Author: Author

1994-95: I Saved It!

In February of 1994 Palo Alto Software was on the brink of failure. By February of 1995 it had a successful new software product with more than a million dollars of sales orders. Here’s how.

Note: I say I saved it because I did. That was me, in all the meetings, making all the decisions, doing the work, writing code, moving it all forward. But in all these hard times, Vange suffered with me, listened to me, took the risk with me, and advised me of her instinct about people, and her instinct about not spending money we didn’t have. She also supported me in the moral support sense, so that I didn’t feel alone, didn’t feel like I’d lose my family if I made the wrong decision.

The previous story here tells how it got that bad (1993-1994: PAS on the brink). I flew back from New Orleans in February of 1994 dealing with bad product, bad packaging, bad management, and the implied debt of about a quarter million dollars worth of unsold product coming back as returns.

Faced with all those problems, I doubled down. In my blogs and speaking I tell people to do what I say, not what I did. Don’t get yourself into a corner with no way out except digging deeper. Plan better. Anticipate better. But I didn’t. I was in that corner with no good option. My consulting income plummeted as my key people left Apple at about the same time. I had to make Palo Alto Software succeed. So I turned up the risk, doubled the bet. And won.

Step One: Undo the Bad Deal

My recovery plan started the day after the long dark flight from New Orleans. I called Ron Walro, my business attorney, then Paul B., then Ron again. Paul knew Ron and trusted him. I trusted him too. Ron was working on a mediation specialty for his practice and suggested a mediation session.

We met on the next Saturday morning. In one two-hour session we cleared the partnership language and got Paul B. completely out of Palo Alto Software. He got our $30,000 shrink wrap machinery and two Macintosh computers in exchange for signing away any and all rights and claims. I got Palo Alto Software back as 100% ours without any encumbrance. To Ron’s credit, each of us was relieved and happy with the solution.

Paul thought he dodged a bullet. He got out from what he thought was obviously doomed for failure. And he got his beloved shrink wrap machine. He had no faith in me or the business. He thought he’d escaped being associated with something that was so obviously going to crash and burn.

I did dodge a bullet. I got my company back. I got my freedom to do things my way. And I gave away nothing that hurt.

I hated the damned shrink wrap machine. I’d bought it only because Paul Berger was obsessed with it. From the day he started with me, until I finally agreed to buy it, I’d told Paul over and over that I didn’t want to manage packaging and assembly. I didn’t want to own the damned machine. Our core competence was business planning software. Packaging and assembly were fine as a per-unit variable cost and I didn’t want that to be assets and fixed cost to manage. Paul never stopped pressuring me. He was obsessed with the damned shrink wrap machine and owning the whole process I’d put the idea down — it was my company, so my decision — but he’d just wait a few days and then bring it up again.

This was a great example of mediation the way it should be. Both sides winning.

Paul B. was not a bad person. He was a tireless sales person. He was relentless with the distributors who held the key to our sales in a market that was all retail and mail order. He’d leave a voicemail every day for months without response and happily do it again the next day. He established Palo Alto Software’s relationship with distributors and retail chains. He was always honest and he always worked hard. As it turns out, I had trusted him too much, failed to manage him, just let him go on without supervision. My loose style of management was bad for his not knowing what he didn’t now, and his lack of strategic sense. And the incentives were wrong. I’d let him have goals on sales and sales alone, without regard for costs or expenses.

Step Two: Sales Reps

Do you know the concept of fixed costs vs. variable costs? It’s pretty simple conceptually. Fixed costs are like rent and salaries that you pay regardless of sales or financial health. Variable costs are like per-unit promotions and per-unit commissions that you pay only if you sell.

Sales reps are the ultimate variable cost. One bright spot in the darkness of the New Orleans revelation (1993-94: PAS on the Brink) was meeting Donna Corson, a successful sales rep, in the process of starting her own sales rep firm, who had also just moved to Eugene from Los Angeles. It was the great serendipity. I became Donna’s first local client. She took on all of my sales tasks in exchange for a 6% commission on sales into retail channels to be paid to her only after the channels paid us. I was one of only four or five clients and she was good at sales. People in the channels knew her and liked her. And she knew the business of packaged software sales. It was a match made in heaven.

