The Beginning of the DMA’s Next Chapter

As I wrote a few months back, I recently joined the DMA’s Board of Directors and its Executive Committee to try to help the association – one of the largest and highest profile groups representing marketers – advance its agenda in a few specific ways.  At the time, I noted that my interests would be on consumer advocacy and engagement, execution around interactive marketing issues and the internet community, and transparency around the organization itself.

Yesterday, John Greco, the association’s CEO, announced he is stepping down to make way for the next generation of leadership.  John has done some great work the past five years running the DMA and has advanced it materially from where the association was when he took over in terms of interactive marketing, but he recognized (the hallmark of a good leader) that it was time for a change.

There are all sorts of questions people have about this announcement, and I’ve already gotten a number of calls and emails from people trying to read between the lines and get some inside scoop.  Some of the questions have answers – others don’t at this stage or can’t given confidentiality agreements. 

That said, as a new Board member helping the DMA build some bridges to the interactive marketing community, I thought I would share a few perspectives on this situation:

–          There is not a final search committee yet, nor are there final search criteria.  That said, there is a strong commitment to find a leader for the DMA who is not only capable of running a broad-based $30mm+ trade association and running a world class advocacy operating in Washington, but who also has deep roots in the Internet

–          There are many, many initiatives in the works – some of which have been underway for quite some time now – for the DMA to evolve as an association to more effectively execute its mission in the interactive marketing arena.  These will start to unfold relatively quickly

–          The DMA’s Board and Executive Committee are fantastic groups with very progressive, committed volunteers who understand the things that need to happen.  “Reform,” which probably isn’t quite the right word anyway, isn’t being pushed on the association – it is coming from within

–          The DMA is committed in its search process, and in its new “operating system” going forward, to embrace not just its membership but the broader interactive and direct marketing community as it evolves its strategy, broadens its mission, and looks for a new leader

So the bottom line is – this announcement of one change is the first of many.  Stay tuned, and look for much more open and transparent communication from the DMA, including a lot more community-oriented dialog as opposed to just one-way statements, than you’ve ever seen before in the coming weeks and months.

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!

Doing Well by Doing Good, Part IV

This series of posts has mostly been about things that people or companies do that help make the world a better place — sometimes when it’s their core mission, other times (here and here) when it becomes an important supporting role at the company.

Today’s post is different — it’s actually a Book Short as well of a new book that’s coming out later this fall called Green to Gold:  How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, published by Yale Press and written by Daniel Esty (a Yale professor and consultant), and a good friend of mine, Andrew Winston, a corporate sustainability consultant.

Green to Gold is a must-read for anyone who (a) holds a leadership position in business or is a business influencer, and (b) cares about the environment we live in.  Its subtitle really best describes the book, which is probably the first (or if not, certainly the best) documentation of successful corporate environmentalstrategy on the market.

It’s a little reminiscent to me of Collins Built to Last and Good to Great in that it is meticulously researched with a mix of company interviews/cooperation and empirical and investigative work.  It doesn’t have Collins “pairing” framework, but it doesn’t need to in order to make its point.

If you liked Al Gore’s movie, An Inconvenient Truth, this book will satisfy your thirst for information about what the heck the corporate world is doing or more important, can do, to do its part in not destroying our ecosystem.  If you didn’t like Gore’s movie or didn’t see it because you don’t like Al Gore or don’t think that many elements of the environmental movement are worthwhile, this book is an even more important read, as it brings the theoretical and scientific to the practical and treats sustainability as the corporate world must treat it in order to adopt it as a mainstream practice — as a driver of capitalistic profit and competitive advantage.

This is a really important work in terms of advancing the cause of corporate social responsibility as it applies to the environment.  Most important, it proves the axiom here that you can, in fact, Do Well by Doing Good.  If you’re interested, you can pre-order the book here.  Also, the authors are writing a companion blog which you can get to here.

My 360 on Your 360

Last year, I wrote about the 360 review process we do at Return Path, which is a great annual check-in on staff development and leadership/management.  In Part I of What a View, I described the overall process.  In Part II, I talked specifically about how my review as CEO worked, which is a little different.

This year, we changed the format of our reviews in two ways. First, for senior staff, we continued to do the live, moderated discussions, but we dropped having people also fill out the online review form.  It was duplicative, and the process already consumes enough time that we decided to cut that part out, which I think worked well. 

Second, for my review, instead of having the Board review me separately from the senior staff, I combined efforts and had all of them participate in my live moderated discussion together.  I also think this worked well, although we did receive some feedback about how to modify the format slightly for next year.  It was great for the Board to get a window into how the team feels about me, and vice versa, and it produced a single, unified development plan for me, which is much more helpful than two sets of feedback about different questions and issues.

