Episode 55 | Business of Software 2011
[00:00] Rob: Coming to you live from Boston at the Business of Software 2011 conference, this is Startups for the Rest of Us, Episode 55.
[00:16] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: And we’re here to share our experiences and help you avoid the same mistakes we’ve made. What is the word this week, Mike?
[00:32] Mike: It’s really strange looking at you from across the room and recording.
[00:36] Rob: Yeah. So Mike and I normally record across the country. We’re finally in the same room and we have microphone issues that when I talk it echoes. So Mike and I are sitting across this huge room from each other to try to avoid it. Aside from that, we are here in — we’re in Boston and we just wrapped up Business of Software 2011. It’s a two and a half day conference for what the founders call “real software companies” not like Startups that are just trying to do crazy stuff but it’s typically companies that are little further along in the process.
[01:04] I mean, we did this last year and had, you know, got a lot of positive feedback and had good fun doing it. So we kind of want to bring up some highlights that we had here in terms of the talks as well as share experiences of really great — the whole conversation of which, I think yours was the most valuable thing for me. So to start off, what’s your impression, Mike? You’ve now been to two Business of Software conferences, what are your thoughts?
[01:26] Mike: I really like the conference. The speakers and stuff are obviously — Business of Software is a somewhat expensive conference but the speakers for the most part were top notched. I mean, I really liked hearing their views and opinions on different things and obviously, you know, you get the range of speakers and you get more from some than others. And I think that the two that kind of pop out in my head is being the ones that were my favorites to listen to were Clayton Christensen and Jason Cohen. And Clayton Christensen talked about –
[01:56] Rob: What — to take a quick step back, Clayton Christensen is the author of the Innovator’s Dilemma –
[02:01] Mike: Right.
[02:01] Rob: — which a lot of people probably heard of and I think he’s written five other books and he’s a professor at Harvard. So yeah, go on.
[02:07] Mike: So he talked about building disruptive technologies and being able to identify those things that are going to come into a market and take the incumbents and basically push them out because they are building completely innovative technologies that are just completely disruptive to the existing incumbents. And it really struck a chord with me ’cause that’s what I’m doing with AuditShark to be perfectly honest.
[02:33] I mean, I’m coming into an existing formally entrenched market where enterprise sales is really where it’s at and the only place that you that you can get these, the types of offer that I’m building it is from an enterprise corporation and they have a very specific way of presenting their software and the way of selling it and nobody else is doing it. And that’s kind of what I’m doing is just being disruptive to their business model and it has really just struck a chord with me.
[02:58] He gave a lot of examples and the two that kind of stuck out was one was vacuum, two, it was some transistors and how there was a transition from vacuum tubes to transistors and, you know, obviously a different voltage level but they were just a lot smaller. And then for Digital Equipment Corporation where they rose a promise through great management but they fell through the same management. People looked at that as an example and say, well, how could that have possibly happen. And it wasn’t so much the management as it was that there was a new disruptive technology that was coming into the world which was, you know, personal computers where DEC usually made money from mainframes.
[03:33] And although they saw it coming, there was really nothing they could do about it because their hands were kind of tied. They couldn’t really destroy their existing business model without going into that business but at the same time by choosing to do nothing they killed themselves anyway. It was interesting to see that the incumbents in a business where there’s a disruptive technology, there’s nothing that they can do about it. There’s no good way for them to fight the fight.
[03:56] Rob: Right. Well, I would — where the story is about IBM and how they did it twice. How they went from mainframes to microcomputers and the way they did it, well, they basically started an entire separate business unit that almost acted like its own company. They located it like several states away and they have no contact with the old guys and so they were able to behave with autonomy. They moved to make computers and then years later, they moved to what — to PCs and they were the only — he said they were like 9 mainframe manufacturers and IBM is the only one that made it to microcomputers, all the 8 others died. And then — or mini-computers I think. And then there were 9 minicomputers and only one made it to PCs and it was IBM. And they did the same thing both times which is really a fascinating approach when you think about it.
[04:40] Mike: Well, I thought it was more fascinating that he was able to show this is what happens if you can’t do it and this is what happens if you can. He had solid examples to back up the analysis and hypothesis behind why that stuff happens.
