200907 Growthroute Overcoming The Techie Biz Divide

THIS IS A BETA PRESENTATION: PLEASE HELP MAKE IT BETTER Mission: to hone a process that tackles the most common challenges ventures face in a fresh, systematic, actionable manner Objective for this presentation: We seek to test assumptions and collect stories Your contribution will help with a book we are putting together Touching upon both the soft and hard challenges ventures face Including opinion pieces taking a new crack at important issues Endorsements, stories, real-world examples, case studies, quizzes, all practical contributions appreciated Want to participate beyond today’s session? Contact Greg. Jul 3, 2009 WWW.GROWTHROUTE.COM 2 All rights reserved

BETA SOME “EARLY-STAGE” QUESTIONS FOR YOU [ Your name here ], please: Think of your stories of products / services gone terribly wrong or fantastically right Offer your hypothesis of the root cause(s) for it Please share your informed views on the creation of market hit What works, what does not? How is that about culture, processes, individuals? What is the impetus? Jul 3, 2009 WWW.GROWTHROUTE.COM 3 All rights reserved

BETA COMMON FLAWS ENCOUNTERED AT TECH VENTURES ARE OFTEN ROOTED IN A LACK OF BALANCE AFFLICTION SYMPTOMS R&D bias  CTO founder pouring money into the “next thing” while keeping marketing anemic. Scope creep.  Tech founder thinks he can bootstrap business requirements Product bias  Stretching the product line into an unmanageable patchwork of solutions targeting widely different markets, and not doing a great job at solving any particular problem Feature bias  Adding and subtracting features incrementally, without a guiding direction anchored in market needs and mental models Sales bias  CEOs conduct sales directly and neglects their management role. They do not transfer core knowledge to anyone to conduct important technical sales in their place. P&R bias  The company spends extensive resources promoting a pipeline product and then does not deliver. Various project slippage. CEO often spends too much time at conferences and cocktails. Investor bias  When short-term pleasing of investors overrides customer and revenue considerations Political bias  When decisions are made based on who we like and who sides with who, rather than rational data- and logic-driven [Add your own] Jul 3, 2009 WWW.GROWTHROUTE.COM 8 All rights reserved

BETA AS A RESULT, WE OFTEN GET… “… amazing technology and algorithms that the market just doesn't need or simply just does not know how to value.” Serial entrepreneur turned business angel “… or great marketing campaigns promoting products that are not compelling or don’t work.” Growthroute Jul 3, 2009 WWW.GROWTHROUTE.COM 9 All rights reserved

BETA • MOST ENCOUNTERED PROBLEMS AT VENTURES WARNING: QUICKSAND ZONES, EXTRACT YOURSELF RAPIDLY Not wanted: selling something people do not need Not working: making something that does not work Poorly targeted: trying to sell it to the wrong people Only for early adopters: making sophisticated products with lack of usability Badly communicated: not choosing the right “story” to position it Invisible offer: not cutting through the competitive noise Not profitable: spending funds on sub-ROI products and initiatives Unsustainable chaos: absence of organizational design and confused direction, company crumbling under its own weight Just a great product: adopting the wrong business model as all efforts go into the product and little into how to fuel revenue growth [Add your own here] Jul 3, 2009 WWW.GROWTHROUTE.COM 10 All rights reserved

BETA QUESTIONS FOR DISCUSSION Tech leadership: can a tech background lead a go-to-market strategy as effectively as a business background? When should the tech founder let someone else lead the business? Biz leadership: can a business background lead a tech venture and drive its R&D imperative? Product vs. Marketing: how much should you invest in technology development vs. marketing activities at the different stages? Marketing obsolescence: is marketing needed at all in this day and age? If the product is vastly superior, will it not sell itself? Definition: how do you define Marketing? The same as Advertising? Market needs: how do you ensure that your solution addresses a real market need, and that someone is willing to pay for it? Jul 3, 2009 WWW.GROWTHROUTE.COM 11 All rights reserved

