Daniel Pink, former speechwriter for Al Gore, has written an unconventional book on sales called To Sell is Human. In this well researched book, Pink observes a few surprising evolutions in society and their impact on sales.
The hard sell is dead. Enabled by the internet, prospective buyers know more about a product than a salesperson. This is true for cars as much as enterprise software. As a result, the salesperson no longer leverages an information asymmetry to sell a product. Instead, the salesperson must negotiate from the very first word, identify a customer problem and solve the problem using a product. Sales is evolving to consulting.
The purpose of the pitch is to offer something so compelling that it begins a conversation, brings the other person in as a participant, and eventually arrives at an outcome that appeals to both of you.
According to Wharton research, the gun-slinging extroverted salesperson generates only a fraction more revenue than introverts. Champions of the sales floor balance introversion and extroversion. Dubbed ambiverts, these salespeople sell 25% more than their colleagues.
Everyone in a company must sell: customer support, marketing, engineering, and so on. Atlassian and Zendesk have reached tens to hundreds of millions in revenue without sales teams by empowering customer support teams to solve the problems of an educated customer base.
The term elevator pitch originates from the very first demonstration of an elevator with a safety brake. At the time, elevators were hazardous, routinely plummeting down shafts when their hoisting ropes fell, destroying their payloads. In 1852, Elisha Otis invented a locking system that would catch and secure plunging elevator. Unable to drive much interest in his innovation, Otis organized a demonstration in New York City. He stood in the elevator as an assistant severed the hoisting ropes and the safety brake engaged. Otis' innovation paved the way for humans to ride in elevators. Today, the Otis company's products transport 7B people every three days.
To Sell is Human is a breezy, data supported book that catalogues the changes in sales and shares techniques to improve sales performance.
We should be living in the future already. I should be controlling my home lights from my phone. My coffee machine should reorder coffee from Amazon automatically and my washing machine should schedule its own maintenance.
This kind of future demands that machines act with human intelligence. I'm asking my coffee machine to think like me, so that I don't have to.
But we aren't living in this world yet because it requires the synchronized deployment of three of the most advanced technologies developed in the past 20 years: wireless communication, smart phones and machine learning.
First, all these devices must be connected to the internet via Wifi or cellular connection. This means the manufacturers of these devices must design, integrate, test and ship internet devices. Many manufacturers have started to believe in the benefits of subscription revenue economics and ongoing data collection from devices in the field. But hardware design cycles are measured in months and years. In addition until recently the market lacked technologies to help manufacturers build great software for their devices, hence the delay.
When machines anticipate needs and wants and solve problems without consulting their owners, we will be living in the future. I believe the infrastructure, the revenue model, the customer base and the deep learning techniques are finally ready to enable entrepreneurs to seize the opportunity and build the future.
Communication is essential to the success of every startup. Startup teams collaborate in product and engineering conversations, in general management, and in recruiting. Externally, startups sell customers using marketing and sales. Startups also pitch investors during fundraising conversations.
Clearly, great communication makes demands of the audience. But effective communication is challenging.
One of my favorite communication tools is a framework created by management guru Peter Drucker of three fundamentals: perception, expectation and clear demand.
Perception means understanding the audience: their worldview, the language they use, their motivations and their problems. Developing a deep perception of the audience often means listening which takes many forms including market research, the conversations, one-on-one conversations with reports and so on.
Expectation means knowing the frame of mind of the audience - what they expect from a conversation. Violating expectations can be used as a sales technique to change a customer's frame of mind when evaluating different products. While other PC makers fight a market share war based on price/performance, Apple uses design to change the rules of engagement.
Other times violating expectations can be more challenging, for example, delivering a negative feedback review to an employee with a different perception of his work.
Clear demand is the ask. Once the audience's perception and expectation are understood, the communicator must understand her own goal of the conversation, eg closing a sale or relaying ideas for how to improve an employee's performance.
The audience's perception and expectation must be used to frame the demand for it to be effective. They are the keys to encoding the demand in an effective way.
Frameworks like these can be a bit esoteric. But ultimately, this is a tool to determine the best way to relay a message to an audience by first understanding them well, then determining your goal of the conversation and last by framing the goal using the audience's language and comparing or contrasting expectations.
About three years ago, I started journaling my startup education by blogging. In retrospect, blogging has been one of the most rewarding activities for me as an investor. Blogging helps me some observe changes in the start-up ecosystem, communicate trends primarily through data while strengthening and building relationships. It's been more gratifying than I could have hoped.
Over the past year, quite a bit has happened on this blog. I've tried to write a post every working day on both tactical topics for startups like fundraising and management and macro/strategic subjects like the fund raising market and trends in mobile.
During that time, a small community has grown around the blog for which I'm very grateful. Traffic on the blog has grown from about 2,000 visitors per month in January to about 30,000 visitors per month in December. I find it hard to believe the growth.
It's all thanks to you, bold entrepreneurs and intrepid founders who continue to chase big ideas, tackle challenging problems, dare to dream of disruption and innovation - and provide an unending supply of inspiration. Also, this blog wouldn't be possible without the love, support and editing of my beautiful wife.
