The Curse of a New Building

At some point in my career as I began to ponder how/why startups morph from agile, “can do” companies to ones that have lost their edge. I didn’t need to look much further than the “new building” debacle I had a hand in.

Signs of Success
One of the things you do right in a startup, is you move from one cheap and cramped building to another as you grow, with desks, cubicles and engineers piled cheek to jowl.  74HGZA3MZ6SV

One of the signs of success is when you outgrow your last cramped quarters and can afford a “real” building. This happened to us at SuperMac when our sales skyrocketed.

That’s when things went south.

Lets Fix Everything that Was Broken
At SuperMac we were excited to finally get out of the crummy tiltup we had occupied since the company emerged from bankruptcy. Now with cash in hand, we wanted to fix everything that seemed broken and annoying about our office environment. We made what seemed to be a series of logical and rational decisions about what to do with our next office building.

  • Engineers were packed in cubicles or desks right on top of each other?
    Now every engineer can have their own office.
  • We can’t bring customers to this rundown building.
    The new building needs to reflect that we’re a successful and established company.
  • The lobby of the last building didn’t “represent” the company in a professional manner.
    Lets “do it right” and have a lobby and reception area that projects a professional image.
  • We had used, crummy and uncomfortable furniture.
    Lets get comfortable chairs and great new desks for everyone.  None of this used stuff.
  • The last building has stained carpets and walls that haven’t been painted in years.
    Now we can pick out carpets that look good and feel good and we can have clean walls with great artwork and murals.
  • We didn’t have enough conference rooms.
    Lets make sure that we have plenty of conference rooms.
  • Everyone left the building for lunch.
    We need our own cafeteria so employees don’t have to leave the building.

Designing the Perfect Building
Once the commitment to fix everything wrong was in place, we were off and running on the design phase. We hired an interior designer and a great facilities person to manage the process. The exec staff started meeting about the design of the new building.

The company decided that now engineers can have their own offices rather than cramped cubes. The staff got involved about what color the carpet and walls are. And there was lots of discussion of what style of furniture is appropriate.

Our exec staff spent time worrying about who had the corner office, and what departments had the “prime” location. (I was great at “office wars.”) There was lots of talk about the importance of natural lighting and maybe we needed our own cafeteria. And even better, marketing got to design the graphics for the lobby and hallway (bright and colorful neon) to better represent the color graphics business we were in.

We kept the board informed, but they didn’t have much to say since business was going so well, and a new building was needed to accommodate the growing company.

None of This is Good News
This is when things started to go downhill for SuperMac. The most obvious problem; the time we spent planning the building distracted the company from running the business. But there were three more insidious problems.

  1. While offices for everyone sound good on paper, moving everyone out of cubicles destroyed a culture of tight-knit interaction and communication. Individuals within departments were isolated, and the size and scale of the building isolated departments from each other.
  2. The new building telegraphed to our employees, “We’ve arrived. We’re no longer a small struggling startup. You can stop working like a startup and start working like a big company.”
  3. We started to believe that the new building was a reflection of the company’s (and our own) success. We took our eye off the business.  We thought that since we in such a fine building, we were geniuses, and the business would take care of itself.

While our competitors furiously worked on regaining market share, we were arguing about whether the carpets should be wool or nylon.  The result was not pretty.

The Curse of a New Building
If this was just a sad story about a single company, it would be interesting, but not instructive.  However, I’ve seen this story repeated time and again, and not just in Silicon Valley. There’s a mindset that says, “By the dint of our hard work, we are “entitled” to a building upgrade and this is our just reward.”  And on an emotional level it makes sense.  But if you are lucky you have a board of directors who have seen this before. (And they’ll take the CEO out for a trip to the woodshed.)

  1. An upgraded new building is a premature transition away from a startup culture.
  2. It’s a tipping point to a big company culture.
  3. This is a culture and values issue worth fighting over.

Letting this happen is a failure of a board. If the management team is thinking they’ve made it, the new building is just symptomatic of a company heading for a crash.  It’s a company that’s lost sight of the values that got it there.

Don’t let it happen to you.

Stay hungry, stay lean.

Lessons Learned

  • New buildings are a distraction. You should avoid them at all costs
  • Building upgrades can destroy a culture

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SuperMac War Story 10: The Video Spigot

I was lucky to have been standing in the right place when video became part of the Macintosh.  And I got to experience a type of customer buying behavior I had never seen before –  the Novelty Effect74HGZA3MZ6SV

Present at the Creation
It was early 1991 and Apple’s software development team was hard at work on QuickTime, the first multimedia framework for a computer.  At the time no one (including Apple) knew exactly what consumers were going to do with multimedia, it was still pre-Internet. But the team believed adding video as an integral part of an operating system and user experience (where there had only been text and still images) would be transformative

But Apple had planned to announce and demo QuickTime without a way to get video into the Mac. They had this great architecture, and Apple had figured out to get movies into their own computers for a demo, but for the rest of us there was no physical device that allowed an average consumer to plug a video camera or VCR into and get video into a Mac.

