Some Thoughts On Enterprise Software: Increasing Consumerization, A SaaS Bubble & Cross-Company Network Effects

Here are some thoughts related to enterprise software that have been rolling around in my head for the last few weeks.

’Consumerization’ Of Enterprise Is Accelerating

Aaron Levie (founder of Box) tweeted this the other day following the Zoom IPO:

The tectonic shift causing a new era of enterprise software is that product development, distribution, adoption, customer service, and design look vastly more like a consumer company than a traditional enterprise company.

— Aaron Levie (@levie) June 23, 2019

I’m not sure we’re fully there yet, but the tectonic shift Aaron refers to is absolutely happening faster than I had thought.

Back in 2011, Chris Dixon wrote a blog post discussing why consumer tech is so much better than enterprise tech. I posted this comment:

“In a [B2B] transaction, one good salesperson (the “seller”) only has to sell one person (the “buyer”) on the value of the technology. Once the product is sold, the buyer forces their 50,000 employees to use that technology whether they like it or not. A good salesperson with a good deck can do this fairly reliably.

And a good account manager can typically retain the client for a while; employees usually get used to the product and rarely complain enough for the buyer to cancel the contract and force the seller to improve the product. As a result, an enterprise product can suck and still flourish.

With a B2C product, this is much, much more difficult. The seller has to sell 50,000 individual “users”, one by one, on the value of the product without the luxury of a face to face meeting or 18 holes on the golf course. The B2C model forces the seller’s product to “sell itself”. As a result, a consumer product can’t suck if it wants to flourish. It has be good. Much better than the enterprise product needs to be.”

In light of the Slack and Box IPOs, things are looking a lot different than they did back in 2011. There are a few trends causing enterprise software to look more like consumer software.

1/ Bottoms-up enterprise distribution is expanding. This is where an employee within an organization signs up for a service and tells a few colleagues. Soon, when enough employees are using the product, a sales call is triggered and the salesperson tries to sell the product into the organization top-down. Unlike the old days, this strategy only works if the product is really solid.

2/ Micro use cases are increasing the number of buyers inside an organization. The purchase of a CRM or ERP system will likely always be a complicated, top-down decision. But because of the emergence of SaaS products with narrow use cases that require relatively small budgets, the purchase of a SaaS product that, say, improves the efficiency of making sales commission payments to salespeople, will lie with a middle manager in the sales operations or finance function. When buying responsibilities are spread more widely and the decision maker is closer to the user (or is the user), the quality of the product has to improve.

3/ Buyers are getting smarter and products are getting more transparent. The internet has enabled thousands of micro trade groups and private communities to form, allowing professionals to share insights and best practices and advocate for one another. I recently joined a collective of revenue leaders from all over the world. We have a Slack account that we use to share information, ask one another questions, etc. There’s a #techstack channel where we discuss different SaaS products focused on sales and marketing organizations and our experiences with them — Outreach, Gong, Troops, Docusign, etc. I’ll never buy another sales-oriented SaaS product without consulting this Slack channel. At some point, nearly every buyer within a company will be a member of one of these groups (if they aren’t already). This only accelerates the transparency of information for buyers and makes product quality and delivery equally important — and in many cases, more important — than distribution.

There are still a lot of old school industries where top-down purchasing is a requirement because of outdated buying practices, the need for legacy system integration, security concerns, etc. But in the coming months and years enterprise software will continue to look a lot more like consumer software.

A SaaS Bubble?

I’ve heard many people refer to the explosion of SaaS as “the unbundling of Microsoft Excel”. That is, Excel used to do everything for us but now a bunch of companies have peeled off use cases and have built SaaS products around those use cases. This is really true in many ways. Fifteen years ago the companies I worked with did just fine without many of the SaaS applications we have today. We just did all of it in Excel. Sales pipelines, expense reports, commission payments, time tracking for consultants, project management, OKR management, etc. Now all of these things are managed by products like Salesforce, Expensify, Exactly, Harvest, SmartSheet and 7Geese. Companies today use so many SaaS products that Parker Conrad, the founder of Zenefits, raised $60MM to start Rippling, a new SaaS company that helps organizations set up and manage access to all of these applications. Largely due to bottoms-up distribution, the number of applications being used inside today’s companies has gotten way ahead of many system administrators.

