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

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

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.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

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

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

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.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

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

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

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.

SuperMac War Story 5: Strategy versus Relentless Tactical Execution — the Potrero Benchmarks

A few months into my tenure as the VP of Marketing, we now understood who our customers were.  We had thought really hard about “market type” and decided to reposition the company from a technology provider to a solutions provider. Now we needed to put the tactical programs in place to make this repositioning strategy happen. 74HGZA3MZ6SV

Just as an aside, over my career I must have interviewed scores of business school graduates (some from the very fine universities where I now teach) who would say, “I want to do strategy.”  Well yes, I understand that, but this is a startup, what else do you want to do?  “I just want to do strategy.”  Those were very short interviews.  The “strategy” of learning who SuperMac’s customers were, what solutions they needed and what our repositioning would be was a three month effort.

The tactical execution took three years.

Note, if you want to do “strategy” (which is a fine endeavor) and nothing else, you have just defined your career as one in large corporation or in a consulting firm.  Stay out of startups.  Tactics mean tenacious and relentless execution measured in years.

Metrics – Mine is Bigger Than Yours

The first thing SuperMac needed to do was to change how our potential color desktop publishing customers viewed our products versus our competitors’ products.  Over the years marketers have found that using numbers to compare yourself to other products works well.  We’ve all seen ads that say, “Now 30% more” or “Marked down 50%” or “5 times faster.”  As hokey as it is, when confronted with uncertainty or unknowns, human beings like to be reassured by comparative metrics.  But hardware metrics typically focused on raw speed and performance.  The key insight we had was that it wasn’t about raw speed − it was the speed of the applications that customers were using to get their work done.

Believe it or not, until that moment, there were no commonly agreed upon ways to measure the performance of graphics boards on real world applications.

So I was going to give our customers metrics neither they or anyone else had ever seen before.

First, by talking about solutions rather than hardware, we changed the way customers thought about graphics boards.  Now we were going to change the metrics that customers and the press used to evaluate product performance.

Objects in Our Mirror are Larger than they Appear

Our first goal was to set up benchmarks to measure the performance of our own graphics boards on the real applications our customers used (Photoshop, Quark, Illustrator and PageMaker.)  Then we were going to buy our competitors’ boards (think “secret shopper”) and compare them to ours.

Since no benchmarks existed, we enlisted our engineering department in a serious software development effort and wrote our own.  And we made sure that instead of some artificial numbers, the benchmarks truly measured performance on these four key applications our customers told us were important.  Then we ran the same benchmarks against our competitors’ boards.  When we found a subset of the tests on which we did worse than our competition, we … hmm, somehow that never happened.  The numbers were in.  We won.  Overwhelmingly. (What a surprise.) Any customer who used the four critical color publishing applications was going to be blown away by how much better the SuperMac boards were.

Finally, since no one would believe a set of benchmarks named after our company, we needed a façade of independence, so we named them after the street the company was headquartered on in Sunnyvale California – they became known as the Potrero Benchmarks.

Tell Me How to Find You

But having benchmarks in hand that showed us as the winner did us no good unless all our potential customers could see them.  Our first thought was to spread the news ourselves, perhaps in a press release or a “white paper,” (remember this was pre-Internet.)  But upon reflection I remembered that in our interviews with our existing customers they had told us how to get the news to them.  That told us which publications they relied on for news about graphics boards: the three publications that mattered, MacWorld, MacUser and MacWeek became marketing’s highest priority.  Inside the covers of these publications our customers had said that it was the product reviews that most influenced their buying decisions.  That by itself was a sobering challenge since our company had never come in first in any of the previous 14 reviews of graphics products that had been written to date.

supermac-3-publications

Now this is worth stopping and thinking about for a second. We figured out how to reach our customers (through these three publications) because they told us how to do so. We figured out what was the most important criteria they used to evaluate which board to buy – product reviews – again because they told us how to do so.  These were two of the questions I had asked on purpose when we first did the initial customer surveys. Some of my staff had believed we were gathering extraneous customer data.  “Hey, we can make these surveys shorter.  We don’t need to know all this stuff.”  Yes you do.  You need to know the day-in-the-life of the customer.  From top to bottom. If you’re constantly correlating data and searching for patterns, all intelligence if properly integrated will give you insight.

