Thinking About The Business of Software

Sep 8, 2008 Michael Wurzer

I attended the Business of Software conference this last week in Boston and found it very valuable on many fronts. First, the speaker lineup was filled with developers and others I greatly admire, including Joel Spolsky of Fog Creek, Jason Fried of 37signals, Eric Sink of SourceGear, and Seth Godin of Purple Cow fame. It was great to see and hear them in person. Most important, however, was the content. The two days were packed with speakers interweaving all the core topics for the business of software, from development process to finance, ownership and exit strategies.

The conference started with Seth Godin, one of the most engaging presenters I’ve seen. Seth was a great start to the conference because he’s all about idea generation and developing distinctively useful products. My core takeway from Seth’s talk was about developing tribes. An example of this is the tribe Seth set up for his new book, which was limited to just the early adopters willing to commit to buying his book months before it is to be actually released. Seth said during the conference that this tribe is working together at an amazingly high level because those who want to be there are committing themselves, are not anonymous, and they have something at stake (being in the tribe) and so follow the rules of the tribe. Wow, this tribe thing Seth is describing sounds a lot like the MLS to me all the way to the fact that some people don’t like the exclusivity or rules of the tribe and think it should be more open. Sound familiar?

Jason Fried from 37signals was next. Jason provided anecdotes from his success with 37signals about the development process. There really wasn’t much new in his talk that hasn’t already been covered on their blog or in thier book. 37signals builds software they use personally and so they have the enviable position of combining marketing, product management, development, testing and even support into just a few people. Because they use the software themselves, they primarily build what they want and hope that others are happy with it, too, and, indeed, that’s proven to be the case.

As much as I admire the simplicity of the 37signals approach, I’ve found it hard to translate to our company focused on real estate multiple listing software. I haven’t run into any real estate agents who also have the time or inclination to program software while they also practice real estate, so I don’t think having developers who use the product they’re developing is going to change any time in the near future. Given that, we need a bit more process than 37signals suggests is ideal. We need to talk to our customers more to learn their needs so we can communicate that back to the developers. Engaging with customers at that level is hard work and something we’re constantly trying to improve.

Two other speakers were great on this front: Steve Johnson and Steve Krug. Steve Johnson is from Pragmatic Marketing, a consulting firm that advocates and likely defines best practices in product management. My key takeaway from Johnson’s presentation is that product managers cannot get the feedback they need in the office, they must get out in the field and see what users are doing. Steve suggests that feedback inside the company is not very valuable, primarily because it comes from support and sales. In the case of support, the most prominent feedback is either from users needing more training or power users, neither of which are the majority of users. Rather the majority of users are silent or unheard inside the firm and that’s why the product manager needs to get out of the office and find and learn from these users. This is where true improvement is possible and better design decisions can be made that have powerful impacts on the usefulness of the product.

Along these same lines, Steve Krug, author of Don’t Make Me Think, one of the bibles of usability testing, advocated monthly half day sessions of recorded usability sessions so developers can see first hand how users experience the system. Krug said usability testing is like dieting, we all know it is good for us, but we still don’t do it. His core message was to make the usability testing simple enough so it gets done, because, without it, core usability problems will persist in your products. Krug recommends bringing in three to four users for a half hour or so each of testing one morning a month. I was happy to hear him recommend Camtasia Studio and Morae as recording tools, because that’s what we already use, but developing the monthly habit is something we definitely need. I’m hoping this post serves as a constant reminder to us to get usability testing firmly baked into our process.

Back to product management, a couple of the other speakers such as Noam Wasserman, Jessica Livingston and Dharmesh Shah touched on this topic tangentially during their talks about the innovator’s dilemma, CEO succession, and the path to growth for many companies. These talks hit home for me because FBS has been growing steadily over the last decade and that growth raises as many questions as it answers.

Specific to my role as the CEO of FBS, one of my primary functions has been to drive product development by listening to customers and translating their needs into our development process. Having the CEO in this role is common for smaller companies as the CEO usually best understands the business problem being solved by the software, and should be in the best position to articulate the business case to the developers. On the other hand, at some point growth results in the need to consider moving the product management function to others. Several of the speakers at the conference related this to the time when significant venture capital is taken by a firm, because the venture investors often (actually, 50% of the time) require that the founder step down or aside as CEO so growth can be handled by someone more seasoned or focused to that end. Fortunately, FBS is employee-owned and in no need of venture capital, but the core issue still seems applicable, namely whether growth requires more process and management in our firm to continue that growth.

This topic reverberates back to the presentation by Jason Fried, who, in co-founding 37signals, storngly advocates for little or no management and more direct involvement of developers in firm direction. More succinctly, 37signals professes not to develop any long-term or strategic plans at all and they have no product road map. Instead, they simply develop the products hyper-incrementally as they see fit and let the sales be what they may. The approach is as streamlined as it can be, with only one support person to handle about 150 emails per day and no phone support or sales at all. This approach culminates in the conclusion that small is great and certainly good enough. As Jason said, if you’re generating $1 million in revenue, “thats a lot of money.” There’s no need to get biggerer and biggerer. Less is more, right?

Another spin on this topic relates to sales. Contrary to Jason Fried’s advocacy, Paul Kenney’s presentation hammered home the point that building great products is not enough. Rather, good sales people will help find customers who can benefit from the products and demonstrate value where it otherwise would not be apparent. This was a nearly heretical position in the room full of developers, who often believe that the product should sell itself. Mr. Kenny pointed out that this view from developers is cultivated by the fact there are so many bad sales people out there. In other words, many of us think “sales” is a dirty word because there are so many bad sales people. Paul Kenny made clear, however, that great sales people can generate as much value as great products and, when you combine the two, the growth that results is nothing short of phenomenal.

Paul Kenny made another great point about sales — if you have your sales team doing anything else besides sales, they’ll almost always choose that other thing because sales is hard work. This point stuck out for me because we definitely have our sales team doing a lot more than just sales. We define their role as account executives, responsible for the customer experience throughout the contract. This starts with the conversion process, which is short-lived and yet highly intense. In other words, the conversions come and go quickly and so the sales team is integral to the effort. Yet, our conversion/sales cycle has a pretty distinct ebb and flow that would likely balance out better if we didn’t divert the attention of our sales team away from sales. At the same time, we’ve always looked at sales and service as one and I can hardly imagine not having sales involved in the conversion process. Definitely something to think hard about.

Perhaps the best part of the conference was being able to engage with others facing the same challenges. It’s so easy to get mired in your own world and learning that others are in the same boat is invigorating. The business of software is hard and this conference showed me that one of the coolest things about the software industry is that it is filled with brilliant people trying to build great products valued by customers — and they are willing to share their knowledge with others in order to get better themselves. That’s what we’re trying to achieve here at FBS as well, and so it was great to be a part of this conference. We’ll definitely be attending next year as well.

Thanks to Neil and Joel and everyone who put on such a great event!