead of working to get to parity, add new functionality that changes the value proposition of the whole feature set.  Example:  Google Docs doesn’t need to match Microsoft Office feature for feature, as its value proposition is about the cloud
• Your accounting software blows up.  Ugh.  What a pain to have to redo internal system like that – a total time sink.  Use the opportunity to shift from a new version of the same old school installed package you used to run, with dedicated hardware, database, and support costs to a new, sleek, lightweight on-demand package that saves you time and money in the long run

I guess the old adage is true:  The best defense IS, in fact, a good offense.

Unleashing the True Power of Email

A recent Behavioral Insider column had a truly tantalizing quote from iPost’s Steve Webster:

"There is the presumption that when someone receives an email message they then click on the email go to the Web site and either make a purchase or not and then they are done interacting with your email. This turned out to be wrong. We discovered very quickly that the power of an email impression lasts for weeks after the customer has actually received the message. The particular interaction they will have with you later really depends more on their personal preferences than on your putting a new email in front of them."

The highlighted portion is a point we’ve been making here at Return Path for years now.  Emails are not perceived by recipients as distinct, one-off promotions.  But many marketers continue to view them that way and make both strategic and tactical errors because of that.  Here are a five things you need to start doing – right now – if you want to capitalize on the true power of email:

1. Stop analyzing each email in a vacuum.  The whole is worth more than the sum of the parts.  The deeper you can dive into your data and analyze the whole program and how recipients interact (or don’t) the better decisions you can make.  Be sure to read the entire Behavioral Insider column – some of the tests they describe around segmentation reveal how email does or doesn’t influence purchasing and how it can be used more effectively.

2. Sending ever more email isn’t the answer.  To the point above, more email seldom makes buyers buy more.  Marketers don’t quite believe this because every email blast they deploy results in revenue.  But the point this column makes is that you have to look at what is happening at the individual level.  It soon becomes clear that sending targeted, segmented email – less email per person – is more effective.

3. Look past the click. As a corollary to #1, many marketers believe if a subscriber doesn’t click, they haven’t interacted.  This clearly isn’t the case.  The smartest marketers segment their non-clickers into buckets.  For example, a retailer might look at non-clickers who are openers, online purchasers, site browsers or in-store purchasers.  If you have an email recipient who browses your website every other week and then purchases in store once per quarter, it is nutty to assume that the email isn’t influencing that just because they don’t click through.

4. Reliance on CPA is going to bite you.  Yesterday my colleague Craig Swerdloff wrote about CPA versus CPM in list rental on the Return Path corporate blog.  Marketers believe that CPA is the best deal for them because they only pay for performance.  The problem is that CPA often requires a very high degree of volume to achieve success for both publisher and marketer.  All those extra emails don’t just self-destruct and wipe the memory of the recipient who doesn’t take your "action."  They’ve still made an impression – positive or negative.  Both CPA and CPM can be effective, but you need to work with an expert who understands that email is about more than clicks.

5. Permission + value = ROI. Steve Webster’s quote goes on to point out that "We thought the quality of the … creative made all the difference. It turns out that it does – but not nearly as much as the fact that [the email] made an impression on a customer who actually was interested in receiving an email from you."  Sending email without permission, as defined by the customer not by you, is a non-starter.  The first step is getting that person to proactively sign up, and then making sure they recognize your emails as desired.  Then the value piece kicks in.  Do you send what you promised?  Do your emails exceed their expectations?  Do you delight them?  The more yeses you rack up there, the more revenue your email will generate.

Google en Fuego

Google announced on Friday the acquisition of RSS publishing powerhouse FeedBurner (media coverage  here and here).  I was fortunate enough to be a member of FeedBurner’s Board of Directors for the past year and had a good window into the successes of the business as well as the deal with Google.  It was all very interesting and good learnings for me as an entrepreneur as well as a first time outside director.  My original post (the “fortunate enough” link above) contained all the things I love about FeedBurner in it, so I won’t rehash those here, but I will try to distill my top 3 learnings from my experience with the company:

1. Creating value through focus is key in the early stages of a company. The FeedBurner team had a relentless focus on publishers.  That’s what produced the value in the company that Google acquired in the end — massive publisher distribution and great brand and technology behind it all.  Had the company gone on to do a couple more years independently, the team would have had to split focus between publishers and advertisers.  I have no doubt that they would have been able to do the job, but a dual focus is more complex to execute well and harder to balance in terms of priorities.
2. Running a company is all about improv. As many people know, FeedBurner CEO Dick Costolo is a former, I’d argue current, stand-up comedian/improv actor (see his entertaining and informative interview on Wallstrip here).  Dick proved that those skills, while perhaps not as expensive to acquire as an MBA, are probably even more essential to running a company.  You have to be able to elegantly manage chaos with a smile…and you have to constantly be quick to think on your feet.
   
