The summary of an MIT Enterprise Forum’s gathering of 3 economists seemed to be optimistic, but with major caveats and concerns.  With three bubbles in our rear view mirror (dot.com, oil, and banking/real-estate), the concern has turned to a potential fourth bubble: cash (when there’s too much of it, inflation can eat away at it too quickly).

Here in Austin, a major new shopping center has opened (phase 2 of the Domain), and the tallest building in Austin is nearly complete (the Austonian, apparently the largest residential tower in Texas).  Meanwhile, Facebook is opening an office and hiring 200 people in Austin.  And co-working facilities seem to be doing well, while providing a good support network for small businesses. So perhaps the better-than-average local economy is influencing my optimistic outlook.

Meanwhile, the Senate has passed a $15B jobs bill. I don’t know if anything in the bill will affect our business directly, but we make our decisions without regard to tax effects (generally that seems like putting the cart before the horse), and from what we can see the environment is still favorable for BPM software and deployments – businesses are investing in process improvement, and BPM.  And big software companies are investing in BPM software (witness the acquisition activity of December and January).  Its a good time to be focused on BPM.

Ok, its no secret that I love coffee and cafes with wireless.  But as I’ve said before, I think having an office is important.

But recently two authors have made the case much more eloquently than I have.  James Reinhart’s post, “Why your start-up needs to get out of Starbucks and into an office right now” makes a great case for why working at the local coffee house can be undermining your start-up.

He points out the main deficiencies:

• 75% productivity (this might be generous)
• Lack of space for whiteboards, etc.  The virtual tools don’t replace real stuff yet.
• Boundaries between work and play dissolve in an unhealthy way.
• It doesn’t save much money (office space is cheap).

I’d add to this:

• If you have to take professional calls, the coffee house, and the busy street outside, are *not* appropriate places to do so.  Neither is home, with the dog barking in the background.
• You can often sublet space cheaper than the market rate from another company that isn’t able to fully utilize their space yet.

So he’s given us the cost-benefit justifications… and that’s where the “Locker Room Theory” comes in, which captures the essence of how I feel about having an office.

Today, many people believe in the distributed model – many executive teams are spread all over the country (or globe) and connect only virtually.  Many start-ups believe in the model.  But David Dufresne’s reaction:

I’m sorry, but I don’t buy that at all. As far as I am concerned, business is all about people. Building a winning tech company is mostly about people and having a strong team dedicated to a strategy and executing it together. Being a hockey fan, I will use a hockey team as the analogy for a portfolio company. Being on the road is like being on the ice. That’s where you score goals. That’s where you win that big contract. That’s where you build momentum; grow a sales pipeline, forge partnerships, hurt your opponent, drop the gloves if needed, etc.

But, when players are not on the ice, they are in the locker room. The locker room is where it’s hot and where it stinks of hard work and empty cups of coffee. It’s where you regroup in between periods, look your teammates in the eyes, listen to your coach and team captain, get ice for that bloody bruise, adjust your strategy and tactics. It’s also where you celebrate after a game. Open that case of cold beers every Friday at 4PM. Get back to the whiteboard to figure out what went wrong on that goal against or sale lost to a competitor.

I think this is great insight, and if you don’t mind a hockey analogy, it works well.  In our business (business process management consulting), we can’t avoid being a distributed team.  But we do our best to make it feel closer (investing in videoconferencing, for example), and we very much believe in our investment in a headquarters so that when we are together, we can *really* be together and hash things out.

When people ask me why BP3 has office space, I don’t have trouble explaining why.

Great article from Jeff Jarvis advising companies with nonphysical goods to stop selling scarcity and start selling value. It is a principle that can be applied to a great many businesses, not just the “Web 2.0″ world, but as he points out, education and consulting as well.

His advise to advertising businesses: sell the outcome, don’t sell the scarcity of your space!In the Content world, he points out that content just isn’t scarce any more.  The existence of this blog is actually just one more data point to that effect!  Information is not scarce either – with Google at our fingertips. He goes on:

Thus we have performers and consultants. There is still value in unique performance. We will continue to buy tickets to concerts by stars (but we won’t pay for the Muzak covers of their songs on elevators). We will buy books. We will pay to sit in a movie theater with popcorn. The new competition in the case of media and performance isn’t that someone will make a good-enough version of what we do but that there is more call for the public’s attention.

Quality is a scarcity. But it is a real scarcity.

The challenge is, there has to be recognition that:

• You (your company, your product, your content, etc.) represent quality, and
• Your level of quality is discernably and valuably differentiated from other sources of similar product, content, expertise, etc.

In BPM, we’re suffering a scarcity of BPM-related skills.  We already have a general shortage of technical skills in the world, but on top of that, having the technical skills combined with the understanding of business and process improvement – we’re talking about a real scarcity for the right talent and skills.  But as I’ve argued previously, BPM isn’t hard because it is rocket science – each component task we do in BPM isn’t hard – its hard because knowing the right combination of tasks is a subjective, judgmental activity that depends on experience.

