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 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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