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PART THREE: WHERE’S MY DAMN PÂTÉ?

April 13, 2021

By Peter Zaballos

TALES FROM THE EARLY-ISH DAYS OF SILICON VALLEY

As the visibly angry man stormed across the break room holding an empty plastic container, I heard him bellow “where’s my damn pâté? Who the hell ate my pâté?”

It was the summer of 1985. I had arrived at this potential LSI Logic customer, Ardent Computer, minutes earlier and was walking with their head of engineering to a conference room to discuss the custom semiconductors they were interested in building.

What Al Michaels so desperately craved

And that man in search of his pâté? It was none other than Al Michaels: a silicon valley legend who had founded Convergent Technologies, a pioneer of multiprocessor computers. 

And his ego — I realized just then — was as large as his reputation.

The head of engineering and I went to the conference room and he described the basic system architecture of the multiprocessor supercomputer and high performance graphics subsystem they wanted to build. They needed custom semiconductors to build the vector processors needed for the graphics subsystem. And there was a sense of urgency here.

You see, Al and his founders had this idea at almost the same time Bill Poduska decided to build a similar supercomputer in Boston. Bill was also a legend in computing, having founded Prime Computer and Apollo Computer. Al and Bill were effectively racing to market, believing the first one to deliver on their promised performance would get the majority of the huge potential.

But that was pretty much 10am on any random Tuesday back in the mid-to-late 80s in silicon valley. 

The advent of rapidly customizable semiconductors had unleashed a tidal wave of innovation and startups, all rushing to market. With everyone predicting their product would be the big winner and they’d deliver thousands and thousands of products, even millions, to their customers.

As I mentioned in my earlier blog post, all these companies forecasting huge volume were a blessing and a curse for a semiconductor company. There is a finite amount of capacity in a semiconductor fab, and more than one chip company went under by making poor choices about who to allocate that fixed capacity to. Allocate it to a company that failed in the market and your fab would be empty and your company would have no revenue. Allocate it to a company that succeeded and you’d have that fab running 24/7 shipping crates of completed product.

The ’90s would not be kind to Stardent

So while the head of engineering was explaining the nature of the chips they needed built, the sales rep and I had been trained to ask a lot of questions to understand their readiness – where were they on staffing, how complete was the system design, what other dependencies did they have on getting to production, who their investors were.

Our sales reps were bringing multi-million dollar deals to us almost every day. Or rather, “potential” multi-million dollar deals. Part of my job running marketing for Northern California was trying to assess these deals and then sorting out which ones looked the most likely to succeed.

But in reality, it was like I was floating in a fast moving stream and all I was doing was trying not to drown. Too often I would follow the path of a deal rather than affect the path. I was young. I was still finding my voice and experience base. So more often than not I would let momentum dictate the path of a deal

Eventually all deals would flow into a review with all the other marketing managers, the head of sales, the Bill O’Meara (CMO) and at times our Wilf Corrigan (CEO). Frequently my counterpart in sales would make the case for the opportunities in my region – these were their customers, and their literal paychecks on the line.

Ultimately it would fall to Bill and Wilf to make the harder calls. A lot of the less difficult ones my peers and I would work through with Brian Connors and Perry Constantine who headed up sales.

But when I look at my role honestly, I did not do a lot of the advocating, and instead worked furiously to help support the path the deals were already flowing in.

Just as Al Michaels and Bill Poduska were competing to get to market first, I was competing with my colleague, Rick Rasmussen who was responsible for product marketing for the east coast at LSI. Stellar Computer was his potential customer. And we both were likely to need the same allocation of fab capacity. 

One of the many reasons I loved the culture at LSI Logic was that we were fierce competitors – in the market. But inside the company there was none of that fierce competitiveness across departments or within departments. We all knew what we were trying to do, and it was to create a blockbuster category and the company that dominated it. 

So while Rick and I were competing fiercely for this fab capacity, there was zero animosity between us. In fact, Rick and I were good friends, Rick was the guy I worked with at Fairchild who got recruited to LSI Logic, and it was Rick who recommended they bring me over from Fairchild. [Rick and I would work together at C-Cube Microsystems later in the the 1990s]

But make no mistake, we each knew fab capacity would be tight and we wanted our respective customer to be first in line.

Once I had enough information, I put together a proposed set of pricing for the chips Ardent needed. Our proposals had two components

  • The fee to produce the prototypes. This included time in our design center, support from our applications engineers to help with any design issues, the time to run the simulations on our IBM mainframe, the cost of developing the metalization layer mask set for production, and finally, a small wafer set run through production.
  • The per-unit price of the completed chips in volume production. We would ask the prospective customer what their forecasted volume ranges would be – and these typically spanned 2-3 years, and then price the chips accordingly.

We pioneered the category of these custom semiconductors and were acknowledged as the market leader, and we had competitors who were nipping at our heels quite aggressively. I had surmised from my conversations with the folks at Ardent that we were the favored supplier.

But LSI had this weird pricing schizophrenia. We tended to come in with a proposal that presumed that as the pioneer and leader, we could charge a premium. And we would generally submit pricing proposals with a pretty hefty premium. The customer would get the proposal and be shocked at how expensive it was. So they would head straight to our competitors and come back with a set of pricing from them that was 50% of what we had proposed.

And what would we do? We’d drop our prices 50% to take the deal. I was in my mid 20s and I just didn’t know any better to question this. Knowing what I know now, this was a stupid self-inflicted wound and the today “me” would have stopped the process and asked a lot of questions about whether we really thought this was a fair price, did this price represent our brand and values? But 26 year-old me was all wrapped up in the headiness of crafting deals like this and working with everyone to bring them home.. 

