June 16, 2007

Pruning keeps the plant Healthy

Posted in CEO, Product Development at 3:46 pm by scottmaxwell

I wrote a post on how to get things Undone. Matt just undid something with WordPress and I like the metaphor that he used relating to pruning:

“Pruning is an important and necessary step in growing roses. Pruning keeps the plant healthy. It promotes new growth, removes dead, broken or diseased canes and trains roses to a desired shape. Pruning encourages flowering, either more blooms or larger blooms, and is essential to keep modern rose varieties blooming repeatedly all summer long.”

I also thought the comments were pretty interesting, as anything that you do or undo will have mixed reactions. Keep pruning Matt and I look forward to the next blooms!

Advertisements

February 15, 2007

A metric for messaging

Posted in CEO, marketing at 6:34 pm by scottmaxwell

Firas Busnaq recently sent me a link that completely clarified why I can’t read some of the technology company websites and understand what the companies actually do. It turns out that they are using an automated system for generating their branding 🙂
Getting your message to stick is one of the inexpensive and most important activities that you can do. if you think that you do have your messages clearly articulated and as simple as possible, here is a test that will give you a metric for your messaging:

  • Write down your messages on a piece of paper (btw, if you need more than a postcard, simplify your messages!)
  • Ask 3 board members what you do (score 1 point for each board member that comes close within 30 seconds after the question is asked. Score -1 point for each board member that takes longer than 60 seconds to complete the answer)
  • Ask 3 of your most senior people what you do (score 1 point for each board member that comes close within 30 seconds after the question is asked. Score -1 point for each board member that takes longer than 60 seconds to complete the answer)
  • Ask 3 salespeople what you do (score 1 point for each board member that comes close within 30 seconds after the question is asked. Score -1 point for each board member that takes longer than 60 seconds to complete the answer)
  • Ask 3 customer support people what you do (score 1 point for each board member that comes close within 30 seconds after the question is asked. Score -1 point for each board member that takes longer than 60 seconds to complete the answer)
  • Ask 3 customers what you do (score 1 point for each board member that comes close within 30 seconds after the question is asked. Score -1 point for each board member that takes longer than 60 seconds to complete the answer)
  • Clearly, the top score would be 15 points on this test. If you score less than 10 or less than 2 points for any of the groups that you interview, you should work on simplifying your message, making your message “stickier” by making it resonate better, or work on your message delivery systems! (btw, in my experience this test results in negative numbers the first time it is given…a score of -15 is not uncommon for the first test if you are accurate in your scoring)

    The more you can push the score toward 15 with a relatively random sample of people closely related to your company, the more clarity your message and the easier the message will diffuse to your prospects!

    Note: if you don’t have a company large enough to connect with 15 people, then interview the group that you can…you are actually in a better position to get your messaging right as early in your company development as possible…

October 1, 2006

Announcing OpenView Venture Partners

Posted in CEO, Global Investing, introduction, management, marketing, Sales, VC Roles at 6:34 pm by scottmaxwell

Announcing OpenView Venture Partners

I haven’t posted in a while. Unfortunately there has been little time, as I have been working around the clock with my team to launch a new Venture Capital firm, OpenView Venture Partners, located in Boston, Massachusetts. Today, we officially launched the firm with the closing of our inaugural fund on Friday night. Given my excitement about this new venture, I thought that I would take the time to share our concept and some of the details. (Also, take a look at the new website, www.openviewpartners.com.)

The overarching thrust for the firm is Operational Value Add (in addition to capital) for InfoTech companies, who have reached the expansion-stage of company development (as in “I have a product and some customers, Now What?”), and are located anywhere in the world.

We set the goal of operational value add because, in our experience, this involvement helps improve products, sales and marketing, and customer service. The improvement leads to enthusiastic customers and increased growth rates, profitability, and long term competitive advantage. Net net, the more value we provide, the greater and faster the enterprise builds value.

We developed and refined the approach at our prior firm, Insight Venture Partners (we had been working as its Boston Office). As we evolved the approach, we have found the results to be both significant and significantly different than the approaches used by other firms.