A month or two before the QuickTime public announcement in May, the SuperMac hardware engineers (who had a great relationship with the QuickTime team at Apple) started a “skunk works” project. In less than a month they designed a low-cost video-capture board that plugged into the Mac and allowed you to connect a video camera and VCR. But to get video to fit and playback on the computers of the era, they needed to compress it. So SuperMac engineering also developed video compression software, called Cinepak. The software was idiot proof.  There was nothing for the consumer to do. No settings, no buttons – plug your camera or VCR in and it just worked seamlessly. (The Cinepak codec was written by the engineer who would become my cofounder at Rocket Science Games.) It worked great on the slow CPUs at the time.

Something Profound
Engineering gave us a demo of the prototype board and software and asked, “Do you guys think we can sell a few of these boards?”  Remember, this is the first time anyone outside of Apple or the broadcast industry had seen moving images on a Macintosh computer. (A company called Avid had introduced a $50,000 Mac-based professional broadcast video editing for two years earlier. But here was a $499 product that could let everyone use video.) Our engineers connected a VCR, pushed a button and poured in the video of the Apple 1984 commercial.  We watched as it started playing video at 30 frames/second in a 320 x 240 window.

Up until that moment Quicktime had been an abstract software concept to me. But now, standing there, I realized how people felt when they saw the first flickering images in a movie theater. We must have made them play the demo twenty times. There were a few times in my career I knew at that moment I was watching something profound – (Holding the glass masks of the Z80 microprocessor. My first IPO at Convergent. First silicon of the MIPS RISC processor.) I stood there believing that video on computers was another – and equally as memorable.

Lets Sell it Like There’s No Tomorrow
When we all regained the power of speech, our reaction was unanimous, “What are you talking about – can we sell it?  This is the first way to get video into a computer, we’re going to sell and market this board like there’s no tomorrow. Even though we won’t make a ton of money, it will be an ambassador for the rest of our product family.  People who aren’t current customers of our graphics boards will get to know our company and brand.  If we’re smart we’ll cross-sell them one of our other products. We might even sell a few thousand of these.”

Everyone laughed at such an absurd number.

The Video Spigot
“What are we going to call it?” Lets see…, it’s video input, … how about we call it the Video Spigot?”

Now, in hindsight, with a spigot, you’re actually pouring stuff out, and, in fact, the ad actually shows you stuff pouring stuff out, but into your Mac. It made no logical sense (a fact engineering reminded us about several times.) But it made the point that this device could pour video into your Mac and consumers instinctually got it.

Our CEO and our VP of manufacturing were incredibly nervous about manufacturing more than a few hundred of these boards. “There’s nothing to do with this product once you get the video in. You can’t manipulate it, you can’t do anything other than playback the video in QuickTime.”  And they were right. (Remember there were no video applications available at all. None. This was day zero of consumer video on the Mac.)

Our answer was, “People will love this thing, as long as we don’t oversell the product.” We knew something our CEO didn’t. We had seen the reactions of people playing with the prototypes in our lab and when we demo’d it to our sales force. When we saw our salespeople actually trying to steal the early boards to take home and show their kids, we knew we had a winner. All we had to do was tell customers they could get video into their computer – and not promise anything else.

But the rest of the management team really skeptical. We kept saying, “Don’t worry, we’re going to sell thousands of these.”  Little did we know.

We launched the product with this ad that said “Video Spigot, now pour video into your computer,” and this just hit a nerve.

We sold 50,000 Video Spigots in six months.

video-spigot-supermac-ad

(As an aside, we saved money by putting my daughter in the ad. (That’s every marketeers excuse for putting their kids in an ad.) She’s in the little car on the monitor, and she’s also, if you look very carefully, in the water. We had that little car around the house for a while.)

They’re All Coming Back
So, manufacturing ramped up our factory, and as we’re selling 10,000 Video Spigots a month, our CEO is now concerned that maybe all these boards were all going to be returned to us because they didn’t really do anything once you got video into your computer. (A rational fear, as the sum of all of our other graphics boards shipped was about 7,500/month.)

