Jeff Haynie | Vox

‘Scale slower’ and other lessons from 20 years in startups

2016-08-05T08:38:23-04:00

My startup career is roughly as old as Evan Spiegel (of Snapchat), the brothers Collison (of Stripe) and most of today’s YouTube stars. The “startup world” looked very different in my earliest days. AOL sent CD-ROMs (like this) with its dial-up and email offerings through USPS. It took hours to complete one level of Dune. Few companies had websites and even fewer had apps fueled by open APIs. Heck, few developers cared about APIs until 2000.

A lot has happened since those days. Those of us lucky enough to emerge from the first dot-com bubble spent the next few years rebuilding and starting anew, not to mention carrying out post-apocalyptic strategies when the global economy sank into the worst global recession since World War II in 2008. We very well may be on our way to another, albeit different burst, but regardless of what’s to come, the lessons I’ve learned in leading startups through both eras are as relevant today as they would have been back then.

Whether a company is preparing for the next industry-bending force majeure or simply seeking out prudent advice in flush times (or when the belt is tightening), these five lessons all apply:

Monetize early

At my current company (Appcelerator, recently acquired by Axway), we’ve always struggled with the “reach versus revenue” conundrum. On one end, you have “reach” (i.e. market impact) and on the other, you have “revenue” (i.e. monetization).

Every company monetizes differently — not only how and what, but when. In the traditional software sales model, companies spend money to achieve scale and drive monetization. It takes (lots of) money to scale, as well as (lots of) time to do correctly. The freemium model (which we used to grow our Titanium product) uses virality and a good product to drive reach and grab market share. But the further you maximize reach, the harder it is to scale revenue, often due to user resistance in paying for something they’ve received for free. In fact, the more successful you are in using the freemium model, the more friction the system introduces in monetizing the venture. Thus, the conundrum.

One thing I’ve learned is that it’s never too early to charge (something, anything) if you want to eventually have a sustainable business — even if you have to risk reach. I’d prefer to have fewer dedicated “power users” that can’t live without it (and are willing to pay) than lots of users that use our product only on the condition that it’s free. It won’t make you the most popular, but you’ll be around when others fail.

Scale slower

I’ve heard many opinions and had many experiences in this realm over the years. Even with Appcelerator, there was a long period of time (2008-2012) where we went slow, and then a period where we went too fast (2013-2014) and almost went off the cliff.

Out of that, I’ve learned that at a startup, it’s close to impossible to scale fast successfully.

The biggest reason is that you need a lot of things to make scaling fast work that are inherently a mismatch at a startup, including well-defined processes and people that work well with and know those processes well. By definition, startups rarely work well in conditions conducive to strict structure. You’re almost always single-threaded in many areas (HR, finance, operations, IT, etc.) for awhile. When you go into hyper-scale mode (i.e. hiring a lot of people over short bursts of time), the things that worked previously become a huge tax and drain of your attention overnight. You’ll turn 110 percent of your focus to internal things and the stuff you’re good at, like shipping a great product, starts to come second.

If you’re really successful, this problem is unavoidable. But the moment you go down this path at some reasonable scale, it’s hard to slow down. The unintended consequences that come will put an unimaginable burden on the company . Even the best founders and boards have a hard time controlling it.

The funny thing is, sometimes you’ll actually go a lot faster in the end, by going a little slower in the beginning. Rarely do markets and opportunities change so fast that you can’t catch up.

Burn less

As a founder, you always need options, and more often than not, they’re related to how much money you have in the bank. Options give you a chance to control your own destiny when times get tough. (Read: Without them, you’re screwed.)

I’ve learned that it takes a tremendous amount of discipline and organizational restraint to burn less. It also takes so much longer to put on the brakes than you realize. That’s why I strongly recommend making some significant adjustments should you ever see signs of turbulence — all made under the assumption that you’ll need to live with what you have in the bank for at least 12 months. One essential step is taking stock of your resources (i.e machines, property, equipment, people, etc.), and if they’re not essential to your mission, making some tough decisions to sell off certain systems or downsize. On top of that, I strongly suggest freezing any and all increases in expenses. Lastly, I recommend meeting with investors to share your plan to get through the rough patch and, if needed, ask for advanced funding. The smart ones should have confidence in your ability to deliver.