3. Being an outside Board member was fun but had new challenges. It’s hard to know how much to be involved with a company when you’re neither management nor investor.  I was constantly worrying that I wasn’t doing enough for the company, but I was also trying to be very conscious of the fact that it wasn’t my company to run, only to advise.  I think Dick and I got the formula pretty close to right, but it wasn’t obvious.

Congratulations to Dick, Steve, Eric, Matt, and the rest of the team at FeedBurner for a job well done!

Book Short: There is No Blueprint to $1B

Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth, by David Thomson (book, Kindle) sounds more formulaic than it is. It’s not a bad book, but you have to dig a little bit for the non-obvious nuggets (yes, I get that growing your company to $1B in sales requires having a great value proposition in a high growth market!). The author looked for commonalities among the 387 American companies that have gone public since 1980 with less than $1B in revenues when they went public and had more than $1B in revenue (and were still in existence) at the time of the book’s writing in 2005.

Thompson classifies the blueprint into “7 Essentials,” which blueprint companies do well on across the board. The 7 Essentials are:

– Create and sustain a breakthrough value proposition

– Exploit a high growth market segment

– Marquee/lighthouse customers shape the revenue powerhouse

– Leverage big brother alliances for breaking into new markets

– Become the masters of exponential returns

– The management team: inside-outside leadership

– The Board: comprised of essentials experts

As I said above, there were some nuggets within this framework that made the entire read worthwhile. For example, crafting a Board that isn’t just management and investors but also includes industry experts like customers or alliance partners is critical. That matches our experience at Return Path over the years (not that we’re exactly closing in on $1B in revenues – yet) with having outside industry CEOs sit on our Board. Our Board has always been an extension of our management and strategy team, but we have specifically gotten some of our most valuable contributions and thought-provoking dialog from the non-management and non-investor directors.

Another critical item that I thought was interesting was this concept of not just marquee customers (yes, everyone wants big brand names as clients), but that they also need to be lighthouse customers. They need to help you attract other large customers to your solution – either actively by helping you evangelize your business, or at least passively by lending their name and case study to your cause.

The book is more of a retrospective analysis than a playbook, and some of its examples are a bit dated (marveling at Yahoo’s success seems a bit awkward today), and the author notes as well that many of the “blueprint” companies faltered after hitting the $1B mark. But it was a good read all-in. What I’d like to see next is a more microscopic view of the Milestones to $100 Million!

Americans have long operated under an unwritten deal with media companies (for our purposes here, let’s call this the Old Media Deal). The Old Media Deal is simple: we hate advertising, but we are willing to put up with an amazing amount of it in exchange for free or cheap content, and occasionally one of those ads slips through to the recesses of our brain and influences us in some way that old school marketers who trade in non-addressable media can only dream of. Think about it:

– 30 minutes of Friends has 8 minutes of commercials (10 in syndication!)
– The New York Times devotes almost 75% of its total column inches to ads
– We get 6 songs in a row on the radio, then 5 minutes of commercials
– The copy of Vogue‘s fall fashion issue on my mom’s coffee table is about 90% full page ads

The bottom line is, advertising doesn’t bug us if it’s not too intrusive and if there’s something in it for us as consumers.

Since I started working in “New Media” in 1994, I’ve thought we had a significantly different New Media Deal in the works. The New Media deal is that we as American consumers are willing to share a certain amount of personal information in exchange for even better content, more personalized services, or even more targeted marketing — again, as long as those things aren’t too intrusive and provide adequate value. Think about how the New Media Deal works:

– We tell Yahoo that we like the Yankees and that we own MSFT stock in order to get a personalized home page
– We tell Drugstore.com what personal health products we buy so we can buy our Q-tips and Benadryl more quickly
– We tell The New York Times on the Web our annual income in order to get the entire newspaper online for free
– We let PayTrust know how much money we spend each month so that we can pay our bills more efficiently
– We let Google scan our emails to put ads in in them based on the content to get a free email account
– We give their email address out to receive marketing offers (even in this day and age of spam) by the millions every day

Anyway, after a few years of talking somewhat circuitously about this New Media Deal, my colleague Tami Forman showed me some research the other day that backs up my theory, so I thought it was time to share. In a study conducted by ChoiceStream in May 2004, 81% of Internet users expressed a desire for personalized content; 64% said they’d provide insight into their preferences in exchange for personalized product and content recommendations; 56 would provide demographic data for the same; and 40% said they’d even agree to more comprehensive clickstream and transaction monitoring for the same. All of these responses were stronger among younger users but healthy among all users. Sounds like a New Media Deal to me.