Our Approach

The goal of operational value add is a principle that we have spent a great deal of time operationalizing through a combination of focus, value add resources, and a small fund size. We believe that staying focused, having the best resources, both internally and in our network, and then “putting all the wood behind the arrow” is a great approach for delivering the most value (I gave similar advice to emerging growth companies last year and, again earlier this year). Finally, and perhaps most importantly, we work extremely well and in partnership with our portfolio company senior management (an earlier post on the topic is here). The feedback to date from our approach has been outstanding.

Some details on each of the points:

Focus

Our value add starts with the focus that we have on market and stage. With this focus, we have developed a much deeper understanding of the issues and opportunities facing our portfolio companies and have geared our firm to help address those issues and opportunities. Our focal point includes the following:

  • Our Market Focus is InfoTech, particularly around companies that configure software, data, and/or hardware into packages that provide meaningful value to their users. At this point our list includes software (all flavors from installed to on-demand), internet, information services, and technology enabled business models.
  • Our Stage Focus is Expansion Stage. Expansion stage to us starts when a company has worked out the major kinks in its core product, has begun to address its first market, has a viable approach to reaching the market, and has some customers that use, like, and reference the product. (Generally, a good proxy for this is company revenue in the $500k to $1MM per quarter at a minimum with good historic growth).
  • Our Geographic Coverage is Global. Our belief is that expansion stage InfoTech companies all need to develop a global presence, so the starting location is not as important as the company’s desire to expand globally, particularly in North America (given our North American presence).

We strongly believe that the issues and opportunities that emerging growth InfoTech companies face at the expansion stage are very different than the issues faced by companies in other sectors or in other stages of development. By choosing a sector and a stage, we could then more deeply gear our firm to deliver the most value against that more specific set of issues and opportunities. Separately, we have found that the major issues facing expansion stage information technology companies are independent of their geographic location, enabling us to have a wide geographic coverage (that is, we invest globally) without diluting our value add.

Operational Value Add

Our operational value add programs are described on our website. Our general approach is to determine the key issues facing each portfolio company at the senior management level, compare notes with the management team, help determine the top goals of the company, and then offer each company a “menu” of ways that we might help. The menu includes items such as offering our portfolio companies people on our team for small or large projects, introductions to our network, and/or helping our portfolio companies recruit senior staff and add to the “DNA” of their team.

Our efforts also include a number of functionally specific (sales, marketing, development) “best practice” forums for our portfolio companies. The forums are designed to help our portfolio companies network among themselves and also help to spread “best practices” in each functional area between and among our companies. These forums take the form of one-day events in Boston, each devoted to a particular topic.

My blog is also meant to be an extension of this work. By reading some of the posts in the blog, you can get a pretty good feel for the issues that we work on with the companies and some of the principles that we use to address the issues.

Optimal Fund Size

As OpenView took shape, we thought a lot about the optimal fund size. We believe that a smaller fund is better for both our investors and our portfolio companies, which ultimately makes it better for us. Yet, it was important that the fund was large enough to create a level of diversification and to give us enough time for the portfolio to develop before raising our next fund. Net net, we set the fund size at $100 million, which we believe is the optimal amount to meet our goals.

From a portfolio company perspective, the smaller fund size relative to some of the other VCs means that we will do fewer investments, allowing us more time for each portfolio company. From both a portfolio company and investor perspective, it means that a larger portion of our income comes from creating value in our investments, which results in highly aligned incentives between our portfolio companies, our investors, and us.

Working In Partnership

Finally, and perhaps most importantly, our belief is that we can’t add value without building strong relationships and working in close partnership with our portfolio company management teams. Every member of our team has outstanding professional credentials, great values, and a strong desire to build meaningful relationships with senior management teams. These characteristics, as well as an intense desire to add value, help to create great partnerships between our team and the portfolio companies.

You can Help!

