Collected Wisdom on Business and Life from the HBS Class of 1963

“The wisdom of the wise, and the experience of the ages, may be preserved by quotation.”

Isaac D’Israeli

Browsing my tweetstream I ran into this wonderful website the other day and instantly retweeted it, but also made a note to come back to have a deeper look.  On doing so, I decided it was so good that I’d do a quick post to highlight it.

The site, If I Knew Then, is actually also a book written by Artie Buerk, a member of the Harvard Business School (HBS) class of 1963 and contains collected wisdom — all in quotation form — from his classmates, gathered in preparation for their 50th reunion.

In addition to the obvious advantage of providing retrospective from an unusually successful group of people, Buerk argues their views are even more relevant because of the massive change that occurred during their lives.

It is, in fact, because these Harvard grads have lived through all these massive changes that their perspectives count for so much. They have been a part of both the “before” and the “after” pictures of a world transformed.

Consider what the world looked like in 1963:

In 1963, the average price of a new home was $12,650 — a fraction of what even the most modest home sells for today. That year, gasoline sold for 22 cents per gallon, the minimum wage was $1 per hour, [and] the average starting salary of a Harvard MBA grad was $9,500.

(Inquiring minds will be happy to know that today’s average starting salary for a Harvard MBA is around $140,000, growing at about twice the rate of inflation since 1963.)

Here are a few of the pithier quotes.

On business:

Surround yourself with the smartest, most ethical people you can find. Set clear goals, communicate them clearly, and delegate.

On careers:

Decide you like what you do, and do it better and smarter than anyone else.  If you can’t, change your career.  Don’t create an expensive lifestyle — living modestly frees you to make appropriate choices.

On leadership:

The best leaders I’ve seen have been as or more knowledgeable than anyone else about the business and the environment in which it operates. They have a clear vision they can communicate to others, and they make decisions easily.  On a personal level they are easy-going, don’t take themselves too seriously, admit their mistakes, and are quick to give others credit. They have high standards, clearly articulated, to which they hold their people.

On happiness and success:

Success is when you can spend 90 percent of your time doing the things you want to do and only 10 percent doing things you have to do.  Most people’s lives are just the opposite.

On life’s lessons:

There is no substitute for integrity. In a world where greed and taking shortcuts seem to be major themes, there is nothing that can replace one’s reputation. The ability to look back on life and say, “I did it the right way” is a treasure. There is no do-over when you lose your integrity and reputation.

United Airlines: Stop Bouncing People Out of Reserved Seats

Dear United:

Just when I thought you couldn’t get worse, you have managed to again perform well below expectations.  How?

I now believe that you have a deliberate policy to bounce low-tier flyers from reserved Economy Plus seats.  How do I know this?

  • I am a relatively high-tier United flyer, happily achieved not through flying you much anymore, but through legacy status as multi-million mile flyer.  With that status, you treat me just barely well enough for me to think about flying on your airline on competitive domestic routes.  (Though I avoid your international business like the plague.)  You may have noticed I dropped from flying about 100-150K miles/year to maybe 30K/year as a result of changing to alternatives like Virgin America.
  • My wife, however, is a low-tier United flyer.   The way you treat her is simply appalling and quite possibly illegal.  One purpose of this blog is to highlight the myopia of your CRM program where, among other weaknesses, you have literally for decades missed the basic possibility that high-tier flyers are married-to and/or parents-of low-tier flyers.  When you hose the low-tier flyer, you hose the high-tier flyer partnered with them.  But the real point is you shouldn’t treat anyone the way you routinely treat my wife.
  • For about the fourth time you have bounced her out of a pre-reserved Economy Plus seat — thus it is clear to me that this cannot be a series of accidents but a deliberate policy.
  • Today you bounced her (and my son) from 11EF  to 32AB on a 737-900 (literally the worst seats on the plane) even when we were traveling together.  I was never notified.  No email was sent.  I learned this at check-in time.  #nice
  • However, this is topped by my “favorite” story where my wife had paid $90 extra for Economy Plus.  Minutes before departure, she was called up at the gate and handed a new boarding pass for a non-economy plus middle seat.  No explanation was offered.  No refund was given.  Yes, you paid $90 extra for Economy Plus but someone more important came along, so we’re moving you back to 37E because we can.  She was so stunned she said nothing at the time.  If you this transactionally, you got away with it.  #congrats.  If you view this from a relationship perspective, you burned her forever.  Any time I want to fly United (and that’s less and less) she reminds me of the story and says we can’t be certain we’ll get our assigned seats.  Today again you proved her right.

So it’s clear what you’re doing.  You’re making two promises that you seem to have no intent on delivering upon:

  • A low-status flyer can buy-up to Economy Plus and have a guaranteed seat.  This promise is clearly now false.  They can have the seat only if it is convenient for you at departure time.
  • A high-status flyer can bring 1-2 low-status flyers with whom they’re traveling up to Economy Plus.  Today you proved this promise false as well.

Given the frequency with which this occurs it is clear that this is not bad luck or coincidence.  This seems to be policy.  And I think it’s probably illegal.  You’re probably CYAed by some regulation never intended for this purpose.  But what you’re doing is nevertheless wrong.

From a customer experience (CX) perspective, let me make clear what you’re doing.

  • With your normal, crappy, bad flight attendants, no video screens, worst-boarding-process-of-any-airline, service I’d guess you are driving survey responses on a net promoter score (NPS) survey from maybe passives of 7-8 down to detractors of 4-5.   Lucky for you, people don’t expect much from airlines so you can get away with this.
  • However, with the failure to honor pre-reserved seats you are actively creating detractors — and not just 2-3 out of 10 detractors, but 0 out of 10 detractors.  Like “I never want to fly United again” detractors.  Like “I’ll fly one-stop to Denver because I can’t stand United” detractors.  Like “even if it’s business/first, I don’t want to fly United” detractors.  In fact, I have trouble of thinking of a better way to make people hate you more than repeatedly making the promise of reserved seat — and in cases collecting a supplement for it — only to fail to honor that promise.

It’s not an accident.  It must be policy.

This year I’ll probably fly 30K miles on United out of a total of 200K.  Next year my goal is zero.

The Second Agenda: Why No Executive Should Ever Have One

Sometimes leaders have second agendas:

  • CEO:  I want to win for my shareholders and prove I can take a company public.
  • Founder:  I want to win for my shareholders and destroy the great evil at Microsoft.
  • Volleyball coach:  I want to win the league and prove to the world that I can convert an average outside hitter into a great libero.
  •  CMO:  I want to beat the plan targets and develop my protege.

I’m going to argue that in basically all cases these are bad.  Why?  Because when a leader has two primary agendas they can come into conflict.

  • The CEO will turn down a potentially great buy-out offer because he/she personally wants to ring the bell at the NYSE.
  • The Founder will turn down a fantastic deal from Microsoft because he does not want to do business with the great (perceived) evil.
  • The volleyball coach might lose the game by not playing the best players to win it.
  • The CMO might miss plan targets by focusing more on his/her protege than on delivering MQLs to sales.

This is, of course, not to argue that leaders can only focus on one goal.  Running a company requires a whole set of goals that map across the organization.  But leaders should have one mission, one cause, one agenda:  to win.

Any other agenda, no matter how well intentioned will eventually come into conflict with winning and start to tear the team apart.

  • Investors find out a prospective buyer was snuffed without due consideration and lose trust in the CEO (and potentially either fire or sue him/her).
  • The Founder ends up distanced by his organization which now sees him as fighting religious wars instead of running a business.  Employees leave because they wonder what other great deals won’t be pursued for non-business reasons.  (Think:  Yahoo!)
  • The volleyball coach is seen as subjective and someone who “plays favorites” and thus fails to recruit top players to his/her team in following years.
  • The CMO is seen as political and his team starts to distrust his motivations for assigning projects, leading to general distrust on the team, and the loss of several key players.

I remember one day, years ago, when I felt that our CEO had not been loyal enough to a teammate.  I thought “that’s shitty, he prioritized winning over loyalty to a long-term colleague.”  And then I thought some more.  And then I realized that’s exactly the kind of CEO you want to work for.

I’m not saying we should treat people as disposable and that loyalty shouldn’t exist.  Managers should be creative and try to find win/win solutions to issues with employees.  But when you can’t, when there appears to be no win/win to be had then no secondary agenda* — even loyalty — should trump the leader’s primary objective.

# # #

* Obviously I view things like “ethics” and “the law” not as secondary agendas, but as constraints on the solution.

Please Give Me a 10:  Interpreting Customer Satisfaction Surveys in an Era of Bias

Say you’re considering going out to dinner in a city you’ve never visited before and there are two different surveys of local restaurants that you can use to help choose a place to eat:

  • Survey 1, which is taken by randomly asking customers leaving restaurants about their experience.
  • Survey 2, which was conducted by asking every restaurant to provide 25 customers to survey.

Which would you pick?  Survey 1, every time.  Right.  It’s obvious.

Why?  Because of what they measure:

  • Survey 1 measures customer satisfaction with the restaurant in an objective way and can be used to attempt to predict your experience if you eat there. In a perfect world, you could even slice the survey results by people-like-you (e.g., who liked the same restaurants or have similar food profiles) and then it would be an even-better predictor.
  • Survey 2 measures how well the restaurant can pick, prime, and potentially bribe (e.g., “three free meals if you take the survey and give us a 10”) its top customers. It has little predictive value.  It is more a measure of how well the restaurants play the survey game than the quality of the restaurant.

Would it surprise you to know that virtually every major survey in IT software is run like Survey 2?   From big-name analyst firms to respected boutiques, the vast majority of analysts run their customer satisfaction surveys like Survey 2.

Why would they do this, when it’s so obviously invalid?  Because it’s easier, particularly when you need to include a bunch of relatively small startups.  Finding a random list of Oracle and SAP customers isn’t that hard.  Try finding 20 customers of a startup that only has 50.  You can’t do it.

So you make do and ask vendors for a list of customers to survey.  You get a lot of data you can analyze and put into reports and/or awards.  More disturbingly, you can build your special two-by-two quadrant or concentric circle diagram leveraging the data your survey, lending it more legitimacy.  (Typically these diagrams have one more-objective and one more-subjective dimension and things like revenue/size/growth and customer satisfaction factor into the more-objective dimension.)

When people challenge your survey and the methodology behind it, you can typically defend yourself in one of several ways:

  • “The data is the data; I’ve got to work with what I have.” But the data is garbage because of the biased way in which it was collected and the first rule of data is you can’t analyze garbage – “garbage in, garbage out” as the maxim goes.
  • “It was a fair contest,” meaning that every vendor had the same opportunity to select, prime, coach, cajole, reward, and/or bribe the respondents.” While this may be an excellent stiff-arm for the vendors, end users don’t care if your survey was FAIR, they care if it is VALID – i.e., can it provide a reasonable prediction of their experience.  And, back to the vendors, are such contests even fair?  A low-end,vendor with 1000 small customers can cherry-pick its customer base more easily than an enterprise vendor with 75 big ones.
  • “The results are consistent with our general experience talking to customers.” This is a weak defense because it’s both subjective and certainly confirmation biased – what analyst wants to undermine his/her own survey?  It’s also problematic because the customers who call analysts are not random.  Some serve certain verticals or departments.  Some serve big IT groups.  An echo chamber is often created in that process.

In my opinion, the single best thing these surveys do is ferret out vendors that are marketing true vaporware (e.g., a mega-vendor with a new cloud product that they’ve given free to 300 customers in order to claim market success, but since no one is actually using it, they can’t even produce the 25 references).  For that these surveys work.  For everything else?  Not so much.

The whole situation reminds of buying a car where the dealership hits you mercilessly with:

  • “Is there anything I can do to make you more satisfied today?”
  • “Is there any reason you will not give me a 10 when corporate surveys you because my compensation will fall if I get anything other than a 10 and my lovely spouse and children (in the photo on my desk) will suffer greatly if that happens?
  • “You don’t want to hurt my children do you? So please give me a 10!”

Now I can guarantee you that the net promoter score (NPS) produced by that survey will not be valid.  So why do companies do it?  Because, like it or not, it does force a conversation where the dealership asks some important, uncomfortable questions that might highlight correctable problems.

If you’re trying to force a conversation between your organization and your customers, there is probably a role for the “please give me a 10” survey.  If, however, you are genuinely trying to measure satisfaction with your products, then there is not.

So what’s a buyer to do?  If you can’t trust these surveys, then what can you trust?  I think 3 things:

  • The vendor’s wheelhouse.  While most technology vendors attempt to position as everything to everyone, despite their misguided marketing they nevertheless develop a reputation for having a wheelhouse (i.e., an area or segment which is their real strength).  These reputations get built over time and are usually accurate, so ask people “what is vendor X’s wheelhouse?”  Not what do they say they do.  Not every area in which they have one customer — but their wheelhouse.  You should see a consistent pattern over time and you can then compare your needs to the vendor’s wheelhouse.
  • Reference customers. While I believe you can cajole someone into giving you a 10 on a survey, it’s much harder to cajole someone into bogus answers on a live reference call.  The key with reference checking is to find customers like you in terms of size, complexity, problem-solved, and general requirements.
  • Your own evaluation process. If you’ve run a good evaluation process, trust it.  Don’t let some survey up-end a process where you’ve determined that product X can solve problem Y after looking at demos, possibly do some sort of proof of concept, done vendor presentations and discovery sessions, built a statement of work, etc.

More Turmoil at Adaptive Insights

I always have mixed feelings about competitive blog posts and to keep my life simple and the blog pure, I generally try to avoid doing them.  However, for a bevy of reasons related primarily to how Adaptive Insights chooses to compete with Host Analytics, I have made and will continue to make a few exceptions.

From the day I joined Host Analytics, Adaptive made a deliberate FUD campaign against Host Analytics and aimed very much at the company.

  • They’d point out I was a new CEO and that new was scary.  They’d forget to say experienced CEO who already grew a company to $80M, knew the BI/EPM category, and was running a $500M division at Salesforce.
  • They’d say we had scary management turnover.  They’d forget to say that I was building a new team to take the company to the next level and rather than examining the simple fact of change, you should evaluate whether the change was good or bad.  The real question was whether the team I was building was well suited to moving the company forward.  Did the people have the right experience?  Had they built startups before?  Did they know the category?
  • They’d talk about their funding and tell customers (crossing the defamation line in my humble opinion) that we were risky to buy from due to financing issues.  Anaplan shut that down pretty fast after raising a $100M round and to date Crunchbase reports that Host Analytics has raised $86M and Adaptive $101M — no big difference there.
  • They’d boast that they hired our former people.  They’d forget the part about “that we didn’t want.”  In my tenure we’ve never hired someone in the reverse direction, and I don’t expect we will.  Our aim is to be “the Hyperion of the cloud” and you don’t get there with low-end people pumping low-end product.

Adaptive’s argument was simple:  customers should (1) buy from the company who’s raised the most money in the space and (2) not buy from a company if they have had senior management changes.  Thus, I am pleased to report by Adaptive’s own “insights” (i.e., reasoning), that customers should not buy from them.

Why?

If you want the company whose raised the most capital, it’s not Adaptive, it’s Anaplan at $144M.

Note that I never made the argument that most money is best.  Business Objects was grown to $1B+ in revenues on something like $4M in VC.  Tableau is worth $8B today and was built on $15M in (as I hear it, unneeded) VC.  In my opinion, when it comes to startups and VC, the Goldilocks rule applies:  neither too much nor too little — but just right.

If you want to avoid companies with management turmoil, consider the following:

  • By my count, Adaptive Insights is on its fourth CEO since 2011.  Count:  (1) the interim guy whose name I can’t remember, (2) Rob Hull who I believe acted as interim at some point, (3) John Herr who was exited in July 2014, and now (4) retired East Coast venture capitalist Tom Bogan.
  • Long-time SVP of Sales Neil Thomas left the company this past November after 8 years.

Quick: what’s the #1 reason people with quotas suddenly leave companies?

I will try to avoid the tendency to editorialize about the subjective question of whether the new team is the right one, with the right experience, in the right categories, et cetera and simply observe this fact:  if you believe Adaptive’s argument that you should not buy from companies with management changes, then you shouldn’t buy from Adaptive.

#QED.

karma.domino

Video of my Host Analytics World 2015 Keynote Presentantion

Thanks to the 700+ folks who attended my keynote address at last week’s Host Analytics World 2015 conference in San Francisco.  We were thrilled with the event and thank everyone — customers, partners, and staff — who made it all possible.

Below is a 76-minute video of the keynote presentation I gave at the event. Enjoy!  And please mark your calendars now for next year’s Host Analytics World — May 9 through May 12, 2016 — in San Francisco.

Bottom-Fishing Acquisitions and Catching Falling Knives

As mentioned in my recent Curse of the Megaround post, some companies that find themselves flush with cash and under heavy pressure to grow, decide to embark on dubious acquisitions to help shore up the growth story.

As one reader it put it, you can summarize your megaround post with the simple phrase “much money makes you stupid.”  And it can.  Thus, as the old saw goes, fools and their money are soon parted.

What separates good from bad acquisitions in this context?  As a general rule, I’d say that when high-growth venture-backed companies acquire firms that would otherwise best be acquired by private equity, it’s a bad thing.  Why?

Firms destined to be acquired by private equity follow a typical pattern.

  • They are old, typically 10+ years
  • They have tried multiple iterations on a strategy and none has worked
  • They have a deep stack of technology built over the years but most of which could be quickly replaced with modern, often open source, standard components
  • They tend to get strategically inverted — starting out with “what we have” as opposed to “what the market wants”
  • They have gone through several generations of management teams
  • Basically, they’re turnarounds

So private equity funds bottom-fish these opportunities, buy companies for a fraction of the total invested venture capital, scrap most of the original dream and either [1] double down on one core piece that’s working or [2] roll the company up with N adjacent companies all selling to the same buyer.

This is hard work.  This is dirty work.  This is “wet work” involving lots of headcount changes.  And private equity is good at it.   In one sense (and excluding private equity growth funds), it’s what they do.

High-flying VC backed startups are simply the wrong types of buyers to contemplate these acquisitions.  In the core business, it’s all about grow, grow, and grow.  In the acquired business, it’s all about cut, cut, cut and focus, focus, focus.  These are two very different mentalities to hold in your head at one time and the typical fail pattern is apply the grow-grow-grow mentality to the broken startup that repeatedly hasn’t-hasn’t-hasn’t.

The other failure pattern is what I call the worst-of-breed suite.  This happens when a player in space X acquires a two-bit player in space Y, hoping to “get a deal” on a cheap technology they can then sell to their customers.   The vendor is thinking “I can sell more stuff through my existing channel.”  However, the customer is thinking “I don’t want to use a worst-of-breed product just because you decided to acquire one on the cheap.”  Moreover, with easy of integration of cloud services, there is typically no real integration advantage between the cheaply acquired product and a third-party best-of-breed one.

On Wall Street, they say that bottom-fishing falling stocks is like catching falling knives.  For high-growth startups, trying to bottom-fish failed startups is pretty much the same thing.