Blog

Aug 29 2012

Good Enough Technology

Most people don’t need the cutting edge. If you do audio production, you might need top-of-the-line monitor speakers or pro headphones, but most people are content with the earbuds that come with their iPods. If you make your living trading stocks in real time, you might need a blazing-fast and redundant internet connection, but most people are perfectly happy with their garden-variety DSL or cable internet connections. If your business is large-format photo printing, you probably need to invest in the best printers you can afford, but for most people, a standard inkjet or laser printer is all they need.

What You Really Need

So what do you need for those activities that are not part of your core? If your business is feeding the homeless or providing a safe space for victims of domestic abuse, you still have office needs. You still need to coordinate your team and file your paperwork. You could invest in high-powered ultraportable notebooks, a dedicated server, and a fat data pipe. In fact, some technology consultants will tell you that these investments will pay for themselves in increased productivity. They may, but that doesn’t mean they are the best investment for your organization.

Pareto principle

The Pareto Principle, named for Vilfredo Pareto, and nicknamed the 80-20 Rule, states that roughly 80% of the effects come from 20% of the causes. 80% of your profits come from 20% of your customers; 80% of the world’s income is controlled by 20% of the world’s population; 80% of healthcare resources in the USA are consumed by 20% of the patients.

How to Leverage Pareto

If the Pareto principle holds true for technology spending (and in my experience, it is close enough to be a good estimate), it follows that your organization can have 80% of the existing cutting-edge technical capacity for 20% of the potential cost. Cloud hosting services, Google apps for business, and internet connections that are fast enough for almost all organizations can all represent significant savings for you and help focus on using your resources to serve the organization’s mission.

What will you do with the 80% of the cost that you have saved? If technology is not core to your business there is probably a much more powerful point of leverage for that investment. Get your good-enough technology, and put the rest of your investment towards your organization’s core mission.

Jul 30 2012

Measuring Productivity

When you zoom out, the measure of productivity often changes.

For a single-minded programmer, productivity might be lines of code committed.
For a development team, productivity might be working code.
When you zoom out to a product view, working code that implements a feature no one uses is waste, but implementing features that people use is productivity.
Zoom out further to a business level, and it’s not just about using the feature, it’s about that feature making the customer more likely to pay for your service or product.
Zoom out again to an ecosystem (or, for you MBAs, value chain/system) level, and it’s not just about what people will pay for, but what adds value to their lives. And not just any value, but adds more value than the cost of providing said value. (N.B.: people are not rational actors, and will sometimes pay for things that don’t add value to their life.)

Now we’re in the realm of things that are hard to measure. And zooming out once again to a global level doesn’t make it any easier. What does productivity look like on a global scale? Even if we are creating value for people at a direct cost lower than the amount of value produced, are we factoring in the negative externalities to our productivity? If we are introducing pollutants, or stress, or social inequality into the world, are we truly being productive?

I don’t have the answers, but I’d love to start a conversation.

Jul 11 2012

Nonprofits Are Harder

Nonprofit startups face all the challenges nonprofits face, plus all the challenges of for-profit startups. The compounded nature makes it more difficult, not less, to start a successful, lean, and sustainable nonprofit compared to a similar for-profit. One of the key pieces that nonprofit founders frequently forget is that not making a profit doesn’t mean you can ignore the revenue side of the equation. You still need to raise enough money to pay for the services you provide (and to fuel growth), whether that is through donation-based fundraising, corporate partnerships, grants, or a fee-for-service model (or some combination of several of these options).

With a for-profit model, when you convince someone to pay money for your product or service, you have also convinced them that you are providing them value equal to or greater than the cost. You have succeeded in creating value, and identifying a revenue stream.

In the nonprofit world, value is often provided to one party, while another party pays for it. With few exceptions, beneficiaries are not customers. Of course, donors also receive some value in this transaction, but it’s an indirect value proposition. If you’re starting a nonprofit startup, you need to find a way to create value, convince one party to be the recipient (not always as easy as it sounds), and another to pay for it. Further, sophisticated funders demand proof that the actions your organization takes are, indeed, providing the promised value, so you must measure the results of your value creation and compare them to other methods of value creation to ensure that you’re being as effective as possible.

Have you started a nonprofit organization? We’d love to hear your story.

Jun 29 2012

Job Descriptions That Don’t Suck

Most job descriptions are terrible – so are most resumes – but they don’t have to be. Startups, or people hiring for a new job, often have to write job descriptions before they have complete clarity about the position, and perhaps even before they have a lot of experience hiring. If you’re writing your own job description, here are some things you can do to make it better.

Include the best AND worst parts of your job.
You’re looking for a good fit. Leaving out the parts of the job that are turnoffs will just get you more applications from people who are going to leave once they realize that the job wasn’t what they expected.

Describe what a day might be like.
Telling potential job seekers what they might do over the course of a day or a week in this job is a great way to help them envision what it would be like to work for you, and for them to imagine whether it’s a good fit.

Show a personality, not just a list of attribute checkboxes (requirements).
Anyone can play “match the attribute checkboxes.” If you want applicants who are a good cultural fit, you have to give some clues about your culture. Telling people what you value is only marginally valuable; showing them by example is a much more effective way to attract like-minded people. Humor and tone are useful tools here.

Consider hiring someone part-time or on contract.
For some situations, doing projects with applicants before hiring them full-time can help you see if they have the skills you need, and if they work well with your team, much better than an interview or resume. Just be aware that there is a limit to how much of a commitment you can ask applicants to make before you’ve made a commitment to them.

If you liked this article, you might like CultureCamp, the unconference on creating company culture.

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Apr 10 2012

Lean is not Skeletal

Lean does not mean bare bones. It does not mean minimize expenses at any cost. It does not prohibit raising money.

In biology, lean refers to the proportion of muscle to excess fat. In business, lean means getting more value for fewer resources.

Reduce waste. Be lean, not skeletal. Don’t cut the muscle.

It’s about efficiency. And sometimes being efficient actually means scaling up and using more resources. Elite athletes eat more than the rest of us. Michael Phelps needed to consume 12,000 calories a day during the Beijing Olympics.

Too often, I hear people talking about how they are being lean by limiting their resource consumption, instead of putting those resources behind the right purpose.
It can be tempting to focus on the resources part of the equation, and eliminate all sorts of things just because we can. The problem lies in forgoing activities that actually create value. Just because something is expensive, doesn’t mean it’s wrong. Don’t stop doing things, just stop doing the wrong things.

What are the wrong things? Anything that doesn’t contribute to creating incremental value. Value should not be confused with cash, unless the sole purpose of your organization is to produce cash. Most organizations define value differently depending on their industry.

Industry	Increments of Value
Manufacturing	high-quality physical goods
Software development	working code in the final product
Startup	validated learning
Nonprofit	social or environmental change

Lean startups don’t have to be bootstrapped. They can raise funding. They just need to be deliberate and focused about how they spend the money they raise.