John Reynolds writes about the curious case of the disappearing BPM Programmer:

So where does this distinction between Case and Process leave the BPM Programmer?  Are BPM skills irrelevant in the new world of Dynamic Case Management and Social Process?  Are the BPM Programmer’s skills doomed for irrelevance every few years just as the skills of System Programmers (C begat C++ begat Java begat Ruby etc.)?

Will BPM Programmers disappear into the mists of interesting but irrelevant oddities of the past?

The question arises simply because a small but vocal chorus has been calling BPM a subset of Case Management, or predicting the end is near for BPM. Does that mean BPM skills and jobs are thus in decline?

Not to worry.  BPM was always the tool not the goal.  The goal is managing business better.  As the Navy Seals would say, equip the man, don’t man the equipment. BPM is a means to an end.

Processes aren’t going away anytime soon.  Besides, as John says: “Your job has always been about writing software the Manage Business. Process is at the core of Business Management, but you always had to deal with Objects, Rules, and Events.”

Well said.  BPM is here to stay.  It didn’t burn brightly and fade away, it is a slower, steadier progression.  As you would expect it to be, if you understand what it is.  And the momentum is still building, rather than fading.  The name may change, the tools may evolve, but the goal of running businesses better isn’t going away.

There’s a theme about management that has cropped up over the years regarding owning the outcomes, rather than the excuses (Steve Jobs’ definition of the Vice President versus the janitor comes to mind).

Ben Horowitz (of Andreesen Horowitz) captures this perfectly in his “Nobody Cares” post.  It is both great advice, a great reminder of something you should already know if you run a startup, and an admonishment that you need to be tough if you’re going to go down that road:

That might be the best CEO advice ever. Because, you see, nobody cares. When things go wrong in your company, nobody cares. The press doesn’t care, your investors don’t care, your board doesn’t care, your employees don’t care, even your mama doesn’t care. Nobody cares.

And they are right not to care. A great reason for failing won’t preserve one dollar for your investors, won’t save one employee’s job, or get you one new customer. It especially won’t make you feel one bit better when you shut down your company and declare bankruptcy.

This is so true. As consultants we see this all the time – customers don’t care about our excuses, they just want their projects and processes delivered as promised.  Sometimes there are really important mitigating circumstances but we’ve got to help them climb over those obstacles.

And at the end of the day – nobody cares about the excuses.  You have to make payroll, pay bonuses, grow your firm, and make it happen.  And if you don’t, no one will care about the excuses.

SXSWi has one of the more interesting content picking processes I’ve seen for a conference.  It has turned into a well-oiled machine, and it is, in my opinion, responsible for allowing SXSWi to reinvent and remain relevant (even more relevant) over time.

Recently, topics for SXSWi-2012 were released.  These are the panels and sessions that were voted on by attendees or prospective attendees (although a vote isn’t the only input into the panel picking system).

If this year is like most, some additional featured speakers or top-down content will be added, in addition to a few late-selection panels to reflect any late-breaking news or changes in the world around us.

Topic areas:

• Keynote Presentations at the Austin Convention Center
• Featured Sessions (Austin Convention Center)
• Better Tomorrow (Austin Convention Center) – a focus on economy and social issues
• Book Readings (Austin Convention Center)
• Branding and Marketing (Stephen F Austin hotel – which was also the site of the BP3 all-hands meeting!)
• Convergence (Austin Convention Center)
• Design and Development (Austin Convention Center)
• Emerging (Hilton Austin – Downtown)
• Future of Work (Courtyard Marriott)
• Government and Global Issues (AT&T Conference Center)
• Health and Education (AT&T Conference Center)
• Journalism and Online Content (Sheraton Austin)
• Latin America (Hilton Garden Inn)
• Lifestyles and Sports (Campus TBA)
• ScreenBurn and Gaming (Campus TBA)
• Social Networks (Omni – Downtown)
• Startup Village (Hilton Austin – Downtown)
• Workshops (Radisson – Town Lake)

The biggest change I notice : moving the startup events to the Hilton (which is like ground-zero, right across the street from the Austin Convention Center), rather than having them at the AT&T Conference Center, as they did last year.  Last year’s startup sessions were really high quality – and the AT&T Conference Center at UT is a fantastic facility for an event like that – but it is removed from the core action at SXSW.  My guess is that there was an effort to bring this core area back to the center of the activity at SXSWi.  The only downside is it will be much harder to park this year!

To anyone trying to organize a conference, I submit to you that you just haven’t seen crazy til you’ve been to SXSWi.  The number of people and the logistics involved in feeding them, moving them, parking them, seating them, and providing wifi and 3g cell connectivity for their 3 connected devices is an incredible challenge.  And it is impressive how well it all works.

The Startup Village has its own set of articles on SXSW’s website.  This promises to be a great conference.  The number of topics is overwhelming, but the organization into campuses and topic areas at least helps focus attention on the topics you care about.

As I was about to post this, I ran across Austin Startup’s coverage of the same subject.  GREAT tidbits they pulled out from the schedule:

Stephen Wolfram on Computation and Its Impact on the Future. Any chance to hear him speak, I will take it.

Definitely. I look at this session as being potentially as promising as the Craig Venter session from the 2011 conference.  They also pointed out panels from Dachis Group, RecycleMatch, WP Engine, and Foreca.st (local startups).  Josh Baer will reprise a topic he owns: 3 Secrets to a Killer Elevator Pitch.  Even this far in advance it looks like a very strong lineup.

Well, if Sandy doesn’t have the best coverage of the conference, it is by far the best coverage of the bloggers I follow.

First up:  IBM Case Manager, IBM Content Manager, and IBM BPM -

 

• Extend IBM BPM processes with content, using document and list widgets that can be integrated in a BPM application. This does not include content event processes, e.g., spawning a specific process when a document event such as check-in occurs, so is no different than integrating FileNet content into any BPMS.
• Extend IBM BPM Advanced (i.e., WPS) processes with content through a WebSphere CMIS adapter into the content repository. Ditto re: any BPMS (or other system) that supports CMIS being able to integrate with FileNet content.
• Invoke an IBM BPM Advanced process from an ICM case task. Assuming that this is via a web service call (since WPS allows processes to be exposed as web services), not specifically an IBM-to-IBM integration.

Next, up, transformation in the era of Big Data, perhaps a business case for “Watson”?

Some of IBM’s future of big data analytics is Watson, and Manoj Saxena presented on how Watson is being applied to healthcare – being demonstrated at IOD – as well as future applications in financial services and other industries. In healthcare, consider that medical information is doubling every five years, and about 20% of diagnoses in the US have some sort of preventable error. Using Watson as a diagnostic tool puts all healthcare information into the mix, not just what your doctor has learned (and remembers). Watson understands human speech, including puns, metaphors and other colloquial speech; it generates hypotheses based on the information that it absorbs; then it understands and learns from how the system is used. A medical diagnosis, then, can include information about symptoms and diseases, patient healthcare and treatment history, family healthcare history, and even patient lifestyle and travel choices to detect those nasty tropical bugs that your North American doctor is unlikely to know about. Watson’s not going to replace your doctor, but provide decision support during diagnosis and treatment.