The one theme that came out of this year’s live reviews, which is definitely worth thinking about, is the impact of the Heisenberg Uncertainty Principle, that once something is observed, the act of observing it can actually change it.  Because the live discussions are face to face (anonymous to the person being reviewed, but not anonymous among the reviewers), some people mentioned that they were conscious of what they were saying in the presence of others in the company.  Others didn’t particularly care about that but did say things that could be construed as negative about some of their fellow reviewers.  Someone came up to me after one session and said "I wonder what the rest of the group thought of my comments — I need a 360 on your 360!"

The reality is that transparency is a good thing.  There shouldn’t be any state secrets about someone’s performance, especially when the person is in a senior management position.  All people always have things they can improve upon, and the open discussion around what they are and why they happen produce MUCH better results for the people being reviewed, uncomfortable as it may be at times.

The sessions are confidential, so participants should feel comfortable that their thoughts won’t be shared outside the room.  Plus, we provide a mechanism to give feedback that really is hard to provide in public for whatever reason via email or one-on-one conversations with the moderator.

Productive Eavesdropping

We’re in the midst of some pretty extensive renovations of our offices in New York at the moment.  For better or for worse, we’re doing this work without moving out.  We’ve basically crammed everyone into the back half of the office right now while the contractors are working on the front half.  When that’s done, we’ll all move into the newly-refinished front so they can do the same in the back.

One of the interesting side effects of this project is that I’m sharing my office with Anita Absey, our head of sales.  It’s the first time I’ve shared an office in quite a while, at least since the first year of the company’s life when we all sat in one big room together.  So the two of us are getting in a lot more time together than we usually do.  As much as we try to block out the sound coming from across the room, I’m sure there’s been plenty of inadvertent eavesdropping in both directions.

For my part, I’ve enjoyed it.  I have much more of a window into what Anita works on than I usually get.  I’m more in the flow of what’s happening with the sales organization.  I’m seeing what a strong manager she is, and I’ve picked up at least a couple of tips from her around her leadership style.  And we’ve had a lot of quick back-and-forth between things.  When we sat down to have our weekly check-in last week, it was half its normal length since we had already covered much of the topics in the daily flow of conversation.

I wonder if there’s a way to accomplish the same thing with others on my team…or with everyone on my team…without rearranging the office!

As for Anita, well, I suspect I’ll hear from her as to whether or not the arrangement is working for her shortly after I press “publish” on this post!

There’s been much coverage in the news of Saturday’s passing of President Ronald Reagan, but I will add a new wrinkle by trying to distill down what I know and remember of The Great Communicator’s leadership style into a few simple lessons of note for CEOs.

Lesson 1: Sunny optimism motivates the people you lead, but only when it’s balanced with hard-headed realism. Reagan’s message that tomorrow can be a better day than today was powerful and timely for the American psyche, but he didn’t just assume that because he said it, it would be true. He backed up his message with (a) an understanding that the American economy itself was in the doldrums in the late ’70s, and (b) policies designed to fix the economy. Whether you agree with those policies or not, you have to respect the fact that Reagan as a leader wasn’t just talk — he combined the talk with reality-based action. That’s super important when communicating key messages to a company of any size.

Lesson 2: Simplicity of messaging beats out measured intellectualism in broad-based communications. Reagan’s view of the 40-year-old Cold War when he took office was “we will win, and they will lose.” Much easier to rally around than messages of detente and containment (this quote came from an editorial by former Reagan staffer Peter Robinson in today’s Wall St. Journal). Similarly, the bigger and more diverse the group you’re talking to inside your company or in a speech or in the press, the more important it is to boil your key message down to something people can easily take away with them and repeat at home later to their spouse or friends.

Lesson 3: Nobody’s perfect, and you don’t have to be perfect either. He may have been, electorally, the most popular president of our generation, but Reagan certainly had his many and sometimes glaring faults. History will acknowledge his faults but overall judge him on his performance. It was noted (also in today’s Journal, I think) that Reagan got a lot of little things wrong, but in the end, he will be remembered because he got a few big things very, very right. Perfection is something that most mortals can’t achieve, certainly not in a high profile position like President or CEO of anything, whether a 10-person startup or a nation.

Love him or hate him, the man was one of the most prominent leaders of our time. I’m sure there are more lessons from Reagan’s legacy than these three for CEOs, but this is a start, anyway.

