gwabbit Achieves Profitability Within 6 Months of Product Launch!

http://www.marketwatch.com/story/gwabbit-achieves-profitability-in-august-2009-08-31

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Virtuality — Part 2: Strategy and Technics

Virtuality part 2: Strategy and Technics

gettysburg “Muzzle-loading weapons sound awful primitive. They didn’t seem primitive to them. They were a new kind of infantry rifle that is deadly at 200 yards. That was a tremendous step forward. And the tactics were based on the old musket, which was accurate at about 60 feet. And they lined up shoulder to shoulder and moved against a position, and got blown down because they were using tactics with these very modern weapons. They were using the old-style tactics with very modern weapons. A few of the men realized that, Bedford Forrest for instance. He would never make a frontal attack on anything with this new weapon in their hands. But too many of them, including Robert E. Lee and U.S. Grant, followed the old tactics against these modern weapons. That’s why the casualties. There were 1,095,000 casualties in the Civil War. If today you had that same ratio, you’d have something like 10 million casualties, to give you some idea of what happened.”

- Shelby Foote, Civil War Historian

“They were using the old-style tactics with very modern weapons.” History has demonstrated again and again that military strategy and tactics lag the available technology. This is also true in business, where the adoption of advancements like the telephone, fax, email, the internet, software-as-a-service, virtual meetings, voice-over-IP telephony, web 2.0, social networking, viral marketing, etc, have been impeded by the previous generation’s management best practices.

As was the case with previous generations, today’s managers encumbered by yesterday’s vision face an insurmountable competitive disadvantage from those embracing the current technologies and practices available to them. At WebFeat, we were able to defeat companies as much as 100 times our size, simply because we were much more efficient and more productive than our bigger, slower, traditional adversaries. How was this possible?

Two words: opportunity cost.

When I attempt to recount the benefits of the virtual office to a stranger, I invariably am (preemptively) told that office rental is the #1 advantage. While office rent might make my top 100 list of reasons to go virtual, it is far from #1. Number 1 is the cost-effectiveness of my work force. Our virtual office easily yielded double the productivity of our traditional competitors. How?

strategytechnicstable1

This may not seem like a lot, but it adds up:

strategytechnicstable2

27.5 years lost in a 100 person organization. That’s the equivalent of 27.5 extra people!

In addition, in my own experience, I found that my virtual employees tended to work longer hours than those in traditional offices. Typically, this ranged from 20% to 30% more than traditional employee office hours. Apparently this was attributable to two factors:

1. Virtual employees tend to make less of a distinction between work time and personal time than traditional employees, and…

2. It appears I am a hard task master

Whatever the reason, in our 100 - employee hypothetical company, this would add an additional 20 - 30 years annually, bringing the total to 47.5 - 57.5 years of additional productivity — a virtual company is 47.5% - 57.5% more productive than traditional companies.

But wait, there’s more!

While at work, my virtual employees tended to accomplish more than their traditional counterparts. This was due to a number of factors, including:

We held only a fraction of the number of meetings held by traditional companies

When we did hold meetings, they tended to be more productive — why?

Because most of our meetings were held via teleconference, the attendees tended to find silence or “dead air” to be uncomfortable. Consequently, our meetings tended to be short, and they followed classic successful meeting techniques, namely:

  • An agenda was published prior to the meeting, informing attendees what to be prepared to discuss
  • Brief minutes were taken, with action items captured, as well as persons responsible and deadlines
  • If follow-up meetings were required, these action items fed into the subsequent meeting

The bottom line is that we didn’t hold very many meetings, and we got a lot done in the meetings we did hold. Additionally, because our meetings produced cogent sets of action items, the work resulting from our meetings tended to yield better results

Finally, no one “dropped in” to our virtual offices to chat. Granted, some of our more gossipy employees made effective use of online chat, but they had little time to waste at the virtual water cooler. The moral of the story is that the success of the virtual office, as well as the traditional kind, is determined largely by the effectiveness of the management team. However, an effective team in a traditional office will be no match for an effective management team in a virtual office.

While it is difficult to gauge the amount of time consumed in useless meetings and water cooler gossip, consider that if it averages only 1 hour per day per employee, our virtual productivity edge over traditional offices grows to 60% - 70%! How many employees do you know that give up a mere hour each day in meetings and gossip?

