Kellblog

I found this post by Stanford evidence-based management professor Robert Sutton and tweeted about it earlier today.  But since it’s so good, I decided to do a post about it along with some commentary.  First, here are the twelve things:

1. I have a flawed and incomplete understanding of what it feels like to work for me.
2. My success — and that of my people — depends largely on being the master of obvious and mundane things, not on magical, obscure, or breakthrough ideas or methods.
3. Having ambitious and well-defined goals is important, but it is useless to think about them much. My job is to focus on the small wins that enable my people to make a little progress every day.
4. One of the most important, and most difficult, parts of my job is to strike the delicate balance between being too assertive and not assertive enough.
5. My job is to serve as a human shield, to protect my people from external intrusions, distractions, and idiocy of every stripe — and to avoid imposing my own idiocy on them as well.
6. I strive to be confident enough to convince people that I am in charge, but humble enough to realize that I am often going to be wrong.
7. I aim to fight as if I am right, and listen as if I am wrong — and to teach my people to do the same thing.
8. One of the best tests of my leadership — and my organization — is “what happens after people make a mistake?”
9. Innovation is crucial to every team and organization. So my job is to encourage my people to generate and test all kinds of new ideas. But it is also my job to help them kill off all the bad ideas we generate, and most of the good ideas, too.
10. Bad is stronger than good. It is more important to eliminate the negative than to accentuate the positive.
11. How I do things is as important as what I do.
12. Because I wield power over others, I am at great risk of acting like an insensitive jerk — and not realizing it.

And here are some thoughts on them:

1. While 360 degree feedback studies can help managers understand themselves better, I agree that, by definition, managers will always have a flawed and incomplete understanding of what it’s like to work for them.  By the way, in general, I think managers always need to assume they are missing information, regardless of the topic.
2. I agree strongly with this one; I think the media puts too much emphasis on the big, breakthrough idea and virtually none on the mundane business of clarifying operational goals, getting people to agree them, and then holding people accountable for delivering them.
3. I semi-agree with this one.  I think quarterly operational goals are critical, annual goals are important, and some general sense of “where we’re headed” is important as well.  But I do agree that a big part of a manager’s job is getting those small, everyday wins that my colleague Martin Cooke refers to as “1% changes.”
4. I totally agree with this one and struggle with it every day.  On one hand you have experience and opinions and want to show leadership.  On the other you don’t want to run over your people.
5. I’ve seen myself in this way only when it came to certain constituencies (e.g., the board, bankers, analysts) and not in general.  Perhaps I should.  I’ll mull on this one.
6. Yes.  See 4.
7. I am a big believer in understanding both sides of an argument before deciding.
8. I think this is a very important point and every manager, including me, surely believes:  “it’s OK to make a mistake, just don’t make the same one twice.”  The question is does our behavior actually reinforce that view?  People listen to words, they watch behavior, and they weigh the behavior about 10x relative to the words.
9. I agree that innovation is important, and not only in large things.  I think the business media tends to equate innovation with “the next big thing.”  To me, innovation matters in all things, both large and small.  And if you agree with Sutton’s point 3, it matters perhaps more in small matters than in large ones.
10. While I’d never consciously thought about this issue that way, I do have an innate tendency to worry more about driving out the negative than collecting the positive.  Some of my philosophies (e.g., mediocrity intolerance) reflect that.
11. Yes, and it’s easy to miss this one.  As a CEO you can get so results oriented that you can forget the how whilst focusing on the what.
12. Indeed.

A reader sent me to this post about the “Palantir party wagon” which had been taken down before I could see it.  However, thanks to the magic of the Google cache, I found the text here, some of which I’ve embedded below.

Palantir Party Wagon Might Be Taking A Break

[...]

Big money is spent here, which help pay for elaborate parties and groovy soundtracks for demo videos. Palantir is ‘trying’ to lead the effort to integrate, visualize, analyze and make sense of the world’s information.  Palantir employs no sales-people, and consists mainly of ‘drunk on the Kool-Aid’ engineers.  The tactics mirror making the user feel uber cool and sexy with James Bond stylized programs and parties that are just missing the bunnies and the Playboy grotto! Let this speak for itself!

