It’s Always Been About Trust

Sherpa Ventures released a comprehensive presentation on the “on-demand” economy the other day. It’s worth flipping through it if you have some time.

Slide 8 contrasts the “village economy” with the economy we have today and it got me thinking…

We’ve gone from:

  1. The general store where everyone in town knows and trusts the owner to…
  2. Large, main streets with lots of stores with less intimacy and less trust to…
  3. Larger, big box retailers with much less intimacy and much less trust.

As stores have become less intimate and less personal, retailers realized that, in order to compete, they had to try to maintain the level of trust that the owner of the general store had with his or her customers. That led to massive investments in brands – Wal-Mart, Best Buy, Macy’s etc.  They have built brands so that you know they’re low cost, high quality, reliable, etc.  

Every customer couldn’t know and trust the owner but every customer could know and trust the brand, the thinking went.

But in the new economy, constant connectivity, new payment platforms and reputation management programs (ratings and reviews) have recreated this high level of intimacy and trust, without the customer knowing the owner or knowing the brand.

“I don’t know that restaurant but it has a great rating on OpenTable.”

“I don’t know this artist, but people on Etsy like her.”

“I don’t know the guy that owns this apartment in Paris, but people on Airbnb trust him.”

The point of this post is that, regardless of the mechanics that drive our economy, it’s always been about trust. Whether your’e relying on your personal relationship with the owner of the general store on the corner, or you’re relying on Best Buy’s brand when buying an expensive flat-screen TV, or you’re relying on a five-star review rating when accepting a ride from a stranger on Uber — it’s always been about trust.

Innovation & CEO Tenure

Vinod Khosla interviewed Larry and Sergey from Google a couple weeks ago. I recommend watching the entire thing when you have some time.

At one point Larry explains the fact that the average Fortune 500 CEO’s tenure is approximately 4 years. He notes that it’s really, really difficult to solve big problems in 4 years. Twenty years, maybe. But 4 years, no way. So as a result we have a system where our largest companies are acting in a way that is very short-sighted.

We all know the stories of the giant, successful companies not seeing how things were changing and ignoring the little upstarts only to eventually get toppled by them. We’ve always chalked this up to naivety and arrogance on the part of large companies. Polaroid is a great example. They ignored the digital camera and didn’t recognize what its impact would be until it was too late and eventually found themselves bankrupt.

But when you consider Larry’s point, that CEOs are only focused on 4 years out, you can see how it actually made sense for Polaroid’s leadership to ignore the digital camera. New innovations move slowly, the best thing for Polaroid’s stock price (in the short-term) was to continue to focus on their core business — not to pivot and get ahead of a trend.

We’re about to see the same thing happen to big car companies. Self driving cars are the future. And they’re going to operate much differently than the cars we have today. But it’ll take a while, maybe 10 or 15 years. If you’re the CEO of Ford or General Motors, why should you redirect your resources away from regular cars, if you’re really only worried about the next four years? You’re much better off focusing on the here and now. Very logical, but also the thing that will wipe them out of the self driving car business. We can see it right now, it’s going to happen, but they won’t do anything about it.

I’m not arguing that companies should have 20 year terms for their CEOs, but companies do need to recognize that their short-term focus paralyzes the company in dealing with trends and getting ahead of the small upstarts. Companies would act very differently if they were looking further around the corner than the tenure of their leaders allows.

Some Summer Reading

I’ve been meaning to write a couple of book reviews but haven’t found the time so I decided to write a quick line or two about some of the books I’ve read over the last few months. I enjoyed a lot of them — I hope you will too.

To Sell Is Human

To Sell Is Human by Daniel Pink. This is a really, really good sales book that argues quite persuasively that we are all salespeople; that the most important thing that each of us does — regardless of whether or not we’re in sales — is sell. And that the jobs of the future (mostly focused around education and healthcare) are going to be all about “moving people”, e.g. selling people.  He gives really useful strategies for getting better at influencing and moving the people around us.

Where Does It Hurt

Where Does It Hurt? by Jonathan Bush. If you have any interest whatsoever in healthcare, disruption and where things are heading you should absolutely read this book. Bush is the CEO of Athena Health, an innovative healthcare software company, and while you may not agree with a lot of what he says the book is incredibly informative and important. I would expect to see a lot more books like this coming in the future. This is probably the most digestible and useful book I’ve ever read on healthcare.

