The 10 Best Books I Read In 2017

For some reason I've stopped posting my summer reading lists on this blog. So instead I thought I'd start posting a top 10 list at the end of the year. As I typically like to do I read a lot of business books, history books and biographies. I also read a couple good fiction books but none that make the top 10. Here's the 10 best from 2017, in order:

  1. America's Bitter Pill: Money, Politics, Back-Room Deals, and the Fight to Fix Our Broken Healthcare System by Steven Brill. This is a phenomenal chronicle of how the Affordable Care Act came into law. An in-depth summary of the issues in American healthcare and the troubling challenges that come with passing an important piece of legislation in today's environment.  
  2. Smarter Faster Better: The Secrets of Being Productive in Life and Business by Charles Duhigg. This is written by the same guy that wrote the Power of Habit, also a great book. This is sort of a business/self-help book but one of the few with actionable, useful insights to transform busy work into productive work. Probably a bit too long due to all the examples, but this one was worth the time.
  3. Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success by Sean Ellis. This should be required reading for those of us focused on growing early-stage companies. Very focused on consumer businesses but the book is filled with really refreshing "out of the box" thinking that is so important in a high growth company.
  4. Dreamland: The True Tale of America's Opiate Epidemic by Sam Quinones. Probably the best-written book on this list, this tells the depressing story of the formation of the opiate epidemic in America. This should be mandatory reading for any politician interesting in fixing this crisis. There is so much context in here that needs to be understood before anyone can think about effective solutions.
  5. Why Buddhism Is True: The Science and Philosophy of Enlightenment by Robert Wright. No, I'm not a Buddhist but I've been fascinated by pieces of it for a few years now and I wanted to dig into it a little deeper. This is also a wonderfully written book that gives a great summary and strong defense of the religion's truths. 
  6. Extreme Ownership: How U.S. Navy SEALs Lead and Win by Jocko Willink and Leif Babin. Written by two former Navy SEALs that saw enormous amounts of brutal conflict in Iraq and Afghanistan, the book takes the lessons of being successful in war to being successful in business. And these two guys are just incredible human beings. They make a strong case for getting up at 4:30am each morning. Yes, "business is war" is definitely an old euphemism but this book is on point. And it is true that much of what we do in business translates to the battlefield. Jocko also has a podcast that continues the story that's worth adding to your list. 
  7. Leonardo da Vinci by Walter Isaacson. da Vinci didn't just paint the two most famous paintings in history he also obsessively studied anatomy, fossils, birds, the heart, flying machines, botany, geology, and weaponry. This is another book that was somewhat too long but understanding more about this man was enormously inspiring.
  8. Grit: The Power of Passion and Perseverance by Angela Duckworth. I had read so much about this book prior to reading this book that I really didn't need to read it. But the concept is great. The strong evidence of the fact that grit is the most important trait for one to have is fascinating and inspiring. A good one for parents.
  9. The Effective Executive by Peter Drucker. I've read this at least three times and it's always worth it. Timeline insights from the management guru.
  10. Thomas Jefferson: The Art of Power by Jon Meachem. I saw Meachem speak earlier in the year and took a look at what he's written. For some reason, I continue to find early American history to be incredibly interesting. This is really a big history book about the formation of the United States. Extremely well written, an in-depth history book. A good one for the beach.

I hope you like some of these recommendations. Happy New Year!

Hire Your Buyer

Today’s enterprise buyer can access a nearly endless supply of information on the products they're considering buying. From review websites to customer testimonials to video demos to the backgrounds of a vendor's leadership team, a buyer can compile a nearly endless amount of information on a product before talking to a salesperson.

This has shifted the seller’s role significantly. The work of an elite seller is now a lot less about becoming an expert on what the product does or how to run a great demo and much more about finding a way to truly empathize and understand the context of the person buying the product. Sellers still need to educate the buyer on their products, but they must do it through the specific lens of the buyer. That’s a seemingly minor but crucial distinction.

The more that the seller can “talk the talk” and truly understand the day-to-day and the specific needs of the buyer the faster deals will move. This isn’t about "credibility" — that can be gained in a variety of ways; it’s about real empathy and the ability to understand and share the feelings of the buyer.

The importance of this point for sales leaders has only increased as software eats the world and we’ve seen the emergence of “tech salespeople” that bounce to different jobs selling tech into a variety of verticals (ad tech, health tech, ed tech, real estate tech, etc.). Salespeople are getting a lot better at selling tech but have lost some of the natural empathy that existed when a salesperson sold different products into the same vertical and the same buyer for several years (decades). Often, today's sales formula is this: beautiful demo + positive ROI calculation = successful sale. Without a great deal of empathy, that formula will almost always miss the mark. 

One way to create instant empathy is to have buyers join the sales team. That is, identify the people that are in a role where they feel the benefit of the product or make the decision to buy the product (ideally both) and get them to join the sales team. It should go without saying that this doesn't mean poaching a prospect's employees; that's a really bad idea. Everyone should be in the loop and it should be above board. If done well,  the prospect will be supportive. Another option is to hire someone that was formally in the role.