And third, what’s new in IBM ECM products :

There was a question about why BPM didn’t appear in the ECM portfolio diagram, and Clayton stated that “BPM is now considered part of Case Manager”. Unlike the BPM vendors who think of ACM as a part of BPM, I think that she’s right: BPM (that is, structured process management that you would do with IBM FileNet BPM) is a functionality within ACM, not the other way around.

I think the BPM referenced here is with respect to Filenet BPM, rather than “IBM BPM”, but this is one area where Sandy and I probably agree to disagree.  I think the race between BPM and ACM was essentially over before it started.  Managing a business is going to more likely be called “BPM” than “ACM” for one thing.  I think BPM is going to win the war of acronyms.  The go-to-market strategy is going to include “ACM” functionality in a BPM offering.  This isn’t some inside-scoop at IBM, this is just my judgment on the market in general.  I may be wrong, but the market will show that one way or the other in the next few years.  So far, to me, it looks like the BPM firms are winning the argument.

(Which isn’t to say that ACM proponents haven’t influenced BPM product direction – they have.  But my feeling all along is that it just wouldn’t be hard for BPM vendors to fast-follow ACM vendors, such as they are).

Finally, Sandy covered the IBM Filenet BPM updates:

The Process Engine (PE) was ported completely to a standard Java application, with some dramatic performance increases: 60% improvement in response time through the Java API, 70% (or more) reduction in CPU utilization, near-linear growth in CPU utilization for vertical scaling (i.e., more processes on a single server), and constant CPU utilization on horizontal scaling (e.g., twice as many processes on twice as many servers).

So… one danger I see for IBM in general in the BPM space – is focusing too much on speeds and feeds.  Not that these aren’t important. They are.  Especially when you have customers the size of IBM’s customers.  But they also need to solve real business problems and value propositions that aren’t driven by IT metrics.

It reminds me of a conversation we had with a customer once.

US:  So, what reports do you think we need to support the business’ needs? There aren’t really any business-facing reports defined yet.

THEM:  I think we have all the reports we need already.

US:  You do?  Which reports do you already have that the business uses?

THEM:  Well, the timing reports on webservice performance and user interface performance, for example.

US:  hmmmmmmm.  How about measuring vendor quality, vendor response time to RFPs, and pricing estimation to final-price accuracy?  Might tell you who your best vendors are or how much it is costing you to work with a vendor that isn’t fulfilling your business on time.

THEM:  Yeah, but the business isn’t asking for that.  They really want to know how fast the webservices and UIs are running.

Needless to say, we weren’t talking to the right person, and speeds and feeds were just not the right focus.  Faced with that situation, you just have to back up and regroup and find the right focal point closer to a real business problem.

Thanks for the great coverage Sandy -

Well, this was quite a surprise for me – I didn’t expect Sam to step down from the CEO spot at IBM just yet.  But perhaps one of the signs of a strong company is not waiting for signs of trouble to initiate the transition from one generation of management to the next- but simply moving forward when the time is right.

IBM’s official announcement:

Armonk, NY, October 25, 2011 – The IBM board of directors has elected Virginia M. Rometty president and chief executive officer of the company, effective January 1, 2012. She was also elected a member of the board of directors, effective at that time. Ms. Rometty is currently IBM senior vice president and group executive for sales, marketing and strategy. She succeeds Samuel J. Palmisano, who currently is IBM chairman, president and chief executive officer. Mr. Palmisano will remain chairman of the board.

“Ginni Rometty has successfully led several of IBM’s most important businesses over the past decade—from the formation of IBM Global Business Services to the build-out of our Growth Markets Unit,” Mr. Palmisano said. “But she is more than a superb operational executive. With every leadership role, she has strengthened our ability to integrate IBM’s capabilities for our clients. She has spurred us to keep pace with the needs and aspirations of our clients by deepening our expertise and industry knowledge. Ginni’s long-term strategic thinking and client focus are seen in our growth initiatives, from cloud computing and analytics to the commercialization of Watson. She brings to the role of CEO a unique combination of vision, client focus, unrelenting drive, and passion for IBMers and the company’s future. I know the board agrees with me that Ginni is the ideal CEO to lead IBM into its second century.”

I’m also struck by the fact that Rometty arrived at IBM in 1981.  We’re talking about serious longevity at Big Blue.  Under Sam’s watch we’ve seen IBM really go through a makeover of its business – it will be interesting to see if Rometty continues this arc or changes direction over the course of her tenure.  Regardless, I don’t expect IBM to stand still.

The New York Times has coverage of the promotion as well:

The directors’ choice of Ms. Rometty, who managed a crucial merger as well as sales in fast-growing new markets, ends a competition that has been under way for years. The leading candidates were always from within the company’s executive ranks.

A leading rival to succeed Mr. Palmisano, analysts say, was Steven A. Mills, the senior vice president who led I.B.M.’s highly profitable and growing software division. But his age, analysts note, was probably an obstacle. Mr. Mills has just turned 60, the traditional retirement age for I.B.M. chief executives.

Mr. Palmisano, in an interview Tuesday, singled out Mr. Mills for praise, saying “he’s done a phenomenal job.”

Given the traditional retirement age of IBM chief executives I guess I shouldn’t have been surprised by Sam stepping down, but it just wasn’t on my radar.  Steve Mills has been a phenomenal leader in the software space at IBM and just more evidence of the deep talent at the top of IBM executive ranks.

Congratulations to IBM and Virgina Rometty!

MWD has a great series of posts entitled “Calling BS on…”

In a recent installment, the topic was calling BS on “Our technology makes your business more agile.”  Of course, it is silly to think that any technology by itself can make your business more agile:

Making a business – or at least, the parts of it that make sense – more agile requires you to review and be prepared to change people’s incentives, business measurement systems, skills and training plans, information sharing and collaboration practices, operating models and procedures, and management culture – and probably more. Even if we just confine ourselves to the technology domain then increasing business agility is likely to require you to review architecture, governance, portfolio and change management practices. If you don’t at least think about this stuff, then the most you might be able to do is increase potential technology flexibility.

It’s nice to see some of the stereotypical pitches blown up in this series…!

As Neil says:

The key realisation here is that agility is something that – if you’re serious about it – has to be sustainable and sustained for the long haul. It’s not something you can just worry about for 6 months and then forget about.