Step Three: A Stand-alone App to Replace Templates

The huge underlying problem was trying to sell templates as software. I started Palo Alto Software with software called templates. These are programs that run with spreadsheets, also called macros. I had an excellent financial spreadsheet that linked all the assumptions together so that any change in any one would reflect in the others according to proper finance and accounting. The value I sold to my users was a finished professional spreadsheet standardized and well documented, with formula errors locked out. It absolutely required that my users have the related spreadsheet software (for example, Microsoft Excel) because my programming ran inside the spreadsheet. The spreadsheet software managed saving and printing and formatting.

Many people didn’t understand templates and the relationship between templates and the spreadsheet software they ran in. I sold the Business Plan Toolkit for $99. I got near constant friction from people who complained about saving, formatting, or printing, all of which were done by their Microsoft Excel (or similar). I had to take way too many calls wanting help with operating the spreadsheet, or their computers. In their minds, they had bought my $99 product and I should show them how to save and print. I couldn’t tell them their problem was using their spreadsheet.

So, essentially, going into packaged software with spreadsheet templates was a real problem of educating the market and supporting the spreadsheet software that I didn’t make, I have the money they paid for their spreadsheet, but I was expected to support it. I think the idea was essentially doomed from the start. And the evidence is that in the ensuing two decades, nobody I know of has been successful selling templates.

What I decided, in the days after my February 1994 shock, was not to solve the packaging, or sell-through management, or pricing, without first solving the problem. I needed a stand-alone business plan application. It had to manage not just the financials of the plan, but the text too; and charts, and page formatting, and the outline.

Furthermore, as of 1994, computing had evolved enough to make that stand-alone application possible, even with the programming limitations I had. First, the Windows operating system and computer power and data storage had improved and evolved. Second, Microsoft had published a visual programming language, which could create Windows applications, called Visual Basic. I learned Visual Basic and loved it. Third, a software developer published an Excel-compatible software tool that could build spreadsheet functionality into a Visual Basic application running in Microsoft Windows. The tool (I so wish I could remember it’s name, but I’ve done a web search, that history is lost) sold for $395 and its output was royalty free.

I said it was possible, but not easy. I couldn’t just do it myself like I had with the template products. I wrote about a third of the code myself, in Visual Basic, doing the spreadsheet portions and linking them to the application. I found a local three-person programming company (Cascade Technologies, which no longer exists; its founder was Ken Barley) to do what I couldn’t. They added a complete interface to include the words as well as the numbers, and keep it all, even formatting and printing, inside the one application. We bought Visual Basic add-on tools to manage the word processing, outlining, charts, and printing. I paid Cascade Technologies a $1,000 monthly fee for 12 months, plus a royalty of two percent of future revenue. We were still not able to spend money we didn’t have. But we managed to find that money, a bare minimum, to build the product. That product was the first Business Plan Pro.

Step Four: Packaging

In the packaged software business of the 1990s, packaging was 90 percent of marketing. Nobody read ads. Reviews helped a lot, But the real messages, the ones that mattered, were the box. The look and feel, the tag lines, the illustrations, the testimonials, the quotes from published reviews … the boxes sold the product.

Remember how Cathy Kolder (in 1993-1994: PAS on the Brink) said “your boxes suck?” She added, “it’s obvious you designed them yourselves, and you designed them to reflect your values, like recycling and earthy colors. That will never work. To understand packaging, go to a supermarket and look at the boxes. Especially the (bright orange and glaring) Tide boxes.”

So I knew that at the same time I was building a software product, I also had to create good retail packaging. As if it weren’t already completely obvious, I had also just hired Donna Corson the sales rep, and she took me on as a client only on the condition that we do completely new packaging and she had veto control. I was grateful for Donna’s input. Donna lived and breathed packaged software sales in retail channels. She knew and understood that packaging was everything. So I turned to local designer Dave Funk, who frequented local startup meetings, and hired him and his Funk Designs to create good retail packaging.