But the *real* scarcity isn’t the BPM bonafides.  The real scarcity is quality BPM skills and personnel.  Because what we’re selling isn’t truly our hours of labor.  What we’re truly selling is the outcome: a successful BPM deployment; a successful BPM program; or a successful transfer of skills and methods to a COE. My shorthand for this is that our customers are buying success.

Had lots of feedback in favor of adding Disqus commenting system (here and in other blogs), specifically around threading, identity, and sharing.  For example, you can login using your Twitter id or openID etc.

So we finally bit the bullet and installed it.  Hope it helps keep the discussion going in our blog and makes it easy for everyone to post their opinions!

As of February 1, BP3 is in new offices.  We’ve moved just a short distance from our old office on Balcones Drive in Austin, to our new office at Plaza 7000, at the intersection of Far West Blvd and MoPac Expressway.

We’re really happy to have the extra space, and our new co-working arrangement with Red Velvet Events.

Today, I unwrapped a little present for the new office that makes it feel like home to me, and that’s an espresso machine:

First latte at bp3 headquarters

Its a Nespresso Citiz, and yes, I’m expecting to be wide awake at the office from now on, and a little less cash will be going to Starbucks this year.

I couldn’t agree more with Fabrice Grinda’s post on Why you Need a Partner.  Perhaps I’m biased, since BP3 started with two co-founders.  But I also have a lot of friends who own their own business.  And I’ve worked for people who own their own business.  And it just is true that very few people can be good at everything they need to be good at to run these businesses well.  If their business makes enough money, they can hire the help they need to run their business.  But early in a company’s life, it is really useful to have people on your team who ACT like owners (whether or not they are).

Finding the right partner can be problematic – but my recommendation is to try.  Find someone who is different, but make sure that you appreciate and value the differences, rather than finding them annoying.  And make sure the reverse is also true.  This should be someone you would want to partner with no matter what the startup idea was – not just because this person makes sense for this one idea.

And if the partnership isn’t working, exit stage left and try again- but don’t make each other miserable.  Life is too short to get stuck in an unhealthy business relationship.  Make sure you have a fair separation agreement in place from the moment you form your business.

Man. Steve Blank writes some great stuff.  Makes me wish I had gone to epiphany back in the 90’s!  He explains that if you’re going to go work for someone, make sure they have big plans, plans to grow the enterprise – because that growth is what you will benefit as a member of the team.

I thought his IMVU example was pretty interesting.  He mentions Will Harvey and Eric Ries (of Lean Startup fame) as being cofounders who wanted to swing for the fences and turned down buyout offers.  So, being me, I click on the link for Will Harvey – and I see he is at “Finale | Fireworks” along with Chris Hondl.  What a blast from the past.  Will was the TA of a Motorola 68040 assembly language class when I was in college (Stanford CS 110 if I recall) and Chris was the star student in the class.  We had a “robot simulation” game where we programmed the strategy for a robot to interact in a maze.  Mine was one of the four finalists, but Chris’ was a class above the rest in terms of the elegance of design and economy of action. Chris went to work with Will at Sandcastle, and most of us in class were fairly in awe of Will for his chops as the writer of music software for the Mac.

There are times when you realize it is a small world.

At bp3, we’re building a business process company, just like the tag line says, making no little plans.

BP3 will be moving into new digs come February 1.  Doing this move at the beginning of the year feels like good timing too.  A new year with new goals and objectives – and new professional space to go with it – very much a fresh start but with great foundations. Choosing a new office space is important, because it can affect your firm’s personality.  Is it a space people want to come to work in?  Is it a space that promotes collaboration and a professional environment?  We’ve definitely found such a space in the Plaza 7000 building in Austin.  (I should point out that we have a modest space within this fine facility, lest the picture give a different impression)

I’m pretty psyched about the new space as I think it will be a better work environment and offers some better nearby amenities, along with room to grow.  Of course our needs are modest, but most importantly, the new office is still near a local Starbucks…  Some people have asked me in the past – why have office space at all?  After all, we travel a fair amount to client sites, we don’t always get to work out of home base.  And then there is the expense.  But I think the explanation is simple: we’re building a company – a team – and that requires working together, sharing and collaborating.  And sharing workspace is part of building a community and team and having a center of gravity.  The virtual forms of communication are all great, and useful, and keep us connected with our team members who aren’t in Austin, or who are on the road.  But it still helps to have a home base.  The cost is minimal compared to the benefit.

You’ll find us at the corner of Far West and Mopac at the Plaza 7000 building in Austin after February 1st, though mail will continue to forward for some time from our old mailing address. I also want to thank Red Velvet Events, who will be helping us coordinate the move, and will be subletting space from us in the new building.

A funny thing happened the other day on the way to the hotel.

I’m commuting to San Francisco for a really interesting application of BPM technology to customer service scenarios for a company that doesn’t sell product – they sell an experience – a process, if you will – to both sellers and buyers of certain goods.  Just working with a company that thinks of their process as their product is refreshing enough, and makes this a very interesting project to me.