Don’t get me wrong — I still think there’s a time and a place for anonymity. It’s one of the great things about RSS for certain applications. And privacy advocates are always right to be vigilant about potential and actual abuses of data collection. But I think it’s becoming increasingly clear that we have a New Media Deal, which is that people are willing to sacrifice their anonymity in a heartbeat if the value exchange is there.

P.S. Quite frankly, I wish I could give spammers a little more personalized information sometime. They’re going to email me anyway — they may as well at least tell me to enlarge a part of my body that I actually have.

Automated Love

Return Path is launching a new mini feature sometime this week to our clients.  Normally I wouldn’t blog about this — I think this is mini enough that we’re probably not even saying much about it publicly at the company.  But it’s an interesting concept that I thought I’d riff on a little bit.

I forget what we’re calling the program officially — probably something like “Client Status Emails” or “Performance Summary Alerts” — but a bunch of us have been calling it by the more colorful term “Automated Love” for a while now.

The art of account management or client services for an on-demand software company is complex and has evolved significantly from the old days of relationship management.  Great account management now means a whole slew of new things, like Being The Subject Matter Expert, and Training the Client.  It’s less about the “hey, how are things going?” phone call and more about driving usage and value for clients.

As web services have taken off, particularly for small businesses or “prosumers,” most have built in this concept of Automated Love.  The weekly email from the service to its user with charts, stats, benchmarks, and links to the web site, occasionally with some content or blog posts.  It’s relatively easy (most of the content is database driven), it reminds customers that you’re there, working on their behalf in the background, it tells them what happened on their account or how they’re doing, it alerts them to current or looming problems, and it drives usage of your service.  As a bonus for you internally, usually the same database queries that produce a good bit of Automated Love can also alert your account management team when a client’s usage pattern of your service changes or stops entirely.

While some businesses with low values of any single customer value can probably get away with having a client service function based ENTIRELY on Automated Love, I think any business with a web service MUST have Automated Love as a component of its client service effort.

Book Short:  Multiplying Your Team’s Productivity

No matter how frustrated a kids’ soccer coach gets, he never, ever runs onto the field in the middle of a game to step in and play.  It’s not just against the rules, it isn’t his or her role.

Multipliers: How the Best Leaders Make Everyone Smarter by Liz Wiseman and Greg McKeown (book, Kindle) takes this concept and drives it home.  The book was a great read, one of the better business books I’ve read in a long time.  I read a preview of it via an article in a recent Harvard Business Review (walled garden alert – you can only get the first page of the article without buying it), then my colleague George Bilbrey got the book and suggested I read it.  George also has a good post up on his blog about it.

One of the things I love about the book is that unlike a lot of business books, it applies to big companies and small companies with equal relevance.  The book echoes a lot of other contemporary literature on leadership (Collins, Charan, Welch) but pulls it into a more accessible framework based on a more direct form of impact:  not long-term shareholder value, but staff productivity and intelligence.  The book’s thesis is that the best managers get more than 2x out of their people than the average – some of that comes from having people more motivated and stretching, but some comes from literally making people more intelligent by challenging them, investing in them, and leaving them room to grow and learn.

The thesis has similar roots to many successful sales philosophies – that asking value-based questions is more effective than presenting features and benefits (that’s probably a good subject for a whole other post sometime).  The method of selling we use at Return Path which I’ve written about before, SPIN Selling, based on the book by Neil Rackham, gets into that in good detail.  One colorful quote in the book around this came from someone who met two famous 19th century British Prime Ministers and noted that when he came back from a meeting with Gladstone, he was convinced that Gladstone was the smartest person in the world, but when he came back from a meeting with Disraeli, he was convinced that he (not Disraeli) was the smartest person in the world.

Anyway, the book creates archetypal good and bad leaders, called Multipliers and Diminishers, and discusses five traits of both:

• Talent Magnet vs. Empire Builder (find people’s native genius and amplify it)
• Liberator vs. Tyrant (create space, demand the best work, delineate your “hard opinions” from your “soft opinions”)
• Challenger vs. Know-It-All (lay down challenges, ask hard questions)
• Debate Maker vs. Decision Maker (ask for data, ask each person, limit your own participation in debates)
• Investor vs. Micromanager (delegate, teach and coach, practice public accountability)

This was a great read.  Any manager who is trying to get more done with less (and who isn’t these days) can benefit from figuring out how to multiply the performance of his or her team by more than 2x.

