Emu Bob

Opportunities

This week finds me in London opening our UK office. It gave me the opportunity to read this priceless quote in the Financial Times from London mayoral candidate Boris Johnson:

There are no disasters, only opportunities. And, indeed, opportunities for fresh disasters.

This "Boris quote" (he has many apparently) was after being sacked from the Conservative front bench by Michael Howard in December 2004. Sounds like quite a character!

A quick scan of his home page also yielded this beauty:

Why should we cyclists be scraped to a paste by these blasted socialistic bendy-buses, so out of scale with the London streets that they block the traffic like beached whales?

Makes question time in the Australian parliament seem like a tea party!

Crossing the Pond

Geoffrey Moore's Crossing the Chasm examines how to bridge the gap between early adopters and main street buyers. In an interesting spin, Australian technology journalist Brad Howarth asks how much more challenging crossing the chasm is when there is 10,000 miles of ocean between point A and point B? Here are some of my thoughts on the opportunities and challenges for a technology company Crossing the Pond from Australia to the United States.

5 Challenges

• Sales & Marketing Management. Technology companies with a shipping product are typically investing twice on sales and marketing what they are on R&D. Sales and marketing investments are going to make or break a company and should be invested in time zones with the largest market opportunities. Given the magnitude and location of the investments, managing sales and marketing from Australia makes no sense whatsoever. Tap into the Australian government's excellent export market development grants and either move yourself or hire a great sales and marketing leader to head your US opps. Be very careful if the senior management think that you can run sales and marketing from Australia.
  
• Travel. Be prepared to loathe, and accept, travel. It is a bloody long way from Australia to the US anywhere and the only way to overcome it is to get yourself and your team used to long flights. Avoid the temptation not to travel… it hurts but it has to be done.
  
• Culture. A bi-hemispheric company has to worry about its culture much earlier than one packed into a single garage in Palo Alto. The culture of a company evolves and grows dynamically as a start-up builds, launches and evolves its products and services. But with a team divided by the Pacific it is important to make values and vision explicit and to keep it updated regularly (and travel, see above).
  
• Networking. There is an old school tie network in the US as much as there is anywhere. It can take some time to figure out how to leverage and tap into "networking" correctly. The real problem lies with too many general networking opportunities that can spin off lots of only marginally useful contacts and waste a lot of time. With a focused approach to business development I have seen a number of Australian companies come to the US and come home with major partnership agreements two weeks (and three trips) later.
  
• Skills Leverage. In a small technology company there are not enough specialists to go around and your staff end up wearing many hats. This might translate to a developer coming along on sales calls, staffing a booth at a tradeshow or going onsite to carry out professional services from time to time. A start-up in the US benefits from being able to tap into everyone's skills all of the time. An Australian company parachuting into the market faces obstacles in leveraging its talents. (Note: our team does its absolute best to overcome this through frequent travel, starting work early Australian time and leveraging a lot of phone calls and online meetings with customers… thank you)

5 Opportunities

• The World is Flatter. Online advertising, marketing and delivery of technology have opened up opportunities to start selling well before any physical overseas presence. In Ephox's case we were actually able to secure many early adopters and get real revenue traction through online marketing alone. Online collaboration tools have also made it easier to share screens, make and receive phone calls and co-ordinate activities with staff, customers and partners.
  
• World Class Technology & Talent. Australia has highly skilled technology talent where the universities, government research and thriving IT services community provide many good people who can be tapped to build great products. Australia's advanced economy also means that many of the problems that entrepreneurs set out to solve in Australia are equally present in North American and Europe.
  
• Willingness to Partner. As Australians we are used to partnering with gorillas to get what we want (e.g. the Iraq war and the free trade agreement!). Many start-ups in the US underestimate the challenges of going it alone and have under-developed or nonexistent partnering strategies. Embracing partnering earlier and more effectively than US-based competitors can give a company an edge.
  
• Government Support. Export market development grants, the R&D Tax concession and R&D Start grants have provided millions of dollars of funding to many entrepreneurs I see crossing the pond. At Ephox, we have also benefited from starting in a federally funded incubator and tapped into some excellent Gartner et al research free of charge at the Research & Information Service from the Queensland Government.
  
• Healthy Skepticism. Silicon Valley fever it might be called… when you hear time and time again of acquaintances or neighbors hitting it big in the latest wave (Twitter! Facebook! YouTube! Skype!). The 1,000x returns just aren't part of the technology/business psyche and Australians seem much more interested in companies that are built to last, not to flip. A healthy dose of Australian skepticism can go a long way if you are still willing to take the big bets.

Australia the Brand

Occasionally I will meet an Australian who is under the impression that Australia, as a source of technology companies, is perceived very highly. As far as I can tell Australia as a source of technology is not perceived as an overtly positive or negative place. It's just "ok". I do know that many other countries have much stronger expat communities (e.g. TiE or AAMA) and reputations (e.g. Israel). Even with 99% of Americans loving Australia and its people make sure you bring something more than your accent and stories of crocodile wrestling. The tech industry is very very international – accept nothing less than being the best in the world.

