What Kind of Entrepreneur Do You Want to Be?

I had a great time at Princeton reunions this weekend, as always.  As I was talking to random people, some of whom I knew but hadn’t seen in a long time, and others of whom I was just meeting for the first time, the topic of starting a business naturally came up.  Two of the people asked me if I thought they should start a business, and what kind of person made for a good entrepreneur.

As I was thinking about the question, it reminded me of something Fred once told me — that he thought there were two kinds of entrepreneurs:  people who start businesses and people who run business. 

People who start businesses are more commonly known as serial entrepreneurs.  These people come up with ideas and love incubating them but may or may not try to run them longer term.  They:

– generate an idea a minute
– have a major case of ADD
– are easily distracted by shiny objects
– would rather generate 1 good and idea and 19 bad ones than just 1 good one
– are always thinking about the next thing
– are only excited by the possibility of what could be, not what is
– are more philosophical and theoretical
– probably shouldn’t run the companies they start for more than a few months, as they will frustrate everyone around them and get bored themselves
– are really fun at cocktail parties
– say things like “I thought of auctions online way before eBay!”

The second type of entrepreneur is the type who runs businesses (and may or may not come up with the original idea).  These people:

– care about success, not just having the idea
– love to make things work
– would rather generate 1 idea and execute it well than 2 ideas
– are problem solvers
– are great with people
– are maybe less fun at cocktail parties, but
– you’d definitely want them on your team in a game of paintball or laser tag

Neither one is better than the other, and sometimes you get both in the same person, but not all that often.  But understanding what type of entrepreneur you are (or would likely be) is probably a good first step in understanding whether or not you want to take the plunge, and if so, what role you’d like to play in the business.

I was in a Board meeting last week (not Return Path’s), when one of my fellow directors came out with this gem:  “No one will ever thank us for keeping our prices low.”

When I first heard this, as is the case with most great quotes, I was drawn to its wit and simplicity.

But then I started thinking – is it true?  My mind first went to retail.  Having a reputation as being a low-cost provider can be in and of itself effective marketing – if that reputation is strong enough and your selection is wide enough, at least in retail-oriented industries, customers may consistently buy from you even if you’re not ALWAYS the low-cost provider.  Wal-Mart and Amazon prove this one out every day.  That’s the economic equivalent of customers thanking you for keeping your prices low.  Or pick an even more extreme example – gas stations, where there’s even more limited brand loyalty and even more product commoditization.  There’s really no reason to buy gas from a station who charges more than a couple pennies more per gallon than its neighbor.  No, thank you.

But in a B2B environment with smaller numbers of customers and smaller numbers of SKUs, this comment makes a lot more sense.  IT or Marketing departments don’t exactly go to the grocery store twice a week to buy data or software solutions!  I’m a big believer in the diminishing differences between the B2C and B2B universes, but this area may be one where the difference is still sharp.

Low prices might lure prospects to your doorstep, but they’re not going to keep buying your product if it’s not of sufficiently high quality.  Buyers measure quality in different ways, but here are three frameworks to think about as you contemplate the quality of your solutions relative to their prices:

• Is the quality of your product “above the bar”? Meaning, does it work well enough to get the job done that customers are hiring you to do?  If not, you do not have a sustainable business.  If so, see the next two questions
• Is the value of your product strong enough relative to the price you charge? Value-based pricing is increasingly difficult in an era of hyper competition, but if you can offer tailored enough solutions by vertical or of course by client, you can really optimize your pricing model
• Is your price/value equation strong enough relative to the price/value equation of a competing solution? Sometimes a “just barely good enough” solution can beat out a superior solution as long as it’s a LOT cheaper and the job the client needs done isn’t mission critical

The final thought vector in this equation is friction.  Go back to the consumer examples above – your switching cost to buy gas at Station A one week and Station B the next week is zero.  But in a B2B environment, there’s always at least some friction around switching products.  Friction could be implementation cost, time, execution risk.  It could be employee or customer training.  It could be integration with other systems or workflows.  It could even be desire to maintain a halo effect from doing business with you.  The more friction you have with your product, the easier it is to maintain higher pricing.

So my conclusion is that high prices are rarely going to chase someone away in a B2B, low client count/low SKU/moderate friction environment.  And that means my fellow director was spot-on:  no one will ever thank you for keeping your prices low.  All in, this comment was a great reminder for any B2B organization about how to think strategically about pricing.

