danieltenner.com

Startups, company culture, technology, music, writing and life

Productised Services

This article was originally published in 3 parts on swombat.com in December 2011.

One of the most fundamental decisions when deciding to start a company is whether you will sell a product or a service. Most people will immediately pipe up that products are the best, but that’s not so clear. It’s not even clear that the devision is so binary. There is a third alternative: productised services.

In this series, I’ll explore the difference between products, services, and productised services, and offer some tips for how to productise a service (or service-ize – sorry for the butchery – a product).

Product companies

Classic product startups are things like Basecamp. Sure, it’s sold under the moniker “Software as a Service”, which muddies the discussion a little, but the key product property of a product has is that additional sales require a minimal amount of additional skilled time to deliver. There are support costs, server setup costs, etc, but those are marginal compared to a specific sale. On average, each sale has a fixed delivery cost associated with it and requires no human interaction to deliver the benefit to the customer (though the sales process maybe very time-consuming, but that’s another discussion).

The benefit of selling products is that if you build the right kind of product, and particularly the right kind of technology product, it scales tremendously well. If 37signals gets demand for a million new basecamp accounts at once, they should be able to ramp up the server infrastructure pretty quickly and capture that business, rather than turn them away. Services companies can’t do that. A services company with business than they can handle will either turn away customers, or ask them to wait, or raise their prices (same as turning away customers), or even just take the business on and deliver a poor service.

Another benefit is what I call the “making money while you sleep” paradigm. Since there’s little or no human element in the delivery of the product, you can go to sleep, wake up, and find that you earned money while you were sleeping. That’s a great feeling, not to be underestimated as a feature of products – although in theory, once a services company gets big enough, you will essentially arrive at the same point: others work and earn you money while you sleep.

The big downside of product companies is that it can be very hard to validate demand for your product, and until you’ve done that, you don’t know whether the product is worth building. Many people skip the validation step (because it’s hard) and end up building worthless products that don’t sell. Others take too long to build the product (can especially be the case for web startups), or fail to build it quite right, or are beaten by strong competition. Many of the best product markets are winner(s)-take-all markets, where one or a few large successes will reap most of the business, and the rest will be left with crumbs.

Another big problem with products, particularly intangible products like your typical SaaS app or music track, is that people don’t value those very highly compared to physical products. App developers rightly bemoan the fact that people will spend hours deciding which of three 99 cent apps they will buy, and then walk into a Starbucks and spend $5 without even thinking about it. So another problem with intangible products is that it’s hard to get people to pay a high price for them, so you need to sell to lots of customers to make a profit. These two factors rule out direct sales methods and mean that you need to be able to market your product to large numbers of people cost-effectively to stand a chance. By comparison, a high-price item only needs a few sales a month (or even a year) to be profitable, at least when the business is small.

So, basically, products have a lot of uncertainty in terms of whether anyone will want to buy them, and can have a fair bit of upfront expense before you find out whether your effort so far was a waste of time and money (even with lean methodologies, there will be some waste and dead-ends).

Services companies

Services companies are much better and much worse than product companies, depending on how you look at them.

The classic example of a service company is a consulting, web development or design agency (like, oh, 37signals – but before they built Basecamp). Essentially, a services company trades skilled time for money in a mostly linear way.

There are great benefits to services. First, you can often ask for a significant chunk of the money upfront. That’s great for cash flow, and not to be underestimated. It means that services companies very rarely require investment to take off.

Secondly, you know pretty much right away whether anyone wants to buy your time, so you’re not sitting for years waiting to find out if you have a business. It can take a few months, or even years for sales to ramp up to a level where the business can be called “alive”, but sometime in the first few months you should start to see significant amounts of cash coming in. If you don’t, you’re probably selling the wrong service, or selling it very, very badly.

Another good thing about services is that people instinctively understand that skilled time is worth money, so whereas convincing even a 10-people company to spend $200/m on a web product might be a tough sell, they will not hesitate to spend a few thousand dollars on the right service. And before you say “but the $200/m comes in every month forever”, first of all, that’s ignoring inevitable churn, and secondly, most businesses would (and should) rather have $3000 upfront than $200/m for 18 months, even if the latter is slightly more.

Finally, one last benefit of services is that services markets are often very fragmented, so it’s much easier to build a moderately successful company in that kind of market. There are very few winner-takes-all services markets. Most of them look a lot like accountancy and consulting: a handful of huge mega-firms, a bunch of very large firms, quite a few large firms, and lots and lots of small firms. It’s much easier to get a foot in the door and build a sustainable business in this type of market.

On the downside, services are very hard to scale. Since you’re selling skilled time, and you only have so much of that yourself, you need to hire other skilled people in order to scale. The maths for that just doesn’t work in your favour until you get really big (see this article by Jason Cohen for details), and getting really big is really hard, because you need a lot of smart people, and smart people are rare and expensive and hard to recruit.

Another problem is that services have much lower gross margins, because part of your variable cost (i.e. the cost that is attached to delivering the service) is skilled people’s salaries. As long as you’re the only person working in your company, the margins look great because it’s all profit for you, but as soon as you have to pay someone else, suddenly you find those margins dwindling rapidly. By comparison, with a product, your gross margin can and should be extremely high – 80, 90, or even 95% in some cases.

Finally, services kind of suck because they take constant effort. Most services are not recurring, so you have to keep selling. People leave your company, so you have to keep recruiting. New people don’t know what they’re doing, so you have to keep teaching and training. If you stop doing any of those things, your company can develop deadly problems very quickly, like a diminishing sales pipeline, running out of people at a given skill level, or even running out of cash. Those things are hard to delegate until you get bigger. And getting bigger is really hard.

The third alternative: productised services

First of all, what is a productised service? It’s a service which you’ve systematised and supported by tools, automation, processes, etc, so that you’ve decoupled the benefit given to the client from the amount of time spent on your side. In other words, whereas in a services company the ratio of X units of time for Y units of income is relatively fixed, in a productised service, X/Y can be all over the place. Some clients will be extremely profitable, and others less so (but still worth serving – otherwise, turn them away, of course).