Because this project is in San Francisco, there’s really no need to have a rental car to drive around.  Its about $45/day for parking, and if you don’t mind walking a few blocks, and taking BART up from the airport, everything is essentially walking distance.  On Monday I had plans to meet up with an old friend from Stanford, who coincidentally also worked with me at our first employer, Trilogy.  With plenty of time to spare I was walking from the customer’s office to my hotel, which takes me past the headquarters of Vast, where several other friends from Austin and Trilogy work.  As I walk by, I notice an old colleague in the window, so I knocked and he invited me in and we had a great conversation about life, business, the future.  Along the way another gentleman in the office walked over and asked if we could give him some feedback on a pitch he was planning, to promote a creative-commons approach to user-data management.  And we then spent the next 30 minutes hashing out what this meant in the context of Facebook, iTunes playlists, and other types of user-generated content that, he contends, users should have the right to port, move, export, share. The next day he was headed to a conference to try out these ideas on a broader, critical audience. I was really impressed by the depth of thinking on the subject, and how well he could turn our questions into opportunities to clarify the pitch. Good stuff.

After that conversation, I headed back up to the hotel, and met my old friend for dinner.  We walked right past Vast again on the way to the restaurant, and had a good 3-hour discussion over dinner at Town Hall Restaurant (highly recommended, I might add).

I relay this story not because it is that relevant to the world of BPM, but because it touches on something immensely important – the value of your network.  The odds of me running into someone and having such an educational discourse on identity and user data management in the new world order is pretty low outside of the Bay Area.  And coming into contact with new and different ideas and perspectives is part of what makes the software scene so vital in San Francisco.  I’m convinced that at least part of that is due to the “walkability” of the city.  Although you can get similar effects in any city with good gathering spots – be it a coffee shop, a burrito joint, or a local pub.  And in South Bay, it isn’t so walkable, but there are great meet-up spots like Hobee’s, and clusters of companies in Palo Alto or in other parts that provide this same walking-distance effect.  But it isn’t just a story about the network effect in the Bay Area.  After all, the folks I was meeting up with are transplants from my current home town, Austin.  The power of networking in software circles in Austin is pretty incredible to me.  Very small degrees of separation, and a high degree of willingness to share, cross-hire, cross-promote.  Even tighter than the Austin network, that Trilogy Alumni network is quite cohesive.

If I may offer some perspective that 15 years in the business world has given me… Building your network of valued friends, coworkers, colleagues, peers – this is part of the process of building a career.  It is so important to nurture the people you are connected to, and to be open to the opportunities, insights, and perspectives they will offer you over time.  If your old firm doesn’t have an alumni network or mailing list, start one.  I’ve been managing one of these lists for 8 years now, and the personal satisfaction has far exceeded the investment of my time.

Also, when you travel for work as much as I do, you get a chance to refresh your relationships in person, and not just over email and phone and twitter.  It is so important to take advantage of those opportunities.  Meeting with my old friends and colleagues and hearing about their lives and careers is part of what recharges me and inspires me to keep working on the vision of bp3 – “a business process company”.  It’s also part of what helps you establish place and belonging when you are away from home for too long.

I just want to take a moment to thank good friends who take time out of their lives to meet with me on short notice – or even when I just knock on their window passing by – and please allow me to return the favor and entertain you in Austin, Texas if your travels bring you our way.

It was just over 2 years ago that I decided to join Lance in starting BP3.  The day that I decided to take the plunge, my wife and I (along with our daughter) met with her sister at a local Chinese/Cantonese restaurant in Austin and had dinner.  We don’t usually talk about my work at dinner, but we spent most of the dinner talking about it that night. I had just decided to inform my boss for the last 4 years that I was going to leave and join Lance in starting BP3, and was getting my thoughts together for that conversation.

After a very good dinner, the bill came with 3 fortune cookies.  I opened one, and inside were three fortunes, rather than one:

“Now is the time to try something new.”

“You have executive ability. Apply this in the future!”

“Your present plans are going to succeed if you stick to them.”

Far be it from me to argue with the fortune cookies.

Its been a great 2+ years with BP3 – I couldn’t ask for a better team to work with, and I’m very grateful to the customers and partners who saw fit to invest in our success, just as we invest in theirs.

Thanks to Michelle Greer, I found this post on Gaping Void about the using blogs to create a “global micro-business”.  The whole post is a great read about how a tailor in England used a blog to transform and improve his business.

The best part, of course, is that it didn’t require changing the product being offered.  It just meant spending the time to communicate the passion for the business that the owner had, which would generate additional interest in the value of the product he was selling.

