Norman Nie - A Statistically Significant Life

Norman Nie

Norman Nie, co-founder and early CEO of SPSS, died a few days ago. I had the pleasure of working with Norman for several years when I was on the board of Revolution Analytics where he was CEO for several years. Norman was as smart and tenacious a software executive as I'd ever met. Well into his 60s, Norman was gearing up for another bite at the apple. He was a huge believer in the power of Open Source R as a way to build the next generation of statistical software and predictive analytics.

While not a programmer, Norman's impact on the software industry was giant. He created SPSS in 1968 along with Tex Hull and Dale Bent at Stanford University. When Nie moved to University of Chicago, Hull joined him and they continued development for several years, giving the software away free to universities and businesses and publishing a textbook manual. When profits started rolling in, SPSS was incorporated in 1975 with Nie as CEO. 

SPSS is one of the oldest mainstream commercial software packages that is still available today. The original version of SPSS was written in Fortran and ran on mainframe computers. It was ported later to more than 60 operating systems including minicomputer platforms, DOS in 1982, with Mac and Windows versions following in the early '90s. SPSS was the "swiss army knife" of statistics and introduced predictive analytics to a generation of students and computing professionals.

SPSS was eventually acquired by IBM for $1.2 billion in 2007. In a strange turn of events, Norman sued the company to assert his rights in the ownership of the SPSS name and trademark. 

Just last week, with the final board meeting to approve the acquisition of Revolution Analytics by Microsoft, Norman Nie passed away after a long battle with cancer. I'm told he approved the acquisition from his bedside in his last remaining days. Norman was that kind of a guy.

He was a helluva fighter, a smart, passionate son of a gun. Not always easy to work with, but he went out with his boots on and fighting until the very end. He made a mark on the industry that will continue to inspire others for decades on.

Norman, we'll miss you. 


School of Herring

School of Herring

My former boss, Marten Mickos, has created an excellent new resources for early stage founders, managers and execs called www.Schoolofherring.com. Each post has a short write up and often a 2-3 minute video covering a topic such as giving feedback, Peter Drucker's principles of good management, what it takes to build an effective team, hiring for strength etc. Some of these topics are very practical, like how to send good email, others are more thought-provoking, such as the notion that bad news is good news --one of my personal favorites.

Some of these ideas come from legendary management guru Peter Drucker, but they are all shaped with Marten's unique and practical experience.


How To Lower Churn

GigaOm

Dealing with churn, is one of the most important elements of building a subscription business.  While some churn is inevitable over time, too much churn indicates a more fundamental problem: customers aren't finding value in your product.  

I wrote an article over at GigaOm on this subject including some examples about how to reduce churn from my experience at MySQL and Zendesk.

Having churn is like rowing a leaky boat. After a while, you spend more time bailing water than moving forward. By contrast, organizations that focus on reducing churn will find that their revenue grows every quarter.

To accurately measure what’s going on, you should begin by breaking out churn (customer cancellation) from contraction (a downgrade in spending). Measure downgrade and churn separately from upgrades and expansion; otherwise, your net growth numbers will mask problems that are bubbling below the surface. If your SaaS product has different editions (e.g. Basic, Pro, Enterprise) you should watch for downgrades that suggest customers are not seeing the value in the higher-end features.

It’s also worth paying attention to churn and contraction by customer segment. In most SaaS businesses, churn is highest in low-end customers — some of whom will inevitably be acquired or go out of business. Over time, if you move upmarket to larger SMB or Enterprise customers, low-end churn becomes less significant. Customers who spend a lot of money usually have greater commitment and resources for working through any speed bumps during implementation. They’re also far less likely to switch to another vendor with newer features.

Hopefully this article will spark some other ideas and discussions in your company.  You can read the full piece at GigaOm.


Open Source Enigma Project

Open Friggin' Enigma

The wild and crazy guys over at S&T Geotronics, James Sanderson and Marc Tessier, have decided to go full tilt with a Kickstarter version of their DIY Open Enigma Project.  For those who missed the fanfare last year, they were featured on Instructables showing how to build an Arduino-based encryption machine that works exactly like a WWII era Enigma.  You know, the thing that Alan friggin' Turing and his team at Bletchley Park cracked to  bring an end to WWII?  Yeah, that Enigma.  