I have a few thoughts on this.

• Does that look fun? Yes, particularly if you’re 28, hip, and single.
• Does it make me want to buy Palantir’s software?  No.  As in, not at all.
• Is it consistent with a company that claims to have no marketing?  No, no, and no.   Unless the “engineering” budget paid for the party and a public relations “engineer” arranged for the video.

This company very much reminds me of the bubble-era MicroStrategy which, for those trop jeune to know the story, did not end well.  My take on watching the rise and fall of bubble-era MicroStrategy:

• It was a fun, fun, fun place to work, but Daddy did end up taking the t-bird away
• It was not a great company from which to buy software
• It was not a great company at which to learn the business of software
• It was not a great company at which to build your career

Caveat emptor.  And caveat laboris as well.

This post is in response to this story in today’s Mercury News:  Actress’s Role At HP Called Puzzling. (That’s the print title, the online title is different, probably for SEO reasons.)

While there are many things puzzling about the situation at HP, the role they describe for Jodie Fisher is not:  it’s called wingman. (Or I suppose wingperson, but I’ll just say wingman because wingperson sounds weird.)

What does a wingman do at corporate events?

1. Learn who’s coming to the event, determine who the executive needs to see for which reasons, and commit as much of that information to memory as possible.
2. Pre-brief the executive on who he or she will likely meet during the evening (e.g., We’ll see John Jones, CIO of Acme, who you last saw two years ago at the user conference — so don’t say nice to meet you.  John has helped the company several times with reference requests — be sure to thank him for that –and he is in negotiations with us for a large server deal.)
3. Keep the executive moving so he or she can meet as many people as possible during the event.  (i.e., I’m sorry, but can I grab Mark?)
4. Rescue the executive from bad encounters — remember alcohol is served at these events so you almost invariably get the drunken employee airing grievances or confessing deep admiration or the customer/partner who’s had one too many.

All that is a lot of work, particularly point 2 because you need to assemble a holistic picture of the customers — and there might be scores of them at an event — across geographic divisions, product lines, departments, and if you’re really good, history.  That’s why you might make $5K or more for doing it.  I think wingmen are a best practice,  although I also believe a healthy dose of truly spontaneous time should be included in the mix.

The typical wingman is the VP of marketing or communications who might perform the role instinctively, without considering him/herself a wingman.  Sometimes, the wingman might be the partner on the account from the PR agency or, I suppose, an independent contractor.

I have no idea about the specific situation at HP, but I do know that the bigger a company gets, the more you need wingmen (even at internal events) — and at over 300K employees HP is one big company.  I also know that while many questions may continue to surround the situation at HP, the concept of wingman and whether it’s a necessary role at large corporate events should not be among them.

Just a quick post to highlight some interesting facts from Fenwick & West’s (F&W’s) quarterly Silicon Valley venture capital survey.

• Valuations are up.  Up-rounds beat down rounds 55% to 27%, with flat rounds making up the difference.  F&W’s venture capital barometer showed an average price increase of 30%.
• DowJones VentureSource reported that $7.7B of VC was invested in the US in 2Q10 across 744 deals.
• VentureSource reported 79 acquisitions of VC-backed firms, for a total value of $4.3B
• There were 17 VC-backed firms that executed an IPO in 2Q10, compared to 9 in 1Q10
• Fundraising by VCs declined in 2Q10, with 38 firms raising $1.9B, compared to 38 firms raising $3.7B in 1Q10
• 90% of VCs surveyed expect the number of venture firms to decrease between now and 2015.  (I suppose they all think it’s the “other guys” who are going to fold.)  Reasons cited include:  difficultly in achieving successful exits, unfavorable tax policy, and an unstable regulatory environment
• The Silicon Valley Venture Capitalist Confidence Index produced by USF professor Mark Cannice declined to 3.28 in 2Q10 from 3.65 in 1Q10, breaking a five-quarter streak of increases.  The drop was attributed to shocks from the macro economy and shocks to the venture industry itself.
• 18% of rounds in 2Q10 were A rounds
• 27% of rounds were up rounds
• Of down rounds, D rounds led by series at 36% of down rounds
• Software had 34 financings with 73% up and a barometer increase of 51%
• Internet and digital media had 23 financings with 52% up and a barometer increase of 43%
• 40% of rounds had liquidation preferences
• 17% of those rounds with preference had multiple liquidation preferences, 71% of those were in the half-closed interval (1,2]x
• 35%  of rounds had participating preferences

