Category Archives: Positioning

The Next Chapter

This morning we announced that Vector Capital has closed the acquisition of Host Analytics.  As part of that transaction I have stepped down from my position of CEO at Host Analytics.  To borrow a line from The Lone Ranger, “my work is done here.”  I’ll consult a bit to help with the transition and will remain a friend of and investor in the company.

A Word of Thanks
Before talking about what’s next, let me again thank the folks who made it possible for us to quintuple Host during my tenure all while cutting customer acquisition costs in half, driving a significant increase in dollar retention rates, and making a dramatic increase in net promoter score (NPS).  Thanks to:

  • Our employees, who drove major productivity improvements in virtually all areas and were always committed to our core values of customer success, trust, and teamwork.
  • Our customers, who placed their faith in us, who entrusted us with their overall success and the secure handling of their enormously important data and who, in many cases, helped us develop the business through references and testimonials.
  • Our partners, who worked alongside us to develop the market and make customers successful – and often the most challenging ones at that.
  • Our board of directors, who consistently worked positively and constructively with the team, regardless of whether we were sailing in fair or foul weather.

We Laid the Groundwork for a Bright Future
When Vector’s very talented PR guy did his edits on the closing press release, he decided to conclude it with the following quote:

Mr. Kellogg added, “Host Analytics is a terrific company and it has been an honor lead this dynamic organization.  I firmly believe the company’s best days are ahead.”

When I first read it I thought, “what an odd thing for a departing CEO to say!”  But before jumping to change it, I thought for a bit.  In reality, I do believe it’s true.  Why do Host’s best days lie ahead?  Two reasons.

First, we did an enormous amount of groundwork during my tenure at Host.  The biggest slug of that was on product and specifically on non-functional requirements.  As a fan of Greek mythology, the technical debt I inherited felt like the fifth labor of Hercules, cleaning the Augean stables.  But, like Hercules, we got it done, and in so doing shored up the internals of a functionally excellent product and transformed our Hyderabad operation into a world-class product development center.  The rest of the groundwork was in areas like focusing the organization on the right metrics, building an amazing demand generation machine, creating our Customers for Life organization, running a world-class analyst relations program, creating a culture based on learning and development, and building a team of strong players, all curious about and focused on solving problems for customers.

Second, the market has moved in Host’s direction.  Since I have an affinity for numbers, I’ll explain the market with one single number:  three.  Anaplan’s average sales price is three times Host’s.  Host’s is three times Adaptive’s.  Despite considerable vendor marketing, posturing, positioning, haze, and confusion to the contrary, there are three clear segments in today’s EPM market.

  • Anaplan is expensive, up-market, and focused primarily on operational planning.
  • Adaptive is cheap, down-market, and focused primarily on financial planning.
  • Host is reasonably priced, mid-market, focused primarily on financial planning, with some operational modeling capabilities.

Host serves the vast middle where people don’t want (1) to pay $250K/year in subscription and build a $500K/year center of excellence to support the system or (2) to pay $25K/year only to be nickeled and dimed on downstream services and end up with a tool they outgrow in a few years.

Now, some people don’t like mid-layer strategies and would argue that Host risks getting caught in a squeeze between the other two competitors.  That never bothered me – I can name a dozen other successful SaaS vendors who grew off a mid-market base, including within the finance department where NetSuite created a hugely successful business that eventually sold for $9.3B.

But all that’s about the past.  What’s making things even better going forward?  Two things.

  • Host has significantly improved access to capital under Vector, including the ability to better fund both organic and inorganic growth. Funding?  Check.
  • If Workday is to succeed with its goals in acquiring Adaptive, all rhetoric notwithstanding, Adaptive will have to become a vendor able to deliver high-end, financial-focused EPM for Workday customers.  I believe Workday will succeed at that.  But you can’t be all things to all people; or, to paraphrase SNL, you can’t be a dessert topping and a floor wax.  Similarly, Adaptive can’t be what it will become and what it once was at the same time – the gap is too wide.  As Adaptive undergoes its Workday transformation, the market will switch from three to two layers, leaving both a fertile opening for Host in mid-market and a dramatically reduced risk of any squeeze play.  Relatively uncontested market space?  Check.