I think the origin of our approach to pricing was\ simply hubris. We invented the category. We absolutely knew we were hands-down the best. So I think our corporate ego demanded that we price with a hefty premium. But that same corporate ego was a ruthless competitor and we hated losing business.

It was a stupid move because those customers would react to our suddenly cheaper proposal with a wary eye. “What was that first proposal then? If I had gone with that I would have been paying twice what I am now, and you wouldn’t have told me?”

And that’s what happened at Ardent. My followup meeting with the head of engineering was awkward. He said that Al Michaels was incensed at how we had dropped the price and had no intention of giving us the order. The head of engineering was super frustrated and upset. He and I had gotten to know each other well and spent a lot of time together. He really didn’t want this order to go to our competitor, but our whole pricing process had created a huge mess for him.

And remember, Ardent was competing with Stellar to get to market first. Changing to the competitor chip supplier was going to cost Ardent time. And it was going to make the life of this head of engineering miserable.

He and I both wanted this deal to go to LSI. So I asked if it would help if Bill O’Meara came over and met with Al Michaels. At a minimum this would let Al tell Bill exactly what he thought of our pricing practices. And maybe it would help salvage the deal.

So the meeting got set. I drove over there with Bill and our sales rep along with the rep’s manager. We went into Ardent’s board room and got as settled as we could given the awkwardness of the circumstances. The Ardent team trickled in. About ten minutes after the meeting was supposed to start, Al Michaels came in.

I can’t remember who spoke first, but the head of engineering and I each took turns explaining how hard we all had worked to get this proposal together, how much we respected the other’s time and attention.

Al cut in and said – in the same tone and volume he had expressed astonishment his pâté was missing – “These platitudes are nauseating. We’re here because you’ve wasted our time, which we don’t have a lot of. We worked with you for the past few months on this deal, and you show up with pricing that was so high it was insulting. And then you have the nerve to come back and cut your price in half – only because we got a competitor to give us a reasonable price. How can we possibly trust you? I’ve checked around and we’re not the only company you’ve pulled this on. But the real crime here is our wasted time.”

The room went silent.

Then Bill spoke up. 

A bit about Bill. He was one of the four co-founders of LSI Logic and he was not a silicon valley wunderkind. He got started late in his technology career. Bill was a graduate of West Point. The license plate on his car was USMA59. He had learned to lead, he had learned how to earn the respect of his troops. How to motivate and inspire. He was whip-smart and had an equally sharp sense of humor. If you looked up “inspirational leader” in the dictionary, there would be Bill’s photo.

And as you might expect from someone who had been responsible for other people’s lives, he had a disarming ability to connect with people. When you were speaking with Bill it felt like you were the most important person in the world to him right then. Well, because it was true. He was a phenomenal leader.

And as I shared with my Gucci Luggage experience, he had an unshakable sense of ethics. He took full responsibility for his mistakes, and in this case, the mistakes of someone in his organization – me.

He began with “you are right to be outraged and to question whether you can trust us. It was wrong for us to give you such a high priced first proposal and I take full responsibility for how we got here. We were full of ourselves, overconfident and we clearly have to clean up our act. You have my commitment that whether we win this business back or not, we will do the work we need to in order to not repeat this with you or anyone.”

“But I can tell you one reason we priced the way we did is because we also know that we are the best at building custom semiconductors. We invented this category. We have the most reliable technology and process. And we realize your time is precious. What you can count on with us is that once you commit that design to silicon, it will work. And we can scale your production. You can count on that. I’m sorry we broke your trust, but I can assure you we can get you to market faster than anyone.”

Acknowledging our mistake and owning it created an aperture that enabled another twenty minutes of conversation between Bill and Al. The meeting ended and Al said they would have a decision within the next 24 hours.

I believe this meeting was a turning point for LSI Logic. We did examine our proposal process and amended our pricing – not to meet our competitors – to be more competitive with our first proposal.

What Bill didn’t say? What role I had had in the proposal or the role the sales rep and sales manager had had in the proposal. He took complete responsibility. And I believe he did this for a simple reason. If we won this business the salesperson and I were going to have to show up at Ardent frequently. He preserved our relationships.

The story of Silicon Valley

And while the semiconductor project moved forward, Ardent’s overall product development struggled for reasons not related to our semiconductors. They battled getting the cost of the system down, and as a reset their system design ran into some serious delays.

It turns out so did Stellar’s. In their race to market both companies ran into similar system design challenges. And they were burning cash at a furious rate.

The companies combined forces and changed their name to Stardent (a horribly clunky name, but one that could be logically explained). And they, like so many other promising startups went out of business in the 1990s, a victim of being too expensive for the performance they delivered.

I learned a lot from this experience. I learned about leadership and personal relationships that would eventually show up when I was an executive.

Bill O’Meara’s owning up to when he or the company was wrong, owning when he screwed up made a deep impression on me. In a lot of respects he passed along to me his definition of “ accountability” he learned as an Army commander – something that I would never personally know. And as important he imprinted on me his ability to accept personal responsibility for a mistake someone in his organization might have made. 

More than once as an executive I have had to say “I screwed up” or “I made a mistake” – whether I personally made the mistake or someone in my organization did. As the leader of that organization it doesn’t matter who made the mistake. Ultimately the mistake is mine.

Years and years after hearing “Where’s my damn pâté” the Ardent fiasco informed my behavior when I was CMO of SPS Commerce. One of the super, super talented product managers on my team was about to introduce a fundamental redesign of our core product – a product tied to 80% of our revenue. The stakes were incredibly high. We were a public company and this product launch had to go very smoothly.