Accounting services are a great example of productised services. Though many accountants will charge for time above and beyond their “standard service”, most of them have packaged things like “yearly accounts” or “VAT returns” into a fixed price deal. This leaves them free to optimise the delivery of those services so that they take a minimum amount of time, while still charging the client the same amount.

Even large consulting companies, like Accenture, try to productise their services. Back when I was there, Accenture was very keen to sell what they called “Managed services”, where they would take over an entire function of the business and deliver it for a fixed price, enabling them to manage the costs internally and deliver the service in an efficient way without undercutting their own revenues.

Productised services don’t have to, and in many cases, shouldn’t, be marketed as such, or else clients may try and push down your prices if they think it doesn’t take you that long to deliver (conveniently forgetting the time it’s taken you to systematise the service so it can be delivered more efficiently). “But you’re getting a lot of value out of our service” doesn’t always work, especially not with smaller companies, so think carefully before marketing your productised service as such.

Productised services have a number of advantages. Similarly to products, they can scale much more easily than services. Once a service is properly systematised, it is easier to actually carry out, which makes recruitment much easier, since you don’t need your people to be as highly skilled. You won’t be able to deal with a sudden million orders, but you can ramp up capacity pretty damn quickly if you need to.

Like products, the margins can also be quite high, because most of the time-consuming parts of the service have been automated or simplified so that the human time spent is small compared to the return. Unlike products, however, the process doesn’t move along without human involvement, which means you have to keep working on it – but you can structure productised services so that there is a recurring component, which provides similar benefits.

Since this is a service (and perceived as such), people naturally understand the value of it and are willing to pay real amounts of money (in the thousands or tens of thousands) which they would not be likely to throw into a product by a small company.

Because it is a service, unfortunately, you must do the sales directly – it is difficult to sell services without any salespeople. However, the advantage is that you can tailor your pricing to the type of client, and how much value your productised service brings them. If your service will provide £100k of value to one client and £1m of value to another, it stands to reason that your proposal for the second client will have a markedly higher price tag than the first (which might be based on a percentage, or some other calculation method). This is difficult to achieve with most typical startup products, since you often don’t know who you’re selling to until too late.

Finally, another advantage of productised services over both products and services is that they can be taken in either direction if needed. If customers start to require a lot of bespoke work, you can evolve towards a normal service model. If, on the contrary, the customer base just keeps growing, you can automate more and more of the service until it becomes self-service. This makes productised services a great way to kick off a product business, by generating these product-related revenues early on and using them to continue building out the self-service aspects of the product (in effect cannibalising your own service with your product).

Productised services are not good at all stages of a company. Google could not and should not run AdWords as a productised service, for example. At that scale, you need maximum automation. But they could have done so in the early days of AdWords. Nor are they always possible in the very early stages, before you have any idea what your market wants (but then, why are you starting a business in that industry?).

I’ll address the paths to a productised service, from either a product or a service, in later articles, but hopefully in this article I’ve made the case for why there is a third model, which sits in between products and services, and which should be worthy of your consideration when trying to figure out how the hell you’ll get your company off the ground, particularly if you’re a new entrepreneur and are taking my advice to stay away from investment until you have your basic business skills figured out.

Thoughts from 2018:

This article still makes a lot of sense today. The fundamental business forces have not changed. The benefits of each kind of business are still the same.

Investment as a cushion or a springboard

This article was originally published on swombat.com in December 2011.

I believe new entrepreneurs should not take investment. Here’s why.

There are two primary types of investment that I’ve observed being taken: investment as a cushion, to protect the company from having to focus on short-term revenue generation right away, and investment as a springboard, to help the company grow faster or enable a cash-intensive business model. These can be loosely matched with the Seed and Series A stages of funding, though some Series A are cushion funding, and some Seed funding is used as a springboard.

One might expect me to launch into a tirade about how one is better than the other, but that’s not really the case. Both uses are valid. However, cushion funding is dangerous for inexperienced founders.

A cushion from reality

Starting a business with zero revenues and zero funds, you have to do what’s called “bootstrapping”. As UK entrepreneur Iqbal Gandham (who contributed this swombat.com article) argued on TechCrunch, bootstrapping from zero funds is impossible:

The harsh reality for startups is that you need someone somewhere to pick up a tab for around £50k, which of course could be split over two people, i.e £25k a piece, but still that is just £300 or so pounds less than the average salary in the UK.

However, many people commonly raise this initial £50k (though it’s often much less) from their own savings (saving £50k is hard, but hardly impossible, when you’re an IT contractor earning £50-100k/year). Bootstrapping, then, is creating a business without taking external investment. When it’s your own savings dripping through the hourglass, when every expense matters, you end up, hopefully, being very focused on reaching revenues as soon as possible. Lack of funds creates an extreme awareness of the need for more funds.

However, if you have a nice £100-200k cushion provided by someone else, you don’t feel the bite quite so much. Sure, you still have a runway, and it is diminishing, and it is something you need to “think about”, but it is far more theoretical than seeing the biggest number in your bank account steadily approaching zero.

One of the biggest things that new entrepreneurs (at least in most of the world outside of Silicon Valley) need to learn is not how to build a product or deliver technical work, but how to run a business profitably. It’s all these ancillary tasks, from sales to accounting, finance, legal, marketing, and general business management, that take three years to learn (give or take). That learning is one of the most important forms of progress for the new entrepreneur.

In that context, any cushion which slows down the learning, which delays it, makes it more distant and theoretical, is potentially harmful. Most successful entrepreneurs are the kind of people who thrive in sink-or-swim situations, and investment-as-a-cushion can turn this into a delayed sink-or-swim, and even set things up for a sink: having funds makes you more likely to take on fixed expenses start relying on your ability to spend, which you shouldn’t – not until you have a functioning business and/or know what you’re doing.

