David Cummings on Startups

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  • Pods in R & D at salesforce.com

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    A friend of mine from college joined salesforce.com (yes, all lowercase is the proper spelling — it’s a late 90s dot com thing) right after he finished business school and has been there for several years. At last year’s Dreamforce conference I was asking him about their engineering department and how they structure on-shore/off-shore software development. He said all the R&D is done in San Francisco in a pod-like setup similar to yesterday’s post on pods at Rackspace.

    Here’s some info on pods in R&D at salesforce.com:

    • There are roughly 28 different teams/pods
    • Each team focuses on a specific module or piece of a module in the product
    • The pods have one product manager, roughly five engineers, and a QA person
    • Each pod does a daily stand-up scrum meeting led by the product manager
    • The large number of product managers allows each of the small teams to stay close to the customer and minimize the telephone game where details get lost in layers of bureaucracy

    The pod approach makes it easy for salesforce.com to scale their R&D by adding more and more pods as the business grows while staying agile and innovating quickly.

    What else? What do you think of the pod approach to scaling R&D?

  • Pod/Matrix Team Approach in Startups

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    A couple years ago the co-founder of Rackspace told his success story to the EO Atlanta chapter. One of the takeaways I enjoyed from the event was the concept of the pod/matrix approach. Morris, the co-founder, recounted Rackspace hitting several hundred employees and feeling the growing pains trying to service customers with fanatical support. They had dozens of people of in their support department, dozens of account managers interfacing with customers, and dozens of people in accounting to field all the billing questions.

    Departments where having difficulties with more and more layers of management and customer complaints were increasing. In addition, the executive team was really concerned as to how they would scale the entire business from a few hundred people to a few thousand. The solution was a pod system where teams of five were built to handle the majority of customer questions quickly and efficiently. Pods were built to match the most common customer requests:

    • Two Tier 1 support reps
    • One Tier 2 support rep for harder technical issues
    • One account manager for sales
    • One accounting clerk for billing

    With these pods in place, scaling the business was simply a matter of having more and more of these teams as they added more and more accounts. Problem solved.

    What else? What are you thoughts on a pod/matrix system like this?

  • On the Startup Path

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    As I was rushing to the airport tonight to fly from Chicago to Atlanta (I’m prone to be late) I had time to reflect on the train. You see, sitting on the train to Midway Airport there was nothing I could do to speed things up to catch my 6:45 flight. I had my goal in mind: make my flight so as to get home at a reasonable hour for a weekend with my family.

    Being the startup geek that I am, I equated the experience with entrepreneurship.

    Entrepreneurs have a goal of building a successful company. Once the goal is crystallized, much like my more simple quest to get home to my family, you start working backwards and planning the steps to achieve it. During many parts of the entrepreneurial journey there are situations where you put yourself in a position that you are at the mercy of others around you, no matter how much you’d like to speed things up, similar to how I was sitting on a train hoping to get to the airport faster.

    The most important takeaway is there are many things you can control and many things you can’t control. Setting your sights on a target, controlling what you can control (that was a favorite line of Andre Agassi’s coach), and putting yourself in a position to succeed makes all the difference.

    What else? What are some other parts of the startup path?

  • Why the Proliferation of Successful Email Marketing Companies

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    Yesterday I highlighted almost a dozen email marketing companies with at least 100 employees or $15 million in revenue. Yes, that’s right, a dozen highly successful email marketing companies in the United States alone. That’s a ton of companies. The big question is: why hasn’t the email marketing industry gone the way most technology markets with a winner take most outcome in a few industry segments?

    Here are a few ideas why there’s a proliferation of successful email marketing companies:

    • Email marketing, unlike most markets, can show a return on investment within an hour of using the tool
    • Most companies and organizations need email marketing leading to an abundance of specialization by vendors and a large overall market
    • Recurring revenue businesses with high gross margins, like email marketing, make it easier to grow and build a sustainable business once you’ve crossed the desert (say $2 million in revenue, which is incredibly difficult to achieve)
    • A lack of network effects and the multitude of spam challenges and email clients make for fewer reasons to switch providers as an end user, assuming things are working well

    Email marketing is an unusual market for these reasons and more. The proliferation of successful email marketing vendors shows no sign of slowing down.
    What else? What are some other reasons there are so many successful email marketing vendors?

  • Email Marketing Companies with 100+ Employees

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    Email marketing is a strange market. It is one of the few technology markets that hasn’t consolidated into a winner take all (think eBay and auctions) or winner take most (think salesforce.com for SaaS CRM). In fact, there are a number of North American email marketing companies with 100+ employees (figure at least $15 million in revenue based on the low-end of $150k/employee/year revenue) all over the place:

    That’s just a quick list of pure-play email marketing companies in the U.S with 100 or more employees and contractors. There are more outside the U.S. and some that are divisions or larger companies like Epsilon. Tomorrow I’ll talk more about why I believe this market is unusual.
    What else? What hasn’t the email marketing market consolidated or become a winner take most market?

