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Live from #BOS2012: “Coding is the Easy Part!” with Peldi

"Live" notes from Business of Software 2012 in Boston, October 1-3, 2012. See all my notes from Business of Software 2012 by clicking here. Feel free to use these anywhere, but please credit me if you do.

Coding is the Easy Part, Peldi, Founder, Balsamiq

Who’s Peldi? Used to be a programmer bee at Adobe, decided in 2007 to move back to Italy and start his own thing. “Micro-ISV” was the big thing back then – let’s make a small software product & company to feed himself and the family. Since then, Balsamiq has grown to about $6m in revenue of which $3m is profits!

Peldi’s Law of Learning. Learning is a roller coaster ride. For brief moments you think “Wow! I’m smart and can share my knowledge!” but then you immediately realize you’re not really that smart.

Epiphanies encountered during the growth of Balsamiq.

Vision. At first you think all you need is a genius idea. “I have this idea but I can’t tell you because it’s so valuable.” It’s common knowledge, though, that the idea isn’t worth much by itself – you’re probably not the only one with your idea. You need a product. So you build a product, and you think THAT’S all you need.

But it’s not. You need marketing because if nobody knows or cares, nobody buys it. Lean startup/customer development is a big thing and it’s good, because customer development is just as important as the vision.

So you do those three things right, and now you have customers. Now you’re doing support. All. The. Time. So support is actually just as important, too. So you hire people to help with that.

And now you’re a company. This new thing you have to deal with that requires your attention. And it’s just as important as the other pieces because it’s fragile.

Then with all those things, it’s really STILL not a defensible competitive advantage. You need an ecosystem of partners, vendors, community who root for you to be successful. A company with a strong ecosystem is harder to beat than one that doesn’t.

These 6 things are all EQUALLY important. That was the biggest epiphany of all in building Balsamiq. There are books and books about many of them, and today we’re going to talk about Ecosystem and Company.

ECOSYSTEM

You start with the Founders, but when you get employees it adds a layer of complexity. Then you’ve also got the lawyers, accountants, payroll, etc. These are important roles – they protect you from yourself. You have to think of these people as extensions of the team. Add to that contractors, vendors, partners, channels, and competitors. Competitors are an extension of your company in the sense that they influence some of how you behave and no matter what you do they’re going to be there.

Externally to your company, you’ve got your website, your CMS, your blog(s), forums, UGC, teaching resources, etc. It’s all the “same website” but it’s on like 7 different servers/platforms. On top of that, you add Twitter, Facebook, LinkedIn group(s), Google+ (if we’re being generous :) ), other blogs/guest posts, evangelists, and if you’re lucky you have a cottage industry of people who extend your tools with plugins or extensions or the like. Finally, then you have your New Friends who you meet at places like Business of Software!

So you have to embrace all of this ecosystem. If you don’t, the whole thing basically doesn’t work. All the interconnected relationships are just as important as the product development and marketing and support.

"Surround yourself with excellence." Make yourself the dumbest person in the room. Get the best lawyers, accountants, vendors you can. And play nice with them. They’ll play nice with you.

COMPANY

Growth needs gardening. If you want to grow organically, revenue/employees/PR/quality all need to grow together. (See Joel Spolsky’s article “Four Pillars of Organic Growth” from 2008).

Company Values. Pick your battles, and deliver. For Balsamiq these are Usability and Customer Service.

Company Policies follow from the values. These are documents on the Balsamiq wiki that describe how they do their work. Goal is to have as few as humanly possible. It’s easy to ADD policies, but HARD to take them away. Be careful what you add. Like 37signals says, don’t scar on the first cut.

Policies are never frozen. They will never be final. If they’re frozen, you’re frozen and you’re dead.

Always explain the WHY of the policies. Explain (concisely) the reasoning behind them.

Then, why leave them on the wiki? Why not put them on your blog? Ask your community what they think of them.

Main goal of the policies is to keep everyone on the same page. Policies aren’t for the sake of having a law, they’re for the sake of helping everyone understand why things are the way they are. They’re also very useful for new employees: “Read the whole wiki, you start tomorrow.”

Example Guidelines at Balsamiq…
Pace > Deadlines. We’re all mature. If you give a person their dream job and ask them to go fast on their own, they’ll do that. Everybody can go in 3rd or 4th gear, but not 5th or you burn out.

Vacations. TAKE SOME. We can’t afford to have you burn out.

Salary. Heavily inspired by Daniel Pink. Remove the money form the conversation. We pay our employees better than the same job in the same geographical location, so they don’t worry about money. Worry about the work.

Profit Sharing. The formula is interesting. 10% of profits from previous quarter, split among employees. 25% of that is equally divided. The other 75% is based on seniority so new employees get something and the whole thing levels out after about 5 years. It’s not based on job titles or skills, because we think everyone contributes equally to the company. We don’t have equity or shares because I haven’t figured out how to do that right. If the company does well, the company does well. For some employees the profit sharing is nearly equal to their base salary.

Donations. Employees are given money earmarked for donation, that they can contribute anywhere they want.

Other Guildelines.
  • Sales support bible.
  • Setting up a new dev machine. PLEASE tell me you have this :).
  • How we do dev & QA (branching, TDD, etc…)
  • How we communicate. Hipchat, Skype, Google Hangout.
  • How we do support. It’s better to let a question sit while you find a perfect answer than it is to answer immediately only to say, “Hold on while I look this up.”
  • Website Style Guide.
  • How we use Twitter.
  • Sponsorship Guidelines.
  • How we let people go.

Time Saving Tips.
  • Awards. One day someone is going to “give you an award.” They’re meaningless and they want you to pay them anyway.
  • PCI Compliance. PCI compliance charts are intended to terrify you. They have documents just to help you navigate other documents. There are people whose entire job is to “assist” you with this, in exchange for your money – it’s like the mafia. The only valuable thing about it is we got a “compliance policy” document template.
  • Dealing with VCs. Just because we sell stuff on the internet and we’re programmers, we’re supposed to be in the same league as Facebook. VCs and the press are confused about this. All the calls are the same. They happen a couple times a week. We have a standard template reply to make them go away, but be nice to them. People gave them a lot of money that they need to invest, and they’re not used to being told to get lost. Ask Peldi if you want his template :).
  • When to Hire. A couple years ago, I said “Wait until you think you’re going to die.” Now I feel differently. Start earlier so you have more time. Give yourself a chance to find the best person. If you have a good cash flow, start looking so you can take 3 months or whatever to get someone.

The Pledge
I, <your name>, hereby solemnly swear, that I will never, ever, ever, rush a hiring decision.

Do not underestimate the importance and difficulty of growing a company the right way. It’s harder than coding, because it has to do with people and nobody prepares you for this at all. But everybody has to go through this. If you have competitors, they’re going through it too.

Our Current Challenges

Peldi is the bottleneck. I’m the CEO and my job is to ask people what they need. And I love that. But if I have a one hour meeting with each employee every day, that’s a full time job. So now I probably need managers, but I don’t want them!

So we have Valve Envy. They have this beautiful employee handbook and they make us jealous. So I made a wiki page about “Balsamiq 3.0” with links to companies we want to be like, Valve included.

Recurring themes in flat organizations: self-organizing teams. Internal recruiting. People are encouraged to make few commitments, because they’ll tend to overcommit if not reminded. Not job titles. Etc.

Clearly we’re in over our heads, as usual. Is it worth it? But I think about the 6 epiphanies. If every wedge if that pie is just as important, why not give it all you’ve got in each one?

Filed under bos2012