I often joke with the female/minority/over-30 entrepreneurs that I meet that Silicon Valley *is* the ultimate meritocracy, as long as you’re a young male who is white or Asian, who went to Stanford or an Ivy League school.

Now Catherine Bracy from Team Obama’s technology field office has dug out the data behind my statement:

The astounding facts are that essentially 100% of funded founders are white or Asian, and 89% of founding teams are all-male.  In comparison, less than 1% of funded founders are black, and only 3% of founding teams are all-female.

If you want to claim that Silicon Valley is the ultimate, nearly-perfect meritocracy, you need to also make the argument that white and Asian males are the only people who can become entrepreneurs.

Anyone want to make that argument?  I didn’t think so.

Yet plenty of people are willing to state the semantic equivalent, which is that Silicon Valley is a meritocracy.

(Cross-posted @ Adventures in Capitalism)

CloudAve is sponsored by Salesforce.com and Workday.

This post is about the “P” or pain.

The point of PUCCKA was to develop a common methodology to make sure our whole team approaches sales with the same mindset and to give us a language to talk with each other about our prospects, as in, “have you identified your customers pain point yet?”

Having a methodology instead of just going on random sales visits helped force a bit of rigor and honesty amongst team members about how well or not we thought we were doing.

Pain.

It’s a reminder that unless your prospect has a need to solve a problem they are not going to buy a product. Customers sometimes buy things spontaneously without thinking through what their actual need is. But often there is an underlying reason for a purchase even if the buyer doesn’t bring it to the surface.

Take for example the years 2010-2012 where every brand out there seemed to be buying Facebook “Likes.” In truth many companies had no idea why they actually needed Facebook Likes but there was still a pain point. The pain was that somebody senior in the organization had read about the importance of Facebook for business and had begun asking loud questions about why the organization didn’t have a strong Facebook presence.

That is still “pain.” It’s a reason a company would buy. That a boss is a dolt with no economic rationale for what he is asking to be achieved does not disqualify pain. Just watch Mad Men and you’ll know that.

Pain.

Too many sales reps walk into customer meetings with their pre-canned sales decks and proudly squawk through 30 of their favorite slides without engaging the customer in a discussion.

The reason they do this is that it’s far easier to go through talking points you’ve said 100 times than to engage the customer in a dialog about their business challenges.

I call these people crocodile sales people – small ears and a big mouth.

It is not effective because while you leave the meeting feeling great about yourself you really don’t have any further knowledge of the customers “pain.”

I call this sales approach “tell & sell” and I don’t recommend it.

The best sales meetings are discussions. The goal is to get the customer speaking about their organization. And the best kind of questions to ask are open-ended questions.

I’ve also seen the converse too many times – sales reps who walk into a meeting and spout out, “so, tell us what’s not working in your manufacturing process!”

I hate when people do this to me. My first thought is, “You asked for the meeting – why am I going to give you a bunch of ammunition to sell to me?”

There is an art to teasing out pain points.

I recommend starting with a brief overview of you, your company and your solution. And by brief I mean BRIEF! You’d be amazed at how long some people rattle off their life stories in an introduction. Nobody wants to hear your life story other than your mom.

After a brief overview of you, your company and your solution I recommend putting up some example clients you’ve worked with, although you obviously need their approval first.

These references make for great discussions with customers. If you have enough references in your arsenal you obviously want to pick out ones that you believe will resonate with your prospect due to job function or industry.

And then there’s the key transition slide, which I call “What We Find” (WWF) or some variation of this.

WWF gives you the ability to tease out the problem having just shown similar cases where customers have this problem.

“What we find is that many of our customers have been accumulating Facebook Likes because they thought they were supposed to. Now they have a few thousand Likes but haven’t been able to figure out whether this is improving their bottom line. They don’t have a way to measure the effectiveness of a Like.”

“Do you see that at all inside your department? Have you found a way to best link your potential marketing leads in social media into activity that leads to more business?”

Often if a customer has heard similar problems described in other customers (not hearing your solution pitched at them but a real business discussion about the pain point) then they will start to open up and have a discussion.

Even if they start to debate with you whether this is a real problem or not, you’re having a much better meeting then just flipping through slides. If they’re going to take the time, energy and logic to try and debate with you then they’re at least engaged.

People prefer to hear themselves speak rather than to listen to you. It’s just human nature.

So throughout the meeting your job is to tease out as many discrete pain points that are near enough to your solution set to begin talking about what it is that you do.

Write down the customer pains so you’ll have them for later. Ask questions the whole time. The best form of sales is “active listening” where you’re engaged in what the customer is telling you.

And please resist the temptation to cut off the customer with a story of your own.

You know, the blah, blah, blah I heard you but now let ME tell you this great story I have.  Most people naturally do this at cocktail parties (everybody does) but not in sales meetings.  Never. When you cut off customers with your stories you lose valuable insights that might be exposing more pain points.

Open questions equals a treasure trove of information to mine for pain points.

Show your knowledge and charm through great questions not great anecdotes.

In many ways it’s more enjoyable to learn about other people than it is to spout BS about your company or products.

In the words of Dale Carnegie,

“You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.”

Or in words that I first heard from one of the greatest sales gurus of all time, Zig Ziglar

“People don’t care how much you know until they know how much you care”

Apparently Zig got that from Theodore Roosevelt if the Internet is to be trusted.

But it is so true. I think every big sale I have had in life came because I genuinely cared about the person buying from me. In many ways, the “sale” made me feel more committed in my role at the company because I felt a huge sense of obligation to live up to the expectations the buyer had entrusted in me.

Ask more. Listen more. Care more. Problem solve. Good things will come.

Thank you to Jeff Hughes for reminding me of the Ziglar quote.

Summary

If you get your prospects talking about problems you’ve solved the first step of sales, “Why Buy Anything?”

Frankly if you can’t sit with prospects and tease out pain points then you ought to be working in a different department than sales or executive leadership.

Everybody has pain points – believe me.

And once you manage to tease out some problems you can then begin to pivot the meeting importantly to your solution and how it may solve their problem.

But that’s the next post, “Unique Selling Proposition” or USPs.

(Cross-posted @ Both Sides of the Table)

CloudAve is sponsored by Salesforce.com and Workday.

Blodget riffs on a tweet by Paul Graham to estimate the odds of startup success:

“Graham says that 37 of the 511 companies that have gone through the Y Combinator program over the past 5 years have either sold for, or are now worth, more than $40 million.

Most entrepreneurs would probably view creating a company worth more than $40 million as a success (unless the company raised more capital than that). And, on its face, the “37 companies” number seems relatively impressive.

In fact, however, the number tells a scary and depressing story.

This number suggests that a startling 93% of the companies that get accepted by Y Combinator eventually fail.

If only 37 of the companies that have applied to Y Combinator over the years have succeeded, this is a staggeringly low 0.4% success rate.

Put differently, only one in every 200 companies that applies to Y Combinator will succeed.”

(Cross-posted @ Adventures in Capitalism)

CloudAve is sponsored by Salesforce.com and Workday.

I’m going to propose a framework for you in a subsequent post.

But before we get there, let me suggest one simple way to think about your sales comp plan:  your top rep should be driving an M6 Convertible.  Just the top rep.  And not when you hire him or her (you want to hire hungry reps, especially to start).  But by 12 months or so down the road.

What do I mean?

Well, broadly speaking here’s what you want your first real sales rep comp plan to actually accomplish:

• The comp plan must be nominally competitive with peer companies.  If it’s not, you won’t get the good ones.  You can’t cheap out.  You’ll get candidates, but you’ll end up with dregs if you do.