The author makes a couple of great points about why this strategy worked. My favorites, which I believe apply to BP3:

1. A great product.  This really was one of the best tailors in the world.  Similarly, we really believe BP3 is as good as it gets for delivering BPM solutions (service rather than product).
2. Focus.  The tailor kept at it, and kept his blog focused on suits (not breakfast).  When our blog strays from the main topic (process), or our own business (BP3), we’ll try to keep it focused on topics that relate to process, but possibly in different ways than people might usually imagine (e.g. startups, Apple, etc).
3. Continuity – The tailor had it.  We have it too.  We’ve been doing BPM as long as anyone, and we’re focused like a laser on our space.
4. “We don’t have to create the brand out of thin air. We just tell the truth and the brand builds itself.”  I feel the same way about BP3.  We don’t have to come up with a great marketing pitch – our actual project stories are plenty good enough.

So, with that said, we’re going to keep focused on building BPM success with customers, one project, one program, one customer at a time.  We think the “brand” will take care of itself.

As a firm that is entirely focused on BPM implementations, we get a lot of queries from staffing firms, and I’m going to take this post to speak out against the practice of using these expensive, non-value-adding, players in the marketplace.

We get (each of us at BP3) about an email a day from a staffing firm looking for “a Lombardi Teamworks Administrator (or Developer or Architect) in Bentonville, Arkansas (or Bay Area or Boston or where-ever” (or other locations).  (someone should tell these guys that there is only one company in Bentonville likely to buy BPM and need to hire outside help… )  If I could convey one thing to companies deploying BPM and using staffing companies to augment their teams, it would be to understand the value chain in the BPM staffing equation, and why those firms are ill-equipped to help companies achieve their goals with BPM.  If you’re using a staffing firm, odds are you could save money and time, and achieve better results, by working directly with BP3 (or other boutique BPM firms).

Customers: Problems with Staffing Firms

From the perspective of a customer, what are the problems with using staffing firms?

Problem #1:  BPM services aren’t a commodity. They specialize in commodotized staffing in areas where there are millions of developers to choose from, like vanilla Java development, PHP, SQL, HTML, etc.  They have no concept of why the going rate for BPM experts is higher than the going rate for Java experts. They are used to treating software engineers  like day-labor construction jobs.

Problem #2: These staffing companies don’t understand what BPM is. No one at these firms has worked for a BPM software vendor, or a BPM consulting firm.  They’re essentially headhunters/recruiters, with no vertical domain expertise in BPM.  The staffing companies won’t provide any differentiated value add once the person is placed.  There are no skills at the staffing company to help that consultant be successful once they’re onsite.  There’s no technical support, no project management support, no lifeline to call.  There’s just a rate and a # of hours.  They don’t care if you deploy a waterfall or agile methodology, they don’t care if your project is successful – frankly, their job is to sell bodies, not to sell success.   If you are a customer, don’t ask them to help you make your project successful other than by adding or replacing personnel.  If you are a contractor through these firms, God help you if you struggle – you won’t get any help from them.  If they smell blood in the water they’ll replace you as though you were a stapler that didn’t staple straight.  But they will NOT help you.

Problem #3:  Because they don’t understand BPM, they don’t understand Process Improvement.  So you are going to forgo any help identifying opportunities for process improvement, or getting someone on staff who really understands how to do that.  When you work with a firm focused on BPM, you can expect to get those skills in either the people you contact with or the people who support them.

Problem #4:  They can’t get the best resources.  Because they aren’t BPM experts, they don’t know which of the folks they talk to are good and which ones aren’t.  They aren’t deploying people they have years of history working with. They aren’t deploying people they have a good basis from which to interview and judge competency.  They’re just deploying whoever will take the lowest rates and the most demanding contract terms, allowing them to maximize their profit.  There are very few really good BPM experts out there, relative to the demand – and even fewer experts who are available at any one point in time.  Some of the best BPM experts in the world work for BP3 and companies like ours, but you’ll never get to them through the staffing outfits – because boutique firms like ours are a threat to their business relationship with customers.

Independents: Problems with Staffing Firms

From the point of view of a contractor considering a staffing outfit:

Problem #1:  You are a commodity to them – a stapler, or worse, a staple.  They don’t care that eventually you’ll go work for someone else, they just want to maximize profit right now.  They’ll squeeze you hard on rates and terms in the contract.  They don’t care if you’re happy, they don’t care if you’re successful, so long as they have a chance to replace you with someone else and keep getting paid.  They don’t care if you get eliminated from consideration for arbitrary or unimportant reasons (like, having the wrong accent, being unable to travel on a particular date or day of the week, or having 22 months of experience instead of 24 minimum… )

Problem #2:  Staffing companies will not “sell” you to their customers.  They are just presenting you, and not taking sides too strongly – they let the customer decide if they want to work with you, and they’re not strongly invested in the outcome for any one person, because the customer knows that the staffing firm doesn’t know you from Adam and Eve.  See point #1:  you’re a staple. There are more just like you (as far as they’re concerned).

