I, like a lot of you, read lots of blogs and articles each week, some of my favorites include Joel on Software, Coding Horror, High Scalability, Seth Godin, and Tim Ferriss. I also read just about cover to cover the IEEE publications that I receive. I use a variety of methods to keep track of the ones that I like so that I can find them easily when I want to reference them. Two of my favorite tools to do this with are Evernote, where you can clip web pages with tags into your notebook, and ShareThis, where I can drop something in my sharebox and send it to someone at the same time.

I was having a discussion the other day about small services as business opportunities and recalled several threads that seemed to be tangentially related. I parsed through my clipped, starred, and shared items and found these pearls. Whether you are already part of a start-up or considering one here are some ideas that you might consider.

And since one of the technical editors of our book has pounded into my brain the demand to “explain how this relates to scalability”, let me explain. If you’ve read a few of our posts you know that we believe that scalability is about more than technology, in fact if done correctly it’s technology agnostic, but depends greatly on people, process, and architecture. This starts even before the business is founded. The right business plan that balances people and investment with real revenue earning products is critical to scaling. If your cost are too high to service a given number of customers you are losing money. Now you can argue that you’ll get efficiency of scale at some point but you need to survive long enough for that to occur. Without further ado, on to our amalgamation of advice:

Seth Godin says the way to make money on the Internet is by connecting people with what they need. He gives examples that include the following as well as many more:

Connect advertisers to people who want to be advertised to.
Connect job hunters with jobs.
Connect information seekers with information.
Connect teams to each other.

Kevin Kelly says the solution for inventors who are up against the giant aggregators like Amazon is to find 1,000 “true fans”.  If each one is willing to pay $100 each year for something that you invent or service that you provide you can make a great living. This might be four CDs that you produce each year. For those organizations comprised of more than just a solo artist, Kelly states that an increase in fans is necessary but is linearly proportional to the increase in the team size.  He continues that because of the network effect (Metcalfe’s Law) it is likely that the value of the your fans increases proportionally to the square of the number of fans, which means the number of true fans does not have to double to support a duet.

Paul Buchheit, the 23rd employee at Google and creator of Gmail says stick with it, overnight success takes a long time.  They started Gmail in 2001, launched it in 2004 and 7 years later is seen as a huge success with annual growth rates of 40%.

Matt from 37Signals advises to keep your day job and work on your start-up on the side. Even though he capitulates that starting a business does require plenty of time and effort, quitting puts a shot clock on your idea. When coupled with Buchheit’s notion of success is a measure of endurance not speed, this seems like sound advice when possible. For those already under the pressure of the shot clock just remember that is monetization is king and survival is a competitive advantage.

So far in our bucket of advice we have 1) connect people with what they need, 2) find 1,000 fans to support your dream, and 3) don’t jump in until you are able to stick with it for the long haul. What I can add to this is Think Small. Throw away the fifty page business plan that requires $25 million of investment to sustain a profitless company for seven years. Instead think of a single service that people or businesses need.

For Internet companies, there are dozens of services that they need as part of their product offering but only as a small part.  Therefore they either don’t have the expertise or they can’t dedicate the resources to build it well. An example of this is search. Lots of websites need search functionality but few are going to build it themselves when there is a site search tool built by experts available.

Services that come to mind and that either need to be done or need to be done better are contextual classification, yield optimization, micro-payments, recommendations, abstracted scaling, and application monitoring. Go give it a shot and think about scaling from day one of your business.

The Internet Advertising Bureau (IAB) just released Q1 revenue numbers for advertising online which showed a 5% decline over the same period in 2008.  At $55 Billion in advertising revenue for Q1 2009, the amount is equal to 2007 revenue numbers. “Interactive advertising has taken its rightful place as a fixture on marketing plans across sectors, which means we aren’t immune to broader economic trends,” said Randall Rothenberg, President and CEO of the IAB.

David Silverman, PricewaterhouseCoopers Assurance partner, stated “Current economic conditions are clearly challenging … nonetheless, interactive media continues to consume a larger piece of the overall advertising pie.” According to the growth rates of advertising display mediums, internet display ads were growing at 7% year over year from 2007 to 2008 while all other mediums (radio, newspaper, magazine, outdoor, etc) were shrinking, except for television which grew at a modest 2%.

