Yahoo! & Working From Home

Much has been made of Marrisa Mayer’s controversial decision to stop allowing Yahoo! employees to work from home. I've heard pretty convincing arguments for it and against it. I feel pretty strongly about allowing employees to work when and where they’re most productive. Personally, I’ve often found that I can be incredibly productive working from home on Saturday mornings. And not so productive when in the office on a Friday afternoon. And often it can be vice versa. But having the flexibility to manage my own productivity makes me a better employee. Having that kind of control is really important.

But none of this takes into account collaboration with my company and team. There are things that I can’t do on my own time. I have to collaborate with my colleagues, and when and where we do that is not always up to me. So I need to balance optimizing my own productivity with finding time to collaborate and learn and innovate with my colleagues. Ideally, a CEO should allow individuals to manage that balance on their own. But when a company is going through a massive change in management and structure and mission (like Yahoo! is right now) it absolutely makes sense for the CEO to mandate that balance.

Right now, according to Mayer, it appears that Yahoo! is in transition. And in need of better collaboration and teamwork and that’s why she made the decision to bring employees back to the office.

In short, I guess my opinion is to not have an opinion. Those of us that are not on the executive team at Yahoo! can’t really know the circumstances at Yahoo! and, given those circumstances, can't really make an intelligent judgement about the most appropriate work from home policy.

Failure

People of Groupon, After four and a half intense and wonderful years as CEO of Groupon, I've decided that I’d like to spend more time with my family. Just kidding — I was fired today. If you’re wondering why … you haven’t been paying attention.

These were the first two sentences of Andrew Mason's letter to employees announcing that he had been fired as CEO of Groupon following a disappointing fourth-quarter earnings report. The letter goes on to explain some of his failures, as well as express his hope for the future of the company.

It was really refreshing to see Mason take this approach. This guy built an amazing company (I wrote about their growth a while back). And I give him a ton of credit for talking about his failures so publicly. This is so rare in public and private life.

When I interview job candidates I always ask them about the biggest mistakes and failures in their career. Candidates are so reluctant to talk about this topic. They often don't answer the question or talk about a failure where they didn't really fail. They're afraid that I'm going to view their failures as a bad thing.

But failure is a good thing, a great thing actually. Because it shows that you've tried things that are hard and have been through difficult times and persevered. And I want to work with people that have tried hard things and been through difficult times and persevered.

When you try to do great things you're going to fail. A lot. And failing is the best chance to learn. Personally, I learn much more when I fail than when I succeed.

When I interview someone and they can't think of a failure, there are three possible takeaways: 1.) the candidate isn't self aware 2.) the candidate is lying 3.) the candidate has never tried anything difficult. All of these are bad.

I hope we see more business leaders (and interviewees) become more open about their failures like Andrew Mason was last week.

The Photocopier Effect

I've written in the past that one of the secrets to negotiating with partners or potential partners is to always communicate the reasons behind your position. It's critical. The partner doesn't have to agree with your position, but you must explain the business logic behind it. People don't like things that don't make sense. With this in mind, I came across an interesting phenomenon called the "Photocopier Effect" in a Malcolm Gladwell New Yorker article from a while back. The Photocopier Effect proves, scientifically, why it's so important to emphasize the reasons behind your position. From the column:

...Harvard social scientist Ellen Langer. Langer examined the apparently common-sense idea that if you are trying to persuade someone to do something for you, you are always better off if you provide a reason.

She went up to a group of people waiting in line to use a library copying machine and said, "Excuse me, I have five pages. May I use the Xerox machine?" Sixty per cent said yes.

Then she repeated the experiment on another group, except that she changed her request to "Excuse me, I have five pages. May I use the Xerox machine, because I'm in a rush?" Ninety-four per cent said yes.

This much sounds like common sense: if you say, "because I'm in a rush"--if you explain your need--people are willing to step aside.

But here's where the study gets interesting. Langer then did the experiment a third time, in this case replacing the specific reason with a statement of the obvious: "Excuse me, I have five pages. May I use the Xerox machine, because I have to make some copies?" The percentage who let her do so this time was almost exactly the same as the one in the previous round--ninety-three per cent.

The key to getting people to say yes, in other words, wasn't the explanation "because I'm in a rush" but merely the use of the word "because." What mattered wasn't the substance of the explanation but merely the rhetorical form--the conjunctional footprint--of an explanation.

Ecosystems Create More Jobs Than Companies

60 Minutes had a story last week on the increasing impact of robots in corporate America. Because of the technical innovation that continued during the recession, as companies begin to grow again they're finding that they can replace many of the lost jobs with robots instead of people. One of the researchers in the piece points out that Apple, Amazon, Facebook and Google are all public companies and have a combined market capitalization of nearly a trillion dollars. But together, they only have  around 150,000 employees. Which is about half of the size of GE and less than the number of new entrants into the American workforce each month. Sounds like a bad thing, huh?

Not really. What this comment ignores is the ecosystem that these companies have built.  Each one of the companies listed above creates far, far more jobs than the number of employees that work for them directly.