Marketing knew who the Spigot customers were; we had all the registration cards and all the data. So we turned to our customers, surveying a few hundred people who had bought the product and asked:

  • Question: Were you the person who bought the board? Answer: Yes.
  • Question Are you happy with the board? Answer: Oh, it’s great.
  • Question Are you using the board? Answer: No.
  • Question And … wait a minute, you’re not using it anymore? Answer: No.
  • Question So do you want a refund? Answer: No, no.
  • Question Why not? Answer: It did everything you said. We loved this product.

It didn’t do anything else. People loved it, they used it, and they put it in their desk drawer.

We accidently had a product with the Novelty Effect.

The Novelty effect
I didn’t recognize the behavior at the time, but anyone who loves technology and gadgets has at one time or another has bought a technology toy – USB memory sticks, iPod Shuffles, umbrellas with LED lights, alarm clocks that talked, Flip Video Cameras, etc. – used them for a while and then stuck them in the drawer. The product does what it said it would, and amuses you for a while. You don’t regret the purchase price because you got entertained and then you lose interest – the Novelty Effect

Unintended Consequences – Video Editing
As these boards are flying out the door, one of the software engineers at SuperMac got to thinking about what did you do with video once you did get it into a computer – so he wrote the first Quicktime-based video editor which we called ReelTime.

But you probably never heard of ReelTime.  You may know it by its final name.

Since we had gotten out of the software business when we came out of Chapter 11, and our sales channel didn’t know what to do with software, we licensed ReelTime to Adobe.  And, of course, Adobe said, “Oh, by the way, you don’t mind if the software engineer comes with us, do you?”

Adobe renamed ReelTime to Adobe Premiere.  And Randy Ubillos, its author, went on to author Mac-based video editing software for the next 18 years. His team wrote what became FinalCut Pro at Macromedia; it was bought by Apple, and now he’s at Apple doing new versions of iMovie.

So an unintended consequence of the VideoSpigot, and to the benefit of video editors everywhere, video editing for the masses was invented at SuperMac.

Thanks to Bruce Leak and the Apple QuickTime team, Peter Barrett for Cinepak and Randy Ubillos for giving us video editing on the Mac.  It was fun watching it happen.

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SuperMac War Story 9: Sales, Not Awards

While this story is about my experience in packaging for computer retail channels, if you substitute the word “web site” for retail, you’ll get the idea why these lessons were timeless for me. 74HGZA3MZ6SV

SuperMac sold our graphic boards for the Macintosh through multiple distribution channels: direct sales to major accounts, national chains, independent rep firms, etc.  But the computer retail channel was a large part of our sales.  That meant that our boards were packaged in boxes sold to retailers and were displayed on shelves in their computer stores. Customers went into the store either looking for the SuperMac product by name (if our demand creation activities had been effective) or went in unsure of which brand of board to buy.  If they were in the store but teetering on the edge of a purchasing decision, there were only two ways to influence them: incent the sales staff (give the salespeople a special bonus to sell your product) and/or have box packaging sell itself by screaming “buy me.”

Maybe It’s Me
When I got to the SuperMac, our Marketing Communications group told me about our “award-winning” retail packaging for our graphics boards.  Yet when I saw our retail package, I was confused.  Confused because while I knew absolutely nothing about retail packaging, as a consumer I knew this box was not something I would pay attention to. It was black with absolutely no compelling reason to buy – no awards, no why-to-buy message, nothing.

black-supermac-box

While I wasn’t an expert in retail packaging, even as a consumer I knew that when I was in a store, I scanned four or five products on a shelf, grabbed the most interesting one, read what was on the box, and picked one.  And the product that “talked to me”, the loudest and most seductively, was the one that went home with me.

“Black Hole of Packaging” Strategy
Since we had no facts, other than my opinion that something wasn’t right, I took our staff on a field trip.  (You can’t do marketing from inside the building.)  We visited a couple of retail stores to look at how other companies were packaging their products and how ours looked next to theirs.  Standing in the aisles we collectively got a sinking feeling.  Our choice of black had made our retail box invisible on the shelf.

But worse, we had been relegated to the bottom shelf (death valley, since very few people look at their feet when shopping.)  We were down on the bottom because no one had done any “shelf merchandizing” – that is we did not employ “rack jobbers” or the retail stores themselves to put our boxes at eye level in the right place on the shelf.  (These are basic practices for companies selling through retail stores.)

We were on the bottom row – with an invisible box.  We labeled this our “Black Hole of Packaging” strategy. The package had won awards all right – for the ad agency.  The design was actually a negative drag on selling anything off a retail shelf.