Clearly, I’m not talking about moving the corporate performance needle a couple of percentage points. I am talking about a great big game-changing, Earth-moving, paradigm-shifting fundamental makeover that can enable your business to not only weather the current storm, but enable it to prosper and handily crush its competition.

More to come in part 3…

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Interview with gwabbit president & founder Todd Miller

Interview with gwabbit president and founder Todd Miller about the origins and future of gwabbit

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Virtuality — Part 1: News for the Hard of Hearing

snl-news-hard-hearingIn “My New Old-Fashioned Company,” I’ve discussed what’s old about my company. Is there anything new?

Oh yes!

My company, gwabbit, is a 100% virtual office (as was my previous company). No bricks & mortar office whatsoever. Seriously!

I went virtual with my previous company, WebFeat, in 1998. If we were not the first successful100% global virtual company, we were certainly among the first. I must admit that, at the time, my motivation for going virtual was driven more by finance than vision. My little bootstrap start-up was short on cash and we simply could no longer afford our cool New York City office flat. Now, 11 years later, I can’t imagine running a business any other way.

When I would tell Silicon Valley colleagues about my virtual company, I found that most simply could not bend their heads around the notion of a 100% virtual office. The conversations usually went something like this:

Silicon Valley Colleague: “Where is your office?” (note: I had already explained to colleague that we were a virtual office)

Todd: “We don’t have an office”

Invariably, my colleague would ask the question again, slowly, as though either my hearing or cognition was impaired:

Silicon Valley Colleague: “where - is - your - office?” He asked, slowly

Todd: “We - don’t - have - an - office.” I repeated, slowly

One colleague actually asked the question a third time, making arm motions as though he were drawing a real office (ironically, in virtual space) as though I did not understand the question the first two times it was posited. It reminded me of when Garrett Morris did the News for the Hard of Hearing on Saturday Night Live by simply yelling at the camera.

Once my colleague reluctantly accepted the fact that I was serious about my virtual office, he would proceed to inform me why it could never succeed. The reasons included:

  • Virtual businesses can’t scale
  • You can’t supervise virtual office employees
  • You can’t have too many direct reports

I’ll knock these down one-by-one:

Virtual businesses can’t scale — invariably, my critics could never explain why they didn’t think a virtual business couldn’t scale. It just couldn’t scale. Like many reactions to the virtual company, this was an attempt to assign a rational sounding argument to an uncomfortable visceral feeling — we’ll talk more about feelings in later installments.

Despite the very worst prognostications of doom, our business somehow managed to scale anyway. At the time I sold my company, we had 40 employees. Still a small business, but I see no reason why it wouldn’t scale to 100 or 100,000

You can’t supervise virtual office employees — this is probably the most absurd argument against the virtual company — the notion that management can’t keep a close eye on their employees. My response to this is a simple one: why would you want to hire people that require supervision? Whether your business is virtual or not, don’t you want employees that can work and produce without supervision?

Too many direct reports – another one of the sillier arguments against the virtual office. More than one of my otherwise brilliant colleagues assumed that virtual officing somehow translated into every employee reporting directly to the virtual corner office. My experience has been that virtual offices utilize similar hierarchies and numbers of direct reports as their traditional counterparts.

So I’ve discussed some of the arguments against the virtual office – what are the arguments in favor?

There are many, which I’ll discuss in future installments, but the most compelling is this: in my 11 year experience with virtual officing, I found that a well-managed virtual office is 200% - 300% more efficient and productive than its traditional counterpart.

That’s right – not 20% or 30% more productive – 200% - 300% more productive!

In my decade long experience with WebFeat, our virtual David went up against not one, not two, but three traditional Goliaths. These companies had up to 100 times the number of employees as WebFeat, with relatively vast cash reserves. WebFeat, with no venture capital, funded entirely from operations, and fielding a comparatively puny cast of dozens, smacked down each of its Gigantor opponents, gaining top market share.

How – you might ask?

For the answer, stay tuned for the next installment of Virtuality!

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My New Old-Fashioned Company — Part 3: Help!

helpHelp!

“When a customer enters my store, forget me. He is king”

John Wanamaker

1838-1922

This is an excerpt from a recent gwabbit product review:

“For the Support and Information on the app, I can’t say enough about gwabbit and Technicopia LLC’s support. They’re fast and helpful. I was very impressed by it. On the scale they’re a perfect 5. They’re really on top of their game and reading their emails. Great job!”