The week of the launch, I pulled the product manager aside and told her “This is your product, you’ve put 18 months into leading and orchestrating the redesign and have done a fabulous job. This week as you’re on stage launching this to the company and all our customers, I’m not going be anywhere visible. This is your product and your time in the limelight. But if anything happens, if anything goes wrong for whatever reason, I will be out front and be very visible. So go out there and soak it all in, and do that knowing I have your back the whole time.”

And because she was so damn good at her job, that whole week no one saw me.

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Posted in brand development, Business planning, category creation, fear of not succeeding, Intellectual curiosity, meaningful failure, Self-knowledge, Strategy, Success, Values | 1 Comment »

PART TWO: DID WE JUST HEAR THAT?

April 7, 2021

By Peter Zaballos

TALES FROM THE EARLY-ISH DAYS OF SILICON VALLEY

Managing the product marketing at LSI Logic for silicon valley and the greater Bay Area in the 1980s was equal parts daunting and thrilling. I wrote earlier about how groundbreaking LSI’s custom semiconductor technology was and how it helped unleash a massive wave of innovation across the landscape of computing.

LSI made it possible for a startup to come up with a product, and build it in just a few months. We helped lower the cost of starting a company, and shortened the feedback loop to that company finding out of their product hit the mark. And at this point in the computing industry, Apple had proven the merits of a personal computer with the Apple II (launched in 1977), and IBM validated Apple’s direction by introducing the IBM PC (launched in 1981).

But the world (and users) needed so much more to make these tools really productive. Bigger disk drives. Better graphics cards. Support for printers. So these Apple and IBM – along a host of other IBM PC clone makers (Texas Instruments, AT&T, Radio Shack, HP, Commodore,..and literally 100+ others) – stormed into the market to get their share, and add their value.

And the rapidly customized semiconductors we invented at LSI Logic fueled and enabled them all. It seemed like every new customer we met with was planning for a big future – either with a truly novel new product or a quick copy of someone else’s – they all had production volume forecasts in that classic “hockey stick” growth curve. 

I was a year or two out of college, and my days were spent meeting with customers or prospects, spending time with our salespeople, and crafting six and seven figure revenue deals those hockey stick volume curves promised.

It wasn’t exactly a bubble forming, it was more that entirely new categories of computing appeared on the scene, and there was a scramble to fill the voids this innovation created. The two big areas we saw our customers furiously attacking were the markets for graphics cards and disk drives. I was literally in meetings from 8am to 6pm every day with companies bringing products to those markets.

[And I learned that this would be my “normal” for most of my career. In meetings all day accumulating work to follow up on, then spending most of the night and early morning getting all that work done. This really never changed. In my last two roles as CMO of two tech companies it was the same. All that changed was the nature of the work I was doing, but the pattern remained the same throughout.]

And unlike today’s elastic cloud computing world of software where supply is never an issue, in the semiconductor industry, supply is always the issue – just ask anyone in the auto industry, like General Motors, right now. There’s a finite number of chips on a wafer. A finite number of wafers that can be processed each day. And capacity increases are generally measured in “buildings” – so ramping capacity takes lots of time and lots of money.

So while we were furiously meeting with all these companies storming into the graphics card and disk drive markets, we were also having to assess their likelihoods of succeeding, and try to figure out who would get what allocation of our finite supply of wafers. This was a real issue, 98% of these graphics card companies went bankrupt or were sold for scrap eventually. The same for disk drive companies.

Consolidation in the disk drive industry at a high level

Allocating capacity to a company who failed in the market meant we would not ship those wafers/chips and collect OUR revenue – and as a public company, our revenue forecasts mattered a lot. So every new piece of business of any significance was something we all scrutinized, frequently meeting with the CMO (Bill O’Meara) or the CEO (Wilf Corrigan) before closing a deal.

The flip side of that was every company we met with was convinced (as they should be) that THEIR revenue plan was rock solid. And since it was a competitive market (generally we competed against smaller firms like VLSI Technology, or the custom chip divisions of larger semiconductor companies, like National Semiconductor) we had to fight hard to get orders.

This all created a wild environment, and whenever there’s loads of demand coupled with a constraint on supply, weird behavior starts to show up.

DID WE JUST HEAR THAT?

I remember going to meet with a customer in Berkeley who made popular graphics cards. I went with our sales rep who happened to have recently come to the US from Ireland and I think part of his enjoyment was experiencing this industry in the context of American culture. He was super smart and had an awesome sense of humor. He picked me up and off we went up the freeway to the customer.

The salesperson, Fra Drumm, had been meeting with this customer for weeks, and had been told they were ready to place a $1M+ order for a new graphics chip they wanted us to make for them. And they were also speaking to our main rival, VLSI Technology. It was going to be super competitive. This was an important piece of business we wanted, and we’d had a meeting with Bill O’Meara reviewing the terms we were going to propose and what room we had to negotiate. 

Bill wanted me to call him as soon as we left the meeting to let him know how the negotiation went.

Vintage Gucci Luggage Set

We got to the company and were seated in the Purchasing Manager’s office, made introductions, and quickly reviewed the outlines of the potential order. When we pressed for an indication of how competitive we were the Purchasing Manager waited a bit, and then said that they liked Gucci luggage. And I thought, “not my style, but lots of people like it” and I said something like “that’s interesting, a lot of people love that.”

Silence

The Purchasing Manager again said that they liked Gucci luggage.

I glanced over at Fra real quickly and he gave me a look that said “WTF? Did we just hear that?”