The Enigma was also featured in the aptly-titled novel "Enigma" by Robert Harris and the film starring Kate Winslet and some people I've never heard of.  That film was produced by Mick "code-breaker" Jagger.  Yeah, that Mick Jagger... By the way, Jagger owns his own personal friggin' Enigma machine.  How cool is that?  

The Enigma Machine (and it's cracking) remains one of the most significant breakthroughs in computing.  And Turing is considered one of the fathers of modern computing as well as a brilliant mathematician, logician, code-breaker and... wait for it.... world class marathon runner. (I kid you not, the guy ran a 2:46 marathon, coming in 5th in an Olympic qualifying round.  Take that Nazi scum!)

But unless you happen to have a spare $208,137 lying around to throw at a Christie's auction, the closest you're ever gonna get to an Enigma machine is to view Mick Jagger's Enigma sealed behind glass at Bletchley Park.  I've been there, it's fantastic.  But it's also heavily guarded.  Just sayin'. 

Enigma kitNow with the Open Enigma Project, you can get a working, life-size replica of the Enigma and be a part of computing history.  You can sponsor the Kickstarter project for as little as $5 (cheapskate), or if you're a DIY hardware hacker, for $250 you get a bag of electronic stuff you can assemble. 

Or if you're a software person who wouldn't know which way to plug in a soldering iron, then you can get a fully assembled kit (without a case) for $300.  And if you want the whole enchilada including the genuine wooden case, it's $600.  Executives, VCs, rock stars and others can splurge for even higher levels to help make this project a reality. 

This is literally a once-in-a-lifetime opportunity to get a working Enigma replica.  And that is some cool cyber-encrypting steampunk goodness!  You can plug the Open Enigma into your PC via USB port and run some kind of crazy distributed big data bitcoin-mining NoSQL social media photo sharing site on it.  

All the hardware and software is open source so you can compute all you want on your desk, put it behind glass or run a marathon with it.  Just like Alan Turing would have done.


Steven Sinofsky on Disruption

Sinofsky_wings

There is a good article over at Re-Code by ex-Microsoft VP Steven Sinofsky called "The Four Stages of Disruption".  It describes the evolution of products and markets through disruption, drawing from Sinofsky's own insights and also building on the work of Everett Rogers ("The Diffusion of Innovations") and Clayton Christensen ("The Innovator's Dilemma.")  There are few software industry execs with as much experience in shipping billion dollar software products as Sinofsky.  And he understands how brutal it can be to manage large teams.  In my view, Sinofsky is always worth reading, though he can be a bit, ah, verbose at times.

There are dozens of examples of disruptive technologies and products. And the reactions (or inactions) of incumbents are legendary. One example that illustrates this point would be the introduction of the “PC as a server.” This has all of the hallmarks of disruption. The first customers to begin to use PCs as servers — for application workloads such as file sharing, or early client/server development — ran into incredible challenges relative to the mini/mainframe computing model. While new PCs were far more flexible and less expensive, they lacked the reliability, horsepower and tooling to supplant existing models. Those in the mini/mainframe world could remain comfortable observing the lack of those traits, almost dismissing PC servers as not “real servers,” while they continued on their path further distancing themselves from the capabilities of PC servers, refining their products and businesses for a growing base of customers. PCs as servers were simply toys.

At the same time, PC servers began to evolve and demonstrate richer models for application development (rich client front-ends), lower cost and scalable databases, and better economics for new application development. With the rapidly increasing demand for computing solutions to business problems, this wave of PC servers fit the bill. Soon the number of new applications written in this new way began to dwarf development on “real servers,” and the once-important servers became legacy relative to PC-based servers for those making the bet or shift. PC servers would soon begin to transition from disruption to broad adoption, but first the value proposition needed to be completed.

Sinofsky makes a number of good observations on how markets and products evolve through disruption.  But there is a certain irony to reading about disruption by a Microsoft exec.  Is Microsoft a disruptor or a disruptee?  I'd say Microsoft has been on both sides of the disruption equation.

In the early days, Microsoft was a pioneering company that created vast new markets where none existed.  If Microsoft products were not initially the best in their categories, their persistence and steady release cycles gave them the features they needed to beat competitors in just about every category in which they competed, whether operating systems, applications, or networking software.  There were some notable exceptions, such as Microsoft's failure to beat Quicken in personal finance software.  But in general, Microsoft was the 800 pound gorilla in the market and few were brave or foolish enough to tackle them head on.  