One goal I have for my next venture is to always be within two quarters of cash-flow break-even, with the big advantage being that you can halt with minimal organizational and cash impact. Should the market takes a dive or sales slow, you can put the brakes on and reevaluate again in a quarter. In a word: Options.

Don’t be afraid to outsource

Spend your calories on things you do well and the things that make you and your business valuable — and outsource things that aren’t core to that mission. Sure, your developer can build the corporate website over the weekend or set up GitLab on your own server instead of buying a small monthly plan, but the long-term management and ownership headaches far outweigh the short-term economics. It’s just not worth it.

This mantra can sometimes conflict with the “burn less” philosophy, but generally, if it seems cheaper in the short-term, make sure you consider the long-term ROI and other non-financial metrics (such as distraction) when weighing options.

Measure everything

One of our core values is “measure, iterate and improve,” and it has served us well at Appcelerator. I believe that measurement should be a core property from the beginning vs. a bolt-on or afterthought later.

My favorite quip in this area, “You can’t improve what you don’t measure.” I’m always amazed at what we’ve been able to learn when we instrument something and then look at the data. It’s almost universally different from what we assumed it would be. This is not to say that good judgment or decisions based on experience aren’t important, too — it’s just recognizing that you must have the capabilities to make the best decisions and you need them early in the process. It’s the difference between being proactive and reactive, and that difference can make or break a company.

As in most things in life, context really matters and each situation is unique; what worked for me might not work for others. Still, having been through some tough times (with scars to prove it) and having the good fortune to work on a few successful ventures, considering these lessons will at least give you a better chance for success.

Jeff Haynie is the co-founder and CEO of Appcelerator, a comprehensive mobile platform for the enterprise, providing a platform for IT innovation in a post-web age. Reach him @jhaynie.

This article originally appeared on Recode.net.

Surviving Technology Extinction

2019-03-06T05:48:31-05:00

Quantifying the actual rate of technology change is tough. But if you live in IT, you feel it every day, with the current cycles of invention and disruption being enough to make anyone’s head spin.

In a New York Times piece called “How to Survive the Next Wave of Technology Extinction,” Farhad Manjoo recently explored the conundrum facing tech consumers; namely why, with wave upon wave of new devices and services (apps, devices, media offerings, wearables, etc.), it’s harder than ever to separate good bets from the next Betamax.

This challenge is hardly limited to the consumer, as I would argue that CIOs and IT leaders are in the same boat. Whether they like it or not, businesses now live in a world in which forces like mobile, cloud and big data have exploded the numbers of devices, platforms, data sources and solution offerings that must be connected, adopted, supported or built around. It’s hardly as simple as Paperwhite versus Nook, Nike+ versus RunKeeper or iPhone versus Android.

To further complicate matters, traditionally “safe” IT mega-vendors have fast seen their businesses eaten by mobile innovators, cloud players and historically consumer-oriented operators like Google and Amazon.

While it’s nice that large numbers of new entrants are promising better-designed, more mobile-friendly and/or cloud-hosted options for every manner of enterprise need, sorting through it all is hellish. Which of these vendors will keep pace with the rate of innovation? How do CIOs avoid betting the farm on partners that can’t stay the course?

There’s no crystal ball, but here are a few principles to ensure your bets won’t come back to bite you:

Embrace the user

Technology has gotten a lot easier to use and more efficient, largely because many companies are moving to cloud computing and supporting more mobile devices. This shift has also dissolved the conventional distinctions among business-to-business (B2B), business-to-employee (B2E) and business-to-consumer (B2C) in software and hardware.

Having seen consumer technology done right in the form of mobile apps that are intuitive, enjoyable and easy to use, we carry these same expectations into the workplace. We have no patience for the convoluted, frustrating experiences of corporate software and hardware from the near past.