It dawned on us both, at that very moment, that we were being asked to buy this person some Gucci luggage to get the order. 

And we both had the same reaction. We quickly apologized for having to leave, but we had another meeting to get to and would be in touch.

And we left.

I was pretty bewildered. There was no way I was going to bribe this person, but I also wondered if I had blown up a big piece of business over the cost of some luggage, and immediately got worried about the reaction Bill and the other sales leaders would have to this.

This was right about the time that “car phones” were a thing, and when we got into Fra’s car I dialed Bill and told him about the Gucci luggage “hint.”

He asked what I did, and I told him we got out of there as fast as we could.

He had a quick and curt reply: “Good” followed by “that’s not how we work.”

At the time I was relieved. It is only with hindsight that I can see that something I had taken for granted was the integrity of Bill and the other leaders at LSI Logic. I’d only known Bill for months, and never really had an issue like this crop up. It was reassuring at the time, to say the least. BTW, that graphics card company was out of business within the next year. We dodged an allocation bullet there.

But as I progressed in my career I came to realize just how unique the culture at LSI Logic was. How important it was that we built that business with integrity.

At some point in the next year one of the sales reps at a distribution partner got ahold of the price list for VLSI Techology’s products and brought it to our office. For a nanosecond we were thrilled. When Wilf Corrigan found out about he was livid (and he was unambiguous with his anger) and instructed us to get it out of the building. Now. Which we did. Unambiguously.

Going back to Bill O’Meara’s reaction, he provided me with an internal reference for how to behave under pressure, how to keep clarity on what really mattered. At various points in later in my career I worked in organizations where I witnessed salespeople lying to get orders. In some cases lying to me in my role as an executive to get an order. And in those organizations the CEOs did not have Wilf and Bill’s integrity, and reacted with “but we got the order.”

No surprise that I left those companies and wondered how I chose to work there in the first place because it is critically important that you work with people who have uncompromising integrity. Because every business runs into problems. And it’s when you’re facing those problems you want the people above and around you making decisions you can stand behind.

That was the best Gucci luggage I never bought.

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Posted in Business planning, category creation, Failure, fear of not succeeding, Intellectual curiosity, Strategy, Values | 2 Comments »

Why marketing is a lot like software development. By Peter Zaballos

March 14, 2018

Four reasons why marketing is as important as code for tech companies.

We’re living in the golden age of marketing right now. The mechanics of marketing and its impact on the business have changed dramatically in the past three years. Put another way, when I hire marketing talent, anything anyone has done more than 3-5 years ago I literally don’t care about or evaluate.

In the past few years I’ve seen marketing shift its focus from providing air cover to sales teams to now being the group within the company that’s determining the messaging and tactics that salespeople can best put into action. The data tells everyone what’s effective, impactful. Fewer opinions, more facts.

SW DEV STRIP

There are four reasons for this:

First. Marketing is a quant business. Everything is instrumented – you know who is responding to which offers, who is engaging with what content, what paths they take. Over time you can correlate engagement to value, and use data to find where and how prospects find you, and what signals the right time to present them with an offer or a call to action. This is a quant-jock’s delight. And data analysts are the new “must-have” role on a marketing team.

In today’s marketing you also have the advantage of short feedback loops which lend themselves naturally to an Agile approach to campaign management. Deploy a campaign, use data to validate assumptions, refine the campaign, repeat. My last marketing team collaborated with our DevOps agile coach to embrace the sprint/retrospective approach, and the team held daily stand-ups to ensure they were cohesive and focused on the most valuable activities.

Second. Google, whether we like it or not, is enforcing quality. What this means is that Google’s ability to interpret page intent is staggering. You genuinely need to be developing content paths that answer the questions your audience has, and legitimately guide them to a solution. If your bounce rate, or worse, your conversion rate is too high or too low, you’ll get penalized. It’s fundamentally obsoleted the marketing tactics that came before this.

It’s as structural a change as containers have been to DevOps. It’s creating a situation where I don’t care what you did three years ago – the search marketing tactics that worked back then no longer work today. Yes, we’re all still focused on the customer journey, but Google’s ability to assess whether that’s a productive journey you’ve created is what changed. This is a good thing. The companies with clear and differentiated positioning and value propositions, who create high quality content paths will win.

If you’re in marketing and you haven’t embraced this new world of content and data-driven optimization, you can still find a job, it just won’t be an interesting one. Just like in software, if you aren’t a full stack developer, if you aren’t learning new languages every year, you can still find a job, somewhere. It just won’t be an interesting one.

Third. Developing an effective marketing presence requires a system architecture. The category definition, positioning, awareness development, the demand generation – requires an architecture. Your category definition and positioning are that architecture, and inform how you will take your solution to your prospects and customers. Like with building software, you need this architecture to build the services that create the go-to-market “product” – the combination of campaigns and tactics you’ll put into motion.

One of my favorite marketing books is not about marketing at all, or rather, on the surface it’s not about marketing.

Building Microservices

The book is Building Microservices and while its purpose is to help the reader understand this new-ish phase of modern software development, it also describes how organizations can function efficiently. How “loosely coupled, trusted” relationships between organizations can produce resilient, agile performance.

Agility is important. There’s an abundance of data that modern marketing teams have access to today, and scrutinizing this data, and adapting campaigns and tactics are a critical success factor. Add to that just how much the mechanics of marketing have changed in the past three years (due to a large part on the above second point), and you have a landscape that looks a lot like…software development. Containers didn’t exist five years ago at scale. Serverless computing? Same thing.