Getting Smarter
While we all had opinions about what we should do, we realized we needed some facts from someone with retail packaging expertise.  Luckily (or maybe because we were in Silicon Valley where there was a domain expert for everything) there was a very smart consultant in the retail computer space, Seymour Merrin, who preached about the importance of packaging. He had teamed up with a former product manager at P&G to deliver seminars on just this subject. We learned the basics of retail packaging: make the box eye-catching, ensure there was a “why-to-buy” message, include just enough information to close the sale, fight and pay for eye-level shelf space, etc. Her packaging class was so good that we sent every new marketer at SuperMac to take it. From grumbling skeptics, they all became packaging design converts.

We realized that we needed to take all these lessons and redesign our packaging.

You May Hate It, But You Won’t Ignore It
The results of our package redesigns were packages like “SuperMac Thunder II”.  They were bright, they were loud, and they had lots of reasons to buy front and back.  And for sure they were never going to win any design awards.

colorful-supermac-box

To check how effective our new packaging was, we ran tests at our local computer retailer. We would run in and put test versions of dummy boxes on the shelf and just watch what happened – we wanted to see if people picked up the box, and when they did what they looked at and what they read.  (We would interview them after they put the box back on the shelf.  And we had to convince a few of them the box was really empty.)  The most interesting thing we learned was that people felt more comfortable about a product when there were words of encouragement on the package.  So we started putting stickers on the packaging every time we’d win an award. People would go, “Oh, this one won the “best of MacUser Magazine benchmark” award,” and it would confirm that this was a safe purchasing choice.

Owning Marketing for our Entire Channel
 In thinking about the packaging story, it would have been easy to blame the agency who designed the box for poor package design.  Or blame my MarCom department who approved it.  But that wasn’t the root cause of the problem. It was a management problem.  We had been outsourcing an important part of our demand creation strategy – packaging – to an outside agency without having the expertise to judge or manage the results. We hadn’t taken the time to learn the basics of packaging ourselves. And the final lesson was that we were keeping score on our packaging with the wrong metrics – it wasn’t about awards, it was about sales in the retail channel.

So we not only sent everyone through packaging school, we also brought the packaging design in-house. From now on we would design the retail boxes ourselves, not because we could do a better design job, but because this was a critical skill that our company and department needed to learn – using packaging to increase retail sales.  When we had mastered the art, then I was ready to outsource it again, but not before this became a core competency of my department.

Oh yes, and retail sales doubled with the new product packaging.

New Century, New Channels
For many of you reading this, boxes sitting on a retail shelf may seem hopelessly outdated, but the same marketing lessons hold for “award winning” web sites or social media.  Your design or ad agencies can impress you with their awards, but if you’re not moving product or creating demand, you’ve missed the point.

Worry about the sales results.

What did we learn?

  • The only “award” in marketing that matters is sales revenue
  • Marketing needs to own all the marketing in a channel
  • Core competencies cannot be outsourced until they’re learned

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Supermac War Story 8: Cats and Dogs – Admitting a Mistake

At SuperMac, I thought I was good VP of marketing; aggressive, relentless and would take no prisoners – even with my peers inside the company.  But a series of Zen-like moments helped me move to a different level that changed how I operated.  It didn’t make my marketing skills any worse or better, but moved me to play forever on a different field. 74HGZA3MZ6SV

Zen moment #1- Admitting a mistake and asking for help

Up until this point in my career I had one response anytime I screwed something up: blame someone else. The only variable was how big the screw-up was – that made a difference in whom I blamed.  If it was a very big mistake, I blamed the VP of Sales.  “This marketing campaign didn’t work? It was a brilliant strategy but Sales screwed it up.”  (My own lame defense here for this behavior is that sales and marketing are always cats and dogs in startups. Historically, these were two guys with high testosterone. They hit each other with baseball bats until one of them dropped.)

This first Zen moment happened at a SuperMac exec staff meeting. I was asked to explain why a marketing program that cost $150,000 bucks literally generated nothing in revenue for the company.  I still remember that I was gearing up to go into my ‘I’m going to blame the sales guy’ routine. Since our sales guy was a good street fighter, I knew the ensuing melee would create enough of a distraction that no one would talk about my marketing debacle.  My brain had queued up the standard, “It’s all Sales’s fault,” but instead, what came out of my mouth was, “You know, I really screwed this marketing campaign up, making it successful is important for the company, and I need all your help to fix it.”   You could have heard a pin drop.  It was so out of character, people were shocked.  Some stammered out, “can you say that again?”

Our president picked up on the momentum and asked me what I needed from the rest of the exec team to fix this debacle. I replied:  “This is really important for our success as company and I’m really at a loss why customers didn’t respond the way we expected.  Anybody else got some other ideas?”