Depending on the product, this might sound crazy. And there’s certainly some risk (the buyer must have some basic level of sales ability). But the benefit of having pure empathy living within the team will, at a minimum, force the sales organization to deeply understand the context of the buyer and in some cases level-up the performance of the entire sales organization. The greater risk might be building a sales organization that can run a great demo and talk up a great ROI but lacks the empathy needed to bring new value to today's enormously transparent buying environment.

A Sales-Cycle Acceleration Framework

I’ve written quite a bit about the topic of creating a sense of urgency in a sales process. See here, here and here. This is an enormously important issue for high growth startups as the timing of when sales will close impacts, among other things, investor expectations and perception, salesforce efficiency, financial performance, cash management and when sales commissions are paid. Sales pipeline review meetings often include more discussion about when specific deals will close as opposed to if specific deals will close. 

Before any discussion of creating urgency can happen, two things must occur: 1.) the seller must understand the buyer's priorities and how those priorities line up (or don't line up) with the seller's product and 2.) the seller must have a detailed understanding of the buyer's buying process and all of the stakeholders that need to be involved in getting a deal to closure. Once these things are understood, sellers can begin to think about how to create urgency and shorten the length of a sales cycle.

Good sales organizations will use a variety of tactics to accelerate a sales process; from the use of detailed ROI documents to help the buyer prioritize one project over another to offering discounts in return for a speedier close. There’s really no end to the number of tactics that can be used to create urgency and more predictable sales results. I’ve created the framework below to help sales organizations brainstorm solutions to this problem and come up with new tactics.

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Here's how to think about the framework. On the X-axis are seller focused versus buyer focused urgency tactics. In most cases, a seller wants to align urgency with what’s important to the buyer. That is, the seller wants to help the buyer understand the cost of the problem of not having the seller’s product and quantify the impact of not having that product. Good sellers will frequently remind the buyer of the value being missed by not having the product in place. It’s also ideal for the seller to line up a close date with a particular event that's important to the buyer (e.g. a life insurance seller lining up their close date with the buyer’s benefits open enrollment period). These are generally the most effective ways to drive urgency.

That said, while a seller always wants a buyer to be moving fast because it’s inherently good for the buyer, this doesn’t always have to be the case. The seller and buyer are on an equal playing field. The seller may have reasons why they want to move a deal faster than the buyer. Obviously, in some cases, the buyer may not care about the seller's priorities but I would encourage sellers to be transparent about them anyway. Recently, a salesperson was trying to sell me more software for my sales team and he told me he’d give me a substantial discount if I bought sooner rather than later. I asked him why he would sacrifice a lot of revenue for an earlier close and he was very transparent about the fact that his company's fiscal quarter was coming to a close and they had a revenue number to hit. As the buyer, I genuinely appreciated this transparency and he was able to get his sale. I don't support the use of tricks or dishonesty to get sellers buy quickly, but I absolutely support sellers being extremely transparent about their priorities.

The Y-axis outlines qualitative versus quantitative tactics. 

Quantitative tactics are those tactics that are driven by a financial impact to the seller or the buyer. On the buyer side this is the revenue that will be gained or the costs that will be reduced from buying the product; e.g. every day that goes by that the product isn’t in place the buyer is losing X dollars. On the seller side, this is about the value to the seller that comes if the deal closes sooner rather than later. This can be the ability for the seller to use idle resources, or the importance of hitting a sales target, or simply the fact that revenue today is worth more than revenue tomorrow.

Qualitative tactics, on the other hand, are more art than science. These are things like the quality of the relationship between the buyer and the seller, the emotional components of the product (e.g. the seller will 'look good' to certain stakeholders if they buy) and the fact that a competitor is using the product and the buyer is not. Qualitative urgency is fun to talk about because it’s a place where sellers can get really, really creative.

Two final thoughts:

First, there are dozens of hooks that will drive urgency within this framework. Those listed above aren't appropriate for every organization. And when brainstorming it's important to get multiple stakeholders involved to come up with as many hooks as possible. Many of them may be totally unique to an individual organization.

Finally, I generally believe that sellers want to spend most of their time focused on the top-right quadrant. Ultimately, quantifiable, buyer-focused value is the most scalable and sustainable way for an organization to grow. But it doesn’t work every time on every deal. Selling into large organizations can get incredibly complex. The best sellers combat complexity with creativity. I hope the framework above helps sales organizations do just that.

Sales Commission Principles

Sales commission plans are a crucial part of a company's sales organization. They can be really complicated and difficult to get right. And for earlier stage companies they'll often change quite frequently. Managing this change can be really difficult as a sales leader has to balance several different components and several different stakeholders. Because of that, I think it's important to have a set of principles that guide the formation of your commission plan. I recently put these down on paper and thought I'd share them here. 