Exactly.  Which is why it is so frustrating to hear pundits or analysts say that something like “continuous process improvement” is a pipe dream.  What they’re saying is that companies should throw in the towel and just stop trying to keep up with a changing world. That’s madness for a corporation.  If a corporation wants to be agile, it takes constant attention.  This isn’t a philosophical point, it’s just reality.

Imagine my surprise to read an article referencing Gen X without falling back on the tired cliches of calling GenX lazy and stupid, in not so many words:

Gen-X has just 46 million members, but they continue to lead the way and set the standards in the startup world.  [...]

Gen-X is rife with entrepreneurs. In fact, they will likely make or break our country’s ability to transition to the new social Internet society. They have drive and independence. And they have a lot they can teach both the boomers and Gen-Y.

I’m not big on the generational stereotype – and this article references some of the old ones, but phrased more politely – individualistic, technologically adept, flexible, valuing work/life balance.  I don’t see that as differentiated from the previous generation, but maybe differentiated from the stereotypes of the previous generation.  At any rate, “GenX” is apparently in the sweet spot (from an age point of view) for starting companies and running companies.  Let’s hope they/we do a good job of it.

[Vizzini has just cut the rope The Dread Pirate Roberts is climbing up]
Vizzini: HE DIDN’T FALL? INCONCEIVABLE.
Inigo Montoya: You keep using that word. I do not think it means what you think it means.

- from The Princess Bride

Normally being an “expert” – one who has acquired expertise – is a good thing.  Generally I recommend that people strive to develop deep expertise in a few areas of interest.  Become an expert.

But there are times when it works against you – Jason Cohen has some great anecdotes in a blog post about when being an “expert” can be harmful.  These cautionary tales show how people who have expertise might not take full advantage of it, by assuming their expertise leads to the answer – instead of assuming their expertise would give them avenues for learning…

As BPM practitioners we have to remain open to the idea that we don’t know what we think we know… I think we’ve all both participated in this, and seen it happen to others:

The worst is when you’re an “expert” because then you’re even less likely to challenge your assumptions.

As an “expert” you’ve devised your own laws about what makes your market different from other markets, and what makes your company unique. Even with prior experience, this knowledge based largely on feeling, not fact.

In BPM in particular, we have to set aside what our “expert” voice is telling us inside our head.  We have to listen to what we’re hearing from our customers.  Similarly, we need to help customers set aside their assumptions about what software will do for them, about what their real processes are, just to name two topics. We’re on a journey together with our customers and that requires learning and listening.

Sometimes being an expert conflicts with listening – but only if you think being an expert means you have all the answers.

Great read from the founders of Yipit, on the long hard road to become and overnight success:

So, it’s now February of 2010, over two and half years since we started, and we have yet another idea: build an aggregator for the early but quickly growing daily deal industry. The idea was sound, timely and right up our alley since we had been doing local deal aggregation for the last 9 months.

And, in just three days, everything changed.

We launched the new idea in a three-day scramble, got some initial press, users loved it, and four months later raised $1 million from amazing investors. A year after that, we’ve raised $6 million, made real revenue, attracted hundreds of thousands of users, and recruited amazing people to join our team (we’re hiring! join us!). And, best of all, we’re just getting started.

I really liked the raw honesty of this post.  I just quoted the happy part – 2.5 years in.  But there’s also this part:

“So, what do you do?”

Ugh. I hated that question.

The truth was that we were trying to start a new venture but we hadn’t really made any progress.

Anyone with a struggling startup can relate to this.  I’ve felt this same awkwardness explaining what we do – not so much because we’re struggling but because BPM isn’t exactly a buzzword for the masses or a great conversation starter at social events.  But I’d much rather be telling people about what we do at BP3 as a BPM services firm than, say, a dating site (not that there’s anything wrong with that!).

I’ve noticed when I explain how we started BP3, people have assumed that we only left Lombardi at the moment IBM acquired the company.  Not so.  We started BP3 about 2.5, almost 3 years, before IBM acquired Lombardi.  An investor would probably call that being “early”.  It wasn’t about the acquisition or potential acquisition.  It was about starting a company that could be the best BPM services firm we could be.

That 2-3 years was great formative time for us to build our reputation, our culture, our team.  It takes a long time to build the foundations for success – especially when you’re bootstrapping – but people don’t always remember how long it takes.  All of a sudden, it looks like success and they wonder how it materialized out of the blue.  But we’re in it for the long run, and we always were.

In closing, congratuations to Yipit on their “overnight” success!

We’re well-overdue to comment on the Forrester BPF 2011 event, partly because we weren’t in attendance this year.  To make up for lost time, we’re linking here to some of the best coverage of the event that we saw in blogging.

First, two articles by Anne Stuart on ebizQ.  The first post, early returns, focuses on this year’s theme for the event, “Customer Engagement”:

“What was good enough before is not good enough today,” Derek Miers, a Forrester principal analyst, warned in one of the event’s opening sessions. And, he added, customer-engagement approaches that work right now won’t be sufficient for long; they’ll need to continue evolving to meet changing customer needs. “We almost have to rebuild the ship while we’re at sea,” he noted.

This sounds like a riff on continuous process improvement – you don’t “arrive at the destination” so much as always take a step back and see how you can improve and then refocus your efforts.  The landscape is changing, so the same goals may not stay relevant over time.

Next up was a post of shorthand notes from a session about getting started with DCM.

Sandy Kemsley once again takes the honors for Most Complete Coverage of the event, with no less than 5 posts tagged accordingly.  In one post, “Empowering the Customer Through Process Improvement and BPM“, she notes:

They [Nokia Siemens Networks] are a big SAP customer, but find that they use Appian BPM to fill the gaps that SAP just doesn’t do without major customization, and to bridge between different systems. They’ve implemented BPM in five major business areas with more than 22,000 users. By reusing some components but adapting to each particular business area, they’re able to roll out new systems in a matter of months. They are pushing into social capabilities to facilitate faster decision-making, and mobile platforms to better support remote users.

Wait, I thought SAP = BPM? Well, layering process on top of SAP is a common BPM deployment story. In another summary, this particular phrasing rang true for me:

Looking at processes in customer experience, we need to use Lean principles to eliminate waste from the customer viewpoint, not just the company viewpoint. We need to understand the full customer journey and all of the touchpoints that need to be managed, and ensure that the end-to-end customer processes are properly defined and orchestrated. This can lead to businesses reorganizing to eliminate business functional silos in favor of process-focused organizational models.

I think the concept of eliminating waste from the customer experience as well as from the company viewpoint is critical.  All too often ill-thought process improvement exercises just “squeeze the balloon”  – moving a burden from one part of the process to another, from one group to another.  If the group you’re moving the process burden to is your customer, look out…

We hope to get to BPF12 next year – for some reason this one flew below the radar all year and sneaked up on us while we were busy making BPM projects happen!