The most clear example of Microsoft being a disruptor was it's entry into "back office" markets for server software as Sinofsky described.  The "Wintel" combination of Windows server software and Intel X86 architecture had a profound effect on redefining the server market.  It enabled large corporate Enterprise customers to move server workloads off expensive proprietary Unix systems for a fraction of the price.  You could argue that SQL Server was not as good as Oracle or that NT was not as good as Unix, but for many users it was "good enough."  And Microsoft was smart enough to add Enterprise DNA to the company to help them build this new class of software.  I'm sure in some cases the incumbents saw what Microsoft was doing, but dismissed it's solution as mere "toys."  And by the criteria of the incumbents that was exactly so.  

But where did all that disruption mojo go in recent years?  The emergence of smartphones and cloud-based software left Microsoft flat-footed.  New versions of Windows have been acknowledged failures.  It's rebooted it's mobile and cloud offerings several times.  And in the last couple of years there's been a steady stream of departures from the executive suite including Sinofsky, Bob Muglia, Hank VigilCraig MundieRay Ozzie, Robbie Bach, J Allard, and soon Steve Ballmer.

In the mean time, Apple, Google, Amazon, Salesforce, Box and others have been the innovators coming up with new cloud-based offerings and products that have disrupted incumbents including Microsoft, HP, Dell and others.  

So what do you make of Sinofsky's article?  How is it disruptors get disrupted?  Let me know in the comments.


What Makes a Good Incubator?

Chicken
Although I took most of the summer off, I did spend some time with various San Francisco business incubators including Heavybit (which focuses on infrastructure and tools) and Hub Ventures (focused on technology with social good).  And I'm familiar with probably another half dozen incubators in the SF Bay Area where I either know people or have spoken at or attended various panels.   

Of course, you would expect San Francisco to have lots of incubators.  But what's surprising to me is just how many business incubators and accelerator programs there are in North America --several hundred it seems. Not to mention numerous incubators in Europe and Asia.  And each one seems to have a couple of dozen promising tech startups.  While the costs of starting a company have fallen dramatically with open source, SaaS and cloud technology, I'm not sure the odds of success have risen.  If anything, the low-bar to creating companies is making the early stage startup market even more competitive.  Every good idea seems to spawn more than it's share of copycats and wannabe's.

While there are real benefits from the mentorship and connections you can make at a good incubator, it seems that the rush to create many tech companies has spawned some pretty lousy incubators.  David Cohen of TechStars recently posted "A Horrifying Accelerator Story You'll Need to Read Twice" that tells the tale of an unnamed incubator from the perspective of a participating startup company.  Short version: lots of promises, psychotic drama and bushel of lies: 

A month later, we’d seen or heard from the founders of the top-billed startup exactly zero times and there had been exactly zero sessions for learning... By the end of the 4 months, their total time invested was 45 minutes with the accelerator. It was very strange given the outline for the program included a very specific syllabus with promises of luminary speakers, tech for non-tech founders, and more. None of it happened.

If you're giving up equity make sure you do your homework before choosing to go with any incubator.  And in particular, speak to companies who are at or have graduated from the program and find out whether the promises of mentorship, investor connections and demo days paid off.  Did they launch their product or service?  Did they get funding?  Are they making money?  While everyone knows most startups have long odds and won't make it in the long run, it's worth remembering that it's probably also true for many of the incubators themselves.  


NPR on Software Patents

Nopatents

A few years back, along with some folks at MySQL and in the open source community, we helped kick off a campaign against software patents in Europe.  This was a hot topic and surprisingly, it seemed no large companies were willing to step up the fight.  As a relatively young company, MySQL had a lot to lose if someone went on the attack against us using patents.  While we had a very small number of patents in our portfolio (mostly through acquisitions), we help them only for defensive purposes.  

It's been interesting to see some stories come out from NPR's Planet Money and This American Life shows that shed more light on software patents.  The first episode was aired in 2011 and cast some well needed light on the rather murky area of software patents and a company called Intellectual Ventures that appears to have accumulated a massive war chest of patents.  I've seen some of the patents and some are truly impressive.  But in many cases, it's less clear how these patents benefit society.  

"We're at a point in the state of intellectual property where existing patents probably cover every behavior that's happening on the Internet or our mobile phones today," says Chris Sacca, the venture capitalist. "The average Silicon Valley start-up or even medium sized company, no matter how truly innovative they are, I have no doubt that aspects of what they're doing violate patents right now. And that's what's fundamentally broken about this system right now."