  1. Commission plans should value and prioritize impact over individual compensation. While the best reps should be very highly paid, the goal of the plan is to benefit the entire organization as opposed to individual reps.
  2. Potential earnings from commissions should be competitive+ and commission should be a large percentage of overall compensation. The percentage will vary depending on the role in the organization. The closer the individual is to the actual transaction the higher the percent of compensation will come from commission.
  3. Commissions should be paid out to reps quickly to ensure that they can easily connect the value they've added to the business with the financial reward they receive. 
  4. The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
  5. The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs. 
  6. The plan should be fair so that there's an equal playing field across territories and customer segments.
  7. The plan should be iterative and updated regularly to ensure that it remains competitive and consistent with the principles above. 

Using Incentives In Enterprise Sales

The 'daily deal’ boom and bust, if nothing else, taught us that consumers will respond to incentives. Deep, short-term discounts are extremely effective with consumers because the consumer generally has full autonomy and decision making authority to make the purchase.

This is not true in enterprise sales. When a seller offers a large enterprise an incentive if they agree to buy on a certain date, the work has only just begun.

I’ve written in the past that, very often, the most difficult part of an enterprise sale isn’t getting an enterprise to buy, it’s getting the enterprise to buy now, or to buy on the seller’s timeline. 

To help with this, here are four questions a seller can ask themselves to be sure that the incentive they’re offering is going to work:

  1. Does the buyer believe in the incentive? Gimmicks don’t scale. Incentives must be legitimate and make sense. There are all kinds of legitimate reasons why a seller wants a buyer to buy sooner rather than later. The seller should communicate these legitimate hooks to the buyer in a sincere and logical way. If it doesn’t make sense to the buyer then they won’t respect the seller’s timeline. 
  2. Does the buyer care about the incentive? Incentives that sound great to the seller may not always sound great to the buyer. Sellers should take the time to dig in and discover how impactful the incentive is to the buyer. It's helpful to say something like, “if this deal closes by the end of the quarter I can offer you a 20% price reduction. I understand that it may be challenging to move this through your process on such a short timeline, so is this something that’s important enough to you to accelerate this deal?"
  3. Does the buyer understand their own buying process? A buyer’s job most likely is not to buy things. They have their own set of priorities to worry about and they may have no idea what it takes to get a contract signed within their own organization. It’s hard for big companies to buy things. Sellers should be aware of this and push their buyer to be sure they understand their own buying process. A buyer can’t agree to buy on a seller’s timeline if they don’t understand what it takes.
  4. Does the buyer have the capability to drive their own buying process and stick to the seller's timeline? While buying decisions are often made at the top, the actual execution of the ‘buy’ often happens at lower levels. Sellers must make sure that the individual that is agreeing to the incentive has the authority to drive the accelerated timeline.

Of course, sellers should always strive to have their product’s core value proposition line up with their buyer's problems to create inherent urgency. But in many cases an incentive may help. Sellers should answer the questions above before they get comfortable that the incentive they’re offering is going to accelerate the deal.

Bottom-Up Enterprise Software Is Now Mainstream

Back in 2012 I wrote about the 'bottom-up' approach to enterprise software distribution. Bottom-up happens when a product is initially procured by an individual employee or group of employees and then, once a critical mass is reached, a seller upsells the product across the organization with additional features, bulk pricing, etc. This has now become a mainstream approach to enterprise software distribution. I recently attended a Go-to market conference held by a prominent venture capital firm and they advised everyone that the first question an enterprise startup should ask before designing a go-to market strategy is: are you bottom-up or top-down?

With successes like Atlassian and Slack and others the bottom-up model has come a long, long way in recent years. 

However, bottom-up doesn't work for every industry -- at least right now. Take healthcare as an example. To sell a product into a large healthcare organization you must get IT approval, work with compliance, promote workflow changes, train staff, potentially integrate into an EHR, address HIPPA concerns and do lots of other stuff before the first user can log-in. The top-down model can be a requirement.

That said, I believe we’ll start to see this change. The bottom-up model will only become more mainstream and will take market share from vendors that don’t adapt. Traditional enterprise vendors should take note and start to evolve.

Some specific implications:

Software vendors need to prioritize the user of their product over the buyer of their product (they're quickly becoming the same person). Engagement and user satisfaction metrics should be equally important as sales metrics. Employees are increasingly demanding that the software they use at work function at an equivalent level to the apps they use on their phone. And switching from vendor to vendor continues to get easier. If a product isn't adored by its users its ripe for disruption.

This change also means that product must play a much larger role in distribution. The product must be remarkable so people will talk to their colleagues about it and it must be easy to spread the word about and nearly effortless to access. If you look at the fastest growing enterprise startups (see below) the one thing you’ll find is that nearly all of them make it extremely easy for a new user to sign up.

Finally, this trend will bring big changes to sales and marketing teams. Marketing (messaging from one to many) will play a larger role in the selling process as it'll be responsible for acquiring the product's early users. This changes messaging and use of channels in a big way. When any employee within a company is a potential buyer your marketing starts to look a lot more like Apple's than Oracle's. And salespeople will need to increase their selling competence to represent both the user (human factor data insights, workflow changes, usability) as well as the enterprise buyer (product context, integration, ROI).

The line between enterprise software and consumer software is continuing to blur. And while there are industries where top-down will continue to thrive, the processes and systems and beliefs that have enabled this approach are beginning to crumble.

