I was excited to read Launchpad Republic: America’s Entrepreneurial Edge and Why It Matters, by Howard Wolk and John Landry the minute Brad sent it to me. I love American history, I love entrepreneurship, and I’m deeply concerned about the health of our country right now. I have to say…on all fronts, the book did not disappoint!

The authors make several points, but the one that sets the tone for the book is that like our country’s origins and culture in general, entrepreneurship is itself rebellious. It’s about upstarts challenging the status quo in some way or other with a better way to do something, or with a new thing. The balance between protecting private property rights and allowing for entrepreneurs to fail and to disrupt incumbent leaders is what makes America unique, especially compared to the way European business culture has traditionally operated (consensus-oriented) and the way China operates (authoritarian).

I loved how the authors wove a number of business history vignettes together with relevant thru lines. Business in Colonial times and how Alexander Hamilton thought about national finances may seem dusty and distant, but not when you see the direct connection to John D. Rockefeller, IBM, GE, Microsoft, or Wendy Kopp.

The book was also a good reminder that some of the principles that have made America great and exceptional also underly our successful business culture, things like limited government, checks and balances within government and between government and the private sector, and decentralized finance.

Without being overly political, the authors also get into how our political and entrepreneurial system can and hopefully will tackle some of today’s more complex issues, from climate change to income inequality to stakeholder capitalism.

At the heart of all of it is the notion that entrepreneurs’ creativity drive America forward and are a leading force for making our country and our economy durable and resilient. As a career entrepreneur, and one who is now in the business of helping other entrepreneurs be more successful, this resonated. If you’re a student of American history…or a student of entrepreneurship, this is a great read. If you’re both, it’s a must read.

Book Short:  On Employee Engagement

The first time I ever heard the term “Employee Engagement” was from my colleague David Sieh, one of the better managers I’ve ever worked with.  He said it was his objective for his engineering team.  He explained how he tried to achieve it.  I Quit, But forgot to Tell You, by Terri Kabachnick, is a whole book on this topic, a very short but very potent one (the best kind of business books, if you ask me).

It’s got all the short-form stuff you’d expect…a checklist of reasons for disengagement, an engagement quiz, the lifecycle of an employee that leads to disengagement, rules for dealing as a manager.

But beyond the practical, the book serves as a good reminder that employee engagement is the key to a successful organization, no matter what industry you’re in.  All managers at Return Path — this is on the way to your desk soon!

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!

Book Short:  A Primer on Viral Marketing

“People talk about Andy,” writes Seth Godin in the foreward to Andy Sernovitz’s new book, Word of Mouth Marketing:  How Smart Companies Get People Talking.   “He’s a living, breathing example of the power of word of mouth.”  Andy’s the CEO of WOMMA, the Word of Mouth Marketing Association, and a former colleague of mine.

Ever since reading The Tipping Point, I keep looking for the secret sauce around viral marketing.  What is it that makes something cool enough to buzz about?  My conclusion from reading Andy’s book is that secret sauce doesn’t exist.  Like everything else, being buzzworthy comes from hard work, being inherently good, AND using the techniques and understanding in Andy’s book.  Tables like “The Three Reasons People Talk About You” and “The Five T’s of Word of Mouth Marketing” are worth the price of the book in and of themselves, as they explain how to manage, handle, and drive viral marketing — once you have your own secret sauce down.

Andy’s wanted to write a book for a long time (in fact, he got us started on ours), and I’m glad he finally did it.  If you’re interested in an easy-to-follow, practical, hands-on guide to viral, or word-of-mouth marketing, this is the book for you.

Subtract: The Untapped Science of Less, by Leidy Klotz is a great read, and in concert with the philosophy of the book, this will be a short blog post.

The book’s basic premise is that less is more, addition by subtraction. The author’s examples range from the genius of the Strider Bike (bike without pedals) that allows 2-year olds to ride bikes to the Embarcadero in San Francisco. Many people don’t remember that that road used to be called the Embarcaro Freeway, a massive, ugly, two-tiered structure that blocked out the views and waterfront, and that the opportunity to tear down the whole thing following the massive 189 earthquake left San Francisco with a much simpler, beautiful, liveable waterfront by the Ferry Terminal.

There are many great takeaways in the book as well as an action plan for how to think about subtracting AND adding, not just adding, which is the normal reflex for humans, and I’d add ESPECIALLY for entrepreneurs!

We put these principles into action a couple weeks ago at Bolster. When we were crafting our 2024 plan, we worked methodically as a leadership team to reduce. We cut out words, but we also cut out topics and strategic initiatives. The end product was less than 50% the size (word for word) of the 2023 plan, and I think it’s much crisper, more memorable, and more actionable for our team than last year’s.

Hopefully over time, we will find more occasions to do less.

I’ll close with two of my favorite quotes, both of which were in the book. One is by Mark Twain, which is “I didn’t have time to write a short letter, so I wrote a long one instead.” The other is by Lao Tzu, which is “To attain knowledge, add things every day. To attain wisdom, subtract things every day.”

Sometimes less takes more time. But it’s almost always more valuable.