[04:54] Rob: Yeah. So I’m really interested — like I said, he’s written several books and I read Innovator’s Dilemma probably 10 years ago and I don’t remember much of it so I’m making it a point to get at least one of his books and maybe turned them on audio and I’m gonna be listening to them in the coming weeks.
[05:10] Now, the stuff he talks about doesn’t particularly apply to me because I’m not — I don’t intend to disrupt large markets. It’s like all the examples he used are like IBM. I mean, they’re billion-dollar companies. So I’m like I can’t think of any true application to my businesses right now. He’s still a super smart guy. His talk was awesome. I know that his books are gonna be good. So yeah, I’m putting them on my list. I think maybe, well, for entertainment for me than the actual business changes but I think for you, I think you’re right since AuditShark is more of a disruptive force. Yeah, basically, the whole time he kept saying, this stock is to help people who want to kill a big competitor or what to not be killed by a small competitor. And you obviously are the small competitor. So that’s cool. Yeah, you also mentioned Jason Cohen’s stock, right?
[05:55] Mike: Yeah. That one definitely rang home as well because his entire talk was about you really need to be honest in your business and he talked a lot about how honesty makes money. And if you look at business in general, the lying is expected in the business, it’s expected when you’re making deals, when you’re doing sales. And, you know, he showed some examples of some various things where it just was very obvious that those things were lies like the Republic of Cuba and the People’s Republic of China. And when you look at these labels that people have slapped on and you go, ha, ha, ha, that’s funny ’cause you know that it’s just completely not true but it’s so commonplace in many areas that people just glossed over it. And it’s common knowledge that honesty is supposed to win but people don’t do it.
[06:41] He came up with several examples of how it was amazing that by being honest about who you are, what you do, that people respond to that and they will actually cut you slack for not being as bigger, not being able to respond as well to different situation and obviously he used all these examples. I think pretty much everybody use all these as an example for different things. It was just really great to see that sort of thing. It got me thinking about what I’m doing and saying, well, do I really need to act like a larger company here. Do I need to, you know, say, oh, well, I have multiple employees when I really don’t. It just rang home to say, well, you know what, I can just say flat out I don’t have any employees. I don’t, you know, have any sales support staff or I don’t offer these things and here’s why. And I think that he’s right. He’s absolutely right. People will respond to that and people will cut you slack for it. So he just kind brought those things to mind and said, you know what, I think I’m actually gonna do it.
[07:36] Rob: Yeah. Here’s what I like about Jason’s stock. He basically had one premise. And it was to be honest. And he was trying to show how companies who have been honest, meaning, that they actually don’t edit reviews of the products that they’ll let — there’ll be negative reviews even on their own website, that they succeed and that sales increase and that by — even allowing maybe reviews from people. That means you won’t have as many returns because when people buy something, if they write a review of it that it says, oh, this thing is good but, you know, this one part doesn’t work. But if you then buy it, then you already know that that one part doesn’t work.
[08:10] So he basically had some data and some anecdotes and was supporting basically a single thesis and I really appreciated that. In addition, I took away like you did a couple of points. I think one is that I’m gonna try on at least one marketing site for my products to point out what my product does not do. He said like going into sales call. If you say, look, my product doesn’t do this, it gains credibility. And right away you can then say but it does do this and it’s very believable because the press will know if he’s telling the truth. And what’s funny is after that, I went and did — I put on a workshop on copywriting and I had a landing page for my book before I publish the book. And the tagline for the thing, the main sentence of it was the book for people who don’t have $6 million of funding in their bank account.
[09:00] And I realized that using a negative is actually a great way to niche and to like raise your focus, your product and to say like, we don’t have these features. It’s not for this people. And I totally want to do that. And I actually think about what HitTail — like what can I say that it doesn’t do to show how simple and focused the tool is. So I absolutely took away actual things that I might not be using to modify the marketing website and at least for HitTail and I’m thinking about doing it for that invoice as well. So I’m definitely pushing that one.
[09:28] Mike: Yeah. And I do that actually on the AuditShark website where I say that it’s a client software for small business which in a way it implies is that it is not for the enterprise space and I don’t think that I’d ever really put those thoughts into words or analyze those things the way that he did and the way he illustrated it in the stock. So I appreciated it too. I thought it was a great way to put it.
