I was recently talking to a handful of successful startups founders about issues they were facing as they scaled up their companies. Unanimously, hiring and retaining people who “get shit done” seemed to be their biggest problem. I’ve been thinking about this for the last few days, because it’s a deceptively simple idea. &nbsp;It’s deceptively simple because people have a very strong cognitive bias - practically everyone thinks they “get shit done”, much like everyone thinks they are an <a href="https://en.wikipedia.org/wiki/Illusory_superiority">above-average driver</a>.&nbsp;Empirically, most people do not get shit done.&nbsp; So what does "getting shit done” look like? How can you define it? The closest I’ve come is someone who, when confronted with a problem, will fix it with a surprisingly good solution in a surprisingly short amount of time. They have an ability to produce an astonishingly high quantity and quality of work. It’s someone I am confident giving my hardest, ugliest problems to, knowing that they’ll solve it better than I could. And when they present the solution, you’ll see they found a bunch of other problems along the way and fixed them too.These are the kind of people you should try to start companies with. If you’re already running a startup, they are your most valuable assets. Give them more equity than your board is comfortable with, and try to get them to stick around as long as possible. &nbsp;&nbsp;In Paul Graham’s formulation, they are “<a href="http://www.paulgraham.com/relres.html">relentlessly resourceful</a>”. Somehow, they just seem to defeat any problem. There are many different strategies. You can plough through an obstacle with brute force applied in just the right place. Or you can avoid the obstacle by redefining the problem, changing the rules of the game to suit yourself. Perhaps simply refusing to give up, and working harder and longer than anyone would consider reasonable. And sometimes doing things that look a little crazy from the outside.The opposite is uncomfortably common. There are many people who will talk about problems, strategise different solutions, seek input and group consensus, but never actually accomplish anything. When things don’t happen, they always have a list of reasons why it’s not their fault. In a startup, this person needs weeding out as quickly as possible because they’re dead weight.Once a company is running, it can gain a momentum all of its own. This seems especially true for big companies with a stable customer-base and market share. Some large companies have such momentum that a large proportion of the employees could simply not come to work and the thing would keep going all by itself. Big companies seem to train managers to be “<a href="http://www.bhorowitz.com/why_is_it_hard_to_bring_big_company_execs_into_little_companies">interrupt-driven</a>”, rather than proactive. So if you’re hiring from big companies, watch out for this.&nbsp; Consistently “getting shit done” takes a huge amount of energy and initiative, but it seems energising for the right kind of person, rather than exhausting. It is a particularly important skill in the early days, because the natural state of a startup is inertia and, ultimately, failure. At first, your company has zero velocity, so you need to apply an incredible amount of time and energy to overcome this inertia and get the thing moving. &nbsp;Nothing happens unless you make it happen.My favourite example is the story of Instacart’s early launch with Trader Joe’s. Instacart is a grocery delivery service and partners with some of the biggest retailers in the world. But when they were starting out, they wanted all of the inventory of Trader Joe’s listed on their site, along with the price and photo for each item. A normal approach would have been to negotiate a business development deal, which would have taken many months, killing momentum. Instead, the founders figured out that they could probably purchase one of every single item in the store, and working for 48 hours straight, photograph it all in a studio that was empty over a weekend. In my book, that is getting shit done.&nbsp;