Return Path Core Values

At Return Path, we have a list of 13 core values that was carefully cultivated and written by a committee of the whole (literally, every employee was involved) about 3 years ago.

I love our values, and I think they serve us incredibly well — both for what they are, and for documenting them and discussing them publicly.  So I’ve decided to publish a blog post about each one (not in order, and not to the exclusion of other blog posts) over the next few months.  I’ll probably do one every other week through the end of the year.  The first one will come in a few minutes.

To whet your appetite, here’s the full list of values:

1. We believe that people come first
2. We believe in doing the right thing
3. We solve problems together and always present problems with potential solutions or paths to solutions
4. We believe in keeping the commitments we make, and communicate obsessively when we can’t
5. We don’t want you to be embarrassed if you make a mistake; communicate about them and learn from them
6. We believe in being transparent and direct
7. We challenge complacency, mediocrity, and decisions that don’t make sense
8. We value execution and results, not effort on its own
9. We are serious and passionate about our job and positive and light-hearted about our day
10. We are obsessively kind to and respectful of each other
11. We realize that people work to live, not live to work
12. We are all owners in the business and think of our employment at the company as a two-way street
13. We believe inboxes should only contain messages that are relevant, trusted, and safe

Do these sound like Motherhood and Apple Pie?  Yes.  Do I worry when I publish them like this that people will remind me that Enron’s number one value was Integrity?  Totally.  But am I proud of my company, and do I feel like we live these every day…and that that’s one of the things that gives us massive competitive advantage in life?  Absolutely!  In truth, some of these are more aspirational than others, but they’re written as strong action verbs, not with “we will try to” mushiness.

I will start a tag for my tag cloud today called Return Path core values.  There won’t be much in it today, but there will be soon!

Challenging Authority

My dad told me a joke once about a kid who as a teenager thought his father was the dumbest person he’d ever met. But then, as the punchline goes, “By the time I’d graduated college, it was amazing how much the old man had learned.”

The older we get as humans, the more we realize how little we know — and how fallible we are. One of our 13 core values at Return Path gets right to the heart of this one:

We challenge complacency, mediocrity, and decisions that don’t make sense

I will note up front that this particular value statement is probably not as widely practiced as most of the others I’m writing about in this series of posts, but it’s as important as any of the others.

Very few things make me happier at work than when an employee challenges me or another leader — and quite frankly, the more junior and less well I know the employee, the better. No matter what the role, we hire smart, ambitious, and intellectually curious people to work at Return Path. Why let all that raw brainpower go to waste?  We thrive as a company in part because we are all trying to do a better job, and because we work with our eyes open to the things happening around us.

I have no doubt that some real percentage of the decisions that I or other leaders of the company make don’t make sense, either in full or in part. And I’m sure that from time to time we become complacent with things that are running smoothly or quietly, even if they’re not optimal or even moderately destructive.  That’s why I’m particularly grateful when someone calls me out on something. We have made great strides in and changes to the business over the years because someone on the team has challenged something. We’ve terminated employees who were poisonous to the organization, we’ve reversed course on strategic plans, we’ve even sold a business unit.

One of the things we do well is blend this value with one I wrote about a few weeks ago about being kind and respectful to each other.  The two play together very nicely in our culture.  People are generally constructive when they have feedback to give or are challenging authority, and people who receive feedback or challenges assume positive intent and nothing personal.  We specifically train people around these delicate balances both via the Action/Design framework and a specific course we teach called Giving and Receiving Feedback.

It takes courage to challenge authority. But then again, nothing great is ever accomplished in life without courage (and enthusiasm, so the old adage goes).

Why We Occasionally Celebrate International Talk Like a Pirate Day

No kidding – next Monday is September 19, and that is, among other things, International Talk Like a Pirate Day. We’ve done a variety of things to celebrate it over the years, not the least of which was a series of appropriately-themed singing telegrams we sent to interrupt all-hands meetings.  I can’t remember why we ever started this particular thing, but it’s one of many for us.  Why do we care?  Because

We are serious and passionate about our job and positive and light-hearted about our day

This is another one of Return Path’s philosophies I’m documenting in my series on our 13 core values.

I’m not sure I’d describe our work environment as a classic work hard/play hard environment. We’re not an investment bank. We don’t have all 20something employees in New York City. We’re not a homogeneous workforce with all of the same outside interests. So while we do work hard and care a lot about our company’s success, our community of fellow employees, solving our clients’ problems, and making a big impact on our industry and on end users’ lives, we also recognize that “playing hard” for us means having fun on the job.