Problem #3:  Once a staffing firm has presented you to a customer (or rejected you for that customer), you have no shot of getting into that customer through another avenue.  This is a function of the contracts between the staffing companies and their customers – usually anyone they present, even if they present them with the reasons why that person isn’t a fit, is no longer available to the customer without violating some kind of contractual constraint that requires them to pay the staffing company.  As a result, they’ll never revisit these decisions.  So if you, as a contractor, put your name out through “Superior Staffing”, but also reach out to BP3 about working on a particular account – odds are that you’ll either get staffed through the staffing firm at a lower rate than what we would pay (if you’ll take it), or you’ll get rejected because the customer has already seen your name through the staffing firm and doesn’t want to run afoul of that contract.  Many independent contractors mistakenly believe they are better off reaching out to as many opportunities as possible at the same time – but if those opportunities are consulting and staffing firms, that isn’t the case.  I’ve seen embarrassing situations where the same person was proposed by three different companies to the same customer.  If you have a more valued relationship with one of those firms over the others, the customer sure won’t see it in that circumstance.  And they’ll likely see you as little more than a mercenary and not someone that they can depend on to work the duration of the contract.

Why Work for BP3?

Against this backdrop, we’re being approached every week by people who want to work with BP3.  And our colleagues refer additional people our way every week.  In fact, we just hired another great asset for our team last week.

In a previous post we made the case for why customers work with BP3:  we’re in the business of selling success. But why do BPM experts and people interested in BPM want to work for BP3?

So why do these highly skilled professionals want to work with BP3?

1. We live eat and breathe BPM.  This isn’t a fad or hobby for us, this is our livelihood and our career.  We understand why BPM expertise is differentiated.  Prospective employees and contractors understand that if they work with us it will improve their own brand in the industry by association.
2. We’re invested in the success of our team.  We want our staff to be successful.  We’re working on long-term relationships with our clients, and as a result – when we put someone on our project, we continue to provide technical and project management support, not to mention support through managing the customer relationship.
3. We don’t squeeze our folks on salaries and rates just because the economy is challenged.  We want to be working with our staff for a long time, and we know BPM is going to be in demand for years to come.  We’re not so short-sighted as to put the squeeze on people at the first sign of trouble.
4. We represent our colleagues well to the customer.  We help our customers understand the strengths and fit of our consultants.  We help work out a travel schedule that works for both parties.  We provide video conferencing capabilities from our home office to help enable effective remote work.
5. When the going gets tough, we help.  We’re BPM experts.  We can help with the technical lifting, and we can help with process improvement consulting.  We can help get a project that is off the rails, back on track.  And our customers know that we’re there to help.  Its part of why they keep coming back to work with us.
6. We have a good reputation.  I believe we have a good reputation for fair dealing, for being good to work with and for.  We also have a good reputation in the BPM market as experts in our field.  It isn’t our first time to the rodeo.
7. Our business is growing.  Despite the economy, we’re growing in the face of it and staying focused on our key value driver:  making customers successful with their BPM projects.

If you’re a BPM practitioner, BP3 is a great firm to work for.  If you’re a BPM customer, BP3 is a great firm to work with.  We’re not your only option, but we’re trying hard to be your best option.

Recently I was discussing with a colleague at a software vendor what BP3 does for a living.  The question was asked, first, what does BP3 do?  I gave my usual response, which has to do with process improvement and implementing processes in BPM suites (I like to call this marrying theory and practice).  At the end of my spiel, I was asked if we’d be interested in being a reseller for their software.  In fact, being a reseller may make sense at some point for BP3, but that’s down the road a ways.  I responded that we really aren’t in the business of selling software – we don’t have a sales staff, we don’t cold call new customers.  In fact, we usually get referred to customers by word of mouth.

By whom? he asked.  Well, it varies, but it includes:

• old colleagues who know what we do now for a living and know we do it well
• other BP3 customers who liked our work
• software vendors
• consulting companies

I think the last two bear remarking on.  My audience wasn’t convinced. Why are software vendors and consulting firms asking us to help out and referring or subcontracting business to us, if they don’t get the quid pro quo of our bringing them additional business by bringing in new customers?

It turns out that the software vendors and consulting companies we work with have their own consulting staff.  But they still bring us into their customers.  Even their prospects.  Why?  Because what they’re buying with BP3 is success.  They’re not really buying our process modeling, our technical jujitsu, nor our process improvement skills – although they know they’ll get top-notch work in each of those areas.  They’re really buying the insurance policy for success in BPM, which is called BP3.

That’s when I realized we had moved from the question of “what do you do?” to “why do your customers work with you?” to “what are your customers buying?”  Why, our customers are buying BPM Success, and they’re buying from us.  That’s why major outsourcing firms will bring us in to work on major accounts or projects.  Its why software vendors ask us to run proofs of concept.  Its why customers call us when they have a critical project.

In the process of answering this question, I realized we’re making our “pitch” incorrectly.  We need to transition from “what we do” to communicating the BP3 value proposition: “what you’re buying from BP3 and why.”