In the end, the real threat that bottom-up startups present to top-down vendors isn't just that they may have a more effective way of getting a product into market, it's that their approach requires them to build something that's very unique in enterprise software: a product that people love.

Buyers Aren't Rational

Perhaps the biggest challenge in enterprise sales is getting a large organization to act and act quickly. Because of size and complexity and bureaucracy it can be very difficult for large organizations to make quick decisions. When an enterprise becomes a certain size it inevitably creates a series of checks and balances to protect its assets and competitive position. This protects shareholders but also makes it difficult to innovate and to make decisions to invest in innovative technologies.

Selling into these organizations requires one to find an external champion that is willing to break through blockers and jump over walls. One of the ways to do this is by helping the buyer see a future positive state. This is what great sellers do. They get a buyer to see a future state that is better than their current state that will require a relatively small investment. If the buyer is rational then they will buy.

Of course it's never that simple.

Over the holidays I had the chance to read Michael Lewis’s new book, The Undoing Project, and it shined some light on some of the many reasons why it's never that simple. The book takes on the issue of “decision theory” and tells the story of two Israeli psychologists and their mission to better understand how the human mind makes decisions. They found that people are absolutely not rational decision makers. I thought I'd capture some of their ideas here.

One of the most interesting ideas discussed in the book is the notion of 'loss aversion'. People will irrationally avoid losing what they have -- even if it could result in a much larger gain. Here's a summary of one their experiments.

When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $ 500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker. The odds that people demanded to accept a certain loss over the chance of some greater loss crudely mirrored the odds they demanded to forgo a certain gain for the chance of a greater gain. For example, to get people to prefer a 50-50 chance of $1,000 over some certain gain, you had to lower the certain gain to around $370. To get them to prefer a certain loss to a 50-50 chance of losing $ 1,000, you had to lower the loss to around $370.

People’s desire to avoid loss significantly exceeds their desire to secure gain.

This is the reason insurance companies make money. They take margin from our irrationality. For most people, the happiness involved in receiving a desirable object is smaller than the unhappiness involved in losing the same object.

Not only do people act irrationally (from a probability perspective) to avoid loss, they'll also make decisions based on descriptions of probabilities.

Another useful example from the book is a study done with lung cancer patients:

Lung cancer doctors and patients in the early 1980s faced two unequally unpleasant options: surgery or radiation. Surgery was more likely to extend your life, but, unlike radiation, it came with the small risk of instant death. When you told people that they had a 90 percent chance of surviving surgery, 82 percent of patients opted for surgery. But when you told them that they had a 10 percent chance of dying from the surgery — which was of course just a different way of putting the same odds — only 54 percent chose the surgery.

People facing life and death decisions will not respond to probabilities, they will respond to the way probabilities are described to them.

Lastly, the book notes that most people will respond to probabilities using their own context and view of the world, as opposed to the actual probability. Here's a great example. 

Ask yourself the following question:

An individual has been described by a neighbor as follows: “Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve more likely to be a librarian or a farmer?

The vast majority of people would say that Steve is a librarian despite the fact that there are 20 times more male farmers in the United States than there are male librarians. People ignore probabilities and give more credence to “resemblance” or context or experience. We don't make rational, probabilistic decisions.

The lessons from all of this for enterprise sellers are simple:

Most buyers will prefer to buy something that will help them avoid loss (keep their job) rather than increase gain (get a promotion). Sellers need to find a way to appeal to loss aversion or find a champion that's willing to take a risk.

Buyers are not buying your product, they are buying your description of your product. The way you explain what you do is incredibly important and needs to be constantly tested and iterated.

Finally, buyers may not make rational buying choices based on the probability of success. They’ll rely on “resemblances” and their own context. They’re more likely to buy the thing that 'feels' like it will be successful than the thing that has the highest probability of creating a positive future state.

What Qualifies As A "Good" Meeting In Enterprise Sales

What one salesperson defines as a good initial meeting in enterprise sales can often be quite different from another salesperson's definition. This is natural as different people have different perspectives and definitions of success. I've found it useful to standardize the definition of a high quality meeting to remove some of this ambiguity and get everyone aligned on what success means. Here are four simple checks to determine whether or not you had a high quality initial meeting with a prospect. 

  1. Did you gain a solid understanding of the customer's buying process (who needs to be involved, where budget comes from, timeline for decisions, potential roadblocks, etc.)?
  2. Did the prospect agree to a short, weekly check-in to keep the buying process on track?
  3. Did you identify an executive sponsor and project lead?
  4. Does the prospect understand and feel some level of urgency to get to closure?

Note that of course you can still have a positive interaction and discussion with a potential customer and not do all of these things. Often it's not appropriate to get through all of this in an initial meeting. But from a pipeline velocity perspective, if you haven't accomplished these four things there's definitely some work to get done.  

How To Diagnose Bottlenecks In A Sales Funnel

When sales aren't moving fast enough, the first thing a sales leader should do is look at the sales funnel to identify the bottleneck. Are we not filling the top of the funnel? Are we not converting meetings to proposals? Are we not getting the contract signed quickly enough?