The Ultimate Sales Job

In a moment of productive tension a couple months back, one of my sales people said to me, “What do you know about selling?  You’ve never carried a bag in your life!”  Technically, the sales person was correct — I’ve never been a member of a sales department.  But as a product manager, GM, and CEO over the last 17 years, I have actually spent a significant of time directly selling customers.  But this comment got me thinking about the role of a CEO and just how much of a sales job it is.

My conclusion:  it’s not a just a sales job, it’s the ultimate sales job!  Why?

• Assisting on sales calls is the most obviously basic sales component to the job.  While some CEOs are more “in the market” than others, and even ones who are active with customers and prospects don’t do it every day, most CEOs that I know have either closed or assisted their sales reps on scores of deals
• Articulating a vision for where the company is headed is selling to the team and building consensus that keeps everyone’s eye on the ball
• Raising money to start or expand the business is selling the company, the vision, the management team, and the market to investors (some of the world’s toughest customers!)
• Recruiting talented employees is selling that same vision as well as your leadership capabilities to a prospective member of your team
• Speaking at conferences and trade shows maybe a subtle form of sales, but it usually involves presenting the image and expertise you want to present to be “on message” to drive new business in the door
• Building strategic partnerships is similarly selling a potential partner on how you can channel the core assets of your business to work for the partner company

In the end, most successful startups end up either going public or getting acquired.  Selling the actual company — now that’s the ultimate sales job within the ultimate sales job.

Who Are Your CPO and COO?

Every senior management team needs a CPO and a COO.  No, I’m not talking about Privacy and Operations.  I’m talking about Paranoia and Optimism.  On my leadership team at Return Path, many of us are Paranoid and many of us are Optimistic, and many of us can play both roles.  But I’m fortunate to have two business partners who are the Chiefs – George Bilbrey is our Chief Paranoia Officer, and Anita Absey is our Chief Optimism Officer.  Those monikers fit their respective roles (product and sales) as well as their personalities.

My view is simple – both traits are critical to have around the management table, and they’re best when they’re in some kind of equilibrium.  Optimism keeps you running forward in a straight line.  The belief that you can successfully execute on your plan, with a spring in your step and a smile on your face, is very motivating.  Paranoia keeps you looking around corners.  It may also keep you awake at night, but it’s the driving force for seeing potential threats to the business that aren’t necessarily obvious and keeping you on your toes.  I wrote about the benefits and limits of paranoia (with an extreme example) years ago here.

Too much of either trait would be a disaster for a team’s psyche.  But both are critical points of view that need a loud voice in any management discussion.  It’s a little bit like making sure your management team knows its actual and target location along the Fear/Greed Continuum.

Sometimes, Things Are Messy

Many people who run companies have highly organized and methodical personality types – in lots of cases, that’s probably how they got where they got in life.  And if you work long enough to espouse the virtues of fairness and equality with the way you manage and treat people, it become second nature to want things to be somewhat consistent across an organization.

But the longer we’re in business at Return Path and the larger the organization gets, the more I realize that some things aren’t meant to fit in a neat box, and sometimes inconsistency is not only healthy but critical for a business to flourish.  Let me give a few examples that I’ve observed over the past few years.

• Our sales team and our engineering team use pretty different methodologies from each other and from the rest of the company in how they set individual goals, monitor progress against them, and compensate people on results
• The structure of our sales and service and channel organizations in Europe are very different from our emerging ones in Latin America and Asia/Australia – and even within Europe, they can vary greatly from country to country
• Although we have never been a company that places emphasis on job titles, our teams and leadership levels have become even more inconsistent over the years – sometimes a manager or director has a bigger span of control or more impact on the business than a VP does, sometimes individual contributors have more influence over a broad section of groups than a manager does, etc.

It’s taken me a while to embrace messiness in our business.  I fully acknowledge that I am one of the more hyper-organized people around, which means this hasn’t come naturally to me.  But the messiness has been very productive for us.  And I think it’s come from the combination of two things:  (1) we are a results-oriented culture, not a process-driven culture, and (2) we give managers a lot of latitude in how they run their teams.

I’m certainly not saying that striving for some level of consistency in organization is a bad goal – just that it’s probably not an absolute goal and that embracing messiness sometimes makes a lot of sense.  Or perhaps phrased more actionably, allowing individual managers to use their own judgment and creativity in setting up teams and processes, as long as they follow high-level guidelines and values can be an incredibly productive and rewarding way of maximizing success across an enterprise.

