Last time I wrote about status quo and how it becomes protected value within companies. I could tell you countless stories of people being (mentally) hurt by status quo. I could tell barely a few of these when status quo was defeated.

How to fight with status quo then?

A short answer is: change rules of the game. Until new status quo emerges everything will be different.

To elaborate a bit more, status quo is painful in terms of lost opportunities. Every time some talented and eager engineer hits the glass ceiling or a poor candidate is promoted over a good one or suboptimal organization is sustained the company loses. It loses in terms of productivity, performance and employee satisfaction. At the end it loses money since at the same cost there could be done more or there could be done equally much but at lower cost.

A good supporting question is: who sees all these problems?

Everyone who tried to improve something but failed because reluctance of people happy with whatever it is today. That would be one group. Another one will be made of few people who are high enough in organizational structure to see how things work, but at the same time have no real power, or interest, to change it.

Another supporting question: can these people introduce change?

No, they don’t. They don’t have enough power. They are either too junior or too new or work too far from the core of the organization. Sometimes they would even try to fight the reality just to learn they have virtually no chance to win. Status quo defenders are numerous and powerful and they prevailed many try-outs like this.

If you came to this point you can basically do two things:

• Change behavior of people who defend status quo. To succeed with this you need to open their eyes first. It may be possible but it doesn’t have to. How to do this? Well, bottom-up approach doesn’t work. If it did their attitude would already be different. What you need is someone with respect. Someone who would coach status quo keepers showing them ways of improvement. Make them aware there are different styles of management. Make them aware how they can improve their leadership. Make them aware how much they can personally gain if they enable changes in their teams. If this approach succeeds game rules will start changing slowly but constantly. Unfortunately this would work only when you have managers who were unaware of the problems. If they were consciously maintaining status quo chances are good your efforts would be ignored.

• Get someone experienced and give her power to change things. It could be one of these peripheral managers but as an insider she would be naturally perceived as an enemy by her colleagues. It’s better to get an outsider, someone who successfully cleaned up a company or two. Hire her and give her enough power to allow her to enforce changes over the current organization. Let the outsider change the rules. If you choose your candidate wisely, you’ll go through a number of clashes, some people will leave, other will be fired but in the end organization will work better. Why? Because every significant change in the company, every leaving, creates opportunities for those who want to improve organization and destroys at least a few glass ceilings. Of course you can rebuild every flawed element you’ve just destroyed but after all one of reasons you have your superhero outsider is to prevent that happening.

As I write this I’m perfectly aware how rare are cases when companies decide to undertake such actions. But every time I hear about another management failure which is triggered by defending status quo (and believe me I hear that a lot) I have the same thought: “Why won’t you, my dear execs, do anything to heal your organization?”

I surely am biased but it happens now and then that I believe I have a few recipes which would instantly improve overall performance, let alone some consistent work on fundamentals. After all management isn’t that hard if you have someone to learn from.

What happens when company grows from 10 to 100 people?

Initially there’s a group of highly motivated and hard working people led by one or a couple of visionaries. Everyone knows each other well. Everyone knows what anyone else is doing at the moment. Then some success happens and organization grows. At the beginning it scales up trouble-free. Somewhere along the way teams emerge. Suddenly company needs a few managers. Who is promoted? What a question. Of course those who were in the pack when employee counter was one-digit.

First hierarchy self-emerges. No one really thinks about this much. After all it’s all about a couple of teams, not full-blown organization. Then the company grows further and by the time it reaches 100 people there are probably at least two levels of management. First managers add new folks to their teams to the point they need middle management to deal with their 30-something people.

Note: at that point there still isn’t much planning when it comes to organizing company structure. It is created in the meantime while people aren’t focusing on their work.

What happens when company grows from 100 to 1000 people?

By the time organization has 100 employees self-emergent structure becomes suboptimal. It is no longer a bunch of people working toward common success. If you don’t hire great candidates only, and let’s face it: you don’t, there are some people on board who just work there and don’t really care for anything beyond their paycheck. There are also few managers who shouldn’t become managers at all but should stick to engineering. To add some spice the company still grows at constant rate.