Related to all of this, we’re due for an economic slowdown. Recessions seem to come around every ten years; we had the oil price shock recession that started in 1990, the tech bubble recession that started in 2000 and the mortgage crisis recession of 2008. We’re just about due for another one as we head towards 2020. When economic growth slows, it’ll be interesting to see the impact on many of these SaaS products. Many of them seem like ‘nice to haves’ rather than ‘must haves’. If that’s true, you have to wonder how many CFOs will cut back on some of these products and force their teams to go back to using tools like Excel. ‘Bubble’ is a strong word. And those that are bullish on SaaS will tell you that the market share of enterprise software that sits on the cloud is still a small fraction of total enterprise software spend. But it does seem logical that the boom is SaaS is supported by the bull market we’ve been in.

Enterprise Network Effects

Perhaps the most exciting thing happening in SaaS these days is network effects across companies. Network effects happen when you have a product that gets more valuable to each user as more users use it. Facebook is a classic example — the more friends you have on Facebook the better your experience is on Facebook. But now we’re seeing cross-company network effects all over the place. Box.com allows companies to share files with their customers. Companies can invite their customers to Slack channels. My company, PatientPing, is a classic example of how this happening in healthcare. It will be interesting to see how far this goes. Competitive and privacy concerns cause companies to be hesitant to share and open up their data troves to competitors and even vendors in many cases. If a company like Salesforce could find a way to get their customers to open up their data it would change the world of enterprise software. The use cases would be infinite. A fun trend to watch in the coming years.

It used to be that employees would sit around the water cooler chatting about systems and processes that don’t work as well as they could or complaining that they’re spending too much time doing low-value work that could be automated with software. This is still true. But now that it’s so easy and inexpensive to launch a software company, many of those same employees are realizing that other companies have the same set of problems and they’re building companies around solutions to those problems. As we’ve seen with Slack, Zoom, and others, some of these solutions can be multi-billion dollar companies.

Enterprise software used to be considered the boring part of tech. It doesn’t seem so boring anymore.

How Silicon Valley Became Silicon Valley (And Why Boston Came In Second)

When I was a kid growing up in central Massachusetts, I remember that a bunch of my friends' parents worked for super high growth tech companies like Digital Equipment Corporation (DEC), Data General, and Prime. While some people reading this may not have heard these names, these companies were behemoths. In the late eighties DEC alone was one of the largest companies in the world and employed more than 120,000 people. These companies were booming at the time in an area known as the “Route 128 Corridor”. Route 128 is a highway that runs south to north about 10 miles to the west of Boston. The area was a hub for technology companies — mostly focused on semiconductors, microprocessors, and minicomputers. It seemed like almost all my friends' parents worked at one of these companies or a company that provided support to these companies.

I also remember the bust that came in the early nineties when many of these companies downsized and thousands of people lost their jobs. It was a rough time for many people in the area.

What I didn't know at the time was that there were a set of competitors based in Santa Clara County, California, in the area now known as Silicon Valley, viciously competing with the Route 128 companies. Companies like Hewlett Packard, Intel, and Apple.

Most people now know that the Silicon Valley companies came out on top and that the tech scene in the area outpaced eastern Massachusetts significantly. Massachusetts remains one of the top 3 tech hubs in the U.S., dominates biotechnology, and is well on its way to becoming the country’s Digital tech hub. But outside of healthcare, the Silicon Valley area is far ahead and sees about 3x the number of startups and venture funding than the entire state of Massachusetts.

That said, back in the mid-1980s, you would've had no idea which region was going to come out on top. It could’ve gone either way.

AnnaLee Saxenian wrote a phenomenal book about all of this titled, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 that examines the differences between the two regions.