Getting Shit Done

Apple’s latest announcement on payments has sparked some interesting debate but also a fair share of breathless pronouncements on a “revolution" in mobile payments.To be clear - Apple Pay is a step forward in terms of end user experience - but it simply entrenches a fundamentally broken card payment network and layers on even more cost.Apple have long been masters of user experience - and Apple Pay does makes significant strides forward in that area. The point-of-sale experience is good, but not much better than contactless cards that have been common in Europe for years. The real leap forwards is in-app payments - new apps installed on an iPhone will have access to payment details without the user having to type in card details for every new purchase. Instead, customers will be prompted to scan a fingerprint, and the payment will be processed - that’s a pretty big leap forward in terms of experience.There’s been speculation that this new payment mechanism might lead to the <a href="http://a16z.com/2014/09/09/a16z-podcast-apple-takes-on-payments-and-your-wrist/%20">virtualization of credit cards</a>. But what does that really mean? Apple is not killing the credit card. They’re killing the little piece of plastic that gets sent in the mail. Again, a big user experience improvement, but a trivial improvement at the payments level - payments are still going across the card networks. Fundamentally, having to switch out a card to access a different credit product seems wrong-headed.All this talk of “<a href="http://danielbower.com/post/97211428585/frictionless-credit-cards">frictionless credit cards</a>” presupposes that cards and card networks are necessary in the first place. Perhaps a more interesting question is "frictionless credit”.To understand how this might work, we need to break down a payment transaction to see where credit fits in:<ul class="ul1"><li class="li3">A customer presents a card to merchant for payment, perhaps entering a PIN in a terminal.</li><li class="li3">The terminal&nbsp;sends transaction details up a line from the merchant to a payment processor.</li><li class="li3">The processor forwards transaction details to the card company’s network.</li><li class="li3">The card company routes transaction details to card issuer (the customer’s bank, or an independent financing company) for authorization. Is there credit available? Ie, is customer within agreed balance or overdraft limits?</li><li class="li3">Issuer approves transaction and sends confirmation back through same channels.</li><li class="li3">The customer gets their item from the shop and leaves.</li></ul>The “credit” in credit card is not related to the plastic card, or even the card network. It’s simply debt financing that’s offered by a financial institution at the other end of a series of pipes. Visa &amp; co provide those pipes, but charge a pretty heft fee for doing so. Thanks to the existing 4-party system, merchants are paying around 2-3% of every transaction as a tax levied by those incumbents, who add little value in return. Apple now makes that a 5-party system, adding extra cost in exchange for a slick user experience.With Apple Pay, instead of a user inserting a card and entering a pin, they’d present their iPhone and touch their thumb to a fingerprint reader. Their iPhone passes up credit card details via the card processor (or, more precisely, it passes up a token that allows the card networks to access card details from Apple’s servers a little way down the line), and the process continues as normal. The metaphor of Apple Pay as a simple “wallet” works well - it simply provides a mechanism for storing your cards, and presenting them to merchants when you want to pay. They aren’t actually processing any payments themselves., unlike PayPal or Google Wallet.Apple Pay entrenches a fundamentally broken card payment network, and layers on even more cost. Apple has struck deals with Payment Networks and Issuing banks, and as part of those deals, it is taking a cut of the fee. It’s now another mouth to feed.What we should be aiming at is frictionless payment over a different series of pipes - the public internet, and existing inter-bank electronic clearing systems. If Banks opened up their platforms to allow multiple credit providers, we’d have competition to offer consumers credit financing on competitive terms. Whether you need an overdraft, a fixed-term loan or individual-item financing, you should get the best rate available in the market. The idea of having to switch payment card to get access to the best rates is crazy.By decoupling the issue of&nbsp;“credit”&nbsp;is from "payment network”, we expose the card networks for the rent-seeking oligopoly they are.<a href="http://tomblomfield.com/post/97304410500/apple-is-propping-up-a-fundamentally-broken-payments">Discuss this post on Hacker News</a>