From there, the conversation took a different trajectory. It was uncomfortable for some people, because it was new ground  – I was asking for help – wanting to do what was right for the company.

It was definitely a “Zen moment” for me in terms of my career.  From then on when I screwed up, not only did I own up to it, I asked for help.  This behavior had an unintended consequence I couldn’t have predicted: when others started volunteering to help me solve a problem, finding a solution became their goal as well.

Soon one or two others execs tested the waters by making a small tentative “ask” as well.  When they discovered that the sky didn’t fall and they still had their jobs, our corporate culture took one more step toward a more effective and cohesive company.

Ownership and Teamwork not turf.

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SuperMac War Story 7: Rabbits Out of the Hat – Product Line Extensions

A year after we started repositioning the company, Engineering, which had been working on a family of new products literally for years, came to deliver some good news and bad news.  74HGZA3MZ6SV

First the bad news:  the new family of eight high performance graphics cards we were counting on couldn’t be delivered.  The plug-in co-processor architecture was too complex and couldn’t be made to work reliably.  Instead of the family of eight products we were expecting, only one could be delivered.  Nothing else was in the development pipeline for the next 12 months.

I couldn’t believe what I was hearing.  One of the reasons I had joined the company was seeing these boards as hope for the future.  Now we were faced with the fact that even though we were gaining market share daily, there was nothing coming out of Engineering.

Well not quite nothing: there was the good news. Instead of eight boards, Engineering was going to be able to deliver one new graphics board.  Just one.  But it was going to be the fastest graphics board ever made.  In fact, according to our Potrero benchmark suite this new board ran our customer applications ten times faster than our current products.

I went home to think about this.  Instead of a product family, we had a single point product.  Each of my competitors each had 5-10 graphics boards covering a range of prices with performance to match.  Even our current product line had four graphics boards in it.  Now our new product line would only have one board?!.  What could we do?

Marketing Gets into the Engineering Business
The next day I walked in uninvited to the VP of Engineering’s office and asked if he had a minute. I said, “I realize you’re trying to get the one board out to market, but I have a question – can you slow our new board down?”   It doesn’t take much imagination to see the look he gave me when I asked that question.  “Steve, this hasn’t been a good week. What do you really want?”  I felt sorry for him, he was working really hard to dig out of this mess.  I replied, “No joke.  Can you make it slower?  I think he wanted to strangle me as he barely got out, “We worked for years to deliver a product that’s ten times faster than anything that exists and you want to make it slower?”  Well, not exactly, “What I want to know is if the board would work if you slowed it down by 10%?”  Yes, was the answer.  “How about if you slowed it down 20%?” Yes, was still the answer.  “By 30%?”  The change in his demeanor – from trying to kill me – to laughing, as it dawned on him where I was going, could only be described as hysterical relief. “40%?”  Yes, yes and yes.

We were about to be partners in building a new product family.

Rabbits Out of the Hat – Branding and Line Extensions
First, what we proposed is that we take our world class, ten-times-faster-than-anyone board and build an entire product family around it, by slowing it down.  We wanted nine boards, each differing in performance by 10%.  The only real difference between them would be the addition of “wait states” or “slow down” instructions on a chip.  Our entire new product family would be an identical board. 

Next, we were going to create three separate product families, each its own unique brand.  And within each brand we would have a “good”, “better”, and “best” graphic board.  All tailored to our color publishing market. 

Finally, these product families would be priced to bracket (box in) everyone of our competitors’ products with better price and performance. We were going to price the products from $699 to $3,999.  Our calculations had us losing money on the two lowest cost boards, breaking even on the third and making great margins on the other six.  We calculated our blended gross margin for the company by estimating the number of units we would sell of each board times the gross margin of each individual board (then I crossed my fingers and prayed we were right.)

In essence we were proposing that we ship the same board in 9 different colored boxes and charge from $699 to $3,999 depending on the color of the box and the speed of the board. (This turned out to give our customers immense value.  We would have charged $3,999 for the high-end board.  Now we could give customers lower price boards without Engineering spending 12 months to design new ones.)

You’re Going to Do What?!
The reaction inside our company could not be described as polite.  At first most people thought we were joking.  No one believed it would work.  Some engineers were insulted that we were going to slow down their board and sales was convinced that within days of the board hitting the street we would have a black market in chips to speed up the $699 boards and turn them into $3,999 ones.  My own marketing department was convinced that the same industry magazines, which we had managed so well, would turn on us when they saw that the boards were physically identical. 