And an excerpt from a recent customer email:

“All I can say is WOW! I am impressed. Not only did a REAL LIVE person answer my email on the SAME day that it was sent, you actually read my questions, understood them, and provided logical responses and suggestions.

This is more than one can say for your competitors who have yet to respond to some product related questions that I have sent them, have sent me only “form letter” responses in other cases, took on the average 3 days to get back to me, and then never really read my question carefully enough to provide a logical or helpful response. Again, my compliments!”

These may seem unimaginable. Many under the age of 30 have never experienced truly great customer service in their lifetime. Many over the age of 30 may wish to forget the time when the “customer was king” because it’s too painful a contrast to today’s sorry state. Today, even if it’s possible to get real time customer support, the odds are high that it will be with an outsourced call basher. Many technology companies will offer support with varying degrees of competence, but you have to pay for it, even if the call was prompted by a product defect. I assume a bad customer support experience every single time I pick up the phone or place my hands on the keyboard to type a help email or chat. My feeling is that if I prepare myself for the worst, I can only be pleasantly surprised. I assume an eternity on the phone, an endless maze of auto-attendant junctures with early primate vocabularies, auto email responses with unfulfilled promises to respond within two or three business days, and uninterested, uninspired, uncaring customer support staff. Why are they uninterested, uninspired, and uncaring? This is typically because they are a direct manefestation of their senior management’s goals and objectives.

As evidence, I present Exhibit A: Why Google Bothered to Appeal a $761 Small Claims Case (and Won)

This is Think Computer Corporation founder Aaron Greenspan’s odyssey in which his company won a $761 small claims court victory against Google, which, astonishingly, Google actually bothered to appeal! The dispute focused on whether or not Google had the right to terminate Mr. Greenspan’s company’s Google AdSense account without providing a valid reason. In the course of the appeal, Google’s counsel appears to have used the usual unctuous courtroom tactics to discredit their opponent (in this particular case, the customer) in the eyes of the judge. The cost to Google of appealing the decision undoubtedly far exceeded the $761 originally awarded Mr. Greenspan’s company. The cost of the thousands of incredulous Tweets, blogs, and Facebook postings that followed the appeal?

Priceless.

No doubt Google has a byzantine rationalization for this stupefying move – perhaps based on a prescient fear of tipping over some precipice of a greater slippery precedent slope. Whatever the rationale, wouldn’t it have been better to: settle the case, make customer happy (or less unhappy), avoid the legal precedent inuring from Mr. Greenspan’s small claims win, avoid the horrible press, as well as the legal fees – please tell me if I’m missing something here. Is this something other than a completely avoidable colossal manmade disaster?

It appears that it is no longer sufficient to merely diss the customer. The company must now crush the customer’s will in order to truly realize today’s modern standards of support.

Many would find Google’s position to be enviable. Its market share and vast reserves enables it to neglect, even abuse its customers and still prosper. Regardless of whether the comparatively lame competitive landscape compels it to serve its customers, I would still encourage Google’s management to remain faithful to its increasing informal “Don’t be evil” motto. You just never know when you’re going to need to call upon your customers’ loyalty.

The conventional wisdom is that great, or even good customer service is too costly for today’s modern business. Moreover many business people assume that most customers’ presumption of service are the same as mine, therefore bad service is not substandard. Despair is the new standard.

This is a classic Tom Peters quote about customer service: “Whether your business is jet engines or whether it’s peddling hamburgers, if you simply treat your customer with common ordinary garden variety courtesy, you can have the lion share of any market because you’d be alone.”

The question is not whether the company can afford to provide excellent customer service. The question is whether the company can afford not to provide it. As my introductory messages illustrate, in the brief period of time we’ve been in business, our little company has already demonstrated that the service it provides its customers is a key competitive differentiator. We don’t just provide good customer service because it is the right thing to do. We provide it because it’s the smart thing to do.

My company is not Google. It does not have billions of dollars in cash reserves. But somehow our little company finds a way to serve our customers. How? It’s because we choose to. It’s simply fascinating that there is often a converse relationship between a company’s financial capacity to provide excellent service and its actual commitment to serve.