So the next time someone asks me what we do, I think I’ll tell them, we sell success.  (And then explain the context of BPM and how we do that.  )

We’ve been working hard on Putting the Band Back Together over the last 2 years. I’m happy to say we’ve just added two new members to the team that have a long, successful history deploying BPM solutions, but who were ready for a new chapter in their careers after writing successful prior chapters.

Pavan is someone we’ve worked with on-and-off for the last 4 years, and he’s had successful deployments both with us and without us during that time, as he was one of the foremost experts on the ground in BPM at BearingPoint.  He’s deployed Lombardi solutions but also worked with other vendor products, and he’s one of those guys you can always count on in a pinch. I’ve been talking to Pavan quite literally for over a year looking for the right opportunity to bring him on board.

Wade is another guy we’ve worked with on-and-off over the last 4 years, and when I found out he was leaving his previous role, we jumped at the chance to bring him on board.  He was the technical lead for a major insurance company’s BPM efforts, and has additional experience with significant IT apps at that firm and at previous firms.  He adds to our insurance expertise, but also brings a wealth of BPM experience to the table.

Both of these guys are the kind of people you’re proud to work with, and proud to have on your team.  They can play more than one role, and yet when push comes to shove they can solve hard problems with software.  They’ll be helping us out with a major project right off the bat, and we couldn’t be happier to have them on the team.  When we say we’re putting the band back together, these are the kind of guys we want on our team-  experience in the school of hard knocks, time in the trenches of BPM deployments, prior experience with other applications and integrations, and maturity.

Welcome aboard, guys!

Anyone in a service business should have a notion of what a customer is worth to you.  The concept of a lifetime value of the customer has been around a long time and Wikipedia is a good reference: Customer Lifetime Value.  But the basics are pretty simple:  take your typical contract value, your typical retention rate, and then run the math to figure out how many times the average customer renews…

I think the main thing that becomes clear, is that customers have a lot more value than the value of the initial contract would suggest.  If you’re retention (renewal) rate is 90%, the value is close to 9x the inital contract.  Of course, for longer term relationships, you also have to factor in some discounted value of future dollars to present value.  Good article here by Tom Karlo that breaks this down (with an actual formula) using a website customer example, but it is important to keep these ideas in mind for any business, because repeat customers are the lifeblood of successful businesses.

I’m often asked why I do what I do by friends who are not in the traveling consultant business.  Been thinking about these types of things a lot lately, as you might have noticed in a previous post.  There are a lot of reasons of course, but there are only a few that really matter:

1. I love what I do.  Yeah, there are days when it is “work” and days when it is fun, but when I have quiet moments on the weekend, I am grateful to get to do this for a living.  (definition:  “this” in my mind, is building what we believe can be the best BPM practice in the business, and building it from scratch, and all that entails).
2. I like being able to provide for my family.  There are other careers I would love, most of them don’t pay as well.  Some of them might, if I jump ship.  But I’m glad that what I’m doing allows me to provide for my family.
3. I love the people I work with.  At each of the last three roles I’ve had at companies, I’ve essentially been able to assemble my team.  In one case I did my recruiting internally, rebuilding a team around the company’s flagship product, responsible for more than $40MM in maintenance revenue every year.  In the next case, we were building up the services practice at Lombardi, where the # of people in technical field services grew (conservatively) 10x in my 4 years there.  I have a lot of good, positive feelings about those people that I helped bring on board.  The same is true at BP3 – we have the kind of team you want to succeed for.  For them as much as for yourself.
4. Mom and Dad are proud.  Admit it, that matters :)

A couple of recent experiences, and a few recent articles I’ve read, rubbed me the wrong way on this question of why we go to work.  Admittedly, that isn’t the question being asked, but it should have been!

Problem #1: How Employers Approach “Why we go to Work”

Employers are far too focused on compensation as both a way to create satisfaction and as a source of employee dissatisfaction.  First, I read this article by Joel Spolsky on Inc.com.  The title is appropriately attention-getting: “Why I Never Let Employees Negotiate a Raise“.  I figured that this one would be interesting, right off the bat, and it was.  But I don’t like the outcome.  He starts with the provocative scenario:

What would happen if you got to work one day, went into the kitchen, and saw a list of your employees’ salaries taped to the fridge? Would you freak out? Would you expect to find half of your staff weeping and the other half waiting with pitchforks outside your office door?

I think for one thing, the employees would be rightly pissed off about the invasion of privacy!  Salary information is not just private to the employer, but to the employee.  Joel asserts that keeping salaries secret is a way to avoid paying people fairly.  He might even be right, though no data or studies are cited to back up the assertion, because that interpretation probably fits how some of us feel about it from anecdotal data – we all know someone who was paid pretty out of line with their peers (high or low) somewhere we worked.

But Mr. Spolsky’s next statement is, I think, the foundation of my disagreement with his approach to compensation:

When my partner and I started Fog Creek Software, we knew that we wanted to create a pay scale that was objective and transparent.