So, my advice to new entrepreneurs is: don’t take funding, and if you do, take a minimal amount and spend as little of it as humanly possible.

A cushion from short-term focus

The proposition is considerably different for experienced entrepreneurs. Managing your cash flow, your runway, your fixed expenses, etc, is a very hard lesson to forget. Once you learn how to sell a product that doesn’t exist based on a reputation that’s only in your head, that’s a skill acquired for life.

Many experienced entrepreneurs who could fund themselves take seed funding anyway. However, they don’t take it “because they couldn’t afford to do a startup otherwise”, they take the seed funding because it enables them to put aside the short-term revenue focus for a little while and aim for something bigger and riskier. Once you’ve learned how much the short-term focus matters to your survival, it’s very hard to ignore it. The cushion of external investment enables an experienced entrepreneur to temporarily ignore that pressure.

In this situation, I think it makes a lot of sense to take external investment as a cushion.

A springboard to greatness

Finally, the third case almost exclusively applies to experienced entrepreneurs, since, at least in the sane world outside of the Valley, VCs will pretty much never invest in a business that doesn’t have either a proven founder or proven revenues (both of which add up to an experienced entrepreneur).

In this case, funding is required to enable the business to grow much faster than by organic growth alone. This is particularly important in winner-takes-all and first-mover-advantage types of markets. Paypal and eBay are great examples of the first: most people will have only one online payment account, and they’ll pick whoever has the most popular platform. This winner-takes-all advantage paradigm is so strong that even with all their misbehaviours, both of those players are still firmly lodged at the top of their respective markets. Worth taking investment to get there first? You bet.

For the second case, looking in the enterprise market, many pieces of software like SAP have huge installation costs. A large SAP installation might cost $200m: $20m in software licences, and $180m in consulting fees to set it up. In a market like this, being the first to make the sale is pretty important, because customers are very rarely going to change platform if it costs that much.

In these contexts, taking growth investment makes sense, because otherwise a competitor who does take that investment will beat you to the post. This type of investment is not at all a cushion – in fact, it makes the fall much harder if you miss, turning a moderate success into a complete failure – it is a springboard, an amplifier of your efforts.

If you know what you’re doing and are willing to take the risk, springboard investment does of course make sense.

Conclusion

So, in summary, taking investment can be seen as either a cushion from reality (often the case with new entrepreneurs), a cushion from short-term focus, or a springboard to greatness.

Only the latter two are good uses for investment. If you don’t yet know what you’re doing, if you feel you need the cushion just to survive, then you probably should not take it.

To conclude, it’s worth noting that these arguments apply mostly to the 99% of the world outside of Silicon Valley, where spending tens of millions to build a company with zero revenues for years is not an option.

Thoughts from 2018

Even as the amount of money available to entrepreneurs has moved up and down with the times, I don’t think the core point of this article has changed at all. If anything, I’d expand it to larger, more mature companies, where my observation is that money without a clear sense of purpose to direct it is itself toxic, as it tends to lead to investing that money in distracting side-ventures that eventually impact the success of the core business.

Taking Responsibility

This article was originally published on swombat.com in December 2011.

Some time ago, I read an excellent historical novel about a character called Sinuhe. Set in ancient Egypt, it charted the life story of a talented doctor who travelled through Syria, Minoan Crete, the Hittite Empire, and other similarly exotic locations. Sinuhe got involved in intrigues, wars, mysteries, and all kinds of fascinating adventures, masterfully narrated in an autobiographical style.

It was an incredibly infuriating book, probably one of the most frustrating that I’ve ever read.

Sinuhe takes the concept of the doctor’s oath of non-intervention to the extreme. Through this monumental example, Mika Waltari shows how remaining passive and uninvolved can lead to great evils. Time and time again in the book, Sinuhe finds himself in exactly the right time and the right place to take actions that will change the course of events, of history, even. And yet he consistently fails to act until it is too late. Through this passivity, he loses both of the great loves of his life, as well as his only child, to stupid and avoidable deaths. Throughout the book, Sinuhe only ever acts when the evil has become manifest, obvious, immediate and urgently needs a cure – which, in most cases, is too late. And then he proceeds to rant about the evils of men, gods, delusions, and other forces of the universe, forever failing to see that every mysery that befell him was a direct result of his own actions, or lack thereof.

There’s a point in there about both startups and life in general.

Taking responsibility

I’ve argued before that the ability to take responsibility is an essential trait of the successful entrepreneur. Sinuhe is the quintessential example of someone who would consistently fail at business (much as he fails at life), because of his inability to accept that he is responsible for what happens to him, and that he can make a difference to those events.

To paraphrase Stephen Covey, until I accept that who and where I am is a product of the choices I’ve made (conscious or not), I cannot take the next step, which is to say: “Today, I choose otherwise.”

It’s easy to blame external factors for playing a part in your startup’s failures. “It was too hard to raise funding”, “the industry was in recession”, “people just weren’t ready for our product” – I’ve used those excuses myself. But that’s what they are, they’re excuses. Ultimately, successful entrepreneurs make things work despite the barriers standing in their way, by focusing on what they can do, and then doing it.

Accepting the results

Which brings me to the final point of this article, one which most of the self-help books out there fail to cover: taking responsibility, getting involved, throwing yourself into the thick of things and making decisions, all that is really, really hard (for most people). Sinuhe, in fact, deserves our pity more than our anger.

Psychologically, it can be very daunting to realise that taking action makes us responsible for the outcomes of those actions. If we get involved in making something complicated better, and we fail, we have no escape from the reality that we personally brought about a result that we did not want. We can’t blame it on circumstances, on external factors, competition, general human stupidity, and so on. It’s our own lack of competence that brought about our failure. If I take responsibility for things that affect others (like running a business or helping someone who needs emotional help), and I fail, I also accept responsibility for hurting others, maybe directly. Some people are so afraid of accepting this possible consequence that they shy away from making any decisions that impact other people.