Retail, No Longer

I’ve evolved my operating system as a CEO many times over the years as our business at Return Path has changed and as the company has scaled up.  I’ve changed my meeting routines, I’ve delegated more things, and I’ve gotten less in the details of the business.

But there’s one specific thing where I’ve remained very “retail,” or on the front lines, and that is the interview process.  I still interview every new hire, usually on the phone or Skype and in most cases only for 15-30 minutes, and then I also do an in-person 15-30 minute check-in when someone is around the 90-day mark as an employee.  For me, these have both been great mechanisms for collecting data about the organization, for making a personal impression on the culture, and for continuing to get to know all employees, at least a little bit.

But the system is starting to break as we scale.  Last year, we hired 82 people.  In the first six months of this year, we hired 80 more.  My calendar is groaning under the strain — and I assume, though they’ve never uttered a complaint about it, that my assistant and our recruiters feel like they’re playing a game of Sudoku with invisible ink trying to make it all work.

So today I changed the policy.  I’ll still do interviews and 90-day check-ins for all manager hires, but otherwise I’m delegating it to my staff.  We all feel that it’s critical for executives to stay as close as possible to the front lines, so we’ll share in the responsibilities.

It’s definitely a bittersweet moment.  It’s great that we’re big and growing fast, and it’s important for us to evolve.  But I will miss the personal connections with everyone, and I’ll have to work harder just to remember names as I walk through the hallways, particularly of our Colorado office, which has the majority of our staff but which I only visit 6-8 times/year.

Parenting and Corporate Leadership

Let me be clear up front:  I do not think of my colleagues at Return Path as children, and I do not think of Casey, Wilson, and Elyse as employees.  That said, after a couple weeks of good quality family time in January, I was struck by the realization that being a CEO for a long time before having kids has made me a better parent…and I think being a new parent the last three years has made me a better CEO. 

Here's why.  The two roles have a heavy overlap in required core interpersonal competencies.  And doing both of them well means you're practicing those competencies twice as many hours in a week than just doing one – and in different settings.  It's like cross training.  In no order, the cross-over competencies I can think of are…

Decisiveness.  Be wishy washy at work, and the team can get stuck in a holding pattern.  Be wishy washy with kids, they run their agenda, not yours.

Listening.  As my friend Anita says, you have two ears and one mouth for a reason.  Listening to your team at work, and also listening for what's not being said, is the best way to understand what's going on in your organization.  Kids need to be heard as well.  The best way to teach good verbal communication skills is to ask questions and then listen actively and attentively to the responses.

Focus.  Basically, no one benefits from multitasking, even if it feels like a more efficient way of working.  Anyone you're spending time with, whether professionally or at home, deserves your full attention. The reality is that the human brain is full of entropy anyway, so even a focused conversation, meeting, or play time, is somehow compromised.  Actually doing other activities at the same time destroys the human connection.

Patience.  For the most part, steering people to draw their own conclusions about things at work is key.  Even if it takes longer than just telling them what to do, it produces better results.  With kids, patience takes on a whole new meaning, but giving them space to work through issues and scenarios on their own, while hard, clearly fosters independence.

Alignment.  If you and your senior staff disagree about something, cross-communication confuses the team.  If you and your spouse aren't on the same page about something, watch those kids play the two of you off each other.  A united front at the top is key!

I'm sure there are others…but these are the main things that jump to mind.  And of course one can be great in one area without being in the other area at all, or without being great in it.  Are you a parent and a business leader?  What do you think?

My cofounder Cathy wrote a great post on the Bolster blog back in January called Procrastinating Executive Development, in which she talks about the fact that even executives who appreciate the value of professional development usually don’t get to it because they’re too busy or don’t realize how important it is. I see this every day with CEOs and founders. Cathy had a well phrased but somewhat gentle ask at the end of her post:

My ask for all CEOs is this: give each of your executives the gift of feedback now, and hold each other accountable for continued growth and development to match the growth and development of your company.

Let me put it in starker terms:

Grow or Die.

Every executive, every professional, can scale further than they think is possible, and further than you think is possible. Most of us do have some ceiling somewhere…but it will take us years to find it (if we ever find it). The key to scaling is a growth mentality. You have to not just value development, you have to crave it, view it as essential, and prioritize it.

