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I always thought that expanding my business at a steady pace was a smart move. Now I worry that it could potentially kill us
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One of our best programmers just came into my office. He's working on a new price list that we're putting into place, and he's on a tight deadline. I need to be able to announce the new rates in three weeks, at the first public demonstration of the application FogBugz 7.0.
Implementing the new prices on our website is going to take too long, he told me. We aren't going to have it ready in time for my announcement.
"What? You've got three weeks! Three weeks to change some prices? I could change those prices by the time I go home today," I lied.
Changing the prices for new customers is easy, he explained. The hard part is building a slick new area on our website where existing customers can go to convert to the new pricing.
"What if we don't have a slick website?" I asked.
"Anybody who wanted to convert would have to call in, and we'd have to do it manually," he said.
"Could you get that part done on time? With the manual conversion?"
He said he could. Which means we're going to do a half-baked job of implementing these new prices. We have to, this time, because we're committed to a date.
Normally, we don't do things this way at Fog Creek. Speed to market usually involves a direct tradeoff with quality. If you need high-quality code, it takes time, and we've always taken the time to do things right. No deadlines here! Among other things, taking the time to do things right has probably slowed us down. A lot.
We're doing great, thanks for asking, but after nine years, I'm beginning to accept the evidence that whatever it is we're doing results in reasonable, steady growth, not spectacular, explosive growth. We've gone from two to 25 employees in about a decade by growing, on average, 54 percent a year.
I have always believed that there is a natural, organic rate at which a business should grow, and that if we expanded too fast, the wheels would come flying off. (We'd have customers calling us up left and right to do things manually that should have been handled online, for example.)
And I have to say, I've been happy with our growth rate. I was resigned to never being on the Inc. 500, because growth for the sake of growth leads to all kinds of, well, growing pains. For the longest time, I smugly thought: We're profitable, our sales are rising, we make terrific products, and our customers love us. So what do we have to worry about?
Then I came across a quote from Geoffrey Moore, who is best known for his best-selling book Crossing the Chasm, which is about how businesses cross over from their initial niche markets to dominate larger markets. In another book, called Inside the Tornado, Moore writes about the great battle between Oracle and Ingres in the early 1980s. The winner of that battle is well known: Oracle now has a market cap of more than $100 billion, and I'll bet you've never heard of Ingres.
"What set Oracle apart from Ingres," Moore writes, "was that [CEO] Larry Ellison drove for 100 percent growth while Ingres 'accepted' 50 percent growth." Executives at Ingres meant well. According to Moore, they felt that the company "simply cannot grow any faster than 50 percent and still adequately serve our customers. No one can. Look at Oracle. They are promising anything and everything and shipping little or nothing. Everybody knows it. Their customers hate them. They are going to hit the wall."
Of course, Oracle overcame those concerns and eclipsed its rival. And this got me worried. Were we Ingres?
I had to wonder. We do have a large competitor in our market that appears to be growing a lot faster than we are. The company is closing big deals with big, enterprise customers. And the wheels are falling off the donkey cart over there as the company stretches to fulfill its obligations. Meanwhile, our product is miles better, and we're a well-run company, but it doesn't seem to matter. Why?
Moore explains that "for pragmatist customers, the first freedom in a rapidly shifting market is order and security. That can only come from rallying around a clear market leader. Once the apparent leader-to-be emerges, pragmatists will support that company, virtually regardless of how arrogant, unresponsive, or overpriced it is."
Uh-oh. Are we actually losing our market leadership position because we're careful?
It's entirely possible. Think of it this way: If you're growing at 50 percent a year, and your competitor is growing at 100 percent a year, it takes only eight years before your competitor is 10 times bigger than you. And when it's 10 times bigger than you, it can buy 10 times as much advertising and do 10 times as many projects and have meetings with 10 times as many customers. And you begin to disappear.
As you may recall, there were lots of cute little word-processing software companies in the late 1980s. Remember WordPerfect? WordStar? Ami Pro? That business has been completely dead since Microsoft Word for Windows emerged as the one to beat in the early 1990s. I'll bet the Ami Pro product managers were sitting around feeling pleased with their solid annual-growth numbers, just as Microsoft was growing faster and becoming the de facto standard.
Expanding your business at faster than its natural rate is a risky thing to do, of course. You have to hire quickly, which reduces the profit margin. You may have to borrow money or take on investors. You have to rely on outside partners more. You have to trust your employees to do things that you used to be able to do yourself, and nobody does them better than you.