 

Finally, the impact of marketing takes time to create. Just like any significant software development.  Assuming you have your category defined and your positioning solid, it will take 6-12 months to get scale from your demand gen. That means you’ll be iterating and iterating, refining, optimizing conversion rates, a lot.

It’s never been a better time to be in marketing. It’s never been a better time to be a CMO. You and your CTO will have a lot in common. And it’s likely your CTO will get jealous at some point, with more and more technology, and data, flowing into marketing, CMO budgets might just become bigger than CTO budgets.

 

 

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Product led organizations build categories. By Peter Zaballos

March 6, 2018

Part Four: Product has the obligation to set the tempo of transformation 

Every business needs to have a laser focus on the needs of their customers. Look no further than Amazon, who has a legendary, systemic, DNA around customers. Literally their customer obsession.

A few years ago I had an opportunity to speak with an Amazon exec about the business he was running and the priorities he had in building it. This business was a direct competitor to a business of Apple’s, and I noticed the Amazon exec was using both an iPhone and a MacBook Pro. I asked him, “why are you using products from your competitors, effectively helping fund them?” – his answer was disarmingly reflexive and sincere. He simply stated “why would it serve my customers better for me to use products that made me less effective at doing my job?”

MountEverest

What does this have to do with product led organizations?

Bringing a category to life and Amazon have the same customer focus.

I wrote earlier about when you’re building a category it’s important to not listen to your customers – don’t let them dominate your near term product priorities. You owe your customers the maniacal focus on your bold vision, and bringing that to life over time, not attending to their long list of improvements in their limited field of view.

Which means product will have complicated relationship with sales and customer success. Sales and customer success are faced daily with enormous input and demands about the here and now. And they should focus maniacally on how to win today’s prospect sale and ensure today’s customers get the value they were promised. But the product team needs to be super careful to include only the most critical few of those customer and prospect needs in the roadmap. The category is the high order bit here.

Your category gets built by bringing tomorrow’s promise to life. I’ve seen companies falter and stall when they take their eye off the category defining focus and shift it to the priorities of their sales teams or their customer success teams. Worse, if the next 90 days of your backlog is the only commitment to your roadmap, you’re never going to build a category. You need to have appropriate commitments to what needs to get done three, six, nine, and 12 months from now.

The product leadership needs to behave like the CEO of their product. That means to operate with a strategic purpose and context. Sure, they need to hear the near term need from sales and customer success, but like a CEO, they’re measured on their ability to perform today but also ensure the company realizes its potential. This is so wonderfully captured in Ben Horowitz’ now legendary 20+ year old essay, Good Product Manager, Bad Product Manager. If you haven’t read this. Do so. Now.

Focusing on the bold future can introduce some awkward dynamics to organizations not used to thinking with a category mindset. In a product-led organization, sales and customer success are going to feel pressure to keep up. They’re going to have to become capable and fluent in understanding the trends and priorities that make the bold product vision important. They will need to fully internalize why the category is strategic and important and be able to explain it to their prospects and customers.

In sales or customer success led organizations, the opposite occurs. The product team will need to simplify and reduce the vision and explain the plan using the terms of today. No matter how well you do this, you’ll never build a category. You’ll just hit a forecast. For a while.

I’ve heard some executives at tech companies use the excuse that “we can’t let the salespeople know about the roadmap, because then they won’t sell what we have today.” If that really is true, then that’s the tell-tale sign that the company in question is not a category builder. Because category builders have salespeople who are experienced and savvy enough to sell what you have today, and who can also convey the compelling nature of what is coming. And why buying today’s product puts that customer on a more compelling and secure future.

No one less than Steve Jobs understood this with his typical clarity. Observing that the difference between technology companies that function as sales organizations versus technology companies that function as product companies is that the sales-led organizations will revert to today’s product. They’re not wired to think about or develop big, bold new products.

Companies like Salesforce have mastered “product-led” organizational behavior. Just watch one of Marc Benioff’s keynotes and you’ll see him talking about capabilities that likely won’t be real for years, but speaking to them as if they’re here now. Their salespeople know how to straddle these two realities. They know that you’re going to be better off getting on the platform now and be better off over the years as the promises get delivered.

Product-led organizations build categories, and categories are the product of a bold vision that the marketing organization communicates and aligns the company around, and a product strategy that brings the category vision to life. And that’s good for your customers. Give them something they can’t envision. It’s never been a better time to be a technology company CMO.

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Category creation – Why a messaging pivot is frequently essential. By Peter Zaballos

February 19, 2018

Part Three: The fallacy of “Everything is working, we just need to tell the story better”

So your CEO has articulated a bold vision of what is possible for your customers. Fundamentally different from what they have today. A change so dramatic they can’t imagine it. But you can.

This all got written down. And these words matter. A lot. They didn’t come easily or quickly. At the beginning they were directional, not precise. Intensive scrutiny and many iterations produced the exact set of words that describe the change you envision, and the category you’re creating.

Now you shift your focus to putting those words into action. And those words will inform and bring to life the go-to-market orchestration that will position you as the leader, the creator of this new category. They will inform the demand generation, the events, the company communications and training, and most important, the experiences customers have when they use your product. Let’s call this your category story.

The category story is the collection of words and visualizations that tell the market, your customers and prospects, and critically your employees about your role in bringing the bold future to reality. It’s the core creative idea that fuels any of the forms of the media you will deploy.

A SpaceX Falcon Heavy rocket lifts off from the Kennedy Space Center in Cape Canaveral

The story can and should live in lots of people’s hands. It’s what gets amplified through marketing. Evangelized through events and workshops. It fuel’s the virtuous circle of adoption. It informs every step of the buyer’s journey. It creates the triggering events that makes someone open to switching from what they’re using now, to the future you inspire them to join.