Lead With A Story

Lead with a Story by Paul Smith. This is a book that teaches you how to incorporate the use of stories into your business life to help influence and inspire. Most of the lessons are somewhat intuitive and there are too many examples and I’d bet most of us do these things naturally, but the book is a good reminder that stories and analogies are a useful asset.

Amazing Things Will Happen

Amazing Things Will Happen by C.C. Chapman. I’ve been following C.C.’s blog and Twitter feed for a long time now. A speaker, marketing consultant and fellow Bentley grad, he is a really interesting guy. If you’re interested in how to manage and improve your personal brand, don’t bother taking a seminar or reading a book, just follow C.C. He is a brilliant at it. As for the book, it’s basically a series of short blog posts, each discussing a life lesson that he’s picked up over the years. Some of them are intuitive, but they’re great reminders. It’s also fairly short and can be read on a plane ride — which is the way all business books should be.

Body of Work

Body of Work by Pamela Slim. This is a really good and important book about how the way that we define a “career” is changing. We’re becoming our own brands and our own companies. Start-up jobs, volunteer work, content creation, freelance work and side projects are becoming the new normal for lots of people. This book does a great job of explaining this new reality and how you can succeed in it.

The Art of Learning

The Art of Learning by Josh Waitzkin. This is a true story about how Waitzkin went from being one the best chess players in the world to becoming one of the best martial artists in the world. He documents and dives deep into the learning process and how we can control it and speed it up to become an expert and master in any field. Highly recommended.

The Hard Thing About Hard Things

The Hard Things About Hard Things by Ben Horowitz. This about Ben’s startup experience. I’d highly recommend this book to any founder or potential founder. It chronicles the pain, the failures, the impossible decisions and the successes of a fast-paced startup. Painful to read at times, but a great book.

Cubed

Cubed: A Secret History of the Workplace by Nikil Saval. If you’re sitting in a cubicle right now and wondering how you got there, this book has the answer. A really interesting summary of work in the United States and how we went from the farms to the cubes. It gets a little dry and I wish it was a bit shorter and punchier but if you’re like me and you find this stuff interesting it’s worth the read.

Capital

Capital In the 21st Century by Thomas Piketty. If you haven’t heard of this one you’ve been living under a rock. Long, complex and controversial this is a magnificent summary of the economy and the steady increase in the wealth gap in the United States. If you’re not super interested in economics you might pass on this one and read some of the commentary around it — this book is being debated everywhere.

The Power of Habit

The Power of Habit by Charles Duhigg. This is a eye opening book about habits and how they dictate our behavior. I’ve always believed that creating habits is one of the secrets of high performance. It’s too hard to try to motivate yourself to go to the gym everyday. It has to be a habit (just like brushing your teeth). The Power of Habit validates this and teaches you to control your habits and perform at a higher level.

Finally, if you’re looking for a light, easy reading thriller that’s great for the beach pick-up Those that Wish Me Dead by Michael Koryta. I spent last weekend on the beach in Cape Cod and and I literally couldn’t put it down.

The Bright Side Of The Big Private Companies

There’s been quite a bit of talk in the blogosphere over the last few weeks about the death of the IPO. Most notably here and here. Most are blaming the paralyzing regulation that came along with Sarbanes Oxley following the financial crisis. They’re pointing to the fact that Uber, Airbnb and Dropbox recently raised private financing at $10 billion plus valuations. And that Twitter waited until they were worth $25 billion before going public. And that Facebook waited until they were worth $100 billion before public.

The problem with this is that most of the uptick in these valuations was missed by the average investor (U.S. law prohibits non-accredited investors from investing in private companies).

There’s definitely a problem here. And it’s terrifying to think about what Washington might try to do to fix it.

But rather than focus on the unfortunate aspects of the growth of these companies, I thought I’d focus on the good. Seeing these companies lumped together made me realize that these companies are all adding significant value to the economy, regardless of how they’re funded.

As the global economy continues to transform and push out jobs that can be automated or sent offshore, these companies are doing the opposite — they’re creating massive numbers of new jobs that can’t.

AirBnB has turned close to a million homeowners into part-time landlords (many of them in the U.S.). Uber has turned every street corner into a cab stand and in the process has created hundreds of thousands of near six-figure jobs.