I've written in the past about how to build and analyze a sales funnel

But in some cases the sales funnel might not be granular enough to tell you what's really going on. 

With that in mind, I've come up with a set of questions to ask to help you identify trends and areas where things aren't working. 

Look across the entire pipeline and ask the questions below about each individual deal. if the answer to any question is 'no' put a checkmark next to the question. If the answer is yes leave it blank. If the question isn't relevant because the deal isn't far enough along in the sales process also leave it blank. 

After going through each of these questions for each of your deals you should get a good sense of trends and what's slowing things down and you can now focus on fixing that problem area. Do it again in a month and focus on that newly identified problem area. Repeat.

This is a super simple and quick way to find out what's going on in the funnel. It can be used for an entire team or an individual rep.

  1. Is there adequate top of the funnel activity -- are we working hard?
  2. Are we getting meetings with people we want to meet with?
  3. Do the people we’re talking to have a problem that we’ve diagnosed?
  4. Do the people we're talking to believe that the problem they have is a large and important one?
  5. Do the people we're meeting with have decision making authority?
  6. Is our message (solution) resonating with the people that have the problem?
  7. Is there excitement around moving to a proposal?
  8. Do we have agreement on a proposal?
  9. Are we getting insight into the buying process and the actors that need to be involved in the buying process?
  10. Are we executing the closing process at a rapid pace?
  11. Are we having weekly check-ins with our project sponsor?
  12. Have we identified a contract signer?
  13. Is there urgency around the close date?
  14. Is there anything preventing our signer from signing?

Some Thoughts On Trump & The Election

I couldn’t stay up to watch the results come in. I went to sleep around 11pm. I woke up around 4am and checked my phone and saw a Business Insider alert that said:

“Trump strikes conciliatory tone in victory speech, praises Clinton."

A small bit of light in an enormous amount of dread.

I didn’t sleep much after that. I laid there and felt a weird combination of fear and sadness. But a couple hours later when I went to the gym I started to come around a bit. Here are some of the thoughts that have been rolling through my mind today.

  1. I used to kind of like Donald Trump. I remember listening to him when he would call in to the Don Imus show many years ago. I didn’t know much about him and he was pretty right-leaning on fiscal issues but on the social stuff he was definitely a New Yorker. He was a reasonable guy and made good some good points. And I loved how positive he was. We’ve all been annoyed by his constant use of adjectives like "terrific" and "tremendous" and "unbelievable" but back then I kind of liked it.
  2. Month after month throughout the primary and into the general election everyone laughed at the notion of Donald Trump becoming President. It was a joke. What he pulled off last night was amazing. He brilliantly tapped into a large amount of fear and anger and ignorance and was able to light a fire among a huge number of rural voters.
  3. To light this fire he talked about a ban on Muslims entering the country, reversing Roe v. Wade, repealing Obamacare and building a wall on the Mexican border. I’d be willing to bet that not one of those things will happen. And I’d be willing to bet that Trump doesn’t actually want any of those things to happen. Those issues generated talking points that won him the election. He won. He doesn’t owe anybody any favors and he doesn’t need to do any of that nonsense. If he wants any chance at reelection he’s going to have to come way, way back to the middle.
  4. We need to create a new word and stop using the word “racist”. It’s too strong and inflammatory and in most cases inaccurate. I don’t think Trump is racist and I don’t think most of his supporters are racist. I think they’re ignorant and uninformed and fearful of a changing world but I don’t think they’re racist. When we call them racist it makes thoughtful conversation almost impossible.
  5. Trump is a brilliant marketer and he knows that taglines work. "Make America Great Again" was the perfect tagline for him and it’s a crystal clear indicator of his strategy. When he says this to fearful voters in rural areas what he really means is let’s go back 50 years to a time when the world was less competitive. Where automation wasn’t destroying jobs and we didn’t have to compete globally and you could stay at a job for thirty years and you didn’t need two incomes. We live in a global economy now and those days are over but that vision is incredibly appealing to a lot of people.
  6. The most important political issue to me personally is healthcare. Throughout the campaign Trump has continuously threatened to “Repeal Obamacare!” and has received loud cheers for it. I’ll bet if you asked the people cheering what that actually means most of them would have no idea. Those that do have an idea would probably just assume he’s referring to the mandate. I really doubt that healthcare is going to be high on Trump’s list. The election is over and he doesn’t need the “Obamacare” talking point anymore. Further, there are now 22 million people that have insurance as a result of the Affordable Care Act and that will be difficult for politicians to roll back. A lot of people were angry when Medicare launched but virtually nobody would advocate taking it away. And most of the payment reform has been rolled into a new law called MACRA that is separate from the Affordable Care Act. Healthcare is complicated and for the most part on a good path that should be supported by both parties (if you remove the politics). I don’t see things changing in a material way in the next four years.
  7. You can argue that Trump has no experience but the reality is that Obama didn’t have the greatest experience and that turned out ok. What Obama did in the last two elections was also amazing. I’m a big fan of Obama but he was not the most qualified candidate when we was first elected. The presidency is now a popularity contest. We just have to get used to that.
  8. Having said the above, I think we deserve a president that is prepared and dignified and isn’t reckless. I always thought George W. Bush was in over his head and wasn’t well prepared and was misguided but he didn’t embarrass our country and he wasn’t reckless. This is my main concern with this outcome. Being embarrassed by our President isn’t the end of the world but I do fear his recklessness. The generals should keep him in line when it comes to putting troops on the ground where they don’t belong but his rhetoric clearly can’t be contained. This isn’t about fearing that he has his finger on the button. This is about tiny groups of people all over the world looking for a reason to hate America. There is no worse time in American history in my view to be alienating our enemy. They are inside of our country and outside of our country and they have no home state and no borders and we can never find them all. Reckless, reactive, inflammatory speech from the American president is the most useful recruiting tool that Isis and other terror groups could ever imagine. I fear that he may not be able to rein this in. I truly hope I’m wrong.
  9. As of right now it's being reported that 118 million people voted. Trump got 59 million and Clinton got 59 million. The difference is 0.3 percent. That's just crazy.
  10. Finally, Trump is our President. Obama said this morning that we should all be rooting for Trump now and he’s absolutely right. We may hate everything he says and disagree with everything he says but like it or not he’s our President. As much we don't want to, we have to at least accept that.