Unfortunately, such decisions get made with or without our input. When we refuse to take responsibility, we let others take those decisions for us, or, even worse, we let the decisions be taken by the faceless system of default behaviours that composes the world. This is disastrous both in business and personal life. The default outcome for any startup is death. The default outcome for life in the western world is being normal, unremarkable, unnoticeable. If you are unhappy with either of those results, you need to take responsibility and take action.

Had Sinuhe acted, perhaps he would have brought about his and his friends’ downfall. But perhaps not. By his inaction in times when he had the opportunity to do something, he achieved failure anyway.

Thoughts from 2018

This article is an evergreen. As illustrated by the central example (set in ancient Egypt), the points being made here have applied throughout human history – and will probably continue to apply as long as there are humans about.

An injured man on a bike

First, I felt some shame that I’d been fooled so easily.

The man on a bike had approached me from the street while I was on the pavement. He was on a bike. He pointed to his arm. There was what looked like a fairly sizeable gash, and blood coming out.

“I had a bike accident, I need to go to the hospital, I want to take a black cab, do you have £5?”

I’m not sure exactly what happened next, but it resulted in me deciding to hand him the £10 that happened to be in my pocket, with a wish that he get help.

Almost as soon as he rode off on his bike, my rational mind kicked in again.

“So,” it said, “he’s riding off on the bike, huh?”

“Erm…”

“Seems quite comfortable too as he smoothly makes his way down the street. Surely he could ride to a nearby hospital on that? Oh, look, he just went past the ambulance station there on your right.”

“Ok…”

“And he’s now stopped by these two other people… look at that, they’re now going to the cashpoint nearby to get him more cash.”

There was a bit of anger, directed at myself first, for falling for it so easily. And then I tried to see what the anger was protecting. It really felt like I was not entirely conscious while the brief conversation had happened. I’d reacted without really allowing my analytical mind to do what it’s good at: analyse things, with skepticism if called for, and come to a decision that I can justify. And within seconds after the man had ridden off, it had flicked back on and I could immediately see that I’d been taken advantage of.

I wasn’t so much angry at being taken advantage of, as at the effortless ease with which it had happened. As I considered the scenario, I saw that probably, what had happened was something along the lines of the sight of another injured human overriding any sense of suspicion, the desire to help a fellow human being who’s been physically hurt being more immediately important than considerations of being conned.

It had worked marvellously well. The guy on the bike looked homeless, but this was a masterful interpersonal hack, a devilish use of a fundamentally good impulse in all (or most) of us: the impulse to help someone who’s obviously injured. Perhaps he had been a psychologist in a past life.

The true but boring thing to discuss here would be how this ultimately harms all of us. I’ll take it as granted that if you’re still reading, you’re the kind of person who sees that making this fundamental impulse untrustworthy helps no one, least of all a homeless person. It’s a variant of the “crying wolf” story. Some day he (or someone else) might be genuinely injured and dying on the street and not get help because people think it’s a con. I think we all get that. We also all get the stupidity of a society that arrives at this: a homeless person probably deliberately hurting themselves in order to make cash by taking advantage of good human impulses, because that still works and begging doesn’t. It’s tragic, and fairly obvious.

I’m more interested in the feelings it left me with. I felt shame, which was self-directed anger, because of this, and when I stayed with the anger instead of shaming it in turn (“Shame is bad anger! Go away shame!”), I saw that what the anger was protecting was the innocence of being able to just trust that someone who’s injured needs help. That innocence is beautiful, and I want to preserve it and protect it. I want to be able to help an obviously injured person without thinking about it, without considering whether I’m being conned.

And the reality of the world, that the fellow on the bike proved in a few moments, is that I cannot. I guess he gave me a useful lesson for my £10.

Or rather, I can preserve this innocence in some way, but, if I want to be sensible, it needs to be in a bubble that also contains some self-awareness and skepticism. No, you can’t trust a random guy on a bike with a wound on his arm to not be trying to fool you.

Will that result in me being less helpful when someone genuinely needs help? I hope not. My analytical mind is flawed, like anyone’s, but it’s probably going to be fairly good at deciding whether the situation I’m faced with is genuinely an emergency, whether I have time to ascertain some facts, etc. I think reasonably quickly, so I don’t think anyone will suffer greatly from me not disabling my analytical thinking when I meet an injured person. If anything, it might even save me or others. After all, the advice I was taught in First Aid training back many years ago was that the first thing you should do when you enter a space where there is someone injured or unconscious is stop, then think of whether there are any remaining sources of danger (e.g. an electrified floor, or a person who’s still in process of being electrocuted), before you rush to their aid.

So what am I trying to say here?

I guess I want to show compassion to myself for being conned in this simple way. It was the innocent young boy inside of me that got fooled there. That’s ok. I want to show compassion to the part of me that wants to protect that innocence. I also want to show compassion to the part of me that wishes I could retain that innocence. I also want to show compassion to the part of me that knows that the world is more complicated than that and that it is important to build boundaries where they make sense, and this is one of these places.

I share this in the hope that you can also feel compassion for yourself, and your various levels of reactions, the next time you, inevitably, get taken advantage of.

Startup gung-ho

This article was original published on swombat.com in November 2011.

Businesses, investors and consumers alike are gregarious. They want to go where everyone else is going. They want to buy success, from successful companies.

This leads to a perversion that affects the startup world as well as the rest of the business world: the need to appear more successful than you are, in order to get business, investment, customers.

This is not entirely artificial. Building a successful business is also about being able to project the right image to appeal to customer, and an appearance of success is part of that. Fake it till you make it, as they say. People don’t want to buy from or invest in a dying company, so you’ve got to look like you’re doing great, even if you’re an invoice away from technical bankruptcy.

But there’s a reverse side to that, which I believe is harmful to some startups: this projection of fake success extends to meetings with other startups and potential mentors at networking events, and because of that, founders who could really use a good dose of advice from a more experienced entrepreneur end up flying blind and making all the same mistakes again.