The bigger it grows the more power management gets. Execs no longer work with line employees most of the time. They work with excel sheets and if they meet someone they are other execs or senior managers at best. Real power is moved one level down – to managers who make hiring decisions, promote employees and deal with all people-related issues. Who are they? Remember this few veterans who were around from the very beginning and become very first managers in the company? Well, now each of them leads one of multi-team departments with close to 100 pairs of hands each.

Sure, there are reorganizations but most likely they happen out of the center of the company. Core remains unchanged. Why? Well, that is damn good question.

A short answer is: because big organizations are great in maintaining status quo. I don’t want to argue whether a few hundred people make a company big (it does not) but somewhere between 100 and 1000 people this attitude appears and it is there for good.

And here’s a long answer.

• Think about management skills of early-managers. Most likely it is their first management job. Most likely they were engineers initially. I’ll be brutally honest: chances are good they doesn’t really suit management job. The problem is they don’t even know that. They can’t. They may even do their best and still suck as managers. If they have grown with the company they may lack just good role-models in management. I could bet my money against their management skills in this situation and, on average, I would win.

• Now, put yourself in shoes of these veterans. They are with the company from the beginning. They career seems to be well-earned. They aren’t aware they may suck at what they do. When they were engineers they had simple verification of their work: test passed, client didn’t complain thus everything was good. With management it isn’t so easy. Their team won’t come to them to say they suck. Hey, you just don’t go to tell such things to your boss. We can even consider managers are aware they suck a bit. And what would they do? Resign to leave a position for someone better? You must be kidding me.

• So what do execs do with this? Pretty much nothing. They’re chewing through their Excel sheets and as far as numbers are fine everything else is too. And if numbers start to stink who would they talk to anyway? Well, managers I guess. They’re disconnected with most of the rest of people for a long time already.

Maintaining status quo is a safe choice for everyone who has enough power to make any important decision in the company. Those who see problems and would like to change something are either somewhere on periphery of organization or very low in hierarchy structure. The former aren’t taken seriously the latter hit the glass ceiling.

What more, existing status quo propels the same behavior all over again. If the company promoted three out of four engineers from early setup to senior management the fourth one pretty much expects the same. And most likely he will get the promotion, no matter whether he was the best candidate or not.

Of course you can find counterexamples. I don’t say every company works that way. I guess when Google hit 500th employee mark they were still nothing like that. I know startup where all 3 co-founders had experience in management so they aren’t likely to hit this reef either. I know companies which will never make it past 50 people so they definitely shouldn’t care about these issues.

Anyway more often than not defending status quo is a problem. I’ve seen it at all stages from few dozens to few thousands of people. And it always looks like decision-makers weren’t aware of the fact or, if they were, like they didn’t care. When company grows to specific size it is just easier that way.

In the next posting I’ll give an idea what can be done to change the situation. Stay tuned.

This is a guest post from Richard Revis who is one-man army standing behind The Plan Is.

Which milestones have to be on your start-up plan?

I’m a project manager, so when I decided to start a new company the first thing I did was to draw up a plan.

Not everyone agrees that this is a good idea. The arguments against planning are numerous, and the biggest one is that in a start up things change so fast that a plan will be out of date before you get to day 2.

My own experience over the last two months has been that change is rapid and continuous, however the time I spent planning was not wasted as I am still working from the original plan with some minor updates. The key was to pick good milestones to aim for.

There are two types of milestones essential to any plan:

- Input milestones; these are things you do that reflect effort on your part, tasks like getting a website up and running, writing articles and technical milestones such as feature availability.

- Result milestones; these are outcomes of your work such as website traffic and beta sign ups. These show you how well the work being done is turning into customers, sales and money.

Only result milestones matter in the long run, however if you don’t hit any input milestones there won’t be any results. This is why both have a place on the plan. Input milestones drive you to get stuff done and keep you working hard. If you aren’t hitting them you have a performance problem that needs to be fixed.

In contrast result milestones are valuable because they tell you if your plan is a good one. If you are missing your result milestones then you need to know as that lets you change your input milestones to ones that will help you get the results you need to stay in business.

How do you pick good milestones?

The right milestones vary a lot by circumstance, however all your result milestones can be reverse engineered from one date – the day that you will run out of money. The most important thing on the plan is that by this ‘out of money day’ your income is larger than your expenses.