So what's the proper amount of risk? A lot of people would say, "Gosh, zero?" OK, that sounds safe and reasonable. You worked hard to you're counting on it for your retirement and your kids' college and whatever. But if you're not taking any risks, you're pretty much guaranteed to fail. Somewhere, there's someone out there who is taking more risks than you, and that person's business is growing faster than yours, and that person's business may one day come to dominate your industry while yours withers away.
Anyway, you didn't become an entrepreneur to be safe and reasonable.
Here at Fog Creek, I feel like I can certainly afford to take more risks in pursuit of a higher rate of growth. I have the beginning of a plan for how to proceed.
Step One, I think, is to pluck off our biggest competitors. We're pretty certain that we've already built a great product that meets our customers' needs -- but there are still too many cases where we find out that, for some reason, someone went with the other guy. So that's the development team's mission for 2010: to eliminate any possible reason that customers might buy our competitors' junk, just because there is some dinky little feature that they told themselves they absolutely couldn't live without. I don't think this is going to be very hard, frankly. Developing great software is something I'm pretty sure we're good at.
Step Two is something I'm not particularly good at. Not in the least bit. We have to build up our sales force. The bottom line is, we just don't do enough selling. I've been working on the assumption that a product naturally creates demand for itself and the sales team just helps fulfill that demand. But I've realized that I have things backward. I've come to understand that a sales team drives demand. My problem is that I've never been able to figure out how to hire good salespeople. For a guy who wrote a book on how to hire great programmers, it's mortifying how incompetent I've been at enlarging the sales team, which, right now, consists of one terrific account executive and a dog. (I'm just kidding. There's no dog.)
We don't want to win with lousy products or high-pressure sales tactics. We have no intention of giving up our commitment to good customer service or high-quality code. But we do have to work closer to the limits of our abilities, we have to invest more of our profits in hiring more salespeople and software developers, and we have to focus relentlessly on winning more enterprise sales. We have to do that, because otherwise, we're going to end up being the company you've never heard of.
Joel Spolsky is the co-founder and CEO of Fog Creek Software and the host of the popular blog Joel on Software. For an archive of his columns, go to .
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Michael & Meranda’s New Television Show
By Michael Snyder, on January 14th, 2013
Once upon a time, the U.S. economy produced a seemingly unending supply of good paying jobs that enabled American workers to buy homes, raise families and live the American Dream.
But now all of that has changed.
Over the past several decades, there have been some fundamental shifts in our economy that have steadily eroded the value of the American worker.
Thanks to incredible advances in robotics, computers and other fields of technology, many economic activities that once required a tremendous amount of manpower now require very little.
Nothing is going to reverse those technological advances, so the jobs that have been lost as a result are now gone forever.
But there are millions of other good jobs that we have lost that we could have done something about.
Over the past couple of decades, millions upon millions of American jobs have been shipped overseas.
Thanks to a whole host of “free trade” agreements that our politicians promised would be very good for our economy, U.S. workers have now been merged into a global labor pool with hundreds of millions of workers on the other side of the globe that live in countries where it is legal to pay slave labor wages.
In such a situation, it is only natural for big corporations to shift production from high wage areas to low wage areas.
Unemployment in America has skyrocketed and so have corporate profits.
Today, corporate profits as a percentage of U.S. GDP are at an , but wages as a percentage of U.S. GDP are near an .
The lack of decent jobs in the United States is one of the primary reasons why we are in an economic crisis that never seems to end, and things are not going to turn around any time soon.
We truly are witnessing the slow, tortuous death of the American worker, and politicians from both political parties are just standing aside and letting it happen.
Back in the old days, just about everyone that was willing to work hard in America could easily go out and get a decent job.
But today there is savage competition even for jobs that pay close to minimum wage.
For example, thousands upon thousands of people recently applied for just 200 jobs at a new Target …
Thousands of people applied for 200 new jobs at Target over the last three days in Northeast Albuquerque.
KOAT Action 7 News went to Target’s job fair at the Marriott Uptown every day and continued to find lines snaking around the building.
Candidates only have a one in 35 chance in getting a job, but many have said they’re confident they can stand out from the pack.
Those candidates have less than a 3 percent chance of getting one of those jobs at Target.
The odds of getting into Harvard are actually .
But at least there is some economic activity going on in Albuquerque.
All over the country there are other cities that were once bustling with economic activity that are now dying a depressingly slow death.