• Your top 1-2 reps should be able to just kill it.  Make a ton of money.  And buy an M6 Convertible.  Because you want them to prove it works, your sales and business model.  To prove it to everyone else, without a doubt.  Maybe there will only be one LeBron on your team at first.  But you need one.  One that is so good at selling your product, he or she not only closes a ton of business — but is so confident that he or she can continue to sell your product that buying an M6 convertible is just a downpayment on an even greater future as a salesperson at your SaaS start-up. Even great salespeople that don’t believe don’t sign four-figure monthly leases.

• The mid-packers shouldn’t be interested.  You don’t want an incentive structure where the losers hang around on the sales team.  That will not only waste capital and more importantly leads — but you’ll get confusing data.  You want a plan where they cycle out.

• The pretenders should cycle out as well.  These are the guys that talk the talk, but can’t close the customer, at least not enough, at least not without say the entire Salesforce brand [or insert other Big Leader here] and apparatus behind them.  My tell-tale sign here?  The Panerai watch.  The $10,000 watch.  But without the M6 Convertible (or worse, paired to a dated AMG sedan from 1-2 generations ago).  Why?  The winners know they can continue to win. But even the pretenders eventually have one good quarter.  One good bonus.  And buy the $10k watch.  But not the $100k car.  Because they know it was luck, or at least, that they aren’t good enough to sustain it.  So these guys always want a (x) big guaranteed base salary plus (y) a draw for X months.  Avoid them like the plague.

Can you judge the rep by the watch?  I know that’s superficial.  I know it sounds lame.  I know there are many exceptions that make the rule.

But sales is about money, especially at the individual contributor level.  Earning it, chasing it, closing it, living it.

So this seemingly superficial tell?  I think it’s true.

Coming up next here:  an initial sales comp plan that can help achieve these goals.

(Cross-posted @ saastr)

CloudAve is sponsored by Salesforce.com and Workday.

Conventional wisdom and research studies both say that communication is necessary to gain successful project outcomes. However, some (too many) executives use their public relations and communications departments as a megaphone to broadcast one-way directives in the name of “dialog.” This behavior represents self-delusion and not genuine communication.

Image credit: iStockphoto

A Project Management Institute (PMI) study finds that organizations risk “$135 million for every billion dollars” they spend on projects. Of this large sum, related research from PMI concludes that “ineffective communications” drives 56 percent ($75 million) of these at-risk dollars. Based on these numbers and empirical experience, it is clear that communication plays a significant role in the success or failure of projects.

For IT projects, communication challenges arise because new technology forces organizations to change their processes and job functions. Especially on broad projects such as ERP, process change is a fundamental part of the implementation. However, streamlining processes is also important on technology initiatives that are narrower in scope, such as CRM. Because process improvement is so important, communications and change management are a standard part of every well run enterprise software deployment.

In a previous column on change management, I note the need for project communication:

Managing transformation and change is one of the most difficult aspects of enterprise software implementations. In my study of IT failures, poor communication ranks high on the list of key issues that cause problems on large projects.

The PMI studies give voice to the truism that communications is critical to project success, but the concept itself can be problematic. The Merriam-Webster dictionary defines communication as:

1. an act or instance of transmitting
2. information transmitted or conveyed
3. a process by which information is exchanged

Many executives treat communication and change management according to definitions one and two, ignoring the third, and by far most important, point. For these executives, communications could more accurately be called “management directives pretending to be discussions.”

A study on the ROI of communications and change management, by consulting firm Towers Watson, demonstrates an emphasis on transmitting information rather than fostering dialog and discussion. The following chart shows how the report defines “effective communication.” The following chart shows how the report defines “effective communication,” with most points implying one-way transmission of information:

Towers Watson’s definition of communication in a change context illustrates the point even more strongly. In this graph, communication is clearly a one-way flow rather than a bi-directional dialog:

The Towers Watson approach mirrors conventional wisdom so I am not intending to single them out. However, it is time for executives to add careful listening to their arsenal of strategic skills; I would argue that treating communications as a one-way transmission contributes to many IT failures.

Image credit: iStockphoto

Without a bi-directional flow of information, you will not engage employees, gain their buy-in, or ensure they actually understand the communications you send. Instead, shift your communications paradigm away from transmitting information to cultivating collaboration and knowledge sharing. Learning to listen is the key skill in this new paradigm.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

CloudAve is sponsored by Salesforce.com and Workday.

On the surface, the idea of providing insurance specifically for cloud service providers to help enterprises address these business and financial risk would seem to make sense.   During the IT outsourcing wave of the last decade, many service providers found they needed to buy insurance as they assumed the liability of operating their customers IT infrastructure.   In addition cybersecurity insurance, which addresses the financial impacts of data security breaches, has been in the market since the late 1990′s. While some believe that cybersecurity also covers cloud services, cloud computing models are creating unique challenges and risks.

One of the big barriers to cloud insurance has been the lack of data on security incidents and resulting financial claims.  Ironically the more breaches and security incidents that occur, the easier it becomes for insurers to offer coverage.   With more data points both on incidents as well as the financial settlements that result, insurers are able to more effectively assess exposures, price risk and determine premiums.  Amassing the required data points and analytics required is a function of cloud adoption and time.

It seems like we may have reached this critical mass, as evidence that a market for cloud insurance is emerging.  Just last week Liberty Mutual, the third largest property and casualty insurer in the US, announced that it will be offering cloud insurance policies in partnership with CloudInsure, which will provide a data and analytics platform for assessing cloud service provider risks.  In addition to Liberty Mutual announcement, cloud insurance capacity is starting to appear with other providers as well, including through the MSPAlliance which offers products for its members.

The emergence of cloud insurance products  could change the enterprise cloud market in several interesting ways.

• Shifting the CFO / CIO balance of power - when a CIO claims that cloud services aren’t secure enough for their organization, it’s difficult for business executives to push back.  The availability of cloud insurance products could help to change that dynamic.   Just as insurance companies have strict underwriting processes and requirements for other types of products, so it will be for cloud.  Cloud service providers and users will need to adhere to a set of policies, procedures and controls that meet the requirements of insurers.  As it’s their money at risk, you can bet the underwriter’s standards will be high.   With insurance products available, CFOs will now have third party validation they can point to around the security of cloud services.  While the CIO still may have valid security or compliance concerns, the existing of insurance will change the dynamic of that conversation.
• Opening of new market segments – as technology markets mature, adoption becomes increasingly driven by more conservative buyers.  While it doesn’t address the complete spectrum of risks enterprises face when they migrate to cloud services, insurance  will make a segment of customers feel more comfortable migrating to public cloud models.   We may end up finding that there will be certain segments of the enterprise market for which cloud insurance will be a requirement for doing business.
• Changing application migration dynamics – while most cloud service providers offer compensation for SLA violations today, to say most of them are toothless is probably an understatement.  Customer acceptance of availability and performance risk is considered part of the trade-off for the flexibility and cost benefits of public cloud.  Increasingly customers are expected to architect their applications for redundancy and resiliency, and for applications to failover to other service provider data centers or regions.  Insurance may make it more palatable to migrate non cloud-architected applications to public cloud providers, assuming the business case is there.

How the cloud insurance market evolves will be driven by a number of factors.  As the de facto leader in public cloud IaaS, any move that Amazon makes will be quickly followed by the market.   Cloud service providers offering insurance at point-of-sale to customers could be another potential game-changer.  Regardless of how it evolves, cloud insurance will likely play an interesting role in the enterprise cloud market.

CloudAve is sponsored by Salesforce.com and Workday.

However, I answered a question on Quora about mistakes made starting a company.  I thought this list was a useful checklist for things not to do in SaaS, since they are all avoidable.