My own result milestones, such as customer numbers, sign ups, website hits, and anything else which I can’t control, are a guess based on data about typical conversion rates. For example a 1% website visitor conversion rate is normal for my industry, so my milestone is based around 100 times break even sales. Where data is bad or missing I have taken a guess and will update it when I find out how things really work. The milestone won’t go away, but some of the details might change.

Input milestones are even more variable and will depend on your project, however it helps if they are enablers for results. For example ‘website up and running’ is a good input milestone because it is required for you to be able to achieve your ‘first website visitor’ result milestone.

The input milestones for my company are very high level and look like most normal development road maps. For example you would see entries such as starting open beta and implementing one customer requested feature. These are spaced out about twice per month, so that I always have a goal in close proximity. Knowing I have to tell my advisers which milestones I have reached every month really pushes me to keep working consistently.

How detailed should my milestones be?

The goal is to have a plan to measure yourself against, not an itinerary of the next six to twelve months! By keeping it high level and more adding detail one month in advance you have the advantage of knowing where you are going without boxing yourself into a losing strategy or having to throw the plan away.

This will also help keep your plan more realistic, as you can tailor the exact nature of the milestone to the circumstances at the time. There’s not much point in adding milestones to your plan that can’t be met.

An example of the milestones I have been working to can be seen in the accompanying table. One is still ongoing but I’m pretty happy with how things are progressing so far.

The minor changes to my plan that I mentioned at the start of this article have all been caused by too much detail. The exact features delivered to beta customers were not important so changing one for another didn’t matter, however the overall milestone was critical to the company.

Having a plan is about helping you and the people you work with know where you are and where you are going. Selecting good milestones can make the difference between the plan being useful and a waste of your time.

About the Author:

Richard Revis has run technology development projects involving everything from iPhones up to front line fighter jets. He is currently Project Director at The Plan Is where he is developing web applications that make it easier to plan fixed duration projects. He writes regularly on project management and start ups at http://theplanis.com/blog

Here’s a quick guide how to kill a software company.

1. Analyze all your projects. Kill ones, which aren’t directly connected with planned income. No R&D. No product development. That’s unjustified expense.

2. Focus on formal acceptances and then forget about projects. Investing effort in projects which are already paid is unnecessary and unwise.

3. Forget about quality. No one would pay for the quality. And it’s much cheaper to develop some string-and-bubble-gum solution.

4. Trick your clients. It’s not about delivering them solutions they’ll be happy with. It’s all about soaking money out of them. Being honest doesn’t bring you closer to the goal.

5. Expect you’ll be asked how to deal with every problem. When people decide to deal with issues on their own yell at them. Tell them they’re wrong and they should look for a solution somewhere else.

6. Fire some people. Show the rest they should be afraid of you. Show them you have a big gun and you won’t hesitate to use it.

7. Let people go. When someone wants to leave let the damn traitor go. There wouldn’t be any use of him anyway. And you cut costs too which is a great move during recession.

8. Force people to do tasks they don’t like. More of them will go.

9. Don’t show up too often. Show people you have a lot of important things to deal with and you just can’t be in the office every single day to hear their complaints.

10. Don’t talk with people. They can’t tell you anything interesting. And talking with them is a waste of time. Your time. Your precious time.

11. Don’t trust your team. Don’t tell them anything important. Cross-check each thing you hear. Show them they can’t cheat you.

12. Lie when someone asks tough questions. It’s easier to sell some made-up crap than to face a problem. When they find out the pattern they’ll stop coming to ask you anyway. A win-win scenario.

Who should be a leader of a startup? An easy question. One of founders. Or even better each of them. They are naturally predestined to leading role. They got the idea. They own the company. They keep all things running.

Now the more important question: what kind of leaders are they?

Why is it so important you ask? Well, having a great idea, being a CEO of a company and managing it on a daily basis tells you nothing about leadership. You can end up working either for a great leader or for a sick asshole. No matter which one is true as far as the startup has money leaders won’t change anytime soon.

Because of a small size of the startup role of leaders is defined a bit differently. Not only they motivate their teams and set up a strategy of the company but they’re also personally responsible for building company culture and enabling company growth.