Bringing compelling and unique products to market requires a blend of art and science.  The art is the vision of what might be; the stirring promise of something that might change our lives or make it easier, faster or less costly to perform some function or task.  The science is the practical implementation of that vision; the profitable development, manufacturing and deployment of the product in a manner that is accretive to shareholders.  In our world, product vision embodies the art of what’s possible the science of the practical is defined by architecture, design, discipline and execution. 

Sometimes the intersection of what’s possible and what is practical is narrow or non-existent.  In the case where it’s nonexistent we should run, not walk, away from the idea as very often it is destructive to shareholder value.  Where that intersection exists but is small we should tread carefully to build something that can create shareholder value and hope that the foothold we create can expand once technology advances giving us a first mover advantage. 

But what about when there is a larger intersection?  Which is more important, the art or the science?  While there are many people who will take one side or the other, and while I have my own opinion, the best answer is that you need both.  Rarely is it the case that you will find someone with a compelling product vision and incredible execution skills as these two things seem to sit on opposite sides of a spectrum. It is much more likely that you will find someone who sits in the middle of the spectrum.  These people can paint a vision and execute against it, but they aren’t Steve Jobs on the vision side or Jack Welch on the execution side.

We think some of the best teams are built with two people and potentially two organizations embodying the art and the science.  A natural conflict occurs here, but it needn’t be an adversarial conflict.  Assuming the appropriate company culture and a healthy respect for each other’s abilities and value-add to the company, it is possible for these people or organizations to work together and for the healthy tension to accelerate the creation of shareholder value.  The “science” tethers the “art” and keeps it from wondering off aimlessly with no clear implementable path to value.  The art buoys the science and keeps it from sinking and being mired for a lack of product differentiating vision.

As chief executives, it is our responsibility to attract and retain “the best of the best” within both the art and the science and to create a culture where both are valued.  We should reward the folks who think and appear to be lost in the clouds to the same level as those who are attempting to keep them anchored to the practical.  Neither should be seen as less or more important and the debates between them should be cordial and filled with mutual respect.

We have for far too long relied on a “make to stock” model for the automobile industry. In essence, car companies attempt to predict user demand when scheduling cars to be built through their factories and then shape the resulting user demand to what is actually in stock at the auto dealers.

If our automobile companies had instead relied upon a build to order model, they may not have found themselves asking for billions in bailouts or on the brink of bankruptcy. They would not, for instance, have overproduced the large gas guzzling SUVs that have remained piled up at dealers. When gas prices increased, orders for these vehicles would have fallen and the car companies would have shut down production on them. Jobs would likely have been lost much earlier, but the companies likely would have been in a better position to weather the financial storm.

A 2002 Forrester Research report indicated that “The auto industry’s failure to align production with customer demand costs billions each year”. Why don’t we demand a fundamental shift in business model with some of our taxpayer money? Some things are just too obvious…

Detroit – here’s an idea: Hire a couple executives from Dell and use some of the bailout money to switch from demand forecasting and factory planning systems to built to order “configurator” systems. Dealers can still stock some cars for people to test drive and maybe even purchase, but most sales can happen electronically. Everyone wins. You stay in business, dealer margins increase (they need to stock fewer cars), customers get what they want – not what they are sold, etc. Yes, we might need to wait a couple extra months to get that new car but maybe, just maybe, you’ll be in business for another 10 years.

As advisors we don’t typically spend 12+ hour days in front of a monitor and it has been years since we programmed fulltime for a living.  So we haven’t thought too much about repetitive stress injuries or ergonomics other than the occasional approval for a special chair for the team member with chronic back pain.  Writing this book has us back in front of the keyboard for hours on end and has got us thinking more about the proper ergonomics.  Here are some interesting articles about the best chair for the money, the best keyboard, guides to workstation ergonomics, more guides to workstations, and some basic information on the importance of ergonomics to developers. 