Startups are incredibly dynamic. You’re creating something out of nothing. Disrupting an industry. Revolutionizing something. Putting a dent in the universe. For a startup to succeed, it has to constantly put something in market, learn, calibrate, accelerate, maybe pivot, and most of all grow. How can a leader of a startup scale from one stage of life to the next without focusing on personal growth and development if the job changes from one quarter to the next?

I was lucky enough to have a great leadership team at my prior company, Return Path, over the course of 20 years. Within that long block of time with many executives, there was a particular period of time, roughly 2004-2012, that I jokingly refer to as the “golden age.” That’s when we grew the business from roughly $5mm in revenue to $50 or $60mm. The remarkable thing was that we executed that growth with the same group of 5-6 senior executives. A couple new people joined the team, and we struggled to get one executive role right, but by and large one core group took us from small to mid-sized. Why? We looked at each other — literally, in one meeting where we were talking about professional development — and said, “we have to commit to individual coaching, to team coaching, and to growth as leaders, or the company will outpace us and we’ll be roadkill.”

That set us on a path to focus on our own growth and development as leaders. We were constantly reading and sharing relevant articles, blog posts, and books. We engaged in a lot of coaching and development instruments like MBTI, TKI, and DISC. We learned the value of retrospectives, transparent 360s, and a steady diet of feedback. We challenged ourselves to do better. We worked at it. As one of the members of the Golden Age said of our work, “we went to the gym.”

The “Grow or Die” mantra is real. You can’t possibly be successful in today’s world if you’re not learning, if you don’t have a growth mentality. You are never the smartest person in the room. The minute you are convinced that you are…you’re screwed.

If you don’t believe me, look at the development of your business itself as a metaphor for your own development as a leader. What happens to your startup if it stops growing?

(You can find this post on the Bolster Blog here)

Brad wrote a fun post a couple years ago about rituals, including one about The Annual Dinner that he and Amy, Fred and Joanne Wilson, and Mariquita and I have been having not quite annually for almost 15 years now.  His most poignant comment (other than that apparently he and I are both getting larger and greyer in sync with each other) is about the power of marking the passage of time together with the same group of people.  We have a similar tradition at Return Path that’s worth noting in the context of my reboot program since it happened a few weeks ago and was part of the reboot cycle.

On the first anniversary of Return Path’s founding, I took my co-founder Jack Sinclair and our first two colleagues, Matt Spielman and Alexis Katzowitz, our to lunch where we shared lessons learned from the past year at the company and predictions for the company in the coming year with each other.  Jack, George Bilbrey, and I continued doing an end-of-year meal tradition with those two conversation topics for over a decade.  The last three years, since Jack left to join Stack Overflow, George and I have continued the tradition on our own.  Although some of our conversation every year isn’t really for public consumption, I’ve always regretted not blogging some highlights of it.  The tradition is a very powerful one of reflection and retrospective, which is deeply ingrained in Return Path’s culture, as a means of continuous improvement through renewal and refreshing.

Last month, we came up with a few good lessons learned that are featuring in my reboot.  Here they are:

• Growth covers up a lot of weaknesses.  While we still have a healthy growth rate as a company, it’s lower than is used to be – as is the case for all companies as they grow and face the law of large numbers.  What’s interesting, though, is how many weaknesses growth can cover up that start getting exposed as growth slows.  Think of it as an analogy to Technical Debt, call it Organizational Debt.  It’s the accumulation of small decisions over time to take an expedient path on a particular item.  It’s the “oh, we’ll throw a body at the problem now and automate the solution later” type thing that never gets automated, then gets compounded when the hired body needs to be replicated, then managed, then turned into a department.  You get the idea.
• Executive playbooks must be applied flexibly.  As is true of many growing companies, we’ve hired a number of outside senior executives over the last few years.  Some have worked out and others haven’t.  One thing we’ve learned, though, is that there’s a bit of a myth sometimes around the “I have the playbook” claim, the same way there’s a myth around hiring sales people who claim “I have a Rolodex” (or whatever the current version of that is).  Every company is unique, even in the same space.  Every situation is unique.  What makes an executive great is the ability to take learnings and experiences from prior roles and companies, both good and bad, and apply them thoughtfully to new situations, not the ability to run the same play over and over again in exactly the same way.  Sure, there are core business processes or systems that can be applied consistently, but most of those don’t require senior executive expertise.
• Know the job your customer is hiring you to do and what the alternatives are.  This is contemporary product management language, but it really rings true.  No matter who you are, no matter what job you do, you have a customer.  That customer is paying you something for a reason.  That money could go somewhere else.  Keeping that reason top of mind (and understanding when and why and how it shifts) is critical to developing the right solutions.