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We survived them, obviously — and ultimately thrived.  But I could have done even better knowing what I know now.

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So just don’t do the following 10 things in your first 12-24 months or so

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My Top 10 Mistakes Starting An (Ultimately Successful) SaaS Company

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• Launching Too Early.  This paid off with press, PR, partners, etc.  But we should have made the product better and waited 3-5 more months before public launch.

• Insufficient Diligence.  While I thought I understood the market we were attempting to create and attack, with time, I realized I didn’t fully research comps as deeply or successfully as I could have.  If I had, I would have better understood the likely end point vis-a-vis freemium vs. enterprise.  And then, I would have invested more wisely in Year 1 especially.

• Turning Down Extra Series A Funds That Were Offered and That We Ended Up Needing.  I ran it probably too lean, not so much to avoid dilution, but I guess, to maintain control in some fashion.  Or really, just not to lose control.  But that wasn’t necessary.  We ended up needing another $500k in our Series A to get to the B.  Not the end of the world, but it could have been.  We should have taken more money when initially offered.  In fact, I made this mistake twice.  We also turned down $2-$4m extra in the Series B.  We should have taken $2m more.

• Not Hiring 2-3 Sales Reps to Start.  I started with one.  I thought this was a better way to learn.  I should have hired 2-3 as soon as we were ready for 1.  You can learn a lot more if you see how 2-3 reps perform than just one.  More on that here.

• Not Realizing Your First Customer May be / Likely will be the Same as Your 1000th.  Our first ‘enterprise’ customer seemed like an outlier.  But in fact, the use case, the profile, was the same as our 1,000th.   We made this customer happy and successful.  I should have “listened” to why that enterprise customer took such an early risk on us.  Instead, we wondered if they were an outlier or part of a nichey vertical.

• Confusing MVP and MSP.  A minimal viable product isn’t interesting in SaaS.  A minimal sellable product is.  It wasn’t clear which we were building for our 1.0.

• Scaling Too Slowly — and Too Quickly.  I should have invested a little more in sales reps, more quickly, one we had some initial traction (see above).  But I also tried to scale up too quickly after our Series B.  Money has to chase opportunity at this phase.  Instead, I tried things I strongly suspected wouldn’t work in the hopes of growing even faster.  That was a mistake.  I should have told my investors I was taking a pause after our Series B, and invested another 3-6 months in processes and people, instead of rushing to ‘Scale Up’.

• In Year 1, Not Fully Seeing What Was Working, Stuck in the Fog of “The Plan”.  I should have gotten more, better advisors in the early days.  We accomplished so many great things in our first year.  But I couldn’t see it, because we came up about 50% short on our revenue plan.  But we hit everything else.  So, really, that delta was irrelevant from a long term perspective.  I wish someone had been there to show me just how well we actually somehow did in Year 1.

• Should Have Spent Even More Time Recruiting & Upgrading the Team.  I spent a ton of time here.  But I should have spent even more.  You just can’t settle or hire a B player.  Time is the real reason we settle.  Thank goodness I hired a rockstar VP Marketing in Year 1.  But I should have added more rockstar execs post-launch and pre-traction.

• Not Going Long All the Time.  I believed in the big market, and the big opportunity — always.  But the endless operational challenges pre and then post-Initial Traction buried me a little too much.  Instead of just focusing on hitting the number for this year, and working on the next — a full time job already — I should have found a way to also focus on hitting the numbers for 4 and 10 years out.  That can seem hard to do, even a luxury.  But it’s not.

My 10, FWIW.

Don’t make any of these mistakes yourself.  They are 100% avoidable.  Make other mistakes instead.  :)

(Cross-posted @ saastr)

CloudAve is sponsored by Salesforce.com and Workday.

Sponsored by the SNIA, the event is targeted for hardcore storage development and data engineers who configure, integrate and support storage and data management solutions – often called “storage plumbing.”

My keynote was an updated version of the “State of the Stack” presentation on OpenStack and cloud computing that I’ve given several times since the OpenStack Summit in Portland a couple of months ago. Everywhere I’ve given this presentation to a non-OpenStack audience, I ask the audience:

“How many of you are familiar with OpenStack?”

At SP/DE, I was surprised that approximately 80% of the hands in the room went up. These people are hard-core storage engineers. They’re building and running infrastructure supporting data warehouse, archive, DR, and Hadoop apps for service providers, SaaS providers and enterprises, chiefly in the Bay Area.

It’s yet another data point that punctuates what has become obvious: OpenStack is rapidly reaching full awareness saturation among those responsible for building and operating the infrastructure, platforms, and applications that define the present third-wave in enterprise IT.

And it’s not just public cloud. OpenStack clouds are running in private cloud configurations at large financial services, communications and healthcare companies.

Over the next few months, I’ll be speaking at a half-dozen or so conferences (more on that later). And even if the topic is not OpenStack cloud, I’m going to find a way to work my casual polling question in. I’ll be especially interested to gauge familiarity of OpenStack outside the Valley and outside the echo chamber.

I’ll keep you posted on what I hear.

(Cross-posted @ Cloudscaling)

CloudAve is sponsored by Salesforce.com and Workday.

Prior to SaaS, most enterprise software was sold based on perpetual licenses, to CIOs and IT departments, with little to no input from end-users.  The result was generation after generation of shelfware.

In contrast, SaaS made it easy to adopt new software packages, especially for line-of-business managers, shaking up what had become a rigid market dominated by three players (Microsoft, SAP, and Oracle).

A second wave of SaaS companies rode the freemium business model to even more rapid success, as exemplified by the “Box Brothers,” Box and Dropbox.  These cloud storage companies used the consumerization of the enterprise to build 9-figure businesses.

There’s only one problem–as Box and Dropbox turn their attention to true enterprise sales, they’re going to find their way blocked.

Quietly, “Enterprise SaaS” has been beaten to the punch by “Hybrid Cloud.”  These companies provide a web/mobile front end that runs on a back end contained in the customer’s data center.

CIOs have jumped on hybrid cloud like a starving man on a pizza.  SaaS promised to make datacenters (and the CIOs who run them) obsolete.  Hybrid Cloud lets them offer the CEO and business heads SaaS-like apps (consumer-y, web/mobile) while still keeping the keys to the kingdom (the datacenter, hardware, and data).

Faced with a choice between paying the Box Brothers $1 million+, or spending most of that on their own datacenter and staff, which do you think the CIO is going to choose?

It ain’t pretty, it ain’t in the best interests of the business, but it’s going to happen.

(Cross-posted @ Adventures in Capitalism)

CloudAve is sponsored by Salesforce.com and Workday.

Debarghya Das has a fascinating story on how he managed to bypass a silly web security layer to get access to the results of 150,000 ISCE (10th grade) and 65,000 ISC (12th grade) students in India. While lack of security and total ignorance to safeguard sensitive information is an interesting topic what is more fascinating about this episode is the analysis of the results that unearthed score tampering. The school boards changed the scores of the students to give them “grace” points to bump them up to the passing level. The boards also seem to have tampered some other scores but the motive for that tampering remains unclear (at least to me).

I would encourage you to read the entire analysis and the comments, but a tl;dr version is:

32, 33 and 34 were visibly absent. This chain of 3 consecutive numbers is the longest chain of absent numbers. Coincidentally, 35 happens to be the pass mark.
Here’s a complete list of unattained marks -
36, 37, 39, 41, 43, 45, 47, 49, 51, 53, 55, 56, 57, 59, 61, 63, 65, 67, 68, 70, 71, 73, 75, 77, 79, 81, 82, 84, 85, 87, 89, 91, 93. Yes, that’s 33 numbers!

