B2E2B (Business to Employee to Business)

We all know b2b and b2c, and even b2b2c. I'd propose that an emerging software business model is b2e2b (business to employee to business). While it hasn't been called out clearly like this (trust me, I've 'Googled' it) there are many companies that are already using this approach (Yammer, Dropbox, Xobni and others). The way it works is that a company builds a product that can be accessed directly by a single employee of an organization. As the number of users within a company grows and reaches a critical mass, the company then has a salesperson contact the organization to make the upsell -- e.g. business to employee to business.

Of course, this model is interesting in its own right. But there are much larger implications for enterprise software. Chris Dixon and others have talked a lot about the fact that enterprise technology is far behind consumer technology. As I've written before, I believe that the reason for this is that enterprise technology can get away with being bad. For example, if you're a payroll provider and you provide a lousy interface for employees you can get away with it because you only have to sell one person in HR on your product (and then they force ten thousand people to use it). But if you're a consumer site like Mint.com you can't get away with being lousy because you have to sell 10,000 people, one by one. You have to be great or you'll fail.

And this is why the b2e2b approach is so important. It’s radically changing the way enterprise software is built and sold. And as a result, we should see the quality of enterprise technology begin to catch up with consumer technology. And when it does, those big b2b companies that continue to rely on their brand or their sales force to drive sales will begin to collapse.

Facebook's 15%

You may have noticed that there are fewer posts in your Facebook feed these days. The reason? Facebook is now selling its ‘sponsored posts’ feature to individual accounts in addition to business accounts. So now, when you post an update to Facebook telling your friends that you’re going to the gym or looking forward to watching your favorite television show that post only appears in approximately 15% of your friends’ news feeds. But, if you pay a small fee (I hear around $5 to $10) Facebook will show that post to a much larger group of friends. This change has caused quite a bit of frustration for Facebook users. And rightfully so.  Many businesses and individuals have spent massive resources acquiring Facebook followers and have been using Facebook as a way to engage their customers for years. You can understand the frustration among businesses and individuals that suddenly have to pay to speak to their own network.

For Facebook, though, the move makes a lot of sense. They’re a public company now, and the market wants to know how they’re going to continue to add shareholder value.  And given that there are reasons to believe that their user growth is beginning to top off, there’s lots of pressure on them to monetize their user base.  Offering a paid product to their entire base of users – which, by the way, equates to about one seventh of the world’s population – is arguably a step in the right direction.

Of course, what’s good for Facebook’s stock price in the short term may not be good for its users. Beyond the anecdotal frustration, Mark Cuban and others are advising their companies to pull back from using Facebook as a primary marketing channel. And some of the bands I follow on Facebook have asked their users to begin following them on Twitter instead.

Facebook has to walk the thin tightrope of providing an accessible and valuable platform to the masses while it tries to monetize more and more of their user base. In the past, shareholders could argue that Facebook may have leaned too far towards providing the free platform. With this change, they’re now leaning in the opposite direction. They'll have to adapt their product and communication strategy to figure out how they can continue to thrive using this new model – and they better hope their users stick around while they do.

Results From My Super Bowl Commercial Experiment

5 years ago when I started this blog, I had a theory. The theory was that participating in big, broadcast marketing was a bad strategy. And that companies that continued to participate in it would likely see their stock prices fall over time. To test this theory, I selected a group of 6 companies that ran television commercials during that year's Super Bowl and noted their stock prices with the intention of measuring their performance against the S&P 500 index. The 6 companies were Pepsi Co., E-Trade, Anheuser Busch, Coca Cola, Bridgestone and FedEx.

Anheuser Busch was of course acquired by InBev back in 2008 so 5 years later that leaves me with 5 companies to test my theory. Here are the results:

• The S&P 500 outperformed the mean of the Super Bowl stocks by just over 13%.
• The S&P 500 dropped 2.2% during this period and the 5 Super Bowl stocks dropped 15.3%.
• The S&P 500 outperformed 3 of the 5 Super Bowl stocks.
• Only one stock price increased during the period (Coca Cola by 22%)
• E-Trade's stock price ell by 83%.