Startup networking events

When I turned up to my first startup networking event, I didn’t know what to expect, so naturally, I turned on the “we’re doing great” façade (which, I quickly observed, everyone else did too). Isn’t it amazing how, in a high-risk industry where most companies are expected to fizzle out in the next few months or years, everyone is doing great, growing fast, acquiring more users, etc? How often do you meet a new founder and hear “Yeah, well, I’ve been at this for 9 months and our revenues are still way too small, so I think I’ll be throwing in the towel and trying something else soon, because this isn’t working.”

Another aspect of this problem is that once you start putting up the appearance of success, it becomes very tempting to do so consistently, with everyone. Anyone could refer you to some business, after all, so you have to be on your toes all the time. Otherwise, you might miss out on some great opportunity that would have come your way if only people thought you were doing well. At least, that’s how it often feels.

To make matters worse, if you introduce yourself by presenting what’s wrong with your business, people will peg you as a negative type, and that’s not the kind of founder people think of as being headed for success. No, you have to be an outgoing, friendly, open extrovert with a strong dose of self-confidence and a very slight touch of arrogance.

I’m very lucky that I can genuinely say that at this point, the two businesses that I am involved in are doing very well. But this wasn’t always the case.

Missed opportunities

In the times when my companies were not successful, did I get any amazing opportunities by claiming to be successful to my startup peers? I don’t think so. Founders have a pretty finely tuned bullshit detector. I doubt anyone was all that fooled. What about investors? With them, faking success is even less useful. VCs will not invest without doing a fair amount of due diligence. Claims that you’re doing great when you’re going bust will never lead to investment, unless you’re a consummate con man.

What opportunities did I really miss, then?

How about opportunities for advice? Entrepreneurs are a helpful lot, but if you don’t present your problems clearly, your peers won’t be able to help you. Even non-entrepreneurs seem more likely to offer advice and connections if they think you’re struggling and they could make a difference. Perhaps the only set of people to whom you might want to project the “appearance of success” are clients, during a pitch. Even that is unclear, though. It really depends on your industry. In some industries, a fledgling startup is more likely to get a foot in the door than a mature, successful company, and expectations will be lower, and therefore easier to beat.

In summary

  1. Appearing more successful than you really are will destroy more opportunities than it will create.
  2. Instead, be honest with fellow entrepreneurs. Don’t be negative about it, but don’t claim to be doing great when you’re not.
  3. VCs will not invest based on an appearance of success, so bullshitting them won’t work either.
  4. Appearances of success may work with some types of customers in some industries, but think about it for a few minutes instead of simply defaulting to the startup gung-ho attitude.

Thoughts from 2018

This article was and still is bang on the money. And it has thankfully become less of an original thought due to a lot of focus, in the startup scene and elsewhere, on depression and how it impacts people in jobs with a high pressure to appear successful, like startup entrepreneurs. Tragically, that focus has generally come about due to people committing suicide.

In a more prosaic sense, the same is still true. People at startup events rarely talk about their problems, opting instead to project an image of success. And yet, there are all sorts of “fail-con” types of events that also try to portray the reality that many startups don’t succeed. It feels like we still have a fair bit of work to do as an industry to bring these two poles together.

Driving, and the art of running a business

Learning to drive and learning to run a business are surprisingly similar endeavours.

When you learn to drive, you don’t know what you need to pay attention to. There are, seemingly, a million things going on, and some of them might kill you if you fail to heed them. This can cause a sense of panic in the beginner. When you know how to drive, you rely your experience to know what to pay attention to and what you can simply ignore or deal with without thinking about it.

Learning to run a business is similar. There are a million things that you could do, and some of them will kill your business if you fail to heed them. This can cause a sense of panic in the beginner. When you know how to run a business, you rely on your experience to tell you what you need to pay attention to and what you can simply ignore, delegate or outsource.

When you learn to drive, there are a lot of new habits that you need to build into automatisms. Learning to use the clutch to change gears rapidly while accelerating onto the motorway, surrounded by speeding cars, seems very difficult at first. But the more you do those things, the more they become automatic and unconscious. When you know how to drive, you don’t even really think about changing gears, you just do it.

Learning to run a business is similar. There are a lot of new habits that you need to build into automatisms. Learning to detect that the person in front of you is a lead, pitch them in the correct way, follow up, and close the sale, seems very difficult at first. But the more you do it, the more it becomes automatic and unconscious. When you know how to run a business, you don’t really think about pitching and closing sales, you just do it.

To learn to drive, you have to actually sit in a car and drive yourself. No amount of reading or talking about it will enable you to drive. You could study driving for years, and even watch someone else driving for years (most of us watch our parents driving for our entire childhood), and still it won’t replace the actual experience of driving. While it is possible to build car simulator, even that is a poor substitute for actual driving.

Learning to run a business is similar. You have to actually run a real business yourself. No amount of reading or talking about it will enable you to run a business. You can do all the MBAs you want, and study entrepreneurs and entrepreneurship for years, and still it won’t replace the actual experience of running a business. While it is theoretically possible to build a simulation of a business, it’s a poor substitute for actually running a business.

The best approach for learning to drive is to get an experienced driving instructor who will sit in the car with you and figure out what you know and what you need to learn, construct a teaching plan personalised to you, teach you those things, demonstrate them when it helps, and help you practice them over and over again in a safe environment, watching out for things that might kill you. Because this approach works, it is used throughout the world.

The best approach for learning to run a business is similar. You get an experienced mentor or coach or close advisor who will be lightly involved in the business, who will figure out what you really need to know next and point you in that direction, who helps you work through tricky business issues, and who watches out for things that might kill your business and that you haven’t spotted. This is much less widely used in business than indriving, perhaps because good business coaches are much more rare than good driving instructors. But driving schools for business are getting more common every day.

There is a difference between learning to drive and learning to run a business. In business, there is no such thing as a safe environment. You’re on the motorway from day one. And most people drive their first business without an instructor by their side.

