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Agile Communication

In Agile software development methodology the communication between team members is critical. Two of the twelve principles deal with directly with this issue:

  • Business people and developers must work together daily throughout the project.
  • The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.

Despite the importance of this, time and time again we see teams that are spread out across floors and even buildings trying to work in an Agile fashion. Every foot two people are separated decreases the likelihood that they communicate directly or overhear something that they can provide input on. In physics, there is such a thing as an inverse-square law where a quantity is inversely proportional to the square of the distance from the source. Newton’s law of universal gravitation is example of an inverse-square law. I don’t believe anyone has associated this law with verbal communication but I’m convinced this is the case.

communication : 1 / (distance x distance)

This isn’t to say that remote teams can’t work. In fact, I’m actually a proponent of remote workers but I think because they are not in the building or across the street special arrangements are made like an open Skype call with the remote office. People might worry about being seen as lazy if they Skype someone across the room but across the country, that’s fine.

The take away of this is to put people working with each other as close together as possible. If you need to move peoples’ desks, do it. The temporary disruption is worth the gained communication over the length of the project.


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Newsletter – New Associate Partners

Below is part of our recent newsletter. If you haven’t subscribed yet, click here to do so.

New Associate Partners
We are very excited to announce that Geoff Kershner and Dave Berardi are joining AKF Partners.

For those who have worked with AKF in the past, you might recognize Geoff as he was part of our extended team a couple years ago. He most recently spent time at LiveOps running a Program Management Office in efforts including Agile development and PCI-DSS certification. He also spent 6 years at eBay and PayPal.

Dave is a long time friend and colleague as well who recently spent a number of years helping Progressive with incident and problem management processes. He has led various software development teams and spent 8 years at GE working on data warehousing and six sigma projects.

Check out Dave and Geoff’s full profiles.

Trends
We’re seeing three interesting areas continue to popup this summer:

  1. Cloud Computing
  2. Becoming a SaaS Company
  3. Agile Organizations

Here are some highlights:

Cloud Computing
One of our latest blog posts discusses the current trends with cloud computing. A common definition of cloud computing is the delivery of computing and storage capacity as a service. A distinct characteristic is that users are charged based on usage instead of a more conventional licensing or upfront purchase. There are three basic types of cloud computing: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Servie (SaaS).The major trend is that we are seeing more and more companies becoming comfortable with cloud offerings. In a 2012 survey with 785 respondents by North Bridge Venture Partners a very low 3% of respondents consider cloud services to be too risky and 50% of the survey respondents now say they have “complete confidence” in the cloud. The demand for SaaS offerings is growing rapidly as Gartner predicts that SaaS will hit $14.5 billion in 2012 continuing through 2015 when it will be $22.1 billion. This means your company should be leveraging the cloud as infrastructure where possible (burst capacity, rapid provisioning, etc) and if you’re not already a SaaS provider you need to be thinking about moving their rapidly. Which brings us to the second trend…

Becoming a SaaS Company
Given the comfort with cloud offerings that is now pervasive in industry if you’re don’t already provide a SaaS offering you need to start thinking about it now. One of the hardest things to do is to move from an on-premise or shrink-wrapped software company and become a Software-as-a-Service company. It is not enough to simply bundle up an application in a hosted fashion and label yourself a “SaaS” company.  If you don’t work aggressively to increase availability and decrease your cost of operations, someone with greater experience will come along and simply put you out of business.  After all, your business is now about SERVICE – not SOFTWARE. We have pulled together some advice such as start thinking about having two different products (on-premise and SaaS) or determine which business you want and kill the other one off. Attempting to satisfy both with a single architecture will likely result in you failing at both.

Our belief is that scalability and ultimately business success require architecture, organization, and process to all be aligned and functioning well. This brings up our last trend, how to organize for success as a SaaS company.