The comments are even more fascinating where people are pointing out flaws with his approach and challenging the CLT (central limit theorem) with a rebuttal. If there has been no tampering with the score it would defy the CLT with a probability that is so high that I can’t even compute. In other words, the chances are almost zero, if not zero, of this guy being wrong about his inferences and conclusions.

He is using fairly simple statistical techniques and MapReduce style computing to analyze a fairly decent size data set to infer and prove a specific hypothesis (most people including me believed that grace points existed but we had no evidence to prove it). He even created a public GitHub repository of his work which he later made it private.

I am not a lawyer and I don’t know what he did is legal or not but I do admire his courage to not post this anonymously as many people in the comments have suggested. Hope he doesn’t get into any trouble.

Spending a little more time trying to comprehend this situation I have two thoughts:

The first shocking but unfortunately not surprising observation is: how careless the school boards are in their approach in making such sensitive information available on their website without basic security. It is not like it is hard to find web developers in India who understand basic or even advanced security; it’s simply laziness and carelessness on the school board side not to just bother with this. I am hoping that all government as well as non-government institutes will learn from this breach and tighten up their access and data security.

The second revelation was – it’s not a terribly bad idea to publicly distribute the very same as well as similar datasets after removing PII (personally identifiable information) from it to let people legitimately go crazy at it. If this dataset is publicly available people will analyze it, find patterns, and challenge the fundamental education practices. Open source has been a living proof of making software more secured by opening it up to public to hack it and find flaws in it so that they can be fixed. Knowing the Indian bureaucracy I don’t see them going in this direction. Turns out I have seen this movie before. I have been an advocate of making electronic voting machines available to researchers to examine the validity of a fair election process. Instead of allowing the security researchers to have access to an electronic voting machine Indian officials accused a researcher of stealing a voting machine and arrested him. However, if India is serious about competing globally in education this might very well be the first step to bring in transparency.

(Cross-posted @ cloud computing)

CloudAve is sponsored by Salesforce.com and Workday.

I did have the wherewithal to visit potential customers and try to understand the pain points that I thought could be solved with our solution.

This is a very important to do when you first start a company. It’s what I call “the evangelical phase” of a company in which you’re out trying to persuade customers that a product you’ve designed is going to meet their needs better than other solutions on the market.

Invariably your first efforts at product won’t quite hit the mark – and this is OK.

It’s OK because in an era where you can much more rapidly prototype and build products it is far more beneficial to launch your first version, get initial customer traction and then talk to your customer base to understand how well it meets their needs.

Steve Blank calls this “customer development” in which you built an initial product that is in search of “product / market fit.” In non-tech speak, this is where your product solves the need of a customer segment well enough that many customers in that segment are willing to pay you money for your product.

And when you achieve product / market fit your company often ramps revenue very fast and you need to build an organization to address it from demand generation (aka marketing) to sales discovery to implementation and after-sales support.

But before you achieve product / market fit you’re often in “consultative sales” mode where your objective is to tease out customer needs. And often your solution won’t solve them entirely so you’ll often have to allow open-access to your product or integrate it with other solutions.

In my journey to better understand the sales process, my management team and I developed a sales methodology. It was really a common language we could all use with each other that became really important as we added new sales people and new geographic territories.

It helped make sure that we all thought about our sales campaigns in a uniform way and that we had a common language that would help us decide where to spend our limited resources.

After all, the golden rule in sales is “qualify, qualify, qualify” specifically because you always have limited resources and you must put them against the highest potential opportunities weighted for probability and deal size.

I’m going to set up the framework today and in future posts I’ll drill down into each area.

We called our methodology PUCCKA

= Pain. Unique Selling Proposition. Compelling Event. Champion. Key Players. Aligned Purchasing Process.

We were based in England and it was a play on the British Slang “Pukka,” which means high quality and genuine and was popularized by one of our favorite chef’s – Jamie Oliver.

In short:

Pain is where you identify a business problem your prospect has and begin to get acceptance that there is a real need for a solution. This answers the question of “why buy anything?” question in sales.

Unique Selling Proposition or USP is the things that your product is uniquely positioned to solve. If a customer has pain they and you get them to articulate this the next step is to show you can solve that problem.

If you make headway don’t be so naïve as to think your prospect – however friendly they are to you – won’t go out and search for alternate solutions. They now know they have a problem! And it’s their job to make sure they talk with multiple vendors to find out where the best fit for their pain really is.

USP answers the “why buy me?” question in sales.

Compelling Event is the thing that forces your prospect to realize they need to kick off a project immediately. The most compelling events are often driven by market conditions (regulation that forces your prospect to implement a system or a workplace incidence that causes them to implement systems to follow procedures more carefully).

When external factors drive adoption of your solution you have instant product / market fit.

But you can’t count on this so you must create your own compelling events and the only way I know how is a business case / return-on-investment (ROI) study.

If you can show a customer is losing business or money the pain is a lot more compelling.

Compelling event answers the final question in sales, “Why buy now?” which is the hardest question to answer. Often customers will think your product is useful but just don’t have the time, budget or inclination to adopt your solution without a compelling event.

Champion is the person who drives through the approval to give the go ahead (and secures budget) to your product or company. Orders don’t fill out themselves – you need somebody who will take a risk on you and guide you through he process. A champion is somebody with both “influence” and “authority.” This is in contrast to NINAs.

Key Players are the other people involved in the sales process including enemies, technical experts, sponsors, etc. The most telling sign of an inexperienced sales person is that they meet one person in an organization that is nice to them and they spend all their time with this one individual.

The problem with this is that if a customer has a real problem then often your competitors are in there talking with them as well and if you’re not meeting and neutralizing the people who support your competitors you’re in for some nasty surprises.

Aligned Purchasing Process is the act of your customer being ready to buy when you’re ready to sell.

It’s your job to figure this out. You might have a customer with a pain that they’ve agreed with you and they like how your solution uniquely solves their problem. But they simply might have more urgent pains their solving at the moment.

Or perhaps your customer is in a budget freeze or the key resource who was allocated to lead your project has just resigned.

The sales team’s job is to figure out whether the customer not only has a need but also has budget, resources and an approval process to work with you.

If they don’t then it’s a case of putting your prospect into a “marketing funnel” so that non-sales resources can focus on staying in touch with the customer through white papers, seminars, etc. while your sales people focus on the near-term deals and hitting your quarterly targets.

So there you have it. PUCCKA. In the next post I’ll go more in depth into “pain.”

Photo Credit – Photo of Jamie Oliver from filming of “Food Revolution” in Santa Monica as posted on Flickr.

(Cross-posted @ Both Sides of the Table)

CloudAve is sponsored by Salesforce.com and Workday.

Bosh – What is it?

Bosh handles deployment and upgrades of Cloud Foundry environments. However, it isn’t particularly limited to just Cloud Foundry. It’s been used to launch Riak Clusters, setup Redis, Cassandra, CouchDB and other services that don’t just fit neatly in the Cloud Foundry services design.

It is a very important tool in regards to keeping a Cloud Foundry environment up to date with the latest bits, security fixes, bugs and related elements. Bosh is broken down into several key components that work together to handle these deployment and maintenance tasks.

To put it another way, Bosh aims to give ops or devops the ability to throw together an entire stack to deploy. Bosh starts with stemcells, packages and jobs as the core concepts of how it works.

Bosh is used, within Cloud Foundry and prospectively for whatever anyone would want to use it for, to launch instances, change out the instances, change networking values, IPs and other configuration information. Overall it kind of rolls a lot of other tooling (chef, puppet) together into one tool. How well it does this is up for debate, but I’m not arguing what it is here, just going to get some definitions here.