Yet I believed that this was the only alternative to slowly going out of business. (While our engineering department was close to the customer, seven of those eight products they were going to ship to those customers weren’t going to see the light of day.)  Now it was up to Marketing is to take the technology as delivered by Engineering and shape it to the needs of the customers and market.  By creating these new families of products we could provide real value to our color desktop publishing customers by giving them performance at a price they couldn’t get anywhere else.

A Big Idea – Marketing Adds Value. This notion of Marketing taking what Engineering builds as a starting point, not an end point, is the difference between just being a marcom department and a value-added Marketing department.  If all you’re doing is shipping and launching the product as spec’d by Engineering, you’re not adding value. The job of Marketing is to help Engineering figure out how to deliver product(s) that customers need and want.  It starts with a deep understanding of what customers need (and making sure Engineering is getting continuous customer feedback and interaction.)  We did that when we surveyed our customers. Next, we had a good understanding of the capabilities of the product that Engineering was building.  And in this very unique case, we figured out how to maximize revenue and profit by branding and product line extensions.

We would use this same idea 10 years later at E.piphany.

SuperMac product line - built on a single graphics card
SuperMac product line – built on a single graphics card

Relentless Execution
If we were right, this line extension and branding strategy would allow us to catch up to our competitors and overtake them. 

Luckily marketing had built a reservoir of credibility with our peers and CEO.  After the VP of Engineering described the alternatives (no new products for a year), desperation became the mother of innovation and we launched our new family of nine new graphics boards.  As far as manufacturing was concerned, they were the identical graphics board.  As customers saw them, they were a new family of products aimed directly at the color desktop publishing market with astonishing performance and a low-cost entry price.

The results spoke for themselves: Not one black-market board ever appeared, and the press was satisfied with our “customer value and product family” explanation. Our new graphics boards became the market leader of the industry. In three and a half years SuperMac’s market share went from 11% to 68%, as we went from bankruptcy to $150 million in sales.

Years later, I was having coffee with the VP of Sales and Marketing from one our competitors and he said, “We would have beat you guys, but we just couldn’t keep up with the tidal wave of products coming from your engineering department. They came up with exactly the right products at the right price.”  I took a long sip of coffee as I thought of all the things I could say. Instead I smiled, nodded and said, “Yep, it was amazing, they just kept pulling rabbits out of the hat.”

What did I learn so far?

  • At times, what Engineering delivers is the raw material.
  • Marketings job is to take engineering products and use them to maximize revenue and profit.
  • In an existing or resegmented market, this may include branding and product line extensions.
  • This requires deep customer and competitive knowledge.
  • In most markets, “first mover advantage” is illusorily; fast followers often win.

SuperMac War Story 6: Building The Killer Team – Mission, Intent and Values

If you don’t know where you’re going, how will you know when you get there?

At the same time we were educating the press, we began to educate our own marketing department about what exactly we were supposed to be doing inside the company. During the first few weeks I asked each of my department heads what they did for marketing and the company. When I asked our trade show manager she looked at me like I was the house idiot and said, “Steve, don’t you know that my job is to set up our trade show booth?” The other departments in marketing gave the same answers; the product-marketing department said their job was to write data sheets. But my favorite was when the public relations manager said, “we’re here to write press releases and answer the phone in case the press calls.” 74HGZA3MZ6SV

If these sound like reasonable answers to you, and you are in a startup/small company, update your resume.

Titles are not your job
When I pressed my staff to explain why marketing did trade shows, or wrote press releases or penned data sheets, the best I could get was “why that’s our job.” It dawned on me that we had a department full of people who were confusing their titles with what contribution they were supposed to be making to the company. While their titles might be what their business cards said, titles were not their job – at least in any marketing department I was running.

Titles are not the same as what your job is. This is a big idea.

Department Mission Statements – What am I Supposed to Do Today
It wasn’t that we somehow had inherited dumb employees. What I was actually hearing was a failure of management. No one had sat the marketing department down and defined what our department Mission (with a capital “M”) was.

Most startups put together a corporate mission statement because the CEO remembered seeing one at their last job, or the investors said they needed one. Most companies spend an inordinate amount of time crafting a finely honed corporate mission statement for external consumption and then do nothing internally to actually make it happen. (And to this day I can’t remember if we even had a corporate mission statement.) What I’m about to describe here is quite different.

What was missing in SuperMac marketing was anything in writing that gave the marketing staff daily guidance on what they should be doing. The first reaction from my CEO was, “that’s why you’re running the department.” And yes, we could have built a top-down, command-and-control hierarchy. But what I wanted was an agile marketing team capable of operating independently without day-to-day direction.