Given the small sample size, I'm not sure the data is all that conclusive. But it certainly doesn't conflict with my theory. So I'll stand by it for now...

Conscious Capitalism Talk

Here's a great talk that my former marketing professor, Dr. Raj Sisodia, gave at TEDxNewEngland about a month ago. The talk addresses how the world has changed dramatically in recent years and encourages our large corporate institutions to change too. Dr. Sisodia was without a doubt my favorite professor in business school and this talk reminds me of one of his great lectures. I hope you enjoy it.

[youtube http://www.youtube.com/watch?v=O8faXr6WhCM&w=420&h=315]

How I Interview Job Candidates

I think a lot about the best way to interview job candidates.  I’m always trying to determine how effective they’ll be at my company but also how much they’ll actually want to be at my company.   I want to be sure that we’re going to like them long after they’re hired and, just as importantly, that they’re going to like us long after they’re hired. Here’s the framework I’m currently using when I interview a job prospect:

1. Resume Walkthrough.  First, I walk through their resume to get to know them.  I try to understand why they chose their schools, companies and industries and I always ask why they left each job.  Walking through their resume gives me a really good sense of who they are.  It can be somewhat of an intense conversation so it helps me get to know them right away.  On the surface, I don’t care about gaps in resumes or sabbaticals but I like to understand the choices that the candidate made and why they made them.   At the end I always ask them my favorite interview question.  I ask them to tell me what they want to do without naming a company or an industry.  Specifically I want to know how they want to add value to an organization.
2. Analysis of Strengths.  Next I dig in on their strengths.  I assume that they’re really good at what they do but I like to understand exactly why they believe they are so good.  Often I’ll ask something like, “if you’re the top performer on your team and I asked the average performer on your team what makes you so good, what would they say?”  This gives some insight into how analytical they are about their success.  I don’t really care that much about hearing about their success, I want to hear about why they’re successful so I can assess whether or not that’ll be transferrable to my company.  Candidates that can’t intelligently tell you why they’re successful are risky.
3. Hesitations.  At this point I’m in a good position to assess my hesitations.  In a nice way I tell them exactly what I think of them so far and what I’m hesitant about.  And I give them a chance to respond.
4. Tension Breaker.  Then I lighten things up and ask what they do for fun.
5. Questions.  Lastly I ask if they have questions for me.   I can usually get a good sense of how much they’ll like working at my company by the questions they ask.

This approach has been working well for me lately so feel free to borrow it.  I’ll try to document how this changes over time.

Is There A Shortage Of Sales Talent?

An article on the Harvard Business Review blog today talked about the shortage of good sales talent and the need for more formal sales training programs. My theory is that there's actually a lot of sales talent out there but those people simply don't want sales jobs. Here's the comment I posted.

Great post and an important topic.  I believe that in today's business environment you need a variety of skills to be a good salesperson -- it's not about back slapping on the golf course anymore.  Sales is much more complex now.  You need to have a strong understanding of finance, economics, accounting, marketing, strategy, technology, product and management to understand what makes a good prospect, what problems your prospects have, where markets are going and how your company's products can fit in.  These skills are not easy to acquire.  In my experience, they come from getting an MBA or working in a client-facing role in a very early stage company where you're forced to wear a lot of hats and figure out how to make your product work or, in a rare case, you've gained these skills on your own by educating yourself.  And I've found that people that have that kind of experience under their belt are, for the most part, uninterested in filling a typical "sales" job.  They're interested in getting into finance or consulting or strategy.  This is because sales has a stigma to it.  People with that kind of ambition and experience often don't want to tell their friends and family that they're a "salesperson".  Not because sales isn't an admirable job -- it is -- but because there's a stigma attached to it.  People that don't understand the complexity of today's sales environment think of the used car salesperson trying to sell them a lemon.

As a result, I believe we need to begin to stop using the word "salesperson" to describe the roles we're trying to fill.  And not just for recruiting reasons.  Because the word no longer describes what these people are being asked to do.  These people aren't selling knives door to door to every house in town.  They're not pitching and responding to objections.  They're seeking out and understanding business opportunities, carefully selecting the appropriate individuals to connect with, having open, informal business conversations, validating assumptions, iterating those assumptions, refining products and services, participating in internal and external strategic planning, creating mutually beneficial partnerships, negotiating legal & business terms, setting goals for the partnerships and seeing that those goals are met.