The Pieces of BOSH

Stemcells

A stem cell or stemcell is something that is a bit hard to track down a definition for. I’m taking a stab at it with what I know a stem cell is, so if you have any corrections please comment below – I’ll be more than happy to add a correction or three. Overall I understand a stem cell to be a complete framework stack built on some sort of virtual image. It can be thought of as the recipe for building an operating systems that will act as an active member of a Cloud Foundry environment. In some situations, such as with a distributed database like Riak, it becomes not so much a member of the Cloud Foundry environment itself but an active node available to a distributed database cluster. This can then be used as a distributed database that is managed by Bosh and accessible within the Cloud Foundry ecosystem.

Packages

A package is sourec with the appropriate scripts for building it into usable binaries. Think of this as a package in the Node.js NPM, Gems (Ruby/Rails), or Nugets (.NET) worlds. It’s something that Bosh will pull in and compile on demand.

There are a few key parts to a package, referred to as package specs. These are: name, dependencies and files. Of the specs, the name and files are really the only required parts. The dependencies are an optional list of other packages this package would depend on.

Jobs

This is pretty self-descriptive. The jobs within Bosh spool up, start servers and services and other miscellaneous responsibilities as needed.

Relavent Sites, Documentation & Key Content

• The Cloud Foundry Bosh Repo => This is the actual code repository on Github. If you’re in need of really diving into what it does, there’s always the possibility of reading the code!

• Cloud Foundry Documentation => This has links to documentation related to Bosh that is pivotal (no pun intended).

• Bosh Documentation => This is the Bosh documentation. It’s almost a good idea to start on the “Running Cloud Foundry” part of the documentation. This documentation can use your help (it’s super sparse at the moment), so if you get going and using Bosh, please contribute with examples and other material.

• Stark & Wayne Repositories => I already mentioned them, but they’re likely some of the best material out there.Bosh DB => This is a site & repository that Brian McClain @brianmmcclain put together to keep track of bosh stem cells and other repositories related to launching certain tools, services, servers and other things in Cloud Foundry environments via Bosh.

• Dr Nic’s intro to Bosh => This page serves as an into and description of what’s going on in Bosh. I read this a while back for my own kick off with the Bosh Tool.

Summary

This is what I’ve found and put together as a good starting point. I still think there’s a bit of confusion around what Bosh is, how it works, how to get started with it and having it clearly defined on the web. Documentation is getting better, but still needs a lot of work (remember, you too can contribute). For systems outside of Cloud Foundry it also is a bit difficult and sometimes sketchy to use Bosh as the primary means of deployment, maintenance and upgrading. But just like the documentation that is also getting better. I’ll have more coming in the near future regarding what Bosh is, how it works, and things you can do with it – until then check out Dr Nic’s material for the most up to date how-to and related documentations and videos. He’s done some great work with the tooling and continues to knock it out of the park.

Keep reading and I’ll have more definitions, outlines of what is what, and the entire inception that Bosh is.

(Cross-posted @ Composite Code)

CloudAve is sponsored by Salesforce.com and Workday.

It’s a philosophy, really.

And it applies to business relationships & networking as much as it does to remuneration in the workplace.

It seems we live in an era of “ask.”

I see it on Twitter. Lots of asking.

I see it on email even more. And in person in spades.

Everybody is in such a rush that they go for the “ask” too early.

Sometimes there is no other option – I get that. And sometimes I feel happy to help somebody even when we’re just getting to know each other. That happened yesterday with a nice lady who moved to LA last year.

But less as a complaint and more as advice to younger networkers, the more you invest in relationships the more you will get when you need.

The more you accomplish through hard work the more you will feel comfortable asking for more compensation at your job.

Give. Then Get.

I know Brad Feld wrote a similar post. When he wrote it I smiled because I have always used the same saying.  Brad is the ultimate giver. It’s why whenever he does ask my answer is “yes” before even knowing what he’s asking.

I was thinking about this yesterday because my assistant Tasha posted a link on Facebook to Paul C. Brunson’s short and to-the-point blog post, “It’s Called Networking, Not Using.”

In it he talked about how he gets daily emails asking for intros to Oprah (he does a lot of work with her) and his advice

“The most successful relationships I have built are with people I do more for then they do for me. I give, give, give, give, give, then ask.”

So true.

It’s not only more effective but more rewarding. It feels much better to be a giver than a receiver. It feels much better to be helpful than to be indebted.

One of the most common questions I hear from first-time entrepreneurs is, “How do I meet angels?”

There is such an obvious solution. Think about it – who knows angels the best? People who have raised money from them. Duh.

So why not get out and meet them? It’s why I wrote the blog post on 50 Coffee Meetings. You need to be out there building relationships long before you have an “ask.” Be authentic. Be helpful. Earn the right to ask if they wouldn’t mind an intro to an angel. And don’t ask for 10.

It’s why I talk about building VC relationships early – Lines, Not Dots. Fill your VC good will, build relationships, be helpful to them not just asking for things. It becomes easier to ask when you need help or money.

Some practical examples.

Jason Nazar is a master networker. As good as they come. Early in his days when he was raising capital for DocStoc he came to see me a lot. Of course he wanted to talk a lot about his product and company – he was looking for money after all. But every time he came he was looking for ways to help me. He would send deals. He was eager to introduce me to his angels – a great group that I didn’t know at the time. Later on he would offer to share his advice on SEO with other portfolio companies. He would offer his time to Launchpad LA companies.

Jason could ask me just about anything now. He’s been such a consistent giver over the years.

Todd Gitlin is one of the best executive recruiters the technology & startup market in Los Angeles. On many occasions over the years I’ve called him with a request, “I’m not looking for an X right now but if I were, who is good in the market.” Within an hour I always have 4 CVs with notes on their accomplishments. He motto is, “If you want to talk with any of them I’ll introduce you. No fee required.” Todd does this naturally but in his physche is wired the concept of reciprocity. He knows that good people return favors which means that when we do have a commercial need at a company we call him.

I have other business relationships where it feels like the clock is always running. “What’s in it for me?” OK, I could be an advisor to your company but if I intro them to X I’d like to get an additional % option grant at your company.

And then I think about me. When I joined GRP Partners in 2007 I was offered a role as a General Partner. The compensation at the time was much less than what others told me a general partner at a VC firm would get. My philosophy was simple

“I’ve never been a VC before. So they’re taking a bit of a risk on me. 

Who cares what my equity is. If I do well, I’ll ask for more later. If I don’t do well, at least I got a shot at being a VC. If I don’t do well I didn’t deserve the comp.”

I did well. I asked for the comp later. I got it with no argument. And I always remember who put me in business. Life is about karma.

I always try to give before I get.

Photo Credit: Ben Grey on Flickr

(Cross-posted @ Both Sides of the Table)

CloudAve is sponsored by Salesforce.com and Workday.

Jo Jo White is profiled in a biography called, “Make It Count, and holds the team record for playing 488 consecutive games, an obviously extraordinary accomplishment. Jay Wessel has been with the Celtics for 23 years, so both men know the team inside and out.

The subject of teamwork is a consistent theme throughout the discussion, which you can watch on the video embedded at the bottom of this post. Jo Jo credits coach Red Auerbach for bringing together the players needed to make a winning team:

It took somebody who understood how to put the right thing together and we were fortunate to have him…. [Most important is] how you use your individual talent on a team to benefit the other guys on the team.

I asked Jay to explain how the concept of teamwork affects his approach to technology at the Celtics:

Working in a team is so important, otherwise, you are doing technology for technology’s sake, building computers and putting together networks just for the sake of doing it. What I find more exciting is working with the other groups here, [such as] ticketing, finance, marketing, sales also the basketball coaching staff.