Apple Is Propping Up A Fundamentally Broken

<a href="http://www.paulgraham.com/growth.html">Startups are about growth</a>,&nbsp;and of all the different possible metrics, startups often focus on user growth -&nbsp;if people aren’t using your new product or service in greater and greater numbers, it’s a good sign that you’re not on the right track. And, as long as your business-model is solid, user growth is a leading indicator of revenue and profit growth.But there’s another key metric that can be the making of your company, or the death of it - churn, or the proportion of existing customers who become ex-customers during a period of time (generally a year).In the early days, it’s very hard to measure your churn because you simply haven’t been around long enough. The early revenue growth curves for high- and low-churn companies may look identical.&nbsp;In fact, high-churn businesses often have exceptionally impressive growth numbers in their first months or years because they’ve found some viral loop, the crack cocaine of startup-land, which provides an explosive catalyst for new-user acquisition.However, problems often start to appear after the first year or so - occasional weak months look exceptionally bad, since your business model relies on new customers in the top of the funnel to replace those flooding out. And even if you manage to keep finding new people to push into the top of your funnel for several years, you will eventually churn through your entire addressable market.Then your business implodes.The prime examples are Zynga and Groupon - both of which have been catastrophically failing over the last year or two.Conversely, low-churn businesses often have relatively modest initial user-acquisition growth curves. Often, the nature of low-churn businesses (in particular, high switching costs) makes it incredibly hard to gain your first few users before you’ve established credibility. However, these same hurdles present considerable long-term advantages, and the occasional slow month in terms of user-acquisition still increases monthly revenue. Once you’ve built up a loyal customer base, it becomes an extremely attractive business model - costs are often fixed &amp; up-front, and the marginal cost to serve each customer every month is minimal.When talking to startups, my favourite graph to look at is their revenue by monthly cohort. That is, splitting each months’ revenue by the month in which the users originally signed up to the service.In a low-churn business, the graph looks like a layer-cake, with each new month of users adding a layer of revenue on the top of the business.<figure class="tmblr-full" data-orig-height="281" data-orig-width="500" data-orig-src="/media/img_1743235354310_tumblr_inline_n37sy2AZA91r5tr1m.png"><img alt="image" src="https://64.media.tumblr.com/03191d7dfb6182592958947804301530/tumblr_inline_p7p9vritV41r5tr1m_500.png" data-orig-height="281" data-orig-width="500" data-orig-src="/media/img_1743235354310_tumblr_inline_n37sy2AZA91r5tr1m.png" width="500" height="281"></figure>The thin cohorts at the bottom of the graph are the loyal users who signed up at the start, and who are still paying for your service 18 months later. The orange tip in the top-right are the users who just signed up, and have only contributed to revenue in month 18.In the best low-churn businesses, the revenue provided by each cohort can actually&nbsp;grow over time - each cohort gets “fatter” - if you can successfully up-sell new services.In a high-churn business, the cohorts decay alarmingly quickly, and once new-user acquisition starts to slow, the business implodes.<figure class="tmblr-full" data-orig-height="293" data-orig-width="500" data-orig-src="/media/img_1743235354310_tumblr_inline_n37sxtY37t1r5tr1m.png"><img alt="image" src="https://64.media.tumblr.com/1218f50f2c042d528fad7a730e1d97ce/tumblr_inline_p7p9vrcmtt1r5tr1m_500.png" data-orig-height="293" data-orig-width="500" data-orig-src="/media/img_1743235354310_tumblr_inline_n37sxtY37t1r5tr1m.png" width="500" height="293"></figure>If you simply looked at the top-line of the graph (total monthly revenue), without considering the cohorts, you’d think the high-churn business was doing much better until at least month 13-14. But one-and-a-half years in, it’s clear that the low-churn business is on a path to success, while the high-churn business needs to execute a substantial pivot to avoid failure.Indicators of ChurnSo what are the characteristics of high- and low-churn businesses, and what techniques can you use to minimise churn?High Switching Costs - if it’s slow, painful &amp; costly to switch providers, you will experience very low customer churn. This is clearly the case with retail banks, email providers and recurring payment processors. I still bank with the same provider I chose 15 years ago, despite their crappy service and barely-functional website.New competitors have developed clever tactics to solve this problem - developing onboarding tools to reduce switching costs, or focussing on new customers before they’ve committed to an incumbent provider. This is one reason Stripe focusses so hard on serving other startups, and banks target teenagers.Sales Architecture&nbsp;- the way a product is priced &amp; sold is often designed to minimise churn. Gyms &amp; dating sites are the best examples here. People come out of the Christmas &amp; New Year vacation period feeling unhealthy, lonely, and determined to change. One large dating site books over 70% of its annual revenue in the first quarter of the year.&nbsp;Strong Brand Loyalty / Personality&nbsp;- the best brands position themselves as expressions of their customers’ personality.Cigarette companies and beverage manufacturers are the best example of this - products are often indistinguishable from each other, and the switching costs are minimal. The customer can just reach for a different can on the shelf. Companies combat this by investing heavily in marketing to position their products in customers’ mind as extensions of themselves.There’s an interesting phenomenon in the drinks industry where a couple of faceless mega-corps control a wide variety of incredibly powerful brands with basically indistinguishable underlying products - MillerCoors and Anheuser Busch.&nbsp;&nbsp; Make Something People Love&nbsp;- after&nbsp;some fantastic comments from readers, I’ve added this extra point. Perhaps the most difficult, but also most effective form of customer retention is making a product or service that is dramatically superior to the competition. As Barry put it, “The switching cost is missing out on a great service.” It’s subtly different from brand loyalty - Google has very low churn because its search engine is so much better than the competition. It arguably doesn’t have a very strong brand or “personality”.So What?To some extent, you’re stuck with the churn inherent in your industry. But you do have some level of control.If you enter a market like payment processing, be prepared for the long-haul. You’ll likely struggle to establish your credibility early-on, and finding innovative ways to acquire new customers be vital. You’ll need to raise significant amounts of early capital to invest in infrastructure that will only start to pay off years later.If you’re part of an industry in which you can acquire customers incredibly cheaply and monetise them quickly, you’ll generally need less early capital. You’ll often reach profitability very early on, and it may feel like you’re on a startup rocket-ship. But make sure you’re providing sustainable, long-term value to your customers, otherwise you risk running out of fuel and crashing painfully back to earth.<a href="https://news.ycombinator.com/item?id=8015917">Discuss this post on Hacker News</a>

Customer Churn Can Kill Your Startup

“When eating an elephant, take one bite at a time.”- Creighton AbramsI was chatting with an investor a year or two ago, shortly after our Series A, and the subject of revenue goals came up.At the time, our revenue was pretty low - less than 10% of monthly costs.&nbsp;We estimated our business would only become viable when revenue reached a level 10 times greater than our current costs.The implication was that we needed grow by 100 X before our business had any significance at all, and I was struggling to come up with any credible plan for getting there.Her response was for us to simply put one foot in front of the other. Just focus on growing every month, and the rest will take care of itself.At 15% month-over-month growth, you’d grow by 100 X in around 33 months.At 20% month-over-month, it takes 25 months.At 25% month-over-month, it takes 21 months.