Our take on the subject is that it is absolutely worth spending the money for a comfortable workstation, chair, keyboard, mouse, monitor, etc.  Fish’s personal choices are the Logitech cordless keyboard and mouse on a Humanscale keyboard tray that has great negative tilt which allows for neutral wrist position.  Marty’s choice for ensuring ergonomic bliss….pushups, of course.

Success is a function of focusing on the right market opportunities, building the right product for that market opportunity and building that product the right way.  In our experience, the area that fails to get the right attention most often is “building the right product”.  Companies very often do not seek the right inputs, perform the right analysis or have the right discussions to select the product and feature set with the greatest value to their users.  Very young companies tend to ping between several ideas of the day, resulting in lost opportunity as product initiatives are started and abandoned before completion.  Without product management, these ideas result in disjointed and loosely related features getting bundled into a product offering that is not well understood by the end user.  Oftentimes, especially in SaaS environments, feature enhancements such as scalability, availability and performance are abandoned without being evaluated for their impact to profitability and strategic fit when compared to feature enhancements. 

Our recommendation to help resolve some of these issues is for companies to introduce a process that forces critical thinking about the product feature set, allows for open discussion amongst the business and technology leaders and prioritizes opportunities based on costs, benefits and strategic fit.  The process that we recommend most is a process called the product council.  The product council should include the GM or P&L leader of the product/business in question, senior engineering executives for the product and the appropriate product manager and product management leadership.  The meeting should be held at least monthly, but your company’s release frequency and average time of development might suggest more frequent meetings.

The purpose of a product council is to ensure that the company is choosing the right product features to build given the following: the competitive landscape, customer needs and wants, the need for scale and availability, and company/product profitability.  To this end, the company should create a living list of all the features and product ideas that have been generated within the company and its extended community (shareholders, end users, and other stakeholders).  This list should be analyzed by the product council for strategic fit, financial benefit and risk. 

In analyzing strategic fit, the requests/features are evaluated in order to determine the degree to which they are aligned with the business objectives and strategic direction of the company.  A Maslow’s hierarchy approach to identifying strategic fit is a good way to help prioritize product requests:
• Which features are necessary to complete a base product offering?
• Which features add significant benefit but aren’t absolutely necessary?
• Which features are simply nice to have? 
Debate as to the strategic fit of each of the initiatives should happen within the product council meeting to help ensure that the product initiatives with the greatest fit are prioritized appropriately.

The activity is to perform a lightweight financial analysis.  The financial analysis might be as simple as determining rough cost to build and expected business benefit.  As the company matures it should consider maturation of this process into something that looks more like a probabilistic equation with percentages allocated to each possible financial outcome.  The intent here is to measure impact to profitability.  Product council should return to this analysis after launch to determine if the expected benefits were achieved.

Finally, we recommend evaluating risk as measured through customer impact, potential impact to availability or scalability, and the actions that competitors might take. A simple method of risk analysis can be accomplished by using the Failure Mode and Effects Analysis framework that we shared in a previous post. 

The result of the strategic, financial, and risk analysis should be a prioritized list of product initiatives.  We urge the inclusion of this well defined but easy to manage process as part of your product management practices.  Let us know if you use or prefer something else to ensure you are working on the right products. 

We work with many early stage startups in which the early and critical product phases including discovery, prioritization, specification and the later equally important product phases including product validation (am I getting the results I expected?) are either not performed well or sometimes not performed at all.

Sometimes the company feels that it doesn’t have the money necessary to fund a team of product professionals and attempts to limp along using the entrepreneur’s early vision with the help of some intrepid engineers. Sometimes the company feels that product professionals simply aren’t needed, even going so far as to cite agile methods as the reason (see later posts to explain why agile doesn’t eliminate the product manager position). Oftentimes the company just hasn’t had the opportunity to realize the benefit that a real product professional can offer to their product development lifecycle.

For those of you hoping for a quick and simple answer to the question above, we’ll give it to you right now: Yes – you need product management and you need to staff that team with product management professionals. Marty Cagan does a great job of describing what a product manager’s responsibility is here.