The second episode, aired in 2013, went even further in disclosing the money that is being made by Intellectual Ventures through a licensee called Oasis for rather dubious claims around internet backup technology.  

It's unknown how much money Oasis received from those licensing arrangements. We do know how much it wanted from Carbonite. Danielle Sheer said Oasis proposed a $20 million license fee plus a portion of revenue going forward.

Tom Ewing, an intellectual property lawyer who studies patent infringement cases, says, assuming Oasis was asking for settlements in rough proportion to the size of the company being targeted, a pretty good estimate of its total take "might be in excess of $100 million..."

Because of documents filed with the court, we now know that Intellectual Ventures, owned by Nathan Myhrvold, gets 90 percent of Oasis Research's net profit. Intellectual Ventures sold Crawford's patents to Oasis on this condition.

It's a fascinating story and illustrates just how out of control the patent system has become.


VentureBeat: Protect Yourself From An Online PR Disaster

Venturebeat logo

A few months back, I wrote a guest editorial over at VentureBeat called "How to Protect Yourself from a Twitter-Fueled PR Disaster".  Somehow, I forgot to do a cross-post.  Here's an excerpt:

Facebook, Twitter, YouTube, Yammer, Flickr have changed the world. What started out as a way to hunt down old high school pals has revolutionized how we communicate with friends, family, and businesses. On the business side, a few retweets, and a single offhand comment can spark a PR disaster. Papa John’s realized this when a photo of a racist comment on a receipt blew up on Twitter within minutes. Both Verizon and Bank of America had to scrap newly proposed user fees after customers waged a full-blown protest via social media. And we all know how Netflix got an earful when it sprung a new pricing structure on its customers.

The point is, in the customer service realm, where customers’ interactions with a company are now incredibly public and visible, social media has created a newly empowered “collective” customer. Customers, not companies, are controlling how customer service policies are created and implemented...

Perhaps the best way for corporations to leverage social media is to regularly solicit customer feedback through online surveys and customer satisfaction ratings. These and related inexpensive tools give you invaluable information about customer perceptions and needs. Armed with this, you can create the best solutions and staff customer service teams at times when they’re needed the most.

You can read the full article at VentureBeat

 


SambaCloud and Big Content

Sambacloud_app

Another hot new startup that has recently come out of stealth mode is SambaCloud.  The founders Ian Howells and Razmik Abnous bring many years of content management experience from companies like Documentum and, in the open source space, Alfresco.  

When I first heard about SambaCloud, I was a bit skeptical.  But as soon as I saw the demo, it was quite clear that SambaCloud does something that no one else does.  While there are lots of content management software companies and quite a few cloud storage companies, SambaCloud brings a much needed fresh perspective on some age-old problems that vex most organizations.  Namely, how do you get people sharing the right information?

SambaCloud enables you to easily set up different channels of content so that you can monitor, share and collaborate with others. These channels can be built from different types of content ranging from external newsfeeds to internal documents and presentations.  That may sound like a minor detail, but it's a huge breakthrough in transforming content management from something that sounds as fun as a tax audit into something that's as easy to use as Facebook or FlipBoard.  

Despite the fact that SambaCloud is a relatively young company, they've also come out of the gate with not only an easy-to-use Web application, but also mobile versions for iPhone and iPad. Initially, SambaCloud is targeting sales & marketing teams, but ultimately I think there are probably dozens if not hundreds of potential use cases. 


Tok.tv's World Series Pitch

Tok tv

San Francisco and Silicon Valley have become obsessed with the World Series.  After all, it's not that often your team gets to play a second world series in three years.  And for some, there's a unique combination of tech and sports resulting in brilliant innovation.  One such innovation comes in the form of Tok.tv, the brainchild of open source guru Fabrizio Capobianco.  Fabrizio was the founder of Funambol, an open source cloud sync technology that has become the de facto choice for many carriers.  He's also a huge San Francisco Giants fan, perhaps the biggest Italian baseball fan ever.

Right now, Tok.tv is an iPad application that enables baseball fans to talk and cheer in real time with their friends.  But Tok.tv has much more potential than just baseball.  Why not football?  World cup?  Tennis?  Movies?  Reality shows?  I'm sure Fabrizio has big plans...

Meanwhile, Tok.tv is getting great news coverage for its unique "second screen" play for baseball fans.  So come cheer the San Francisco giants with your friends by using Tok.tv's iPad app.