Aspirationally, this doesn’t sound so bad.  My objections? First, if the goal was fairness, why not say “fair”, rather than “objective and transparent” ?  Notice, the word fair didn’t occur here an the assumption is that if it is objective and transparent it will also be fair (but I can name several examples in life that are transparent and objective – and not fair)… Second, the statement presumes that a pay scale can be objective and transparent – that is the basic assumption going in.  I’ll concede that there is precisely one objective part of compensation: the dollar amount.  And you can make that dollar amount transparent.

But the process of selecting the right salary, and the transparency of that process, has limits.  The basic idea is to take your experience + skills + scope of your job, sounds pretty objective.  But then there’s the question of which experience should count – does someone’s .NET programming experience count toward their Java programming salary?  The article proposes that objective skills are pretty easy to arrive at, from newbie to “consistent successes” – but these are subjective judgments that they are making about their employees skillsets – not *objective* assessments, and as such they can never be fully transparent.

Ultimately, I’m not a believer in putting a number on someone and assigning salary based on that.  I think a respectful conversation between the employer and employee (or prospective employee) generally will lead to mutually agreeable answers that are less likely to be looked at badly in the future (by either party).  Make sure that if the discrepancies in pay between employees are ever exposed, that you can confidently defend those differences.  If you can, then there’s no reason to fear questions on the subject.  In one important aspect I agree with Mr. Spolksy:  you should *assume* that salary data will get shared at some point, and so you should not do anything you can’t stand behind 100%.

Problem #2:  How Employees Approach “Why we go to Work”

People (in this case, we can probably just say “Employees”) often approach this question without really thinking about it.  They’re chasing the next rung on the ladder, the next reward, the next bonus, the next project, the next external confirmation of success.  But they haven’t defined, for themselves, what success looks and feels like.  As a result, there’s often an over-focus on compensation.  But Maslow’s hierarchy would tell us that after a certain point, when our income covers our physical needs and safety, that it has diminishing returns (because its utility toward achieving love/belonging, esteem, and self-actualization is less than its utility for achieving basic needs).

At South-by-SouthWest (SXSW) this year, Tony Hsieh gave a great presentation about customer service and culture at Zappos.  Particularly relevant to this subject, skip ahead to the slides in the 40’s, and especially slide 44, where he displays the 3 types of happiness:

1. Rock star – chasing the next high
2. Flow – engagement, time flies
3. Meaning / Higher Purpose – being part of something bigger than yourself

The point is that having a larger purpose is a more sustainable form of happiness than chasing the next high.  In general when I talk to people about joining our team (or, in previous lives, my other organizations), I first made sure that there was cultural alignment about what matters to the employee and what matters to me, and what matters to our team.  If someone doesn’t already start out believing that customer success matters, I’m going to have an uphill battle teaching that to them, and it might be easier to let them figure that out on someone else’s dime.  If someone doesn’t get excited about building the best BPM shop in the world, or being part of a great team – it just isn’t a fit.  When someone is consistently focused on compensation trumping all other concerns, I generally recommend they either stay where they are or go contract, and accept that risk/reward proposition.  Or if they’re too focused on being paid “fairly” they may prefer a system like Fog Creek’s.  I would expect Contractors won’t get the psychological rewards of building up a company, but they can more easily maintain a laser focus on their own personal bottom line.  Just beware slide 44 from the Zappos presentation!

Meanwhile, we’re going to get back to building a BPM business we can be proud of.

Ismael has lately been posting about dogfood lately – er, rather, Intalio eating its own dogfood by deploying Intalio’s BPM software to run internal processes at Intalio.  It goes into a bit too much detail for my interest- listing just about every open-source project known to man-kind that is being leveraged at Intalio (which is great, but more detail than necessary for me!).

However, the point raised by this is a valid one.  Often software startups write software that is purported to help with some general-purpose endeavor, but then fail to employ their own software for their own business.  At a previous employer, we wrote software to improve salesforce productivity, but we didn’t use our own software in our salesforce.  I think that not using our software actually hurt our business, and hurt our ability to understand customer complaints and issues.

While I was at Lombardi, we used our own softare (Teamworks) for building the support site.  It had great advantages for the company over using a pre-packaged solution:

1. Our support staff had to become very intimate with our product in order to build the support site.
2. We gained an important production beta-test site for new releases.
3. We gained an important migration site from one version of software to another.
4. We could actually see our own warts.

Lombardi also used Teamworks for certain internal processes – running the build and test processes for example.  But we didn’t use Teamworks to run our sales process – we used Salesforce for that – for the simple reason that Salesforce is a specialized application around that process, and the benefits of using a mature technical solution outweighed the benefits of eating our own dogfood.  And, as it turns out, it helped us understand how to help customers with processes that Salesforce didn’t quite handle.