George, thanks for a decade and a half of reflections together (among other things!).

I’ve been uncharacteristically quiet since April (I still hate non-competes and while I respect the right of the Chamber of Commerce to sue the FTC, I hope common sense prevails). Between then and now, we switched things up at Bolster, and my co-founder Cathy Hawley is now the CEO. Things are great there, and if you need any executive search help (Director to C-level or Board/Advisory/Fractional), let me know.

I’ve been hard at work on a passion project while I’ve been between things professionally, and I’m excited this week to announce the launch of my new podcast mini-series, Country Over Self: Defining Moments in American History. That link is to the web site where you can see the whole plan for the series.

Whether or not you’re a US History nerd like me, I hope you enjoy the Country Over Self podcast, especially since what I do is basically take a CEO lens to the whole subject.

Here are the links to the show on the three major podcast platforms and YouTube if you want a video option:

• Apple
• Spotify
• Amazon
• Youtube

I am taking a very nonpartisan approach to analyzing critical moments in American history to tell some of our shared stories and highlight some of our shared values as a country to play some small part in bringing us back together as a nation. This is NOT a political podcast, but it IS at least in part a response to this divisive election season and the environment the past 10-20 years, partly the product of a lifelong obsession with the American Presidency. Somehow, and I don’t know how this is possible, I’ve never blogged about it, but Brad has. My bibliography has grown a lot since then, but this is a good start.

My trailer (Episide 0, about 3 minutes long) is live as well as E1, on LBJ, which I just dropped today, all on all those platform show links above. I’ll drop 1-2 episodes a week until the end of the year when I’ll wrap up the series. I am so lucky to have been able interview the historians I have to produce this.

I am closing in some new CEO opportunties, so I’ll be back with more once those shape up.

I Love My Job

The picture below is a picture of my dress shoes in my closet at home.  You may note that they all have dust on them.  That's because I didn't put them on once for six weeks.

When we started Return Path back in 1999, we sat down to write our employee handbook, and all I could think was "what things can we add in here that will make this company a unique place to work?"  And one of them was a six week paid sabbatical after 7 years.  It didn't occur to me that we'd even exist after 7 years.  Then for good measure, we said, "7 years and every 5 years after that."

I'm happy to report that everyone who has hit their 7 year anniversary has taken the time off.  Some have traveled around the world, some have rented a house or villa somewhere, others (like me) did a "stay-cation."  Although my sabbatical was delayed (and quite hard to schedule), it was a fantastic experience.  I completely unplugged from work.  Cold turkey.  No email, no calls.  Spending time with Mariquita and my kids, which I never get to do much of, was completely refreshing and energizing.  And everything went fine at work, as I expected.  Business is in the best shape it's ever been in, and my amazingly talented executive team and assistant handled everything without missing a beat.

But back to the subject line of this post.  I figured a few things out while I was away.  One was that I haven't actually become a workaholic over the years despite working hard.  I *could* unplug without feeling aimless.  Another was that it's really nice to be untethered from the Internet, but it's near impossible to go through life now without some minor usage of the web and messaging.  But by far my biggest insight is plain and simple:  I love my job.  It's not that I didn't know that before, but I had more thoughtful time to break that down while I was away:

1. I love what I do:  I consider myself extremely fortunate to love the substance of my job.  The diversity of experiences that I have within a given week or day as a general manager, the interactions with people, shaping the business strategy, travel — it's all right up my alley. So many people out there don't have that match between interest, passion, skill, and reality. 

2. I love who I work with:  I have to admit that I stack the deck here since I do the hiring and firing, but the reality is that my colleagues at work are also my friends.  Not working was one thing.  Not talking to one particular subset of my life for six weeks was something else and just plain weird.  I just missed them and the interactions we have, which always blend the professional with the social. 

3. I love what we are working on:  We have an incredibly interesting business at Return Path.  It's very intellectually engaging, sometimes to a fault.  The spam problem is incredibly complex, and we're coming up with some extremely innovative approaches to reduce its impacts and hopefully someday eradicate it.  We're not curing cancer as I always say internally, but we're also engaged in some high impact problem solving that I just love.