The Chase

Then we began an educational blitz of these three critical publications.  We set up a series of meetings with the editor-in chiefs and the key writers who reviewed graphics products.  We had one story to tell and surprisingly it wasn’t about our company or our product.  It was an educational mission to tell the story of who our customers were (and by inference who all the graphics board customers were) and why the current reviews of these graphics boards weren’t adequately measuring what was important to this large market.

(Now as VP of Marketing, I could have sat back and let my PR agency handle the press.  Theoretically, that’s why I hired them.  But these meetings were life and death in our struggle for market share.  You don’t delegate life and death. The head of the PR agency agreed that we would work together as a team.  We both met often and went to all of the press meetings together.)

Why did we believe that these magazines would care?  At the time desktop publishing was one of the mainstays of the Macintosh market, and therefore the readership of these magazines reflected the demographics of the Mac.  For these magazines to find out that they didn’t truly understand what their customers cared about got their full attention.

I knew with a high probability before the meeting started what the end of the meeting would be like since there was no other way to go.  My staff didn’t believe it when I told them it would happen this way, but in meetings with all three magazines they said, “Ok, you convinced us these four applications are critical for the color publishing market, but how can we measure the performance of these applications?”

The Trojan Horse

“Well…” I said hesitantly, “I’m not sure we should share this with you but we have a set of benchmarks that we use to measure performance….” You can imagine the rest of the conversation; my sounding reluctant to let our own tests outside our building, the magazines begging us to let them have them, and finally a deal gets struck where we let the benchmarks out to the test labs of these magazines under their own name “The Potrero Benchmark Suite” without attribution to us.

Our benchmark had just become the standard test suite for all magazine reviews that our potential customers would read.  Our benchmarks, which were tuned for our boards, had just become the standard test suite for all our competitors’ graphics boards.

Relentless Execution

Once the education and benchmarks were in place, we then worked with each magazine writer as their product review deadline approached.  We provided customer references and testimonials supporting the key features we were promoting.  Focused on winning these reviews, I left nothing to chance.  My rule was no magazine could review our boards without us present.  The magazines’ rules were that no company could be in their labs when they reviewed the boards.  So we would always wait to the last minute to provide our boards for testing and then “forget” to ship the cables to connect the board to a computer monitor.  When the panicked manager of the magazine test lab would call under a last minute deadline, we would apologize profusely as we sent the cables over – with beer, pizza, and our product manager to help them through any testing “issues”.

My PR agency, my head of marketing communications and I set up a wall-sized chart (in my office where I had to close my eyes not to see it) of the editorial calendars of these publications. We listed the editors, writers, what they had previously had written, deadlines, what the competitive products were, how our benchmarks stacked up, what “upgrades” our boards needed from engineering to win, etc.  This was upfront and center for anyone who walked into my office could see what I thought was important.

In parallel, we educated the rest of our own company how essential winning these product reviews were to our customer and our financial success. What used to be an exercise in teeth-pulling frustration to get help from our own manufacturing or engineering departments turned into a well-oiled process as everyone stopped what they were doing to help us win.

None of this was an accident.  It was all part of a strategy.  But its successful execution would take a focused set of tactics and a great group of marketers working with me.  And I now had both.

From a company that never won a benchmark review with its graphics boards, we want on to win twenty-one of them in a row.  It was two and a half years before our competitors even realized that the Potrero benchmarks and SuperMac having its building on Potrero Street had any connection.

By then it was too late.

Our market share was starting to climb.

And we were just getting started.

What did I learn so far?
• Strategy points you to the goal
• Relentless tactical execution gets you to the goal
• Keep the tactics simple and focused
• Tactical execution needs to be managed at the highest level – you can’t delegate success in a startup

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

SuperMac War Story 4: Repositioning SuperMac – “Market Type” at Work

With insight into our customers, the first part of our strategy was to understand what kind of positioning problem we had.  Was SuperMac attempting to introduce radically new products and create a new market?  No, not really. 74HGZA3MZ6SV

Was the company attempting to be a low cost provider by introducing cheaper products to an existing market?  While we sometimes cut the price of graphics boards, it was only because we offered our customers no compelling reasons to buy one that was priced equivalently to the market share leaders.  And we lost money when we did so.  Therefore, no, we weren’t really equipped to be the low cost provider.