To the extent you are interested and willing to help, there are a few things that you could do that would thrill us:

  1. The team would be very appreciative if you would be willing to mention OpenView Venture Partners and our URL (www.openviewpartners.com) so that the search engines have an easier time picking us up. Version 1.0 of the site just went live, so it will probably take some time for the spiders and indexers to register its presence. Your mention of the site would greatly help this effort,
  2. We are constantly looking for people to add to our network globally. To the extent you are interested in helping our portfolio companies, let us know via e-mail, and
  3. We are always on the lookout for the next expansion stage InfoTech company to meet with (our focus is above). If you know of one, send us an e-mail!

Summary

OpenView Venture Partners is all about Operational Value Add aimed at Expansion Stage InfoTech companies located anywhere in the world. Our approach has been in place and constantly refined for several years now and we take great pride in the references that our current and former portfolio companies offer about us.

If you want to participate in some way or have an interesting company that we should know about, let me know. My new e-mail address is smaxwell@openviewpartners.com. I do my best to keep up with the e-mail, so drop me a line. This post marks the end of the beginning of what we hope will be great for everyone that participates!

A Special Thanks

It is hard to talk about the launch of a new fund without reflecting on and acknowledging some of the people that enabled the success. We had a significant amount of help from our portfolio company senior managers, enthusiastic and extremely high quality investors, and our tremendous network of individuals and companies who have helped us be successful over time. In addition, the team at Sparring Partners Capital did a fantastic job as the fund’s placement agent and the team at Goodwin Procter have done an equally outstanding job as council to the fund.

The group that I would like to single out here are my (now technically former) partners from Insight Venture Partners. The partners have been very supportive over the years as I pushed on different initiatives, and since the idea of OpenView started gaining traction they have been extremely supportive, helpful, and generous with their time. In addition, we have been able to work out an approach whereby we will continue to work directly with our Insight investments until each of the investments has grown and exited, something that is extremely important to us given our value add focus. Thanks guys!

EndNote: I have apologized many times to my network that has had difficulty reaching me over the last several months and appreciate the enthusiastic support and encouragement that has come from everyone. I expect that now that the firm is formed and the fund is closed I will be returning to a more normal schedule of focusing on my portfolio work and network and even updating my blog more frequently 🙂

January 27, 2006

You really need to focus!

Posted in CEO, management, Product Development at 9:14 am by scottmaxwell

I posted several times on the issue of focus, including the opportunity to develop a scope advantage against the large company, the issue of time horizon of CEO focus vs. company size, the the issue of CEO time horizon focus by day of the year.

I am just completing a week of meetings with emerging growth technology companies in Germany and Russia, and the meetings reminded me again that everyone talks about focus, but very few companies actually do focus (this is true of emerging growth companies in all countries, not just the companies that triggered this post).

There are two major opportunities for most (all?) emerging growth companies:

  1. Narrow your focus– Reduce the number of products and the number of new features that you are trying to add to the products. Use the extra time to make the product and features that you are developing that much better (and simpler).
  2. Improve the target of your focus– Listen to your customers to help you narrow down to the right product and the right features. (some ideas on how to do this are in my post on gaining an information advantage).

Ok. I know…obvious points. But if the points are so obvious, why is it that so many companies feel that they understand their customers so well without spending much time with the customers? Why is it that they are thinking up grand new products when their current products have a long way to go before they are fully intuitive and extremely easy to use?

I think the issue is that most companies are not critical enough of themselves…they go through their day thinking that they know their customer (using logic and a lot of assumptions) and they are focusing when EVERY company has significant opportunity to improve on both! (one senior manager on this trip went so far as to explain to me that talking to the customers will mislead the company into believing the feedback, which would only be relevant for that particular customer. While he is right to point out that you need to be careful about your approach and conclusions that you reach, this is a very bad excuse for not taking the time to understand your customers’ point of view!!)

An approach that will help most (all?) companies is to appoint a person responsible for both formalizing and capturing the customers’ feedback AND be responsible for minimizing scope creep (this needs to be a highly disciplined person that feels comfortable keeping everyone focused and on target). The role could be called (or be part of) product marketing or product management. If you do not have this role in your organization, consider creating it and assigning the right type of person to it.