BETA • POSSIBLE ROOT CAUSES WHY DON’T ALL VENTURES GROW LIKE ? Generalizing: finding the root causes of product success or failures is traditionally ripped with generalizations and simplifications Complex: creating market hits is about dealing with a complex system made of many interacting parts correctly Correlations: having said the above, we can hypothesize on some statistically-recurring characteristics and observe correlation with failure Some root causes : External VCs say they reward market need, but too often they pour money into tech companies without visibility on revenues. They also optimize for acquirers, revenue is usually one of many other metrics to maximize to that end Strategic acquirers are often awed by current buzz and technological performance, at the expense of a business model and actual synergies e.g. acquisition of Skype by eBay While surfing on trends can work for VCs, it rarely does for strategic acquirers Internal: something inside the company is keeping it from being successful, constituting an obstacle to market adoption and growth [Offer yours here] Jul 3, 2009 WWW.GROWTHROUTE.COM 12 All rights reserved

BETA A CONTROVERSIAL HYPOTHESIS: MENTAL MODELS “A mental model is a kind of internal symbol or representation of external reality, hypothesized to play a major role in cognition and decision-making. Once formed, mental models may replace carefully considered analysis as a means of conserving time and energy.” Wikipedia (think Blink rapid cognition) Jul 3, 2009 WWW.GROWTHROUTE.COM 13 All rights reserved

• FROM MAD SCIENTIST TO SNAKE-OIL BETA SALESMAN A CONTINUUM OF MENTAL MODELS WITH STRONG AFFILIATIONS TO A TECHNOLOGICAL OR A MARKET FOCUS/BIAS Scientist CTO / Product Product Manager Strategic Product Marketing Salesman Developers Marketing TECHNOLO MARKET GY Jul 3, 2009 WWW.GROWTHROUTE.COM 14 All rights reserved

BETA A PATTERN OF DIFFERENCES BETWEEN MENTAL MODELS OF TECH AND BUSINESS TYPES Tech Mental Model Biz Mental Model “One really doesn’t need marketing if “It’s all about PR and advertising, not the product sells itself. Look at Apple building things in the lab” etc.” Experiment and discover Focus and sell Performance Appearance Doing things that work Doing things that sell Innovation is technological Innovation is more than technology Proud to be a techie, focused on Proud to be a business type, focused creating something cool and useful on customer Although experience impacts mental models, it is also filtered by them. Education affiliates people to a certain type and leads to the acquisition of models that are hard to change and often self-reinforce Jul 3, 2009 WWW.GROWTHROUTE.COM 15 All rights reserved

BETA MANIFESTATIONS OF THE MENTAL MODEL DIVIDE Manifestation Causes and effects Groupthink  Strong sense of affiliation and attainment makes it difficult to open up to new mental models  “I am a programmer”, “I am an engineer”, “I am a marketer” … and that’s the way “we do things”… Lack of trust  Each group holds on to stereotypes about the other as a group defense mechanism across types  “Marketers are bottom-feeders”, “marketing = hype”  “Techies can’t focus on a market need”, “who needs to understand the technology?”, “keep techies in the dark etc…” Lack of  Communication errors due to language and concept definition  Coordination problems caused by unshared differences in methods and communication approaches Isolation  Siloeing of each group, refocusing on their own capabilities Jul 3, 2009 WWW.GROWTHROUTE.COM 16 All rights reserved