So what we needed to do was to craft a Departmental Mission statement that told everyone why they come to work, what they need to do, and how they will know they have succeeded. And it was going to mention the two words that SuperMac marketing needed to live and breathe: revenue and profit.

Five Easy Pieces – The Marketing Mission
After a few months of talking to customers, talking to our channel and working with sales we defined the marketing Mission (our job) was to:
Help Sales deliver $25 million in sales with a 45% gross margin. To do that we will create end-user demand and drive it into the sales channel, educate the channel and customers about why our products are superior, and help Engineering understand customer needs and desires. We will accomplish this through demand-creation activities (advertising, PR, tradeshows, seminars, web sites, etc.), competitive analyses, channel and customer collateral (white papers, data sheets, product reviews), customer surveys, and market requirements documents.

This year, marketing need to provide sales with 40,000 active and accepted leads, company and product name recognition over 65% in our target market, and five positive product reviews per quarter. We will reach 35% market share in year one of sales with a headcount of twenty people, spending less than $4,000,000.

  • Generate end user demand (to match our revenue goals)
  • Drive that demand into our sales channels
  • Value price our products to achieve our revenue and margin goals (create high-value)
  • Educate our sales channel(s)
  • Help engineering understand customer needs

That was it. Two paragraphs, Five bullets. It didn’t take more.

Working to the Mission
Having the mission in place meant that our marketing team could see that what mattered was not what their business card said, but how much closer did their work move our department to completing the mission. Period.

It wasn’t an easy concept for everyone to understand.

Building the Team
My new Director of Marketing Communications turned the Marcom departments into a mission-focused organization. Her new tradeshow manager quickly came to understand that their job was not to set up booths. We hired union laborers to do that. A trade show was where our company went to create awareness and/or leads. And if you ran the tradeshow department you owned the responsibility of awareness and leads. The booth was incidental. I couldn’t care less if we had a booth or not if we could generate the same amount of leads and awareness by skydiving naked into a coffee cup.

The same was true for PR. My new head of Public Relations quickly learned that my admin could answer calls from the press. The job of Public Relations at SuperMac wasn’t a passive “write a press release and wait for something to happen activity.” It wasn’t measured by how busy you were, it was measured by results. And the results weren’t the traditional PR metrics of number of articles or inches of ink. I couldn’t care less about those. I wanted our PR department to get close and personal with the press and use it to generate end user demand and then drive that demand into our sales channel. (The Potrero benchmark strategy was one component of this creating end user demand through PR.) We were constantly creating metrics to see the effects of different PR messages, channels and audiences on end-user purchases.

The same was true for the Product Marketing group. I hired a Director of Product Marketing who in his last company had ran its marketing and then went out into the field and became its national sales director. He got the job when I asked him how much of his own marketing material his sales team actually used in the field. When he said, “about ten percent,” I knew by the embarrassed look on his face I had found the right guy. And our Director of Technical Marketing was superb at understanding customer needs and communicating them to engineering.

Teaching Mission Intent – What’s Really Important
With a great team in place, the next step was recognizing that our Mission statement might change on the fly. “Hey, we just all bought into this Mission idea and now you’re telling us it can change?!”

We introduced the notion of Mission intent. What is the company goal behind the mission. In our case it was to sell $25 million in graphics boards with 45% gross margin. The idea of intention is that if employees understand the thinking behind the mission, they can work collaboratively to achieve it.

But we recognized that there would be time marketing would screw up, making the mission obsolete (i.e. we might fail to deliver 40,000 leads.) Think of intention as the answer to the adage, “When you are up to your neck in alligators it’s hard to remember you were supposed to drain the swamp.” For example; our mission said that the reason why marketing needed to deliver 40,000 leads and 35% market share, etc, was so that the company could sell $25 million in graphics boards at 45% gross margin.

What we taught everyone is that the intention is more enduring then the mission. (“Let’s see, the company is trying to sell $25 million in graphics boards with 45% gross margin. If marketing can’t deliver the 40,000 leads what else can we do for sales to still achieve our revenue and profitability?”) The mission was our goal, but based on circumstances it may change, but the Intent was immovable.

When faced with the time pressures of a startup, too many demands and too few people, we began to teach our staff to refer back to the five Mission goals and the Intent of the department. When stuff started piling up on their desks, they learned to ask themselves, “Is what I’m working on furthering these goals? If so, which one? If not, why am I doing it?”

They understood the mission intent was our corporate revenue and profit goals.