Some might argue that these companies are just transferring hotel jobs and cab driving jobs to someone else. Not true at all. In industry after industry we’ve seen that as it becomes easier and more convenient to transact, more people get in the game. More people are traveling thanks to AirBnB and more people are hitching a ride thanks to Uber. These companies are growing the pie and helping the economy in the process.

There are lots of other marketplaces that are creating freelance sources of income (Clarity, Angie’s List and Google Hangouts to name a few). And I wrote about the enormous number of  jobs that the iOS and Android marketplaces created a while back.

There’s no doubt that most Americans are missing out on the big equity gains coming from these hyper-growth startups, but the jobs that these companies are creating is potentially far more impactful. And seeing new technologies create net new jobs in the short-term instead of wiping them out is a trend that shouldn’t go unnoticed.

A Mid-year Gap To Goal Analysis

Today is the second day of the second half of the year. It’s worth taking a couple minutes to assess where you are against your goal for the year. This is a great exercise whether you’re running a sales team or selling yourself. Below is a sample of a model I’ve used in the past.

Note that to build this for yourself you’ll have to fill in the fields in blue to match it to your pipeline (definitions of each field below).

Gap to Goal Analysis

Definitions:

  • Goal – 2014 goal
  • Actual – revenue closed to date
  • Value of late stage deals – deals that are either in contract or just about to be in contract
  • Late stage close rate – likelihood that late stage deals will close (in the next 6 months)
  • Number of highly engaged deals – number of early stage deals that you’re speaking to weekly
  • Highly engaged close rate – likelihood that you’ll close the average early stage deal (in the next 6 months)
  • Average deal size – for early stage deals you very likely don’t know how much their worth; go back and look at the last 5 to 10 deals that you’ve closed and take an average

The number in red should give you a very good sense of where you need to focus your time for the rest of the year. That is, should you focus on executing and growing deals that are already in motion or do you need fill up the pipeline with new opportunities. Based on this number, it’s a good idea to write down three things that you’re going to focus on over the next six months to ensure that you get to goal.

If you’d like the model in Excel feel free to email me

A Step Forward For Telehealth

A few weeks ago, the Federation of State Medical Boards passed an updated recommendation for telehealth use.  This is interesting because the federal board often guides policy for state boards and state boards often guide policy for providers.  Two notable things:

  1. The recommendation notes that virtual visits can be used for first time provider-patient encounters (a 180 degree turn from their prior position where they recommended that telehealth only be used once a relationship has been established).  This propels telehealth companies deeper into the patient acquisition business.
  2. To qualify as a telehealth visit, the board requires that the encounter be done using video (as opposed to just audio).  Phone-based telehealth companies won’t be eligible to provide telehealth based on the updated recommendation. Nor would the board recommend that those visits be eligible for reimbursement.

The news is being reported as both a big step forward for the industry (initial consults can move online) as well as a big step back for the industry (it limits vendors’ ability to provide services to patients that don’t have internet access). Regardless, it’s nice to see this channel becoming more officially recognized and sanctioned. For some segment of provider-patient encounters telehealth will lead to better outcomes and significant reductions in the cost of care.

5 Counterintuitive Sales Tips

To state the obvious, if you want to be much better than the average salesperson then you have to do something much different than the average salesperson.

With that in mind, I’ve picked up a few things over the years that most salespeople definitely do not do but that do seem to improve sales outcomes significantly. I’ve written about some of these before. Here are five:

1. Never leave an introductory meeting without talking about your product’s flaws. If you tell a prospect that your product doesn’t have weak areas you’re either lying or your product hasn’t chosen an area where it can add significant value. Be proud of your product’s flaws — be proud of the areas where you’ve decided to focus and those areas that you’ve chosen to deprioritize. Those decisions are what make your product unique. You’ll gain much more credibility by discussing those areas with a buyer.

2. Never criticize the competition (because you have no competition). No two companies prioritize the same features and do things exactly the same way. There is no competitor that does what you do. It’s simply not possible. So instead of saying, “we’re better than the competition”, point out the areas where you’ve chosen to focus and the areas you’ve chosen to prioritize. Help the buyer line up their priorities with the right seller. If the competition is a more appropriate fit you should tell them that. Again, you’re far more credible when you take this approach.