BETA DUE TO PREVALENCE AT TECH VENTURES, TECH MENTAL MODELS POSE BIGGEST HURDLES TO MARKET SUCCESS Manifestation Causes and effects Performance bias  Technology education still focuses heavily on performance rather than practicality and usability  This leads to concentrating on features rather than utility. Think Vista.  The “less is more” approach does not work well with such mental models Focus on early  The tendency for developers of complex technologies is to focus on “familiar faces”, users offering them lots of psychological “touch points” adopters  This makes it difficult to target the right segments and “cross the chasm”  We would argue that it greatly restricts the market size for tech products Resistance to  Approaches likes Agile Programming, next to useful techniques like rapid iterations, have emphasized the futility of deadlines, without really proposing reliable alternatives. Tech types deadlines have embraced that as a philosophy, while it often goes against market building requirements and the need for focal points Pervasiveness of  Since there usually are many more tech-educated than business-educated people at tech ventures, the hurdles created from those mental models tend to be more prevalent, especially in traditional tech the initial phases of growth mental models  Since most tech companies have many more techies than biz types initially, to build the product, the balance of power is tilted towards techies  That’s also why there tends to be more techies in product and senior management positions at tech ventures. Not necessarily because of higher performance.  As a result, business-educated entrepreneurs and managers, often lack the legitimacy of techies – Not necessarily because they do not understand the technology, but because their mental models differ from the prevalent one in the company Jul 3, 2009 WWW.GROWTHROUTE.COM 17 All rights reserved

BETA NOT SO FAST: HOW ABOUT BIZ TYPES FLAWS? Manifestation Causes and effects Limited  The mental models acquired through a business education often lead those profiles to place unpractical demands on product development understanding of the  Less scientific / rigorous thinking and processes for decision-making often lead to product organizational confusion development cycle Limited depth into  Biz types also have less of a passion for the product than tech types show  Too many topics competing for a business type attention technological  Money is often the biggest motivator, before customer satisfaction even, in spite of intricacies traditional claims to the opposite Short-termism  Business education still focuses on achieving quick hits and asserts the influence of the business manager, creating inflated expectations that can derail an otherwise perfectly viable business  High sensitivity to immediate market pressure Cultural misfit  Biz types also have a sense of affiliation and practical accomplishment making it difficult for them to spontaneously open up to techies mental models unless prompted Lack of legitimacy  Putting a business type in the driving seat at the start of a venture often creates tension as techies direct the first gate to successful commercialization (the product) and use that to retain control Jul 3, 2009 WWW.GROWTHROUTE.COM 18 All rights reserved

BETA REALIZE THAT TECHIES AND BUSINESS TYPES COMPETE FOR TIGHT RESOURCES Power struggle Ultimately this is a power struggle. Technically, the longer techies hold business types at bay, the least challenged they usually are, the longer they get paid, the more work they get and the least risk of being terminated they tend to have This works until a time of “market reckoning”, and even then techies know it is likely they will still be on board, if the company still stands, especially in highly political / “personality-cult” type environments Sometimes leads to overcapacity in one group and subsequent “backlash” Techie levers Pressure to get the product “out” is a lever techies cleverly make use of “First-mover” advantage: being first in the place, they can shape it and accrue time-based reputational credits, i.e. legitimacy, with relative ease Biz types levers Market and funding access Trying to do that “on the cheap” generally rarely lead to success Cannot “force their way” into tech ventures as they do not have a power base to start from Jul 3, 2009 WWW.GROWTHROUTE.COM 19 All rights reserved

• THIS MENTAL DIVIDE COSTS MUCH AND CREATES SYSTEMIC UNDERPERFORMANCE AT TECH VENTURES Integration imperative: as we saw previously, most of the commercially successful innovations came from a market-driven transformation of technological capabilities into useful and attractive solutions Low market success probabilities when innovation gets siloed : if tech types and biz types do not work well together and do not cross over each domains to develop realistic solutions through a market-driven approach, the probabilities the company grows market hits is much lower. The lack of synergies between the product and the market strategy is a kiss of death in this competitive market Overall underperformance: currently, the cheer numbers of tech-educated entrepreneurs and product managers in tech ventures hide the overall underperformance of this sector when it comes to delivering market hits and general ROI Most products fail. In other words, we could do much, much better Jul 3, 2009 WWW.GROWTHROUTE.COM 20 All rights reserved