Was the company attempting to introduce faster and better products to an existing market?  On first glance this was exactly what we were trying to do. But with a little bit of thought it struck us that if we attempted to do that, our competitors had a pretty substantial advantage, since they held nearly 90% of combined market share.  If we tried to match them on their playing field we’d never catch up.  They had more than enough dollars to outspend and out market us.

We knew from back-of-the-envelope calculations that I would need 3 times the combined marketing and sales budgets of the incumbents for a head-on assault. (I had found that the numbers 1.7x and 3x kept coming up time and again in attacker/defender ratios when I gamed out our market entry strategies.  It wasn’t until I found the extremely obscure Lanchester Strategy for market share that I realized that these ratios had their basis in operations research and the Lanchester’s Laws.)

So if we couldn’t be new, cheaper or attack our competitors head-on, what was left?  The real answer seemed to lie in attempting something a bit more difficult.  We needed to redefine or resegment the playing field (the existing graphics board market) so it favored us.  We needed to negate our competitors’ existing advantages and hopefully turn their strengths into weaknesses.

market-type

When we looked at the color graphics board market, our competitors had defined the market as one measured by technical metrics: screen resolution, number of bits of color, screen refresh rates, acceleration, etc.  We had been attempting to compete by their rules with the same types of technology messages.  I had a marketing department spending $4m a year trying to do so against competitors spending $20M year. The 3:1 Lanchester Laws said I would need $60M in marketing and sales spending to win.  I didn’t have it, wasn’t going to get it, and we needed to stop thinking that our path to success was just to “try harder.”

We needed to come up with a playbook with completely new rules, then execute relentlessly and with urgency. Up until now all the graphics board companies supplied “technology”, and it was up to the customers to figure out which of these arcane specs was best for their business.  Our first radical move was to redefine the market from SuperMac a company that sold graphics boards, into SuperMac a company that provided desktop publishing professionals with better color publishing tools.  We were going to be the leading supplier of color publishing solutions for the Macintosh. Our strategy was to resegment a hardware business − the graphics board and monitor market − into a desktop color publishing market.

To say this was a radical notion at first was an understatement.  I lost several very good product marketing people who couldn’t/wouldn’t get it, or who couldn’t/wouldn’t move with the urgency I needed.  But an 11% market share company wasn’t one I wanted to work in.  We were gearing up to go from status quo to relentless and continuous execution, and everyone needed to be on the same team.

Next, we needed to focus our messages away from technology and onto what the customers told us they needed – performance solutions for four key publishing applications.  Our company’s graphics boards were designed to speed up a key part of the Macintosh graphics operating system called QuickDraw.  All the marketing materials, data sheets, advertising, press releases, trade shows, etc. focused on the technical fact that we accelerated (made much faster) this arcane piece of computer code.  Technically our positioning was correct, and with an infinite marketing budget (my back of the envelope calculations said $60M) and time, we might have made this technical fact (QuickDraw acceleration) something a customer understood and cared about.  But we didn’t have infinite cash; we had just emerged from bankruptcy, and unless we could get customers to quickly understand why our products were great, we were headed there again.  Yet the customers not only had told us who they were – color desktop publishers – but what they cared most about – graphics performance when running their four key applications.

It didn’t take much imagination to realize that what we had to do was to tell our story around one key metric performance − performance for color publishing, performance on the applications that mattered.  And paradoxically we had to raise our prices.  Why?  Because if we were going to be the high performance color graphics company, we were going to have to stop competing on price and start building a perception of a high-value, high performance color solutions company.  Customers had already given us permission to do this, when they said they were price insensitive.

Now we needed to act.

What did I learn so far?