[09:50] Rob: We’re not gonna go through all the talks, obviously, there were too many to fit into the show. But there was, let’s see Alex Osterwalder who has written a book called Business Model Generation. His talk was good. It was basically out of the book. I’ve read the book before. His material is about innovative and disruptive business models and do it didn’t and doesn’t apply to me per se. But I was actually thinking about you because of AuditShark. Does it apply? Do you think you’re bringing a disruptive business model to your space and did you find resonance in Alex’s stock or was it or not?
[10:22] Mike: I do and I did. And during the course of the talk he actually had people do a workshop and I was sitting next to a pair of guys, one of them was from AMD. So we said this really doesn’t apply to me so why don’t we do you instead. And we just walked through the exercise of setting up and specifying what the resources I need to succeed are, what are the inputs or the outputs. What sort of value propositions I have. I’ll say that it was an exercise that I’d already gone through in my head but it was not quite as formalized. The exercise that I’ve gone through in my head previously probably included every single one of those things. Like I said, it just wasn’t nearly as formalized but I had answers for every single one of them and I have them right at the tip of my tongue ’cause I knew exactly what my answers for all of those things were.
[11:08] And I think that being able to clearly identify what space you’re attacking and who your competitors are and how you’re going to go about beating them and what things you need to succeed, those things are extremely important to being able to put together successful business when you’re trying to bring it off the ground or if you’re trying to reposition it in the market, you know. How can you go about bringing this to market? What sort of things are necessary? What things can you get away without, etc.?
[11:34] Rob: Cool. That after new — two workshops which were different this year. The previous year, it had been at lounge tables that their, you know, you pick around people based on which talk that resonates with you and just discussed it. And that has — I mean, that has much of use. I particularly enjoyed that part. So this year they actually ask folks to give one-hour workshops based on a very specific actionable topic. And so as I said, I put one on copywriting and, you know, sales, marketing, copywriting for landing pages and home pages. And I thought that went really well. There are four to something people in it. So it wasn’t like I could sit around the round table and just talk. I did some slides but I have a lot of exercises as well and I’m hoping I can actually do that talk again just ’cause it was fun and I know I had to make it better now that I’ve given it once. Which one did you attend? What do you think?
[12:24] Mike: I went to the one on the characteristics of SAS application. I’ll be honest, I probably didn’t learn necessarily nearly as much as I thought I might have and it was mostly because it was talking in a more of a general fashion about the types of sales, models, some of the financials about custom acquisition cost, and you know, how to do marketing sales and how your customer lifetime value has to be greater than your customer acquisition cost. It seems like those were more of an intro to SAS. You know, it’s just not quite what was I expecting. It’s not that it wasn’t valuable information ’cause I think it’s certainly was. But I think I was probably further along than somebody who was really the target market for that particular workshop.
[13:04] Rob: Sure. Did they wrap up and attend the party? Was that evening at the Whiskey Priest here in Boston? I took awesome conversations. You and I actually talk for a while and that was cool. We talked with — I went to talk with Patrick Foley, with Ruben Gomez from Bidsketch. I talked with a guy named Jude who works at FogBugz and he does quite a bit of marketing for them. He’s also a developer. And then I had a good conversation with Jason Cohen. We round up sitting at a table with some folks from Light One Security and just discussing all types of — Patrick Foley was there and he was, you know, defending Usher and Microsoft and then Jason Cohen were like, lob fireballs at it if you like. You know, I developed dot net for years and it’s such a disaster, you know. It’s hard to keep up with everything and then I was interjecting that I just acquired HitTail which basically is like a classic XP with some dot net.
[13:55] And so it was cool conversation. We talked about business models. We also talked about programming and then, you know, just kind of wander around. But I got to be honest those kinds of conversations, those are probably the most valuable thing for me these days when I go to conferences. I always enjoyed the talks but I don’t get as much out of it. Yeah, these days I find that when I go to conferences, I keep the most value I get from them is actually in the hallways. I still learn stuff from the talks but I think as I gain more experience it — I just learn less and less. I must need more focus talk because I’m hyper-focused in my apps now. You know, I’m looking at very specific issues that I’m struggling with. And the broad stuff I kind of already uncovered.