You have a huge opportunity to make better products while growing faster with fewer managment headaches.  At a minimum, walk around your company for the rest of the day saying to everyone that you meet “You really need to focus!”  I am 100% certain that everyone will agree…

January 3, 2006

Sales is Humming!

Posted in CEO, culture, Execution, Sales at 10:08 pm by scottmaxwell

In my last post, I described how the CEO, like the drummer, sets the overall beat of the organization. This post is meant to show how the sales group taps with the CEOs beat.
The chart below shows how a VP Sales manages within the context of the overall beat. Again, the horizonal axis is the day of the year (the full chart is one year) and the vertical axis is time horizon of the VP Sales focus (i.e., a 10 day time horizon means the VP of sales is focused up to 10 days out on that day of the year).
CEOSales

Some thoughts:

  • As with the CEO beat, the VP Sales graph has the distinguishing characteristics of the strategic review in the August timeframe, the annual planning session in mid-November, and the quarterly meetings that review progress from the prior quarter and make adjustments for the remainder of the year.
  • Somewhat smaller on the chart above (see the close-up of the first two weeks of each quarter on the chart below for this point), the VP sales starts every week looking out over the remainder of the quarter (roughtly 90 days the first day of the quarter and 83 days one week out) and then focuses in on the executing near-term for the rest of the week (note that the time horizon of focus is 4-days on Tuesday, 3-days on Wednesday, 2-days on Thursday, and 1-day on Friday).

closeup
Finally, I superimposed the CEO chart from my prior post so that you can see how the CEO focal points fits well with the VP Sales focal points (the two are in rhythm!). There are two key differences with the graphs. First, the VP Sales focuses on very tactical accomplishments each week (gets the work done) and only steps back to examine the rest of the quarter once a week. Second, the VP Sales spends some extra time before and after the CEOs quarterly, annual, and strategic sessions to both prepare and to incorporate feedback into the plans.

CEOVPSales
The point here is not to debate exactly what the focus is at any point of the year (every company will be different), but to point out that there is a regular rhythm set by the CEO that the rest of the organization fits into, in this case sales. Also, it is meant to show that most of the time the VP of sales should be extremely tactical, but also step back at different points to take a longer term view and make adjustments to the plan (similar to the way I swim…I swim for a while and then need to poke my head out of the water and make corrections to my path).

As with the CEO, the two mistakes that VP Sales seem to make is either tactically executing all the time (thereby missing the larger context and opportunities for adjustment) OR spend too much time on the longer-term plans and waste time that they could be executing. It is difficult to get it exactly right, but perhaps thinking in terms of a rhythm helps.

My next post is on the marketing rhythm…

January 2, 2006

Is That You Humming?

Posted in BOD, CEO, culture, management at 3:23 pm by scottmaxwell

I spend a lot of time trying to help my portfolio companies develop management approaches that help the management stay focused on important activities. The core issue with every company is that there are too many things to do and never enough time to do it.

For example, how does management focus on its short-term execution targets while also focus on building for the long-term? Because it is incredibly difficult to think long-term while you are executing short-term and equally difficult to execute short-term while you are thinking long-term, some companies only focus on short-term issues at the expense of longer-term strategy and other companies focus too much on longer-term strategy at the expense of getting things done in the short-term. What is the right balance between the two and how do you manage the balance?

My observation is that the best managers set up and manage a daily, weekly, monthly, quarterly, and yearly rhythm that allows for both short- and long-term focus. (They get into a rhythm that requires short-term execution most of the time, but also requires longer-term thinking part of the time.) A second observation is that every company can improve its rhythm, as I have never seen a company get this perfectly right. In addition to balancing the short- and long-term issues, “getting into a rhythm” helps employees’ attention and activities stay aligned over time, and the regular, coordinated “change of pace” and change of focus helps to keep everyone in the organization fresh.

The CEO sets the beat…

Just as great marketers develop a marketing rhythm for their customers, great CEOs set the beat for the overall organization. I highlighted below an illustrative rhythmic beat that an expansion stage CEO could set for the overall organization. (looks something like a EKG measurement of a heart beating, doesn’t it? Perhaps this is why companies with a great rhythm seem to come alive?)