The reality is that a lot of companies formalize their category vision after they’ve shipped their product. After they’ve sold it. After they’ve figured out how to create demand.

When I was a venture capitalist, I lost track of the number of Series B and Series C financings I was pitched where the CEO would sheepishly admit that they’d “shipped their demo.” It worked well enough to get traction and funding. And that part of the next financing was to finish and fix what had gotten them started.

So a lot of companies need to make this pivot to build their category while running their existing business. With demand gen working. Salespeople selling. Customers using the product. Going back to what I wrote in Part One, category creation is for the bold and means you’ll need to make some pretty scary choices to leave the familiar past behind to realize the category’s potential.

It’s crucial that you amplify the category value proposition. Not the tactical value prop that got you here. The chief warning sign that’s you’re falling into that trap is believing…

“Everything is working we just need to tell the story better.” 

But that’s the wrong story. The old story is made up of well thought through campaigns and tactics, but without the purpose of creating your category dominance. The old story may produce near term success, but it sure won’t build your category.

This is the “make or break” juncture for the business. You can certainly amplify the tactics that got you to where you are today. Increase the paid search budget targeting potential buyers of today’s tactics. Scrape for more organic visitors by tuning the search performance of your pages to the value prop of today. Train your salesforce to sell what got you to where you are today.

You’ll just dig the hole you’re in a lot deeper. You’ll acquire customers and partners who aren’t aligned to your category vision. Who won’t evangelize it’s potential for you. Whose product and service feedback will be a distraction from your category progress.

So when I’m asked by executives and CEOs about how to scale their growing business and how build awareness of the role their solution plays in the market, I always go back to “what is your category and how is that aligned with your growth campaigns?”

This is where the CMO’s marketing organization needs to carry the responsibility to transform words into bold actions. If you start from anything else, you’re applying bandaids to a wound that won’t heal, and will instead get worse. And more bandaids won’t fix that.

With category alignment you can build kickass marketing campaigns. Your events will bring your ecosystem together and send them off evangelizing your value. Your paid search and your organic search will be aligned and fill your demand gen funnel.  The C-suite at your prospects will see the value in standardizing on your solution.

That’s the kind of foundation durable leadership can be built. Category leadership.

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Posted in brand development, Business planning, category creation, fear of not succeeding, Intellectual curiosity, Venture capital | 1 Comment »

Category creation and the value of not listening to your customers. By Peter Zaballos

February 15, 2018

Part Two: Your vision is strategic, your customers’ vision is tactical

In my earlier post on category creation, I touched on how critically category creation depends on a bold strategic vision owned by the CEO. And that vision gets taken to market through a product that delivers a fundamentally different experience and value to customers from what they have today.

This is hard because your customers live in the world of today. With the product you have right now. That’s what your salespeople sell, and your customer success teams support.

But creating a category is about delivering something so much better than “today.” Ambitious, bold companies learn to live with and take advantage of the ambiguity separating today from the bold future you see possible.

Spot Mini opening door

And given the role the product strategy plays in creating a category, a disproportionate responsibility falls on the product and marketing teams. As a result, there are some subtle but critical factors a CMO needs to take into account.

First, do a 12+ month product plan.
Creating a category involves envisioning a future your customers can’t see. But you can. So fundamentally you are creating a product strategy – a framework that extends from today into the not so distant future.

This means, if you’re using Agile, you look out 12-18 months and understand what are the core capabilities you’ll need to figure out and master. How many of those require foundations to be built now? Work back from those to your field of view 6-12 months from now, and the deliverables will be clearer. More specific. The dev and product teams will have a clearer sense of what is straightforward, understood and what is hard, unknown.

Now look at the 3-6 month timeframe. Here you should have a pretty clear sense of scope and difficulty. The iteration in thinking between 3-6 month windows and 7-12 month windows will likely reveal some dependencies and challenges.

Finally, you can think through what the next six sprints need to look like. Here you’re going to be fairly specific about use cases, personas, and technical scoping.

Every two weeks get everyone together and review where you are on the journey. Both with what has shipped, and what customers are telling you. Customer feedback is essential to checking your assumptions on the 3-6 and 7-12 month release plans. This is super important, and plays into the next two sections below.

If you don’t think Agile works this way you’re wrong. Here’s an awesome podcast from Command Line Heroes laying out Agile and why it’s suited for what I describe above. Agile isn’t about two week fields of view. It’s about rigor and discipline about what you’re doing every two weeks, and how you’re doing it. To have working software validate assumptions, or invalidate them.

Second, don’t listen to your customers
Does this contradict what I just said above? No. Your customers are helping you validate assumptions about your vision. What you don’t want to listen to is their long list of things they wish were better with the product you have right now. Category creation is about bringing something fundamentally different to market.

Customers want what they can see in front of them to be better notdifferent. They see what is sitting right in front of them. That’s what your sales people sold them. That’s what your customer success teams support.

When building a category around a bold vision of what’s possible, the sure sign you are losing your way is to devote most of your time into making your existing product better. And if you listen only to that or let customers drive more than 10-20% of your backlog or dev capacity making the product better, well then you’re not building a category.

Worse, driving your product priorities around “better” means you’re ensuring you will be competitively vulnerable. Then you’re really just building a business around your competitors. Because they too can listen to customers about today. About chasing better, not delivering different. If you focus on better, you’re building an product line that is structurally vulnerable to competitors. You’re solving for now. Not the future.

Third, test your roadmap
With the majority of your roadmap devoted to bringing your category to life, you can now devote your customer engagement to testing your category assumptions. Which also means testing whether or not your vision for what is possible is truly compelling.