Thank you all for making 2012 a memorable year.
Below is a list of the top ten posts I wrote this year measured by traffic and engagement on social media - a best of. I hope you enjoy it.
It's easy to call a tablet a larger a mobile phone. Or a replacement for a notebook or ultrabook. But to dismiss tablets as scaled clones of their bigger and smaller brothers is a mistake.
Tablets are the third type of device: the one with the most revenue potential for ecommerce and developers alike. Tablets drive greater volumes of traffic, that convert to paid at better rates, and drive better qualified and less expensive leads through advertising.
In addition, tablet demographics are much more attractive. According to Flurry, tablet owners also skew disproportionately older and wealthy with a 18 percentage point skew towards households with income exceeding $50k and a nearly 10 percentage points skew towards 55 and older users, compared to smartphones.
Not every application category will benefit from pursuing tablets. But the form factor, usage patterns, customer acquisition economics and demographics will confer tablet-first companies a unique advantage that isn't yet evident in the market.
When I started working at Google, I heard the word generalist over and over. “We only hire generalists,” I was told. Eight years later this mantra is pretty common. I hear it often both referring to the desired characteristics of new hires and also the aspirations of a team - “we want to be a team of generalists”.
At the time, I understood the word generalist to mean someone really good at a lot of things. In computer science, it might mean an engineer who is great at Javascript, CSS, HTML, Java, Rails, MapReduce, NodeJS - familiar with every technology up and down the stack. But these engineers are unicorns - they're mythical.
Even if I were to find one, how could an interview possibly screen for such depth of knowledge? And is a walking technical encyclopedia really the right fit for a startup?
Reading through Drucker's Effective Executive, I came across this passage which I think is a much better definition:
The only meaningful definition of a “generalist” is a specialist who can relate his own small area to the universe of knowledge. Peter Drucker
In other words, a generalist is someone has demonstrated learning one field, who has an open mind and who can articulate relationships between known domains and new ideas.
A team built of these types of people would be a great fit for a startup - smart, flexible thinkers who communicate well.
Startups bob and weave. They change architectures and products and markets and tactics. Startups need teams who can change the tires on the bus as it's traveling at 60 mph; they need a team of MacGyvers, who combine a little bit of knowledge, a wad of gum(ption) from their pocket and some raw smarts to solve a problem. That's my kind of generalist.
The famous global macro hedge fund manager George Soros once said,
“I don't play the game by a particular set of rules; I look for changes in the rules of the game.” Inside the House of Money
Soros' insight is equally well applied to startups. Successful startups discover and leverage changes in the rules of the game.
Discovering the changes in the rules of the game is one of the hardest things about starting a company, but understanding precisely the change and developing a hypothesis for exploiting the change is essential.
Typically, there are three types of changes in the rules of the game that startups pursue: technology discontinuities, ecosystem discontinuities, and behavioral discontinuities.
Technology discontinuities, those changes in the rules that occur as a result of new technology are often the most apparent. Clay Christensen's smaller hard drives is the classic example.
More recently big data technologies like MapReduce, OpenFlow Networking, enterprise grade flash storage and NoSQL databases represent fundamental advances in technology.
Technology discontinuities afford opportunities first in commercializing new technologies (MapR, Pure Storage, BigSwitch) and second capitalizing upon them as advantages in other, pre-existing markets (risk modeling in financial services and real time bidding ad tech, for example).
Ecosystem discontinuities arise when the costs to serve customers in a sector suddenly change dramatically. In the last five years, social media and mobile app distribution have built platforms offering unparalleled access to billions of customers at a fraction of the cost of highly efficient search advertising. This fundamental change in the rules has spawned tens if not hundreds of fast growing social and mobile companies like Pinterest, Kabam, PocketGems and others.
Ecosystem discontinuities typically offer short term customer acquisition advantages for first-movers and fast learners. Whoever can learn the new rules of the game the quickest will win.
Behavioral discontinuities are the most nuanced and subtle changes in the rules of the game. They require entrepreneurs to examine and extrapolate small changes in user behavior into new opportunities and build precisely the product that enables users to say, “Yes, that's exactly what I needed.” Behavior changes typically start very small and then grow quite quickly.
Social networking represents a fundamental shift in communication patterns that started by satisfying two human desire, curiosity and vanity, and provided the substrate for a massive behavioral change.
Behavioral discontinuities require a deep understanding of changing user wants and needs. These are often discovered through self-observation, introspection or field research.
Other discontinuities: Of course there are many other types of discontinuities. Swings in the financial markets both public and private, government regulation and antitrust rulings, industry consolidation, and so on.
And there are myriad ways uncovering these discontinuities. But common to most startups is the successful identification of a discontinuity and hypothesis for how to exploit it.
Discovering the changes in the rules of the game may take years of observation or it can happen in a flash. It can happen in any number of ways. But ultimately, it's what we're all chasing.
Email and most meetings aren't work. We all know this to be true. But huge swaths of our days are allocated to meetings and answering email. It's impossible to accomplish much aside from information dissemination.
A close friend, who like me is a productivity nut, asked me a question that made this point clearly:
What fraction of your day is spent in meetings you asked for compared to meetings that were asked of you?