In a big organization one asshole doesn’t make much difference – you either work for dozens of them or he’s going to be the only low-performer among great leaders. In a big organizations company culture is already set and it takes a lot of effort and a lot of people to change it (for better or worse). In a big organization one person won’t hamper growth even if that’s CEO who believes leadership is all about yelling at people.

In a startup one person makes a difference if he leads the company. If he’s a sick weirdo don’t expect healthy atmosphere all over the place. If he makes working for him a hell you won’t see many long-runners in the team as everyone comes and goes as soon as they realize things just won’t change with that kind of boss. In small organizations poor leaders are the main reason why companies suck.

If you worked for a person who is physically unable to build anything bigger than a couple dozens of people or creating healthy atmosphere at work you exactly know what I’m talking about. Big corporations can be filled with these types and they’ll manage. Startups don’t have luxury to be lead be them.

That’s a final post of Entreprenurs Time series. I hope you’ve enjoyed it. Please leave your feedback and let me know whether I should post this kind of series in the future.

Last time I shared mistakes we made while working on Overto – startup which was closed down some time ago. Today another part – things we did right and are worth replaying next time I’ll be engaged in a startup.

Setting up a company behind

Setting a company, which is quite an effort in Poland, from the very beginning was really a good idea. All founders knew each other well so lack of trust wasn’t the main reason standing behind the decision. We just wanted to give ourselves a bit of motivation making it a real business. However thing we didn’t really plan was that we gained much credibility showing company’s details instead of letting people think the whole thing was created by some student during holidays and won’t be supported in any way in future. Seeing a company behind a service doesn’t guarantee you it won’t die but at least you can be sure someone cares.

Long discussions before start

Before launching the project we had very long discussions about what we plan to do and how we want to do it. Of course not every detail was checked but when I compare Overto to other startupish projects I was working on it was really well-thought at the beginning.

Wide range of roles covered with our experience

We had really good pack to run an internet service. Development, administration, user support – in all those areas we had experience from the past. There weren’t many things which could have surprise us. We weren’t forced to look for a specialist in any technical aspect of building our application.

Working in the same place

For some time we worked in the same building which helped much in decision-making process. We could all meet ad-hoc whenever something important had to be decided. After some time we spread among different places and suddenly we saw how much value was in working in the same office.

Despite we invested some money to fund the project I don’t treat it as a loss. For experience I gained it was a low price. Another time when I’ll decide to jump to that kind of project chances of success will be bigger.

First part of lessons learned from startup failure

Whole Entrepreneurs Time series.

Some time ago we closed down Overto – startup I was involved in. It was a failure – pretty obvious thing since we’ve closed the service. Since we learn much on our mistakes I think a reliable analysis why the business have failed should be valuable for you. For the beginning things we screwed.

No one working full time

From the very beginning we knew none of people engaged is willing to leave their daily jobs to commit fully to the startup. We thought we’d able to run internet service after hours. To some point that was true. As far as nothing bad was happening with the servers and the application it was all fine. We were working on new features when we had enough free time. Problems started when we faced some issues with our infrastructure. We weren’t able to resolve issues on the fly and had several downtimes. You can guess how it influenced user experience. That also backfired on service development since we had to focus on current problems instead of adding new functionalities. Lack of person working full-time and being able to deal with maintenance and bug fixing was the most important reason of failure.

Catching the market

That’s partially a consequence of the previous point. Since we spent majority of our limited time on trying to keep the service running we weren’t able to catch the changing market. We needed to cover new areas to move the application to another level but we couldn’t complete ongoing development. The whole project stopped in beta version and for users it didn’t look like anything was about to change.

Lack of marketing skills

Thin line between life and death of internet service is a number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately no one of us was skilled in that area. Even worse, no one had enough time to fill the gap. That would be another stopper if we dealt with the problems mentioned above.

Business model

We hadn’t checked very well a business model we set up on the beginning. We were surprised a couple of our features weren’t as unique as we’d initially thought. Ironically that wasn’t a big problem since we had a bunch of ideas how to adjust the strategy in a new situation. Anyway, you should plan to change your initial business model.

Screwed chance of selling the business

After we’d decided we won’t be able to maintain the service in the long run we had a chance to sell it. To make a long story short we screwed negotiations starting with way too high price. We thought more about how much work we put into the project than how much it can be worth for potential buyers. Things are worth as much as one’s willing to pay for them, no matter how long it took you to produce them.

Waiting too long with final decisions

I think that one is a bit sentimental. Since the service was our child we were reluctant to make a decision about closing it faster and limit losses. We’ve been tricking ourselves thinking that everything would be fine while we couldn’t get the application back to work properly.

Second part of lessons learned from startup failure

Whole Entrepreneurs Time series.

My today guest on Software Project Management is Piotr Ukowski. Piotr is an entrepreneur who started his business with a couple of friends two and a half years ago. In the following interview we discussed starting a business and bringing a startup into success. If you think about running your own company you can find Piotr’s thoughts very interesting.

His company – INTENSE GROUP (unfortunately the website is available only in Polish) – is built on knowledge and experience. They goal is to provide high quality, technologically advanced Business Intelligence solutions and consulting services which allow their clients to achieve sustainable competitive advantage.

The first and the most obvious question is: why? Why have you changed a nice safe position in corporation to uncertainty of own business?

I won’t be very original here – I’ve needed a change. A change in work environment, atmosphere and company culture. Changing a boss to “no boss” was an argument too. If I changed one corporation to another it wouldn’t give me all of that. Maybe that’s not so professional – it makes some mess in resume and brings a lot of risk but sometimes that’s the only reasonable choice. Anyway, there are successful election campaigns built on “need a change” motto.

In my opinion people often start a business with only short-term plan and they believe things will go somehow. How did it look like with your startup?

I don’t know what you consider as a short-term perspective. In IT business you can’t predict and plan everything 5 years ahead. We started from a scratch. On the very first day we were sitting on the floor of our office writing first lines of code of our product. We had no guarantee our ideas were good. There was no “proof of concept.” However I think our plan was very precise. We had all written down for 18 months from the starting point: budget, product development plans, team, marketing activities etc. As a curiosity I can say that after 18 months we missed our budget goal by 0,2%. That requires much luck of course – we’re good at planning, but not yet perfect.

Having a plan is crucial. You need to be ready for a lot of different challenges and problems. That’s because unplanned problems can be a real pain in the neck while planned ones are bread and butter – you just manage them.

What was an initial plan to fund a company? Did you have to change it over time?

The initial idea was a bit broader than what came out from the plan. Working on budget and searching for financing forced us to focus on main goals only. Initial investment was made fully from private money of founders. We had some offers of outside financing but we preferred to adjust strategy a bit and have no investor over our heads. The price of freedom one would say.

Talking about money, how long you could go with no income?

It’s hard to say precisely. Costs are always connected with income so with zero income we’d run a company much cheaper. If I had to give you a number it would be about half a year.

It is said that business model of startup will change over time and the best owners can do is to prepare for that change. Have you changed your strategy during those years?

The funny thing is we haven’t. I’m always surprised about that. We had a lot of luck since our predictions appeared to be pretty good. It’s fairly obvious we made some corrections over time but they were rather small anyway. To give you an example: when we were working on the second version of our system (the first one was made in Power Point) we found out we need a workflow application for our own reasons so we added workflow functionality to our production plans. It was hardly a revolution but it generated some work in software development and sale strategy.

What in your opinion makes a successful small business? Does INTESNE GROUP stick to this picture?

When we consider software business the team is the key. If you want achieve a success you have to create work environment where great people would like to work. When you have a great team it’s much easier to guide them in the right direction.

Another path one can choose is a brilliant idea. With a great idea you have a chance for huge growth – even a couple of thousands percent yearly. Of course both paths are complementary.

We don’t do a revolution. We just build Business Intelligence systems better than anyone else. That’s because we have a great team, big experience, deep knowledge and we’re consistent in what we do. Our growth is about 40-50% per year and that’s perfectly OK for us.

The most difficult moment so far was…

It’s hard to say. I guess it would be the first year looking from financial perspective. We were much stressed these days. As I’ve said we started from a scratch, we had no products, no clients and no contracts. Since we rejected outside funding our resources were limited, so we couldn’t play big. Lucky for us it all went according to the plan.

Any advice you wish to give people who think about their startups?