BETA SUMMARY ON HOW TO NURTURE TECHIE/BIZ BALANCE This is a CEO job: be aware of the need for balance between tech and business mental models, and manage this balance as if your life depended on it Be aware of your own background and biases, and correct for those constantly and “mechanically” Shape product managers as balance guardians: if you need product managers to help, select them and empower them to help prevent imbalance, not contribute to it. Else don’t use them, and have a customer service manager instead. Work on mental models through a progressive approach using both direct and environmental actions Manage the ARC: organizational Architecture, Routines (processes), and “Culture” to reinforce the balance towards the objectives Focus on tangible results and measurable milestones Be wary of the word “culture”, it is too vague for management purposes, often a one-size-fits-all to justify mood swings and impulsive decisions. Ultimately it is about having compatible goal and reinforcing behaviors that drive towards them Have targeted initiatives to engrained mutual understanding in the company: job shadowing, monthly office reshuffle, open online idea exchange tools Do not hire narrow-vision specialists: choose smart generalists and domain experts who “looked through the mirror onto the other side” Favor external providers for well-defined, precise needs Jul 3, 2009 WWW.GROWTHROUTE.COM 23 All rights reserved

BETA PROGRESSIVE WORK ON MENTAL MODELS Step 1: Awareness  Be aware of the impact of mental models Step 2: Assessment  Observe your own bias, ask for peer feedback (on specific behaviors, not your ‘mental model’ in general) and monitor your own behaviors Step 3: Small steps  Know your bias and start to self-correct for it. It will feel artificial, it’s normal  Train like a dog. Assume auto-pilot is broken.  Hang out with the “other” type.  Ask to shadow play the other role for a day (more is better!) Step 4: Take some breaks  Do a typical activity for your own type Step 5: Step out of your  Acquire extensive experience in a general management role comfort zone Step 6: Spread awareness  Use your new awareness to be a connector and a change and lead change actions agent [Your suggestion here] Jul 3, 2009 WWW.GROWTHROUTE.COM 24 All rights reserved

BETA THE CENTRAL ROLE OF THE CEO/COO AND PRODUCT MANAGER(S) A job for the CEO/COO: both of them must manage the balance of power in the interest of the company, with the help of product managers reporting directly to them Shared service model: when PMs report to CEO/COO, marketing and product development become expert resources and advisors/partners of product managers Need for product manager(s): pre-revenue companies often don’t have product managers, although it can be useful in order to grow them into their future role Backgrounds of product managers: they usually come from either a tech background or a business background. A tech BSc./MSc. with an MBA often counts as a techie as early mental models filtered a lot of the MBA learning out! Siding risks: experience has shown that product managers tend to side with one side or the other based on their natural affiliations. Usually the tech side, given propensity for tech backgrounds of such role at ventures in emerging technologies. Resist siding tendencies. Product Manager are guardians of the balance between technological possibilities and business requirements. When it shifts too much towards one side, they need to push the organization back towards the other. Jul 3, 2009 WWW.GROWTHROUTE.COM 25 All rights reserved

BETA • MANAGE THE ARC FOR BALANCE WITH EXAMPLE OF POSSIBLE ACTIONS Align all 3 levers of Architecture, Routines MARKET HIT TARGETING and Culture towards tech/market balance and sweet spot For Culture: write down all your top priorities constrained by and suggested solutions, splitting them CULTURE customer, competition between techie and biz mental models , and and capabilities assess the balance of the results Ask collaborators which activity you spend too much time on, and correct imbalances ERS / NS ERS CO MP CO TOM UM ED PO ET NE S SIT ITI CU ET S ION ON FIT RK BU NE MA ING ZZ BE MARKET HIT FEATURES AR DIFFERENTIATION ES CH IN For Architecture: have a smart IT UT EC business person from Day 1 For Routines: organize 1-day RO TU Have Product Managers report CAPABILITIES of exchange / shadowing RE to CEO/COO between techies and biz types Include both business and Reshuffle desk allocation technological understanding in every month all compensation drivers Jul 3, 2009 WWW.GROWTHROUTE.COM 26 All rights reserved