  • Deep and detailed understanding of the customer is the only way you can understand your “Market Type” choices
  • Market Type choice drives Positioning/differentiation strategy
  • Positioning/differentiation drives communications strategy
  • If you are resgementing into a niche in an existing market make sure it’s into a space that customers care passionately about and will pay for

Listen to the podcast here
Download the podcast here

SuperMac War Story 3: Customer Insight Is Everyone’s Job

After my first month we knew a lot, we knew more about our customers than anyone in the company.  In this one month we had learned more about desktop publishing on the Mac than any one of our competitors.  Now the question was what to do with it.  First I need to make sure what we really learned was information we could base a company strategy on. 74HGZA3MZ6SV

Our first question was, did the total number of customers that had already bought products from our competitors and us represent a saturated market or the tip of the iceberg?  In other words what was the Total Available Market (TAM) and how much of the market had been already served?  Since our competitors were also small privately held companies, none of their data was readily available.

But we knew something they didn’t; the total available market for color graphics boards was measurable by looking at an adjacent market, the color desktop publishing software market.  As it happened there were quite a few industry analysts following software companies like Adobe, Aldus, and Quark, who happened to be the suppliers of the four key applications our customers said they used.  These analysts not only told us that the market had plenty of room to grow, they took an interest in us, since we were going to be a hardware company going after this growing market.

Since I was heading a marketing department, not acting as an individual contributor, I needed to teach all of marketing the importance of customer data.  First, I presented what I had learned.  You could sense the skepticism in my staff meeting as I described what I found.  But no one was prepared when I said, “These facts are now old, but since we are going to be changing customer perceptions we need to get new customer data weekly.  All of you are now part of the customer discovery collection team.”  Then I handed out the questionnaire to all of marketing and made two customer calls a week mandatory for everyone, including my secretary.  At first people couldn’t believe they were actually going to have to call a customer.  Some took cajoling to make the calls, other took me sitting by their elbow, but eventually everyone started dialing.  The first part of my weekly department staff meeting was dedicated to hearing everyone going around the room and talking about their customers.

Within a month the change inside the marketing department was palpable.  Customers were no longer some theoretical entities that existed only in data sheets, they were real people you talked to, understood, and connected with.  Soon marketing was talking about the needs of our customers with first-hand knowledge, passion, and conviction.  And without knowing it, the quality of marketing department’s work changed.  Instead of spec’s and technical features, our literature and interaction with customers shifted to how we could solve their problems.

Within a year we had called over 1,000 customers, and every year after that another 1,000.  Marketing, which had been unsure or unaware of what their jobs, were now had weekly reinforcement of who they were selling to and became a formidable force in the Macintosh graphics market.

Now we could execute a relentless come-from-behind strategy off of the information we had learned and discovered from our customers.  Now what was the strategy?

What did I learn so far?

  • Facts are the rock on which you build your strategy and tactics
  • In a startup second-hand facts are almost as useless as opinions.  Decision makers need to hear the facts first hand

Listen to the podcast here
Download the podcast here

SuperMac War Story 2: Facts Exist Outside the Building, Opinions Reside Within – So Get the Hell Outside the Building

A week before I started I got inkling of really how deep I was in.  While I was waiting in the lobby to pick up my offer letter, the head of marketing communications (who was to be one of my direct reports) came up to me as I held my just signed employment agreement.  She said, “Oh I’m glad you’re coming, and I wanted to grab you before you started because we need to resolve the company’s biggest marketing problem.”  I was impressed; this was something so important that she couldn’t wait for my first day.  Was she going to propose a coherent communications strategy?  An in-depth reseller survey?  Or offer some real insights into our customers?   No.  “We need to decide immediately between which version of the new logo to use.”  Ignoring my dropping jaw, she pointed out the key differences in the Pantone colors between what appeared to me to be the two indistinguishable alternatives.

supermac-logoAs her description receded to background noise it dawned on me that the color of the logo seemed to be the size of the marketing communications department’s universe.  It wasn’t a lack of competence or skill in her job; it was just that as far as she was concerned, her job had no connection to the rest of marketing, our customers or our ultimate success as a company.  “We need your decision now because we are about to spend $50,000 on new collateral.”

Coming out of the fog at the sound of serious dollars about to be spent, I politely suggested that the new collateral was on-hold, and we were going to spend the first few weeks of my tenure trying to understand who our customers were, and what we wanted to say to them.  And I hadn’t even started work yet.