Some examples:

• Apple's app store now has more than one million apps that are built and sold by entrepreneurs that don't work for Apple.
• Thousands of independent merchants sell their goods through the Amazon Seller Program. Amazon gives these sellers access to 200 million+ shoppers each month. Amazon also enables authors to self-publish and sell their work through the platform.
• There are more than 10 million revenue generating apps that plug into Facebook.
• Google's Android app store has more than one million apps built and sold by entrepreneurs that aren't employees.

So when you dig a bit deeper you find that the combined market cap of these four companies is incredibly dependent on the work of an enormous number of entrepreneurs that are making a living through these platforms. So while GE may have more employees than these companies, the number of individual livelihoods that are supported by their platforms dwarf the employee headcount of any American company.

Blocking Out The Competition

Over the last few months, Twitter has removed the auto-preview feature for Instagram Tweets. So now you have to click through the link in the Tweet to see the photo. Presumably Twitter did this to encourage their users to use their native photo sharing application. When LinkedIn redesigned their profile page about a month ago, they dramatically decreased the exposure of a user's Twitter account. In fact, it's not even on the main profile page, you have to click "contact info" to see a user's Twitter account. This is a drastic change given the LinkedIn/Twitter integration that used to exist.

So LinkedIn is blocking out Twitter and Twitter is blocking out Instagram.

I think this is dangerous for LinkedIn and Twitter. I've written in the past about how difficult it is to build a successful B2C business. Your product has to be so great and so valuable if you want to win. You don't have the luxury of a salesperson whispering in the user's ear giving them context on your decisions or information about what's coming soon and how the product will improve. The product has to be great, right now.

Of course, I don't know all of the facts behind these decisions. But I do know that the effect of blocking out applications that users like is bad. And in a B2C business, what's bad for the "C" very quickly becomes bad for the "B".

Individual Employee Budgets

The other day I wrote about the fast growing b2e2b business model where enterprise software companies make their product available (often for free) to individual employees. Then – after those employees love the product – they put pressure on their employers to buy the premium version or to buy the product for the entire enterprise. While I believe that this model is going to continue to grow at an extremely fast pace in 2013, there is no doubt that it’s inefficient – i.e. the employee has to go through a bureaucratic purchasing department to buy a tool that will make them better at their jobs.

That’s why I believe that, as we see b2e2b grow, I think we’ll also see this inefficiency addressed. That is, we’ll start to see more budgetary control put in the hands of the individual employee. Many companies – even large companies – already give their employees a cell phone budget. I think we’ll see this kind of control flow down to other productivity tools as well to the point that budgets won't be bucketed by division or group or team -- we'll see more and more money flowing into individual employee budgets.

Of course there are internal compatibility, security and scalability concerns that will slow down this trend, but I think this it's something for enterprise focused companies to watch out for in the coming years.

Enterprise Software & The Network

Fred Wilson posted a talk he did the other day on enterprises and networks. Including Q&A, the talk is nearly an hour. For me there is one incredibly important takeaway for software companies that are focused on the enterprise. And that is that in today's environment, in the long term, you must remember that your business model is a commodity, your software is a commodity, your customer service is a commodity and your sales team is a commodity. The thing that will provide you with sustainable, incremental value over the long term is your network of users. That is the one thing that is extremely difficult to copy in the long term. Enterprise focused companies that have large networks of engaged users that are adding value to the product simply because they use the product are the products that will win over the long term. Here are five good examples of enterprise software products that are successfully using their network to increase engagement and product value.

• Yammer (users are an extension of the sales force)
• LinkedIn (users -- i.e. job candidates -- are the product for recruiters)
• Mongo DB (users improve the code by using the product)
• DropBox (users are an extension of the sales force)
• Disqus (user discussion drives increased traffic and engagement to participating blogs)

B2E2B (Business to Employee to Business)

We all know b2b and b2c, and even b2b2c. I'd propose that an emerging software business model is b2e2b (business to employee to business). While it hasn't been called out clearly like this (trust me, I've 'Googled' it) there are many companies that are already using this approach (Yammer, Dropbox, Xobni and others). The way it works is that a company builds a product that can be accessed directly by a single employee of an organization. As the number of users within a company grows and reaches a critical mass, the company then has a salesperson contact the organization to make the upsell -- e.g. business to employee to business.

Of course, this model is interesting in its own right. But there are much larger implications for enterprise software. Chris Dixon and others have talked a lot about the fact that enterprise technology is far behind consumer technology. As I've written before, I believe that the reason for this is that enterprise technology can get away with being bad. For example, if you're a payroll provider and you provide a lousy interface for employees you can get away with it because you only have to sell one person in HR on your product (and then they force ten thousand people to use it). But if you're a consumer site like Mint.com you can't get away with being lousy because you have to sell 10,000 people, one by one. You have to be great or you'll fail.

And this is why the b2e2b approach is so important. It’s radically changing the way enterprise software is built and sold. And as a result, we should see the quality of enterprise technology begin to catch up with consumer technology. And when it does, those big b2b companies that continue to rely on their brand or their sales force to drive sales will begin to collapse.