Having lived in and worked in both areas, here are some of the key differences between the regions that I think allowed Silicon Valley to outperform. Certainly some of the takeaways are isolated to these regions at that point in time. But as lots of cities across the country try to increase the number of tech startups launched in their communities, many of the lessons from the battle between Silicon Valley and Route 128 can be applied by policymakers and tech leaders today.

Cultural differences

Massachusetts had a much more traditional, risk-averse approach compared to the Valley. A big reason for this comes from the parochial and puritanical cultural history of Massachusetts. But, more practically, it also comes from the fact that most people that worked in Silicon Valley weren’t from California. They were from the east coast or the midwest. You can’t underestimate the impact this has on a region. People aren’t spending time with their high school friends or church friends or summer camp friends. They’re spending time with the people they work with. And what do they talk and think about during that social time? Work. They’re bound together by their work. And they're much less worried about trying something new and failing at it because their friends and family back home may not even know about it. An executive that worked on both coasts described it this way in the book:

“On the East Coast, everybody’s family goes back generations. Roots and stability are far more important out here. If you fail in Silicon Valley, your family won’t know and your neighbors won’t care. Out here, everybody would be worried. It’s hard to face your grandparents after you’ve failed.” —William Foster, Stratus Computer

This meant that people in the Valley were much more willing to take risks, start companies and jump from job to job. As they jumped from job to job and made friends with people at work, they created networks centered around their work across several companies in the region. It was common for an engineer to quit their job on a Thursday and show up at another startup on Monday. These new experiences led to more friendships and led to a ton of collaboration between companies and an openness to sharing with one another for the greater good. It was common for Silicon Valley competitors to call one another for help with technical problems. This kind of collaboration created a rising tide for everyone in the area. The power of this kind of environment is enormous.

By contrast, in Massachusetts, most of the people working in tech were from New England. From the book:

”The social world of most New England engineers, by contrast, centered on the extended family, the church, local schools, tennis clubs, and other civic and neighborhood institutions. Their experiences did little to cultivate the strong regional or industry-based loyalties that unified the members of Silicon Valley’s technical community. Most were from New England, many had attended local educational institutions, and their identities were already defined by familial and ethnic ties.”

There was a separation between work and social life for Route 128 workers. For workers in the Valley, it was much more of a grey area. Workers in Route 128 tech often went right home after work and immersed themselves in their local towns, where they had ties that went back generations. Workers in the Valley didn’t have these ties. Instead of driving several miles back to their town, they were more likely to go out to dinner or to a bar in the area to talk about technologies and markets.

Job hopping

As mentioned above, workers in the Valley would jump from job to job growing their network and gaining new experiences. Route 128 had a much different culture where loyalty was highly valued and if you left you could never come back. Workers often stayed at their jobs for 10+ years. This was unheard of in the Valley. Workers felt that they were working for the Valley — the community — rather than for an individual firm. If they decided they wanted to come back they were often welcomed with open arms. As I've written in the past, this impact is felt today as California has banned the use of employee non-compete agreements while Massachusetts has allowed them to persist.

Collaboration with universities

Stanford actively promoted startups by offering professors up to help with product development and created several funding mechanisms for new ideas. MIT took a far more conservative approach and was very reluctant to invest dollars or time into things that were too risky. This created artificial walls between the best tech companies and the best technical research. Many of the east coast companies claimed they had better working relationships with Stanford and Berkeley than they did with MIT and Harvard.

Dependence on government contracts

Because of its proximity to Washington, Route 128 companies had lots of reliance on government contracts that had long term obligations that restricted innovation. It also (appropriately) led to a secretive culture that stalled collaboration with associations, competitors, partners, and other organizations in the local ecosystem. By contrast, by the early seventies, Silicon Valley companies were receiving far more financing from venture capital investors than they were from government contracts. The east coast's dependence on government contracts made widespread collaboration nearly impossible.

Geography

Silicon Valley companies started around Stanford and expanded to cities like Mountain View and Santa Clara but couldn’t go too far as they were locked in by the Santa Cruz mountains to the west and the San Francisco Bay to the east. This led to a very dense community of tech companies. By contrast, the Route 128 companies were spread far and wide. DEC, the largest of the companies in the eighties, was based in Maynard, with more than 20 miles of forest separating them from the hub of Route 128.