I believe that the sooner that companies create roles and job titles around this new skill-set, the sooner we'll see more professionals signing up to fill these jobs.

Retaining Your Employees

Fred Wilson had a good post a while back on employee retention. I posted some of my thoughts in a comment there and thought I'd post them here as well. One trend that I’ve seen is that employees leave companies, for the most part, for one of three reasons:

1. They don’t think they’re great at what they’re doing

2. They don’t feel like what they’re doing is important

3. They don’t feel appreciated for what they’re doing

Smart, ambitious people want to be winners. They want to be awesome at what they do, they want to be doing work that is meaningful and impactful and they want to feel appreciated for it. If an employee feels this way, it’s very unlikely that they’ll leave. But with so much going on, busy managers often forget about these things. It’s critical for managers to stop and recognize when an employee is good at something. Verbalize it, don’t just think it. Tell them they’re awesome. Say thank you. Show appreciation.

Everybody gets insecure at some point, even top performers. I remember Mike Krzyzewski, Duke’s basketball coach, explaining that once or twice a year he calls his best player into his office to tell him how much he’s appreciated. This kid is in Sports Illustrated and on ESPN and is the most popular kid on campus, but as Coach K says, everybody gets insecure. And when they do, results suffer.

It’s management’s job to create an environment where people feel awesome. They feel like they’re good at what they do, they’re doing important work and they’re appreciated by their company. When you have these three things in place,you’ll see your retention numbers soar.

As Jack Welch used to say, self-esteem is the fuel that powers great companies.

Do Your Employees Know How To Work The Projector?

I've seen a few blog posts over the last few days about the lack of innovation that exists in large companies. One of the fundamental lessons I recall from business school was this: success leads to arrogance and arrogance leads to failure. The notion was that companies that get successful and big will inevitably become comfortable with their own success.  This comfort will encourage them to stop innovating and start putting bureaucracy in place that will protect what they have -- and that will eventually cause them to fail.  It’s a natural cycle that always exists. So my professor was encouraging us to be conscious of it so our companies might avoid that fate.

Over the years, I've met with companies big and small -- from startups with fewer than 10 employees all the way up to Fortune 50 companies with hundreds of thousands of employees. A small thing that I’ve noticed is that if the company has more than about 1,000 employees you can guarantee that something will go wrong with the presentation tools in their office. You can’t get online. The projector is broken. Nobody knows how to turn the videos screens on.  The cabinet storing the CPU is locked.  Literally, 95% of the time, something will go wrong when you're presenting to a big company.

This never happens when I meet with startups. Everyone knows how things work, there’s less security and bureaucracy and even the most senior people in the room know how to work the projector.

Obviously, on the surface, this observation seems meaningless. But I do believe it’s symbolic of the arrogance that exists naturally in a large company. Employees at big, successful companies either don't believe they need to know how to do simple things like this or the company has put so much bureaucracy in place that they're unable to learn.

If you're an executive at a big, successful company ask around and see if your employees are able to work the projector. If they're not, I wonder what else they can't do.

Firing An Employee

A while back Chris Dixon had a good post on firing people. I shared a couple of my thoughts on the topic in a comment. I thought I'd post those thoughts here as well and add on a couple more. These are a few things I like to keep in mind when parting ways with an employee:

1. With very, very few exceptions the person is better off being fired. If you're considering firing someone, and you decide not to, they have very little chance of being successful at your company in the long term. And the situation is bound to get worse. It's better to get them off to another organization where they can shine. While it can be very painful in the short term, I've never seen someone get fired that didn't end up in a better situation within a year.
2. In another role, in another company, in another culture, the person you're firing could perform better than you or anyone else in your company. You're not better than the person you're firing. They're in a place where they aren't performing at their best. It could be the role, the industry, the company, even the management that's keeping them from performing at the highest level. Regardless, I believe it's always best to push that person to find a place where they can rise to the top.
3. With good management, a firing should never come as a surprise. I believe strongly in a culture of candor. If an employee is performing well they should know it. If they're not performing they should know it as well and they should know exactly what they need to do to perform better. They may be unable to perform better (either because they don't want to or they're not capable) but managers should lay out clear expectations for employees and clear consequences when expectations aren't met. So that when it comes time to make a change, it's not you telling them they're fired, it's an agreement that expectations aren't being met and it's best to move on.
4. Never, ever, ever speak ill of a terminated employee to customers, employees or anyone for that matter. For whatever reason, it wasn't a good fit. It's that simple. Leave it at that.
5. Even though I've broken this rule in this blog post, don't use the word "fire". Say "part ways" or "moved on" or "made a change".  It's a small thing but these phrases are far more elegant and professional.