3. Instead of “always be closing” you should “always be leaving”. I’ve written about this before and I think I first picked it up in Mastering The Complex Sale. Remember, you are not talking to a buyer because you’re they’re to close them. You are talking to a buyer to determine whether or not you can create a mutually beneficial relationship. Be laser focused on mutually beneficial relationships. Have a healthy paranoia that the person you’re talking to doesn’t care about what you’re saying. If you don’t know, ask them. Walk away from prospects and people that aren’t interested. You’re bringing value and your prospects are bringing value — if there isn’t a match, walk away. In short, don’t be a salesperson.

4. Don’t ask too many questions. There’s nothing worse than the seller that starts a presentation asking a bunch of questions about the buyer’s business. What are your biggest priorities? What keeps you up at night? I get it. Sellers want to be appear that they care about the buyer’s business. But don’t ask too many questions. It’s annoying and insincere. You’re they’re to determine if a partnership makes sense. Get to it.

5. Be confident but not certain. Whenever you get a question from a buyer and you’re unsure of the answer don’t be afraid to tell them you’re not sure. Walk them through your thinking on the issue, but don’t be certain when you’re not certain. Buyers are afraid of sellers that know everything. Think things through with the seller when you don’t the answer.

Why Is Foursquare Unbundling?

Foursquare recently announced that they’re splitting in two. They’re moving the location sharing feature to a new app called Swarm. I’ve been a fairly loyal Foursquare user for quite some time. And when I think back to why I use it and why I’ve stayed loyal, I’d say it’s a few things (in order):

  1. Their search and discovery is really good. It’s incredibly useful when I’m in an area I don’t know well and random searches like “free wi-fi” or “cappuccino” are really effective. And their GPS is extremely accurate.
  2. Foursquare records a history of where I’ve been. If I’m trying to remember a restaurant that I really enjoyed it’s great to be able to look back at my history when I can’t remember its name.
  3. The gaming component is fun. Their UI/UX is absolutely phenomenal. I have to admit it’s pretty satisfying when you check-in.

The one thing I don’t use Foursquare for is location sharing. I don’t have a large network on Foursquare and I’m uninterested in sharing my location with large groups of people. That said, there are lots and lots of people that love to share their location with the world. But that market was quickly swooped up by Facebook a while back when they released the exact same feature.  So for me there isn’t much value to Swarm.

I recognize I’m a sample size of one, but all of this makes me wonder if Foursquare unbundled because they wanted to create two really valuable, standalone apps. Or if the move was more of a spin-off or divestiture of a less valuable and less promising feature (location sharing). I’m not sure. But it will be interesting to see what comes of Foursquare and Swarm as mobile search, discovery and location sharing evolves.

SaaS & Minimizing Buyer Risk

Andreessen Horowitz had a podcast recently on software company valuations. All of their podcasts are excellent by the way and definitely worth listening to when you have some time. This one discussed the fact that, traditionally, big enterprise software deals were sold as “perpetual” licenses. This meant that the enterprise would pay big money upfront for software that could be used forever. This was a nice thing for the seller from an accounting point of view. You’d get big bucks on day one that you could use to pay your engineering team and sales force. Your financials would look really good in that period.

The software as a service model (SaaS) is much different. With SaaS, the license is sold as a subscription and revenues and costs are spread out over the life of the agreement. At first glance, the SaaS model doesn’t make a seller’s financials look so good. When the deal is closed the seller has to pay their engineering team and sales force upfront. All that cash is out the door but the revenue is collected and realized over several years. This is why Castlight Health was called the most overpriced IPO of the century when they went public a couple months ago at a valuation of $1.4 billion on only $13 million in revenue (an outrageous 100x revenue multiple). I don’t have a strong opinion on the company or their valuation but what many people in the media missed is the fact that most of that multiple was being driven by the company’s “deferred revenue” — or deals that have been closed but not yet realized from a revenue recognition perspective. Deferred revenue is a critical measure of a SaaS company’s health.

I say all of this to make a related point. One of the challenges in selling enterprise software is the buyer’s concern about risk — e.g. a buyer might say “what if we make a big investment in your product and we find that it doesn’t work for us, do you provide a guarantee?” When you’re selling SaaS (as opposed to a perpetual license) it’s important to explain to your buyer that you are totally aligned on risk. The entire SaaS model is built around getting renewals. During the initial contract period, the cost of selling the software likely exceeds the revenue collected so it’s critical for the seller to get the buyer to renew. The good news for the seller is that over time the costs are amortized and when the client renews the relationship becomes quite profitable. So the entire model is setup to drive customer renewals — in many cases, most of the risk is actually on the seller. It’s worth explaining some of this simple accounting to a buyer when they push back on risk.

