The craftsmanship between a great idea and great product

Saw this from Dixon’s blog over the weekend. It’s a good clip from Steve Jobs in 1995 where he talks about how building great products and thought it was worth a repost.

As the head of Product at Kapost, it really resonates to me as we often start off with a product idea and through months of discussion and design, come out at a different place – one that is always better than where we began.  I also like the talk of keeping things out of product.  In my opinion, that’s one of the hardest part of design product – trying to intentionally remove or not include parts that customers claim they want.  

The Jobs quote:

 

There’s just a tremendous amount of craftsmanship in between a great idea and a great product. And as you evolve that great idea, it changes and grows. It never comes out like it starts because you learn a lot more as you get into the subtleties of it. And you also find there are tremendous tradeoffs that you have to make. There are just certain things you can’t make electrons do. There are certain things you can’t make plastic do. Or glass do. Or factories do. Or robots do.

Designing a product is keeping five thousand things in your brain and fitting them all together in new and different ways to get what you want. And every day you discover something new that is a new problem or a new opportunity to fit these things together a little differently.

That’s one thing I love about product.  You need to understand design, your business, competitive landscape, your customers, technology and how to get things done.  It’s one of the more interdisciplinary roles a company has. 

 

Two Pieces of Business Advice

An employee recently left Kapost (sad to see you go T) and i was out to lunch with her and she asked some advice. I thought back to two pieces of advice that I was given or things that i have witnessed from successful colleagues.  Here’s what popped up:

“90% of Power is Taken not Given”

This is a quote from my old boss Bill Raduchel.  Bill loves saying phrases like this to me, and this was one juicy nugget he spat out in 2002 when I was working at AOL.  I took it to heart. I was a product manager at the time and aspired t

Bill at the Inn at Little Washington

o have even more responsibility within the company.  He noticed that and delivered this great quote.  What he meant was that nobody is going to give me extra responsibility.  If i want it, i have to go take it and earn it.

That’s what i did. I wanted to run video services within the company.  There were lots of people running bits and pieces but nobody was owning it.  Instead of waiting for a title and position to be created, i just started acting like i was the defacto video product manager. I had weekly all-hands meetings with the other stakeholders, came up with a product roadmap, and basically acted like the product owner.  What happened? Eventually the company realized i was the product owner and rewarded me with that title.

In small companies there are too many things to do.  In big companies there are lots of ambiguity, swirl and gray space. In both instances, there’s an opportunity to do what you want.  Just be proactive and go do it.  In real estate, ownership is 9/10 the law.  In startups, doing is 9/10 the position.

Don’t Eat Alone

This is just something i’ve realized. Most of the people we hire at Kapost come from referrals.  Most of the opportunities i’ve been given in my career come from contacts of friends of friends.  The size and strength (i.e. authenticity) of your network matters in today’s work world and in your career.  I’ve seen people (Nick O’Neil) go crazy about this where they actually track in a spreadsheet the people they’ve met and want to keep in touch with and make sure every X number of days that they give them an update.  It may sound excessive but it works.  He has a ton of connections who regularly help him out.

There’s even a pretty good book, called “Never Eat Alone” which talks about the power of these connections.

Those are two things that immediately came to mind.  I’d be curious if any of you have heard any other nuggets of great advice that you’d like to share.

Growth vs. Profitability and Kapost

One of the more interesting learnings I’ve learned at Kapost is what makes SaaS business models work. Related to that I often get the question asked to me, “How is Kapost doing? Is it profitable yet?” implying that if it isn’t, things are bad and if it is, then things are good.  This post is an attempt to address that question.

When talking about a company’s performance, I’ve noticed that you have to talk about both its growth and profitability, and discussing just one in the absence of the other is dumb.

I recently did a post comparing Salesforce and Linkedin.  You’ll notice in there that neither company is profitable yet both are worth over $30 billion dollars.  LinkedIn makes a $1 billion a year in revenue, whereas Salesforce does $1 billion a quarter ($4 billion a year).  Why are they worth the same?  Because LinkedIn is growing at 60% a year whereas Salesforce is growing at 30%.

To investors, companies are worth what their cash flow is going to be in the future – not what it is now.  That’s all they care about.  If they think the cash flow will be huge, the company will command a huge valuation.

Let’s take Amazon.com as an example.  They have had no profits for years, yet it’s currently worth $166 billion.  One analyst even jokes about it, writing:

With every Amazon quarterly earnings call, my Twitter feed lights up with jokes about how Amazon continues to grow its revenue and make no profits and how trusting investors continue to rewards the company for it. The apotheosis of that line of thoughts is a quote from Slate’s Matthew Yglesias earlier this year: “Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers.”

The point here is that you need to understand why any company is not profitable. In the case of Amazon, it is making huge investments in warehouses to grow its retailing business and huge investments in data centers to grow its AWS business. It could stop making those investments and start generating profits. But doing so will sacrifice growth in the market they current work in.  Amazon’s doing $70 billion in revenue this year and did $34 billion in 2010.  Here’s Amazon’s revenue since 1996:

That’s doubling in 3 years.  That’s pretty amazing.  I’m sure it’d be worse if they were focusing on profitability.