• MAKE IT CLEAR TO EVERYONE THIS MODEL IS BETA WRONG INNOVATION CAN COME FROM BUSINESS TECHNIQUES AS MUCH AS TECHNOLOGY TECHNOLO Source of MARKET GY Innovation Market hits are about much more than technology and even product Timing Messaging Customer service Sales resources Partnerships Awareness etc… See Peter Drucker, Innovation and Entrepreneurship, and think “Banking” or “Google AdSense” for example Jul 3, 2009 WWW.GROWTHROUTE.COM 27 All rights reserved

BETA STARTING WITH A BALANCED, HOLISTIC APPROACH FROM DAY 1 Tech nolog ical p ossib il ities Product development MARKET HIT nts equ ireme Ma rket r Does one need marketing when she has the best product in the world? Wrong question. To get to the best product in the world you need market understanding. History is filled with better products that did not make it. To cut through the market noise, you also can’t just rely on product properties. The right people need to try it and talk about it. It is best however to build “marketing into the product”, to enable a fully-integrated lead generation and conversion strategy Jul 3, 2009 WWW.GROWTHROUTE.COM 28 All rights reserved

BETA • BIZ TYPES SHOULD STRIVE TO CREATE MORE VALUE REALITY IS THAT THEIR CONTRIBUTION OFTEN LACK RIGOR Lack of rigorous business management approaches Have an integrated model and build it as your craft. Think of yourself as a professional with a discipline, frameworks, and tools e.g. doctor, lawyer Know about the latest theories but do not embrace them because they are hot Market your services adequately. Be clear as to what you bring in terms of fundraising, organizational efficiencies, lead generation and conversion, partnership development, product positioning etc… Forget about pure management positions, nowadays all are expected to roll up their sleeves and do concrete work themselves Obsolescence of traditional business and marketing approaches Marketing as we know it doesn’t work anymore (if it ever did) for tech ventures, nor for many other businesses for that matter Redeploy your skills around new media, consider innovative business models as a product to be launched, take a techie approach to marketing Leverage all your assets for the company, do not define your role narrowly, learn about the technology and anchor your strategy into that learning Jul 3, 2009 WWW.GROWTHROUTE.COM 29 All rights reserved

BETA OTHER PRACTICAL SUGGESTIONS FOR MARKET HITS Tie all to end results Have clear objectives, widely and frequently communicated Ensure all individual goals tie into that overarching objectives Keep it clear and simple else we guarantee it won’t happen Understand mental models are extremely hard to overcome – work around them Note the focus on education and affiliation: this can be overcome by experience but it takes a lot of it, in a general management role, and usually deliberately Mental models are highly entrenched: you can influence behaviors quickly, but influencing people’s reflexes and intrinsic motivations can take years Be aware of your own bias Comfort zone for techies is to not have any business guy Comfort zone for business types is to forget about technological limitations Don’t drink the kool-aid on your product Get regular reality checks and be ready to change gears and pull the plug on anything that doesn’t work Think sunk costs. If you keep investing just because you’ve started to invest in something, this is usually the sign of a mental model bias, e.g. R&D bias Involve your smart business person in product development from day 1 Have that person be a part of the product development process as a resource They learn as the product is created, so they are ready to hit the ground running Do not let techies drive your business strategy or worse, hold the company hostage Educate and involve them actively in the business side, but clarify this is driven by a trained business person and not to be bootstrapped Accept a healthy dose of tension and ambiguity For educators: alter education so there is less sense of affiliation to a “church” Jul 3, 2009 WWW.GROWTHROUTE.COM 30 All rights reserved

BETA • IT DOESN’T STOP AT THE COMPANY’S DOOR NAILING A BLOCKBUSTER PRODUCT MEANS GETTING THE CUSTOMERS MENTAL MODELS RIGHT , TOO Anchor it in a deep understanding of a narrow customer need Superficial market research helps superficially You might observe a consumer does something a certain way. But do you know why? If so, you might be able to offer alternative, superior ways of achieving the same purpose. Purposes change little over time: food, drink, sex, health, sleep, entertainment, moving, ego, clean, learn (tends to be in that order ;) The way to meet those needs is what changes. Understand why people do the things they do. And how they’d do it differently if you removed some of the constraints Amazon Apply rigorous testing Build your assumptions and use market research to test them from both: a qualitative perspective: do they hold? and a quantitative one: how many people would pay how much for it if it was true? Jul 3, 2009 WWW.GROWTHROUTE.COM 32 All rights reserved