Organizational structure

Related to the dependency on defense contracts and its proximity to established political and financial institutions, Massachusetts companies were more formal and created organizational structures that had a strong resemblance to the military. This kind of organizational design can slow innovation as the lower rungs of the ladder are less reluctant to offer new ideas and there's far less cross-functional learning. Executives had their own parking spaces and executive dining rooms. Stock options were only offered to those at the highest levels of the organization. This even applied to work attire — the uniform for 128 companies was a jacket and a tie, in the Valley it was jeans and a t-shirt.

Today, something like 75% of all venture capital funding goes to three states -- Massachusetts, California and New York. As governments and entrepreneurs across the country try to expand the number of tech companies that emerge and grow in their communities, it’s important to remember that ecosystems create a lot more jobs than companies. The key is less about funding and micro-incentives and more about creating the complicated environment that allows an entire ecosystem to thrive.

The Sales Evangelist Podcast

Several weeks ago I had the chance to appear on Donald Kelly’s Sales Evangelist Podcast. The topic of the podcast was How To Deal With The Pressure Of Hitting Your Quarterly Number.

We discussed how to project sales results, how to be analytical about what’s working and what’s not, empathy, transparency and a bunch of other things related to working in a high pressure environment.

Check it out below on Stitcher or on iTunes.

I’ve done a bunch of these now so I’ve added a Podcasts category to the archive.

The Second Most Important B2B Sales Metric

As a sales leader, your most important metric is top-line revenue.

But a very, very close second is the percent of sales team members that are attaining quota. Ideally, this number should be around 60% to 70%

If you’re hitting your top-line number but only 10% or 20% of reps are hitting quota, you have a couple heroes but you don’t yet have scale. That’s a problem. You’re placing all your cards on a small number of individuals that could stumble. And you’re also wasting a lot of time and money on reps that aren’t carrying their weight.

Some reasons why you might have this problem:

• Product/market fit isn’t yet validated (broadly, or in specific markets or product segments).

• Inequitable territory allocation. 

• Quotas too high.

• Lack of training. 

• Inadequate management or coaching.

• Ramp-up times are too aggressive.

• Lack of quality sales talent.

• Low employee engagement. 

One caution: be careful about the time period that you’re using to measure this metric. For SMB sales teams, it’s fine to look at quota attainment over a month or a quarter. For enterprise sales teams you probably want to look at this on a rolling 12-month cycle. 

Finally, view this metric as a journey that never ends. When a company starts, generally the founder is the only one that can sell the product, then a couple more can do it, then a few more and so on. As you grow, you’ll need to continuously evaluate and solve for the problems listed above. When you solve for these things and get quota attainment up to 60% to 70% it’s time to increase your quotas and do it all over again. 

The hardest part of building a growth machine is that it’s never finished.

The 10 Best Books I Read In 2018

I’ve started writing year-end book lists rather than summer reading lists. See past lists here.

I recently heard someone say that they only read books that are more than ten years old. His thinking is that if the book is still getting good reviews after all that time then it must be really good. I think I like that idea. A lot of newer books that get good reviews don’t end up standing the test of time. This past year I read a lot of new books. I’m going to change that in 2019.

Here are the best books I read in 2018, in order:

1. Atomic Habits by James Clear. I’m such a believer in the power of habits. Motivating yourself every day is just too damn hard. This book offers a very actionable guide for creating them. A fast read with great advice that you can put into action right away.

2. Empires of Light: Edison, Tesla, Westinghouse, and the Race to Electrify the World by Jill Jonnes. Business history is my favorite book genre. This one gives the reader all the detail on these three amazing entrepreneurs and the competitive dynamics they faced in trying to commercialize electricity and light. Not much has fundamentally changed in entrepreneurship since the 1800s. Success in new ventures requires the ability for the founder to see the crazy big opportunity that most can’t see. Most people thought electric lights would only be used to replace gas street lamps. These three saw so much more than that.

3. Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou. The story of the rise and fall of Theranos. Even if you don’t care about tech or healthcare or startups this one is just a great read. It reads like a great fiction novel. Carreyrou was the Wall Street Journal reporter that exposed what was really happening within the company and this book lays out all the troubling detail.

4. Tribe of Mentors: Short Life Advice from the Best in the World by Tim Ferris. This is one of the best books I’ve ever read. The only reason it isn’t first on the list is because it isn’t really a book; it’s a series of short interviews with dozens of world-class performers (writers, entrepreneurs, athletes, etc.). It talks about their habits, morning routines, secrets to success and other philosophies on life. I made more highlights in this book than any book I’ve ever read. After reading nearly 600 pages of interviews with high performing individuals, if I had to summarize their secrets to success I’d say it’s two things: they read a lot and they meditate daily.

5. The High Growth Handbook by Elad Gil. Gil has been through it all at several high growth startups (Airbnb, Twitter, Google, and others). This book is basically a technical handbook on growing a startup. It offers extremely practical and actionable advice and gets really, really specific. I’d call this a must read for any first-time founder.

6. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor by David S. Landes. The title says it all. A fascinating and detailed look at the way societies have evolved and why some have done so well while others have struggled (hint: it’s mostly about climate). Despite the heavy topic, Landes keeps this one pretty readable.

7. Tribe: On Homecoming and Belonging by Sebastian Junger. I think I’ve read everything Junger has written since the Perfect Storm (one of my absolute favorites). He’s such a great writer. Tribe is a quick read and covers the topic of PTSD for veterans returning from war and the irony that so many troops are happier at war than they are when they return home. The reason is that war-time creates such strong bonds between platoons regardless of race or ideology or other individual traits. It creates enormously strong ties and loyalty and there’s a strong human desire to belong to a tribe. All that seems to fall apart when troops return home. A troubling but really interesting topic.

8. Shackleton's Way: Leadership Lessons from the Great Antarctic Explorer by Margot Morrell. This is a classic leadership book that I can’t believe I hadn’t heard of it until someone recommended it to me a few months ago. The book chronicles Sir Ernest Shackleton’s leadership of his crew through a failed 1914 Antarctic expedition. Shackleton’s boat got stuck in ice and sank in the middle of the Antarctic and he and his crew survived for two years before being rescued. The story itself is amazing but Morrell lays out really interesting and classic leadership lessons from Shackleton along the way.

9. This Is Marketing: You Can’t Be Seen Until You Learn To See by Seth Godin. I’m pretty sure I’ve read all of Seth books and I rarely miss his daily blog posts. Seth’s books are always a little idealistic and aspirational and this one is no different. This one is sort of a summary of most of Seth thoughts on marketing. If you haven’t read anything by Seth this one would be a good place to start, though I think Permission Marketing should be required reading for business school students and is one of the best business books ever written. So read that one too.

10. Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion Dollar Company and Revolutionized an Industry by Marc Benioff. The story of how Benioff flipped the enterprise software business on its head. This is a great read for anyone that works in enterprise software. Someone recently made the point that every 1% of Salesforce.com’s market cap represents a unicorn. I think this company is going to be really interesting to watch over the next several years. There are literally hundreds of startups trying to unbundle this massive CRM. Benioff is an outstanding salesman and a great leader and for anyone that works in enterprise software this one is definitely worth reading.

My User Guide

Several months ago, my company’s CEO, Jay Desai, was featured in the First Round Review in a piece titled The Indispensable Document for the Modern Manager. The feature was about Jay’s “user guide” that he had written for his team that outlines the way he works and how his team can work with him most effectively.

From the piece

“He’s seen too many immensely talented and productive teams stall because of a subtle misunderstanding on how to best work with each other. After consecutive year-long searches for his Head of Product and Head of Operations, he didn’t want to squander that investment because he couldn’t figure out how to work with them.