For example, just check out the following excerpt from an article by Don Terry about Gary, Indiana entitled ““…
Like Flint, Detroit, Cleveland, and Akron, like hundreds of cities and towns across the once-industrial Midwest, Gary is emblematic of the new American poverty, the poverty that descended when the factories closed down. The city is half the size it was in 1970, its population reduced from 170,000 then to 80,000 today. Its poverty rate is 28 percent. A fifth of its houses, churches, school buildings, and other structures are vacant and boarded-up. The hulking steel mills still line the Lake Michigan shore in northwest Indiana, but they’ve been hemorrhaging workers for decades.
You can see some stunning photos of the ruins of Gary, Indiana .
It is hard to imagine that Gary was once a truly great manufacturing city.
But of course Gary is far from alone.
The following is from a recent article posted
that detailed the shocking decline of Ypsilanti, Michigan…
In the late 1970s, some 20,000 people worked for Ford and General Motors in Ypsilanti. Today, only a few hundred work in the auto industry here. It’s the same story in cities throughout Michigan, Ohio, and Indiana.
To say the least, Ypsilanti has seen better days. Tax revenues have plummeted over the past 20 years. The mayor says he’s considering combining fire and police into one department. The parks and recreation department has a budget of $0. It’s just a web page that rarely gets updated.
Meanwhile, U.S. car companies are busy putting up shiny new factories on the other side of the globe.
For instance, Chrysler recently announced plans to build new manufacturing facilities .
You don’t hear much about the decline of manufacturing in the United States on the mainstream news, but it is certainly one of the biggest economic stories of this century so far.
Back in the year 2000, there were
Americans working in manufacturing, but now there are .
So what are American workers supposed to do?
Are they supposed to learn new skills for the “jobs of tomorrow”?
One of the few areas of the U.S. economy that has been steadily growing has been the healthcare industry.
There are hordes of Baby Boomers that are getting older, and they are going to need a whole lot of medical care.
I used to tell friends that nursing is a good field to go into because there will always be jobs available.
In fact, at one point we were told that there was supposedly a “shortage” of nurses in America.
about recent nursing graduates that cannot seem to find work no matter how hard they try.
The following is a short excerpt from one of those horror stories…
I graduated from San Jose State University in May and got my registered nurse license in July. I have been searching and applying for an RN position for seven months now and still have not found a nursing job.
I have applied for jobs all over California and also other states such as Texas, Nevada, Oklahoma, and Virginia.
So if you can’t find a job in healthcare, what field are you supposed to go into?
Please don’t say law.
There are hordes of new law school graduates competing for very few entry-level jobs each year.
In fact, one law firm has come up with the bright idea of making young lawyers pay a fee for the “privilege” of getting legal experience by working there.
Just check out their .
The cold, hard truth is that there are not nearly enough jobs in America today.
As a result, our incomes are declining.
Median household income in the United States has fallen for .
Overall, it has fallen by more than $4000 during that time period.
Things have been particularly rough on .
If you can believe it, U.S. families that have a head of household that is under the age of 30 have a poverty rate .
And, as a recent
explained, life expectancy for younger Americans is depressingly low…
Also, new evidence revealed that younger generation of US citizens (those under 50) die earlier and have poorer health than their counterparts in other developed nations, according to a new study of health and longevity in US.
US men ranked last in life expectancy among the 17 countries in the study, and American women as second to last.
The 378-page report by a panel of experts convened by the Institute of Medicine and the National Research Council was based on a broad review of mortality and health studies and statistics and included other countries such as, Canada, Japan, Australia, France, Germany and Spain.
The future simply does not look too bright for American workers.
Thanks to advances in technology and the rampant offshoring of jobs, big corporations simply do not need U.S. workers as much as they used to.
In fact, many of them try to minimize the number of expensive American workers that they have on the payroll as much as they can.
So what are we all supposed to do?
What are we supposed to tell the millions of American workers that cannot find jobs?
Well, I guess the good news is that you can find “We Accept EBT” signs
these days.
As the number of good jobs has declined, the number of Americans on food stamps has absolutely soared.
If you can believe it, the number of Americans on food stamps rose from about
in the year 2000 to more than
That is staggering, and it is truly unprecedented.
Back in the 1970s,
was on food stamps.
Today, about one out of every 6.5 Americans is on food stamps.
The American worker is dying a slow, tortuous death, and unless dramatic action is taken immediately, things are going to get a whole lot worse.
For much more on all of this, please see another article that I wrote recently entitled ““.
So what do you think the future looks like for the average American worker?
Please feel free to post a comment with your thoughts below…