One thing I learned about using your own software:  the commitment to develop the applications has to be critical to getting your job done, or include support from the top.  Support from the top doesn’t just mean “I like that idea, go do it!”, and it doesn’t just mean tacit support of getting it done, or even pressure to get it done.  It means providing the air cover, equipment, time, and funding to get it done.  “What funding?” some would ask – after all, you own your own software.  But if you are applying a developer’s time to an internal task, that is time she is not spending on product development – an opportunity cost.  If it is a consultant, then your opportunity cost is that consultant’s hourly rate, plus the cost of a potentially under-served customer base.  So there is a real cost to the time devoted to internal projects.

Why air cover?  Because there will be demands to pull you or your staff away from these internal improvement projects – just like there are these demands with your customers’ teams.  In order to resist the temptation to distract your team with too many competing priorities, you need to provide the air cover for them (with your management), or your management needs to offer that air cover to you.

Equipment?  You’ll need to deploy your application somewhere when it goes into production.  It may not require dedicated hardware, but you need some kind of environment to deploy to, and the support of your IT staff to keep it up and running.  You may well need development hardware and test hardware (or allocations in a shared environment, which again will require support from the IT staff).

If you get everything lined up, there can be a lot of benefits from deploying your own software internally – and those benefits tend to last and build on themselves over a long period of time.  But if you are missing the key ingredients you run a pretty high risk of delay and/or failure.

We just had our first internal videoconference between HQ and our Atlanta office.  Well, that’s how we like to refer to Flournoy when we’re not calling him BP3-East.  We made the decision to invest in Videoconferencing equipment because it is really important to have high fidelity communications both internally and with our customers.

When I was at Lombardi we built a distributed geographic technical team based on the belief that high-value, high-touch interactions with customers were crucial to building lasting customer relationships.  That’s a really hard thing to do right when you are starting from a base of 2 or 3 staff members, and don’t have the national network of people to draw on.

At BP3 we’re going to attack this in two ways.  First, we’ll hire geographically again, I have no doubt.  We have a better national network to tap into this time around, and some of our colleagues from Austin have moved to other cities, and might be able to help us find the right people.  Second, we’re going to invest in videoconferencing equipment.  We think it will enhance the quality of our offsite work with customers, and likely it will somewhat reduce the need for travel expenses.  It also sends a powerful message to our team that we’re interested in their quality of life and their ability to do good work remotely.

Videoconferencing still isn’t cheap (can’t wait til its under $1000/seat), but I was pleasantly surprised at how affordable it is compared to what it cost 10 years ago, for a better product.  And with the cost of travel increasing, videoconferencing looks more and more affordable by comparison.  Oh, sure, you can go the <insert favorite IM chat client> route, but the fidelity of such video connections is generally terrible, and certainly not good enough to show someone at a remote location what you’re drawing on your whiteboard.  We went with a Lifesize system.  Its high-def, the quality is fantastic (720p), and with remote control, the person on the other end can zoom into our whiteboard to see what you’re drawing.  Voice is included in the video/audio stream, so there’s no need to place a separate voice call.  And there’s no per-call charges because it all goes over IP (over your network).

We’ve been pleasantly surprised at how many of our customers have videoconferencing setups as well.  Often these are underutilized assets, but there’s no reason for that to be the case on our projects!

I want to thank good friend Megan Lueders for giving us a demo of the system and getting us to take this seriously.

[author's note:  we're going to publish a number of blog posts that reveal our thought process behind what we do.  I guess you could call it looking backstage or behind the curtain.  I think this formulation is particularly interesting at the stage of the business that we're now in. ]

Not Just What. It’s How and Why.

We have a set of services we can offer customers, and in fact we have a list of a good number of those services on our website. That’s the “What” as Lance would say. But we don’t have the How, or the Why.

So Lance has been going through the process of defining the How and Why, and yet boiling it down to a visual that can be easily consumed. All great creative processes seem to require napkins or white boards. We went with white boarding. We now have a great chart on the wall that shows progression over time for achieving improvement in your process based on the three calls to action on our front page of the website: Visibility, Control, and Performance. Each horizontal band captures a discipline, and each vertical band captures a focus area. The intersections are specific services with expected outputs and expected value (return).

To me, the brainstorming around this framework was a lightbulb moment – the “aha” moment that crystallizes all those things we do into an actionable framework. For a given process, you find out what your goals are in terms of Visibility, Control, or Performance (or combination of the above), and where you are in your current progression from top to bottom (timeline reflecting actions taken to date). Based on that, the framework pretty well tells you what you should be looking to do next.

Already decided what to do? Well, our framework will tell you what the expected return on that next step is, and what the expected outputs should be.

We have some interesting ideas for this framework. It let’s us do apples to apples comparisons of projects and processes that, on the surface, are quite different. Which then allows for how we can focus our business growth and business development, because we can talk about statistically significant volume of projects and ROI’s associated.  Over the long run this will be a really valuable asset, and in the short- to medium- term it helps us drive a lot of decision-making.

We’re still working on the fit-and-finish for the framework, and it will likely to continue to be a work-in-progress as we build out our business, but watch this space for more details soon.