From a technology perspective, Jay focuses on bringing technology to the arena, maintaining back office business systems (such as ticketing and CRM), and supporting the coaching staff with technology. Mobile, analytics for team statistics, video, are among the technologies that help create an appealing and entertaining stadium experience to attract fans.

Although corporate sponsorships are an important source of revenue for the Celtics, team finances rely primarily on ticket sales. For this reason, most professional sports organizations, including the Celtics, invest significantly in technology to create an attractive experience for fans. One sports CIO summarizes this goal with the imperative mandate to get “butts in seats.”

Also read: Professional sports innovation: Patriots, Celtics, Red Sox, and Bruins

The Celtics use analytics to link data on how fans use mobile and interact on social media, such as Facebook, with who buys tickets and for which games. Combining analytics with customer data enables the team to tailor the services and information it provides to specific groups of fans, while targeting marketing efforts more narrowly to specific audience segments.

Although technology is the heart of the CIO role at the Celtics, the style of work is highly collaborative. Jay is a technologist by training, but the approach is human-centric:

Understanding what [departments in the Celtics organization] are doing, how they do their job, how they would like to do their job, and then figuring out how we can develop systems that actually help them do it. I like that human interaction and the teamwork of technology and the business side or the coaching side, which really for us is business, much better than building systems for the sake of systems.

From a CIO perspective, the key lesson is this: for most organizations, technology is easy compared with the challenge of deeply connecting with users. Many CIOs claim to understand their business users, yet there is frequently a disconnect between the CIO’s opinion and the perception of folks on the business side.

Two key factors that drive technology at the Celtics are understanding business requirements (including back office functions, arena operations, and coaching) and a core belief in teamwork. Professional sports teams, unlike most organizations, can legitimately point to teamwork as a defining business competence. For this reason, professional sports can help us come to grips with partnering and the need to put aside ego in service of the common benefit

=======

The conversation with Jo Jo White and Jay Wessel is part of an ongoing series called CxO Talk. Each week, co-host Vala Afshar and I talk with senior leaders to learn from their experience and gain their advice.

The video below includes a passionate inside view of the Celtics. Although this post focuses on technology, the video includes extensive discussion with Jo Jo White about his experience playing for the Celtics:

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

CloudAve is sponsored by Salesforce.com and Workday.

I’ve always liked Meraki, I think the concept makes a lot of sense. But it’s over. Meraki is unlikely to see 2015. How do I know this? Elementary, I refer to the recent Cisco World Wide Partner Summit. From the Cisco Blog:Midmarket Push at Partner Summit: New Cloud Managed Services:

Since our acquisition of Meraki in late 2012, you have heard us talking about the midmarket and new opportunities for channel partners and customers. I’m pleased to say that today, at the Cisco Partner Summit in Boston, we have some exciting updates for you. Specifically, we’ll focus on our Made for Midmarket portfolio which includes a range of new product offerings, services and solutions designed for midsize customers.

All great news. Then came the death knell. Cisco gave away a Meraki router to all attendees. It may seem benign, but this is not an act of generosity, it is an act of execution.

1. In 2009, attendees of this same conference received a complimentary Flip video camera. Then, April 2011, The End: Cisco Shuts down Flip, a $590 Million Mistake
2. In 2011, Cisco provided a Cisco Cius Tablet to all attendees. Then, May 2012, Cisco Kills its Cius Tablet, Blaming BYOD

Never look at a gift horse in the mouth unless you want to see decay. RIP Meraki, you had so much potential.

(Cross-posted @ TalkingPointz)

CloudAve is sponsored by Salesforce.com and Workday.

The Three Levers to Break Through the SaaS Growth Ceiling

At any given time, you can calculate the SaaS growth ceiling for your SaaS business with a simple formula: customer acquisition rate divided by percentage churn rate. For example, if you acquire 200 new customers each year and your percentage annual churn rate is 20%, then at 1,000 customers ( 200 / 20% ) your growth will slow to zero, because customer churn will equal new customer acquisition of 200 customers per year. New customers come in the front door, while old customers leave out the back. Moreover, you will begin to hit the SaaS growth ceiling in exactly one average customer lifetime of 5 years, equal to 1 divided by your 20% churn rate. Finally, your SaaS growth revenue ceiling will equal 1,000 customers times your average customer subscription, e.g., $10M per year for an average subscription of $10,000 in annual recurring revenue. Without a fundamental change to your business, that’s all the SaaS growth you get.

This SaaS growth ceiling depicted in this example is calculated generally by the following basic formulas from the SaaS metrics series.

max SaaS company # customers = acquisition rate ÷ % churn rate

max SaaS company revenue = acquisition rate x average subscription value ÷ % churn rate

Alternatively…

max SaaS company revenue = acquisition rate x average customer lifetime value

This last formula highlights two of the three fundamental SaaS growth levers: acquire customers faster and increase customer lifetime value. If you double your customer acquisition rate, the SaaS growth ceiling doubles with it. Double customer lifetime value by doubling average subscription value or halving your churn rate and again the SaaS growth ceiling doubles.

In the end, however, churn always wins. Churn scales with the size of your customer base. Churn is negatively viral and can only be countered completely by a positively viral growth lever: network effects. Adding more sales reps and increasing your marketing spend are not enough. These strategies may increase your acquisition rate, but to outpace churn you must increase your acquisition rate again and again and again.

The SaaS Growth Levers Follow the Customer Lifecycle

The three fundamental SaaS growth levers: customer acquisition rate, customer lifetime value and viral customer network effects arise naturally and sequentially as a SaaS business matures. You have to acquire a few customers before lifetime value becomes important, and you have to acquire and nurture many loyal customers before network effects kick it. As your SaaS business evolves, you may find yourself cycling through each lever as your highest potential source of SaaS growth.

The three levers of SaaS growth map nicely to the lifecycle of the individual SaaS customer lifecycle as it evolves from initial purchase to deeper use of your product to advocacy within your customer community. Each stage of the SaaS customer lifecycle offers unique opportunities to drive SaaS growth.

The three levers of SaaS growth: customer acquisition, lifetime value and network effects
map to the SaaS customer lifecycle and each stage of the SaaS customer lifecycle
offers unique opportunities to drive SaaS growth.

The diagram above visualizes the deep relationship between the three fundamental levers of SaaS growth and the SaaS customer lifecycle. When read from left to right and bottom to top, each block of this SaaS growth pyramid highlights a proven strategy for SaaS growth that is directly linked to the SaaS customer lifecycle, beginning with driving prospects through the purchase funnel to saving customers that could churn and upselling those that don’t to nurturing a customer community that fosters advocates of your service and drives viral growth.

This is the first post in a series that explores strategies and tactics for driving SaaS growth. Having introduced the three fundamental levers of SaaS growth and their direct relationship to the SaaS customer lifecycle in this article, future posts will focus on each of the ten proven strategies for driving SaaS growth in the SaaS growth pyramid above with real-world advice on how to put each strategy into action. Stay tuned!

(Cross-posted @ Chaotic Flow by Joel York)

CloudAve is sponsored by Salesforce.com and Workday.

And it was convenient for me because we also held our annual London board meeting of DataSift, who helps companies processes and analyze large volumes of social plus enterprise data in realtime.

Final le web london (june 2013) from Mark Suster

The topic of the conference was “The Sharing Economy” and as I read many of the session title descriptions I realized that people would be talking more about “collaborative consumption” (think airbnb, taskrabbit, uber) than about why people are sharing more on Instragram & Snapchat.