What does this mean for Kapost?  Kapost has established itself as the market leader in content marketing software and hit profitability early in 2013.  However, we desired to grow and grow quickly.  Thus, we raised a round of funding and are using the those funds to accelerate our growth.

Why can’t we grow organically with our profits?  

The way SaaS businesses work is that they face significant losses in the early years because they have to invest upfront to acquire customers, but they recover the profits from that investment over a long period of time (the life of the customer).  What’s somewhat strange for people to understand about SaaS businesses is that the faster the business decides to grow, the worse the initial losses become.

For example, imagine a world we you spend $6,000 to acquire a customer, and then charge them $500 per month.  For one customer, you’ll get the money back after a year, but you need $6k up front first to get them.  And, if you want to grow faster and get even more customers, you have to spend even more money.  The graph below shows that the more you spend, the better the rate of growth is.

This is why Kapost did another round of funding.  Going forward, as long as we’re accelerating the rate of revenue growth, we’ll always be needing more money and more money that we’ll need to fund that growth.  That is, unless we don’t want our rate of growth to increase.

Now, of couse, profits are critical to the health of a business.  The key is to be able to be profitable if we want to be and to be profitable at some point in the future, at least hypothetically. So, when you hear that a company is losing money, don’t read that as a necessarily bad thing. It could be a very good thing. It all depends on why.

———

Notes: Here are some good posts on this topic that helped me out:

  1. David Skok is awesome.  I stole his graph and a lot of his thoughts.
  2. Wikivest
  3. From Eugene Wei’s blog
  4. From Fred Wilson’s blog

 

 

Trying to Reach the Sun

Starting a business is hard.  There’s always the fear of failing and when things fail, the idea that it was all your fault and you could have done things better. It’s a shitty feeling.  That’s what struck me about this poem below was it celebrates the accomplishment before the failure.  I often think about the skiing mantra, “if you’re not falling, you’re not trying hard enough.” 

So, to all of you who are trying to reach the sun like Icarus, bless you, and keep on flying…

Failing and Flying

Everyone forgets that Icarus also flew.
It’s the same when love comes to an end,
or the marriage fails and people say
they knew it was a mistake, that everybody
said it would never work. That she was
old enough to know better. But anything
worth doing is worth doing badly.
Like being there by that summer ocean
on the other side of the island while
love was fading out of her, the stars
burning so extravagantly those nights that
anyone could tell you they would never last.
Every morning she was asleep in my bed
like a visitation, the gentleness in her
like antelope standing in the dawn mist.
Each afternoon I watched her coming back
through the hot stony field after swimming,
the sea light behind her and the huge sky
on the other side of that. Listened to her
while we ate lunch. How can they say
the marriage failed? Like the people who
came back from Provence (when it was Provence)
and said it was pretty but the food was greasy.
I believe Icarus was not failing as he fell,
but just coming to the end of his triumph.

9 weeks in: a report

I last did a report about life with Hunter when I was 3 weeks in.  Since then, I’ve learned a few more things.

Getting up in the middle of the night repeatedly can make a man (and mom) batshit crazy.  For us (and most people), the getting up in the middle of the night to feed the child never stops and is totally exhausting.  Diane and I are taking turns who gets up for the main feeding in the middle of the night.  We found that if the same person keeps doing it, that person becomes not so fun to hang out with.  We’ll see how this new experiment goes.

Hunter is not always happy

Continue reading “9 weeks in: a report”

Two Funnels, Two Types of Content Marketing

Note: I wrote this post on Kapost but thought I’d republish here as lots of people, especially those who read this blog, don’t really know what I do or what Kapost does.  Here’s an attempt to explain.

The term “content marketing” has been hot in 2012 and is often heralded as the best new marketing tactic.

“Sure, there are still other ways to get in front of your target audience, but content marketing is proving to be an indispensable tool to complement traditional communications strategies,” writes Brian Aitken, director of new media for the Foundation for Economic Education, on CNN’s iReport.

Continue reading “Two Funnels, Two Types of Content Marketing”

The REAL tech meetups in Boulder

This morning I took a ride up Sunshine Canyon in Boulder.  We stopped half way up and we looked around and took a little poll about who was on the trip.  We had 4 Techstars companies represented (Orbotix, Kapost, Everlater, and PivotDesk), one VC (Hwy12), and one Techstars mentor (Jamie).  

While biking 6 miles straight up, and in between deep breaths, we talked about building product faster to meet demand (Dave from PivotDesk), growing revenue (Mark from Hwy12), and how to correctly build a financial model for a an early stage company (Nate and Natty from Everlater).  If you’re wondering how work in Boulder happens or how the tech community interacts, I’d say this was a pretty perfect example.  

Oh, and the views aren’t bad either….

You can see the damage from the fire from 2 years ago still: