Business of Software conference news

Why do you write software?

George Orwell once said that he – and all writers – wrote for a combination of four reasons:

1. Sheer egotism – The desire to seem clever
2. Aesthetic enthusiasm – The perception of beauty in the external world or in words and their right arrangement
3. Historical impulse – The desire to see things as they truly are
4. Political purpose – The desire to push the world in a particular direction

There are probably parallels in software development (for the first two items, definitely). If you write software, why do you do it? Post here.

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Think — and think again: The Jeffrey Pfeffer interview

Jeffrey Pfeffer can make you uncomfortable: He’ll take your preconceived notions and new-found knowledge and smash them against the rocks. He makes you think – and think again.

Pfeffer will be a featured speaker at Business of Software 2007 (, October 29 and 30 in San Jose. He is the Thomas D. Dee II Professor of Organizational Behavior in the Graduate School of Business at Stanford University, and author or co-author of 12 books, including The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action; Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management; and the most recent, What Were They Thinking? Unconventional Wisdom About Management . He also writes a monthly column called “The Human Factor” for Business 2.0 magazine.

Fellow Business of Software speaker Dan Nunan talked with Pfeffer recently about a wide range of management topics, from the contempt that software companies show for their customers, to the need to treat employees like adults.

Nunan: In your Business 2.0 column, you’ve written both in defense of bosses from hell, and on the value of retaining good talent. How do you determine whether or not the bosses from hell are hurting the company by chasing away good talent?

Pfeffer: I don’t think you got the point. Bosses from hell, like Steve Jobs, invariably drive talent away. And talent is inevitably important. But it’s a matter of balancing costs and benefits. All medicines, even aspirin, have side effects. So, what do you do? You balance costs and benefits. What I said in the article is that there are some fields, including software and entertainment, where the contributions of an individual creative talent may be so large that you need to put up with some personal idiosyncrasies. I never suggested that one should not try coaching or other things to reduce those personal foibles. But I just recognized that no one is perfect, and hiring and retention decisions need to balance gains and losses.

Nunan: What causes the knowledge-doing gap and how does it affect the way companies conduct business?

Pfeffer: There are numerous causes of the knowing-doing gap; among them are a climate of fear and a tendency to take what was done in the past into the future without much thought or reflection. Companies continually search for "new knowledge" and have spent a fortune on intranets and other devices for knowledge sharing. That is all well and good. But knowledge that is not turned into action – into everyday practice – isn’t worth a thing. And the research suggests that this is a big problem; that companies are not acting on the basis of what their people know.

Nunan: Can you give any examples of technology firms that have breached the gap and how have they done it?

Pfeffer: None come to mind, although I am sure there are many.

Nunan: Do you think that Alfred Sloan’s book My Years with General Motors is less relevant today than it was when it was written?

Pfeffer: It is as relevant now as it was decades ago. The basic, fundamental bases of business – for instance, Peter Drucker’s common sense insight that there is no business without a customer, so take care of your customers – and the fundamentals of human psychology have not changed. The continual search for new and trendy ideas has created more harm and havoc than anything else, although it has probably moved a lot of books and magazines.

Nunan: You’re stuck in an elevator with someone about to start a business. They bought your latest book, paid full price, and think you owe them advice. You can’t escape for a minute, so what would you tell them about starting a business?

Pfeffer: The first thing I would tell them is that buying my book doesn’t entitle them to advice. The second thing I would tell them is that they ought to ask someone who actually has experience starting a business. The third thing I would tell them I heard from one of the co-founders of SAS Institute, the largest privately owned software company in the world: "Listen to your employees, listen to your customers. Do what they tell you."

Nunan: Are managers less deluded now than they were when you started studying business?

Pfeffer: Not that I can tell. Things seem to be getting worse in some places, better in others.

Nunan: Have the management theories you elegantly lampoon in Hard Facts (such as sacking 10% of your workforce annually) ever worked?

Pfeffer: Not that I can find any evidence of.

Nunan: How would you quantify the intelligence of the great leaders that you’ve encountered?

Pfeffer: Leaders have many forms of intelligence. I think Sternberg’s research, made popular in books like Goleman’s Emotional Intelligence, is important and correct. There are many ways of assessing these other forms of intelligence, many valid and reliable measures.

Nunan: Working where you do in Silicon Valley, you must have seen your fair share of technology firms come and go over the years. Are the challenges facing the software industry any different from those in other industries?

Pfeffer: No. I think the problem in the software industry is one that many high technology and, for that matter, low technology, companies share: contempt for the customer. In what other industry do you purchase a product that is a "license" so you are forced to purchase upgrades that offer features you don’t want or need; do you get to help with the product testing; and do the vendors sell you "upgrades" that fix their mistakes?

As Walter Mossberg pointed out in a column in the Wall Street Journal years ago, if your toaster had the reliability of most software, you would throw it out. The problem now is that customers don’t trust the vendors – for good reason – so the sales cycle has gotten longer and more expensive. And the real problem is that the good companies suffer from the behavior of the less-than-good, a contagion effect that bedevils business generally and that my colleagues in leadership positions often don’t seem to pay enough attention to.

Nunan: Is this still true? Google, Yahoo, Apple,, Facebook, etc., all produce software that people and businesses love, and seem to trust with incredible amounts of personal data.

Pfeffer: It may not be as bad as it once was, but it’s still true. Most of the companies you list, such as Facebook and YouTube, aren’t generating much revenue. The software industry is mostly IBM, Accenture, SAP, Oracle and Microsoft, whose revenues dwarf a lot of companies that get more ink. If you talk to people who sell business software, they will tell you they deal on a daily basis with the residue of products that don’t work and installations that are bungled.

Want an illustration? Go to Stanford’s website, go to the news archives, and type in “Oracle financials.” You will see stories in which Stanford administrators apologized to the staff for the hassle they were put through, and this for a system that cost about $50 million and won’t save the university a cent. Search out the websites that describe the PeopleSoft implementation in a university in Ohio – Cleveland State if my memory serves. The horror stories abound, and by the way, are quite current. That seems to be contempt for the customer, and is behavior that would drive companies in almost any other industry out of business.

Nunan: A big problem in the software business is the war for talent, particularly for developers. This is compounded by the very low (and shrinking) numbers of women studying computer science at university level. Given this is a problem as much for the software industry as it is for educational institutions, what should the industry do about it?

Pfeffer: That’s simple: have workplaces where women want to work. The U.S. is a laggard: the only country in the world that has no mandatory vacations or sick days – all are offered at the discretion of employers; the only country where even unpaid maternity or family leave seems to leave employers feeling that this is all just too much. I could go on. The younger generation wants flexibility and the ability to have a job and a life. Those employers that offer great places to work, in any industry, even software, don’t have a shortage of employees. Those employers who offer toxic workplaces because they mistakenly believe this is the only way to succeed deserve the employee problems they have.

Nunan: European managers are frequently told to behave more like American managers. In the tech industry, governments are encouraging the building of technology parks in the hope they can copy a little bit of Silicon Valley. Is European management really that much worse than U.S. management?

Pfeffer: I don’t know who is telling them this, but it isn’t me. A lot of people have confused economic performance (which depends on government policies such as interest rates, trade policies, etc.) with the performance of companies. Moreover, according to a detailed analysis in The Economist, European productivity growth and other measures of economic performance, including return on capital, have generally matched the U.S. – even as Europeans get more vacation and more healthcare, among other things. Europe now has a burgeoning venture capital industry and Eastern Europe is drawing a lot of investment in both technology and manufacturing.

There is no American or European management in any event. There is too much variation to speak of a dominant style. Is American management that of the companies on Fortune‘s Best Places to Work list, or is it the approach used at United Airlines?

Nunan: What do you think of the principles behind Ricardo Semler’s industrial democracy? Do we even need managers?

Pfeffer: Semler’s books aren’t followed even in Brazil, which is too bad. The evidence on the usefulness of self-managed teams is pretty compelling. We don’t need as many managers as we have, mostly because we don’t need as much control as the typical organization has. We need people to architect a culture that permits people to use their skills and abilities to make decisions. It is pretty clear that without people to protect and develop that culture, it won’t last under the pressures of investment bankers and business journalists. But beyond that, we ought to treat employees like adults.

Nunan: Why are so many managers so bad? Evidence-based management is all very well, but most managers still screw up the basics. In medicine, there are well-defined procedures for weighing up and defining what counts as evidence, but in management a lot of evidence is really just personal experience. How can managers actually get hold of quality evidence that they can trust to make decisions with?

Pfeffer: I’m not sure managers are bad. I think many companies are led by people who have more political skills than leadership skills, and I think a lot of companies are run by people who have very mistaken ideas about human motivation and the sources of company, and country, success.

The evidence is all around them. Many companies have invested fortunes in business systems that capture information but then don’t use it for decision making. To many CEOs, evidence and analysis is something for the IT department or IBM. Just as most companies don’t recognize the strategic value of their people, they don’t recognize the strategic value of better decisions based on facts, not experience or wishful thinking. But all the better for those that do it. After all, competitive advantage comes from things that not everyone is doing.

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Is Quechup Incompetent or the best malware since the Anna Kournikova virus?

I almost got caught up in the Quechup scam that’s hitting the internet at the moment. I got an e-mail from somebody I know inviting me to join this new social networking site. Once you sign up, you have can send invites to selected contacts from your gmail / hotmail etc. contact list. However, rather than just sending invites to those you’ve selected, it will send invites to everybody in your contact list. In the case of gmail, that might be anybody you’ve ever e-mailed.

My first instinct was that this was a case of extreme incompetency. Some poor programming – a rogue semicolon that testing didn’t pick up maybe. But then I began to wonder. Rather than incompetency, could this be the most competent internet scam since the Anna Kournikova virus?

Nobody’s going to fall for the promise of pictures of naked tennis stars nowadays. But the very hint of a new social networking site and we’re falling over ourselves to hand over our login details and passwords to strangers. And it’s not fresh-faced newbies who are falling for this scam: these are seasoned web 2.0 veterans.


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Micro ISV survey

In response to a post on the Joel on Software forum, I’ve put together a survey about Micro ISVs. If you’re a MicroISV and are willing to (anonymously) divulge some information about sales etc. then you can fill in the survey here:

I’ll collate the responses, do some analysis, and post the results up here in a week or so. If you’ve got any comments about the survey, post them here.

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I predict a riot: facebook, social groups, symbols and jargon

It’s a human instinct to form groups. Whether it’s families, football teams, churches or schools we have an in-built urge to group together and connect with others. We are social animals: this is why social networking sites are so popular. It’s not due to technology; it’s because they fulfil a basic human need.

We do more than simply passively form groups though. We adopt symbols to identify group members. Whether it’s through clothing, anthems or jargon, we encourage the cohesion of our group and are hostile to outsiders. We over-emphasize the similarity of people within our group, and exaggerate the differences of those outside it. Blacks and whites, Catholics and Protestants, Yankees and Red Sox: there’s much more similarity between – and less within – these groups than we want to admit.

Facebook, myspace and other social networking sites let us form groups in new ways. As we group in new ways, we’ll find new ways of marking out our groups and defining them in opposition to others. Initially, this will just reflect hostility and competition in the real world. Soccer club Everton have an ‘Anti-Everton People’ facebook group (‘for all people who hate the TOFFEES throughout the world’), presumably populated by fans of rival Liverpool. Manchester United’s captain has a facebook network dedicated to him. The ‘Gary Neville is a Wanker’ network has 14,413 members and 3,115 wall posts.

As the internet makes it easy to form groups, it also makes it easy to subvert them. Anybody can pretend to be a member of your group, and harm it from within. The ‘Anti-Everton People’ group is now a closed one because of attacks from Everton defenders.

The fragility of social groups makes jargon and symbols more important. You need to distinguish those who really do belong from those just pretending. If you’re a paedophile sharing child porn then you want to be very sure that your friends are who they claim to be and not federal agents. Customs, symbols and language are one way of doing that.

As technology catches up with human behaviour, we’ll find new ways to antagonise as well as befriend. We’ll also find new ways of protecting our groups from outsiders, and to infiltrate others’ groups.

Here’s one thing that might happen. Currently, networks on Facebook are defined by individuals who have self-selected. You place yourself in the groups you think you belong to. In real life, there is another way to form groups: other people can categorise us. Sooner or later, this will happen in the virtual world too. We will have individual, private tags (an enemies list, for example). We will also be able to socially tag others. If enough people place you in a particular group, then you are tagged. If people consistently label you as ‘asshole’, ‘Manchester United supporter’ or ‘fun to be with’ then that label will stick.

Right now, words are the weapons of choice for competing social groups. But who knows what Facebook widgets, APIs and other new tools will bring. I predict a riot …

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Porridge, Wonko the Sane and restrooms: the good, the bad and the ugly of user assistance

In the fourth book of Douglas Adams’s Hitchhiker’s Guide to the Galaxy trilogy, Wonko the Sane is a hermit who lives on Santa Monica beach. He has flipped the world inside out. He lives on the ‘outside’ in a small room, while the walls of his room contain the rest of the world on the ‘inside’

Why does he live there? Here’s an extract from the book:

Hold stick near centre of its length. Moisten pointed end in mouth. Insert in tooth space, blunt end next to gum. Use gentle in-out motion.

‘It seemed to me,’ said Wonko the Sane, ‘that any civilization that had so far lost its head as to include a set of detailed instructions for us in a packet of toothpicks was no longer a civilization in which I could live and stay sane.’

This is a good example of instructions at their worst. Bad instructions are superfluous, cluttering and patronising.

Instructions can be necessary though. They’re often needed to recover from bad design. Here’s the sign above the washbasins in the rest rooms of the Pitt building in Cambridge:


Doors with instructions to ‘pull’ or ‘push’, washing machines and telephones all are common examples of products whose failed design forces necessary but cluttered instructions for everyday tasks.

While we shouldn’t need written guidance on how to open doors or use taps, there are tasks we can’t reasonably expect to work out from first principles or by trial and error. In these cases, we need written instructions.

Designers often avoid text almost pathologically, but written instructions are a good way of communicating complex, conditional and interdependent tasks. A sentence can be worth a thousand pictures, as you’ll appreciate if you’ve ever tried to build Ikea furniture.

At their best, instructions are simple, elegant and built in to the design. They’re not glued prominently on as an afterthought or tucked away somewhere that nobody can find them.

Making porridge is a good example of an infrequent task that requires instructions:


This is an excellent example of good instructions. They’re where you need them: directly on the packet so they can’t be separated from the porridge. They’re clear, well laid out and tell you what you need to know. Also, note the ‘pour milk to here’ mark. The instructions could just have said ‘add 180ml of milk to your bowl’ but a bit of thinking and good design means that the instructions go beyond telling you what to do; they actually help you do it.

So how does this translate into software? First, don’t include instructions just because you can. Every extra word is clutter: if you don’t need it, cut it out. Second, instructions are sometimes a work-around for bad design. This happens, but clearly it’s a last resort. Third, good instructions are often part of the product. Rather than simply telling you what to do, they help you do it or even do it for you.

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The inevitable death of the ecosystem

Ever since James F Moore’s 1993 article in the Harvard Business Review it’s been fashionable to talk about business ecosystems. A good example is the Microsoft ecosystem. Microsoft is the shark and third party tools are the pilot fish that eat Microsoft’s leftovers.

This analogy is wrong. Microsoft isn’t the shark – it’s a greedy fisherman. With one hand it throws bread crumbs to encourage the little fishes to grow while with the other it trawls the bottom of the ocean for fish large enough to eat. It catches the fish, but its nets scrape the ocean floor bare, ruining the ecosystem for decades to come.

Microsoft have abandoned their benign tending of the ecosystem. They have moved from helping it flourish to harvesting it. You can see this in many areas. In the developer tools market, rather than providing a set of core development tools they’ve decided to try to flog us bug tracking, source control, unit testing, load testing, enterprise modelling and collaboration suites. These were markets already well served by good, affordable third party tools. For the sake of a few thousand dollars per seat off enterprise customers too lazy or scared to investigate the other possibilities, Microsoft have shut down that part of the ecosystem.

In SQL Server, Microsoft are open about this, at least in private. Senior people in the SQL Server team have always made it clear to me that they want to put everything any SQL developer or DBA could ever want in the box. This will inevitably shut down the SQL Server ecosystem too.

Red Gate – the company I work for – is in a better situation than most. We’ve been going a while, we’re profitable, our revenues are growing and the people who work here are outstanding. Microsoft’s intentions, however, are clear: they want to own the entire SQL Server ecosystem. Anybody left standing in 5 years time will be there despite Microsoft’s efforts, not because of them. Although some companies – Red Gate among them – will survive the cull, many won’t. I do not envy the fragile companies in this market.