BETA APPLY BALANCE TO APPLYING BALANCE This is not a plea against specialization. You do not want everyone to become generalists. This is not about being all things to all people, but about having everyone in the company develop a good understanding of other mental models, to increase collective intelligence and facilitate cooperation All actions should seek to unify the company further around defined objectives, not to narrow the cultural bandwidth and tolerance This is necessarily a simplification of reality. The views presented are based on observations and experience I developed in my venture executive role, professional learning and discussions with other venture practitioners. You should assess your own situation and use our suggestions as working hypothesis to be proved/disproved in your context, prior to developing a strategy and applying corrective actions. Jul 3, 2009 WWW.GROWTHROUTE.COM 33 All rights reserved

BETA ABOUT ME Fundraising, commercialization, strategic marketing, product Work history: management, sales systems, thought leadership and lead generation Lead Partner for emerging tech practice at Riverdale Partners Pre-revenue and up to $5M in sales Marketing Director for web start-up Emerging technology focus Consultant for the Boston Consulting Group in Core vertical interests in web technologies and Toronto cleantech Involved in Cleantech – Started a web portal on Also developing mobile, embedded web, others Solar Energy Channels: Commercial Attaché for French Ministry of GrowthRoute Finance in Asia www.growthroute.com Corporate Sales at France Telecom and Product To Revenue (blog) Management at Nestle www.torevenue.com Semantics Incorporated (blog) www.semanticsincorporated.com Twitter: gregboutin Connect on LinkedIn: gregboutin Objective: building the most helpful commercialization firm for emerging tech ventures Jul 3, 2009 WWW.GROWTHROUTE.COM 37 All rights reserved

BETA GROWTHROUTE TAKES RISKS OUT OF THE CONTINUUM OF OFFER FOR VENTURES TECH VENTURING PROCESS THROUGH A DEDICATED MODEL & MARKETING DEPARTMENT” “OUTSOURCED STRATEGY Tech Venture-Only for ventures in emerging technologies and their investors and providers only Reverse-Engineer Success use revenue and fundraising objectives as catalysts for rapid company transformation Outsourced Executive remove fixed costs, tighten integration between strategy and execution Cloud Consulting build A-teams of independent providers for each project to closely address client needs Jul 3, 2009 WWW.GROWTHROUTE.COM 38 All rights reserved

BETA GROWTHROUTE SERVICES: LAUNCH, SELL, SCALE, FUND LAUNC SELL H Segmentation models Business case / story Non-customer and customer personas Positioning Distribution and partnership Product development Pricing Market insights (not “research”): Thought leadership, buzz building Interviews, Market material synthesis, Themes Competitive intelligence, Revenue analysis (as Channels: blogs, twitter, press releases, relevant) podcasts, webinars, industry articles, events, speaking engagements SCALE FUND Branding and branding materials Organizational architecture Fundraising go/no-go decision making Facilitation of organizational strategic decisions, Investor selection Compensation system, Job descriptions, Job Valuation optimization ads /Candidate Sourcing Pitch and pitch delivery Sales systems and analytics Training KPI selection and tracking Fundraising team lead or participation CRM system Due diligence facilitation Web presence and analytics Jul 3, 2009 WWW.GROWTHROUTE.COM 39 All rights reserved

BETA EXAMPLE OF FIELDS OF ACTIVITY Water distribution loss reduction solutions Mobile indoor mapping solutions Clean energy solutions for residential and commercial clients Semantic platform solutions for insurance companies Radio and TV media source mash-up solutions Semantic platform solution for IT providers and manufacturing Vertical B2B news integrator Jul 3, 2009 WWW.GROWTHROUTE.COM 40 All rights reserved

200907 Growthroute Overcoming The Techie Biz Divide

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