Thoughts from 2018:

Not much to add to this article! I still think this is a good and useful analogy for learning to run businesses, and the best ways I have observed to train entrepreneurs are indeed experiential and based on working on a real business.

People, Processes and Tools

This article was originally posted on swombat.com on October 24th, 2011.

Some years ago, one of my managers used to repeat this “Accenture truism” (or so he designated it): to fix or improve something, first you need the right people, then you need the right processes to help those people work together, then finally you need the right tools to support those processes. People, processes, and tools – in that order.

This is even more true for tech startups than for corporations. As geeks, whenever we face a problem, we often start by looking for a tool to fix it. “Our team isn’t communicating properly – let’s set up Campfire.” “But I don’t like Campfire, why don’t we use Yammer?” “Yammer and Campfire are so lame, let’s just use good old IRC.”

This is the wrong approach. Tools by themselves rarely resolve problems in your business. If your team isn’t communicating, you need to solve that problem step by step.

First you need to figure out if that’s because of a “people” problem. Maybe one member of your team just doesn’t want to talk to the others. If that’s the case, no tools or processes are going to fix that. For example, many sales organisations try to get their salespeople to communicate everything they know about every client – but salespeople don’t want to do that, because it makes them more easily replaceable. Setting up a CRM tool doesn’t solve that problem, until you fix the people, by giving them the right incentives to do what you want (or, if that’s impossible, either changing what you want or changing the people).

Then, you need to look at the “processes” part of the problem. For example, assuming your team wants to communicate with each other, maybe they can’t because they tend to sleep at random schedules in different parts of the world. That’s a process problem that can be fixed by, for example, declaring a certain time each day “team time”. For example, you can anoint the period between 2pm and 4pm in some timezone as “team time”, and require everyone to be available to chat at that time every weekday.

Finally, once you’ve got the right people and they have the right processes in place to support them, then you can start looking for tools to support those processes. Depending on what you actually want “team time” to look like, you might choose campfire, GTalk, IRC, or any number of other tools. But by now, you can select the tool based on whether or not it supports your processes, rather than whether or not it’s the sexy SaaS app of the month.

Thoughts from 2017

The principle still feels true to me. If anything, it feels even more true. The biggest addition would be a much deeper and nuanced understanding of what working on the “people” and “process” problems can mean, and how they feed into each other. At GrantTree we’ve even adopted and developed a whole interview aimed towards figuring out how well people will be able to adapt to our complex processes (open culture makes significant demands on people’s abilities), so we try not to find ourselves hiring people who are perfectly fine individuals but not well suited to our environment.

As the years have passed, tools, however, have become less and less interesting in and of themselves.

Steve Jobs Lives On

This was originally posted on swombat.com on October 6th 2011.

I’m sure there’ll be thousands (probably tens of thousands) of blog posts, comments, and other forms of expression and eulogies about Steve Jobs. The man had that much influence over us. Maybe some, maybe all of them will repeat what I’m going to say here, but that’s not why I’m writing this. Fundamentally, it’s because I feel compelled. I can’t not write it.

I was sitting in a meeting about UK legislation throughout the morning, and found out, at the end, that Steve had died. Even though it was obvious that he was going to die sometime, it was still incredibly sudden and shocking. It’s amazing how personally and emotionally touched I feel by this.

1.

First, it seems amazing, unbelievable, that Steve Jobs could be dead so suddenly. His death at a young, young 56 is a brutal reminder that death takes us all.

Even if you’re a multi-billionaire, someone who’s changed the world twice over, loved by many, influential beyond measure, leading one of the world’s most powerful human organisations, living what was presumably a model life from a health perspective, even if you’re someone who literally has all the world at his disposal, still the great scythe will sweep and it will not miss. Taxes may not be certain. Death is.

2.

A second thought is of the empty “reserved” chair, visible in the front row at the Apple keynote just two days ago, was reserved for a man who was probably lying on his death bed at the time. The empty chair reminds us that Steve worked until the very end, resigning only when, presumably, his declining health made it impossible for him to work.

Like Freddy Mercury said (and did, working until June, dying in November): The Show Must Go On.

Steve died as the curtain fell. I’m not ashamed to say that it actually makes me cry a little, here in this coffee shop. Oh well, I’ve always been a sentimental.

3.

A third thought is about what a tragic, personal loss this is to, well, everyone who loves technology. You may have loved Steve Jobs or hated him, but what you can’t deny is that he was a force for the progress of technology.

Steve Jobs revolutionised the world of consumer computing with the Mac. He upended the music industry (and a few others), transformed consumer electronics, forced the mobile phone industry to leap kicking and screaming into the 21st century, and finally pushed forward a device which will possibly represent the future of computing. The shape of things to come – cue Battlestar Galactica music in the background.

Seen from the perspective of where technology was a mere 10 years ago, the iPhone and iPad are, quite simply, science fiction. No matter your emotional stance on Steve Jobs, it is impossible to deny that, on a technological level, he made a big dent in the world.

What a tragic, personal loss this is to all who love technology, and even to those who don’t. Here was a truly exceptional man, who made the world better in the way he could, and he is no longer with us. We have lost him – all of us. We’ll have to make do without him.

4.

A final thought occurs, a thought about life and death that I’ve been mulling over for some time.

I don’t have much experience of death, but here is my perspective. While we live, we influence the world around us, through our will (which led some philosophers to declare that will was the fundamental unit of reality). When we die, that will is extinguished.

How quickly it seems that the world erases all trace of most people. Some live on for some time, through great art or great acts, but eventually, it erases all, without fail, without exception. The broom follows the scythe and sweeps everything away. The well of the past is indeed bottomless and filled with the forgotten memories of those who came before us.

And so with Steve Jobs. One day he will be utterly forgotten, not even an atom of a memory will remain, even if humanity lives on. But for now, what Steve Jobs achieved in Apple, over a brief decade since he came back to it, was to create, in a medium other than art, an extension of himself. Apple is modelled after Steve’s vision, and it is fair to say that it is an extension of what he learned, through his life, and, more importantly, of what he willed. Apple is Steve’s will, externalised.