Agile Organizations
We’ve written lots of posts about this issue starting with how“old school” organizations are aligned functionally and then hownew Agile organizations are aligned by delivery of services. The organizations that align this way have remained remarkably nimble and agile despite sometimes having thousands of software developers. As a SaaS provider you need to rethink the traditional organizational structure and start thinking about how to organize to provide the best service possible at the lowest cost.


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Growing Too Fast

When you’re waiting for your startup to achieve the hockey-stick growth, so you can ring the NASDAQ bell in a hoodie, it might seem impossible to grow too quickly. However, there are some serious possible negative consequences of too rapid growth using the wrong metrics, i.e. vanity metrics.

A household brand that we can point to for growing too quickly is Starbucks. Schultz, when he was on his 8-year hiatus from the CEO role, wrote a letter criticizing the Seattle-based company for growing its global chain of 13,000 coffee shops too quickly. He stated that as a result the company was commoditizing itself and losing much of its soul. Upon his return to the CEO role he took actions to close over 600 of these stores. Not only are situations like this harmful to the brand but all those stores employees were negatively impacted as well.

At AKF, we deal with hyper-growth companies every week and sometimes we get to keep up with them over years. The growth of most companies is not steady but rather it is sporadic. When a company has grown too quickly based on the wrong metrics, trouble ensues.

At Quigo (our previous company acquired by AOL) traffic growth would move along steadily until we brought on a large customer and then it might double overnight. But traffic isn’t revenue. Making money on that traffic lagged by weeks or months. Had we celebrate the increase in traffic rather than the really important business metrics (revenue & profit), we might have grown too rapidly. Some of the bad things we’ve personally seen with companies that grow too rapidly based on vanity metrics include:

  • Organization – bringing employees up to speed takes time and it is easy to get behind or ahead of the demand curve. Hire too slowly and customers might be impacted but hiring too quickly means either too high of a burn rate or having to lay people off. Growing rapidly in year one and then laying people off in year two causes credibility issues. This in turn might give potential new customers pause and will certainly result in hiring difficulties in the future.
  • Valuation – interest, from an investment perspective, in particular types of technology companies waxes and wanes over time. Online advertising companies were hot in 2007 but now it is a much more competitive environment. Social networking was hot before the FB IPO but now people are concerned. Raising money at too high of a valuation, unless it’s the last round, will make future rounds more difficult and painful.
  • Office Space – along with hiring too many employees comes building out or leasing too much office space. Obviously this causes excessive burn rates but it also can have morale implications. With too few employees and too much space the team is reminded every day that they haven’t grown fast enough to fill the office. They also might gravitate away from each other (often heading for the available offices) and lose the power of sitting beside each other.
  • Hardware – while you might have to buy or lease hardware based on a vanity metric like web traffic, this doesn’t mean you should forget how much revenue and profit this traffic is generating. Traffic that might not bring in the expected revenue should be treated as such. We’ve argued for an R-F-M analysis for storage costs which can be extended to processing as well.

Are you growing too fast or have you seen companies grow to fast?


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Mergers and Acquisitions Revisited

We wrote a post last Sept about successful acquisitions. In that post we first struggled with how to actually define a “successful” acquisition. After that we postulated that there were two primary methods of achieving what would in general be considered a successful outcome from an acquisition.

The first method is by overwhelming the acquisition’s culture and turning it into the acquiring culture as fast as possible. I called this the GE-approach because of all the acquisitions I saw while at General Electric during the 90’s, this appeared to be the dominant strategy. The second approach is to leave the acquisition completely alone and let it run autonomously. The only tie to the acquiring company is through financials. Reading an article recently I was shocked but pleased to see that academic research had arrived at similar strategies for successful mergers and acquisitions.

Clayton Christensen, Harvard professor and author of books such as The Innovator’s Dilemma, wrote an article recently in HBR with several other authors about the new M&A playbook. In this article the authors state that studies indicate that mergers and acquisitions fail over 70% of the time. Much has been written and studied about this but from the perspective of attributes of the deal. Christensen et al suggest that the problem isn’t attributes of the deal but that executives fail to match candidate acquisitions to the strategic purpose of the deal.