I didn't know the answer but I calculated it. I was disheartened by the result. Over the past three weeks, my ratio is 6 to 4. For every 6 minutes I spend in a meeting I arranged, I spent 4 in a meeting I was invited to.
What is your ratio? And what should it be? Presuming meetings I request are more productive than meetings I'm invited to (because I'm driving the agenda and accomplishing my goals), if I could shift that ratio by just one minute to 7 to 3, I would improve my productivity by 17%.
The bigger the company, the worse the problem becomes. Last week, I chatted with a friend who joined had just joined a large company. He found his team to be incredibly unproductive even though his reports were smart. After he asked the team to their tasks in 30 minute blocks, he realized 6 of every 8 hours of their days were spent either responding to emails to attending irrelevant meetings. In other words, it took four employees to accomplish the work of one focused worker.
With the new year around the corner, it's that time to make New Year's Resolutions. My theme in 2013 is “return to fundamentals.”
Set objectives and key results by quarter. These are clear goals with quantifiable metrics. For example, spending 50% of my time helping portfolio companies.
Block the time every week on my calendar to achieving these goals. Control my calendar to make sure I'm maximizing my meeting ratio (as mentioned above).
Prepare for meetings. Send agendas with precise questions, agendas and rough timings for each item ahead of time.
Measure and tune. I'm going to track these time allocation metrics and my productivity goals. I hope to improve my focus and have a more positive impact with my teams.
Email and meetings consume big chunks of time. And though it's easy to convince ourselves they're productive, they aren't. It's hard work that moves companies forward. Time to get back to fundamentals.
I call the last working week in December Board Week because it's packed with board meetings. These board meetings are often the most important of the year. By virtue of their place on the calendar, everyone in the room is thinking more strategically, less tactically. These meetings set the tone and strategy for the company for the upcoming year.
I've assembled a checklist below of top 5 things I've seen founders do in and around the end of the year that position their companies for success in the next year.
An annual post-mortem. What the company accomplished in 2012? What went well? What could the company have done better? This post-mortem is created by the management team with input from the company as a whole. Afterwards, the findings are presented to the board and the company in an all hands.
Team evaluations. Pick a flavor: peer reviews, 360 degree evaluations or management reviews, annual reviews are essential to honest cultures in startups. Annual reviews are the best time to evaluate compensation, reward the top performers and begin to manage under-performers out of the organization.
OKR setting. I'm a avid proponent of the OKR (objective and key result) model where the company leadership sets three measurable, quantitative goals for the year. Managers divide those three goals into smaller goals for themselves and so on down the organization. Andy Grove pioneered this at Intel and we used it to great effect at Google. This management technique aligns all the efforts in a company toward the goals.
The three things we're worried about. This is a critical part of the checklist. Board members, founders and management team are each worried about issues facing the business. But are they worried about the same issues? Ensuring that each understands the challenges of the other and that the team is prioritizing the same top three concerns grounds communication and focuses the company on the hardest challenges.
For startups, founders and VCs, the end of the year is a good time for introspection, evaluation and communication. Structuring this tasks has helped our companies become more productive. I hope they help your business too. Email me with other suggestions if you have them and I'll publish them tomorrow.
Great teams accomplish amazing things. But it’s rare for any founding team to have all the constituent parts on the day they start the company. Most startups will need to build a strong management team whose strengths and knowledge complement the founding team. Finding the right people to help starts with being honest.
But words “building a management team” evoke anxiety in many founders I meet. Below is the process I've seen work well at many of our portfolio companies.
The process
Assessing the team
The first part of building a management team is performing an honest assessment of the strengths, weaknesses and personal goals of the founders. In other words, “What kinds of people does this person need around him/her to be successful?” Everyone has strengths and weaknesses. Great teams have individuals who complement each others weaknesses' with strengths - as a result, they team becomes a force multiplier for the business.
A founder may be a great technologist who is passionate about architecture and technology, but needs help managing team. A founder may be a great salesperson and leader who wants to remain in the field and needs help managing product and engineering. A founder may be a great general manager but needs help scaling the business, managing all the different parts of the company efficiently. Every situation is unique. But common to each, the key element for growth is building a trusted team.
Defining the role
The second part of building the team is defining the ideal candidate's strengths and weaknesses. These parameters fall out naturally from the founder strength assessment and the demands of the role. Often, it's helpful to speak with other founders who have hired similar candidates or hire an expert recruiter to guide the process and build a candidate pipeline. Easiest of all is to point to someone in the ecosystem and say, “We want to hire someone exactly like that person!”
Finding candidate/team fit
Just like product/market fit, candidate/team fit is the most important characteristic of building the management team. Open communication, trust and shared vision are the sine qua non of a new management hire. They are essential.
Management team candidates should spend lots of time with the company meeting as many of the team as possible in as many different environments as possible (team meetings, offsites, crises) to build rapport, understanding and trust.
Matrix Multiplication
Management teams are the infrastructure upon which great companies are built. Underinvesting in them will hamper growth and leave founders scrambling to find the time to code, design product, and the six hundred other items on their task list. But laying the right foundation and making the right investments can drive exponential growth.