Facebook's 15%

You may have noticed that there are fewer posts in your Facebook feed these days. The reason? Facebook is now selling its ‘sponsored posts’ feature to individual accounts in addition to business accounts. So now, when you post an update to Facebook telling your friends that you’re going to the gym or looking forward to watching your favorite television show that post only appears in approximately 15% of your friends’ news feeds. But, if you pay a small fee (I hear around $5 to $10) Facebook will show that post to a much larger group of friends. This change has caused quite a bit of frustration for Facebook users. And rightfully so.  Many businesses and individuals have spent massive resources acquiring Facebook followers and have been using Facebook as a way to engage their customers for years. You can understand the frustration among businesses and individuals that suddenly have to pay to speak to their own network.

For Facebook, though, the move makes a lot of sense. They’re a public company now, and the market wants to know how they’re going to continue to add shareholder value.  And given that there are reasons to believe that their user growth is beginning to top off, there’s lots of pressure on them to monetize their user base.  Offering a paid product to their entire base of users – which, by the way, equates to about one seventh of the world’s population – is arguably a step in the right direction.

Of course, what’s good for Facebook’s stock price in the short term may not be good for its users. Beyond the anecdotal frustration, Mark Cuban and others are advising their companies to pull back from using Facebook as a primary marketing channel. And some of the bands I follow on Facebook have asked their users to begin following them on Twitter instead.

Facebook has to walk the thin tightrope of providing an accessible and valuable platform to the masses while it tries to monetize more and more of their user base. In the past, shareholders could argue that Facebook may have leaned too far towards providing the free platform. With this change, they’re now leaning in the opposite direction. They'll have to adapt their product and communication strategy to figure out how they can continue to thrive using this new model – and they better hope their users stick around while they do.

Results From My Super Bowl Commercial Experiment

5 years ago when I started this blog, I had a theory. The theory was that participating in big, broadcast marketing was a bad strategy. And that companies that continued to participate in it would likely see their stock prices fall over time. To test this theory, I selected a group of 6 companies that ran television commercials during that year's Super Bowl and noted their stock prices with the intention of measuring their performance against the S&P 500 index. The 6 companies were Pepsi Co., E-Trade, Anheuser Busch, Coca Cola, Bridgestone and FedEx.

Anheuser Busch was of course acquired by InBev back in 2008 so 5 years later that leaves me with 5 companies to test my theory. Here are the results:

• The S&P 500 outperformed the mean of the Super Bowl stocks by just over 13%.
• The S&P 500 dropped 2.2% during this period and the 5 Super Bowl stocks dropped 15.3%.
• The S&P 500 outperformed 3 of the 5 Super Bowl stocks.
• Only one stock price increased during the period (Coca Cola by 22%)
• E-Trade's stock price ell by 83%.

Given the small sample size, I'm not sure the data is all that conclusive. But it certainly doesn't conflict with my theory. So I'll stand by it for now...

Conscious Capitalism Talk

Here's a great talk that my former marketing professor, Dr. Raj Sisodia, gave at TEDxNewEngland about a month ago. The talk addresses how the world has changed dramatically in recent years and encourages our large corporate institutions to change too. Dr. Sisodia was without a doubt my favorite professor in business school and this talk reminds me of one of his great lectures. I hope you enjoy it.

[youtube http://www.youtube.com/watch?v=O8faXr6WhCM&w=420&h=315]

How I Interview Job Candidates

I think a lot about the best way to interview job candidates.  I’m always trying to determine how effective they’ll be at my company but also how much they’ll actually want to be at my company.   I want to be sure that we’re going to like them long after they’re hired and, just as importantly, that they’re going to like us long after they’re hired. Here’s the framework I’m currently using when I interview a job prospect:

1. Resume Walkthrough.  First, I walk through their resume to get to know them.  I try to understand why they chose their schools, companies and industries and I always ask why they left each job.  Walking through their resume gives me a really good sense of who they are.  It can be somewhat of an intense conversation so it helps me get to know them right away.  On the surface, I don’t care about gaps in resumes or sabbaticals but I like to understand the choices that the candidate made and why they made them.   At the end I always ask them my favorite interview question.  I ask them to tell me what they want to do without naming a company or an industry.  Specifically I want to know how they want to add value to an organization.
2. Analysis of Strengths.  Next I dig in on their strengths.  I assume that they’re really good at what they do but I like to understand exactly why they believe they are so good.  Often I’ll ask something like, “if you’re the top performer on your team and I asked the average performer on your team what makes you so good, what would they say?”  This gives some insight into how analytical they are about their success.  I don’t really care that much about hearing about their success, I want to hear about why they’re successful so I can assess whether or not that’ll be transferrable to my company.  Candidates that can’t intelligently tell you why they’re successful are risky.
3. Hesitations.  At this point I’m in a good position to assess my hesitations.  In a nice way I tell them exactly what I think of them so far and what I’m hesitant about.  And I give them a chance to respond.
4. Tension Breaker.  Then I lighten things up and ask what they do for fun.
5. Questions.  Lastly I ask if they have questions for me.   I can usually get a good sense of how much they’ll like working at my company by the questions they ask.

This approach has been working well for me lately so feel free to borrow it.  I’ll try to document how this changes over time.