CEORhythm.gif
This particular chart has several characteristics:

  • The CEO sets the focus for a 3-month time horizon at the beginning of each quarter and then ramps down the time horizon focal point as the quarter continues (i.e., the organization is focused on this quarter, so as the quarter progresses the time horizon gets shorter), making sure that everyone is focused on nailing this quarter’s goals.
  • About 3-weeks into each quarter, the CEO has all the data to step back with the senior managers and Board of Directors (BOD) and review results for the prior quarter as well as make adjustments in plans for the rest of the year (the time horizon for these meetings is the rest of the year. Note the decline in time horizon as the year goes on. Each quarterly BOD discussion has a time horizon that ends at the end of the year, as the major focus needs to be to execute for this year!)
  • At some point during the year (I prefer the July/August timeframe, as it is generally a lighter period), the CEO, along with the senior managers and BOD, step back to think about adjustments to the longer term (2-3 year time horizon) plan in the context of the market environment and progress to date.
  • Later in the year (mid-November seems about right), the CEO, senior managers, and BOD can use the results from the strategic review and progress for the year to rough out the plan for the following year.

(Just so that it is clear, the point of this chart is not to show you the rhythm that you should have, but rather to give you an example of a solid rhythm to spark your thinking on your current situation and adjustments that you might want to make.)

Organizations with a rhythm have a real hum to them. Perhaps this is why people in high performing companies say “we are humming!”

Note1: I am really making two separate points in this post. One point is about the need to create rhythm and the other point is about the rhythm associated with short- vs. long-term focal points. There are clearly many dimensions of rhythm, but all the dimensions should follow the same general beat.
Note2: The chart illustrates a company that is focussed on quarterly numbers. Many companies are also focussed on daily, weekly, and/or monthly targets. The chart would clearly change depending on your time horizon at each point in the year.

December 31, 2005

When Should CEOs Focus?

Posted in CEO, Execution, management at 3:21 pm by scottmaxwell

I wrote a recent post on the benefit and practices of focus, but wrote more about how to focus than when to focus. The chart below (of a successful product/company) is meant to expand on that post by showing the stage aspects of focus. Generally, prior to starting a company, and during the initial stages of determining exactly what you are trying to achieve in your product market, you will have a relatively broad scope (so that you can understand the landscape of the various product markets that you are considering as well as the technologies and distribution models that you might deploy). Once you nail down what you are trying to accomplish, you should move rapidly to a pinpoint focus on executing against your goals (i.e., keep your head down and execute). Extra thinking outside of your extreme focus will slow you down, perhaps considerably. As you begin to complete the product and get a few paying customers, you can expand the focus slightly. Finally, as you move up the S-curve for your product, you will need to once again expand the scope of your focus to better understand the market opportunities for continued expansion.

CEOFocus.gif

Three possible traps…

There are three possible traps that you can fall into if you are not careful:

  1. You do not have a broad enough scope before you are clear on what you are trying to achieve. Thoroughly understanding the product market, competitors, technologies, and your capabilities is important to determining where and how you want to play in the market and should give you a greater probability of success.
  2. You do not narrow the scope dramatically once it is clear what you are trying to do. Like focussing the sun energy through a magnifying glass, the right focus will lead to execution and lack of focus will lead nowhere.
  3. You do not broaden the focus once you nail your product market. While this is much less critical than the first two points (I almost left it off the list), you will probably want to continue growing and will need to start looking for new opportunities. (better to err on the side of being late with this point.)

Most emerging growth company CEOs fall into the second trap at some point, so take a careful inventory of your how you spend your time and what you think about…you may be in this trap right now!

Finally, as companies get larger and the company enters multiple product markets, this graph is still valid for the individual unit management. From the CEO perspective, these multiple graphs get superimposed and the CEO’s role naturally gravitates toward the broader scope.