Selling a Line of Business

It’s been a couple of years since Return Path decided to focus on our deliverability business by divesting and spinning out our other legacy businesses. That link tells some of the story, and the rest is that subsequently, Authentic Response divested part of the Postmaster Direct business to Q Interactive.  Those three transactions, plus a number of experiences over the years on the buy side of similar transactions (Bonded Sender, Habeas, NetCreations), plus my learnings from talking to a number of other CEOs who have done similar things over the years, form the basis of this post.  The Authentic Response spin-out was also partially chronicled by Inc. Magazine in this article earlier this year.

It’s an important topic — as entrepreneurs build businesses, they frequently end up creating new revenue opportunities and go off on productive tangents.  Those new lines of business might or might not take off; but sometimes they can take off and still, down the road, end up being non-core to the overall mission of the company and therefore candidates for divestiture.  Even if they are good businesses, the overall enterprise might benefit from the focus or cash provided by a sale.  Look at the example of Occipital building the Red Laser app, then selling it to eBay to finance the rest of their business.

Here are some of the signs of a successful divestiture:

• Business is truly non-core or relies on starkly different competencies for success (e.g., one is B2B, the other is B2C)
• Business is growing rapidly and requires assistance to scale properly (either technology, or sales)
• Business has its own culture and operations and “a life of its own”

Conversely, here are some of the reasons why a divestitures of a business unit might stall or fail:

• Lack of a very compelling story as to why you’re selling the business unit
• Stand-alone financials of the unit are too hard for the buyer to determine with confidence
• Operations of the unit too tethered to the mothership
• There is some problem with the leadership of the unit (there is no stand-alone leader, the leader isn’t involved in the divestiture, the leader isn’t squarely behind the divestiture)
• Business performance weakens during the process

I have a couple points of advice to entrepreneurs in this situation.  The first is to clarify for yourself up front:  are you selling a true line of business, or are you selling assets?  If you are selling assets, you need to clearly define what they are, and what they aren’t, and you need to make sure all legal details (contracts, IP, etc.) are buttoned up before the process starts.

If you are selling a true line of business, beware that buyers will not be interested in doing any hard work, or if they feel like they have to do hard work, the price they pay for the business will reflect that in the form of a steep, steep discount.  The financials must be understandable and credible on a stand-alone basis.  The business must be completely separated from the core already.  The business must have its own management team, completely aligned with the decision to sell.

You also have to be extremely cognizant of the human aspects of what you’re doing.  Every culture is different, and I’m not advocating one style over another, but selling or spinning out a business is very different than selling a company.  There’s going to be a big difference in reactions, perceptions, hopes, and fears between the people in the core who are staying, and the people in the business unit that’s going.  Having a heightened awareness of those differences and factoring them into your communications plan is critical to success, as a poorly managed effort can end up harming both sides.

In terms of valuation expectations, don’t expect to get any credit for synergies.  You have to present them and sell them, and they may make the different between getting a deal done and not, but they will most likely not impact the price you get for the divestiture.

Finally, remember that buyers understand your psychology as well.  They know you’re selling the business for a reason (you need to raise cash, you’re concerned about its future performance, it’s become a distraction or has the potential to suck scarce resources out of your core, etc.).  They will completely understand the costs you carry, whether financial, opportunity, or mental, in continuing to own the business.  And they will factor that into the price they’re willing to offer.  Of course, as with all deals, the best thing you can do to maximize price is have multiple interested parties bidding on the deal!

Book Short:  Finishing First

The Power of Nice:  How to Conquer the Business World with Kindness, by Linda Kaplan Thaler and Robin Koval, is one of those “airport books” that takes about an hour to read.  I had an ear-to-ear grin reading the book, in part because, well, it’s just a happy book, filled with anecdotes about how a smile here or a gesture of kindness there made a difference in someone’s life — both personally and professionally.

But part of my interest in the book was also driven by a long-standing debate we have at Return Path over whether we’re “too nice” as a company and whether we should have “sharper elbows.”  I was struck by a few comments the authors made, things you would expect like “nice doesn’t mean naïve” as well as things you wouldn’t like “help your enemies.”  To me, that says it all about success in business:  you can be a fierce competitor externally and demand accountability internally and still be a warm and kind person, and that’s the best (and most rewarding) place to be.

Book Short:  Underdog Victorious

The Underdog Advantage, by David Morey and Scott Miller, was a worthwhile read, though not a great book.  It was a little shallow, and although I enjoyed its case studies (who doesn’t love hearing about Ben & Jerry’s, Southwest, JetBlue, Starbucks?), I didn’t feel like the authors did enough to tie the details of the success of the case study companies back to the points they made in the book.

That said, the book had some great reminders in it for companies of all sizes and stages.  The main point was that successful companies always think of themselves as the underdog, the insurgent, and never get complacent.  They run themselves like a political campaign, needing to win an election every single day.  A lot of the tactics suggested are timeless and good to remember…things like never declare victory, always play offense, always respond to attacks, remember to communicate from the inside out, and remember to sell employees on a mision and purpose in order to make them your main ambassadors.  The laundry list of tactics is the book’s greatest strength.