Dethroning The King

I recently finished reading, Dethroning the King: The Hostile Takeover Of Anheuser-Busch, An American Icon.

The book, written by Financial Times columnist Julie Macintosh, gives the reader an astonishingly detailed look inside the takeover of Anheuser-Busch by InBev, a Belgian company run by Brazilians. Because the transaction occurred smack dab in the middle of the housing crisis in 2008, many didn't pay attention at the time.

If you like business history and have an interest in the mechanics of enormous organizations and enormous transactions, you'll love Dethroning the King.

Managing Up

I gave a short talk a few weeks ago on some of my thoughts on being effective at managing up.

 Managing up is critical.  Bosses want to be assured that you care, that you're getting results and that you're contributing to moving the business forward.  With that in mind, here are the three tips I gave on managing up:

1.  Have a Point of View.  That is, have an opinion, hopefully a strong one, on how you should grow your business, both for your group and the company as as whole.  You may not get your way, that's life, but you should always have a point of view.  Be interested and passionate and opinionated.  Don't be annoying and try to push all of your ideas through but have an opinion and advocate for it.

2.  Drip Your Insights.  I like to say that "insights are just as important as results".  Obviously results are what everyone wants and they should be the primary tool for measuring success or failure.  But when you get results, you should be able to tell your boss exactly how you did it.  You should have insights that are repeatable and scalable.  Of course, the opposite is also true.  When you're not getting results, you should be able to tell your boss exactly why.  It's ok to not get results in the short term if you're showing that you're making massive gains and getting smarter every day and closer to success.  As you gain these insights, be sure to "drip" them to your team, your clients, your boss.  Send emails, share them in meetings, write them on a whiteboard.  Sharing your development and how you're getting smarter is critical to managing up.  Show that you're obsessing over figuring out how to hit your goals.  And that you're getting smarter everyday -- when you're getting results and when you're not.

3.  Build Trust.  This one is the hardest and I'm reluctant to give too much advice on how to build trust.  People do it in their own way and you should build trust with your boss in a way that works for you.  But one thing that's clear is that you're never going to be the lynchpin in your organization if you aren't trusted.  One way I've built trust in the past is to effectively walk the fine line between being a complainer and being a trusted advisor that speaks up when it's needed.  In short, you have to learn to not sweat the small stuff.  Your boss has a lot to worry about -- likely a lot more than you.  Taking problems on yourself and not complaining upstream makes your boss's life easier.  But, when a problem is important enough, raising it up the ladder is also critical.  When you've proven you can balance what's important and what's not your boss will be inclined to shift the more important projects in your direction.

The Business Model Test

A simple way to think about the viability of a new business idea is to use the logic test and the economic test:

1. The Logic Test: does the business make sense?  Is it easy to explain the value it will provide and how it will make money?  You can't understand its viability if you can't understand these things.
2. The Economic Test: once you've established that the business idea makes sense, now consider whether it can work profitably.  Space travel is a good example of a business that passes the Logic Test but not the Economic Test.  Certainly there would be a lot of people that would like to travel to space for the weekend, but with the current technology it simply can't be done profitably.  Kozmo.com -- the famous dot-com bust -- that promised free, one-hour delivery of things like CDs, DVDs, candy and magazines is another example.  It's just not possible to deliver a pack of gum to someone within an hour at a profit.

Once these two tests have been passed, there are of course dozens of other factors to consider.  But I've found this framework to be helpful in discussing a new idea's viability.