You can of course view the presentation in SlideShare above or download it directly for free here.

Why is Collaborative Consumption Becoming a Hot Trend for Startup Companies?

As I outlined in my talk, I believe the greatest Internet companies created over the past 15 years have been “deflationary” meaning they are driving down the prices or goods & services. They are also driving down the margins they make and are offering products that are initially lower functionality than their competitors.

I described that phenomenon in this post.

Declining prices & margins in a small market  is much less interesting. But as we now know 33% of the world’s population is now connected to the Internet, the majority of traffic to the major Internet properties is now global and at Benedict Evans pointed out in his recent report, more than 70% of the world’s literate population will have a smartphone within 4 years.

Prices down. Network Up. But what else?

The world still has economic challenges that often aren’t perceived by many of us the tech world in our little cocoons of Silicon Valley, NYC or Los Angeles.

Example: More than 50% of all youth in Greece & Spain (34% in Italy) are unemployed and if you take “under-employment” it is even worse. I we know the if people miss getting on the career ladder for just 3 years it can affect the entire trajectory of their lifetime earning potential.

In the US that number is 17%, which is still too high.

Add unemployment to debt. Student debt alone in the US is now $1 trillion, which $100 billion being added / year.

These types of trends are unsustainable.

I believe that market conditions drive innovation as much as great entrepreneurs do. As they say, “necessity is the mother of all invention.”

So those underemployed people who have part time jobs but need more wages will gladly take on 5 dogs / week in their house on DogVacy.

The person who is between gigs will gladly drive people on Lyft or offer out their spare bedroom on airbnb.

Consider the case of Tradesy founder Tracy DiNunzio who could only launch her startup by giving up her bedroom for a year and earning $28,000 that allowed her to not have a full time job that year.

If your closet is full of clothes and your credit card is full of debt – of course you’re going to trade clothes with other people rather than only buying new stuff.

What are the Types of Collaborative Consumption Companies?

I broke down the types of CC companies into 5 main buckets today to give a framework to think about your startup if you’re entering this space:

1. Tapping into global markets – There are talented people in the world who can’t earn a “global market rate” for their services but when you open them up to global demand – boom! An obvious example of this is oDesk. Another is DeviantART who are able to tap into hundreds of millions of people around the world who produce art and help them making a living. That’s why dA has nearly 70 million monthly actives producing 2.5 billion page views making it the largest communities of artists in the world.

2. Empowering the under-employed – I spoke about this briefly already. When you have millions of unemployed youth plus millions more not earning a high-enough wage they are going to find ways to make extra money on the side by running tasks, sitting dogs or reselling their closets. Market meet reality.

One area I didn’t talk about in the presentation that really interests me and seems underserved is helping to empower senior citizens. We know that this generation has retired without enough savings. We see our seniors increasingly at Walmart or Starbucks check-out lines. But who is going to put these people back to work part time in their homes and one their phones – tapping into beautiful brains that don’t have the same physical abilities they once did?

3. Moving from hierarchic to flat structures – Some of the peer-to-peer markets are driven where a flat structure is better suited than a top-down model. Here I talked about Lending Club where I understand hedge fund managers are now deploying capital to lend directly against pools of borrowers.

But an equally obvious case is BitCoin where people who live in Iran, Syria or Libya may rather put their money into non-governmental units (even knowing the risks) than to trust their local governmental leaders to protect their assets from inflation or seizure.

4. Breaking down markets requiring physical barriers – I am also very interested in cases where people break down physical barriers that limit wages of instructions while costing too much to students. The obvious cases I mentioned are ones like Udacity but I believe this trend will encapsulate personal trainers, financial planners, depression or substance counsellors, etc. Anywhere where the service provider can earn more at a lower margin by proving more service to the masses.

5. Making existing markets more efficient – There are of course markets that have always existed – like the taxi or limo service markets – that are simply being made much more efficient through companies like Uber.

Will this Trend Last?

In my mind there is no doubt this a lifetime trend.

Venture capital will be easy and then hard. The press will romance the topic and then spurn it.

That always happens.

But the key drivers: un / under-employment, personal & governmental debt, globalization, resource scarcity, transparency & shifting demographics will mean collaborative networks will form throughout our life.

It is the antidote to top-down control.

I also spoke about the trend of open communications from radio to TV to telephony. I believe the natural success to that is Twitter more than any other technology of our generation. It is open and empowering. But with empowerment also comes awareness of what others have that you don’t. Which leads to disenfranchisement. And rebellion.

Think Tunia, Egypt, Syria and now Turkey.

Transparency can breed discontent.

And the solutions to many of the worlds problems will come from the people as much as from governments.

Collaboration. We’ve only just begun.

How Will it Evolve?

I did spend some time in the presentation to how consumption networks will evolve. It was my sixth trend and one I really believe in. In a world where P2P networks threaten existing business value chains some companies and systems will disppear.

But there are always ones who adapt and thrive. And if you can create a company that can help existing players jujitsu their nimble startups you’ll do well.

One such company is Deliv. They are taking the same approach as an Uber or Lyft (finding drivers who want to earn a bit more) and in stead of matching them up with consumers they match them up with local retailers to deliver goods to people’s homes.

Think about it – most retailers can’t compete with the scale and costs of Amazon.

But they do have a local physical location in your neighborhood.

And what if you could meet the holy grail of same-day delivery for the same cost as overnight on UPS.

That’s what Deliv enables. Retailer wins. Driver earns extra income. Consumer gets same-day deliver.

Win.

I suspect you’ll see many more companies helping business tap into consumption networks in the years ahead. Companies like this don’t capture the sexy headlines in the same way as cars with pink mustaches on them. But they do tend to build large and profitable businesses.

(Cross-posted @ Both Sides of the Table)

CloudAve is sponsored by Salesforce.com and Workday.

• We’re So Sticky.  Once we’re in, it’s so hard to rip us out.

• Our Churn is Basically Zero in the Enterprise.  We’re doing great because No One Leaves.

If you’re coming from a Freemium background, or B2C, that will sound amazing!  Compare Freemium churn rates of 2-3% a month, to Enterprise SaaS net churn (including upsell / upgrades) that is often less than zero … man it sounds like those Enterprise customers don’t go anywhere.

And in truth, they usually don’t go anywhere for 1 or 2 or even 3 years.  And if you’re not playing a Long Game, you can stop here.  If you close Starbucks, and they invest 3 months getting up to speed on your product, and you see real usage — they’re not going anywhere for now.

But here’s the thing.  That’s not enough.  For two key reasons:

First, if your customers aren’t happy — They’re Prisoners.  It’s a term well known to Net Promoter Score advocates.  These are unhappy customers that aren’t willing to switch to another vendor, it’s too much work.  But they won’t pay you another cent unless under duress.  They won’t recommend you to anyone.  And what happens is you’ll lose all your Second Order Revenue.  You’ll lose 50-70% of the total direct + indirect revenue you could have gotten out of a truly happy customer.  More on the huge revenue loss from Prisoners that doesn’t show up in the direct short-term numbers here.

Second, switching today is hard.  But switching eventually is easier than you think.  Even if you don’t have a great competitor today, you will in 2-3 years, or sooner.  Eventually, there will be enough resources on your customer’s side to switch.  Maybe not on a dime, or even in a year.  In fact, a lot of times, due to deployment and renewal cycles, you don’t even see Enterprise churn until Year 3 — see more on that here.  But switching is not as big a deal as you think it is, 90% of the time.  You won’t see this if you’re focused on the short term.  But it’s a big deal if you’re Going Long.