As I mentioned in a previous post, I’ve recently started writing a column for The Magill Report, the new venture by Ken Magill, previously of Direct magazine and even more previously DMNews. I share the column with my colleagues Jack Sinclair and George Bilbrey and we cover how to approach the business of email marketing, thoughts on the future of email and other digital technologies, and more general articles on company-building in the online industry – all from the perspective of an entrepreneur. Below is a re-post of George’s column from this week, which I think my OnlyOnce readers will enjoy.

Guest Post: Staying Innovative as Your Business Grows (Part One)

By George Bilbrey

As part of The Magill Report’s Online Entrepreneur column, I’d like to share some of Return Path’s learning about how to stay innovative as you grow. In Part One, I’m going to cover some of the organizational techniques we’ve been employing to stay innovative. In Part Two, I’ll talk about some of the practices we’re using in our product management and development teams.

When we were starting our deliverability business at Return Path, staying innovative was relatively easy. With a total of four people (two employees, two consultants) involved in selling, servicing, building and maintaining product, the environment was very conducive to innovation:

• Every employee had good conversations with customers every day—We could see the shortcoming of our tools and got great, direct feedback from our clients.

• Every employee was involved in every other function in a very detailed way—This gave everyone a strong intuition as to what was feasible. We all knew if the feature or function that the client was asking for was within the realm of the possible.

• We were very, very focused on creating customers and revenue—We were a startup. If we drove revenue above costs, we got to take home a salary. Every conversation and decision we made came down to finding out what would make the service (more) saleable. It was stressful, but productively stressful and fun.

We were lucky enough to come up with good concept and the deliverability services market was born. Our business grew rapidly from those two full-time employees to where we are today with about 250 employees in eight countries supporting more than 2,000 customers.
Growing our business has been one of the most challenging and fun things I’ve ever had the chance to take part in. However, growth does have some negative impacts on innovation if you don’t manage it right:

• Supporting the “core” comes at the expense of the new—As you grow, you’ll find that more and more of your time is spent on taking care of the core business. Keeping the servers running, training new employees, recruiting and other internal activities start to take up more and more of your time as the business grows. Clients ask for features that are simple linear extensions of your current capabilities. You don’t have time to focus on the new stuff.

• Staying focused gets harder as the business get more intricate—As your business grows, it will become more complex. You’ll build custom code for certain clients. You’ll need to support your stuff in multiple languages. You find that you have to support channel partners as well as direct customers (or vice versa). All this takes away from the time you spend on “the new” as well.

• Creating “productive stress” becomes difficult—At the point our business became profitable, life became a lot better. There was less worry and we could invest in cool new innovative things. However, it’s hard to drive the same urgency that we had when we were a start-up.

Of course, a bigger profitable company has advantages, too. For one, there are the profits. They come in awfully handy in funding new initiatives. And while they can remove the “productive” stress that comes from needing revenue to keep a venture going, they can also remove the distracting stress of needing revenue to keep a venture going. Second is the ability to capitalize on a well-known brand—the result of many years of marketing, PR, and thought leadership within the industry. Third, we have access to a much broader array of clients now, which I’ll explain the importance of in a minute. Finally, back-end support and process—an accounting team that gets the invoices out, an HR team that helps make strategic hires—makes the folks engaged in product development more productive.

So what have we done to leverage these strengths while also combating the forces of inertia? We’ve done a lot of different things, but the major focus has been, well, focus. For the two to three key initiatives that we think are fundamental to growing our business, we’ve built a “company inside the company” to focus on the project at hand. A good example of this is our recent Domain Assurance product, our first product to address phishing and spoofing. Initially, we tried to run the project by assigning a few developers and part of a product manager’s time with some part-time support from a sales person. It didn’t work. We weren’t able to move forward quickly enough and some of our folks were getting fried.

Our answer was to create a dedicated team inside our business that focused entirely on the phishing/spoofing product space. The key components of the “company inside the company” were:

• Fully dedicated, cross-functional resources—Our team represented very much the kinds of folks you’d find in an early stage company: development, system administration, sales and marketing. This team worked as a team, not as individuals. Many of these resources were fully dedicated to this new initiative.
• Deadline-driven productive stress—When we launch new products, they go through four discrete stages (I’ll explain this in more detail in my next column). We set some pretty tight deadlines on the later stages.

• Customer involvement, early and often—The team involved customers in building our new product from the very beginning. From continuously reviewing early wireframes, prototypes and then beta versions of the product, we got a lot of client and prospective client feedback throughout the process.

We’re still working on the exact right formula for our “company inside a company” approach, but our experience to date has shown us that the investment is worth it.

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!