Enterprise User Acquisition & Consumer User Retention

In thinking about a product's user acquisition, the nice thing about enterprise products is that when you get one customer you get a lot of users. You just need to sell one CIO on your product and you’ll quickly pick up thousands of users.

The not so nice thing about enterprise is that you’re going to lose about 20% of those users every year due to employee turnover. Your entire user base is going to turn over every five years. Acquisition scales in enterprise. Retention does not.

The not so nice about consumer products is that, unlike enterprise, you have to acquire users one by one. You don’t have the scalable distribution channel that you have with enterprise. In consumer, user acquisition is expensive and really difficult.

But the nice about consumer products is that once you get users you can keep them forever (you don’t have the turnover problem).

It’s interesting to note that some companies have figured out how to take the good from enterprise and the good from consumer.

One example is eShares, an enterprise product that digitizes paper stock certificates and options and warrants and rolls them up into an easy to use cap table to help startups and startup employees manage their equity. Employees generally sign up for the service just before their start date when they receive an option grant from their new company (to sign the option grant employees need an eShares account). If the employee leaves the company they keep their account open to manage their equity and they can add subsequent option grants from subsequent companies to keep all their documents in one place.

eShares is brilliant in that they have morphed an enterprise product into a consumer product and have reaped the benefits of both models. This is a super powerful way to quickly build a huge set of engaged users and is a great way to get ahead and build a platform rather than just a useful app. I’m sure eShares investors are taking note.

Some Notes On MACRA For Digital Health Startups

Over the weekend I spent some time reviewing the 2015 Medicare Access & CHIP Reauthorization Act final rule (MACRA) that was released by HHS last week.

MACRA was a bi-partisan law focused on the Obama administration’s goal of moving 50% of Medicare payment away from fee-for-service and towards alternative payment models. The final rule lays out details on how the program will work and how clinicians can participate.

For those of you that are new to this stuff, the goal of all of this is to allow clinicians to focus on (and get paid for) the quality of care they provide as opposed to the quantity of care they provide; with a focus on disease prevention and improving coordination between clinicians. This is a major part of how we're going to reduce the $3 trillion cost of healthcare in the U.S.

The overarching set of policies that make up MACRA are referred to as the Quality Payment Program.

The document released by HHS last week that explains all of this is 2,398 pages long though the majority of it is made up of responses to public comments made regarding the proposed rule (you can find a 24 page summary of the document here). The rule will be implemented beginning in January of 2017 and will impact nearly all stakeholders across the healthcare system.

I thought I’d capture some of my notes on the rule here with a particular focus on those things that might matter to digital health companies. If your company is focused on improving outcomes, patient engagement, patient volume, interoperability or care coordination then you should take some time to understand MACRA. Key points from the rule below:

  • For context, Medicare covers 55 million people and accounts for more than 20% of all U.S. healthcare spend. Medicare’s approach to payment is generally followed by commercial payers — in fact, many of these payers are farther down the road in payment reform than Medicare is at this point.
  • MACRA is a statement by the government that they are dead serious about paying clinicians for value. If your business relies on a flat fee-for-service model it's time to start thinking hard about how you can get ahead of this change.
  • Medicare has setup a transition year for the Quality Payment Program (2017), but physicians must act in some form during 2017. If clinicians do nothing in 2017 with regard to the Quality Payment Program, they’ll receive a 4% penalty against their Medicare payments beginning in 2019.
  • With all of these acronyms the Quality Payment Program can seem confusing. It's really not. There are two simple payment programs that clinicians can participate in: 1. Merit-based Incentive Payment System (MIPS) or 2. Alternative Payment Model (APM) — NextGen ACO, Medicare Shared Savings ACO, etc.
  • If a clinician is already in an APM nothing will change for them and they'll receive a 5% lump sum incentive payment that will run through 2024 and they can avoid the reporting requirements that will come with MIPS.
  • Some of the APM options in 2017 will include Comprehensive ESRD (end-stage renal disease), Comprehensive Primary Care (CPC+), Next Generation ACO. Medicare Shared Savings Program - Tracks 2 and 3 (Track 2 allows clinicians to take up to 60% of shared savings; Track 3 - 75%).
  • If a clinician is not participating in an APM, they can participate in MIPS. MIPS will focus on 3 areas: quality measures, advancing care information and general improvement activities. Medicare has created a nice set of guidelines to help better under the measures associated withe each of these areas. Vendors should take a hard look at these measures as these are major business drivers that non-APM clinicians will be thinking about next year.
  • The MIPS program allows for more flexibility than previous programs in that clinicians can select their own pace and the amount of data they would like to collect and submit to Medicare. There are three options to participate in MIPS in 2017. 1. Test the program by submitting a minimum amount of quality data. 2. Submit 90 days of 2017 data. 3. Submit a full year of data.
  • The timeline for implementation looks like this. At some point in 2017, clinicians must collect some amount of performance data and collect data documenting their use of technology and submit that data to Medicare by March of 2018. Medicare will give feedback on that data during the remainder of 2018. If eligible, clinicians will then earn a positive MIPS payment adjustment or APM incentive beginning in January of 2019. The payment adjustment will start at 5% and increase to 9% in 2022.
  • MIPS will consolidate three existing programs: the Physician Quality Reporting System, the Physician Value-Based Payment Modifier and the Medicare EHR Incentive Program.
  • The program will impact 600,000 clinicians.
  • Clinicians must participate if they receive $30k+ in Medicare billings and care of more than 100 Medicare patients per year.
  • “Quality” will be measured using both evidence-based standards and practice-based improvement efforts.
  • The payment program applies to physicians, physician assistants, nurse practitioners,  clinical nurse specialists, certified nurse anesthetists.
  • Medicare is putting aside $100 million to be paid over 5 years to train small practices on the rule.
  • CMS will also allow “reporting as a group” for clinicians that put themselves under the same tax identification number.
  • MIPS replaces meaningful use with the "advancing care information" program which speaks to use of technology. This program is focused on only 5 key areas: 1. Security risk analysis, 2. e-prescribing, 3. patient access, 4. summary of care, 5. request/accept summary of care. Again this is a good area for digital health companies to dive in.
  • The rule is set to be finalized on October 19th.

For the most part, commentators are praising this effort by Medicare. The Quality Payment Program does a nice job of setting up clear objectives for clinicians, with flexible levels of participation and lots of concessions for smaller providers that don't have the infrastructure or resources to facilitate complicated reimbursement activities.

With a new administration coming next year and the inevitable confusion around what will come next, the Quality Payment Program does a nice job of making it much easier for clinicians to embrace those activities that will significantly lower cost and improve quality and ultimately patient health.

Exciting times in healthcare.

Sharing & The Next Generation of Enterprise Software

Salesforce.com runs the CRM system (Customer Relationship Management) for a huge number of companies — at last check more than 150,000. It’s interesting to think of the number of duplicate records that must exist in Salesforce. As an example, there are probably hundreds of vendors that, as we speak, are trying to sell their product into Microsoft. Each of these vendors has a record (or opportunity) titled, “Microsoft” in their instance of Salesforce. In many situations, such as sales to a large software company like Microsoft, this redundancy makes sense. Most of the vendors selling to Microsoft are selling very different products to very different stakeholders within the company. So it's logical to have a different record in Salesforce for each sales opportunity.

But for narrow industries like real estate, this redundancy makes no sense at all. As we speak, there are at least ten brokers trying to rent space on the 11th floor of 600 Park Avenue in New York. If all of these brokers use Salesforce.com as their CRM that means there are ten records for only one sales opportunity. Ten brokers would be entering information on the same opportunity in ten different places. This is silly. But this is the way traditional, silo'ed CRM works.

Real estate brokers would benefit immensely from shared records in Salesforce where they all could view the same profile for the same sales opportunity. The opportunity would include the most up to date information on availability, square footage, price per square foot, etc. This would bring 10x more value to Salesforce's customers.

Now consider what's happening in healthcare. The average Medicare patient sees seven providers per year; if the patient has a chronic condition it can be many more than that. These seven providers don’t work together. They’re employed by different organizations, work in different locations and likely use different medical record software. This means that there are seven separate records in seven different places containing seven separate sets of information for only one patient. This isn't just wasteful, it makes it impossible for providers to work together to optimize patient care.

Real estate, healthcare and many other industries need software that doesn't simply get the same job done seven or ten times across disparate organizations but instead brings all of the stakeholders together to use a single, shared record.

Of course there are a number of challenges associated with building this type of networked software -- not the least of which is getting disparate stakeholders to agree to share important information with one another. But I'd guess that a big segment of the next generation of multi-billion enterprise startups will build software around sharing and networks as opposed to silos and features.