If you really think your app is so sticky, ask vendors of sticky apps what happens when their champion at a customer leaves, and a new VP comes in that prefers their competitor.  You know what happens?  They switch.

Here’s my only point, because I hear it again and again.  Don’t take a false sense of confidence in the Enterprise just because your churn seems low / negative.  Or just because you’re automating a complex business process.

It’s easier to switch that you think, given enough time.

Your only choice is to make your customers truly happy.  And see it rewarded in declining churn rates and increasing upgrade rates as measured over 3+ years.  It will take you a long time to really see this.  Your board and investors probably won’t even be able to see it.  But if you’re Going Long — it’s almost all that matters.

I’d like to hear more about that, about quantitative customer happiness.  Net promoter score is one, albeit flawed, vehicle.  There are a number of exciting new start-ups working on this.

And I’d like to hear a little less about gates on the way out.  Because that captures exactly $0 of the second-order revenue.

And a lot less about how amazingly low your enterprise customer churn is.  Because of course it is.  In years 1 and 2.

(Cross-posted @ saastr)

CloudAve is sponsored by Salesforce.com and Workday.

The conjecture may be correct. The NSA, the FBI, TLA and ETLA might be plugged right into the data centres of the internet’s giants, slurping down your messages, searches and calls. If they are, that’s potentially serious. But we don’t actually know that they are, yet. Until then, reporters, bloggers, analysts and pundits are speculating and considering implications. That’s a good and useful thing to do. But they really need to stop suggesting that they’re reporting facts.

Whether PRISM turns out to be as wide-ranging as suggested or not, a lot of confusion is being caused by misinformed, malicious or badly phrased speculation. There is rarely smoke without fire, but real damage is being done here. As David Meyer notes in a piece for GigaOM this morning,

“All of this is likely to prove very problematic indeed for U.S. cloud firms trying to push further into the European market.

Imagine you’re a European government wanting to move your IT systems into the cloud. For some, nationalism and protectionism already come into play at this point – witness the French (of course) and the two national clouds that they have under development.

Now imagine you’re a U.S. firm trying to drum up business in that context. You can say you have an EU data center and you’re even willing to set up a mini-cloud in the country, just to put everyone’s mind at rest. You can say it and you can mean it, but can you really be surprised when you get laughed at because everyone now sees U.S. internet companies as being in league with the NSA? Even if you’re Amazon, which isn’t part of PRISM, you have a problem.” (my emphasis)

Most countries around the world have a legal means to access data stored on servers operating on their soil. The degree of judicial oversight – or evidence – required varies widely from one country to the next, but it is widely accepted that law enforcement agencies should be able to gain access to data under certain circumstances. It was also widely believed that this doesn’t actually happen terribly often.

Alleged information on PRISM obtained by The Guardian would suggest that this programme is able to go much further;

“Companies are legally obliged to comply with requests for users’ communications under US law, but the PRISM program allows the intelligence services direct access to the companies’ servers.”

The piece continues,

“The PRISM program allows the NSA, the world’s largest surveillance organisation, to obtain targeted communications without having to request them from the service providers and without having to obtain individual court orders.

With this program, the NSA is able to reach directly into the servers of the participating companies and obtain both stored communications as well as perform real-time collection on targeted users.”

Over in the States, the Washington Post makes even more extreme claims;

“The National Security Agency and the FBI are tapping directly into the central servers of nine leading U.S. Internet companies, extracting audio and video chats, photographs, e-mails, documents, and connection logs that enable analysts to track foreign targets, according to a top-secret document obtained by The Washington Post.” (my emphasis)

Companies such as Google and Apple, originally accused of active cooperation, were quick to issue carefully worded denials, explicitly challenging the ”direct access to… servers” claim. The New York Times, at least, is being careful;

“The New York Times has not confirmed the authenticity of the documents, and several of the Internet companies issued statements strongly denying knowledge of or participation in the program.” (my emphasis)

Elsewhere, headlines, ‘news’ and editorials leap gleefully into the melee, proclaiming that government agencies are ‘lying,’ warning that data is being read by the NSA and FBI, accusing tech firms of collusion, and worse.

I don’t know the extent to which the powers attributed to PRISM are real. I also don’t know how often — if ever — they’ve actually been used. Nor do most of the others commenting so knowledgeably on this story. Just bear that in mind, as you read what they write.

Prism image contributed to Wikimedia Commons by ‘Ffffnm‘.

Related articles

• PRISM – US Gov. mining data from Google, y, msn, skype, youtube, and FB (washingtonpost.com)
• Google, Facebook And Apple Deny Participation In NSA PRISM Surveillance Program (techcrunch.com)
• PRISM program lets FBI, NSA secretly mine data from 9 U.S. tech companies (report) (venturebeat.com)
• How the NSA lied about not tracking Americans with PRISM (venturebeat.com)
• NSA spying scandal fallout: Expect big impact in Europe and elsewhere (Updated) (gigaom.com)
• How likely is the NSA PRISM program to catch a terrorist? (bayesianbiologist.com)
• How Congress unknowingly legalized PRISM in 2007 (washingtonpost.com)
• Secret program gives NSA, FBI backdoor access to Apple, Google, Facebook, Microsoft data (theverge.com)
• NSA has direct access to tech giants’ systems for user data, secret files reveal (guardian.co.uk)
• By the numbers: The NSA’s super-secret spy program, PRISM (foreignpolicy.com)

(Cross-posted @ The Cloud of Data)

CloudAve is sponsored by Salesforce.com and Workday.

The advice I tends to be very specific to the product and industry.  For example, I urge entrepreneurs (who are very smart and creative) to resist the urge to get smart and creative when it comes to pricing.  Prices are the way they are for a reason, and it’s usually a good one.

Pricing “on the nines” (e.g. $19.99 instead of $20) seemed like an arbitrary, transparent, probably ineffectual practice…until scholarly research showed that it worked.

The meta-advice I give is to price the way that customers are used to.  For SaaS, it’s per month or per user per month.  For mobile apps, it’s a single up front charge.  For hardware, it’s a simple purchase price.

So assuming you’ve figured out the shape of the price, how do you figure out the quantity?  Here are three foolproof ways:

1) Powers of 10

My first shortcut is always to ask the entrepreneur to react to different orders of magnitude.  Would people pay $1? $10? $100? $1,000? $10,000? $100,000? $1,000,000?

Even people who claim they don’t know how to price can pinpoint a power of 10 that represents the ballpark price.  A Nintendo game, for example, ought to cost something like $10.  $1 is insanely cheap, and no one would pay $100.  Simple, right?

2) Powers of 2

Once you’ve established a ballpark, you need to figure out an optimal price.  This technique is taken from Nathan Berry’s guest post on A Smart Bear:

“I always ask myself, “If I were to double the price (from $0.99 to $1.99), would I lose more than half the sales?”

If the answer is no, then I double the price. Fewer customers can often be a good thing, especially when it comes to fewer support requests. Also, a higher price tends to attract a higher quality customer.”

This is great advice.  Whenever one of my guru friends complains to me that his/her speaking schedule is too busy, I simply tell them, “Double the price and cut the number of gigs in half.”  I even applied this technique for myself recently.  I’m on my friend Dan Martell’s service, Clarity.fm:  When I decided I wanted fewer calls, I simply doubled my price.  If that doesn’t work, I’ll double it again.

3) Flinch pricing

This only works when you’re face to face.  The idea is to keep ratcheting up the price until the customer visibly flinches.  This was made most famous by Oracle.  “The cost is $1,000…per application…per CPU…per month.”  Just make sure you’re not too obvious about it!

(Cross-posted @ Adventures in Capitalism)

CloudAve is sponsored by Salesforce.com and Workday.