Don’t underestimate these developments.  Both these changes are huge.  I have a lot of respect for Vector in seeing them.  They say that Michelangelo could see the statue within the block of marble and unleash it.  I think Vector has clearly seen the potential within Host and will unleash it in the years to come.

What’s Next?
I don’t have any specific plans at this time.  I’m happily working on two fantastic boards already – data catalog pioneer Alation and next-generation content services platform Nuxeo.   I’ll finally have time to write literally scores of blog posts currently stalled on my to-do list.  Over the next few quarters I expect to meet a lot of interesting people, do some consulting, do some angel investing, and perhaps join another board or two.  I’ll surely do another CEO gig at some point.  But I’m not in a rush.

So, if you want to have a coffee at Coupa, a beer at the Old Pro, or – dare I date myself – breakfast at Buck’s, let me know.

Unicorn Tears, Beyond Ultimate, and the Silicon Valley Hype Mentality,

Back in the day we working on a press release and I was a CMO.

Me:  “Somebody, get Randy (the PR director) in here.”

Me:  “Randy, what is this press release calling our new offering the ultimate in business intelligence?”

Randy:  “Yes and the problem is?”

Me:  “The problem is it’s not the ultimate, it’s better than ultimate, it’s beyond ultimate … there must be a word for that … I don’t know, maybe penultimate.”

Randy:  “Chief,” he said sheepishly after waiting a minute, “penultimate means one less than ultimate.  Ultimate means ultimate.  There is no word for one more than ultimate.”

Me:  “Oh.  Well, God damn it, go make one up.”

It was at that moment that I realized I’d been fully sucked into the Silicon Valley hype machine.  Just as unique means unique and requires no modifier like “amazingly,” so does ultimate means ultimate.

Speaking of “amazing,” during my tenure at Salesforce, I used to count the number of amazing’s Marc Benioff would say during a speech.  You’d run out of fingers in minutes.  But somehow it worked.  He was a great — no, amazing — speaker and I never got tired of listening to him.

This is Silicon Valley.   The land where one of my competitors can still peddle a cock-and-bull story about how he, as an immigrant limo driver with $26 (and a master’s in computer science), sold a company (where he was neither founder nor CEO), worked as (a member in the office of the) CTO at SAP, and is growing stunningly — no, amazingly — fast (despite a rumored recent down-round and rough layoffs).  Fact-checking, smact-checking.  If it’s a Man Bites Dog story, people will eat it up.  Blog it, hit publish, and move onto the next one.

Maybe I should pitch the equivalent story about me:

Lifeguard and Self-Taught Programmer Who Arrived in California with Only $30, a Red Bandana, and a Box of Bootlegged Grateful Dead Tapes Becomes CEO of Host Analytics

“Dude, I was guarding by the pool one day and this wicked thunderstorm hit and, flash, like totally suddenly I realized the world needed cloud-based, enterprise planning, budgeting, modeling, consolidation, and analytics.”

And we could discuss how I “hacked” on paper tape back in high school:  “the greatest part about hacking on paper tape was you could roll bones with it when you were done and literally, like, smoke your program.”

It would be a roughly equivalent story.  I’m sure they’d eat it up.

Silicon Valley is a place, after all, where we can create a metaphor for something that doesn’t exist — a unicorn  — and then discover 133 of them.

Is our reaction “bad metaphor?”  No, of course not.  It’s “wow, we’re special, we’ve got 133 things that don’t exist.”

Unicorns (generally defined as startups with a $1B+ valuation) are mostly of a result of three things:

  • The cost and hassle of being a public company, post Sox.  Why go public if you don’t have to?
  • The ability to raise formerly IPO-sized rounds (e.g., $100M) in the private markets.
  • A general bubble in late-stage financing where valuations are high enough to create the IPO-as-down-round phenomena

As the late-stage financing bubble appears to be near popping, you increasingly hear new terms for unicorns.  For example, Good Technology, a “onceacorn,” sold earlier this month for $400M.  Since I love words, I’ve been tracking these new terms closely with some amusement:  formercorns, “just horses with birthday hats on,” usta-corns, dying unicorns, and unicorpses.