Here is the retail packaging we did for the first Business Plan Pro:

What Happened? We won!

We finished Business Plan Pro in November of 1995 and it hit the retail shelves in February of 1995. It was a success. It did get good sell-through. The channel tracking service everybody used had us as #1 in small business software by July 0f 1995.

Reflections of a Hypocritical Business Planner

Irony: I’m a business planner, and I have been for 30 years now; but the biggest decisions of my real life have been remarkably unplanned.

Rewriting history backwards

I could rewrite my own history backwards to make it all seem like it had been planned, but it wasn’t. Going from hippy to business planner to entrepreneur, I tripped over the most important right decisions, accidentally. It was a lot like a shiny metal ball bouncing around in a pinball machine, hitting obstacles and changing directions. Sometimes I made the wrong decisions and got the right results. Go figure.

For example, in college I studied what interested me: Literature. I wasn’t making a career choice, I was taking the path of least resistance. It was an easy step from Literature to Journalism, and — after 10 years with UPI and McGraw-Hill and others — from there to the MBA. And in 30-some years of business I keep meeting people whose careers seem to reconfirm the basic wisdom of studying what interests you. These are people who followed that path of interest and found, later, that it led to the right place.

Bad advice?

All of which could end up as dangerously bad advice, I suppose: if taking the downhill path leads only downhill. Sometimes you have to buckle down and work; but at least, if you’re doing something that interests you, the work feels better. That was certainly my case. I got my first job in journalism in Mexico City, by mail plus a plane trip from Oregon, because I was happy to work cheap and they guessed that since my wife is Mexican I probably spoke Spanish (which wasn’t true until a few months later). There was no planning there; it was a job, in 1971, when jobs were scarce (as they are now). It seemed to prove the wisdom of taking that pinball-like change of direction.

When I sold out

The next time I changed direction it was for the money. I switched to business writing from regular wire-service news journalism after three years of it because my wife and I had two kids by then and with kids, money became an issue. Before that, neither one of us cared that much. Journalism had enjoyed an aura of save the world for a while, but that gets old. That change doubled my income (from very little to a little bit more). I waded slowly and fearfully into business writing with about as much enthusiasm as an ophidiophobe (fear of snakes) wading into a jungle swamp. At first, it was just a sellout; but then it got interesting. I took business classes at night school. I really wanted to know what was going on underneath the press releases, in the numbers, where the truth hides.

So it took me 10 years to get from undergrad studies to business school, but that wasn’t a bad thing. By the time I got there I was — notice the theme here — once again interested in what I was supposed to be studying. I’d had enough of business journalism to want to actually know what I had been writing about (novel idea) and that made business school fascinating. And my years as journalist helped me get through business school while working full-time in consulting. I could write fast, and that’s a good thing in school.

Sometimes bad decisions have good outcomes

I made some very bad decisions that created very good outcomes. In some circles, we call that luck. Later I quit a good job to go on my own writing computer books, but with the help of my wife and my favorite former client, that became business plan consulting. And that — again with the help of my wife and some clients — became business plan software. It seemed like a natural progression. Just as it was critical to write for readers in Journalism, it was even more critical to write for users in software. And all of this changing directions meant that it wasn’t until 1994, 20 years after switching to business writing, 11 years after leaving that good job, that Business Plan Pro was first released.

And, while we’re on the general subject of unanalyzed decisions with good outcomes, doing what you want, in 1969 I asked a girl to marry me after knowing her about two weeks. As of 2023 we’ve been married 53 years. (And we both agree we were lucky. Don’t try this at home. Wait longer.) And at every key moment from literature to journalism to business to entrepreneurship, it was always two of us, never just me. When things were really dicey — like when we realized we had three mortgages and $65K credit card debt in developing Palo Alto Software — it was never “you idiot, what have you done,” but rather “we’ll take the risk together, and if we fail, we’ll fail together.” Knowing that you’re not going to lose a marriage over it makes it a lot easier to change directions.