Be ready for unexpected. There are always things you can’t predict.

Be consistent. If you’re convinced of doing something, just do it.

And one last advice for founders of software companies – technology is not everything. Remember about salespeople, managers or people who will deal with administrative tasks like accounting and HR.

Was it worth the effort?

Yes! For me that’s completely different to what I was doing before. New level of responsibility, more adrenalin but satisfaction is bigger too. It may sound weird but my current team is 10 times smaller than the one I had in corporation I worked for, but I don’t regret. It’s fantastic to feel you can raise a company exactly the way you want. Even if you make a mistake you pay for that with your own money. The only limit is your business environment, not the organization or structures you work in.

Whole Entrepreneurs Time series.

Recently I wrote why business plans are important when you think about starting a company. OK, having a business plan doesn’t automatically mean you have a good business plan. What most often makes a business plan a piece of crap?

1. Undiscovered environment.
You haven’t checked competitors and products which exist on the market. You think you’re unique but you haven’t really checked. You can end up with a great plan to discover and conquer virgin land. Unfortunately it’s already overcrowded. This is by the way the major reason why my last business plan sucked.

2. Business model not clear.
There are people out there who are your potential clients. Do you know how to reach them? And when you reach them do you have a plan how to convince them to pay for your crap… I mean product? This is a tricky part for technical people because it usually takes some marketing to achieve a goal. And we don’t even like a sound of m-word, do we?

3. Price as differentiator.
If the only thing which differentiates your product from others is price, well, as far as you don’t own a factory in China that’s a problem. Price is the easiest thing to be changed by your competitors. They can kill you in a couple of months and don’t even sweat.

4. Made-up numbers.
In every business plan you need some numbers. You can make them up on the fly. “We’ll have $100,000 costs so we need $150,000 income. Let’s write it down. Looks fine.” Sure, it looks nice indeed. However you can expect a visit from Mr Reality who will adjust your income plan a bit. He’ll take away 0 here and 1 there and your real numbers will suck.

5. Personal bias.
When we play with our own idea most of the time we aren’t objective about it. We imply everyone would use the service/product/whatever because we’d use it. That reminds me an old discussion with a friend “would you pay more for a taxi if you were guaranteed a taxi-driver was nice?” I would, but somehow I’m yet to see a taxi company which would use “we’re friendly” as a slogan.

Whole Entrepreneurs Time series.

Recently I went through a number of ideas for a startup. I was on both sides: the one who was responsible for preparing a business plan and the one who is asked for involvement and judges a concept.

Actually no matter which side I was on one thing was common – when thinking about a startup one should start with writing a business plan. When I think about business plan I don’t have any formal document on my mind. That’s rather a draft, but complete one, telling others what do you want to do, and why will you succeed.

When talking about a complete plan it should cover:

• A product description. What do you want to do? How does it differ from other products which are on the market?

• Usefulness of the product. Why would people use it? Who will use the product?

• Business model. How do you want to gain money from your users/clients?

• Business environment. Who do you compete with? How are you better then them?

• Development. How do you want to build a product? Which resources do you need?

• Detailed short-term perspective. First year should be planned rather precisely. How many people? How much would you pay them? What about office and administration stuff?

• Long-term perspective. What is a coarse-grained plan of development for a longer time span? How can it change over time?

• Numbers. How much will it cost investors to maintain a company? How much money will be brought from sales? How does cash-flow look?

• Growth. How fast your incomes would grow? And costs? When do you plan to break even?

Technically as far as you address those questions the form shouldn’t matter much. However you most likely will be asked to prepare a SWOT analysis or something similar. From my perspective it doesn’t have to be a big document. Several pages should be enough. The quality is more important than quantity here.

Personally I find writing a business plan opens my eyes to new aspects of what I’m about to do. Sometimes it shows new opportunities; sometimes it points you that you’re heading to a dead-end. As far as you can’t convince yourself something is worth investing you money (assuming you have some) you won’t convince others either. As far as someone doesn’t cover one of important areas in a business plan you risk you’re doomed if you follow them.

For me the reason for writing a business plan is mainly not for convincing others to your idea, but to put your thoughts in order and ensure yourself that’s a good plan.

Whole Entrepreneurs Time series.