Core Values
Even after we had Mission and Intent down pat, one of the things that still drove me crazy was when we failed to deliver a project for sales on time or we missed a media deadline, everyone in my department had an excuse. (Since a large part of marketing was as a service organization to sales, our inability to deliver on time meant we weren’t holding up our end of the mission.) I realized that this was a broken part of our culture, but couldn’t figure out why. And one day it hit me that when deadlines slipped there were no consequences.

And with no consequences we acted as if schedules and commitments really didn’t matter. I heard a constant refrain of, “The channel sales brochure was late because the vendor got busy and they couldn’t meet the original deadline.” Or, “the January ad had to be moved into February because my graphic artist was sick but I didn’t tell you assuming it was OK.” Or, “we’re going to slip our product launch because the team thought they couldn’t get ready in time.” We had  a culture that had no accountability, and no consequences –  instead there were simply shrugged shoulders and a litany of excuses.

This had to change. I wanted a department that could be counted on delivering. One day I simply put up a sign on my door that said, “No excuses accepted.” And I let the department know what I meant was we were all going to be “accountable.”

What I didn’t mean was “deliver or else.” By accountable I meant, “we agreed on a delivery date, and between now and the delivery date it’s OK if you ask for help because you’re stuck, or something happened outside of your control. But do not walk into my office the day something was due and give me an excuse. It will cost you your job.” That kind of accountable.

And, “since I won’t accept those kind of excuses, you are no longer authorized to accept them from your staff or vendors either.” The goal wasn’t inflexible dates and deadlines, it was no surprises and collective problem solving.  After that, we  spent a lot more time working together to solve problems and remove obstacles in getting things done on-time.

Over time, accountability, execution, honesty and integrity became the cornerstones of our communication with each other, other departments and vendors.

  • We wouldn’t give excuses for failures, just facts and requests for help
  • We wouldn’t accept excuses for failures, just facts, and offer help
  • Relentless execution
  • Individual honesty and integrity

That was it. Four bullets. It defined our culture.

Why Do It
By the end of the first year our team had jelled. It was a department willing to exercise initiative, had the judgment to act wisely, and an eagerness to accept responsibility.

I remember at the end of a hard week my direct reports came into my office just to talk about the weeks little victories. And there was a moment as they shared their stories, that they all began to realize that our company (one that had just come off of life support) was beginning to kick the rear of our better-funded and bigger competitors.

We all marveled in the moment.

What did I learn so far?

  • Push independent execution of tasks down to the lowest possible level
  • Give everyone a shared Mission Statement: why they come to work, what they need to do, and how they will know they have succeeded.
  • Share Mission Intent for the big picture for the Mission Statement
  • Build a team comfortable with independent Mission execution
  • Agree on Core Values to define your culture

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Startup Ethics: Albatross or Essential?

A comment left on the previous post made me realize that it was time to discuss a subject I was going to save for latter – ethics.

While the story about the Potereo benchmarks was about relentless execution, its glib description of designing the benchmarks could be read as we cheated.  Given we consciously worked hard not to, here’s what we were thinking.

We decided to work with our engineering department to create the Potreo benchmarks because we really wanted to see how our boards performed with the four applications customers told us that they used; Photoshop, Quark, Illustrator and PageMaker. These were applications we had never seen or ran before when the boards were designed. As we ran our tests, our engineering team found ways to improve our graphic boards performance for these applications and they made revisions to the boards firmware (its operating instructions.) The goal was to make our boards run really fast on customer applications – the benchmarks just reflected that.

It would have been easy for marketing to skip all of this and just write a set of benchmarks that made us look good. It would have been possible to have our graphics boards recognize a benchmark and just speed that test up, but not really be faster in the real world. All these shortcuts were available to us. And we decided not to. And here’s why.

Even in the smallest of companies ethics matter. Culture matters. As a private company you can decide that winning at all costs is your culture. You can decide that coming in first at all costs is your culture. Unless your board of directors is looking over shoulder they may never know that’s what you’re doing and no one will tell you to stop.

Don’t confuse or rationalize “relentless and focused” with cheating.

Shortcuts are easy. But besides being morally wrong, in the end they come back to bite you big time. (Think about the baseball Steroid scandal, Tour de France doping scandal, housing bubble, etc.) When your employees see that it’s “an anything goes” culture you’ll find unethical behavior occurring that you will regret. And in a big company most of it is illegal and can have enormous consequences.

If you are a founder of a startup ethics begin with you. Think through if you want to win at any cost.  (I avoid these entrepreneurs like the plague.)

A final note. I’m sure at Enron and Madoff there were plaques and posters about ethics. Just remember ethics and values are about what you practice when the going gets tough. It’s the decisions that you make that might cost you an order, a sale or a higher stock price. Do the right thing. It pays off in the end.

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