[14:32] So the talks with Jason Cohen and asking specific things. Even if the guy’s from Formstack, if you have — I don’t know if you talked to those guys, but Formstack’s kind of like Wufoo. I mean, they’re online form builder. They’re SAS app and so there were these cool insights that they were able to lend. I had questions for them. Also, know we had taken from AppSumo course and Ruben from Bidsketch. And there were probably five others. Anytime, oh, you know what, I get to meet Ian Landsman for the first time. That was awesome from User Scape, HelpStop is the product.
[15:00] Again, ask them questions like what’s your biggest lead driver today. And we’re starting a lot of traffic to you. And talk about some approaches that I just had, oh, I haven’t heard those, you know. So I noted them down and I’m gonna look at implementing for HitTail. So the most notes that I have are from conversations like I had at the Whisky Priest and frankly just in the hallways and in between and after.
[15:24] Mike: Yeah. I found myself sending myself e-mails here and just so that when I was — you know, when I was sitting there listening to the speakers I had my laptop on. I was taking notes and everything ’cause there were times like the things last year that I just completely forgotten about or I said, oh, that’s really good. And I came out of speaker presentation feeling really great but not really remembering everything or nearly as much as I wanted to. And I found myself when I was talking to people about different things, I would send myself an e-mail just so that I made sure I reminded myself about whatever it was that they were talking to me about. But yeah, I totally agree. The conversations that you have with people in between the sessions and, you know, at lunch and dinner and everything else, those are insanely valuable.
[16:05] Rob: I know they Livestream — this is the software this year. I don’t know if they’re gonna have it online or whatever. I do want to revisit a couple of points of some of the talks but, yeah, overall I don’t feel like I need to watch it all again. You know, I feel like I got the most out of it and if you did watch the Livestream, I’m sure you got some cool stuff but I do encourage you to think about actually attending this or another conference. I’m just walking in to one of the sessions this afternoon and David Cancel who started Performable, they started it by HubSpot, is walking out and I go to introduce myself and he’s like, hey, Rob. Hey, ya. We just start — you know, we just got into this awesome conversation and he had this really it could be — like for me, it could be a game changing suggestion for HitTail. I could probably blew it up about this opportunity, you know, there’s no market place and blah, blah, blah.
[16:50] But it’s like crazy and it’s just like, wow, that was like two minutes of my time. That right there could make the entire three days’ worth it, right, just that two-minute conversation.
Well cool. Hey. So I have a question for you because I’m like — there were a couple of talks that I really, really wanted to see and one of them was Patrick McKenzie. I didn’t make it. I’m hoping that I could watch it online. I heard some people raving about it, talk about how specific he was. And now I also heard some folks saying that it was like too specific that it wouldn’t work for their business ’cause they are obviously in a different, you know, kind of different line of business. But what were your thoughts on it?
[17:27] Mike: I can see how people could have taken it in a way and said, well, yeah, that doesn’t apply in my business because it’s too small. But there were lot of examples that he gave and many of the things that he worked through were actually not from his business. They were from some of his consulting customers so I can understand. And maybe there’s just a missed perception about what things applied to their business and which ones don’t. But he talked a lot about the examples of different types of funnels. So, for example, e-mail funnels, trial funnels, you know, going through the sale cycle, figuring out the core usage of your products and who’s using it and how. And these are all things that have nothing to do with the actual checkout and sale of your product when you guys should be doing that too.
[18:09] But there’s all these other things that you can be testing and creating funnels with and he talked about how to do all those things and then, you know, what you’re supposed to be doing with a funnel, some of the different tools that he uses, you know, the general rules of thumb to follow like having a shorter funnel is probably better and, you know, removing steps in the funnel is definitely hopeful for your bottom line. But the fact that those little improvements that you make are multiplicative as opposed to additive so when you increase something by 0.5% in the beginning, you don’t get a 0.5% increase at the end, you get a 0.75% increase, for example. You know, and some statistics majors can figure out the actual math on it. And it depends a lot on how big your funnel actually is but a lot of was about how to — how A/B testing is not medicine. It’s medicine for example, it’s not a solution if you have a bad product.
[19:01] Rob: Well, cool. I apologized to the listeners for the background noise. Obviously, we’re at a conference in the side hallway and folks are walking by. So hopefully if you’ll just based on our great content on the day.