Book Short:  A Twofer

My friend Andrew Winston, who is one of the nation’s gurus in corporate sustainability, just published his second book, this one from Harvard Business Press — Green Recovery:  Get Lean, Get Smart, and Emerge from the Downturn on Top.  It builds on the cases and successes he had with his first book, Green to Gold (post, link to book), which came out a couple years ago and has become the standard for how businesses embrace sustainability and use it to their financial and strategic competitive advantage rather than thinking of it as a burden or a cost center.

Green Recovery is a shorter read (my kind of business book), and it hits a few key themes:

• Going green not only shouldn’t wait for better economic times, it’s a key way out of this mess

• Businesses have relied on layoffs to cut costs for far too long — it’s time to get lean on stuff, not people
• This is about survival for many businesses:  Detroit died because it missed the green wave of environmental interest and rising energy prices
• And the overarching theme…Green doesn’t raise costs, it lowers them – it’s a source of profit and innovation
  

The book reminds me a lot of my post Living With Less, For Good, which I wrote at the beginning of the financial market freefall last fall, talking about how we as a company were figuring out how to cut back without cutting people (something we’ve managed to do).  Although I wasn’t talking about green initiatives specifically, the point of getting leaner on “stuff” really resonates with me.

At the end of the day, Andrew proves that steering your company to go green — no matter what industry you’re in — is a twofer:  you can increase the strength of the business and simultaneously do your part to clean up the environment.  That’s definitely the “change we can believe in” mentality applied quite pragmatically!

The Gift of Insight

Jonathan Schwartz has a great post entitled “Every Customer Visit is a Lesson.” It’s so true…if you want to give yourself a gift this holiday season, give yourself the gift of insight and spend some time in the market with a few of your top customers or prospects.  I’ve always found that to be one of the most valuable ways to shape the business, both strategically and operationally.

One of the most vivid memories I have to illustrate this concept is a meeting that I had with Crate and Barrel, a prospect, in the very early days of Return Path, back in 2000 or 2001.  I went in with my colleague Sophie Miller, and with a number of product sales specialists from our reseller, DoubleClick, for an all-day session with C&B’s online marketing team.  We collectively were pitching everything, possibly including the kitchen sink — ad serving through DART, buying online media through the DoubleClick Network, using Abacus to expand the reach of their catalog, sending email through DARTMail, renting email lists through DoubleClick’s email list business, oh yes, and using Return Path’s ECOA service to keep their email database clean.

The meeting was a mess, and as far as I can tell, it didn’t really lead to any meaningful business, either for us or for DoubleClick.  I learned two things in this call the hard way, but both were incredibly valuable lessons that continue to shape our business today.

First, we created massive confusion by bringing multiple sales people in to each present a specific product to the customer, rather than sending in one senior, consultative sales person to present a holistic digital marketing solution.  Picture yourself as the head of e-commerce for a major retailer, expecting an insightful day with the leading vendor in the space…then walking into the meeting and seeing that vendor’s SEVEN different sales people introducing themselves to each other!  It was a mess.  Since then, we have tried hard (and I think DoubleClick has as well) to run with a single sales force organized around the customer, not organized around our own products.

Second, we discovered that the original version of our flagship ECOA product (which was still in beta at the time) had a couple of flaws in the business model that were probably going to make it a non-starter in the retail/catalog vertical.  We also learned, happily, that the client loved the concept, but there were some details in the original product that had to be fixed if we were ever going to get traction with key customers in that key segment.  We fixed these problems and were able to successfully re-launch ECOA later that year, but more important, we now stay much closer to our customers as we develop new products and features so we make sure concepts are more firmly market tested before they head into development.

There are many more examples of this Gift of Insight, which I’ll share in future posts.  Happy Holidays!

CEO Diary:  What Makes a Great Day?

5:30 a.m. – run (have to keep up with Brad)

8:45 a.m. – networking coffee with former main contact at large strategic partner; now CFO of another company in the industry

9:30 a.m. – work time/email/read newsletters, Wall St. Journal online, various RSS feeds

10:30 a.m. – internal meeting to discuss mothballing a product feature that’s hard to maintain and doesn’t generate much revenue

11:00 a.m. – internal meeting to clarify roles and responsibilities between account management and  client technical operations

11:30 a.m. – brainstorm 2006 strategy with head of one of our lines of business

1:00 p.m. – great sales call on a Tier I prospect with new sales person; business almost certainly forthcoming!

3:00 p.m. – meet with head of sales and hea of HR to discuss candidate for sales position and potential changes to sales compensation structure

3:30 p.m. – review draft of new (revolutionary!?!?) corporate web site; do deep dive on critical headlines and copy points with team members

4:30 p.m. – status meeting with new head of marketing,including quick stand-up meeting on PR strategy for upcoming trade show with one line of business head and product manager

5:30 p.m. – work/email/planning next Board meeting agenda/blog posting

7:00 p.m. – dinner with CTO

Energizing (frenetic?).  Diverse in terms of functions/departments covered.  Good balance of internal vs. external.  Some items high level, some more detailed.  Mix of brainstorming vs. decisions vs. status checks.  Some social mixed in with hardcore work.  This is why I love my job!