1987: Business by Handshake

(Reposted from timberry.bplans.com)

As a four-year mutually beneficial relationship ended, turning our cooperation into competition, Emmett Ramey offered this as a final thought:

So now we’re competitors, but we can still be friends. The way I see it, it’s like two people fishing on a pier. I’m not worried about the fish nibbling on your line, because there’s plenty of fish nibbling on my line at the same time.

Emmett Ramey and I did business together for four years, money was spent and earned, and the business relationship ended amicably with an agreement to compete against each other, all based on a handshake, without either of us signing a contract.

Yes, it’s a true story. No, I’m not suggesting that this is the right way to do business; it’s an anachronism, definitely out of date. Still, it happened.

Emmett and his wife Ardella were owner-operators of Oasis Press in Milpitas CA when this happened in 1984. I was a one-man company called Infoplan, doing planning and market research, writing books and magazine columns, and working out of a home office.

We got together because I’d developed a business plan template, for use with Lotus 1-2-3 and Microsoft Excel, for the financial portion of a business plan; and Oasis Press had published Develop Your Business Plan, by Leza and Placencia. My financial templates worked very well with that book. We agreed that Oasis Press would buy the templates from Infoplan and add them into the book, as an option.

That deal lasted for about four years. I sweetened the pot for both of us by taking payment for a monthly column in Business Software magazine as a free black and white ad for Oasis Press, rather than money. The ad advertised the templates and the book. Oasis Press took the sales, and paid me for the add-on.

It worked really well until Emmett called one day, sounding embarrassed, saying that his authors wanted royalty payments from me for my software. That didn’t make sense to me. I’d already written books published by McGraw-Hill, Dow Jones-Irwin and other publishers, and business planning was my favorite topic, and the authors hadn’t contributed anything to my software. So we agreed, again without having to negotiate with lawyers or sign anything, to split it apart.

So I stopped selling the template for Develop Your Business Plan, and developed Business Plan Toolkit, which was released in January of 1988. Oasis Press continued to sell the book, but without software. It moved to Oregon in 1991 and was purchased by Entrepreneur Press in 2003.

And, with apology for repeating, I’m not recommending you do it this way now. I guess this was the exception, not the rule. And in this case, business by handshake worked perfectly well.

1979: Forecasting a New Market

(Reposted from timberry.bplans.com. In the summer of 1979, after we had moved from Mexico to Escondido Village on campus at Stanford, while waiting to start the MBA program, I worked with Creative Strategies International as a contract consultant. My last Mexico employer, Business International, owned Creative Strategies and helped me get the contract work.)

In 1979 Creative Strategies International, a high-tech market research company, assigned me the job of forecasting the market for automated teller machines in the U.S.

There were a very few of them already in place at the time. Maybe a few hundred.

I got the numbers as best I could. I found out how many banks there were, and how many branches. I got data for growth in banking customers and growth in branches. I got data for employees in banks.

I talked to dozens of experts. Product managers in companies making ATMs, or companies that could possibly be making them. Lots of bankers, lots of consultants to bankers, several journalists involved in bank-specific trade magazines.

Not all of them wanted to talk to me, but an older and more experienced vice president in the same firm (Tom Arnett was his name) had some good advice (and I’m paraphrasing here, it’s been 30 years):

They have to be interested in what they do, the market they’re in, or they couldn’t get up in the morning.

So hook them in fast. Tell them you’re forecasting the market for Creative Strategies. Tell them you’re thinking the market is going to grow at some percent — it doesn’t matter — but most experts disagree. Make it clear as quickly as possible that you’re going to offer opinions and information as part of the conversation, if they have time to talk to you.

Most of them will. They want to feel like experts. They want to be asked. And they want to know what you’re thinking too.

I used Tom’s advice a lot, and talked to a few dozen experts.

In the end, though, there was not technical or mathematical way to forecast ATMs. At least I was able to relate the projection to numbers of branches to give me some sense of error check, but it wasn’t clear that ATMs would all be in bank branches.