It’s not as if we run an improv comedy troop in the lunch room or play incessant practical jokes on each other (though I have pulled off a couple sweet April Fool’s pranks over the years). But as the value is worded, we try to set a lighthearted and positive atmosphere. This one is a little harder to produce concrete examples of than some of our other core values that I’ve written up, but that doesn’t mean it’s any less important.

Whether it’s talking like a pirate, paying quiet homage to our unofficial mascot – the monkey, stopping for a few minutes to play a game of ping pong, or just making a silly face or poking fun of a close colleague in a meeting, I’m so happy that our company and Board have this value hard-wired in.  Life’s just too short not to have fun at every available opportunity!

I’ve written a few times over the years about our Sabbatical policy at Return Path, including this post and this post about my experience as CEO when one of my direct reports was on his sabbatical, and this post about my own sabbatical.

People ask me this all the time, so I thought I’d write the policy out here.  This is the language in our employee handbook about them:

You have big dreams. We know. This is your chance to cross something off your life list. Whether it’s climbing Mt. Everest, learning Russian or taking your kids across the country in a Winnebago, we believe in rewarding longevity at Return Path and know that a good long break will leave you refreshed and energized!  As such, you are eligible for a sabbatical after your first seven (7) years of employment; then again after every five (5) years incremental employment. The sabbatical provides you with up to six (6) weeks of consecutive time off provided you have that time off approved by your manager at least two months prior to the start of your sabbatical.

You will be requested to sign an Agreement before your sabbatical: if you do not return to work after your sabbatical or if you leave employment within twelve (12) months of returning to work, you will be required to reimburse all amounts received while on sabbatical.  If a holiday occurs on any of of the days of absence, you will not receive holiday pay in addition to your sabbatical pay.  During your sabbatical, your benefits will continue and you will be responsible for making payments for the employee portion of insurance costs if applicable. The period you are on leave will be counted as employment for the purposes of determining your applicable level of benefits.  If you are eligible and have not taken your sabbatical and your employment with Return Path ends (for any reason), you will not be paid out for sabbatical time not taken.

I also wrote an email recently to someone internally that is worth reprinting here, which is How to Prepare for Your Sabbatical, which is aimed at both the person taking the sabbatical, and the person’s manager:

As the employee:

–          Prepare your team

• Make sure their goals and metrics for your time out are super clear
• Make sure they know who to go to for what
• Set their expectations of management coverage (see below). 
• Remember that your manager has a day job so you should look to see how your team members can take over some of the responsibilities.
• Give them stretch goals while you’re out

–          Prepare your individual contributor work

• Hand off all loose ends with extra details. 
• Make introductions via email if your manager/team member  is going to have to work with external parties
• Can be to your team, to your manager, to someone else

–          Prepare your manager

• Brief your manager thoroughly on everything going on with your team, its work, your individual contributor work
• Good topics to cover with your manager:Discuss specifics of team and 1:1 check-ins and agree on a plan for coverage.
  • What are the big initiatives that you’ll need coverage on
  • Which team members would you like the manager to spend a little extra time with?  Are there any work you would like the manager to help a particular EE with?

–          Prepare yourself

• Plan any personal travel early so you get good rates!
• Figure out how to keep your work and personal communications separate – your email (autoresponder, routing, disabling from your smartphone), your voicemail if you use Google Voice or Simulscribe, etc.
• Block out two full days immediately when you return to catch up on email and catch up with your manager and team

As the manager:

–          Prepare your team

• Make sure the rest of your team knows your time will be compromised while you’re covering
• Figure out what kind of coverage you need (either internal or external) while you’re covering

–          Rearrange your calendar/travel

• Add new team meetings or 1:1s as it makes sense.  You don’t have to do exactly what your employee did, but some portions of it will make sense to pick up
• If your employee works in another office with members of his/her team, you might want to plan some travel there to cover in person
• It’s ok to cut back on some other things a bit while you’re covering – just remember to undo everything when the employee’s sabbatical is over

–          While you’re in charge

• Surprise your employee with how much you were able to keep things running in his/her absence!
• Learn as much as you can by doing bits and pieces of his/her job.  This is a great opportunity of the employee to get some value from a fresh perspective.

–          Prepare for your employee’s return

• Keep a running tab of everything that goes on at the company, critical industry news (if appropriate), and with your employee’s function or team and prepare a well-organized briefing document so your employee can hit the ground running when he/she returns
• Block out an hour or two each of the employee’s first two days back to review your briefing document

My main takeaway from this post?  I am overdue my second sabbatical, and it’s time to start thinking about that!