Microsoft’s actions are as futile as they are frustrating. They will trawl with their nets, destroy the ecosystem but reap little for themselves. Business intelligence, gaming, mobile phones, business accounting, CRM, development tools and SQL Server third party tools are all areas where Microsoft are now competing with their one-time partners. Judging by their current efforts, Microsoft will not win in many -if any – of the areas they are competing in.

The ecosystem won’t be destroyed overnight: it will wither slowly. Third parties will start to leave the ecosystem and they won’t be replaced. When entering new markets, companies will think about joining the Microsoft ecosystem and then won’t. By the time Microsoft realise what is happening it will be too late.

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The Golden Guy (Kawasaki) on what he funds, how Truemors changed him, and his Microsoft fantasy

There’s no truth to the rumor that there are bracelets circulating around Silicon Valley inscribed with WWGD (What Would Guy Do), but it’s not inconceivable. Guy Kawasaki has an uncanny knack of being at the right place at the right time with the right strategy. He describes it as “Guy’s Golden Touch: Whatever is Gold, Guy Touches.”

Considering the traffic on his “How to Change the World” blog, and the success of his Truemors site, a lot of people are hoping the Guy Touch rubs off on them.

Guy will be a featured speaker at Business of Software 2007, October 29-30 in San Jose ( He was kind enough to answer some questions from Business of Software on the current VC environment, evangelism, and what he would do if he was on the Microsoft board.

BoS: You write and speak extensively about innovation. Where are you seeing innovation today in the software industry?

Kawasaki: Most of the innovation is happening with "two guys/gals in a garage" creating web sites with MySQL, Ruby, and other open-source tools.

BoS: Where is the software industry in most need of innovation?

Kawasaki: Innovation is needed everywhere you look. It’s just that some places look like they’re already "owned" by large companies. That’s a fallacy.

BoS: You’re a VC. If two guys/gals in a garage came to you and said they wanted to create a new search engine, would you fund them if they were persuasive enough?

Kawasaki: Based on the Google phenomenon, we’d certainly take a look at it, but it would be an uphill battle because there’s already Google. Of course, there was already Yahoo! and Inktomi when Google was starting. This is the conundrum of venture capital: You never know.

BoS: What attributes are you looking for in terms of technology and management for companies you fund?

Kawasaki: I look for unproven people in unproven markets with unproven business models because this is where I think the big hits occur. However, I’ve yet to prove this theory.

BoS: You set up Truemors for $12,000. Presumably you have people telling you similar stories and asking for millions in return. How has your experience with Truemors changed your behavior as a VC?

Kawasaki: I certainly know now what can be done in two months with $12,000. If an entrepreneur tells me that he or she needs $1 million, five engineers, and a year to build a social networking or user-generated content site, I will throw them out.

BoS: Would you have funded Truemors?

Kawasaki: No. It didn’t need enough capital, and the CEO has a dubious amount of management experience.

BoS: Are we in a bubble?

Kawasaki: You bet we are. Isn’t life great?

BoS: So why are you still investing?

Kawasaki: Because hope springs eternal and because venture capital firms are not set up to short private companies. Just because we’re in a bubble doesn’t mean that every company will fail.

BoS: You are perhaps the world’s best-known evangelist for your work at Apple. Is evangelism still effective?

Kawasaki: More so than ever because more companies are starting with smaller, if not non-existent, marketing and advertising budgets. When you have $20 million to introduce a product, you seldom rely on evangelism.

BoS: You often make fun of Windows in your speeches. But Apple still isn’t one of the top 5 PC manufacturers in the world, and you won’t see many IPhones replacing the Blackberry on Wall Street. You’ve already worked at Apple (twice), so suppose you were on the board of Microsoft sitting on your 90%+ market share. What would you do?

Kawasaki: I would be wondering whether I should buy a house in Montana or the south of France –or maybe both. Or which Gulfstream would look best in my hangar. And why the company whose board I sit on can’t seem to hire designers despite the infinite money it has.

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Business of Software 2007 update

When was the last time you went to a conference and really learned something? At Business of Software 2007 you’ll learn the timeless, eternal truths of what drives success in the software business. No fads, no sales pitches, no bull.

The early bird discount for Business of Software 2007 will end on August 15th. To hear Guy Kawasaki, Joel Spolsky, Tim Lister, Eric Sink and more great speakers for the special 2-day price of only $1195 you need to book soon.

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