I’d like to close this installment with an outline of service standards we try hard to hit at our company. Perhaps you will find these to be useful for your company as well:

  • Support included. The cost of support (preferably the excellent variety) should be factored into the cost of the product. Additional charges should only apply if the customer is being assisted with custom configuration or development
  • Live support. It should be possible for a customer to talk to a human being during reasonable business hours. Support should be available via phone and email. Chat and blogs are also encouraged
  • Self help. Excellent self-help materials should be available, such as FAQs, Help database, documentation, or blogs. It is important to note that self help materials are not considered a substitute for excellent live customer support
  • Hours. Hours for live service for US products should be, at minimum, 9AM ET – 5PM PT (9AM – 8PM ET). Perfect world, hours should be 24×7, particularly if your company has an international presence
  • Responsiveness. Support should respond promptly to support requests. If a customer’s product or service is seriously impaired, the response time is ASAP, not the next business day. Support staff should be in regular contact with the customer (multiple times/day) keeping them informed of progress in resolving their problem. More routine problems and suggestions should also be acknowledged promptly and personally
  • Competence. Support staff should have sufficient training to be capable of addressing the vast majority (at least 80%) of customer issues without escalating
  • Tracking. Companies should have good trouble ticket tracking systems capable of logging and categorizing customer issues, good workflow to route tickets and ensure timely follow-up with the customer, and enrich customer issue databases
  • Support basics. These are some “A” Game support basics:
    • Listen. Tom Peters says that listening is the highest form of courtesy. Moreover, he says that support representatives should listen naively, not as experts determined to be right
    • Be friendly, courteous, and helpful. In short, support representatives should be genuinely nice people who are really interested in helping the customer
    • Empathize. Staff should make a real effort to empathize with and connect with the customer
    • Fix the problem. Oh yes, by-the-way, staff should make a real good-faith effort to resolve the problem
    • Follow-up. If the issue cannot be resolved real-time, and it is one that seriously inhibits the usability of the product, staff should escalate and give the customer a realistic timeframe of when a solution or update can be expected. Staff should follow-up on or before the deadline provided
    • Evaluate the true cost of your support decisions. All of us have those mind-boggling customer support stories in which a company expended far more in hard or opportunity costs to defeat a customer than would have been the case had they simply refunded the customer’s money or offered some other incentive to ameliorate the situation. In addition to quantifiable cost, businesses should factor in the cost of bad will. My companies will never do business with Allied Van Lines or Sprint as a result of horrific experiences I had years ago. Bad service can be expensive.
    • Don’t argue with the customer. Nothing good can come from arguing with the customer
  • Refunds. If an issue that renders the product essentially unusable cannot be resolved, the customer’s money should be refunded. Better to cut your losses and salvage some of the customer relationship than to drag the baggage of an unhappy customer along with your company. Accumulate enough grumpy customers and they become an anchor on the company’s progress – clinging to the customer’s money is simply not worth the associated downsides of drains on support time and company reputation

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My New Old-Fashioned Company — Part 2: Bride of Frankenstein

bride_of_frankenstein_3Before I comment further on old and new revenue models, I should do a reality check: is it reasonable to charge money for a useful product or service? Is it reasonable to charge money for a car, a cheeseburger, or a plane ticket? Sure it is, provided the value of the product or service is commensurate with its price.

So why should software be the sole exception? It costs money to make and maintain and support and promote software. It costs money for servers to host Software-as-a-Service. The developers who write the software may extol the virtues of open architecture, but I have yet to meet one who doesn’t expect their paycheck on time.

Somewhere in time, money for software became a bad thing – probably about the time Google happened and advertising was burdened with paying the tab for everything. Microsoft didn’t help matters by premium-pricing its products, regardless of whether or not they had been battle-tested before being released to the public.

Google changed much more than revenue models. Now, the goal of many businesses is no longer to make a profit. The goal is to sell the business to Google. Take the examples of Twitter and Facebook. Twitter’s founders have been riding a public relations tsunami recently, presumably to pump up the purchase price to Google. On a recent Colbert Report, Twitter founder Biz Stone was asked by Stephen Colbert how Twitter planned to make a profit, comparing the business to failed .bombs like pets.com. Biz replied that they were “experimenting” with revenue models and that they had “patient investors.” Sure they do, as the goal does not appear to have been to build a viable standalone business, but instead to offer the potential to drive enough additional traffic to Google to justify the additional ad revenue required to justify Twitter’s purchase price. This is all well and good for Twitter’s investors, provided that Google buys the company at or near the asking price. If they don’t, those “experiments” in revenue had better yield something other than Bride of Frankenstein. Personally, I would dismiss any Google-centric business plan as too risky, and I think that it’s way too late to experiment with revenue models after the business is well underway. Call me old-fashioned, but I think entrepreneurs need to have a very clear idea how they’re going to make money before they launch the business.