And Apple lives on. And Apple is, technically, immortal (as in, not subject to mortality – obviously it can go bankrupt). One day it will err and die, but its potential lifespan is considerable, given where it is now.

Certainly, Apple will change, but so would Steve, had he lived.

This is a poor form of immortality. As Woody Allen said, “I don’t want to achieve immortality through my works, I want to achieve immortality through not dying”. But whereas art, to a large extent, is static, a company is an entity – legally and in reality – capable of making decisions, of changing the world, capable, in short, of will.

It may not be a perfect proxy for Steve’s will, but it’s what we have left after this great man has passed away. That, and the science fiction he made real for us.

Thoughts from 2017

Most of the thoughts in this article still feel true, but as my articles about my ill-fated adventures with the new Macbook Pro have perhaps made clear, I suspect that the answer to the question of whether Steve Jobs’ will lives on in Apple is, sadly, no. But I might be wrong, who knows. Jobs made a few mistakes in his time too, though generally they didn’t lack vision. Time will tell.

Still, I wanted to preserve this article on danieltenner.com.

My life in Accenture before startups

This was originally posted on swombat.com in June 2011.

I regularly get asked about my time in Accenture, and my transition into entrepreneurship, both by people who are trying to decide whether to apply to go there after university, and by people who are currently working there. Here’s an attempt to answer some of those questions in one place.

Background and overview

First, some background. I joined Accenture in 2003 as a Junior Software Engineer, on the basis of my mad Java skills (certified by Sun) and the undeniable fact that I didn’t have three heads.

I’d like to say the interview process was gruelling and that I succeeded where many failed, but to be honest, I think at the time they were hiring anyone that could write two lines of Java to grow the newly created Solutions Workforce (engineering people, basically), so I don’t remember the interview process being particularly hard at that stage.

On my first or second day, I sat in an induction presentation where they told us that the Solutions Workforce was designed so that “it’s ok to stay at the same level for 10 years if you want to, it doesn’t have the ‘up or out’ pressure of the Consulting Workforce”. From that horrifying moment onwards, I knew I had to get the hell out of the Solutions Workforce into Consulting.

Transition to Consulting

There was no process allowing people to do so, so it took me about a year to bypass the un-process (which included having to go through a whole new round of much harder interviews) and transform from a Software Engineer (I got promoted in the meantime) into an Analyst (which earned me some £10k a year more than other Software Engineers).

This was, largely, a very good move. I learned a lot in Consulting. I had always been a good programmer, but now I was able to take on all sorts of non-programming roles and round off my non-technical skills: client management, people management, planning, recruiting, processes, performance reviews, and all sorts of other “softer” tasks that I really wanted to learn how to do well. I’ve always liked being a generalist, and I’ve always liked pressure, and Consulting suited both those tendencies very well.

At the same time, something really bothered me about my work. It felt pointless. One project I did (whose output was basically a PPT and Word document outlining the successes and failures of a client project), which took two and a half months, had, as its only apparent purpose, the promotion of the person who had led the project. Accenture was paid (quite well) so that I would sit there and produce a piece of paper that justified this person’s promotion.

To me, that didn’t seem like a good use of the precious few years we have on this Earth. In fact, the feeling that I was wasting my time was really killing me inside (I’m not exaggerating).

The height of absurdity was reached, I believe, when I was asked to prepare the proposal for the preparation of a plan to produce a proof of concept for a module of a tool the client was implementing. Long before that, though, I had started to look for other things to do. Wherever I looked in the corporate world, though, I found more of the same (usually more of something even less good). As far as the corporate world went, Accenture was not so bad.

About two years into my four-year corporate journey, I started looking for other jobs, but found nothing I liked. Another year passed before I started considering the idea of starting my own business. From that point on I was looking for a partner to start it with (I knew I didn’t have the knowledge or skills to do it all by myself yet). Soon, my best friend approached me with a product idea. It was all I’d been waiting for, so we got started. Nine months of hard work and no sleep later, I handed in my resignation, and finally ended my stint in the corporate world.

Hindsight

Do I regret my time in Accenture? No. Not at all.

I think I should probably have planned my time there better, and exited sooner, but all in all, it wasn’t a bad experience. I learned a lot, both in terms of skills and self-knowledge. Accenture has some truly exceptional people working there, and they tend to be fairly accessible, so if you’re the kind of person who naturally strives to get advice, who reaches out to your network for assistance, you will get plenty of coaching from people at all levels.

Most of the managers I worked with, directly or indirectly, were excellent (some less so), and I learned a lot from them both. One of the most crucial things I learned in Accenture was how to hold back my habit of being blunt and direct with everyone. I learned to be smoother and far more effective. That’s a valuable thing to learn. I also gained a lot of confidence in my abilities to pick up and absorb new things and become productive quickly – something that I knew I could do with technologies, but which I saw I could now do with almost all subject areas.

So, in hindsight, would I do it again? I’m not sure. I was far from ready to join the startup world before I joined Accenture – but then, I was just as far from ready when I left Accenture, and in the end I’ve done alright, I think. You’re never ready to take that leap. You might think you’re ready, but you’re not, really. It’s impossible to say what my life would have been like if I’d joined a startup instead of Accenture, or if I’d simply tried to launch my own business.

I was already toying with some entrepreneurial ideas with a friend in Geneva before leaving for Accenture. Perhaps life could have gone differently.

Conclusion

My advice to people who are hesitating between startups and a company like Accenture is: don’t worry too much about it.

Big, prestigious corporations have their share of benefits. Accenture is probably not a bad choice amongst the selection of corporate masters. If you’ve got the bug for entrepreneurship, chances are a few years in a large corporation won’t distract you from it (and they might even strengthen your resolve). If you feel like you can start a business right away, you can try that too.