[19:15] Mike: Overall, the conference was well worth it. I mean, people talked about that, oh, it’s an expensive conference. Do I really wanna pay that much money for it? And it’s not so much the conference that you’re really paying for, it’s the interactions with people and I think we’ve talked about having Ted on at some point. But the very first night we were there, Ted was asking me some very difficult questions about why I haven’t launched AuditShark yet and that alone was worth coming to this conference for because it really made me think about what sorts of things I should be doing. What things are important and more importantly what things are not important.
[19:51] Rob: Yeah. That was actually really cool. So it’s Ted Pitts from Moraware software. And a lot of you may remember Harry Hollander was on — it was to more of Episode 40 talking about hiring like professional services companies. Well, his business partner is Ted and Mike had known him for a couple of years now. Yeah. He was totally decadent to you with accountability essentially and I was joking that like I should be doing this on a podcast ’cause Ted was doing a way better job of it of basically busting your chops than I do. Yeah, you’re right that was fascinating and it was actually really good for me to hear as well ’cause it was just he was asking good questions. And its good questions when you removed from a process, you can just put someone’s feet to the fire and say, why aren’t you doing this? And when you’re kind of too close to it, it’s hard to ask those questions.
[20:33] You’re right, that was really cool. There was a cool little thing at the end of this second day where Peldi from Balsamiq interview to getting John Nese who owns an entire store. It’s called the Soda Pop Shop and all it does is sell soda, right? Sounds like they have a 500 or 1,000 different kinds of soda. And it was just — John interview and afterwards we had a soda tasting where you just have to taste all kinds of crazy types of soda that you’ve never heard of. But you had mentioned to me earlier that you asked question during that talk and that it was — there’s kind of an appropriate answer. So I wanted to hear, you know, have you told the listeners what happened?
[21:11] Mike: Right. So the question that I’d asked him was that the context of it a little bit is that this person had a supermarket that he was selling a lot of different things then and Pepsi came in and said we would like you to — oh, I’m gonna sell you this palette of Pepsi for X and he said, well, how much am I gonna make on. And they told him. He said, well, why would I wanna do that? I don’t want to because, you know, I know that my customers can buy it somewhere else. And they said, well, you can’t tell us you’re not gonna care of this. This is — we’re Pepsi.
And a long story short, basically, over the course — of a couple of years I think it was, he essentially decided that he was going to start selling nothing but different sodas from around the world and one of the things that I asked him was that wasn’t he afraid of what was gonna happen when he sort of going down these roads and started going against Pepsi and Coke and, you know, the big soda companies. And he said, it’s very easy to make decisions when you’re going bankrupt and it was just the most appropriate thing I could possibly think of. I was just like, I absolutely know what you’re talking about, you’re absolutely right.
[22:20] Rob: Right. And it ties into your talk at MicroConf. You had talked about your business swinging from — I don’t remember. It was like plus 90K, they’re like negative 70K or something within a couple of months where you are based — I mean, you weren’t going bankrupt per se but your business was essentially not solvent. It’s like you said, you had to make decisions to fix that. It was just such an appropriate response and I thought I thought it was good.
[22:45] Rob: You know what being here has made me excited about is starting to plan MicroConf honestly. We actually haven’t announced it on the podcast but we’ve decided to do MicroConf 2012. I finally after months I’ve talked you into doing it. Luckily he’s viewed it.
[22:59] Mike: And the listeners know that’s a lie because we’ve talked about it before.
[23:04] Rob: And I’m the guy saying, I don’t wanna do it. But, yeah, so we decided to do it and we’re actually gonna sit down right after this podcast and start talking about it. We’re thinking somewhere between April and June, Las Vegas, 2012. We’re gonna start looking at hotels and put together our shortlist for speakers and such. So it just got me excited to get the band back together. Frankly, it’s like people I saw here I haven’t seen any years since the last BOS and to revisit here about what the businesses are doing and in the show. You know, what I’m doing was it got me all fired up to do it again here in six months ’cause frankly, waiting another year to do it is just too long for my case. I think I can do this every three months, honestly like that would be like the ideal, not this particular conference but just different conferences where for software folks.