Neil Ward-Dutton is following up on previous work he’s done looking at BPM practices at big firms. We’ll start with this, wherein Neil tells us Capgemini are lining up their ducks:

Top Line Initiatives within Capgemini are identified where a need is seen for an internal ‘accelerator’ (my word) that can place the company to play in high-growth market sectors – and furthermore, where the potential is seen for the company to grow at twice the overall market growth rate. In line with BPM having been identified as a Top Line Intiative, Capgemini is looking to grow its BPM project delivery business 40% per year for the next 4-5 years.

Well, this is both what is right and wrong about the big consulting firms.  What’s right: they’ve realized BPM is a growing market opportunity and worth investing in.

What’s wrong:  that’s the only motivation behind these companies getting into BPM.  There’s no passion for business improvement, process improvement, or business process management.  There’s no raison d’être.

But there are a few other positive notes here to pick out:

The company has realised that the traditional body-shopping approach doesn’t work; and it’s also realised that trying to push a significant proportion of project work offshore is also going to be difficult – particularly in the early stages of engagement with a customer. Rather, it aims to create small project teams of between 6 and 12 consultants, working onsite with customers and getting business and technology representatives from the customer’s side collaborating with them as much as possible. It’s aiming to structure projects to deliver results in 3-6 months, and its goal is to build relationships with clients so that it can set up sequences of such projects that overall create engagements that last 2-3 years.

It is encouraging to hear that some of the big consulting firms are finally coming to grips with this – the project work for most BPM projects needs to be local.  Now if only customers will come to the same conclusions…

What Capgemini sees as small teams (6-12) would represent large BPM teams if they’re only focused on the BPM parts of the business (and not supporting aspects, e.g. technology integrations, etc.).  CapGemini is focused on the right time-frames:  3-6 months for results. The “2-3 year’s” for overall engagements however- when you’re a smaller firm like BP3 that longer term relationship has to be earned, we don’t go in assuming it will be there.  We execute the project, and try to acquit ourselves well enough that if there are additional projects we’ll be invited into planning discussions – or better yet, invited to help funnel additional project ideas into funded projects.

Great read on Capgemini – and instructive for other companies looking at BPM services…

Fabienne: Whose motorcycle is this?
Butch: It’s a chopper, baby.
Fabienne: Whose chopper is this?
Butch: It’s Zed’s.
Fabienne: Who’s Zed?
Butch: Zed’s dead, baby. Zed’s dead.

- Pulp Fiction

There have been raft loads of articles and blogs written about “Millenials” over the last few years (not to mention Generations X and Y).  Chris Taylor has decided to take his shot, on BPM for Real-  “Does Generation Z have a ’2-second advantage’”?

What happens when a whole generation that has lived their entire lives with the ability to feed information to themselves (and at a time and format of their choosing) becomes the dominant group in the workforce?

My bias against these generational stereotypes is well recorded, but let’s review this one.  I expect predecessors to Generation X wondered what would happen when kids showed up at work who grew up their whole lives with a computer at home.  Of course, only a minority of kids at that point – but still more than in any previous generation.  Maybe it is because I was one of those lucky kids that I’m not particularly concerned about the changes this will effect on our society or workplace.

Chris Taylor explains:

I recently read The Two-Second Advantage, a Malcolm Gladwell-like book about how we learn and build mental models that predict what will happen next based on experience and data that arrives so quickly it would overwhelm–if not for our learned ability to work through it. Most of Generation Z has been living in a state of information overload longer than any human beings before them, and the result should be a capability to handle a complex world even better than we do. They should have more complete mental models for the workings of the world due to their ability to know whatever they choose, whenever they want. If you buy into the ideas of this book, they are likely developing a “two-second advantage” that should give them a leg up on the older generations.

Perhaps the new generation will be better equipped than the previous.  However, the world will change fast enough to make them feel as ill-equipped for the next transition as many of of those writing about Generation Z appear to feel now.  By objective measures, the rate of change appears to be increasing.

But the way information-technology-adept people deal with the world is not by addressing its complexity, typically.  It is by simplifying it.  Rather than having more complete models, they technologically adept will have meta-models that don’t require completeness.  We just had the Austin City Limits Music Festival here.  In the complete model world, I’d know pretty much all the acts performing, and that I was interested in, and on which of 8 stages they’re playing, and at what time.  I’d do my research before the concert and figure it all out in advance by sampling songs by various artists that are performing.

In the simplified world, as I’m walking to the concert I download an iPhone App that tells me what bands  are playing on what stages at what times.  I can quickly browse the bands and see if any of them appeal.  I can group-text my friends to find out what they’re listening to (more than one stage is active at the same time) – and that’s built in to the app if I don’t already use a group-texting application.  You can guess which of these two approaches describes my ACL Festival experience…

Think how “getting directions” has changed since GPS and maps have become so ubiquitous on cell phones.  You don’t really need directions, you just need a destination.  The only directions someone needs to give you are the little bits that never show up in a navigation system or map: “don’t turn in the first drive, use the second driveway”.

So the software and hardware is delivering the results of increasingly complex interactions with other systems.  Let’s face it, my iPhone computing directions to a destination using maps and GPS is much more complicated from a systems view, than someone scribbling directions on a piece of paper.  But the end-result to the user is actually simpler than the old way of doing things. I think that’s actually the metaphor to use going forward. The touch interfaces today give even infants a chance to interact – because the cause-and-effect is more clear.  So the interaction isn’t just the tactile (as it might be when they play with a physical keyboard), it is direct manipulation – something their brains are already wired to learn from.  The systems of the future (software and hardware) are likely to appeal more directly to the way our brains already work – and thus feel more natural to us, even as they get more complicated in principle, behind the scenes.

It isn’t really an issue of generational advantage- if you buy into Malcolm Gladwell’s thinking on practice – it takes about 10,000 hours to become an expert at something.  Any one, of any age, can become an expert if they put in that 10,000 hours of purposeful use with technology.  There’s no reason to let your kid be the only one in the house with a “2 second advantage”.  I watched my own parents leapfrog technology shifts.  They both bought iPhones before most of my friends.  They still have trouble using Microsoft Windows.  But they use their iPhones and iPad, and Kindle, just fine.  Don’t let these generational tags define you, or your views of others.  Besides, the idea of “2 seconds” being a short time is already a sort of generational bias, isn’t it?  But it does roll off the tongue better than a 2 nanosecond advantage.

I’m sure several BPM firms could comment on this article by Jacob Ukelson, as so many of them have been acquired over the last few years!  Jacob gives “10″ rules for doing this successfully, and they’re all good.  In particular:

Rule 5 – Pretend you are a doctor and have taken the Hippocratic oath – first do no harm. Don’t change anything until you have learned the landscape of the new company. I know successful US executives have a penchant for action – but this is a case where early action can be disastrous. Understand that it will probably take a year until the company is more or less integrated. Maybe I should have put this rule first.