Testing your roadmap with customers is a way to make sure your 3-12+ month release plan has integrity. It can confirm or question the validity of your core platform and functionality assumptions. It’s about being inherently curious. Being a voracious learner, and where being an optimist and not a cynic finds a comfortable home.

So that means being super hard core about why your roadmap, working all the way back to the next sprint, is creating and testing the building blocks of the future. The different. You may be shipping a “better” feature that customers care about today, but is there a way to build that “better” improvement in such a way that it also helps inform your progress towards “different?”

At every step along the way. From today’s standup to next year’s category-defining product launch has to be threaded through “am I staying focused on different?”

Go into this not being burdened with what you see today, and instead be driven by an optimism of what’s possible.

Your category vision should invigorate you, your team, and your company every single day. Your category vision should invigorate your customers and entice your prospects. Your product strategy brings all of that to life.

That’s the real role of being a CMO. Ensuring your very talented product and dev teams have struck the right balance around delivering on the strategic vision of different and not getting distracted with today’s noise of better.

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Posted in brand development, Business planning, category creation, fear of not succeeding, Intellectual curiosity, Strategy | 1 Comment »

My User Manual

October 12, 2013

By Peter Zaballos

October 13, 2013

A little over a year ago I started a new job, and a big component of my role was to help the company bring a lot of scale to their marketing, and bring a higher tempo and user focus to the company’s product development. This meant taking three groups of already high performing teams, and leading them into territories unfamiliar to them, while also helping them develop skills and capabilities new to many.

This is the kind of job that comes around in your career rarely. Tremendous, tremendous fun, and the best part is it’s only just beginning. We’re growing like crazy, and are about to enter that phase of the market where we have the right offering at the right time, and are about to see some pretty breathtaking expansion.

transparency

And I found myself explaining how I work, how I manage, and many of my core values as a manager, but also as a person. A lot.

So much of creating the opportunity for the rapid experimentation, fast failure, “iterate to excellence” team performance is based on how you work as a team, not what you work on as a team.

I mentioned this to my wife in a text message while on a train headed to work, and she pointed me to an interview with a CEO about his “user manual” – a one page document that lays out how anyone in the company can easily understand how to work with him. I LOVED it. A combination of approaches, philosophy, and personal values.

By the time I got off the train I had a complete draft of my User Manual. Check it out, I’m on v4.3

By the time I’d plugged in at the office I published it to  everyone on my teams via Chatter, as well as my counterparts on the exec team and a bunch of others I work with frequently.

Folks on my team appreciated the transparency, and it’s made it so much easier to engage with other teams and get to a place of trust and performance that much more quickly.

But the best part was for me. Any time you have to be intentional about something, and write it down, you learn something about yourself.

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Posted in brand development, Business planning, Failure, Intellectual curiosity, meaningful failure, Self-knowledge, Strategy, Success, Uncategorized, Values | 3 Comments »

The Unfamiliar State of Funding a Startup

March 8, 2012

I work with a lot of startup companies, and am currently involved with three that share the same characteristics: pre-product, pre-revenue, and at the very beginning of fundraising. And I’m having the same conversation with all three. It goes like this:

  1. The cost of getting a company to scale and even to profitability has dropped dramatically in the past ten years.
  2. The nature of venture capital has shifted from an early stage focus to late stage or even growth equity investing.
  3. Angels and experienced high net worth folks have stepped in to fill the role VCs served for early stage investing.
  4. A viable fundraising strategy can default to a path that doesn’t assume VCs participate at all, or perhaps only towards the end.

Let me expand on each of these points.

COST OF GETTING TO SCALE – THE RISE OF THE MACHINES

There are a lot of factors at work here, to the benefit of entrepreneurs. The rise in cloud computing means that fixed infrastructure expense has largely been eliminated from the business plan, and this will only get better (Amazon just announced it’s 19th price decrease in six years). Virtual teams + Google Docs drive OPEX down even further unburdening you from lease costs.

The shift to “inbound marketing” – social media, blogs, SEO, viral – can drive large volumes of traffic at significantly lower costs (60% less or more) than traditional “outbound methods – and at higher conversion and retention rates. It takes a lot less of your marketing budget to reach and acquire users. With the shift to freemium and subscription business models you can also let your most active users decide for themselves to pay for your services through in-app messaging and offers – significantly reducing the cost of sales.

I call this the “Rise of the Machines” because metrics and machine-driven resources/methods do much of the heavy lifting at a fraction of the cost of human-intensive alternatives. Josh Kopleman surveyed his portfolio and found “…that companies today are 3 times more likely to get to $250K in revenue during an eighteen month period than they were six years ago. ”

VENTURE CAPITAL IS DEAD – LONG LIVE VENTURE CAPITAL

The money that VCs invest comes from “institutional investors” – pension funds, endowments, insurance companies – and these institutions allocate their investments across a wide range of “asset classes” to manage and diversify risk. They tend to make these allocations based on ten year return performance averages, and beginning in 2009 (as my partners and I found out with unfortunate timing) the ten year return for the VC asset class went negative.

That’s for tough the VC industry overall, but if you look at the top 20-25 firms, the ten year return is quite good. So what institutions did was stop putting money in general into the VC asset class, and only put money into the big, established firms. This caused fund sizes to swell (Accel’s most recent fund was $1.35B+ comprised of $475M “early stage” + $875M “growth equity” funds), which incents those firms to put larger and larger investments to work in each deal (to justify their partners’ time).