  • Mission, Vision, and Values

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    At last week’s EO Strategy Summit we spent time on a number of topics and one of the areas was around mission, vision, and values. EO does a great job with these and should be commended. Here’s a definition of each and EO’s position:

    • Mission – purpose, reason for being, the “why”
      EO mission:  Engage leading entrepreneurs to learn and grow.
    • Vision – where we’re going, aspirations
      EO vision: To build the world’s most influential community of entrepreneurs.
    • Values – non-negotiable rules of the road
      EO values:
      Boldly Go! – Bet on your own abilities
      Thirst for Learning – Be a student of opportunity
      Make a Mark – Leave a legacy
      Trust and Respect – Build a safe haven for learning and growth
      Cool – Create, seek out, and celebrate once-in-a-lifetime experiences

    Mission, vision, and values are important and I recommend entrepreneurs spend time working on them for their startup.
    What else? What do you think of mission, vision, and values?

  • Little Apps or More Modules in the Core Product

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    Sometimes we get the urge to build a little app on the side to solve a certain problem that isn’t as core to our main product (like billing). Fight the desire, we must. Building a small app outside the core product introduces a host of challenges like:

    • The fresh excitement to build an app from scratch wears off when no one wants to maintain it on a day-to-day basis
    • Testing and QA won’t be as rigorous due to higher priorities
    • Interface changes won’t be implemented consistently due to the separate code base
    • Server monitoring and administration infrastructure won’t be as thorough due to unique aspects of the architecture that are different from the main app

    My recommendation is to avoid making little apps when at all possible as maintenance of them becomes a serious challenge. Unfortunately, they won’t be given the necessary on-going attention.
    What else? What other thoughts do you have on making little apps vs more modules in the core product?

  • The RSS-Driven Startup Dashboard

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    RSS is great in that so many apps support publishing and consuming the XML format. So much so that it really becomes the core plumbing to drive a startup dashboard. Tools like Google Reader, Socialite Mac, and Thunderbird support bringing in RSS feeds along with other types of information, perfect for creating a central hub of data.

    Here are some potential items for the RSS-driven dashboard:

    As you can, this is really a list of critical business apps and RSS provides a mechanism to centralize the most important information for each, which in turn represents the current pulse for the entire business. Of course, this could lead to information overload but I’ve found it’s better to have too much information compared to too little.
    What else? What do think of an RSS-driven dashboard and what feeds would you add?

  • Business Idea: Prospect Instant Call-Back and Qualification Service

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    There’s a need in the market for a technology-enabled business services startup that specializes in calling inbound leads and qualifying them immediately in a pay-per-action manner. Most companies do a poor job of getting back to prospects that raise their hand for the first time in a timely manner. Think about this: when you fill out an online form, how long does it take for you to hear back from someone? In my experience, I expect to talk to someone within 24 hours of filling out a form, would prefer to talk to someone within an hour, and usually hear back in 2-3 days, if I’m lucky.

    It isn’t that companies don’t want to follow-up on their new prospects instantly, it is that it is too costly to staff a dedicated person to do it and existing sales and marketing teams already have competing priorities. Studies have shown that the sooner you get an inbound lead on the phone after they request information, the higher the chance of closing the deal. That’s right — let a lead linger and every hour you wait the chance of them buying from someone else goes up.

    Here are some ideas on how the business might work:

    • Pay a fixed cost per lead called and qualified (e.g. $50) as well as a bonus for the desired outcome (e.g. an additional $25 if a web demo is scheduled on the phone)
    • Allow for hot-swapping the call from the person qualifying the lead to a sales rep
    • Provide a set of standard questions to qualify the lead as well as simple next steps.
    • Use an extremely friendly, well-paid onshore call center
    • Interface with leading marketing automation, inbound marketing, and CRM products to process leads
    • Partner with marketing agencies, appointment setting firms, and marketing technology products as the indirect channel
    • Sell directly to marketing managers and sales managers espousing the benefits of timely follow-up

    There’s a marketing opportunity for a technology-enabled business services company to fulfill this need and provide more timely call-backs to new prospects. Everyone wins: sales and marketing close more deals and leads get to talk to a company representative faster.
    What else? What do you think of the business idea?

  • ARMD Goals for Startups

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    Continuing the EO Strategy Summit theme from yesterday, there was another new methodology used that I hadn’t seen before: ARMD goals. Back in 2008 I talked about SMART goals, and now that I know about ARMD goals I like them better because they are simpler and don’t have the redundancy sometimes found in SMART goals.

    Here are ARMD goals:

    • Actionable – What specific things need to be accomplished?
    • Realistic – How attainable is the goal?
    • Measurable – Is there a number (metric is ideal) or “completed/not completed” that can be attached to it?
    • Date – When is it going to be done?

    My recommendation is to answer the four points of ARMD when making goals.
    What else? What do you think of ARMD goals?