So there you have it.  My work shoes are now dusted off and back in action.  It's great to be back.  We'll see how long I can stay in "mental vacation" mode, how much more time I can try to make for my family now that I'm back in my work routine, and whether the fresh perspective translates into any new actions or decisions at work.  But the best thought of all is that my 12 year anniversary is only another year and a half away!

OnlyOnce is Ok

Fred and Brad from Union Square Ventures have a great post today about the kinds of entrepreneurs they like to back and why.  I particularly like it because almost half their portfolio is made up of companies led by first-time CEOs, which as you probably know, is one of the founding themes around this blog.

Your Goal:  Professional Nirvana

Brad wrote a delightful post the other day entitled "My Work is Play to Me."  His theory about how to achieve it is worth reading.  I, too believe that my work is play (under this definition), and that has been one of the things that’s kept me going as an entrepreneur for nearly seven years now.  And you don’t have to be a VC, or a CEO, or be working remotely to achieve the state.

This is reminiscent of the Fish books (here, here, and here), although in a more fundamental, philosophical, internally-generated way.  Those are good, quick "airport" reads — at least get the first one, which is the story about the famous Pike Place fish market in Seattle, which is a great place and experience.

This is easy.  Repeat after me:

If you have a job, your goal should be to make your work play.

If you manage other people, your goal should be to make work play for anyone on your team.

Email Articles This Week

I know, not a real inspired headline.  There are two interesting articles floating around about email marketing this week.  I have a few thoughts on both.

First, David Daniels from Jupiter writes in ClickZ about Assigning a Value to Email Addresses.  David’s numbers show that 71% of marketers don’t put a value on their email addresses.  I think that may be an understatement, but it’s a telling figure nonetheless.  David’s article is right on and gives marketers some good direction on how to think about valuing email addresses.  The one thing he doesn’t address explicitly, though, is how to think about the value of an email address in the context of a multi-channel customer relationship.  Customer Lifetime Value is all good and well, but the more sophisticated marketers take the next step and try to understand by customer (or segment) how valuable email is relative to other channels.

Second, David Baker writes in Mediapost’s Email Insider about Finding New Customers Via Email.  The column is a nice discussion of how important email is to retaining customers.  We at Return Path completely agree.  However, the question Baker posed at the beginning is not well addressed — “Should I use email to find new customers?”

My company works with hundreds of smart marketers every week who say, “Yes!  Because it’s effective, cost efficient and is the only way to combine the relevancy of search with the power of online advertising.”

I applaud Baker’s note of caution to marketers planning to acquire customers via email.  It’s always a good idea to plan the campaign with the same diligence you plan any marketing outreach — making sure the targeting, message, design and offer are all optimized for the prospect interest and the medium.

However, I take great issue with his conclusion that email acquisition marketing “does more harm than good.”  Our clients disprove this claim every day.  Email prospecting done well includes a synergy of organic, viral and paid techniques.  Consumers and business professionals still want to receive relevant and informative offers via email.  More than 50,000 of them sign up every DAY for email offers from Return Path alone.

Poeple who have failed list rental tests (and there are lots of them) need to ask some hard questions of their campaign strategy, their creative, their list rental partner, and their agency.  Did you try to send the same message and design to a list of prospects as you do to your house file?  No wonder no one got the message, they don’t even know you.  Was your list double opt-in?   Did you segment the list by interest category or demographics?  Perhaps your message was mis-targeted.  Did your landing page make it easy to take advantage of the offer?  Did you test on a small portion of the list before blasting the entire file?  Did you optimize your subject line to ensure higher open rates?  Did you try to do too much?  The golden rule of email list rental is “one email, one message.”

The success of many marketers using list rental today can not be ignored.  Done well, email acquisition is extremely powerful.  And, the addition of new lead generation, co-registration and offer aggregation opportunities create even more custom and targeted opportunities to connect with prospects.

It’s too easy to dismiss something that didn’t work two years ago by blaming the medium.  Instead, recognize that old experience for what it was.  A well-intentioned effort to test out a new medium, that didn’t work because many tried to apply practices from other media to it.  Times have changed, and email acquisition has proven its value.

Stick with Daniels’ article, figure out how valuable an email address can be for you, then go out and collect as many of them as you can from customers and prospects who will be all-too-willing to give them to you in exchange for content, offers, and other points of value.