CIOs must recognize the huge productivity gains of providing employees with apps that truly help them perform their jobs better — those that are simple, complete and conform to their lifestyle versus the other way around. The criteria for such a world is one in which applications run on the user’s device of choice, the user’s identity extends anywhere and data is always accessible.

Geoffrey Moore, author of “Crossing the Chasm,” locates these things at the center of the new user-centric enterprise architectures, which must protect “my content, my device, my identity.”

As Box founder Aaron Levie notes, the aim is an IT outlook where “control of information is no longer prioritized over making sure the right people can access it. CIOs who don’t empower their workforce become disempowered.”

These criteria can be used as a kind of measure for modern vendors. Do their solutions help CIOs meet these criteria for the business? And to what degree has the vendor itself embraced these criteria in its own architectural and design strategy?

Favor ecosystems over features

As Apple has famously proven with its devices and App Store, ecosystems drive innovation at a pace that even the mightiest internal R&D departments can’t match. Apple now boasts a huge, diverse ecosystem of at least six million developers (as of a year ago), driving an ever-exploding set of capabilities and services to the company’s flagship platform.

The best modern solutions find themselves at the center of a broad, diverse ecosystem as well — composed of groups like developers, as well as software and services companies. The presence of such ecosystems indicates a few important things:

The vendor has done a good job making its own offering easy to extend with complementary offerings. (And that they don’t suffer from the dreaded Not Invented Here syndrome.)
Smart, independent technical folks have vetted and embraced the solution.
This company has cultivated a deep pool of available skills. The more people who have built careers or businesses around the solution, the easier it is to find resources for future development or support.

In practice, a good ecosystem amounts to a kind of “innovation exchange” in which ideas and offerings can flock for evaluation, and where the winners rise to the top, regardless of source. That kind of collaboration drives better products, with more add-ons and extensions than any single vendor could ever hope to offer.

Expect openness

Most tech vendors, wise to customer concerns about lock-in, are quick to peddle their embrace of open technologies. But separating product marketing from the facts of the underlying architecture can be tricky. Plenty of vendors have come late to open standards, and their products offer little more than “shims” of open technologies on top of legacy proprietary standards.

There are a couple of indicators of true openness:

Interoperability: Can the solution be run with any standards-based technology (e.g., browser, app server, etc.)? If you want to move hosting from, say, AWS to Rackspace, what does this entail?
Active contributors: Look for companies that have committed some significant portion of their technology to the open-source community. This means more than just lobbing code into SourceForge. The real sign is a community of active contributors. For example, how many people have made contributions (features, bug fixes, etc.) to the company’s technology on collaborative development sites like GitHub?

Vendors for whom openness is a part of the DNA offer customers more than just lowered risk of lock-in. There is also the ubiquity of skilled resources, as well as the likelihood of a broader ecosystem. Openness and ecosystems go hand in hand.

From surviving to thriving

In just the past few years, we’ve gone from Web to cloud to mobile — an entirely different beast comprising not only apps, but wearables, data sources and “things” much more broadly. Picking the right new technologies out of the pack isn’t easy, but it’s also an opportunity. With systems now designed to serve users instead of the other way around, IT is no longer stuck simply managing systems, holding down costs and keeping the lights on.

As McKinsey Consulting confirmed in a recent survey, enterprises are looking to IT to lead the charge in digital innovation, harnessing cloud, social and mobile technologies to empower employees and even to open up new markets.

When it comes to the enterprise, it’s not about just surviving “technology extinction.” There’s a very real opportunity to thrive in these times of uncertainty, simply by embracing the opportunity while competitors dither.

Of course, all of that starts with placing the right bets.

Jeff Haynie is CEO of Appcelerator, a comprehensive mobile platform for the enterprise, providing a platform for IT innovation in a post-Web age. Reach him @jhaynie.

This article originally appeared on Recode.net.