We are of the belief that building the right product is every bit as important as building the product the right way. The former is accomplished by having a disciplined product selection process that is informed by a professional product management team which in turn analyzes the customer needs, competitive landscape and strategic benefits of different options within the product portfolio. The latter (building it the right way) is an engineering responsibility informed but ideally not limited by the specifications that an professional product management team creates.

Equally important is the need for a product discovery phase. This phase is often ignored within many product development lifecycles and includes determining whether there is a product that can succeed within your target market as well as exploration on the topic of what that product might need to do to properly capitalize on the market opportunity.

Ensuring consistent vision through a single organizational owner of the product is yet another benefit to having a professional product management group early. Continuity helps ensure that lessons are both recognized and hopefully retained through organizational muscle memory. Evaluation of product results as measured within the business metrics creates a continuous process improvement feedback loop that helps grow those organizational muscles over time.

Finally, creating a sufficient backlog of product specs within an organization separate from engineering helps to ensure that engineers stay focused on creating shareholder value through implementation rather than specification.

So yes, you should have a product organization and yes they are a team separate from your engineering team. Build one now and help your company grow!

Obviously Youtube and other video sharing sites have changed the way we entertain ourselves. Who doesn’t like silly monkey videos or people getting hit in various parts of their anatomy, or even the way we educate ourselves such as studying philology from Ms. Hotforwords?

How as software developers can we take advantage of this? Well, the folks at 37Signals who brought us Ruby on Rails and some very cool products like Highrise, use video to promote their new versions of software. We think this is a pretty clever idea that goes so far past the standard release notes that it really sets a new standard for other software shops. Besides being a way to promote the new features to existing customers it also serves as a marketing message for new customers. Another example of how video is changing our world comes from Johnny Lee at TED who has had his Youtube video seen over 4 million times in six months resulting in 500,000 downloads of his open source software.

Yet another example of high potential online media is a product called Goldmail.

Are you using video to promote yourself, your product, or your ideas? If so let us hear about them.

From the “C”-suite offices to the product manager’s desk, everyone seems to be frustrated with time to market as measured from the initial idea to the launch of the product. At one level, the frustration is understandable as nearly every organization has something they can do to improve time to market.

That said, unrealistic expectations stemming from a frustration over why things can’t happen overnight is an all too common problem that can be damaging to an organization. Unrealistic expectations can cause low morale and frustrations that ultimately lead to employee turnover, delays in product schedules and lost opportunities.

In our experience the problem behind unrealistic expectations often stems from a limited understanding of the product development process, and the misguided notion that the combined phases of product discovery, product engineering and product release should somehow take less time than the time it took to generate the initial idea: “I explained my idea three weeks ago. Where is the product and when do we launch?” This notion often isn’t stated out loud and if discussed in a group it even sounds ludicrous, but it exists nonetheless in the minds of many C level executives.

Good ideas are extremely valuable, and yours might be so brilliant that it creates significant strategic differentiation; creating barriers to entry for competitors and prohibitive switching costs for customers thinking of moving from your products. Your idea may be the result of endless hours of analysis and insight – but you must recognize that your idea and the desire to implement it is a form of demand generation for services from your product and engineering teams.

This “demand” generation is akin to deciding that you want to build a house with certain amenities. While we all understand that it takes time to build a house when considering the discovery phase (is our house feasible on the plot of land and with the local regulations, and is there a builder who can build it to our expectations?), architectural phase (a combination of designing the house and planning for the construction) and building phase (the engineering or construction of the house), we somehow have a hard time understanding that these concepts apply to your products and services as well.

None of this is meant as an excuse to have low standards, or a reason to not hold your team to an aggressive schedule of shareholder wealth creation. In fact, we argue for just the opposite. But understanding that even the most brilliant of ideas costs much less in time and money to “ideate” than to explore, specify, implement and deploy in systems and software is a good step towards creating aggressive yet realistic targets.

Ask for detailed plans and question the details until you are comfortable. Drive to the earliest possible date, but create that date from good analysis and good planning, and drive and challenge your team to create the best possible date from good data. Remember – if your idea can be implemented overnight, it can probably be copied in 2 nights by your competitors. True value creation can take time.