Unlike a perpetual license, the buyer and seller’s interests are completely aligned: the buyer needs great software and the seller needs a renewal.

4 Things That Big Healthcare IT Companies Must Do To Stay Competitive

The healthcare IT space is possibly the most exciting and dynamic industry in the United States right now. Healthcare is going through a total transformation driven by massive regulatory change, the “consumerization” of healthcare and the important shift from a system that manages sickness to a system that manages health. Underlying all of this change is the software that runs large healthcare organizations — specifically, the big EMR systems. Given all of the rapid change in healthcare, the EMR industry — and the dominant players that lead it — are ripe for disruption. It’s not unlikely that there’ll be some big names dropping out of the race over the next several years.

With that in mind, here are 4 things I think the large EMR players should do to remain competitive amidst all of this change.

1. Move to the cloud. Healthcare IT is all about big data. And the large EMR companies host loads of it. In the traditional database space, Oracle and SAP waited much too long to move their data to the cloud. And it seems that some of the big EMR companies appear to be waiting too long as well (though, it’s possible they could be making this transformation behind the scenes). Regardless, the fact is that health information is going to have to live on the cloud in the long-term. There is no way around this. Patients are going to demand interoperability of data between their primary care doctor and their gastroenterologist and their dermatologist and their dentist. And there is no way that all of those providers are going to be running the same EMR – the space is way too fragmented. I’d argue that not moving to the cloud is a bigger risk for EMR companies now than it was to the large database companies ten years ago. Patient advocates and regulators are simply not going to allow a big EMR vendor to keep their data in house. Larry Ellison said it took 7 years of development to get Oracle on the cloud. EMRs vendors can’t continue to put this off.

2. Open up platform APIs (I mean, really open up platform APIs). I’ve used the BlackBerry versus Apple’s iOS example in the past when discussing this topic. Apple opened up its app store early (effectively employing hundreds of thousands of app developers) and as a result made the iPhone 1,000 times more valuable. Meanwhile, BlackBerry dragged their feet and eventually ended up near bankruptcy. There are a number of reasons why the analogy isn’t perfect (EMRs aren’t consumer products, there are HIPAA restrictions around exposing personal health information, etc.) but EMRs should take a close look at what caused BlackBerry’s demise. Part of the reason they dragged their feet on opening up was that their corporate customers were hesitant to allow their employees to download apps. They let their own customers slow down their development. Now some will tell you that the EMRs have created APIs and are adding services on top of their products all the time. This is not true. Even the most open EMRs are tightly policing the products that plug-in to their platform. The first EMR that takes a true “app store” approach will have a massive advantage. There are a ton of well-funded developers building amazing things that these EMRs can tap into if they open up.

3. Focus on usability. I’m not a doctor and I don’t work in a doctor’s office. But I’ve seen enough of these systems and I’ve heard enough complaints from users of them to know that the usability of most EMRs is not up to par with high quality B2B software tools. This is the classic case of B2B software being bad because it can. These companies have high talent sales teams that only need to sell a handful of executives and the rest of the health system is forced to use it and deal with the usability problems. With the emergence of B2E2B (business to employee to business) sales strategies a lot of this is changing. Staff members expect B2B software to work the same way their consumer tools work (Facebook, Gmail, Amazon, etc.).  Granted, due to high switching costs, the big EMRs can get away with poor usability for a while — it’ll be a long time before EMR software is sold the way Yammer is sold but when big contracts come due in a few years, usability will be a massive competitive advantage.

4. Get out of the B2C business. Many big EMRs are rapidly creating direct to consumer products, mostly in the form of a patient portal. This is being driven by 1.) the belief that consumers will continue to be more and more engaged in their care and 2.) the government is requiring it as part of meaningful use; though it’s mostly being driven by the latter, which is a recipe for really weak consumer products. Take a look at the app store ratings of many of the big health IT apps – consumer expectations of what makes a good app are much too high for an enterprise-focused vendor to meet at this point.  To compete in the consumer space you have to be totally focused on the consumer. It has to be an obsession. Take a look at a company like Oscar Health that has built their entire business around consumer experience. This isn’t a criticism of the EMRs, they do lots and lots of things really well. The point is that they should focus on those things and double down on them. Moving to the consumer space is too hard and too competitive and too much of a distraction.  The better approach is to buy or partner with an organization that is built around the consumer.