Companies that are acquisitive tend to have a very well-oiled acquisition process.  But companies that don’t do a lot of acquisitions likely put together a team on the spot to go make it happen.  I observed the Lombardi acquisition from the outside, but even so it was obvious that IBM has done a few acquisitions before – the terminology, the process, the time taken, were all indicative of years of practice.  When a company has jargon like “Bluewashing” you know they’ve integrated a few companies.  In the particular case of Lombardi, you have to give IBM credit for giving expression and voice to the “Lombardi” DNA they  acquired, and not just stamping it out with IBM-ness.

Momentum for Austin startups continues – with news that Austin startup Spredfast has raised a $12Million round of funding.  Rod Favaron, our Lombardi CEO, is running the company:

The company, which launched its service last year, received the funding from InterWest Partners of Menlo Park, Calif., and Austin Ventures. It has raised a total of $16 million.

Spredfast’s software lets clients manage campaigns and conversations on social media sites, including Facebook, Twitter, LinkedIn, YouTube and blogging platforms. Rather than going to each social site, Spredfast lets users publish and monitor social activity from one central platform.

[...]

“This is a big step for us, and we’re ready for the next stage of growth,” said CEO Rod Favaron, who joined the company in February. Favaron was previously CEO of Lombardi Software Inc., which was acquired in 2010 by IBM Corp. for an undisclosed price.

It is both a vote of confidence in Spredfast, and in Austin.  In 2010 it was common to read about the dearth of funding in Austin, but almost ever since then, we’ve been seeing more news about funding in Austin than I can remember since the ’90s.

In a followup to the previous post about recruiting talent to Austin, I think news like the above fundraising does more to recruit industry veterans to Austin than the recruiting trip they recently embarked on.  The coverage on MarketWatch wasn’t flattering:

In fact, I have to report that the Austin group’s recruiting night in San Francisco was something between a bust and a learning experience for the group.

It sounds like the two main events were, basically, a tough learning experience.  But hopefully the CEOs took advantage of the trip to prearrange a bunch of meetings with likely recruits rather than just depending on the group events.  Still, the target and the optics are all wrong.  Instead of getting a story about what a great place Austin is to work, and that people are coming here to work at our high tech companies, we got an article essentially about indifference in the Bay Area and how hard it is to find talent in Austin (which isn’t quite as dire as the article makes it out).

Imagine if these same CEOs had gone on a tour of Universities in California (or other states) to recruit talent?  To put the idea out there for college students to think about Austin as a destination.  University is the right place to strike.  The experienced industry veterans don’t need to go to a job fair to find companies in Austin – they’ll leverage their connections to find a job.  Its the college kids who need some help discovering Austin and Austin companies as a place to land.

The rest of the article focuses on “solutions”… and here’s one perhaps the 30 tech CEOs could get behind – an Austin-funded scholarship at several universities – giving us some press out there on the coasts.

Update:  This article on Austin startups finding funding via Angel List is probably relevant as well.  It just speaks to how the world of fundraising is changing, and there are fewer barriers than ever for Austin entrepreneurs:

Even for Austin startups that aren’t actively raising money, AngelList is becoming a way to get on the radar of potential investors, partners and customers.

Bill Boebel, an Austin entrepreneur and angel who has invested in 15 companies, calls it the “LinkedIn for startups.”

“It’s a startup’s resume,” he said. “Just like when you’re recruiting an employee and want to learn a little more about that person, it’s a great way to find out more about a company.”

And further, Ravikant says:

“Entrepreneurs inside Silicon Valley already have access to investors here, but it can be harder for a promising startup in Austin to break in,” he said.

“We have helped Austin startups get exposure to Silicon Valley and New York investors, and we also give those investors the lay of the land in Austin.”

Has there been a better time to invest in people and talent?

Jason Cohen, a local Austin startup hero, paints a bleak picture for consulting in “The unfortunate math behind consulting companies.”  The basic thesis is that it is really hard to ramp up from a single-person consultancy to a bigger company that makes money.  He’s right. It *is* hard.  But it is also harder to be an individual consultant than he lets on:

• Most independent consultants have a hard time relaxing when they’re “off”.  They get enough time on the bench or on vacation to live a good life, but when they’re on the bench they’re worried about when the next project starts. It makes it hard to truly enjoy time off.
• Lack of camaraderie.  There’s no team as an independent.  At first that is liberating, but later on it is frustrating for those of us that are more social.
• Lack of vision.  Being an independent consultant does lack a certain vision.  What are the goals? What are we building toward?  What gets me excited about getting up in the morning to do this work?  You know, besides paying the bills?
• Not to mention, your income is clearly a function of hours worked * billable rate.  Not everyone likes that.
• You have to do it all: sales, contracts, insurance, delivery of the project, project management, QA, etc.

Most happy independents that I know offload at least a couple of these things:

• Having a spouse with insurance.
• Having another company produce most of their leads/business, while they just focus on delivery.
• Paying other independent consultancies to do things like accounting, benefits, and other bits that aren’t in the sweet spot.

So this leads to the question:  should you hire?  Should you try to grow your consulting firm to a bigger practice?  Jason writes:

Consulting can be a great way to fund a startup or make a bunch of cash. It’s easy to start; Just pick an hourly rate and jump in.

But someday soon you’ll notice there’s only so many billable hours in the day, and you’ll be tempted to expand. Maybe hire an employee for $30 per hour and re-bill them at $60. Easy money, right?

Unfortunately the math doesn’t work that way.

Jason is right. It isn’t that easy.  But it isn’t quite as bad as he makes it out to be either.  First, let me lay out some of the ground rules you can use as assumptions if you’re building a consulting company.

1. Base your budgeting on 2000 hours in a year.  It is a nice swag (2 weeks off), and it also makes the math easy!
2. Expect 80% billable as your realistic maximum, though some of your people will do better than this.
3. A good rule of thumb is that your minimum billable rate is 2x the hourly cost.  At 80% billable this is better than break even.  But at 50% billable you’re losing money. This isn’t a good billable rate, but it is the minimum billable rate. Because you do have costs: Medical benefits, 401k contributions, office space, vacation, downtime, sales & marketing, etc.  But there’s no reason to settle for the minimum rate.
4. If you are using a contractor (1099) in the US, you shouldn’t expect to markup their rate by more than 50% (ie, 33% margin for you at most).