My first day at work I found myself staring at a set of marketing faces, mostly holdovers from the previous version of the company that had gone belly up, some were bright and eager, some clearly hostile.  “OK, let’s start with the basics, who does marketing think our customers are?”  We went around the room and every one of them had an opinion. Unfortunately, all their answers were different.

By now, nothing surprised me. This was a company that had sold 15,000 graphics boards and monitors to consumers.  A large number of these customers had mailed back their registration cards (this was pre-Internet) with their names, phone numbers, job titles, etc.  So I asked the fatal question, “Has anyone ever looked at the customer registration cards?  Has anyone ever spoken to a customer?”  Silence.  Most just stared at me like the question was incomprehensible.  The one or two product mangers who should have known better glanced down at their shoes.  Then someone asked, “Well, who do you think our customers are?”  Ah, a leading question.  I said, “I don’t know. And if I tell you what I think we’ll just have one more uninformed opinion.  But what we need right now is some facts.  Does anyone know where the registration cards that the customers sent back are?”

Why did I ask these questions?  As a company with a past history, the company had a massive advantage over a typical startup – it had customers.  Normally in a startup you spend an inordinate amount of time and energy in Customer Discovery and Customer Validation.  Yet here was a “restart” with over 15,000 customers who by putting their money on the table had personally validated the market.  Now I was cognizant I might find a customers that hated the products or company.  Or I might have found that the company was in a business that wasn’t profitable and no way to get profitable (which I had concluded was the case with their commodity disk drive business.)  But this was an opportunity that needed to start with customer facts, and I was going to get them.

Twenty minutes later a cart rolls into my office with 10,000 unprocessed, unlooked at, and untouched registration cards.  All with names, addresses, phone numbers, job titles; all wonderful data longing for human contact.

Customer survey

Three hours later I had made up a three-page customer questionnaire.  I wanted to know some simple and not so simple things about our customers.  The obvious one’s were who were they?  What did they do that they needed an expensive color graphics card?  If you believed the opinions in the marketing department, the customers were in science, engineering, color desktop publishing, and a variety of applications with no single industry or application dominating the list.  I wanted to know the facts.

Within these applications how did our customers spend their day?  Were our products a small part of their life or large? And since the card was useless without any application software, what other software products did they use on it?  How important was the card to them getting their own job done?  What was the most important attribute about our graphics cards and monitors that made them buy it?  And by the way since we sold both the graphics card and a big screen color monitor did they buy both from us?  Did their choice of the card affect the choice of who they bought the monitor from or vice versa?

I also wanted to know if the marketing our company had been doing to date was effective.  So I asked a set of questions about how customers had heard about our company.  Do they know anything about us?  What did they think we stood for?  What did they know about our products?  If they had they heard anything about us where did they hear it?

I also wanted to know who our existing customers thought we competed with.  While I could have told them, it was more valuable hearing their perspective. Had they heard about our competitors and their products?  If so, where?  Who did they think were the leaders in the color graphics board and monitor market?  Why?  What did they think the leaders most important attributes were?

Since this was the marketing department, I was going to be planning to spend some advertising and public relations dollars.  It would be great to know how they got news and information about new products and new companies.  What magazines did they read?  What reviews did they trust?  Did they attend trade shows?  Which ones?   Had they seen any our ads?  Did they understand them?  Had they read any stories about us?  I wanted to know if marketing was getting any bang-for-the-buck in spending its demand creation dollars.

I wanted to understand how customers bought our products.  I knew we were selling through a multi-level indirect sales channel.  That’s a mouthful to say that our sales people didn’t sell our products directly to a customer.  Instead they managed rep firms (independent sales companies that carried multiple, non-competing products) that called on computer resellers that sold to the customers.  Since we weren’t talking to our customers directly I wanted to know if the message we were giving our sales people were coming out the other end. Kind of like the game of telephone you played as a kid.  You started a message on one side of a long line of people and passed it on, one-to-another until it came out the other end.  The result is usually hilarious.  The ending message sounds nothing like the one you started.  Market messages to indirect sales channels are just like that.  What I wanted to know is what kind of reseller did they buy from?  What product did they go into the store thinking they were going to buy?  Was it the same one they left with?