It’s a been a while since I’ve done one of these posts, so I thought I’d take a minute and pull some highlights from the very useful quarterly report done by the Software Equity Group.

• Following IT spending increases of 9% in 2007 and 6% in 2008, IT spending declined 10% in 2009
• Goldman Sachs forecasts IT spending to increase 7% in 2010
• Web conferencing and email top CIO SaaS adoption at 27% and 21% respectively
• BI and data warehousing are at the bottom of CIO SaaS adoption at 1% each.  BI-as-a-service still seems to have trouble taking off; while I hear good things about Birst, one cannot forget LucidEra

• Median enterprise value (EV) to revenue (R)  ratio of public software companies was 2.1x
• $1B+ companies have a median EV/R ratio of 3.1x
• <$100M companies have a median EV/R of 1.1x.  This means the size arbitrage lives on; big players can buy revenue at 1.1x and sell it at 3.1x
• The median public software company (in the SEG Index) has an EV/R of 2.1x, EV/EBITDA of 12.8x, EBITDA margin of 16%, TTM revenue growth of 0%, and TTM revenues of $218M
• SuccessFactors, Concur, and Salesforce are high flyers on the EV/R ratio at 7.6x, 7.5x, and 7.5x respectively
• SaaS companies have a median EV/R of 3.4x, EV/EBITDA of 32.3x, EBITDA margins of 9.2%, and TTM revenue growth of 11%
• SaaS companies with above-average growth had an EV/R of 4.2x while those with below-average growth were at 2.2x

• There were 5 IPOs in 1H10:  SS&C, SPS Commerce, Convio, Broadsoft, and Motricity
• The median offering amount was $58.7M
• The median enterprise value was $203M
• The median EV/R was 3.8x
• The median EV/EBITDA was 42.5x
• The median first-day return was 1.4%

• 7 software companies filed S-1′s in 2Q10:  Qlik Technologies (about whom I blogged here), IntraLinks, Tangoe, RealPage, Ellie Mae, Tripwire, and AutoNavi
• 4 of those 7 are on the SaaS model
• The median proposed offering is $86M
• The median annual revenues is $73M
• The median net income is $10M
• The median TTM revenue growth is 20%
• This suggests a shift from the 50/50/0 IPO bar that I have previously discussed based on these reports (i.e., $50M+ in revenues, 50%+ growth, and 0% EBITDA).  These medians suggest a higher bar in terms of both revenue and profit, but a lower bar on growth.  Note that the bar is inherently a flexible concept (e.g., smaller size can be offset by higher growth) and one that most definitely changes over time.

• There were 507 software M&A deals in 2Q10
• Total value of the M&A deals was $17.5B, up dramatically from $4.3B in 1Q10 and $3.3B in 2Q09
• The high dollar volume was boosted by mega-deals including SAP/Sybase ($5.4B), TPG/Vertafore ($1.4B), IBM/Sterling ($1.4B) and Allscript/Eclipsys ($1.2B)
• The median M&A deal was done at a EV/R of 2.1x and EV/EBITDA of 12.0x
• By category, development tools and IT asset management topped the M&A EV/R ratio at 3.5x, with healthcare in second at 2.7x, and BI/GRC at 2.6x.  ERP and messaging/communication were at the bottom with EV/R of 1.0x and 0.9x.