So what did Desai do? He penned a user guide — similar to the kind that’d accompany a rice cooker or bassinet — but this one deconstructed how he operated optimally, when he might malfunction, and how others could use him to their greatest success.”

This guide has been a great help to Jay’s direct reports and many others across our company.

As the piece mentions, Jay inspired me to write my own user guide.

I’ve found it to be invaluable — especially for my newer hires. Rather than taking several months to figure me out they can cut right to the chase and get lots of context on how to quickly start working together most productively.

I highly recommend writing a user guide and sending it to your team and asking them to do the same.

See my user guide below. I’ve embedded it as a Google Doc so any changes I make to it will flow through to this post.

Dealing With The Pressure Of Hitting Your Number

Like many jobs, sales leadership can be quite stressful. Success in many ways is binary. You set a goal at the beginning of a period and you either hit it or you miss it. Lots of jobs don't have that level of clarity around success or failure. In sales you can’t hide. There’s no grey area.

This kind of pressure isn't easy to deal with. Here are some of the things I've picked up over the years to make the stress a bit more manageable.

1/ First and foremost, set goals that are attainable and that you believe in. Don’t let finance or your CEO or your board dictate the number for you. You have to believe you can hit the number.

2/ Have your own financial model and forecast. Your finance team and others will have their own models. Have your own as well. Ideally, the elements of the model will consider the following assumptions: 1.) quotas by role 2.) headcount and hiring plan 3.) ramp-up time for new reps 4.) quota attainment % and 5.) rep turnover rate. If you have 10 ramped-up reps with a reasonable quota of $250k and, on average, the team hits 80% of quota then you should be comfortable with a $2MM quota. The math isn’t hard. The hard part is getting comfortable with each of the above assumptions. And that takes time. I'd encourage you to create some slack around your assumptions while you're still figuring out how accurate they are.

3/ In the early days, you won’t have any of those assumptions. You’ll have to calculate your target from a bottoms-up perspective; e.g. what you can accomplish based on current pipeline and your current understanding of deals are likely to close. This means you’ll have to set shorter term targets (monthly or quarterly instead of annual).

4/ Approach your job as a police investigator would approach an investigation. Always look for clues as to what’s working and what’s not working. Create your own dashboard in your CRM that shows you what's happening in real-time. The dashboard should include things like revenue, opportunities created, pipeline dollars created, speed to close, etc. All of these reports can be broken down by sales stage, rep, market and customer segment. Watch these numbers on a daily basis and have a borderline obsession with what's happening. Find the bottlenecks. Write up and document wins and learnings every week and have your team do the same. Those tools will give you the clues you need to track down what things you should do more of and what things you need to change. I’ve written a bit about pipeline management here, here and here.

5/ Create a weekly meeting where you review the learnings and findings above and invite your sales leadership. The topic of the meeting is one thing: are we going to hit our number? Don’t leave that meeting until you have consensus on that answer. And if the answer is “no” then get consensus on what’s going to be done that week to get back on track.

6/ Be as transparent as possible with leadership and your board. Think of this as a see-saw. When you’re on track to hit your number, the see-saw goes to the left (numbers up, need for transparency down). When you're not on track, the see-saw goes to the right (numbers down, need for transparency up). When things aren't working people want to know why. Don't wait for them to ask.

7/ Build a process around how you update various stakeholders (weekly meetings, email status updates, pipeline reports, deal reviews, etc.). Again, be proactive on this. Nobody should have to ask for these updates. Make sure people are getting what they need.

8/ Learn from others that have the same challenges. Some sales books and blogs are great but I've found sales and sales leadership podcasts to be the most effective way to get smarter about this topic. Listening to an actual person that does what you do is a great way to gain insights and generate ideas for what you and your team can improve. Check out a couple here and here.

9/ Finally, and most importantly, take care of yourself. Create healthy habits and get more aggressive about following those habits when the pressure increases. Get enough sleep. Eat well. Drink lots of water. Exercise. I also encourage meditation. I'm not as consistent with meditation as I could be but there's no doubt mindfulness gives you important perspective on the pressure you’re under. I use the Calm app and love it. Again, I've found that doing all of these things is more important when the pressure increases. When you're feeling good no problem is insurmountable.