So, hopefully, as the financing fuel that’s stoking the fire starts to die down, the hype bubble will go with it.  Until then, enjoy this tweet, which captures the spirit of Silicon Valley today just perfectly:

vape

Stop Making the #1 Mistake in Presentations

Ever hear this story?

VP of Sales:  “Hey, how did the sales training on the new presentation go?”

VP of Marketing:  “OK, well, you know, pretty good.”

VP of Sales:  “Why are you hemming and hawing?”

VP of Marketing:  “Well, I could tell they didn’t love it.”

VP of Sales:  “Do you know why?  I do.  They told me it was a great looking set of slides, but it felt more like an analyst pitch than a customer presentation.”

What’s gone wrong here?
It’s simple.  Marketing made the #1 mistake that managers of all ilks make when it comes to creating presentations:  they start with what they have — instead of starting with what’s needed.

What does that mean?
Marketing probably just came back from a few days of analyst briefings and when they needed to make a revision to sales presentation, they re-used a bunch of the slides from the analyst deck.  Those slides, created for analysts, talked about company strategy, positioning, and messaging.  Customer slides need to talk capabilities, benefits, and customer testimonials.

The slides, never designed to be used with customers, are thrown into a deck, and marketing feels great and super-efficient because they’ve re-used materials and presumably even increased message consistency in the process.  #wow

But it’s a #fail.  They broke the first rule of presentations:  it’s all about the audience.

Know thy audience
Presentations are all about the audience.  The first step in creating any presentation should be asking:  who I am speaking to and what do I want to tell them.

It’s not about you; it’s about them.  Which brings to mind one of my favorite quotes from Frank Capra, director of It’s a Wonderful Life.

“I made mistakes in drama. I thought drama was when actors cried. But drama is when the audience cries.”  — Frank Capra

It’s not just about marketing
While I started with a marketing example, this isn’t just a marketing problem.  Here are some other favorite examples:

  • Making a board presentation from an operations review deck.  Yes, they both have a lot of data and analysis about the business, but the ops review deck is created for an audience of your peers, for people who want more detail and who are far closer to the daily operations of the business.  One great way to hang yourself in a board meeting is to paste a bunch of slides from your ops review deck “to save time.”
  • Making one sales presentation from another.  This might work if the two customers have a lot in common, but if they don’t it will be a disaster.  My favorite quote here comes for a story about an Atlanta-based salesrep who kept referencing Coca Cola to Delta Airlines.  “Stop telling us about Coke.  We are Delta.  We fly airplanes.”
  • Making a product introduction presentation from a product management presentation.  You instantly doom yourself to feature-itis.
  • Making a vision presentation from a sales presentation.  Sales presentations about motivating benefits and differentiation.  Vision presentations are about what’s wrong with the status quo and how to fix it.
  • Making a roadmap presentation from a product planning deck.  Not only will you forget to pad the dates, but you will likely end up turning your product vision into a laundry list.

I could go on and on.  But the key mistake here is simple.  Instead of starting blank-slate with what’s needed based upon the audience, you start with leftovers.  What you have lying around from a prior presentation or meeting.

The road to Hell
Don’t have the good intentions of maximizing re-use when you make presentation.  Instead focus on your message and your audience.  That means starting with what’s needed instead of starting with what you have.

What’s the trick?
Most people condemn themselves at the 5th second of the presentation-creation process by double-clicking on PowerPoint and then hitting “open.”

Don’t do that.  Never do that.

Instead hit “new” and “blank presentation.”

Then think about the audience.  Think about your message and start roughing out an outline to achieve your goals and the slide structure (often just titles) to do that.  Let it sit for a while.  And then do it again.  Put your early energy into the structure of the presentation, not the slides.

Then — once you have a clear outline for what you want to say and how you want to say it — and only then, should you go looking for existing slides that will help you say it.

Product is Not a Four-Letter Word

“Customers buy 1/4″ holes, not 1/4″ bits.”
Theodore Levitt, Harvard Business School

At some point in every marketer’s career they produce a data sheet that looks like this:

Our product uses state-of-the-art technology including a MapReduce distributed backend processing engine with predictive analytics including multivariate adaptive regression splines, support vector machine classification, and naive Bayesean machine learning.