So, even with all that, Jason paints a pretty bleak picture for your prospects of making money as a consultancy.  The primary issue is scaling the size of your business so that you can (a) reduce risk, and (b) make more profit.  If you talk to friends at startup software companies, they’ll spend lots of time discouraging you about the scalability of consulting companies (something investors and software folks are pretty convinced of).  Here are my thoughts about how to address scale, risk, profit:

Start with a co-founder.  If you don’t have one, find one who is also a specialist in the same area, or who has a tightly complementary specialty.  Make sure that you have enough skills overlap that you can cover for each other in a bind, but that you also have some different skills to augment each other in unique ways.  Starting as a company of two partners is easier than being the sole founder with one employee.  (Who wants to be your first employee, anyway?).  It allows you to reduce your risk – and if you charge correctly you can be break-even if one of you is billing.  And you’ll have more flexibility to chase leads, take vacations, etc. – without company revenue declining to Zero while that is happening.

If you’re going to grow, you’re going to forgo profits.  The independent consultants I talk to don’t want to admit that, but it is true.  At BP3, Lance Gibbs and I certainly could have had a more profitable first 3 years of operation if we just ran a two-man shop.  But we saw an opportunity to grow a bigger business.  We hired great people – and held on to the team through lean times in 2008 and 2009 – taking lower salaries ourselves and paying people when they were on the bench for long periods of time.  That scrappiness and determination got us into a great position to grow our team in 2010 and 2011 – from a bigger base.  But remember – every time you hire, you’re investing profits – reducing your cash flow for 60-90 days (or longer if training is required).  A good way to think about it is that people you hire in 2011 will add materially to your business in 2012 – it makes you plan conservatively around what you can afford.   Now that we’re a little bigger, it is easier for us to hire when we come across the right person – we don’t have to work as hard to time each hire just right.

This also means that it is better to not grow, than to hire the wrong people.  If you take this approach, when you can’t find enough talent to grow, you’ll be more profitable.  When you can find those people, you’ll grow the business at a little lower margin, and with a little tighter cash flow – but with your future baseline performance at a higher level.

Those early hires are really important.  See the previous point.  Early hires in a consulting firm set the tone: culture, discipline, follow-through, work-ethic, reputation, skill.  Don’t hire someone on reputation alone – better to hire someone whose reputation hasn’t caught up to their real performance than to hire someone whose reputation exceeds their real capability. If you hire the right people at the beginning, it actually gets easier to attract the right talent later on.

Forecast next year’s revenue based on your current staffing.  Don’t fall into the trap of building a consulting-based business plan that depends on hiring people in the same year that they contribute to your bottom line.  I’ve seen a lot of these “plans” before: “we’ll hire 3 people in Q1, 4 people in Q2, 6 people in Q3…”  To which my response is typically “which 3 people? which 4? which 6?”  If you don’t know who they are, take that out of your plan.  A better way to write it would be:

Based on our forecast we can afford to hire 3 people in Q1, 4 people in Q2, 6 people in Q3.

Point being: there’s a difference between what you can afford, and what you can actually execute.  Given how important each person is to the growth of your company, are you going to hire the best 3 people you can find in Q1, or will you only hire 2 if you can only find 2 you’re excited about?  Intellectually we all know what the right answer is but it is important to actually act on that knowledge.

Get Financing.  You may not think you’ll need it – but as soon as you can, get it.  When you’re a small consulting company, usually one customer has an outsized influence on your cash flow.  Having a line of credit or a loan can give you some cushion against the vagaries of their accounts payable.  Word of warning: it is very difficult to get a traditional bank to do this until you have 3 years of history as a business.  Second, you’ll be referred to operations that do receivables factoring, but I would recommend steering clear of those companies because their contracts are horribly one-sided and may make it difficult to get traditional financing later on. If you and your partner have the capital for it, it may make sense to put some money into a corporate savings account – to be tapped only in certain situations that all the partners agree upon.

Have a sharp focus.  You have to know how to say no to work that isn’t in your sweet spot.  Saying yes to all the opportunities that come your way will cause the following problems:

• You won’t build the necessary depth in your chosen area of expertise, or any particular area at all.
• Your win rate will be a lot lower – because you’ll be competing with people who specialize in each area, whereas you are essentially presenting yourself as a generalist.
• You can’t effectively partner with other people or companies because you always feel like you could be competing with them for business.  Ask yourself what kind of work you would refer to the partner firm, and what kind of work the partner would reasonably refer or sub to you.  If you can’t answer that question, one or both of you is lacking focus.
• You won’t build a reputation in your niche.  Reputation in the age of twitter and blogs is really powerful.  Lack of one is similarly powerful in its absence.  Start blogging, get on twitter, and learn your niche and who the experts are.  Those experts are rarely wanting for work.

Back to Jason’s Post:

Jason terms it “unfortunate” math for consulting… but the real problem is that consulting is an EQ business, rather than an IQ business.  It requires more emotional maturity and awareness, and the smartest guy in the room is not necessarily the best consultant.  Ideally you’re both high IQ and high EQ.  But don’t forget which one will get you further in consulting – EQ.  If you don’t have a high EQ, partner with someone who does!  There’s no one “right answer” to how to succeed as a consultant.  But there are definitely higher or lower risk plays on the business.

Jason points out in his post a series of problems a small consulting firm will face.  There are remedies to the problems Jason points out, and he offers a few himself.  But as you ramp up your team, in my experience when the firm is ~5 people is the hardest phase in growth.  At that stage you need everyone billing as much as possible, you can’t afford to pay for overhead (a non-billable person working for your company), and somebody (hello, founder) has to work a lot of extra hours to get things like invoicing, sales, and recruiting done – because customers don’t pay you to do that work with billable time, you don’t want to pay someone else to do it for you, and it has to be done right.

As you head north of 10 people, the math starts to work more in your favor.  You can hire non-billable help with administrative or sales work, or one of the knowledgeable billable people on your team can explicitly spend less time billing.  Another thing I’ve often heard from bigger companies is that getting past 15 people is a tough barrier – that you run out of “people you know” to hire, and have to get your operations in much better order than you required as a smaller company. I agree that somewhere between 10 and 20 people, the nature of your firm changes and you need to change with it.  I’m sure that is true at many inflection points further on as well.  If you just look at this as another interesting business problem to solve, you’re in good shape.  If someone tells you there’s a glass ceiling to how big your services business can get, just ask them if they know how big IBM’s professional services business is.

Jason’s thought on running the business at smaller sizes:

• None of these new tasks are fun or creative. It’s drudgery, and it’s on you. Congrats, you’re a business owner.

Well, don’t go down the path of building a business unless you enjoy being a business owner and running or building your business.  If you enjoy doing this sort of thing, it won’t feel like drudgery – it will feel empowering and gratifying*.  If you don’t enjoy this sort of thing… partner with someone who does, or get a job!