So at a macro level, investment into VC funds dried up for all but the top firms (reducing the total number of VC funds) and poured into the top firms, shifting their focus to larger investments in later stage firms.

ANGELS BECOME ANGELS ALMOST LITERALLY

At the same time early stage VCs moved out of the market, a wave of experienced tech executives who had made fortunes building internet companies became very active investors. They brought more than deep pockets, they brought valuable insight and experience and even better – intensive, engaged roles with the companies they funded.

And along the way, incubators emerged as mini-factories where angels could become involved with lots of companies and let the law of large numbers help them there. Overall, angels are investing 40% more than they were even a year ago – now over $700K per round, and there are concerns there’s a bubble happening with incubators. But the headlines are, angels have stepped into early stage investing at a scale and role traditionally reserved for VCs.

STARTUP FUNDRAISING HAS NEVER BEEN BETTER, AND WORSE

What this means for startups is you can get your business to scale with ten times less money that you needed 10-15 years ago. $3M – $5M. If you plan well and are well connected you can do this with individual investors who add a ton of value and will roll up their sleeves to help out. The real benefit is you can also find individuals who share the same expectations you have for the outcome of the business. A 5X return on $3M may be the right outcome for the business and for investors who define success as a financial return coupled with a durable business that solves a problem they care about.

It also means you can liberate yourself from having to map your business and outcome to the trajectory that many of the larger VC firms need their investments to align with – they need billion dollar exits to generate the billion dollar returns they committed to their institutional investors.

Don’t get me wrong here. VCs are an important and valuable catalyst to the technology sector and the economy – and many are out there doing what they’ve always done to identify the next great disruptive business. And for your business, a VC can be the exact right fit either at the beginning or once you’ve gotten to scale.

It’s just that now VCs are playing a different role than they have in the past, and for startups this means it’s a brand new, unfamiliar, day out there.

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Posted in Business planning, fundraising, machine-driven methods, Networking, Strategy, Success, Uncategorized, Venture capital | Leave a Comment »

Back online

February 29, 2012

Well, that was a long hiatus. But for a lot of good reasons I needed the time away from this and feel ready and enthusiastic about resuming the exploration of technology and startups and how failure critically enables their success.

Next post to follow, and will be on the theme of how user acquisition costs and leverage have dramatically reduced the financing required to get a company to break-even (and to a seven figure user base), and how that’s reshaping not just early stage businesses, but mature enterprises.

Stay tuned, and thanks for your patience these past months.

Pete

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Posted in Business planning, fundraising, machine-driven methods, meaningful failure, Strategy, Venture capital | 1 Comment »

You miss 100% of the shots you don’t take

December 15, 2009

Something I have just loved about being in the venture capital business is the people I’ve met, running businesses I did not fund.  And of those there are a few I found so relevant to my own interests, and with founders who had such passion and integrity, that I continued to meet with them well after saying “no.”  Trying to be a productive sounding board, making introductions, passing along knowledge or experience where it seemed helpful.

It’s always been such a pleasure to get the updates from these CEOs, they arrive when you least expect them and it’s exciting to see how things are developing, where the connection is no longer the possibility of financing, but a genuine interest in the business and a relationship with the CEO/team.

Dustin Hubbard of Paperspine is one of these.  His company offered a subscription service for books.  Physical books.  He  had the idea for his company after finishing a book, and having no room for it in his already jammed bedside table.  So, he planned and planned, left his job at Microsoft, started and ran Paperspine out of his garage.

Paperspine worked really well, and solved problems that people cared about.  It probably saved my family hundreds of dollars, just with my 16 year-old daughter, a voracious reader, and who routinely dropped tens of dollars at bookstores, only to read the books once.  She loved Paperspine.  She was on a five book out at once subscription at one point, and it enabled more massive reading without bankrupting her.

And while Dustin had gotten Paperspine off the ground with funding from friends and family, he couldn’t raise his next round of financing – in a market where raising money is almost impossible anyway.  But he applied himself to solving this problem with every ethical means imaginable.  Cut costs to get to break even, went back to work at Microsoft, tried to expand into ebook rentals.

Dustin and I spoke every 45-60 days, where he would walk me through his latest set of challenges, his ideas to address them, and we’d then spend the next hour testing his assumptions, plans, and brainstorm solutions.  But he always arrived prepared and ready to dive into a meaningful discussion, and sometimes I could help, other times I think he just valued the opportunity to have someone outside the company to run his thinking by.

But for many reasons, some within in his control, many outside it, he was unable to get his next round of financing.  And he seemed to be reaching the limit of how much this business was encroaching on his life, quality of life, and family.

So, last night I was truly saddened but not necessarily surprised to receive an email from Dustin, saying that he was closing the doors.  I can only imagine how hard this was for him, how heartbreaking.

And he closed off his dreams for Paperspine with the kind of grace and thoughtfulness that we should all take note of, and admire.  You should read his final blog entry, a real fitting testimonial to a worthy business, and an incredibly decent founder.  And you can see pictures of his “warehouse” in his garage, and learn more about how he took his idea and brought it to life.

His wife framed this so well, reminding him that “you miss 100% of the shots you don’t take.”

That phrase captures the essence of what it means to take an idea that crossed your mind, and have the courage to start a company to bring that idea to life.  And you bring it to life focused on why it will and should succeed, while also keeping, in a separate place, the knowledge that there are many reasons why it could fail.

Dustin, you should be very proud of what you accomplished and learned these past two years, but you should also be very proud of how you ran your company, and how you finished.  Well done, not painless, but well done, indeed.

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Posted in Business planning, chicken killer, fear of not succeeding, meaningful failure, Success, Venture capital | 2 Comments »

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