[23:43] Mike: Yeah. I totally agree. I mean, it’s just great getting in back together with people and being able to talk to them face to face and get their ideas because certain things kind of come to the forefront of your thoughts when you are talking to them directly versus when you’re just kind of conversing over e-mail and saying, hey, can you help me out with this or what is it you’re doing over here. You don’t necessarily get those conversations or talk about the things that are — I guess the most important to you when you’re doing it via e-mail.
[24:10] Rob: Yeah. It’s just hard. It’s so different to say that there was at least for an hour at a table with someone, you kind of have to start asking questions that you normally wouldn’t talk about at too many conversation. And you start warming up to folks and you’re willing to tell them more and they’re willing to tell you more and that’s when it really gets interesting, right? That’s when you start hearing things that can become game changers for your business is just hearing from the trenches. It’s things that are like so cutting edge or so experimental that they haven’t been written about or talked about it yet, and that haven’t been in talks but it’s like these guys, like I tried the specific thing and it’s crazy. You know, it happens to be working right now. I don’t know if it’s gonna work two months from now but it’s like, wow, I wanna try that or a variation of that, you know. You wouldn’t hear about that otherwise.
[24:56] Mike: Right. I’ll give you a very specific example was last night we went out to dinner. We went — it’s all the way over to Chinatown from here. And we had dinner at this French restaurant right on the edge of Chinatown. And we got talking about pricing and how to price a new product and I was very interested in how the guys at the table had priced their products and how they had gotten their start and one of them told me honestly said, our first hundred customers, every single one of them paid us a different rate because most of it was high touch sales, at least initially it was high touch sales. It’s not anymore. But it gave them an idea of what people were willing to pay based on the conversations that they had and one of his first sale, he said, we went it, we offered three different price points and I asked one, it was $500 a month. And they actually laugh and said, well, pay double that. And they did pay double that. And then next one, they went to and said, well, the price is $3,000 a month and that completely fell apart because the company said, well, our budget is like $20 a month.
[25:55] So it was just very interesting to see. It’s a very valid way I think of testing how you determine what your pricing is, is just by asking those people and sure you charge some people more and you charge some people less but they’re okay with that because you’re providing value to them.
[26:09] Rob: Right. Yeah. I know that’s good. That’s a good example.
[26:11] Mike: But that’s not something I would have ever learned from one of those speakers. I mean, maybe they would have mentioned it or something like that but it’s just something I don’t think would have come up.
[26:21] Rob: My closing thoughts are obviously BOS is a great conference. Everyone — everyone hears that. We do that every year. There are several folks who really are doing something unique in this world that we’re living, the software and startup world. Obviously, we can make it 2012. Or, even catch the videos. I don’t know if they’re gonna be online or not. And they were Livestream but I don’t know if they’ll be there afterwards. But if you catch them I definitely recommend it and you know, if you attend it and you’re listening to this, feel free to give us a call or send us an e-mail at Questions@StartupsfortheRestofUs.com. I’d love to hear your thoughts and you know, we can obviously read them on the air next time. Oh, you know what, you and I had conversations here that were pretty valuable and it was about the podcast format. Our release schedule has been every two weeks and what we’re gonna start doing is we’re gonna start doing a weekly podcast again. But what we’re gonna do is — this is based on feedback we received here as well as over the past few weeks. But why don’t we — we’re gonna just do Mike and I discussing our products, right?
[27:17] It’s kind of our update of what we’re doing, steps we’ve tried, our thoughts on it. So those shows maybe short, if you have a lot to say. I could see some of being 10 minutes. I could some of being 30 or 40 minutes like a normal podcast. And the beauty is that, you know, people could hear our updates and such. And I also basically could use time I spent preparing. That obviously helps us because we’re busy. And every other week, one of you, the normal thing of what we’ve been doing for the past year. It’s obviously resonating with folks where we do more of a structure, tutorial type of thing. Basically, if you don’t like the update you’re receiving, you can skip them or something but we hope that people are just interested and wanna listen about them. Did we agree to that or did I just ambush you to that?
[27:55] Mike: No, that’s fine. I think we did kind of agree to it. We just never really formalized, said yes, we’re gonna do this. So I think we both just thought it was a great idea.
[28:01] Rob: All right. Well, that wraps us up for Episode 55 and we’ll see you guys again next week.