Finally, I also wanted to understand the resellers themselves.  These were the people who had the face-to-face interaction with our customers.  What did they think about our company?  Our products?  Was our compensation program good, great?  Were they making enough money with us?  Who did they think were buying our products?  Who did they think our competitors were?

Hypothesis to test

After writing up the questionnaire, and before I called the customers, I wrote a one page summary of who I thought the customers were, what markets they were in, how and why they bought, etc.  I was curious to see how close to my hypothesis the actual customer answers would be.

At the end I had a three-page questionnaire that I timed in a practice session with one of my marketing people.  I could get it done in twenty minutes.  Now the question was would anyone care to give me those twenty minutes.

With the questionnaire written I turned and stared at the cart full of registration cards.  They were in shoeboxes arranged by month and year they were received.  I figured that the newer ones were more relevant than those sent in years ago.  I took a deep breath and plunged in.  I grabbed 500 of the most recent cards, which were from the last four months, and I started calling.  Quite honestly since few customers ever get “hi, how are you doing calls” directly from an executive at the company who sold them a product, I didn’t know what to expect.  Would anyone take my call, would I get hung up on, would they answer this long list of questions?

Three hours and ten customers later I was beginning to feel like this would work.  It had taken about two registration cards to get one customer on the line.  And out of those, 9 out of 10 were happy to talk to me.  Actually happy is the wrong word.  Stunned was more like it.  They had never had anyone from any company, let alone a computer company call and ask them anything.  Then when I told them I was actually the VP of Marketing they were flabbergasted.   They were happy to give me everything I asked for and more.  And then to their surprise I offered them either a SuperMac coffee cup or T-shirt for their troubles. Now I had happy and surprised customers walking around with paid advertising for my company.

For the next three weeks I spent 8 hours a day calling customers and another 6 hours a day managing my new department.  I’m sure the CEO thought I was crazy.  But after three weeks and three hundred customer calls I was done.  I had been to the mountaintop and had gotten the message.

 Here’s what I found.

  1. Market segment: While the company did have customers in a wide range of industries and businesses, the actual users were in a (then) new and emerging segment called color desktop publishing.
  2. 80%: In fact, over 80% of the customers who turned in their reg cards were in this group.  This was a real eye-opener.  No one in our company knew this.  Now we could stop guessing about who our customers were.  We could even go further and talk about how they worked and what they needed to be successful in their jobs.
  3. Key applications: At the time color desktop publishing customers used only four key applications: Page layout programs called Quark and PageMaker, a photo manipulation package called Photoshop, and a drawing program called Illustrator.  These were big ungainly applications and on the computers of the day, very slow in manipulating large color files.  (The dependence on these applications was another new and important fact for our company.)
  4. Performance: What these customers cared about more than anything was graphics performance in these four key applications.  And by more than anything, I mean that the word performance came up time and again from these professionals.  Waiting for images to move around the screen were not only driving them crazy, but costing them money.
  5. Performance over price: In fact, for over half of these customers performance was even more important than price!  (If you haven’t stopped reading, please do so.  To find a customer who says anything is more important than price is the Holy Grail for a marketer.  Few times in his/her life will they find such a market.)
  6. Purchase driver: The color publishing customers were making their purchase based on the features of the graphics board, but they were buying the color monitor from whoever sold them the board.  That is none of the features of the monitor seemed to matter, it was the board that drove the monitor sale.  So much for all our efforts to promote our monitor features.  (What it meant is that instead of dividing our marketing budget, dollars and resources, we could focus all our energy in promoting the graphics board and let its sale pull the monitor with it.)
  7. Three publications: In our market there were a myriad of magazines to read.  Yet our customers said they got their company and product information from only three publications: MacWorld, MacUser and MacWeek.  They said the product reviews in these publications were by far the biggest influence on which card to buy.   (This made our PR problem manageable and focused.  Now we knew what was a make-or-break publication and review and what we could pass on if we didn’t have the time or resources.)
  8. Two trade shows: Customers who had bought our products only went to two trade shows (if they went to any at all): MacWorld, the general Mac trade show, and if they were true publishing professionals, perhaps the Seybold Publishing conference.  (Learning this meant that instead of attending every possible Macintosh tradeshow we now knew we only had to look like the biggest and best in two.)
  9. The bad news: That was the good news.  The bad news is when I asked what had they heard about SuperMac, I got a litany of stories about the company going out of business, about how their dealers complained that they owed lots of money and that our ads were incomprehensible.  More importantly, no one knew what business the company was in.  “Aren’t you the cheap disk drive company?” This information coming from someone who had already bought our graphics boards.  Gulp.
  10. Worse news: The worst news was that more than half of our customers had gone into their dealers to buy another brand of graphics board.  And it had been the dealers who had convinced them to buy ours.  (As we found out when we interviewed our dealers, our sales department was using extra commission payments – called Spif’s – to incentivize the channel to move our product.)  The good news was that the Spif strategy was working; the bad news is that it was costing the company our entire profit.  We were losing money on every board we sold.
  11. The worst news: The worse news was what wasn’t said, less than 10% of our existing customers bought because of some proactive marketing campaign.  No one remembered our ads, saw our reviews or had read a positive article about us.  Yet outside my office door was a mass of people who thought they were in the marketing department and had honestly believed they were contributing to the success of the company.  Spending $4 million/year on marketing