Going All In On Content

Several weeks ago I spoke to a partner at Andreessen Horowitz (also known as a16z), the prominent, Silicon Valley venture capital firm.

He explained to me that his firm takes more of a "marketing" as opposed to a "sales" approach in attracting entrepreneurs to their funds. For people that know the firm, this may seem obvious.

When I started working in tech, the best venture capital firms did not take this approach. Their investments were driven by rooms full of young associates cold calling entrepreneurs to find the best companies. a16z has taken a different approach and has focused on getting entrepreneurs to come to them.

The way that they’ve accomplished this is through the production of great content — blogs, social media, podcasts, videos, etc.

The quality of their content is phenomenal. The a16z podcast has been a favorite of mine for years. One of their founders, Ben Horowitz, has written a best selling book, The Hard Thing About Hard Things, that has become an indispensable guide for people starting a company. They’ve also recruited partners that were great at producing content long before they joined the firm. Chris Dixon, now a partner at the firm, was a major inspiration for me to start writing this blog. He no longer blogs independently but you can find his archives here. I also followed Benedict Evans closely long before he joined the firm back when he was a mobile analyst in Europe and writing great stuff about tech. Now he's a partner at a16z. He’s arguably become the new Mary Meeker of tech with his annual State Of Innovation Talk.

a16z made a brilliant move by recruiting these two guys. I'm sure they're great investors in their own right, but I know for a fact that they're incredible content producers.

Case in point: when my company started talking to a16z about taking an investment from them I was very excited; not because I knew the firm well, but because I had an extremely high opinion of them that was driven by their content before ever actually meeting or speaking with anyone from the firm. That is the definition of great content marketing. High quality content that doesn’t ask the consumer for anything, but passively improves the perception of the company or product.

I just started reading Seth Godin’s new book, This is Marketing, and in it he reminds us of the right way to do marketing:

“The other kind of marketing, the effective kind, is about understanding our customers’ worldview and desires so we can connect with them. It’s focused on being missed when you’re gone, on bringing more than people expect to those who trust us. It seeks volunteers, not victims.”

Seth has been saying this in one way or another for almost 20 years (at least since writing the Purple Cow) and it’s a great way to think about content production. If a16z’s content went away, a lot of people would miss it. That’s a great standard.

Most marketers are producing some form of content these days. But very few are going all in. At last check, a16z sees about 2,000 qualified inbound pitches per year, only to make 20-40 investments. So going all in is clearly working for them.

Marketers don’t necessarily need to hire the top thought leaders in their space to create content. But it’s worth thinking about what going all in would mean for your brand and asking yourself if anyone would miss you if you were gone.

The B2B Growth Podcast

A few weeks ago I had the opportunity to be interviewed on the B2B Growth Podcast with Logan Lyles. I really enjoyed the discussion. We touched on a few things I’ve been thinking a lot about lately; including how to structure a marketing team with sales objectives in mind, the different profiles of marketing leaders and some thoughts on hiring great leaders.

The Apps > Infrastructure > Apps > Infrastructure Cycle In Health Tech

Union Square Ventures had a great blog post the other day on The Myth of the infrastructure Phase. 

They argue that the narrative in tech that says there’s an orderly infrastructure phase followed by an application phase is a bit of a myth. Instead of orderly and distinct phases, they argue, it looks more like an ebb and flow. Apps, in many cases, drive infrastructure then that infrastructure enables new apps, and vice-versa. From the post:

“Planes (the app) were invented before there were airports (the infrastructure). You don’t need airports to have planes. But to have the broad consumer adoption of planes, you do need airports, so the breakout app that is an airplane came first in 1903, and inspired a phase where people built airlines in 1919, airports in 1928 and air traffic control in 1930 only after there were planes.