Facebook is another aspect of current conventional wisdom in Silicon Valley. Fortune recently reported that Facebook grossed $280 million in 2008, yet has yet to make a cent of profit. Even more troubling was the blasé attitude exhibited by their CFO and investors in response to this situation. One VC I spoke with recently said Fortune’s reported revenue number was on the low side – perhaps by as much as $70 million. Whether the number is $280M or $350M, how on Earth does Facebook not make a profit? Their users create all the content on Facebook – they even make their own advertising! Granted, Facebook requires a lot of horsepower to drive the service, but what do they need all those people for? This is an example of a typical Silicon Valley affliction: waste. The bloated payrolls, the game rooms, the gelato machines, the massage therapy, and on and on. And everyone spends an hour or more in their car on highway 101 to get to and from a bricks & mortar office building, even though nothing is manufactured inside, with the possible exceptions of frozen yogurt and coffee. It is the “nature abhors a vacuum” business model – consume every cent of potential profit with as much waste as possible in the shortest period of time. There is nothing particularly challenging about spending money rapidly. My goal is different – I want to get as close as possible to a $1 billion business with a headcount of one – now that’s a challenge!

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My New Old-Fashioned Company — Part 1: Time Tunnel

timetunnel4“Where do you get off charging $19.95 for your product?!?!” demanded the VC. I was stunned. I had never met this man, and wouldn’t have known his name if not for his DEMO ’09 name badge. Yet here he was, in my face, insisting to know how I could, God-forbid, charge money for my software product.

“I’m not looking for venture money,” I replied.

The VC dropped his jaw and lurched back, as though he’d been sucker-punched. He’d probably used this crap intimidation tactic before to blindside unsuspecting and hungry young entrepreneurs. Maybe it had delivered the intended pantsload effect for him in the past.

Not this time. I was neither young, nor hungry. And even if I was, well, this guy was just plain rude.

Realizing there was neither an opportunity to invest nor terrorize an entrepreneur, the VC quickly found his own exit strategy, grunted, and walked off. In the span of 30 seconds, I had managed to violate not one, but two fundamental tenets of Silicon Valley business: 1) never charge money for your software product, and 2) never offend a VC.

I should preface what comes next by saying that I’ve been away from the industry a long time. I started on the hardware side of the technology street in the 1980’s with a start-up business that made Motorola 68000 co-processors for the Apple II and IBM PC computers. It was like sticking a Pratt & Whitney jet engine inside a Volkswagen Beatle and, as it turns out, about as useful. I was fresh out of school and, like many fresh grads, was convinced that I knew more than everyone about everything. My first business pummeled my youthful hubris and boosted my common sense. Luckily, I managed to sell the business and escape with my skin mostly intact. Afterwards, my career took an unexpected 20+ year turn into information technology. After I sold my most recent venture, WebFeat, I found that I really sucked at retirement and needed to get busy with another venture. My new product, gwabbit, inserted me back, front-and-center into mainstream Silicon Valley. I was both anxious and excited about returning to the world of consumer hi-tech. When I had last worked here, it was a thrilling time, the zenith of the Comdex era of computers. Now Comdex is lost in time, like some unimportant geological strata. So too appear to be many of the business fundamentals I have taken for granted over the years. Reawakening now in the 21st century has given me an opportunity to actually think about every aspect of technology business, no matter how rote they may have been only a year ago.

Take profit, for example. My odd encounter with the VC was not my only looking-glass experience regarding my desire to, God-forbid, charge money for my product. Numerous reporters and analysts remarked about the novelty of my revenue model, as though it were a curious artifact found in some archeological dig. I think the reality is more akin to litmus than carbon 14, as gwabbit’s traditional pricing model offers an acid test of the current software industry’s revenue models as compared with reality (or sanity).

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DEMO ‘09 Launch of gwabbit for Outlook

This is gwabbit President & Founder Todd Miller’s presentation at DEMO ‘09. gwabbit received the prestigious DEMOgod award, the highest honor bestowed by the nation’s premier technology conference for launching startup companies. See the presentation that started it all!

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