What made the biggest difference to that forecast was the placement of two ATMs at Stanford Shopping Center on the side of the Bank of America branch there. We lived in grad student family housing at the time, and we would ride our bikes over to the shopping center. The ATM was very convenient. It gave me cash fast. It gave me cash after banking hours. I used it a lot.

Most of the bankers told me people would never accept doing business with a machine. They’ll never warm up to that.

Happily, I believed what I saw instead of what the bankers told me. I projected a very fast growth rate for ATMs. As the years ticked off, it turned out I was very close. The forecast I made in 1979 gave a relatively accurate view of the future, given how much uncertainty was there in the system.

Take note, however: it was a human educated guess. The math helped me to compare my projection to the numbers of bank branches, but that was just a reality check. I was guessing.

1974: Jews? Yes, Tomato.

(Reposted from timberry.bplans.com.)

Although it was tame compared to recent years, Israel was very tense in 1974. It was just a few months after the Yom Kippur war. Still, tourism went on. I was a temporary tour guide, in charge of a group of about three dozen people going around the world from Mexico City.

The group was a Mexican group, mostly from Mexico City with some couples from other parts of Mexico. It was an expensive tour so they were economically well-to-do, which in Mexico usually correlates with speaking pretty good English.

Julio Sanchez and his wife Carmen were exceptions. They were from El Salvador and they didn’t speak English. At least they hadn’t spoken English at the beginning of the trip, but during the trip they picked up a lot. Waiters and hotel clerks and people along the day were much more likely to speak English than Spanish. So Julio and Carmen learned how to order meals, and find restrooms, and give taxi directions back to the hotel.

Despite the tension in Israel, it was also Jerusalem, an amazing city to visit, a place people in the group had wanted to visit all their lives. They’d visited the Taj Mahal, Hong Kong, and other splendid places, but Jerusalem was, to most of the group, the highlight. The organized tour went through as many of the main places in Jerusalem as possible — Bethlehem, the Wailing Wall, the stations of the cross — but not the Dead Sea. It was left out on purpose, because of the recent war, meaning tightened security, and more danger.

So it turned out that on the one free afternoon of the stay in Jerusalem, six of my group set out on their own to see the Dead Sea. Normal tours weren’t going there, but they found a taxi driver who, for a fat fee, was willing to take them. I didn’t know until later, but it wouldn’t have been up to me anyhow. They were all consenting adults. I was in charge of tours, logistics, meals, baggage, but not discipline.

They started late. They arrived at an abandoned Dead Sea bathing area late in the afternoon. They had to walk several hundred yards from the parking area and normal beach spot — which was pretty much abandoned — to the water. The taxi waited.

Night fell. They weren’t sure of which direction to walk back to the taxi. They argued. Then suddenly, spotlights, a loudspeaker in a language they didn’t understand. There were military vehicles, people in uniforms pointing guns at them. Angry men, shouting at them and pointing guns, loaded them into a military vehicle. They were driven through the night to a military outpost with a lot of searchlights, and led into a closed room with no windows.

They stood in front of an officer, surrounded by men with guns. There was not a lot of light in the room. The officer asked them questions, angrily, but it was a language they didn’t understand. They could only shrug and shake their heads. What had they done? They couldn’t even ask each other, because the men were angry if they tried to speak to each other at all, and more so because it was Spanish, a language they — the guards, the officer — didn’t understand.

It was at this point — I heard the story a few hours later, in the hotel — that Julio’s newfound English, learned just during the recent weeks of the trip, saved the day.

“Jews?” the officer asked angrily, “Are you Jews?”

Julio’s face brightened. At least, some words he recognized.

“Yes, thank you,” he answered. “Tomato, please.”

They said it took a couple of seconds before the group realized, and started laughing. The tension was broken. The captured tourists, suspected of being terrorists, and the guards, and the officer, laughed together. Both sides switched to English, and understood each other (Julio and Carmen needed help, but they were there with four fellow tourists who did speak English, and the Israeli army personnel all spoke English.)