Why Satya Nadella Has a Fighting Chance of Saving Microsoft From Itself

2019-03-06T05:42:13-05:00

Imagine you’re Satya Nadella.

You’ve just taken the helm of the world’s largest software provider, but the company faces threats from almost every direction. What’s your biggest problem? What must you do, above all else?

Your first problem is not R&D. Microsoft’s R&D is in comparatively good shape — nothing like the starving, demoralized organization Meg Whitman faced when she took the reins at Hewlett-Packard, and has been fighting to reinvigorate since. Microsoft spends $10 billion annually in R&D, more even than Google.

Organic innovation isn’t dead, either, despite what many say. Take Microsoft’s announcement of a smart contact lens, which predated Google’s announcement of the same by a full two years.

What about “the cloud”? Surely this is it: When you’re a legacy enterprise vendor, the cloud is always the source of — and solution to — every problem. The trouble with the cloud, at least in its PaaS/IaaS embodiment, is that it’s driving otherwise sane companies to throw enormous capital into a fast-commoditizing business. This cloud is a race to the price bottom that Amazon has already won.

But if Microsoft’s chief need isn’t bigger R&D, or more drastic innovation, or a broader cloud, then what is it?

Developers.

That word doesn’t appear in Nadella’s introductory letter to the company, but it should. The largest threat facing Microsoft is its irrelevance to new generations of developers, particularly mobile developers. And the company’s first-order need is for a true, modern developer ecosystem.

The fact remains that it was the iPhone, much more than any cloud, that blew the Wintel world to smithereens. With their mobile devices and App Store, Apple has set the model for the modern developer ecosystem. Apple has paid out more than $10 billion to developers via the App Store — half of it within the last year alone.

Of course, the relationship has been more than mutually beneficial. Apple now boasts a huge, diverse ecosystem of developers, innovating at a pace that no R&D org can match, driving an ever-exploding array of new capabilities to the company’s flagship platform. Google was quick to catch on, encouraging its own rival ecosystem with an open source alternative, and by standing up Google Play.

But Microsoft …?

The irony is that behind initiatives like MSDN, Microsoft was one of the original creators of great developer ecosystems. It was the mutual embrace between Microsoft and devs that helped drive the company’s software onto so many machines, and then keep it there.

Unfortunately — predictably — that monopoly position turned Microsoft into a bully. The company began to view openness and playing well with others as traits for also-rans that couldn’t afford to do otherwise. This attitude was perfectly mirrored in Steve Ballmer, a domineering salesman who had grown up in the desktop world that Microsoft owned.

With the appointment of Nadella, the company seems finally to be acknowledging how dead and buried that old world is. This is the man who used a Mac — a Mac — onstage at Build. His aim? To show how Azure could be used to create iOS apps. (In the same appearance, he demonstrated how Google Chrome could be set as the default browser for websites built with Microsoft tools.)

It doesn’t hurt, either, that Nadella is an engineer, giving him the advantage of being “one of us.” Even if Ballmer had wanted to throw open the door to non-Microsoft talents, what independent developer would have trusted him?

Not that convincing devs will be easy for Nadella. In an Appcelerator survey of nearly 7,000 mobile developers, conducted jointly with IDC, we see that Microsoft has spent the last three years stuck in neutral for developer interest. And despite Nadella’s stewardship, even the plaudits for Azure’s ease of use come mainly from Microsoft-centric shops. If you’re a developer building apps in JavaScript, Java or Objective-C, Azure isn’t likely to be a destination for cloud services.

For Nadella to turn Microsoft’s fortunes, he’ll have to do what would have been unthinkable under Ballmer: Make non-Microsoft technology stacks and languages into first-class citizens, coequal with every Microsoft offering. In this, it may prove easier to change the technologies than the perceptions. But it’s here that Satya Nadella gives Microsoft its best chance.

Jeff Haynie is CEO of Appcelerator, the leading mobile enterprise platform company. Follow him on Twitter at @jhaynie.

This article originally appeared on Recode.net.