When the draft review comes back someone invariably says “Yo! We sell solutions to problems here, not products.”  The author then revises the copy to:

Our solution uses state-of-the-art technology including a MapReduce distributed backend processing engine with predictive analytics including multivariate adaptive regression splines, support vector machine classification, and naive Bayesean machine learning.

And then, in most companies, everyone would be happy.  “Way to sell solutions!”

This, of course, would be called missing the point.  Completely.

Nothing drives me crazier than marketers who “sell solutions” by doing a global replacement of “product” for “solution” in their work.

While I am big believer in Theodore Levitt’s quote, it is not tantamount to saying never discuss product.  If I run a machine shop, while I am indeed “buying holes” at the macro level, I might nevertheless care very much about your drill bits:  are they carbon or titanium?  What is their useful life?  Can they drill into concrete?

Saying don’t lose sight of the fact that customers buy solutions to problems is not equivalent to declaring product a four-letter word.  There are both appropriate and inappropriate times to talk about features or “feeds and speeds” when discussing your product.  The problem in high technology is many marketers are so in love with the technology that all they talk about is features and technology at the cost discussing benefits.

That is, they are so in love with the bit that they forget people are buying it to drill holes.

There are two basic frameworks for doing product marketing:  FFB and FAB.

  • Feature/function/benefit (FFB).  Discuss the feature, describe how it works, and the first-order positive result from using it.
  • Feature/advantage/benefit (FAB).  Discuss the feature, the first-order positive result from using it, and the second-order results that come from the first-order result.

Here is an example showing elements from both frameworks.

  • Feature:  the green spots in Cheer laundry detergent.
  • Function:  some amazing chemical process that removes stains
  • Benefit 1:  whiter towels (and if you like puffery, towels that are whiter than white.)
  • Benefit 2:  you receive compliments on your towels’ whiteness at your pool party.
  • Benefit 3:  you receive a kiss from your spouse for getting complimented by the neighbors

You can see that the benefits are in effect a stack that you can climb arbitrarily high.  Here’s a business example:

  • New programming tool.
  • Makes your programmers more productive.
  • Means you output more product than your predecessor.
  • Means you get promoted.
  • Means you get nicer office.
  • Means you get a raise.
  • Means you get a bigger house.

Benefit-oriented marketers spend their time talking about this stack.  They talk about positive consequences for both you personally (cited above) and your company (imagine forking a different company benefits stack off more productive programmers).  There’s nothing wrong with this.

Since most tech marketers tend to forget it, a lot of sales and business people spend a lot time telling marketing “stop talking feeds and speeds,” “stop all the bits and bytes,” “don’t forget the benefits,” and “remember, we sell solutions to problems.”

But that is not to say that product is a four-letter word.  There is a time and a place to talk about product and marketers who answer clear product-oriented questions with benefits-stack answers will be seen as stupid and quite possibly evasive.

Think:  “yes, I know if goes faster I can buy fewer computers that will save my company, but what I’m asking is what makes it go faster?”

This means three things for product marketers

  • Never, ever do the product/solution global substitution as it accomplishes nothing.
  • Always know whether you are working a on primarily feature/benefit piece (e.g., a data sheet) or a feature/function piece (e.g., a white paper)
  • Get very, very good at clearly articulating the function of a feature.

Here’s a concrete example from my past of the FFB and the before/after of the “function” description, for a database feature called group commit.

  • Feature:  group commit
  • Function:  groups the commit records from different users into a single I/O to the transaction log file.
  • Benefit:  enables system performance in the 100 TPS range by eliminating a potential logging system bottleneck at around 30 TPS.

I spent hours talking with the engineers trying to understand the function of group commit.  I heard all kinds of stuff that I needed to filter before I finally could distill it:

Well you know when we commit a transaction we have to flush a record to the transaction log file in case the system crashes so we can guarantee the atomicity of transactions, you know so that we can either rollback or commit the transaction to the system and, as you know, those same transactions logs can be used in the roll-forward process in recovery, where we restore the entire database from a checkpoint and then systematically roll-forward the transactions applied to it up to some point in time.