The article states that there are two reasons to acquire a company, to boost your company’s current performance or to reinvent your business. To extend your business but not fundamentally change how you compete, an executive should buy a company with resources aligned with the current business and fold them in, letting the acquisition eventually die. This is what we described as “overwhelming the acquisition’s culture” or the GE-approach. To reinvent your business, executives should seek companies that have a different business model put resources into it and let it grow. This is what I see as our approach of leaving the acquisition alone letting it continue to grow, perhaps providing financial resources from the parent company.


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Sensible Security

This post is the last in a 3 part series and will cover the last 2 points from our post entitled the Top 4 Failures in Corporate Information Security.  Here we are going to focus on why firewalls aren’t always the best solution to your problems and how to use your security team properly in your risk making processes.  We’ll end with a quick review.

Firewalls Can Be Bad Too

Firewalls can absolutely be overdone.  In fact, in our experience they are very often overdone.  Often firewalls are cited as being necessary to be compliant with certain regulatory requirements or industry standards (such as PCI compliance).  Sometimes companies feel they must put them in place simply because similar “comparison companies” have installed them.  Many times the driver of this need isn’t as much the requirement, standard or “comparison” company as it is misinformation on the part of firewall vendors or decisions made without complete information.

Firewalls, besides not being free either in terms of labor or capital (obviously), almost always reduce your availability and decrease your flexibility.  Like any other piece of hardware and software, they fail from time to time.  These failures often either lead to idle employees who cannot perform their work or even worse, the turning away of revenue generating customers from certain functions on your site.  There’s no way around it – if you put a firewall in the way of a transaction sooner or later it will cause a problem.  Sometimes this is both acceptable and advisable, such as the additional protection that a firewall provides a database that stores PII information such as credit cards.  Other times, it is just an unfortunate cost and burden such as when firewalls are used to protect static image servers that have very little valuable information on them and which are of little interest to money-focused bad guys.  And finally they can really harm employee productivity by stalling business initiatives.   It’s not unusual to spend thousands of dollars of labor several times a year troubleshooting why a new service won’t work or an why an old service quit working  before identifying that a port in a firewall needs to be opened or was recently closed.

Security Teams as Contributors – Not Decision Makers

Your security team very likely has a lofty and aggressive goal – to keep your company, your systems and your data (or your customer’s data) free from being abused by bad guys.  This goal doesn’t come cheaply and the only way to guarantee it is attained is to either go out of business or spend so much on your risk adjustment initiatives that you will never make a profit.

The security team rarely has the business background and overall business context to make business tradeoffs when it comes to risk.  While they may in fact have a number of people with advanced business degrees, their focus on reducing risk means that they are not focused on maximizing profits within the context of all of the available business levers.  And you may not want them to have such a broad business focus as some practitioners argue that you want your risk team focused singularly on the available risk options rather than making the risk tradeoff decisions.  The bottom line here is that the team should be involved in the decision process, but they are not necessarily the best decision makers for your risk management options.

Acting Sensibly

Treat your security and risk initiatives as you would your personal property and valuables.  Lock up and keep out of sight those things of significant value, but retain enough flexibility to allow you and your team to do your jobs quickly.  You probably don’t put deadlocks on every bedroom in your house as it just doesn’t make sense and you probably don’t need to put firewalls on every LAN segment in your network for the same reason.  Add passive detection advices such as intrusion detection systems to increase your level of security.

We covered four failures in corporate information security:

1)      Fear rather than Risk and Profit driving decisions

2)      Teams not understanding financial drivers of the “enemy”

3)      Overemphasis on Firewalls

4)      Security decisions made by the wrong team

By understanding what motivates your enemy, approaching security with risk and profit rather than fear as a driver, acting sensibly when it comes to risk mitigation and making risk decisions at the appropriate level you can both decrease risk and increase profitability.


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