The taxi was long gone, presumably hoping not to get disciplined for taking tourists to the deserted Dead Sea area at night. The Israeli solders took the tourists back to the hotel. Check points were passed, the story was told, there was a lot of laughter along the way.

So that’s the end of the story. It’s as true as it was when they told it to me that same night, in the hotel bar, where they found me waiting for their return and pretty worried.

This happened in 1974, when I lived in Mexico City and worked with United Press International. We worked six-day weeks at UPI, so we got six weeks of vacation.

And I took the picture here from our hotel, looking across the street, that same day:

1987: The Heat, the Kitchen, and Credit Cards

(This is reposted from my blog at timberry.bplans.com)

I was furious. This guy had stolen from us, blatantly, by ordering a software product, returning it, getting his money back from us, and then getting his money back from the credit card company.

This was back in the “old days,” the beginnings of Palo Alto Software, when I was the only full-time employee. I knew the guy’s history. He had done the same thing with the previous version, and then he did it again with this version.

So I was furious when I called the credit card merchant services line to get my money back. This guy was stealing from us and the credit card people were empowering him.

I got about five minutes into the call when I finally had to take a breath, which gave the very smart and presumably very well trained woman on the other end of the call a moment edgewise.

“Mr. Berry, can I interrupt you, break your train of thought for just a moment?”

“Okay,” I said, but begrudgingly.

“If your company is going to do business with customers who have credit cards, this is going to happen to you from time to time,” she said, calmly, with a reassuring tone.

“What’s happening is that our biggest problem is credit card fraud, merchants who take customers’ money and skip out. We live and die on our customers trusting us that credit card purchases are safe.”

I was listening. She continued.

“So you have to just think of it as a cost of doing business. We are always going to side with the customer, at the drop of a hat. It comes with the territory.”

And by then, I was getting it. Like the old saying, “if you can’t stand the heat, stay out of the kitchen.”

“So basically,” I asked, “anybody who is prepared to lie to you can take my goods and get them free?”

She hesitated only a few seconds, just the right amount.

“Well, please don’t quote me on that,” she said, “but think about it. Is it worth it to you to take credit cards?”

I thanked her, gave up the issue, and went on to do something else more useful.

1988: Focus on What Was Right

(Reposted from timberry.bplans.com)

Years ago we were coaching a soccer team of six-year-old girls. That was me and two of my teenage kids. Another of my kids was on the team. After a game with a team clearly way more organized and much better coached than ours, I asked the other coach how he did it.

“Oh it’s not what we do,” he said. “It’s what we don’t do, and even what we don’t say.”

He explained that they kept things very simple.

“We don’t tell them about passing or dribbling or very much of anything. We just tell them we want the ball in the goal.

“We don’t call them halfbacks or fullbacks or strikers or sweepers. They’re kickers and honeybees and goalguarders. Kickers go where the ball is, honeybees go where the ball is going to be, and goalguarders kick it away if it gets close.”

And perhaps the most interesting thing of all:

“We never tell them what they did wrong, or what they’re doing wrong,” he said. “Instead of that, we wait until they do something right, and when they do, we make a really big deal of it. We make sure all the others know what they did right.”

This made so much sense that we started copying it immediately. By the following year, the girls had way more fun, the parents had more fun, and the coaches had more fun, and oh, by the way, not that it mattered, but that team also won every game. 

1983: I Don’t Create Competition

In 1983: The First Day of a New Business I told the story of leaving Creative Strategies and going out on my own to write books and, as it turned out, build my business planning and market consulting business. I was recently reminded of an offshoot of that story, valuable to me as a lesson in running a business right.

The lesson came from Larry Wells, who was the founder of Creative Strategies, president of Creative Strategies when this took place, and was later a venture capitalist in his own firm and then Citibank Venture Capital. I don’t know where he is these days. It’s been a long time, and I moved from Palo Alto to Eugene, but if you’re out there Larry, send me an email. I just Googled you and it didn’t work, there are many Larry Wellses out there, none seem to be the one who started Creative Strategies.