Well in order to make all that stuff happen we need to flush records at commit time into the transaction logs and — this is important — it’s not enough to write them to some cache because if there’s a power failure and we lose that cache then we’ll lose the commit records and particularly because we now also have fast commit, we are not guaranteed to write all the database changes to the database at commit time, so it’s absolutely critical that we write the log records and then flush them to the disk.

Now the trick with flushing log records is that there is only current one logfile in the system and that can live on only 1 disk at a time.  And since then-current technology mean the most I/Os per second you could do to a disk, then you’ve got a built-in bottleneck that will prevent the system from going faster than 30 TPS.  Now that’s not to say that if you eliminate that specific bottleneck that we won’t find other bottlenecks that limit system performance, or — heck — there may be other bottlenecks in the system that cause us not to even get up to this 30 TPS limit, but as long as you are flushing one transaction in an I/O then you are about 30 TPS-limited.

Now, in a high-transaction environment, if you could make a few transactions wait just a bit before flushing them, you could probably pick up a few more transactions seeking to commit in the same timeframe and then group those commit records together and write them all out in a single I/O.  Thus your new bottleneck becomes the 30 times the number of commit records flushable in a single I/O …

That is the kind of stream of consciousness you sometimes get from an engineer when discussing product details.  Sometimes you’re lucky and get handed a very precise, terse definition.  Sometimes you get the rambling stuff above and it’s up to you to distill it.

The great product marketer, both because they want to be articulate and because they want to free up time to talk about benefits, thus seeks to describe the function of the feature as clearly and succinctly as possible.

Remember, product and feature are not four-letter words.  But you do need to be careful to when to talk product, when to talk function, and when to talk benefits.

Does Benihana Mean Birthday or Teppanyaki?

On the face of it, Benihana is a pretty simple restaurant which ought to mean just one thing in the mind of its customers: teppanyaki, the form of tableside cooking/entertainment for which they are famous.

I like the notion of businesses owning one word in the mind of the customer. While I’m not sure where it originated, Ries and Trout are big believers in this marketing concept. See, for example, Positioning, The New Positioning, virtually any of the Immutable Laws books, or the recent book by Jack Trout (not to be confused with the flyfishing guide) In Search of The Obvious: The Antidote for Today’s Marketing Mess.

Examples: Volvo means/meant safe. Siebel meant sales. PeopleSoft meant HR. At this point, I think Oracle means software. I’m not sure what Microsoft means. To me, Sun meant struggling. SAP meant ERP for a long time; I’m less sure what it means now. They would like it to mean clear, but there’s often a difference between what marketing puts in the ads and what sticks in the mind of the customer. LinkedIn means colleagues, or maybe jobs. Facebook means friends. Twitter means tweets, an example of inventing your own word which can work really well or be a total catastrophe such as fahrvergnügen.

I understand why teppanyaki doesn’t work in terms of word ownership for Benihana. The word is not well known, it’s hard to pronounce, and it’s harder to spell. There’s also the confusion with the word hibachi, which the restaurant seems to foster. So I get why perhaps teppanyaki doesn’t work as Benihana’s word, but I don’t get how Benihana came to mean birthday instead.

Many years ago, my kids started taking/dragging us to Benihana on their birthdays. I didn’t think much of it at the time. But now that I’ve done it multiple times/year for several years, I can say first-hand that every time I got to Benihana virtually every table (of eight) has at least 1 and sometimes 2 people celebrating a birthday. And, by the way, the place is always jammed.

How did this come to pass? Frankly, I don’t know.

Yes, they do an allegedly bi-lingual happy birthday song and free photo for those who claim/admit it’s their birthday. But that certainly can’t be enough to reposition the entire restaurant from “the place for wacky tableside grilling” to “the place for birthdays.” Yes, if you dig around you can find a $30 coupon for use on your birthday, but I doubt that’s it, either.

For now, it appears to be a great mystery of organic repositioning. For no matter what they’re trying to do at a marketing level, somehow they have been positioned in the only place it counts — the mind of the customer — as the place for birthdays.