Growth

<a href="http://dilbert.com/strips/comic/2000-05-21"><img alt="image" src="/media/img_1743235360931_6379.strip.sunday.gif"></a>The question of deadlines is one of the most divisive issues in software development today. Business-people despair at developers’ inability to meet goals, while developers lament the latest unachievable deadline imposed by their pointy-haired boss.In practice, there is often a common cause of this malaise. If your team doesn’t have an agreed scope with sufficiently granular time-estimates for each component piece of work, your project will inevitably overrun, and sometimes by an order of magnitude.Scoping a projectThe solution is to come up with a scoped deadline - a date in the future by which you will have implemented an agreed list of features or functionality. Crucially, each of the features needs an estimate of the amount of time or effort required to complete it, similar to some styles of <a href="http://en.wikipedia.org/wiki/Agile_software_development">Agile software development</a>.The only effective way to estimate effort is to break the project down into chunks of work that can individually be estimated. In no case should any chunk be more than 2 developer-days, and ideally they’d be around ½ a day each (4 hours). There are lots of methods for actually coming up with these numbers - <a href="http://en.wikipedia.org/wiki/Planning_poker">Planning poker</a> is one neat collaborative solution, or Joel Spolsky’s <a href="http://www.joelonsoftware.com/items/2007/10/26.html">Evidence-Based Estimation</a> is also interesting.Fundamentally, developers should be the people saying how long a given chunk of work will take. Whatever system you use, it’s essential to have a relationship where developers feel like their judgment is respected and the business-side of the company trusts developers to put in a reasonable amount of effort. At the end of the day, even the best estimation techniques can’t fix a broken culture.The alternative, an “it’s done when it’s done” attitude, is dangerously counterproductive - if there’s no pressure to hit business goals, technical decisions will tend towards feature-creep and perfectionism.Why scoped-deadlines are usefulAs far as I can see, there are 3 main benefits of scoped deadlines:It makes you iterative - forcing everyone involved to ask “is this feature really necessary?”. You will always have more development work than time available, so choosing what to work on is a crucial skill. If you strive to keep your deadlines around 2 weeks, you will prototype very quickly, building only the features you really need. Half the time, customer feedback will change what you saw as “version 2” anyway.Second, it prevents scope creep during the project, as you’ve locked-in the features that are going to be delivered. This is good for both developers and business-people. For the former, it encourages a &nbsp;pragmatic approach to the quality-vs-speed tradeoff - personally, it helps me check the urge to refactor code when it isn’t strictly necessary. For the latter, it provides a positive response to the perennial request of “can you just implement XYZ for me?”. Sure - in the next version.Third, it can sometimes good for motivation &amp; productivity, for some combination of people, teams &amp; problems. I find deadlines energising - crossing to-do items of a list, and delivering impressive new feature motivates me. It’s a very tangible way for a team to see that they’re making progress, and people love being part of success. But it’s certainly the least important of the three.Deadlines in practiceAs a project progresses, you should be regularly deploying your code - use a feature-switch to keep new work visible to only staff or small segments of your user base. This is very important because it’s a leading indicator of missed deadlines. If you’re halfway through your “sprint”, and no code has been deployed, you’re likely going to overrun. It also helps catch bugs early, and makes you consider how your code will interact with the existing codebase from the very start.Even with this advice, you sometimes just won’t hit your deadlines. It might turn out that the version on open-source library you’re using isn’t compatible with a new tool you want to implement. Unexpected problems crop up. While I don’t think it’s a terrible thing to work a couple of late nights if your project needs to get back on track, it’s very different if the scope of the project has fundamentally changed.Retrospectives are a good way to identify any patterns in scoping problems - if you highlight areas that consistently overran, you’ll get better at spotting them in future.On the other hand, be quick to celebrate your successes. Releasing code from behind a feature-switch to your general user-base is a great time to gather the team and reflect on your achievements.Discuss this post over at <a href="https://news.ycombinator.com/item?id=6514572">Hacker News</a>

Tom Blomfield

Getting Shit Done

Apple Is Propping Up A Fundamentally Broken

Customer Churn Can Kill Your Startup

Growth

Startup Series Part 4 Deadlines