But don’t stress about it. You’re not making the most important decision in your life. There’ll be many chances to adjust the shot if you decide corporate life is not for you. Many entrepreneurs get started later in life, after having held steady jobs for decades.

If it’s in your blood, it’s in your blood.

Thoughts from 2017

Not much to add to this article. It’s still a sensible look back at those years in Accenture, that seem rather more distant now (this year, I reached the “10 years since I quit my last regular job at Accenture” milestone).

Who am I, right now?

Over the last 6 months, finishing recently, I have been going through a leadership development course called the SAS, by CirclingEurope. It is built on the practice of Circling, which I won’t try to define fully here. For me, one of the essences of it is accepting and therefore being able to embrace the present moment and what it brings me.

About halfway through the course I wrote the following on the Facebook group page for my SAS cohort:

“Who am I, right now?”

Asked with curiosity, with acceptance of whatever the answer may be, with openness to discovering something new, with love for the asking and the answering…

This is the most powerful question I can ask myself in my life now. Every breath can bring a different answer, if only I can let go of the answer that came a decade, a year, a month, a week, a day, an hour, a minute or even just a breath earlier.

Another powerful pair of questions and answers that resolve to the same idea, for me, from de Mello:

> What is love? The total absence of fear. What is it we fear? Love.

Surrender into this absence of fear (which, paradoxically, may be full of fear), moment to moment, breath by breath. Immerse your soul in love (Radiohead). Gentle impulsion, shakes me, makes me lighter, fearless on my breath, teardrop on the fire (Massive Attack). Emotional landscapes, they puzzle me, confuse, the riddle gets solved, and you push me up to this state of emergency, how beautiful to be (Björk).

Language fails to quite express, but this one question captures it all.

Who am I, right now?

Who am I, right now?

Who am I, right now?

Who am I, right now?

Who am I, right now?

Meditation and other mindfulness practices like Circling can seem, to some people, divorced from the practical realities of being a person who lives in the real world, who works, who achieves things. Yesterday and today I had a brilliant example of this question, this openness, applied practically, and with impact.

I was at Pirate Summit (which just finished), and scheduled to give a talk about Holacracy. While rehearsing it yesterday, I felt uncomfortable, a clear feeling in my solar plexus that something was not right. It wasn’t obvious why I was uncomfortable. It came across first as a desire to do something else – anything else – other than rehearse the talk I was giving the next day. I had spent the whole day at the conference feeling a bit disconnected from things, not really engaging or getting into any great conversations, and now this. My first instinct was to simply flee the battle. I just didn’t want to be there, or to go to the next day. It seemed pointless. A step backwards! I don’t need to be here! There are other, better things I could be doing! Rationalisations and escape routes came easily, as they usually do.

There was such a strong desire to not give this talk! I could have just overridden it through force of will, and made myself rehearse and give the talk anyway. Or, I could have given into it and (quite unethically), found a reason to not be there the following day. But if the SAS course and now almost a year of Circling has taught me anything, it is to stay with apparently “negative” feelings and be open to letting them teach me something. For example: who am I, right now, as I feel this pain in my solar plexus? Is this discomfort telling me, perhaps, that there’s a deeper, greater version of myself that I could be, if only I could let it happen? Is there something I’m afraid of, that would be a truer expression of me?

This question, who am I, right now, symbolises an openness to finding out something new about myself, to being different, to letting go of who I thought I was and therefore more fully stepping into whatever I actually am at this present moment. It requires a trust that whatever I will discover in this process will be good for me. Experience has taught me that it always is, but still it is hard to let go of the ego’s fears. In fact, worse than that: the ego’s fears are usually the very thing that points the way to deeper truth.1

Thankfully, I had my wife with me, and she helped to circle me, and in the process, we discovered that yes, I felt wrong about the talk I was about to give, because it felt empty to me, free of passion or presence. I was just going through the motions. There was no challenge, no risk, no vulnerability in giving this talk. It was just a superficial act without any growth in it for me, at least in the way I had structured it.

So then the way forward became obvious: what talk would I have to give for it to truly challenge me, for it to be a developmental edge? I was definitely afraid of having to redo my talk from scratch at 9pm the night before (the talk was at 11:40am), but what was the talk that I was afraid of giving? After a bit of thinking, it was clear that the new version of the talk should start with vulnerability about this process, a willingness to admit my weakness and failure, not as a founder, but as a speaker and as a participant in the conference. This was what I had avoided saying to anyone all day, as I hung around in the conference, on my iPad, not talking to any of the wonderful people there: that I was bored, that I didn’t feel like I wanted to be there, that I felt disconnected from the tech scene, tired of it. Step into that truth, and let the rest of the talk flow from this place of vulnerability 2, combined with my honest desire to bring something of value to every audience I speak to, and with my actually useful knowledge of Holacracy.

And so instead of a flat, dispassionate talk that would have best been forgotten, I gave the talk below. And in the process of finding, preparing, and delivering that talk, I took the opportunity to grow as a person, to explore a new way to be fully present when giving presentations. All of which would have been missed if I hadn’t stayed with that discomfort and explored it. Instead, I imagine I would have left Pirate Summit with a vague feeling of disgust and unease, none-the-wiser as to what I might have done differently, perhaps deciding that the cause of my unease was the conference itself, rather than my present state of mind. Denying this state of emergency (or emergence), my life would have been less rich, and my audience would probably have gotten less out of my talk.

This is Circling applied.


  1. “Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, ‘Who am I to be brilliant, gorgeous, talented, fabulous?’ Actually, who are you not to be? You are a child of God. Your playing small does not serve the world. There is nothing enlightened about shrinking so that other people won’t feel insecure around you. We are all meant to shine, as children do. We were born to make manifest the glory of God that is within us. It’s not just in some of us; it’s in everyone. And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” – Marianne Williamson

  2. Admitting to an audience that you can’t bring yourself to care about what they care about feels pretty damn exposed!

« Older posts

© 2018 danieltenner.com

Theme by Anders NorenUp ↑