How To Sell An Innovative Product To A Large Enterprise

Selling an innovative product into a large organization is extremely difficult. The average enterprise sale requires sign off from 5.4 individuals. And when selling something that is novel that the buyer hasn't bought before it can be two or three times that number. In addition, there's no set budget or buying process in place for a buyer to buy. As a result, it falls on the seller to create a process for the buyer to purchase the innovation.  I designed the process below to help address this challenge. The idea is to take the buyer through a set of meetings that generates support for the idea and get an gets them comfortable that they're checking all the boxes they need to check to get a contract signed. Enterprise Sales Process

The process requires three meetings (though the second and third meetings could be grouped together for smaller, less complex deals).

  1. The Concept Meeting. This meeting is where the seller introduces the concept, gets support from the buyer that the product solves an important problem and that the seller's product might be a good solution to that problem. The goal for this meeting is to ask for the buyer's permission to start a process around examining the potential ROI of a partnership. If the buyer isn't supportive of the concept, both parties shake hands and part ways.
  2. The Financial Meeting. If the concept meeting is successful, prior to the financial meeting, the seller should ask the buyer to provide them with some financial inputs that will help determine the return on investment that would come from a partnership. The purpose of the financial meeting is to walk through the financial inputs and an ROI model and allow the buyer to poke holes in the model and to get to agreement on what a realistic ROI might be. If the ROI is compelling and the project is worth prioritizing, move to the next meeting. If it's not, shake hands and part ways. The ROI is going to be the thing that drives the rest of the process so it's crucial to have agreement in this area. It's also crucial that, when possible, the seller is using the buyer's own numbers in the model, rather than industry averages. 
  3. The Implementation Meeting. The purpose of this meeting is to determine whether or not it makes sense for the buyer to buy the product now. With a compelling ROI, it will most likely make sense, but there are lots other considerations. Technology resources, leadership changes, budget cycles, competing priorities, etc. The idea is to get the prospect so excited about the importance of the problem and the concept and the ROI that all of these concerns will be overcome. But this meeting should be used to put everything on the table. The meeting should include the appropriate stakeholders from both sides to determine if the project can be implemented and, if it can, what kind of work will need to be done and which resources will be required. A timeline with tasks and assigned owners should also be discussed and (ideally) agreed upon. If successful, the next step is to move to contract and setup a weekly meeting between both organizations to track the deal to contract close and product delivery. If that can't be done, both parties should shake hands and part ways. In this meeting the seller should inventory all of the elements of the customer's procurement process and get all of them down on paper. Those elements should be incorporated into a project management document that will be tracked in the weekly meeting.

One other note: when moving the deal to contract, the seller should setup a short meeting with the attorney on the buyer side. Because the product is innovative, the contract terms may be confusing and non-standard. Walking the attorney through the product and the purpose of the partnership should dramatically reduce back and forth on the contract.

Being disciplined about taking the buyer through these three meetings and understanding exactly what they'll need to do be able to write a check will help sellers accelerate sales cycles and avoid many of the pitfalls that come when selling into a large organization.

So often "selling" innovation is the easy part. The bigger challenge, in many cases, is helping the buyer "buy."

Enterprise Network Effects & User Retention

LinkedIn-Chart A16z had a good podcast the other day talking about startups with network effects and it got me thinking about network effects in enterprise businesses. A product has network effects when the product becomes more valuable as more people use it. Your fax machine was more valuable when more people bought fax machines — you could fax more people. Facebook is more valuable when more of your friends use it -- you can view more photos of your friends.

Businesses with network effects scale exponentially. The reason is that their users effectively become extensions of their sales and marketing team. A Facebook user has an inherent incentive to get other people to use the product. This is a beautiful way to grow and scale a business.

In order to maintain growth, though, these businesses need to ensure that they're retaining the users they acquire -- which is an entirely different challenge. This is relatively easy in B2C because, in theory, the user can be part of the network forever. This is much harder in B2B because users — employees — turnover at the rate of ~20% per year (people get terminated and quit). So in theory, the entire network turns over every five years. And while it's true that often an employee that leaves is replaced by another this kind of churn is not a great way to scale.

That said, some B2B network effect businesses have found ways to retain some users after they change jobs. LinkedIn, Evernote, Wunderlist, Dropbox are a few that come to mind. Not only do these businesses retain their users as they move from job to job, these users also drive new customer acquisition by promoting the product within their new companies (what I refer to as B2E2B). These businesses are seeing network effects drive new users, retention of those users when they move to a new job, and new sales driven by those employees that evangelize the product in their new companies. This how an enterprise business can grow like WhatsApp.

But this isn't easy. Enterprises are concerned about their employees using the same software as they move from company to company -- e.g. they don't want an employee taking their Evernote notes on to their next company. And the product customizations and switching costs may be so high in some cases that the value of the product doesn't translate from one company to another.

The challenges are significant; but the businesses that build an enterprise product with 1.) inherent network effects to drive new users and 2.) the ability for those users to stay engaged with the product as they move from job to job will be the networks that win.