Enterprise 2.0 – Gorillas vs. Best of Breed

Forrester Research polled 120 CIOs in March about Web 2.0… and there are some interesting stats on what CIOs prefer:

• 97 percent, said they were familiar with Web 2.0
• 61 percent of respondents indicated that they would prefer both a suite solution and a large incumbent vendor
• Nearly 75 percent said they would be more interested in Web 2.0 technologies if they were offered as a suite
• 93 percent of the CIOs survey using six Web 2.0 technologies would rather get the products from such vendors as Microsoft, IBM or Oracle than from smaller, pure-play vendors, such as Socialtext, NewsGator or MindTouch
• Few CIOs view Web 2.0 as a passing fad, and, as a result, most are not ready to hitch their wagon to a small vendor that may not exist in three to five years -- even if it might have better technology

Of course, CIOs aren't the only ones buying into Enterprise 2.0. Much of the adoption is being driven by end users.

As the market grows no doubt a large share will be captured by the gorillas but the changing nature of technology acquisition and adoption will no doubt leave plenty of room for best of breed players. I think best of breed players can sometimes bring more than just different/better technology… their focus and customer orientation (e.g. Atlassian's legendary service) can be just what customers with specific business problems to solve are looking for.

Selling to End Users

At Ephox, we often find most of our success when end users get involved in championing our products at their organisation. Of course, being an authoring tool it is rather fortunate that our software is highly focused on end user productivity and what we offer really resonates with them. Whilst not always the case, occasionally IT departments/software architects push back on looking at us because they are very busy firefighting elsewhere and quite frankly would rather be knocking off early (say before 10pm?) rather than having yet another technology to deal with. It really wouldn't matter HOW easy we made it for them, they simply are too busy to care. We get the best results when the IT departments are being run ragged by angry end users … then they really have pain to solve.

This experience appears to be consistent with a wider trend in the software of end users driving decisions. I have heard it variously referred to "bottoms up technology diffusion", the "consumerization of IT" and a key element of "Enterprise 2.0".

To get a fix on how big a trend Software 2007's survey came to the conclusion that:

When asked how this spend would be controlled in the future, 40 percent responded that software spending would be more business-unit (BU) controlled in 2 years versus only 28 percent of respondents predicting further centralization.

So it is definitely a trend, although the IT guys are still clearly in the picture. To make the most of this trend Peter Yared, CTO of ActiveGrid, has some interesting tips in selling to users:

• Self-Service Product
• Downloads, Not Meetings
• Sell to Users
• Feed the Channel

Peter's summary is to "Make software that is sexy with major features (that) are easy to use, get people to come and check it out, and then tweak it to the point where people want to pay for it. Software today is decidedly product-focused rather than sales-focused. This is great, since building excellent product quickly is the competitive advantage of a startup."

I would agree that the more you can shift your investment to the out-of-box experience (ease of use, installation and integration) the more likely you will be to get a new product launch off the ground and on its way to sizable revenues. That is not to say that growing a software company still does not require a large investment in sales and marketing… even Red Hat invests close to 50% of their gross profit in sales and marketing and NetSuite has consumed some $100M in venture capital to get to its IPO. But what it does do is focus where you spend your S&M $ … to an easy to use web site, community building, advertising and straightforward copy rather than in costly onsite visits. It also shifts the emphasis of where you put your R&D $…. to usability, installation and quality rather than the rocket science stuff that only a small percentage of people will use.

AgentArts Gets Fast

Well the other way around actually. Norwegian enterprise search company FAST has acquired Australian technology company AgentArts.

I remember meeting Andrew Coates and a few of his team members on the Austrade High Tech Tour of Silicon Valley in 2001. At the time, there were just 2 or 3 of them in the US working out of a loft in San Francisco. They had an interesting set up of a webcam and screen in both their San Francisco and Melbourne offices that broadcast continuously… to build a sense of collaboration between their teams. Not a bad idea that we should probably try.

So well done guys for hopping the pond, surviving the tech wreck and being acquired by what appears to be a great company.

Update on Product Managers

Back in April a few of us at Ephox posted about some changes down under in our R&D team. I held a job interview today where the candidate mentioned she read all of our blogs and asked me how the changes were coming along with veiled concern that the word restructuring elicits from people seeking a happy, stable place to work. To reassure her and any future candidates I definitely think an update is in order.

In keeping with the continuous improvement mantra that permeates Ephox we have we have left few of the original changes in place and ended up with something a little different than we first imagined. Instead of going with the "3 Product Manager" split that we originally envisioned where they would focus on a particular product area we have gravitated more to the roles in which everyone can contribute the most. Instead of segmenting by product we have instead segmented by talent/skill and passion.

By mixing up the team's roles I had originally hoped to fire up some product innovation (i.e. new products) in addition to the terrific process innovation (i.e. Extreme Programming) that we have adopted over the past 12-18 months. The net result is that instead of looking after EditLive! product management Rob has moved to some very cool server-side development of a product we are codenaming "E2". Damien, who was supposed to be the E2 Product Manager, is now sticking with more of a traditional product management role across all of our products. And Adrian is morphing into a CTO/Evangelist role which I think suits him very well given his prolific ability to churn out both code and blog posts.

The new structure seems to be meeting our original goal of getting product innovation fired up. My only concern – which is really independent of the various roles and more to do with how busy everyone is – is that we can do this whilst keeping up the rage on the XP work that Doug and Brett have been a big proponents of (yes, I am listening).