After three weeks I stopped the customer survey when I started hearing the same stories again and again.  Looking at the customer data I realized there were some potential “gotchas”:

  • This was a survey of those who had already bought product from us.  Those who didn’t buy from us might have completely different characteristics
  • This survey could only reach those who sent back their registration cards.  Those who didn’t might be different.

As it turned out, large companies that bought graphics card for their publishing departments didn’t always send registration cards back, so my survey was skewed to smaller groups.

What did I learn so far?

  • Organize questions about customers, channel and market
  • Build a series of your own hypothesis about each area
  • Test the hypothesis with real customers

Listen to the podcast here
Download the podcast here

SuperMac War Story 1: Joining SuperMac

After leaving Ardent (a supercomputer company I’ll blog about later) in 1988, I consulted for Pixar when they were still in San Rafael and were a hardware company trying to make software and commercials. While I was consulting for them, I got a call from a recruiter for a company called SuperMac, which made add-on products for the Macintosh.  They were one of the first companies to sell an external disk drive for the original Mac; they had the first “color paint programs” for the Mac; and when the Mac was just black and white they had the first color graphics boards and large screen color monitors for the Mac.  And with all of that they had gone broke, out of business and into Chapter 11.

Yet two smart VC firms, Sigma and Matrix Partners, realized that somewhere in this mess there was value. Their guess was that they would find value in the high margin graphics business.  Now with a new infusion of $8 million dollars of venture capital, SuperMac had been resurrected from the dead and was attempting to restart.  The first step was to recruit a new management team.

Why they were looking to me to run marketing wasn’t clear.  They sold their product through the computer retail channel, something I knew nothing about.  They sold to a set of customers I knew nothing about.  Yet somehow they thought that my prior experience in high-end computer graphics might be relevant.  Why I was interested was equally obscure.  The company was the laughing stock of the Mac market.  The two other players in the add-on graphics business, Radius and RasterOps, had a combined 90% market share.  After talking to its resellers and customers I realized that SuperMac was the only company that could be described as “fifth in a group of three.”

In essence it was a restart with a mixed bag of assets and liabilities.  The assets were a series of products already developed and on the market or in the development pipeline.  So perhaps a more accurate description was that the company was a “restart.”  The new products potentially looked to be industry leaders if and when they came to market. When I went through their financials as part of my due diligence I realized that if they ditched their low margin disk drive products, it wouldn’t take much to make them a profitable company.  They had an existing distribution channel and their dealers and customers thought they knew who the company was and what it stood for.

The liabilities were equally clear: the existing distribution channel and their dealers and customers thought they knew who the company was – a failure – and what it stood for – a mixed bag of commodity products with low margin, no compelling reason to sell and a set of competitors with much better products.  Worse, no one inside the company had a profound belief in who the company was and why they existed.  They had no model of who their own customers were and what it would take to make those customers bang down their doors to buy their products.

Nothing I couldn’t fix.   I took the job.

Listen to the podcast here
Download the podcast here

Follow

Get every new post delivered to your Inbox.

Join 149,610 other followers