December 28, 2005

Top 10 New Year’s Resolutions for CEOs

Posted in CEO, culture, Execution, management at 12:02 pm by scottmaxwell

As the year draws to a close, I thought that I would offer up my top 10 possible New Year’s Resolutions for Emerging Growth Company CEOs:

Choose the most appropriate (maximum of 3) from the list below:

  1. Customer Focus– Telephone or meet with at least 3 customers that you don’t already know each week, for 12 weeks. There is nothing like customer conversations to truly understand the perceptions of your organization (and perception is truly reality). Then, do something useful with the information!
  2. Product Focus– Choose the 1-3 most important areas of improvement to your product that you have known about for a long time (hint: ease of use is one of them), and spend the first 90 days of the year helping your product groups both building the improvements AND build the processes, organization, and staff to make ongoing improvements. Set and meet measurable progress goals by the end of Q1.
  3. Marketing Focus– Choose a (simple) message, and make sure that by the end of Q1, everyone inside your organization recites the message when prompted (this is not as easy as you think and should be measured by random prompts at the end of the quarter).
  4. Sales Focus– Put in place 1-2 new approaches that significantly improve the efficiency and/or effectiveness of your sales funnel, with noticeable improvement by the end of Q1. (for example, pure channel sales can improve their online channel partner support or improve training of the partners. E-commerce distribution could put in web analytics or use what you already have to improve page abandonment or put in a program to reduce shopping cart abandonment. Telesales distribution companies could put in place or improve e-commerce. Field sales distribution could put in place telesales or telemarketing.)
  5. Service Focus– Sit with your customer service staff answering incoming customer service requests for a half day each week for 4 weeks. Use the knowledge you gain to make 1-2 significant changes (e.g., product feature, product usability adjustments, building help into your product, customer self help tools, customer service process step, etc.)
  6. Employee Focus– Take one employee to a one-on-one breakfast or lunch each week for 12 weeks (or until you run out of employeess to take out). Use the knowledge that you gain to make 1-2 significant changes by the end of the quarter.
  7. Strategy Focus– Create 1-3 initiatives from this list, make considerable progress on implementing by the end of Q1 to help increase your competitive advantage.
  8. Financial Results Focus– Take your current plan for Q1 and figure out how to outperform it by 10-15% on the bottom line in the first quarter, by raising the bar on hiring, focussing on better cost management, or getting involved in closing more sales.
  9. Execution Focus– Make sure that each of your direct reports has 3-5 major goals for Q1 with objective measures for success. Make sure that your direct reports do the same thing with their employees. Ask for a regular (at least weekly) review of progress against the activities to nail the goals as well as the results relative to objective measures.
  10. Have Fun– While nailing your goals are important, waking up every day passionate about your work is at least as important. Implement 1-3 initiatives that will improve the amount of fun that you and your employees are having (do it right and your productivity will improve as well).

Happy New Year!

October 25, 2005

Who is the right CEO?

Posted in CEO, management at 8:20 pm by scottmaxwell

One of the first questions that I get asked by companies that I am talking to is “who is the right CEO for the company?” I always get confused by this question (I am not sure why, given the frequency of the question), as there is almost always a CEO in place, and the CEO has generally been in place for two or more years by the time I invest. My view (which I recognize is different than many VCs) is that a CEO that has brought the company to the point I am willing to invest is the best CEO going forward. Many of them have not had the job before, but all of them have the passion, domain expertise, and customer and product knowledge, which I do not believe, can be replicated by hiring a new CEO. I also find that the CEOs that I invest in are likeable people, which seems to be aligned with the skills necessary to be a good CEO. My approach is to try to understand the CEO as much as possible by working with them over time. After a while, a profile emerges with strong spikes in certain areas and valleys in other areas. Once the profile is clear, and as the company grows, new senior positions open up that can then be filled by people who have spikes where the CEO has valleys. For example, if the CEO is not process oriented, we might find a senior CFO or COO that will augment the skill. If the CEO is more sales oriented, we might find a CTO that can balance out the senior skill set. Every so often, a CEO asks us to help find a replacement, sometimes before we invest, sometimes well after we invest. In all cases, my inclination is to try to carve out the role that the CEO wants (still probably the highest value person in the organization) and to launch a search that augments their skills (same basic approach, different title). This approach has worked many times over extremely successfully…