His other recommendations are in bold, my comments in regular typeface:

Recommendation: Charge more.  Well, this one is a bit obvious.  If you have too much demand for your services, you generally need to raise your rates or hire more people (increase supply).  Figure out which one you can do.  The basic issue is, pricing is incredibly important in consulting businesses.  Mimiran is a great resource for better pricing techniques.  But regardless, you have to understand that your consulting value is worth more than the hourly wage you put in.  You have uniquely differentiating value.  You’re likely committing to provide your customer with an outcome or else lose your “job” (contract) – which is something their own team may not be putting at risk.  An hour is not what you are truly charging for, you’re charging for the output you produce, and dividing it by the # of hours. There is a difference.

Recommendation: Bill more hours.  Generally consultants bill more than what Jason was describing in his post. While this is true, so long as you bill by the hour, I’d phrase this differently:  provide more value.  That might mean billing more hours.  Or it might mean that you will either raise your rate or the demand for your services by providing “better outcomes”.  Focus on the value.

Recommendation: Build a product.  I’d be very careful with this one.  Most consulting companies don’t make the transition.  The product you’re going to build has to be something that will get a lot of your attention and TLC – and likely something that earns money for you right away.  What you don’t want to do is take a profitable consulting company, plow the profits into a product that isn’t profitable (most products aren’t), and then find yourself with a less valuable enterprise overall.  Make sure the product is truly something you want to invest in, and make sure you understand how it will yield revenue.

Recommendation: Use subcontractors instead of employees.  This is lower risk, but lower reward – and I don’t just mean financially.  This choice comes down to what you want to be when you grow up. Is this a business or a body shop? There’s a difference.  If you’re building a business, you use contractors as a minority of your business or to augment specific skill sets or deal with variability of demand.  But if you’re building a business, it is your team, your employees, that will really build it with you.  You need to hire those people – contracting them won’t cut it.

Concluding Thoughts…

Jason’s conclusion:

It’s always hard. Most consulting companies don’t make much profit, and it’s one in a thousand that has the discipline to launch a successful product during off-hours. If you’re going to make it happen, you yourself need to be serious, disciplined, and relentless.

The idea that small consulting companies don’t make much profit doesn’t ring true.  A well-run consulting business is a good business.    Of course, for many consulting companies their margins may look lower because they do certain things:

• Provide generous benefits, from vacation to medical insurance, to 401k or profit sharing.
• Pay generous salaries & bonuses.
• Buy the latest and greatest hardware gadgets and software tools.
• Keep overhead (non-billable head count) low.

These tend to reduce margins in the short run, but retain top contributors in the long run.  Usually a tradeoff worth making.  But the biggest question for the independent consultant moving toward a small consulting firm:  What’s next?

Is the goal to build a big consulting firm?  To make some money?  To solve a particular problem in your industry or specialty?  To have a boutique firm of good friends and rock star specialists?

It really is up to you.  But the answers will help dictate what makes sense as you build your business…  For BP3 it is to be the best business process firm we can be – which is compatible, for now, with being a growth business.

*  Author’s note:  One of the things I enjoy about building the business, as a consultant, is the opportunity to practice our craft (BPM) internally.  As we get bigger, there are real payoffs to improving processes. And we have time to actually think about our business and improve it.

** Another note: Perhaps the title should just be “Consulting Math” since we didn’t discuss Software Math… but I think the prevailing public opinions about consulting businesses largely come from people with a software background – primarily that they don’t make much money and can’t scale, and are inherently riskier.  But, most people don’t mention the fact that these days, most software companies are probably less profitable than consulting companies.  There are really significant exceptions (e.g. Google, Microsoft) which is what people focus on.  But in enterprise software most of the money is in consulting these days.

Hard not to revisit this subject when there is so much material out there right now.  Vivek Wadhwa in the Washington Post:

American companies must be provided with the incentives to invest in their workers as they used to. As recently as the 1970s, America’s most respected companies would make significant investments in workforce training. IBM, for example, took non-technical workers and taught them technical skills. They then trained these technicians to be computer programmers, sales reps, or product managers. New recruits received a year or more of training before they were expected to become productive.

I don’t know any company doing this anymore.

Today, nearly all American companies, including IBM, expect new hires to be productive on day one. These employees are given a day or two of “orientation” at best. Companies routinely fire people whose skills are obsolete and hire replacements with the right skills to maximize quarterly revenue and profits. Employers often fear that if they spend too much on skill development, employees will become more marketable and leave.

I’m afraid we are guilty as charged.  At a small company, I can understand this problem more than at a larger company.  At a small company one might not have the resources to invest in training in the early days.  And yet, it is precisely at these small companies that many people investments are made.  Are being made. Right now.  If you’re one of those small companies making excuses about investing – stop.  Stop making excuses.  Just start figuring out how to invest.

Martin Zwilling’s post on 7 startup co-founders that can lead to conflict reads like a greatest hits of imminent failure.  Not that there aren’t notable exceptions to every problem cited, but at this level we’re talking in generalities.

His advice?

If you think about it, you should realize that not everyone is ‘ideal partner material.’ Most of us learn that in other partner relationships, like dating and marriage. First you have to be clear on who you are, and who you can co-exist with, what complementary skills and resources you need, and what decisions in the business you are willing to relegate.

Lance and I are often asked how we make our partnership work at BP3.  We’re different.  Different personality types and different kinds of career experience and skills.  Martin addresses this neatly:

4.  “We are so alike, we finish each other’s sentences.” You really need a partner who is complementary, and can tackle the operational roles, like marketing, finance, and sales. A partner who is a carbon copy of you will likely mean two people working on every problem, rather than a natural separation of duties. Most startups can’t afford that.

I couldn’t agree more.  Lance and I are good complements.  And we each respect the other person’s strengths.  And we know how to step in for each others’ weaknesses.  I really think respect is the foundation for people who are truly different to have a good working partnership.  Without the mutual respect, conflict is inevitable.

Lance and I were fortunate (in a sense) – we had the opportunity to test our partnership while we were still working at Lombardi.  We had a 13 week assignment – with 8-hours of travel required each way, and traveled 5 days a week for 13 weeks.  We spent 2 hours in the car each trip, we ate three meals a day together, and we worked together with our customer for 8-12 hours a day.  And that was just the MINIMUM amount of interaction we had for 13 weeks.  In this environment, you either earn mutual respect or you never want to work together again.

At BP3, it hasn’t all been roses.  2008 and 2009 were tough years for the US economy.  We grew in those years – but we had to scratch and claw are way through it.  Our previous experiences of trial-by-fire prepared us to get through those tough years as well – we didn’t give up or play the blame game, we just got to work.  And it prepared us to be able to tell each other tough truths.  I recall taking a call, the day our son was born, about taking a new assignment for BP3 – one which I needed to personally handle and travel to – at what we might say is a sensitive family time.  But we talked about it and we knew what the right decision would be for the business.  Lance has similarly taken tough assignments in Europe and other places hard to travel to – when it was what the business needed.  Sacrifice is required to build the business up.  Make sure you’re in the hole digging with someone you respect.

