Thursday, October 06, 2005

Painful Entrepreneurial Lessons Learned

Don Dodge works for Microsoft. His job is to "help VC's and start-ups be successful with Microsoft." He certainly has the proper pedigree having previously worked for Forte Software, AltaVista, Napster, Bowstreet, and Groove Networks.

Although we don't know each other personally, Don and I do share a tiny amount of common professional DNA in that we both, once upon a time, worked for DEC (Digital Equipment Corp) in the database arena. (Also, I've been told, Microsoft employees are encouraged to visit my ITscout web site as part of their new hire orientation.)

Don's blog, labeled "Don Dodge on The Next Big Thing," recently included a posting entitled "Napster - the inside story and lessons for entrepreneurs." At the end of his commentary he includes a really nice list of lessons learned. Below are edited excerpts:
  • Never get too far ahead of the market. Creating new markets, new business models, and value propositions is very difficult and takes lots of time and money. Pioneers are usually unsuccessful, the fast followers make most of the money.

  • Understand who your customer is, what problem you solve, and how much they are willing to pay for it.

  • Never start a business focused on solving a big company's problem. They don'’t know they have a problem...and they are probably right. That is how they got to be so big in the first place.

  • Test your assumptions before spending lots of money. Interview your potential customers. Understand what their top 10 problems are. Don't try to convince them that you have a solution to a problem they don'’t know they have.
As an entrepreneur, I too, unfortunately, can readily identify with what Don has written. My company, Flashmap Systems, was a startup exactly five years ago this month. We shipped our flagship product less than one year later, ten days after 9/11. The good news is we're profitable today and we have existing customers that read like a Who's Who of corporate America. The bad news is how arduous the journey has been.

Our pioneering approach to helping enterprises harness Technology Architecture and IT standards has unquestionably involved the creation of new markets, and this has taken much more time and effort than I would ever have imagined back in October 2000. We also thought we knew who our customers were -- Enterprise Architects. But, we completely misgauged how little money or influence most real-world enterprise architects actually have.

Perhaps the biggest challenge my young company has faced corresponds to the third item on Don's list of lessons learned. Undeniably, we started our business by focusing on solving a problem big companies have -- the need to improve the efficiency of established IT investments. I assumed it would be intuitively obvious to large businesses that they'd be interested in cutting their technology portfolio costs between 10 and 25 percent by consolidating, standardizing, and simplifying. As such, I committed the major faux pas of not surveying potential customers, as Don suggests. I can certainly attest that it's very difficult to convince potential customers that "we have a solution to a problem they don't know they have." Still, I'm just continually amazed that business people don't realize how much money is wasted by owning redundant products that deliver overlapping functionality. Total Cost of Ownership (TCO) is most definitely not a well understood concept in today's business environment.

Recently, Gartner has reported results from their annual IT Staffing and Spending survey that indicates U.S.-based organizations plan to increase their IT budgets next year. Still, the results of the survey also suggest that "organizations plan only small increases in their IT staff budgets, and they plan reductions in their budgets for IT contractors." The largest planned increases are in software budgets. You'd think someday, somehow, somewhere, managers would finally begin to realize the need to consolidate, the need to standardize, and the need to simplify. Maybe in the future Don Dodge will be able to write about ITscout, ITguide, and ITatlas as "The Next Big Thing!"


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