Larry and I remained friends during and after my exit from Creative Strategies. He kept me on retainer for more than a year, passed some business over to me, and made sure I got all of my accumulated vacation pay. I stayed on an extra nine months longer than I wanted, because my original exit date was awkward. Larry was trying to buy back the company from Business International and wanted me to remain until after the deal was done.

There was, however, one thing he wouldn’t do: help me build a business to compete against him. That’s exactly what he said when I asked him to cosponsor a newsletter that became Infotext: the Strategy Letter (and died many years ago).

“Sorry Tim, that would be helping you to build a name to compete against us. I never do that. That’s always bad business.” Larry looked me straight in the eye and answered as simply and clearly as possible. I got it.

It’s a good lesson. Don’t build the competition. Even if you’re friends, or allies, you have to be able to look into the future and see where that leads.

1982: Metrics, Swag, and 3 Types of Lies

(Reposted from timberry.bplans.com)

This is a true story. Back in my market research days, 20-some years ago now, I watched one of my friends and colleagues (call him Fred) present a market forecast to a committee of IBM executives. They objected to his numbers, which seemed way off of what they expected, which was also what they’d received from competing market research companies.

The pause that followed seemed to me to take forever. I watched with excruciating pain as the IBM executives in the room exchanged glances. I was sure they thought we were idiots; and expensive idiots too.

It was probably only a second, maybe two. Fred, thank goodness, was a seasoned veteran of this kind of moment, an alumnus of Stanford Research Institute with a lot of degrees and a lot of experience. He responded immediately. “Oh, that’s because we define the market differently,” he said, quickly and confidently. Then he started asking questions. “How do you define PCs? Does the processor make a difference?” Our clients seemed bewildered first, then apologetic. Fred resumed his presentation. We were home free.

What I knew, but kept to myself, was that Fred had changed definitions as quickly as a carnival con man changes peas underneath walnut shells. There’s sleight of the hand and sleight of the definitions. Definitions are a market research consultant’s best friend.

Which brings me to the subject of metrics. By that I mean numbers, measurement, a scorecard. People want to see how they’re doing and we’re used to scores in numbers. I’ve posted on this blog before about the importance of metrics, which drive accountability into planning and management. Metrics are to management what mortar is to a brick wall. How can you have accountability if you can’t measure performance?

In three ways to make your employees miserable I quoted author Patrick Lencioni saying that employees need, deserve, and want metrics. Earlier I had posted the magic of metrics, about how much I like metrics in my own work life.

My story here is about another side of metrics, the pliability of metrics.  There’s an old quote, attributed to Mark Twain, Alfred Marshall, or Benjamin Disraeli:

“There are three types of lies: lies, damn lies, and statistics.”

Mark Twain

Sometimes we manufacture truth to fit our purposes. It’s not necessarily bad. When our Palo Alto Software soccer team went 8-1 in the city league last year we called a local trophy shop and ordered our own trophy, which most of the players assumed was given by the league for finishing in first place (and if this is you reading this, sorry, we thought you deserved it).  This gets particularly interesting when we do this with the metrics that are built into our management.

That comes to mind today for the juxtaposition of a story in the New York Times and a post by Seth Godin. In How Many Site Hits? Depends Who’s Counting, Louise Story reports on widely varying ranges of traffic statistics on different websites, depending on the source.

…big media companies — including Time Warner, The Financial Times and The New York Times — are equally frustrated that their counts of Web visitors keep coming in vastly higher than those of the tracking companies. There are many reasons for the differences (such as how people who use the Web at home and at the office are counted), but the upshot is the same: the growth of online advertising is being stunted, industry executives say, because nobody can get the basic visitor counts straight.

I do remember that in the old days of the dot-com boom we could manipulate definitions to change Web traffic numbers. For example, there were visits, visitors, unique visitors, unique visits, page views, hits, lots of different but related numbers. Of course the true measure was sales, but even with sales, did we count returns? Did the month end at midnight of the last day of the month, when orders were made, or when the orders were tallied and posted? There’s always some wiggle room.

In his post “The New York Times Bestseller List”, Seth Godin points out that the New York Times is manipulating the list to serve various purposes. But, he adds,

The best part… it doesn’t matter. Cumulative advantage is so powerful that even though the accurate reports of book sales often completely contradict the Times list, authors and others still obsess over it. We’re always looking for clues, especially in crowded markets.

The easy answer to this puzzle is consistency. Measure performance by one consistently applied measure, without making it matter much which measure you use, but stick to the same measure so you can see change over time. In the real world, however, even those consistent measures over time are subject to change.

Fred, the market researcher in my opening story, was in his early fifties when I was working at Creative Strategies, myself in my early thirties, and he taught me a thing or two. One of them was his use of the term SWAG as a data source. SWAG stands for “scientific wild-ass guess.”

1983: First Day of a New Business

(This is reposted here from my blog at timberry.bplans.com)

This is a true story. I think it’s worth telling because it’s one real example, one that I lived through, of how plans change and you have to adapt. And it’s also an example of how random businesses are, and how many different ways people get started on their own path.

I’m a business planner by profession, and I find it humorous how differently my own steps in my own business went from what I had planned.

It was a hot day in August of 1983. I sat typing in to a home-built business computer that was bigger than a dorm-room refrigerator, writing a book on spreadsheets, using mostly Wordstar and SuperCalc. I was in my home office at the corner of Mariposa and Miramonte in Palo Alto, CA. My third daughter and fourth child, Cristin, 18 months old, shared the office with me, playing on the floor with a used keyboard. I needed to finish the book to collect the second half of the advance, which was part of my plan.

The plan, however, was not going to work. What I had planned was to make a sufficient living writing computer books. Stuart Brandt had collected a $100,000 advance (or so it was reported) for the Good Earth Catalog. It seemed like publishers were looking for computer books and I was  a computer lover, former journalist, and MBA, well positioned to write them.

I didn’t know then that my plan wasn’t going to work.  The book was on schedule and I had contracts for two others.

I had left Creative Strategies International, a high-tech market research and strategy-consulting firm, two months earlier. When I left I was vice president of the software group, which had the company’s highest margin and highest gross sales, so I was well positioned. But, I had decided that what I wanted to do was the work, not the supervision of other people doing the work. I liked writing and analysis, and I liked market forecasting and market research. What I didn’t like was checking on other people and managing them.  I needed to make money to support my family of six; we had no savings, and debts left over from business school, so it was foolish to give up a good job, but I actually thought, foolishly, that I could make as much, or more, money writing computer books.

The phone rang. It was Hector Saldana, who managed Apple Computer’s Latin America group. I had done several market research jobs for Hector while at Creative Strategies. I had a good background for market research in Latin America, having lived for several years in Mexico City and having experience in consulting and market research, and a good set of degrees.

“Tim, I need you to go to Venezuela for me as soon as possible. I need a market study of Venezuela quickly,” Hector said.

“Hector,” I answered, stupidly, “I’m not with Creative Strategies anymore. I’m on my own now, writing computer books.”

“I know,” Hector answered, “They told me that when I called them. What do I care about that? Why would I want to pay them for your work instead of you? Now seriously, how soon can you get down there? I can pay you well.”

I was on a plane three days later, and three weeks later I delivered a Venezuelan market study along with an invoice for more than the combined advances of three computer books. My career as a business planning consultant had begun.

I went on to 12 years of consulting with Apple Computer. I was never an employee, but I worked for Apple Latin America, Apple Pacific, and Apple Japan regularly until 1994. That phone call changed my book writing into a filler and my consulting into a career. It wasn’t my plan; but that’s the way it happened.

I did eventually finish the books I had contracted, but my focus had changed. I admit that thinking I could actually survive economically and support a family only by writing computer books was really dumb, but at least I had the good sense to jump tracks when the opportunity arose.