Our point of view – that co-founders who really do have different backgrounds are a better fit – is actually backed up by research done by the Startup Genome project, which shows that co-founders with a mix of business and tech background are more likely to succeed than co-founders with the same background (I’m paraphrasing badly – but that’s the implication of the research so far).

There’s an argument that says the world is too complex for humans to understand.  Further, that by thinking we understand cause-and-effect, we’re doomed to act in ways that have unforeseen (usually negative) consequences.  It is a really interesting debate, and informative on the more than two sides represented.

Personally, I found myself rejecting this notion as useful.  Not that the notion of complexity isn’t useful – but letting it paralyze you is not useful.  When it comes to running your business, simplicity is more powerful than complexity.  A combination of relatively simple interactions has more power than a complex single interaction.  Simple interactions are more replicable, more scalable. I would focus more on enabling “emergence” than disabling decision-making by leaders.

Simplicity and abstraction go hand-in-hand.  The iPad has a significant amount of complexity baked in – from the hardware, to the software, to the production processes that lead to its creation, to the design processes that lead to its conception.  But to me, it is just a glossy glass enclosure that responds to my touch.

Does my touch cause the apps to do what they do?  Actually, it doesn’t matter whether touch is causal or not – it is, at minimum, so highly correlated between action and reaction that it feels like causation.

And that’s what we should be striving for in our businesses – that our actions would achieve the results we’re looking for – will feel like causation – though there may be a complex choreography and it may not be driven top-down.

There was a truly fantastic quote in the original HBR article:

“If you want to build a ship, don’t drum up people together to collect wood and
don’t assign them tasks and work, but rather teach them to long for the endless
immensity of the sea.”

- Antoine de Saint-Exupéry

Sometimes simple is best.

Great post from Theo Priestley on the unending quest for roles.  It just gets tired, in the way that the endless pursuit of The Next Three Letter Acronym gets tiring.

My favorite quote:

The article starts with “If you have not yet heard the term “business architect”, you soon will…”

I’ll end with “If you have not yet heard the term “business architect”, you’re not missing much…”

Roles are better when they emerge organically than when they are handed down from the mountain.  Better to talk about them as hats you put on or take off as needed, rather than titles you will put on your business card…

There’s been a bit of a blast of news about the Austin Technology Council (ATC) taking a delegation of Austin CEOs to Silicon Valley to recruit technical talent to Austin:

“These events are about Austin making a pretty loud statement in the Bay Area,” said Julie Huls, president, Austin Technology Council.  “Texas is a New Economy State, and we have a killer combination to support it: high-paying tech jobs, fast-growing companies, a low cost of living, and a relaxed way of life.  Over 100 of our area CEOs were together in May at an ATC CEO Summit and one key call to action was to bring more tech talent to Austin.  We are proud to deliver on that idea in a couple weeks in San Francisco and Sunnyvale.”

Some of the best companies in Austin are represented in this trip – and some great CEOs for sure.  These are people that Austin has a lot to be thankful for.  I may not be sure that sending the CEOs en masse is the best way to recruit tech talent to Austin, but I certainly don’t blame Austin CEOs for recruiting in other markets.  From my time at Trilogy and Lombardi, and now BP3, I know a thing or two about recruiting talent to a firm.  I think this event in the Bay Area is more about news cycle than actual recruiting.  Hoping to plant the seeds for the future.  Clearly there is a need for more skilled people in Austin:

Austin currently has several dozen technology companies hiring 40 or more new programmers each.

Integrating new talent into Austin is clearly good for the local economy and ecosystem.  I was part of one of these waves of immigration to Austin back in the mid-90′s – and the imports are now the CEOs and hiring managers at literally dozens of local companies.  But the long term solution to this problem should be a mix of approaches – recruiting and retaining talent from universities, industry, and various locations inside and outside of Austin. Too many of the startups in Austin have stopped college recruiting and really developing their own talent – which is easy to understand when a company has a horizon to exit of less than four years. But it isn’t just college recruiting – it is also hiring people with experience who have the potential to do more – and then challenging them to do it!  Don’t just hire Ruby on Rails experts and developers – hire people that you believe can become Ruby on Rails experts.

The strategy we take at BP3 isn’t to import talent – but to hire our talent where they live – so long as they’re willing to travel to customer sites.  If they live in California, that’s where we hire them and where they base out of.  If we hire them in Minneapolis, that’s where they’re based out of.  It is actually part of our goal to have geographic diversity, and it means that we can hire people that other companies can’t touch as easily. But it has a bigger benefit for our clients-  as we add staff, we’re more likely to be able to serve our customers with local staff rather than a team that has to travel to be there in person.  High touch, high value, we like to call it.

Vivek Wadhwa’s article in the Washington Post was a brilliant assessment of the “talent shortage” in the USA – first by calling out the objectives of the President’s Council on Jobs and Competitiveness:

The council is holding a series of meetings to find ways to fix a perceived national problem: an engineering shortage. Otellini and the council claim that such a shortage seriously threatens America’s ability to create jobs, and that the U.S. risks losing its innovation edge to China and India, which are producing a million engineers per year — 12 times as many as the United States.

But next, by explaining what is wrong with this logic:

The graduation statistics most commonly touted then were: China graduates 600,000 per year, India, 350,000, and the U.S., 70,000. We found that, in 2004, when comparing apples with apples, the U.S. had graduated more engineers (roughly 140,000) than India had (roughly 120,000).

Wow.  Wadhwa’s analyis just does not agree with conventional wisdom.  Wadhwa predicts that great numbers of engineers in India and China will face unemployment or jobs in fields unrelated to engineering.  This is where he cuts to the heart of it:

Then there is the question of whether there is a shortage of engineers in the United States. Salaries are the best indicator of shortages. In most engineering professions, salaries have not increased more than inflation over the past two decades. But in some specialized fields of software engineering in Silicon Valley and in professions such as petroleum engineering, there have been huge spikes.

So, there are shortages in a few critical areas, but overall there is not a shortage of engineering talent.  Again, this matches with the data that I’ve been seeing.  It also better reflects the proliferation of engineering-derivative majors in US universities.

If I were these local Austin CEOs, however, I’d also be shopping in other parts of the country outside of Silicon Valley and Austin, and I might also focus more time on universities – graduates are more likely to relocate and take a chance on a place like Austin.  But that requires a long-term strategy toward staffing that not all companies have.

I’m hoping that companies in Austin, and in general, will start taking the time to invest more in the people they’ve got, and hiring more people with potential, rather than just looking to find someone who has done it all before.