The same pattern follows with the internet. We start with the first apps: messaging (1970) and email (1972), which then inspire infrastructure that makes it easier to have broad consumer adoption of messaging and email: Ethernet (1973), TCP/IP (1973), and Internet Service Providers (1974). Then there is the next wave of apps, which are web portals (Prodigy in 1990, AOL in 1991), and web portals inspire us to build infrastructure (search engines and web browsers in the early 1990’s). Then there is the next wave of apps, which are early sites like Amazon.com in 1994, which leads to a phase where we build infrastructure like programming languages (PHP in 1994, Javascript and Java in 1995) that make it easier to build websites. Then there is the next wave of more complicated apps like Napster (1999), Pandora (2000), Gmail (2004) and Facebook (2004) which leads to infrastructure that makes it easier to build more complex apps (NGINX and Ruby on Rails in 2004, AWS in 2006). And the cycle continues.”

We’ve seen this trend in healthcare technology as well.

The first electronic medical record dates back to the 1960s when Dr. Larry Weed created the problem-oriented medical record that allowed his fellow providers to see notes, medical history, etc. in an electronic format (application). The first EMR as we know it that included additional functionality such as billing and scheduling was launched in 1972 by the Regestrief Institute, though adoption was extremely slow. In the 1980s, the need to transfer clinical information between providers led to the creation of Health Level 7 (HL7), a set of international standards for transfer of clinical data between different applications (infrastructure). By the late 1980s, low-cost personal computers (more infrastructure) allowed providers to do what Dr. Weed was doing at scale. The emergence of the internet in the 1990s (more infrastructure) allowed providers to use electronic medical records remotely, increasing adoption and leading to more use cases (more applications).

Today, thanks to meaningful use incentives enacted under President Obama, the vast majority of healthcare providers use electronic medical records and Dr. Weed’s initial application has become an infrastructure of its own. EMRs, originally just a collection of apps that sat on top of an infrastructure, have now become the infrastructure for a new wave of applications that can plug-in to the data stored within the EMR.

Now we’re seeing a new layer of infrastructure being built that will connect all of these EMRs to one another across the full continuum of care — acute to subacute to post acute to home care to ambulatory, etc. There are lots of organizations working on this (including my own) and there’s no doubt that success is on the horizon.

Once this “connective” infrastructure is built we’ll see a new wave of health tech applications that will be built on top and will bring enormous value to our healthcare system.

We don’t need airports to have planes, and we don’t need connectivity to have medical records. But pilots, patients, and providers are a lot better off when we do.

Uncomfortable Conversations

“A person’s success in life can usually be measured by the number of uncomfortable conversations he or she is willing to have.”

— Tim Ferris, The 4 Hour Work Week

I'm beginning to think this is the best piece of leadership advice I've ever read.

As a leader, when your company grows and the demands of your job become greater the need for crisp, direct and candid communication becomes increasingly important. At some level of scale, avoiding or delaying hard conversations with customers, prospects, peers, a boss, the board or direct reports can literally become disastrous. Decisions get delayed, expectations aren't set, people lack clarity, bad habits persist, and individuals and teams row in the wrong direction.

I've found that uncomfortable conversations, like most things, get much easier with practice. As you have more of these conversations you start to build an "uncomfortable conversation muscle" and these conversations seem much less daunting. When you start getting comfortable with the uncomfortable you really start to see the value. 

I'm not saying that one needs to walk around looking to have difficult conversations but a willingness to jump into a sensitive and thorny dialogue is crucial for success in leadership. Uunfortunately, the easy and natural thing to do for most people is to avoid or put off the hard conversations. The leader that doesn’t hesitate to go there quickly and is willing to address the elephant in the room will have a much higher likelihood of success than the leader that does what’s natural and easy. 

The SalesQualia Podcast

I recently had the chance to sit down with Scott Sambucci from SalesQualia on his Startup Selling Podcast to discuss: The Selling Process vs. The Buying Process in the Enterprise Sale. We covered a wide range of topics, including the most common mistakes entrepreneurs make when selling into large companies, selling innovation and building and managing teams. Check it out below on Soundcloud or on iTunes.